<SEC-DOCUMENT>0001019687-15-000374.txt : 20150130
<SEC-HEADER>0001019687-15-000374.hdr.sgml : 20150130
<ACCEPTANCE-DATETIME>20150130090027
ACCESSION NUMBER:		0001019687-15-000374
CONFORMED SUBMISSION TYPE:	424B3
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20150130
DATE AS OF CHANGE:		20150130

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:			1231

	FILING VALUES:
		FORM TYPE:		424B3
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-201334
		FILM NUMBER:		15560877

	BUSINESS ADDRESS:	
		STREET 1:		9635 GRANITE RIDGE DRIVE, SUITE 100
		CITY:			SAN DIEGO
		STATE:			CA
		ZIP:			92123
		BUSINESS PHONE:		858-459-7800

	MAIL ADDRESS:	
		STREET 1:		9635 GRANITE RIDGE DRIVE, SUITE 100
		CITY:			SAN DIEGO
		STATE:			CA
		ZIP:			92123

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	BISHOP EQUITIES INC
		DATE OF NAME CHANGE:	19930602
</SEC-HEADER>
<DOCUMENT>
<TYPE>424B3
<SEQUENCE>1
<FILENAME>aethlon_424b3.htm
<DESCRIPTION>AETHLON MEDICAL, INC.
<TEXT>
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<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"><B>Filed Pursuant to Rule 424(b)(3)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right; text-indent: 0.5in"><B>&nbsp;Registration
No. 333-201334</B></P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Aethlon Medical, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">24,750,000 Shares of Common Stock</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This prospectus relates to the following
common stock that may be sold from time to time by the selling stockholders identified in this prospectus:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">11,000,000 shares of common stock; and</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">13,750,000 shares of common stock underlying common stock purchase
warrants at an exercise price of $0.30 per share.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">All of the common stock covered by
this prospectus is being sold by the selling stockholders for their own account. We will not receive any proceeds from the
sale of these shares other than proceeds, if any, from the exercise of warrants to purchase shares of our common stock. If
all of the warrants are exercised for cash, we will receive a total of $4,125,000 in gross proceeds, which we expect to use
for general corporate purposes. We cannot assure you that any warrants will be exercised for cash. The selling stockholders
may offer and sell the shares covered by this prospectus at prevailing prices quoted on the OTCQB Marketplace or at privately
negotiated prices. The selling stockholders may sell the shares directly or through underwriters, brokers or dealers. The
selling stockholders will bear any applicable sales commissions, transfer taxes and similar expenses. We will pay all other
expenses incident to the registration of the shares. See &ldquo;Plan of Distribution&rdquo; on page  28 for more information
on this topic.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our common stock is quoted on the OTCQB
Marketplace under the symbol &ldquo;AEMD.&rdquo; On January 28, 2015, the last quoted sale price of our common stock as reported
on the OTCQB Marketplace was  $0.26 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Investing in our securities involves
significant risks, including those set forth in the &ldquo;Risk Factors&rdquo; section of this prospectus beginning at page 4.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">The date of this prospectus is January
28, 2015.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>AETHLON MEDICAL, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TABLE OF CONTENTS</B></P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
    <TD STYLE="width: 91%; padding-right: 0.8pt; padding-bottom: 1pt">&nbsp;</td>
    <TD STYLE="vertical-align: bottom; width: 9%; border-bottom: Black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.8pt 0pt 0; text-align: center"><b>Page</b></P></td></tr>
<TR>
    <TD STYLE="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(238,238,238)">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">About this Prospectus</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">1</td></tr>
<TR STYLE="background-color: White">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">Prospectus Summary</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">1</td></tr>
<TR STYLE="background-color: rgb(238,238,238)">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">Risk Factors</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">4</td></tr>
<TR STYLE="background-color: White">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">Forward-Looking Statements</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">25</td></tr>
<TR STYLE="background-color: rgb(238,238,238)">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">Use of Proceeds</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">26</td></tr>
<TR STYLE="background-color: White">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">Selling Stockholders</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">26</td></tr>
<TR STYLE="background-color: rgb(238,238,238)">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">Plan of Distribution</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">28</td></tr>
<TR STYLE="background-color: White">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">Description of Business</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">30</td></tr>
<TR STYLE="background-color: rgb(238,238,238)">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">Description of Properties</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">48</td></tr>
<TR STYLE="background-color: White">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">Legal Proceedings</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">48</td></tr>
<TR STYLE="background-color: rgb(238,238,238)">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">Market Price for Common Equity and Related Stockholder Matters</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">48</td></tr>
<TR STYLE="background-color: White">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">53</td></tr>
<TR STYLE="background-color: rgb(238,238,238)">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">Directors and Executive Officers</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">76</td></tr>
<TR STYLE="background-color: White">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">Executive Compensation</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">84</td></tr>
<TR STYLE="background-color: rgb(238,238,238)">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">Security Ownership of Certain Beneficial Owners and Management</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">89</td></tr>
<TR STYLE="background-color: White">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">Certain Relationships and Related Transactions and Director Independence</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">91</td></tr>
<TR STYLE="background-color: rgb(238,238,238)">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">Description of Securities</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">92</td></tr>
<TR STYLE="background-color: White">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">Legal Matters</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">93</td></tr>
<TR STYLE="background-color: rgb(238,238,238)">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">Experts</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">93</td></tr>
<TR STYLE="background-color: White">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">Where You Can Find More Information</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">93</td></tr>
<TR STYLE="background-color: rgb(238,238,238)">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">Disclosure of Commission Position on Indemnification for Securities Act Liabilities</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">93</td></tr>
<TR STYLE="background-color: White">
    <td style="vertical-align: top; padding-right: 0.8pt; padding-left: 0.25in; text-indent: -0.25in"><font style="font-size: 10pt">Index
    to Consolidated Financial Statements</font></td>
    <td style="vertical-align: bottom; padding-right: 0.8pt; text-align: center">F-1</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ABOUT THIS PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This prospectus is part of a registration
statement that we filed with the Securities and Exchange Commission for the selling stockholders referred to in this prospectus.
Under the registration statement, once effective, the selling stockholders may offer and sell from time to time up to 24,750,000
shares of our common stock. This prospectus does not contain all of the information included in the registration statement. The
registration statement filed with the Securities and Exchange Commission includes exhibits that provide more details about the
matters discussed in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>You should rely only on the information
contained in this prospectus. We have not authorized any other person to provide you with different information. If anyone provides
you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities
in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is accurate only as
of the date of this document, regardless of the time of delivery of this prospectus or the time of issuance or sale of any securities.
Our business, financial condition, results of operations and prospects may have changed since that date. You should read this prospectus
in its entirety before making an investment decision. You should also read and consider the information in the documents to which
we have referred you in the section of this prospectus entitled &ldquo;Where You Can Find More Information.&rdquo;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>For investors outside the United States,
we have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction
where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to
observe any restrictions relating to this offering and the distribution of this prospectus outside of the United States.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PROSPECTUS SUMMARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>This summary highlights important information
about our business and about this offering. This summary does not contain all of the information that you should consider before
making an investment decision. You should carefully read the entire prospectus, including the information set forth in the section
entitled &ldquo;Risk Factors.&rdquo;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Summary of our Business</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our mission is to create innovative medical
devices that address unmet medical needs in cancer, infectious disease, and other life-threatening conditions. Our Aethlon ADAPT&trade;
(Adaptive Dialysis-Like Affinity Platform Technology) system provides a platform to develop medical devices that target the selective
removal of disease-promoting particles from the circulatory system. At present, the Aethlon ADAPT product pipeline includes the
Aethlon Hemopurifier&reg; to address infectious disease and cancer, and a medical device being developed under a 5-year contract
from the Defense Advanced Research Projects Agency to reduce the incidence of sepsis in combat-injured soldiers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In June 2013, the U.S. Food and Drug Administration
approved an investigational device exemption that allows us to initiate human feasibility studies of our first device, the Aethlon
Hemopurifier, in the U.S. We have initiated patient recruitment for the study at the DaVita Dialysis Medical Center in Houston,
Texas. In the treatment of infectious diseases, the Hemopurifier is designed for the single-use removal of viruses and shed glycoproteins
from circulation. In cancer-related therapy situations, we are exploring the potential use of the Hemopurifier to remove tumor-secreted
exosomes, which promote cancer progression. <I>In vitro </I>studies have demonstrated that our Hemopurifier can capture exosomes
underlying a broad-spectrum of cancer indications. To support our endeavors, we applied for and have received patent protection
for the capture of tumor-secreted exosomes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under our approved feasibility study protocol,
we will enroll ten end-stage renal disease patients who are infected with the Hepatitis-C virus to demonstrate the safety of Hemopurifier
therapy. Upon successful completion of this study, we will be able to initiate further stage studies required for market clearance
to treat Hepatitis-C and other viral pathogens.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In May 2011, we introduced and began marketing
the Aethlon ADAPT system. On September 30, 2011, we entered into a $6.8 million multi-year contract with the Defense Advanced Research
Projects Agency. Under this contract, our tasks include the development of a dialysis-like device to prevent sepsis, a fatal bloodstream
infection that is often the cause of death in combat-injured soldiers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, in 2009 we formed Exosome Sciences,
Inc., which today is a majority-owned diagnostic subsidiary focused on identifying and monitoring neurological conditions and cancer.
We commenced formal operations of Exosome Sciences, Inc. in 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Since inception, we have primarily financed
our operations through the private placement of our debt and equity securities. At September 30, 2014, we had current assets of
approximately $892,189, including cash on hand, and current liabilities of approximately $3,387,956. Between October 1, 2014 and
December 31, 2014, we raised aggregate proceeds of $4,083,579 through equity issuances and raised $415,000 through the issuance
of convertible notes. In addition, between October 1, 2014 and December 31, 2014, we eliminated $988,361 of convertible note debt
from our balance sheet. We believe we have sufficient cash to fund the safety phase of our planned clinical trials in the U.S.;
however, we will need to raise additional capital to fully fund the U.S. trials and continue our other research and development
activities in the U.S. and abroad.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Associated with our Business</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have experienced substantial operating
losses since inception. As of September 30, 2014, we had an accumulated deficit of $79,335,907, which included losses of approximately
$4,503,350 and $3,653,168 for the six months ended September 30, 2014 and 2013, respectively. Historically, our losses have resulted
principally from costs incurred in the research and development of our medical devices, and general and administrative expenses,
which together were approximately $2,303,571 and $1,854,075 for the six months ended September 30, 2014 and 2013, respectively.
We may continue to incur losses in the future. In part due to these losses, our 2014 audited consolidated financial statements
have been prepared assuming we will continue as a going concern, and the auditors&rsquo; report on those financial statements express
substantial doubt about our ability to continue as a going concern.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Although we have made substantial
progress in the development and testing of our devices, and have begun to generate revenue under our contract with the
Defense Advanced Research Projects Agency as we meet billable milestones under such contract, we are not yet able to
commercialize our devices and may never obtain the approvals necessary to commercialize our products or technologies in the
U.S. or elsewhere. Our contract with the Defense Advanced Research Projects Agency is time limited. The Defense Advanced
Research Projects Agency may determine to terminate our contract, and we cannot assure you that we will enter into any new
government contracts with the Department of Defense or otherwise. We compete with U.S. and foreign companies that have
greater scientific and organizational resources, market presence and financial backing than we have. We may be unable
to obtain U.S. Food and Drug Administration or international clearance of the Hemopurifier. Even if we do achieve
such regulatory clearances, we may be unable to successfully manufacture, market and sell our devices in the U.S. or
elsewhere. These risks and others are discussed more fully in the section of this prospectus entitled &ldquo;Risk
Factors&rdquo; immediately following this prospectus summary. You should read these risks before you invest in our common
stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Corporate History</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 10, 1999, Aethlon, Inc., a California
corporation, Hemex, Inc., a Delaware corporation and the accounting predecessor to Aethlon, Inc., and Bishop, Inc., a publicly
traded company, completed an Agreement and Plan of Reorganization structured to result in Bishop, Inc.'s acquisition of all of
the outstanding common shares of Aethlon, Inc. and Hemex, Inc. Under the plan's terms, Bishop, Inc. issued shares of its common
stock to the stockholders of Aethlon, Inc. and Hemex, Inc. such that Bishop, Inc. then owned 100% of each company. Upon completion
of the transaction, Bishop, Inc. was renamed Aethlon Medical, Inc. In 2009, we formed Exosome Sciences, Inc., which today is a
majority-owned diagnostic subsidiary focused on identifying and monitoring neurological conditions and cancer. We commenced formal
operations of Exosome Sciences, Inc. in 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our executive offices are located at 9635
Granite Ridge Drive, Suite 100, San Diego, California 92123. Our telephone number is (858) 459-7800. Exosome Sciences, Inc. maintains
offices and laboratories at 11 Deer Park Drive, South Brunswick, New Jersey 08810. Our website address is www.aethlonmedical.com.
Our website and the information contained on our website are not incorporated into this prospectus or the registration statement
of which it forms a part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Private Placement of Common Stock and Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On December 2, 2014, we completed a private
placement of units, each unit being comprised of one share of common stock, $0.001 par value per share, and a warrant to purchase
1.2 shares of our common stock at an exercise price per share of $0.30, with a term of five years from the date of issuance. We
sold a total of 11,000,000 units, consisting of 11,000,000 shares of common stock and warrants to purchase 13,200,000 shares of
common stock for gross proceeds of $3,300,000 and net proceeds of $3,034,000. We are using the proceeds from the private placement
for general corporate purposes. At the closing of the private placement, we issued to Roth Capital Partners, LLC, the placement
agent for the transaction, a five-year warrant to purchase up to 550,000 shares of our common stock at an exercise price of $0.30
per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As part of the private placement, we entered
into a registration rights agreement with the purchasers pursuant to which we agreed to file a registration statement to register
for resale the shares of common stock sold in the private placement, including the shares underlying the warrants sold in the private
placement, within 20 calendar days following the closing of the private placement. We are required to use our best efforts to cause
the registration statement to be declared effective under the Securities Act of 1933, as amended, as soon as practicable, but in
no event later than the earlier of (i) January 21, 2015 (or, in the event of a full review by the Securities and Exchange Commission,
by February 20, 2015) or (ii) the fifth business day after the date the Securities and Exchange Commission notifies us that the
registration statement will not be reviewed or will not be subject to further review. We agreed to use our best efforts to keep
the registration statement effective under the Securities Act of 1933, as amended, until the date that all shares covered by the
registration statement (i) have been sold thereunder or pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended,
or (ii) may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for us to be
in compliance with the current public information requirement under Rule 144.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The issuance of the shares of common stock
and the warrants in connection with the private placement was exempt from registration under the Securities Act of 1933, as amended,
pursuant to the exemption for transactions by an issuer not involving a public offering under Section 4(a)(2) of the Securities
Act of 1933, as amended, and Regulation D promulgated thereunder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The Offering</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<tr style="vertical-align: top">
    <TD STYLE="width: 55%"><font style="font: 10pt Times New Roman, Times, Serif">Common stock offered by the selling stockholders</font></td>
    <td style="width: 45%; padding-right: 5.4pt; padding-left: 5.4pt"><font style="font: 10pt Times New Roman, Times, Serif">Up to 24,750,000 shares</font></td></tr>
<tr style="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Common stock outstanding</P></td>
    <td style="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">327,739,188 as of December 31, 2014</P></td></tr>
<tr style="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Terms of the offering</P></td>
    <td style="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The selling stockholders will determine when and how they sell
        the common stock offered in this prospectus, as described in &ldquo;Plan of Distribution.&rdquo;</P></td></tr>
<tr style="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Use of proceeds</P></td>
    <td style="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We will not receive any of the proceeds from the sale of the
        shares of common stock being offered under this prospectus. To the extent that we receive proceeds upon the exercise of the warrants
        by the selling stockholders, we intend to use any such proceeds for general corporate purposes. If all of the warrants are exercised
        in full for cash, we would receive $4,125,000. See &ldquo;Use of Proceeds.&rdquo;</P></td></tr>
<tr style="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">OTCQB Marketplace symbol</P></td>
    <td style="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AEMD</P></td></tr>
<tr style="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Risk factors</P></td>
    <td style="padding-right: 5.4pt; padding-left: 5.4pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">You should read the &ldquo;Risk Factors&rdquo; section of this
        prospectus for a discussion of factors to consider carefully before deciding to invest in shares of our common stock.</P></td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>RISK FACTORS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><I>You should carefully consider
the risks described below together with all of the other information included in this prospectus, as well as all
other information included in all of our other filings, when evaluating us and our
business. If any of the following risks actually occurs, our business, financial condition, and results of operations could
suffer. In that case, the price of our common stock could decline and you may lose all or part of their investment.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><I>Investing in our common stock is very
speculative and involves a high degree of risk. You should carefully consider all of the information in this prospectus before
making an investment decision. The following are among the risks we face related to our business, assets and operations. They are
not the only risks we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial
may also arise. Any of these risks could materially and adversely affect our business, results of operations and financial condition,
which in turn could materially and adversely affect the trading price of our common stock. You should not purchase our shares unless
you can afford to lose your entire investment.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Relating to Our Financial Position</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We have incurred significant losses and expect to continue
to incur losses for the foreseeable future. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have never been profitable. While we have generated revenues during the fiscal years ended March 31, 2013 and March
31, 2014, in the amounts of $1,230,004, and $1,623,769, respectively, primarily from our contract with the Defense
Advanced Research Projects Agency, our revenues continue to be insufficient to cover our cost of
operations.&nbsp;Future profitability, if any, will require the successful commercialization of our Hemopurifier technology,
other products that may emerge from our Aethlon ADAPT platform or from additional government contract or grant income. We
cannot assure you when or if we will be able to successfully commercialize one or more of our products, or if
commercialization is successful, whether we will ever be profitable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We have received a qualification from our auditors
regarding our ability to continue as a going concern. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In their report accompanying our financial
statements for our fiscal year ended March 31, 2014, our independent registered public accounting firm noted, in an explanatory
paragraph, that we have a significant accumulated deficit and a working capital deficit, and that a substantial amount of additional
capital will be necessary to advance the development of our products to the point at which we may become commercially viable. Our
independent registered public accounting firm stated that those conditions raised substantial doubt about our ability to continue
as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets, and the values we receive
for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.
In addition, the inclusion of an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern
and our lack of cash resources may materially adversely affect our share price and our ability to raise new capital or to enter
into critical contractual relations with third parties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We will require additional financing to sustain our operations,
and without it, we will not be able to continue operations. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We will require additional financing
to complete our planned clinical trials in the U.S., as well as fund all of our continued research and development activities
for the Hemopurifier and products on our Aethlon ADAPT platform. In addition, as we expand our activities, our overhead costs
to support personnel, laboratory materials and infrastructure will increase. Should the financing we require to sustain our
working capital needs be unavailable to us on reasonable terms, if at all, when we require it,  we may be unable to
support our research and U.S. Food and Drug Administration clearance activities including our planned clinical trials. The
failure to implement our research and clearance activities would have a material adverse effect on our ability
to commercialize our products. In addition, if we do not raise operating capital on terms acceptable to us, we may be forced
to cease operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We will need to raise additional funds through debt or
equity financings in the future to achieve our business objectives and to satisfy our cash obligations, which would dilute the
ownership of our existing stockholders.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We will need to raise additional funds through
debt or equity financings in order to complete our ultimate business objectives, including funding working capital to support development
and regulatory clearance of our products. We also may choose to raise additional funds in debt or equity financings if they are
available to us on reasonable terms to increase our working capital and to strengthen our financial position. Any sales of additional
equity or convertible debt securities would result in dilution of the equity interests of our existing stockholders, which could
be substantial. Also, new investors may require that we and certain of our stockholders enter into voting arrangements that give
them additional voting control or representation on our Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Related to Our Business Operations </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We face intense competition in the medical device industry</I></B>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We compete with numerous U.S. and foreign
companies in the medical device industry, and many of our competitors have greater financial, personnel and research and development
resources than we do. Our competitors are developing vaccine candidates, which could compete with the Hemopurifier 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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>are more effective;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>have fewer or less severe adverse side effects;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>are better tolerated;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>are more adaptable to various modes of dosing;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>are easier to administer; or</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>are less expensive than the products or product candidates we are developing.</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Even if we are successful in developing
 the Hemopurifier and other Aethlon ADAPT based-products, and obtain U.S. Food and Drug Administration 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. 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. If our competitors
develop more effective pharmaceutical treatments for infectious disease or cancer, or bring those treatments to market before we
can commercialize the Hemopurifier for such uses, we may be unable to obtain any market traction for our products, or the diseases
we seek to treat may be substantially addressed by competing treatments. If we are unable to successfully compete against larger
companies in the pharmaceutical industry, we may never generate significant revenue or be profitable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We have limited experience in identifying and working
with large scale contracts with medical device manufacturers; manufacture of our devices must comply with good manufacturing practices
in the U.S. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To achieve the levels of production necessary
to commercialize our Hemopurifier and other future Aethlon ADAPT-based products, we will need to secure large scale 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 coordinating
and overseeing the manufacture of medical device products on a large scale. 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. In addition, there can be no assurances that we will be able to adequately finance the manufacture
and distribution of our products on terms acceptable to us, if at all. If we cannot successfully oversee and finance the manufacture
of our products when they have obtained regulatory clearances, we may never generate revenue and we may never be profitable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our Aethlon ADAPT technology may become obsolete.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Aethlon ADAPT 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 Aethlon ADAPT products. The homeland security industry is growing rapidly with many competitors that are
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. Further, our ability to achieve significant and sustained penetration of our
key target markets will depend upon our success in developing or acquiring technologies developed by other companies, either independently,
through joint ventures or through acquisitions. If we fail to develop or acquire, and manufacture and sell, products that satisfy
our customers&rsquo; demands, or we fail to respond effectively to new product announcements by our competitors by quickly introducing
competitive products, then market acceptance of our products could be reduced and our business could be adversely affected. We
cannot assure you that our products will remain competitive with products based on new technologies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our use of hazardous materials, chemicals and viruses exposes
us to potential liabilities for which we may not have adequate insurance.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 cartridges and the infected plasma samples used in preclinical testing of the Hemopurifier. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We currently carry a limited amount of insurance
to protect us from damages arising from hazardous materials. Our product liability policy has a $3,000,000 limit of liability that
would cover certain releases of hazardous substances away from our facilities. For our facilities, our property policy provides
$25,000 in coverage for contaminant clean-up or removal and $50,000 in coverage for damages to the premises resulting from contamination.
Should we violate any regulations concerning the handling or use of hazardous materials, or should any injuries or death result
from our use or handling of hazardous materials, we could be the subject of substantial lawsuits by governmental agencies or individuals.
We may not have adequate insurance to cover all or any of such claims, if any. If we were responsible to pay significant damages
for violations or injuries, if any, we might be forced to cease operations since such payments could deplete our available resources.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our success is dependent in part on a few key executive
officers. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our success depends to a critical extent
on the continued services of our Chief Executive Officer, James A. Joyce, our Chief Science Officer, Richard H. Tullis, and our
President, Rodney S. Kenley. If one or more of these key executive officers were to leave us, 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 unique knowledge and expertise of these individuals would be difficult to replace
within the biotechnology field. We can give you no assurances that we can find satisfactory replacements for these key executive
officers at all, or on terms that are not unduly expensive or burdensome to us. Although Mr. Joyce and Dr. Tullis have signed employment
agreements providing for their continued service to us, these agreements will not preclude them from leaving us should we be unable
to compete with offers for employment they may receive from other companies. 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. If
any of our key officers were to leave us, it could make it impossible, if not cause substantial delays and costs, to implement
our long term business objectives and growth.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our inability to attract and retain qualified personnel
could impede our ability to achieve our business objectives.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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, our
Chief Financial Officer, and an executive assistant. We utilize, whenever appropriate, contract and part-time professionals in
order to conserve cash and resources. We currently employ two corporate communications groups on a part-time basis.&nbsp;&nbsp;We
also use several consultants to assist us with certain portions of the work under our Defense Advanced Research Projects Agency
contract. At Exosome Sciences, Inc., our majority-owned subsidiary, we have three full-time employees, comprised of Exosome Sciences,
Inc.&rsquo;s Chief Science Officer, Clinical Research Director, and a research scientist.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 personnel. Competition
for these individuals, especially in San Diego, California, 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. Also, if we are required to
attract personnel from other parts of the U.S. or abroad, we may have significant difficulty doing so due to the high cost of living
in the Southern California area and due to the costs incurred with transferring personnel to the area. If we cannot attract and
retain qualified staff and executives, we will be unable to develop our products and achieve regulatory clearance, and our business
could fail.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We plan to grow rapidly which will strain our resources;
our inability to manage our growth could delay or derail implementation of our business objectives. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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. If we cannot manage our growth initiatives, we will be unable to commercialize
our products on a large scale in a timely manner, if at all, and our business could fail.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>As a public company with limited financial resources undertaking
the launch of new medical technologies, we may have difficulty attracting and retaining executive management and directors. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The directors and management of publicly
traded corporations are increasingly concerned with the extent of their personal exposure to lawsuits and stockholder 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&rsquo; and officers&rsquo; liability insurance to pay
on a timely basis the costs incurred in defending such claims. We currently do carry limited directors&rsquo; and officers&rsquo;
liability insurance. Directors&rsquo; and officers&rsquo; liability insurance is expensive and difficult to obtain. If we are unable
to continue or provide directors&rsquo; and officers&rsquo; 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&rsquo; and officers&rsquo;
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. In addition, our products could potentially be harmful to users, and we are exposed to claims of product
liability including for injury or death. We have limited insurance and may not be able to afford robust coverage even as our products
are introduced into the market. As a company with limited resources and potential exposures to management, we will have a more
difficult time attracting and retaining management and outside independent directors than a more established public or private
company due to these enhanced duties, obligations and potential liabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>If we fail to comply with extensive regulations of U.S.
and foreign regulatory agencies, the commercialization of our products could be delayed or prevented entirely. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Hemopurifier 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 U.S. Food and Drug
Administration, 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 U.S. Food and Drug Administration, or any foreign regulatory agencies, to
be commercially marketed and sold. The process of obtaining and complying with U.S. Food and Drug Administration and
other governmental regulatory approvals and regulations in the U.S. and in foreign countries is costly, time consuming,
uncertain and subject to unanticipated delays. Obtaining such regulatory approvals, if any, can take 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>The U.S. Food and Drug Administration may refuse to approve an application if they believe that applicable regulatory criteria are not satisfied.</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>The U.S. Food and Drug Administration may require additional testing for safety and effectiveness.</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>The U.S. Food and Drug Administration may interpret data from pre-clinical testing and clinical trials in different ways than we interpret them.</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>If regulatory approval of a product is granted, the approval may be limited to specific indications or limited with respect to its distribution.</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>The U.S. Food and Drug Administration may change their approval policies and/or adopt new regulations.</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Failure to comply with these or other regulatory
requirements of the U.S. Food and Drug Administration may subject us to administrative or judicially imposed sanctions, including:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>warning letters;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>civil penalties;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>criminal penalties;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>injunctions;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>product seizure or detention;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>product recalls; and</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>total or partial suspension of productions.</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Delays in successfully completing our planned clinical
trials could jeopardize our ability to obtain regulatory approval. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our business prospects will depend on our
ability to complete clinical trials, obtain satisfactory results, obtain required regulatory approvals and successfully commercialize
our Hemopurifier 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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>serious adverse events related to our medical device candidates;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>unsatisfactory results of any clinical trial;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>the failure of our principal third-party investigators to perform our clinical trials on our anticipated schedules; and/or</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>different interpretations of our pre-clinical and clinical data, which could initially lead to inconclusive results.</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>The independent clinical investigators upon whom we
rely to conduct our clinical trials may not be diligent, careful or timely and may make mistakes in the conduct of our
clinical trials all of which could delay our progress. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We depend upon 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 U.S. Food and Drug Administration 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We are and will be exposed to product
liability risks, and clinical and preclinical liability risks, which could place a substantial financial burden upon us should
we be sued.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our business exposes
us to potential product liability and other liability risks that are inherent in the testing, manufacturing and marketing of medical
devices. We cannot be sure that claims will not be asserted against us. A successful liability claim or series of claims brought
against us could have a material adverse effect on our business, financial condition and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We cannot give assurances
that we will be able to continue to obtain or maintain adequate product liability insurance on acceptable terms, if at all, or
that such insurance will provide adequate coverage against potential liabilities. Claims or losses in excess of any product liability
insurance coverage that we may obtain could have a material adverse effect on our business, financial condition and results of
operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Hemopurifier 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 testing, manufacturing,
marketing and sale of medical products. We have recently obtained general clinical trial liability insurance coverage. We cannot
give assurances that our 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 effect 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The approval requirements for medical
products used to fight bioterrorism are still evolving, and we cannot be certain any products we develop for such uses would meet
these requirements. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are developing product candidates based
upon current governmental policies regulating these medical countermeasure treatments. For instance, we intend to pursue U.S. Food
and Drug Administration approval of our proprietary pathogen filtration devices to treat infectious agents under requirements published
by the U.S. Food and Drug Administration that allow the U.S. Food and Drug Administration 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. 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 U.S. Food and Drug Administration
will approve our proprietary pathogen filtration devices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>The Hemopurifier was used to treat one patient suffering
from Ebola, and we have received a supplement to our investigational device exemption to establish protocols to treat Ebola patients
in the U.S.; however you should not construe these events as demonstrating that the device is effective in treating Ebola.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In October 2014, physicians at the Frankfurt
University Hospital in Frankfurt, Germany administered Hemopurifier therapy in a 6.5-hour treatment session to a patient infected
with Ebola. This treatment was made on an emergency basis. The patient was administered Hemopurifier therapy through special approval
from The Federal Institute for Drugs and Medical Devices (Bundesinstitut fur Arzneimittel und Medizinprodukte, BfArM), an independent
federal higher authority within the portfolio of the Federal Ministry of Health of Germany. While we believe the results of the
treatment of the Ebola patient in Germany to be positive with respect to the usage of the Hemopurifier to combat Ebola, no medical
organization or regulatory organization, inside or outside the U.S., has cleared the use of the device for Ebola treatment.</P>

<P STYLE="margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, although the U.S.
Food and <FONT STYLE="font: 10pt Times New Roman, Times, Serif">Drug Administration approved a supplement to our
investigational device exemption to establish a protocol for the treatment of Ebola patients in the U.S., this approval is
very limited and the results of such protocol and potential treatments, if any, cannot be predicted. The usefulness of the
Hemopurifier in treating Ebola is still unproven in any clinical or regulatory process in the U.S. or elsewhere. Even if we
enroll patients in the Ebola protocol, the results of such treatments may not demonstrate the safety and efficacy of the
device, may be equivocal or may otherwise not be sufficient to obtain approval of the Hemopurifier for any uses associated
with Ebola. In addition, the approval of the supplement to our investigational device exemption does not in any way ensure
clearance or approval of the Hemopurifier device for any purpose. We cannot assure you that the Hemopurifier will be proven
to be useful in the treatment of Ebola or that it will ever be approved by U.S. or foreign regulatory agencies for such use,
or if approved, successfully commercialized by us for such use. We may never commercialize the Hemopurifier specifically for
use in treating Ebola.</FONT></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Related to Our Intellectual Property and Related Litigation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We rely upon licenses and patent rights from third parties
which are subject to termination or expiration.&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We rely upon third party licenses
for the development of specific uses for our Hemopurifier devices, including in the area of cancer treatment. Specifically,
we are researching, developing and testing cancer-related applications for our devices under a license with the London
Health Science Center Research, Inc. and Mr. Thomas Ichim. Should any of our licenses be prematurely terminated for any
reason, or if the patents and intellectual property owned by such entities that we have licensed should be challenged or
defeated by third parties, our research efforts could be materially and adversely affected. We cannot assure you that any of
our licenses will continue in force for as long as we require for our research, development and testing of cancer treatments.
We cannot assure you that, should our licenses terminate, or should the underlying patents and intellectual property be
challenged or defeated, suitable replacements can be obtained or developed on terms acceptable to us, if at all. There is
also the related risk that we may not be able to make the required payments under any patent license, in which case we may
lose to ability to use one or more of the licensed patents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We could become subject to intellectual property
litigation that could be costly, result in the diversion of management&rsquo;s time and efforts, require us to pay damages,
prevent us from selling our commercially available products and/or reduce the margins we may realize
from our products . </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The medical devices industry is characterized
by extensive litigation and administrative proceedings over patent and other intellectual property rights. Whether a product infringes
a patent involves complex legal and factual issues, and the determination is often uncertain. There may be existing patents of
which we are unaware that our products under development may inadvertently infringe. The likelihood that patent infringement claims
may be brought against us increases as the number of participants in the infectious market increases and as we achieve more visibility
in the market place and introduce products to market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Any infringement claim against us, even
if without merit, may cause us to incur substantial costs, and would place a significant strain on our financial resources, divert
the attention of management from our core business, and harm our reputation. In some cases, litigation may be threatened or brought
by a patent holding company or other adverse patent owner who has no relevant product revenues and against whom our patents may
provide little or no deterrence. If we were found to infringe any patents, we could be required to pay substantial damages, including
triple damages if an infringement is found to be willful. We also could be required to pay royalties and could be prevented from
selling our products unless we obtain a license or are able to redesign our products to avoid infringement. We may not be able
to obtain a license enabling us to sell our products on reasonable terms, or at all, and we cannot assure you that we would be
able to redesign our products in a way that would not infringe those patents. If we fail to obtain any required licenses or make
any necessary changes to our technologies or the products that incorporate them, we may be unable to commercialize one or more
of our products or may have to withdraw products from the market, all of which would have a material adverse effect on our business,
financial condition and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>If the combination of patents, trade secrets and contractual
provisions upon which we rely to protect our intellectual property is inadequate, our ability to commercialize our products successfully
will be harmed.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our success depends significantly on our
ability to protect our proprietary rights to the technologies incorporated in our products. We currently have three issued U.S.
patents and twelve pending U.S. patent applications. We also have nine issued international patents and have applied for nine additional
international patents. Our issued patents begin to expire in 2019, with the last of these patents expiring in 2027. We rely on
a combination of patent protection, trade secret laws and nondisclosure, confidentiality and other contractual restrictions to
protect our proprietary technology. However, these may not adequately protect our rights or permit us to gain or keep any competitive
advantage.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The issuance of a patent is not conclusive
as to its scope, validity or enforceability. The scope, validity or enforceability of our issued patents can be challenged in litigation
or proceedings before the U.S. Patent and Trademark Office or foreign patent offices where our applications are pending. The U.S.
Patent and Trademark Office or foreign offices may deny or require significant narrowing of claims in our pending patent applications.
Patents issued as a result of the pending patent applications, if any, may not provide us with significant commercial protection
or be issued in a form that is advantageous to us. Proceedings before the U.S. Patent and Trademark Office or foreign offices could
result in adverse decisions as to the priority of our inventions and the narrowing or invalidation of claims in issued patents.
The laws of some foreign countries may not protect our intellectual property rights to the same extent as the laws of the U.S.,
if at all. Some of our patents may expire before we receive U.S. Food and Drug Administration approval to market our products in
the U.S. or we receive approval to market our products in a foreign country. Although we believe that certain patent applications
and/or other patents issued more recently will help protect the proprietary nature of the Hemopurifier treatment technology, we
cannot assure you that this protection will be sufficient to protect us during the development of that technology.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our competitors may successfully challenge
and invalidate or render unenforceable our issued patents, including any patents that may issue in the future, which could prevent
or limit our ability to market our products and could limit our ability to stop competitors from marketing products that are substantially
equivalent to ours. In addition, competitors may be able to design around our patents or develop products that provide outcomes
that are comparable to our products but that are not covered by our patents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have also entered into confidentiality
and assignment of intellectual property agreements with all of our employees, consultants and advisors directly involved in the
development of our technology as one of the ways we seek to protect our intellectual property and other proprietary technology.
However, these agreements may not be enforceable or may not provide meaningful protection for our trade secrets or other proprietary
information in the event of unauthorized use or disclosure or other breaches of the agreements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the event a competitor infringes upon
any of our patents or other intellectual property rights, enforcing our rights may be difficult, time consuming and expensive,
and would divert management&rsquo;s attention from managing our business. We cannot assure you that we will be successful on the
merits in any enforcement effort. In addition, we may not have sufficient resources to litigate, enforce or defend our intellectual
property rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We may rely on licenses for
new technology, which may affect our continued operations with respect thereto.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As we develop our technology, we may need
to license additional technologies to optimize the performance of our products. We may not be able to license these technologies
on commercially reasonable terms or at all. In addition, we may fail to successfully integrate any licensed technology into our
proposed products. Our inability to obtain any necessary licenses could delay our product development and testing until alternative
technologies can be identified, licensed and integrated. The inability to obtain any necessary third-party licenses could cause
us to abandon a particular development path, which could seriously harm our business, financial position and results of our operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>New technology may lead to our competitors developing
superior products which would reduce demand for our products.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Research into technologies similar to ours
is proceeding at a rapid pace, and many private and public companies and research institutions are actively engaged in the development
of products similar to ours. These new technologies may, if successfully developed, offer significant performance or price advantages
when compared with our technologies. There is no assurance that our existing patents or our pending and proposed patent applications
will offer meaningful protection if a competitor develops a novel product based on a new technology.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If we are unable to protect our proprietary
technology and preserve our trade secrets, we will increase our vulnerability to competitors which could materially adversely impact
our ability to remain in business.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our ability to successfully commercialize
our products will depend on our ability to protect those products and our technology with domestic and foreign patents. We will
also need to continue to preserve our trade secrets. The issuance of a patent is not conclusive as to its validity or as to the
enforceable scope of the claims of the patent. The patent positions of technology companies, including us, are uncertain and involve
complex legal and factual issues.&nbsp;We cannot assure you that our patents will prevent other companies from developing similar
products or products which produce benefits substantially the same as our products, or that other companies will not be issued
patents that may prevent the sale of our products or require us to pay significant licensing fees in order to market our products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">From time to time, we may need to obtain
licenses to patents and other proprietary rights held by third parties in order to develop, manufacture and market our products.
If we are unable to timely obtain these licenses on commercially reasonable terms, our ability to commercially exploit such products
may be inhibited or prevented. Additionally, we cannot assure investors that any of our products or technology will be patentable
or that any future patents we obtain will give us an exclusive position in the subject matter claimed by those patents. Furthermore,
we cannot assure investors that our pending patent applications will result in issued patents, that patent protection will be secured
for any particular technology, or that our issued patents will be valid or enforceable or provide us with meaningful protection.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I></I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>If we are required to engage in expensive and lengthy
litigation to enforce our intellectual property rights, such litigation could be very costly and the results of such litigation
may not be satisfactory.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Although we have entered into invention
assignment agreements with our employees and with certain advisors, and we routinely enter into confidentiality agreements with
our contract partners, if those employees, advisors or contract partners develop inventions or processes independently that may
relate to products or technology under development by us, disputes may arise about the ownership of those inventions or processes.
Time-consuming and costly litigation could be necessary to enforce and determine the scope of our rights under these agreements.
In addition, we may be required to commence litigation to enforce such agreements if they are violated, and it is certainly possible
that we will not have adequate remedies for breaches of our confidentiality agreements as monetary damages may not be sufficient
to compensate us. In addition, we may be unable to fund the costs of such litigation to a satisfactory conclusion, which could
leave us without recourse to enforce contracts that protect our intellectual property rights.<B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Other companies may claim that our technology infringes
on their intellectual property or proprietary rights and commence legal proceedings against us which could be time-consuming and
expensive and could result in our being prohibited from developing, marketing, selling or distributing our products.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Because of the complex and difficult legal
and factual questions that relate to patent positions in our industry, we cannot assure you that our products or technology will
not be found to infringe upon the intellectual property or proprietary rights of others. Third parties may claim that our products
or technology infringe on their patents, copyrights, trademarks or other proprietary rights and demand that we cease development
or marketing of those products or technology or pay license fees. We may not be able to avoid costly patent infringement litigation,
which will divert the attention of management away from the development of new products and the operation of our business. We cannot
assure investors that we would prevail in any such litigation. If we are found to have infringed on a third party&rsquo;s intellectual
property rights, we may be liable for money damages, encounter significant delays in bringing products to market or be precluded
from manufacturing particular products or using particular technology.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Other parties may challenge certain of our
foreign patent applications. If such parties are successful in opposing our foreign patent applications, we may not gain the protection
afforded by those patent applications in particular jurisdictions and may face additional proceedings with respect to similar patents
in other jurisdictions, as well as related patents. The loss of patent protection in one jurisdiction may influence our ability
to maintain patent protection for the same technology in other jurisdictions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Related to U.S. Government Contracts</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our revenues are almost entirely derived from one U.S.
Government contract.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have derived and expect for the near
future to continue to derive substantially all of our revenue under our Defense Advanced Research Projects Agency
contract.&nbsp;&nbsp;If the Defense Advanced Research Projects Agency chooses not to continue our contract in year five (commencing
October 1, 2015 through September 30, 2016) of the contract, our revenues could be substantially reduced.&nbsp;&nbsp;In addition,
if we are unable to meet any of the Defense Advanced Research Projects Agency contract milestones to the satisfaction of the Defense
Advanced Research Projects Agency, if at all, we may not earn payments under the contract. Any reduction in our revenues, or the
termination of the Defense Advanced Research Projects Agency contract for any reason, could have a material and adverse effect
on our business and operations. In addition, the Defense Advanced Research Projects Agency has the right to unilaterally cancel
the contract at any time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We may not obtain additional U.S. Government contracts
to further develop our technology.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The U.S. Government has undertaken commitments
to help secure improved countermeasures against bioterrorism and improved medical treatments for U.S. armed forces, and we were
successful in entering into one such contract with the Defense Advanced Research Projects Agency.&nbsp;&nbsp;However, we can give
no assurances that we will be successful in obtaining additional government grants or contracts.&nbsp;&nbsp;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 additional U.S. Government
grants or contracts utilizing our Hemopurifier<SUP> </SUP>platform technology.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>U.S. Government agencies have special contracting
requirements including a right to audit us which create additional risks</I></B>; <B><I>a negative audit would be detrimental
to us.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our business plan to utilize the Aethlon
ADAPT system is likely to involve contracts with the U.S. Government. Such 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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>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;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>audit and object to our contract-related costs and fees, including allocated indirect costs;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>control and potentially prohibit the export of our products; and</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>change certain terms and conditions in our contracts.</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a U.S. Government contractor, we are
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 we have not had
any government audits and reviews to date, 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our Defense Advanced Research Projects Agency Contract
is a fixed price contract, which may not adequately cover our costs in performance should those costs increase.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our contract with the Defense Advanced Research
Projects Agency is on a firm fixed price basis, which means that we are required to deliver our products at a fixed price regardless
of the actual costs we incur and to absorb any costs in excess of the fixed price.&nbsp; If we have not accurately estimated the
costs of expenses to perform the contract, we may not have positive revenue and we may incur losses to cover our costs.&nbsp;We
expect that our future contracts, if any, with the U.S. Government also may be fixed price contracts. Estimating costs that are
related to performance in accordance with contract specifications is difficult, particularly where the period of performance is
over several years. Our failure to anticipate technical problems, estimate costs accurately or control costs during performance
of a fixed price contract could reduce the profitability of a fixed price contract or cause a loss, which could in turn harm our
operating results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>As a U.S. Government contractor, we are subject to a number
of procurement rules and regulations.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Government contractors must comply
with specific procurement regulations and other requirements. These requirements, although customary in government contracts, impact
our performance and compliance costs. In addition, current U.S. Government budgetary constraints could lead to changes in the procurement
environment, including the Department of Defense&rsquo;s recent initiative focused on efficiencies, affordability and cost growth
and other changes to its procurement practices. If and to the extent such changes occur, they could impact our results of operations
and liquidity, and could affect whether and, if so, how we pursue certain opportunities and the terms under which we are able to
do so.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, failure to comply with these
regulations and requirements could result in reductions of the value of contracts, contract modifications or termination, and the
assessment of penalties and fines, which could negatively impact our results of operations and financial condition. Our failure
to comply with these regulations and requirements could also lead to suspension or debarment, for cause, from government contracting
or subcontracting for a period of time. Among the causes for debarment are violations of various statutes, including those related
to procurement integrity, export control, government security regulations, employment practices, protection of the environment,
accuracy of records and the recording of costs, and foreign corruption. The termination of our government contract as a result
of any of these acts could have a negative impact on our results of operations and financial condition and could have a negative
impact on our reputation and ability to procure other government contracts in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>In fulfilling our U.S. Government contract we
depend on a predictable supply of raw materials and components.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are dependent upon the delivery by suppliers
of materials and the assembly by subcontractors of major components and subsystems used in our products in a timely and satisfactory
manner and in full compliance with applicable terms and conditions. Some products require relatively scarce raw materials. We are
generally subject to specific procurement requirements, which may, in effect, limit the suppliers and subcontractors we may utilize.
In some instances, we are dependent on sole-source suppliers. If any of these suppliers or subcontractors fails to meet our needs,
we may not have readily available alternatives. In addition, some of our suppliers or subcontractors may be impacted by the recent
global financial crisis, which could impair their ability to meet their obligations to us. If we experience a material supplier
or subcontractor problem, our ability to satisfactorily and timely complete our clinical trial or delivery obligations could be
negatively impacted which could result in reduced sales, termination of contracts and damage to our reputation and relationships
with clinical trial providers and if applicable, the U.S. Government. We could also incur additional costs in addressing such a problem.
Any of these events could have a negative impact on our results of operations and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Risks Relating to Our Common Stock, this Offering and Our
Corporate Governance</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Historically we have not paid dividends
on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have never paid cash dividends on our
common stock. We intend to retain our future earnings, if any, to fund operational and capital expenditure needs of our business,
and we do not anticipate paying any cash dividends in the foreseeable future. Furthermore, future financing instruments may do
the same. As a result, capital appreciation, if any, of our common stock will be the sole source of gain for our common stockholders
in the foreseeable future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"><B><I>Our stock price is speculative
and there is a risk of litigation.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; background-color: white">The trading price
of our common stock has in the past and may in the future be subject to wide fluctuations in response to factors such as the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; background-color: white">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
    <td style="width: 60px">&nbsp;</td>
    <td style="width: 30px">&bull;</td>
    <td>revenue or results of operations in any quarter failing to meet the expectations, published or otherwise, of the investment community;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
    <td style="width: 60px">&nbsp;</td>
    <td style="width: 30px">&bull;</td>
    <td>reduced investor confidence in equity markets, due in part to corporate collapses in recent years;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
    <td style="width: 60px">&nbsp;</td>
    <td style="width: 30px">&bull;</td>
    <td>speculation in the press or analyst community;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
    <td style="width: 60px">&nbsp;</td>
    <td style="width: 30px">&bull;</td>
    <td>wide fluctuations in stock prices, particularly with respect to the stock prices for other technology companies;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
    <td style="width: 60px">&nbsp;</td>
    <td style="width: 30px">&bull;</td>
    <td>announcements of technological innovations by us or our competitors;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
    <td style="width: 60px">&nbsp;</td>
    <td style="width: 30px">&bull;</td>
    <td>new products or the acquisition of significant customers by us or our competitors;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
    <td style="width: 60px">&nbsp;</td>
    <td style="width: 30px">&bull;</td>
    <td>changes in interest rates;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
    <td style="width: 60px">&nbsp;</td>
    <td style="width: 30px">&bull;</td>
    <td>changes in investors&rsquo; beliefs as to the appropriate price-earnings ratios for us and our competitors;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
    <td style="width: 60px">&nbsp;</td>
    <td style="width: 30px">&bull;</td>
    <td>changes in recommendations or financial estimates by securities analysts who track our common stock or the stock of other battery companies;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
    <td style="width: 60px">&nbsp;</td>
    <td style="width: 30px">&bull;</td>
    <td>changes in management;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
    <td style="width: 60px">&nbsp;</td>
    <td style="width: 30px">&bull;</td>
    <td>sales of common stock by directors and executive officers;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
    <td style="width: 60px">&nbsp;</td>
    <td style="width: 30px">&bull;</td>
    <td>rumors or dissemination of false or misleading information, particularly through Internet chat rooms, instant messaging, and other rapid-dissemination methods;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
    <td style="width: 60px">&nbsp;</td>
    <td style="width: 30px">&bull;</td>
    <td>conditions and trends in the battery industry generally;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
    <td style="width: 60px">&nbsp;</td>
    <td style="width: 30px">&bull;</td>
    <td>the announcement of acquisitions or other significant transactions by us or our competitors;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
    <td style="width: 60px">&nbsp;</td>
    <td style="width: 30px">&bull;</td>
    <td>adoption of new accounting standards affecting our industry;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
    <td style="width: 60px">&nbsp;</td>
    <td style="width: 30px">&bull;</td>
    <td>general market conditions;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
    <td style="width: 60px">&nbsp;</td>
    <td style="width: 30px">&bull;</td>
    <td>domestic or international terrorism and other factors; and</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
    <td style="width: 60px">&nbsp;</td>
    <td style="width: 30px">&bull;</td>
    <td>the other factors described in this section.</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Fluctuations in the price of our common
stock may expose us to the risk of securities class action lawsuits. Although no such lawsuits are currently pending against us
and we are not aware that any such lawsuit is threatened to be filed in the future, there is no assurance that we will not be sued
based on fluctuations in the price of our common stock. Defending against such suits could result in substantial cost and divert
management&rsquo;s attention and resources. In addition, any settlement or adverse determination of such lawsuits could subject
us to significant liability.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our common stock is subject to the penny stock rules,
which could adversely affect your ability to sell our stock.&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 (Section 15(h)
of the Securities Exchange Act of 1934, as amended, and Rules 3a51-1 and 15g-1 through 15g-100 promulgated under the Securities
Exchange Act of 1934, as amended). 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 Securities and Exchange Commission 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Stockholders should be aware that, according
to Securities and Exchange Commission 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our common stock has had an unpredictable trading volume
which means you may not be able to sell our shares at or near asking prices or at all.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Trading in our common shares in the over-the-counter
market historically has been volatile and often has been thin, 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, 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>The market price for our common stock is volatile; you
may not be able to sell our common stock at or above the price you have paid for them, which may result in losses to you. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 26, 2014, the high
and low closing sale prices of a share of our common stock were $0.57 and $0.10, respectively. The volatility in our share price
is attributable to a number of factors. First, as noted above, trading in our common shares often has been thin. As a consequence
of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders 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 investment due to our
limited operating history, limited amount of revenue, lack of 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, 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 the sale of shares or the availability of common shares for sale at any time
will have on the prevailing market price.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>The Depository Trust Company imposed
restrictions upon electronic trading of our common stock, which negatively affected liquidity of the stock and our ability to raise
capital. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In September 2011, The Depository Trust
Company placed a &quot;chill&quot; on the electronic clearing of trades in our shares which led to some brokerage firms being unwilling
to accept certificates and/or electronic deposits of our stock. We have since been successful in lifting the restrictions and our
shares now clear electronically making more brokers willing to trade in our common stock. There can be no assurances that that
The Depository Trust Company will not again place a chill on our common stock. A chill, if placed on our common stock, would affect
the liquidity of our shares which may make it difficult to purchase or sell shares in the open market. It may also have an adverse
effect on our ability to raise capital since investors may be unable to resell shares into the market. Our inability to raise capital
on terms acceptable to us, if at all, could have a material and adverse effect on our business and operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our directors and officers own or control approximately
13% of our outstanding common shares which may limit your ability to propose new management or influence the overall direction
of the business; this concentration of control may also discourage potential takeovers that could otherwise provide a premium to
you.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of December 31, 2014, our officers and
directors beneficially own or control approximately 13% 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 stockholders 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>A large number of our common shares are issuable upon
exercise of outstanding convertible securities which, if exercise or converted, would be dilutive to your holdings. &nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of December 31, 2014, there are outstanding
purchase options and warrants entitling the holders to purchase 100,750,640 common shares at a weighted average exercise price
of $0.17 per share. This includes 1,305,230 warrants that are conditional upon the exercise of other warrants or conversion of
certain convertible debt instruments. There are 9,590,333 shares underlying promissory notes convertible into common stock at a
weighted average exercise price of $0.08.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The exercise price for all of our outstanding
options and warrants, or the conversion price of our convertible notes, may be less than your cost to acquire our common shares.
In the event of the exercise or conversion of these securities, you could suffer substantial dilution of your investment in terms
of your percentage ownership in us as well as the book value of your common shares. In addition, the holders of the convertible
notes, common share purchase options or warrants may sell common shares in tandem with their exercise or conversion of those securities
to finance that exercise or conversion, 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 or conversion of the notes.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our issuance of additional common shares, or convertible
securities, would be dilutive to your holdings.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are entitled under our Articles of Incorporation
to issue up to 500,000,000 shares of common stock. We have reserved for issuance 110,416,475 shares of common stock for existing
options, warrants and convertible notes. As of December 31, 2014, we have issued and outstanding 327,739,188 shares of common
stock. As a result, as of December 31, 2014 we had 61,844,337 common shares available for issuance to new investors or for use
to satisfy indebtedness or pay service providers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Board of Directors may generally issue
shares of common stock, or options or warrants to purchase those shares, without further approval by our stockholders 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our issuance of additional shares of common stock in satisfaction
of services, or to repay indebtedness, would be dilutive to your holdings.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Board of Directors may generally issue
shares of common stock to pay for debt or services, without further approval by our stockholders based upon such factors that our
Board of Directors may deem relevant at that time. For the past four fiscal years (ending March 31, 2014), we issued a total of
71,477,509 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 43% and 22.8% for the years ended March 31, 2014 and 2013,
respectively. During the period March 31, 2014 to December 31, 2014, we issued a total of 42,502,024 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 74%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the past four fiscal years (ending March
31, 2014), we issued a total of 11,547,751 shares as payment for services. The average price discount of common stock issued for
services during this period, weighted by the number of shares issued was 16.0% and 11.8% for the years ended March 31, 2014 and
2013, respectively. 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 at various discounts under circumstances
we may deem appropriate at the time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our officers and directors are entitled to indemnification
from us for liabilities under our articles of incorporation, which could be costly to us and may discourage the exercise of stockholder
rights.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Articles of Incorporation contains provisions
which eliminate the liability of our directors for monetary damages to our company and stockholders. Our by-laws 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 that 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 stockholders
against our directors, officers and employees even though such actions, if successful, might otherwise benefit our company and
stockholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our by-laws and Nevada law may discourage, delay or prevent
a change of control of our company or changes in our management, would have the result of depressing the trading price of our common
stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Provisions of Nevada anti-takeover law (NRS
78.378 <I>et seq.</I>) could have the effect of delaying or preventing a third party from acquiring us, even if the acquisition
arguably could benefit our stockholders. Various provisions of our by-laws may delay, defer or prevent a tender offer or takeover
attempt of us that a stockholder might consider in his or her best interest. Our by-laws may be adopted, amended or repealed by
the affirmative vote of the holders of at least a majority of our outstanding shares of capital stock entitled to vote for the
election of directors, and except as provided by Nevada law, our Board of Directors shall have the power to adopt, amend or repeal
the by-laws by a vote of not less than a majority of our directors. The interests of these stockholders and directors may not be
consistent with your interests, and they may make changes to the by-laws that are not in line with your concerns.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our authorized but unissued shares of common
stock are available for our Board or Directors to issue without stockholder approval. We may use these additional shares for a
variety of corporate purposes, however, faced with an attempt to obtain control of us by means of a proxy context, tender offer,
merger or other transaction our Board of Directors acting alone and without approval of our stockholders can issue large amounts
of capital stock as part of a defense to a take-over challenge.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The existence of the foregoing provisions
and other potential anti-takeover measures could limit the price that investors might be willing to pay in the future for shares
of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive
a premium for your common stock in an acquisition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>We incur substantial costs as a result of being a public
company, and our management expects to devote substantial time to public company compliance programs. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a public company, we incur significant
legal, insurance, accounting and other expenses, including costs associated with public company reporting. We intend to invest
resources to comply with evolving laws, regulations and standards, and this investment will result in increased general and administrative
expenses and may divert management&rsquo;s time and attention from product development and commercialization activities. If our
efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies
due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us, and our business may
be harmed. These laws and regulations could make it more difficult and costly for us to obtain director and officer liability insurance
for our directors and officers, and we may be required to accept reduced coverage or incur substantially higher costs to obtain
coverage. These factors could also make it more difficult for us to attract and retain qualified executive officers and qualified
members of our Board of Directors, particularly to serve on our audit and compensation committees. In addition, if we are unable
to continue to meet the legal, regulatory and other requirements related to being a public company, we may not be able to maintain
the quotation of our common stock OTCQB Marketplace or any senior market to which we may apply for listing, which would likely
have a material adverse effect on the trading price of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Our internal control over financial reporting does not
currently meet the standards required by Section&nbsp;404 of the Sarbanes-Oxley Act of 2002, and failure to achieve and maintain
effective internal control over financial reporting in accordance with Section&nbsp;404 of the Sarbanes-Oxley Act of 2002 could
result in material misstatements of our annual or interim financial statements and have a material adverse effect on our business
and share price. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are not currently required to make a
formal assessment of the effectiveness of our internal control over financial reporting for purposes of compliance with the Securities
and Exchange Commission&rsquo;s rules that implement Section&nbsp;404 of the Sarbanes-Oxley Act of 2002. We are, however, required
to comply with certain of these rules, which require management to certify financial and other information in our quarterly and
annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting commencing
with our second annual report. This assessment needs to include the disclosure of any material weaknesses or significant deficiencies
in our internal control over financial reporting identified by our management or our former independent registered public accounting
firm. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such
that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented
or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control
over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible
for oversight of our financial reporting, including the audit committee of the Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with our audits for the years
ended March&nbsp;31, 2014 and 2013, and their review of our subsequent interim financial statements, our Chief Executive Officer
and Chief Financial Officer concluded that, as of the end of such periods, due to the material weaknesses in our internal controls
over financial reporting identified below, our disclosure controls and procedures are not effective in recording, processing, summarizing
and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Securities
Exchange Act of 1934, as amended, and are not effective in ensuring that information required to be disclosed by us in the reports
that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In assessing our internal controls and procedures
for fiscal 2014, our management identified a material weakness relating to a lack of sufficient segregation of duties, particularly
in cash disbursements. Specifically, this material weakness is such that the design of controls over the area of cash disbursements
relies primarily on detective controls and could be strengthened by adding preventative controls to properly safeguard company
assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our management has also identified a
material weakness relating to a lack of sufficient personnel in the accounting function due to our limited resources with
appropriate skills, training and experience to perform the review processes to ensure the complete and proper application of
generally accepted accounting principles. Specifically, this material weakness led to segregation of duties issues and
resulted in audit adjustments to the annual consolidated financial statements and revisions to related disclosures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are in the process of developing and
implementing remediation plans to address its material weaknesses. We cannot assure you that our plans will sufficiently address
the identified deficiencies, nor can we assure you that there will not be material weaknesses or significant deficiencies in our
internal controls in the future. Additionally, in the event that our internal control over financial reporting is perceived as
inadequate, or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating
results and the trading price of our common stock could decline.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This prospectus contains forward-looking
statements that are based on our management&rsquo;s beliefs and assumptions and on information currently available to us. The forward-looking
statements are contained principally in, but not limited to, the sections entitled &ldquo;Prospectus Summary,&rdquo; &ldquo;Risk
Factors,&rdquo; &ldquo;Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations&rdquo; and &ldquo;Business.&rdquo;
These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties,
and other factors that may cause our or our industry&rsquo;s actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity, performance or achievements expressed or implied by these
forward-looking statements. Forward-looking statements include, but are not limited to, statements about:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
    <td style="width: 5%">&nbsp;</td>
    <td style="vertical-align: top; width: 2%">&bull;</td>
    <td style="vertical-align: top; width: 1%">&nbsp;</td>
    <td style="vertical-align: top">our ability to achieve sufficient market acceptance of any of our products or product candidates; </td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
    <td style="width: 5%">&nbsp;</td>
    <td style="vertical-align: top; width: 2%">&bull;</td>
    <td style="vertical-align: top; width: 1%">&nbsp;</td>
    <td style="vertical-align: top">our perception of the growth in the size of the potential market for our products and product candidates; </td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
    <td style="width: 5%">&nbsp;</td>
    <td style="vertical-align: top; width: 2%">&bull;</td>
    <td style="vertical-align: top; width: 1%">&nbsp;</td>
    <td style="vertical-align: top">our estimate of the advantages of our products; </td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
    <td style="width: 5%">&nbsp;</td>
    <td style="vertical-align: top; width: 2%">&bull;</td>
    <td style="vertical-align: top; width: 1%">&nbsp;</td>
    <td style="vertical-align: top">our ability to become a profitable company; </td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
    <td style="width: 5%">&nbsp;</td>
    <td style="vertical-align: top; width: 2%">&bull;</td>
    <td style="vertical-align: top; width: 1%">&nbsp;</td>
    <td style="vertical-align: top">our estimates regarding our needs for additional financing and our ability to obtain such additional financing on suitable terms; </td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
    <td style="width: 5%">&nbsp;</td>
    <td style="vertical-align: top; width: 2%">&bull;</td>
    <td style="vertical-align: top; width: 1%">&nbsp;</td>
    <td style="vertical-align: top">our ability to succeed in obtaining U.S. Food and Drug Administration clearance or approvals for our product candidates; </td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
    <td style="width: 5%">&nbsp;</td>
    <td style="vertical-align: top; width: 2%">&bull;</td>
    <td style="vertical-align: top; width: 1%">&nbsp;</td>
    <td style="vertical-align: top">the timing, costs and other limitations involved in obtaining regulatory clearance or approval for any of our product candidates and, thereafter, continued compliance with governmental regulation of our existing products and activities; </td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
    <td style="width: 5%">&nbsp;</td>
    <td style="vertical-align: top; width: 2%">&bull;</td>
    <td style="vertical-align: top; width: 1%">&nbsp;</td>
    <td style="vertical-align: top">our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others; </td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
    <td style="width: 5%">&nbsp;</td>
    <td style="vertical-align: top; width: 2%">&bull;</td>
    <td style="vertical-align: top; width: 1%">&nbsp;</td>
    <td style="vertical-align: top">our ability to obtain sufficient quantities and satisfactory quality of raw materials to meet our manufacturing needs; </td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;&nbsp;&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
    <td style="width: 5%">&nbsp;</td>
    <td style="vertical-align: top; width: 2%">&bull;</td>
    <td style="vertical-align: top; width: 1%">&nbsp;</td>
    <td style="vertical-align: top">our ability to secure manufacturing capacity to meet future demand; </td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
    <td style="width: 5%">&nbsp;</td>
    <td style="vertical-align: top; width: 2%">&bull;</td>
    <td style="vertical-align: top; width: 1%">&nbsp;</td>
    <td style="vertical-align: top">the timing of and our ability to conduct clinical trials; </td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
    <td style="width: 5%">&nbsp;</td>
    <td style="vertical-align: top; width: 1%">&bull;</td>
    <td style="vertical-align: top; width: 1%">&nbsp;</td>
    <td style="vertical-align: top; width: 93%">our ability to perform under our government contracts and accurately estimate our fixed costs under such contracts; and</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
    <td style="width: 5%">&nbsp;</td>
    <td style="vertical-align: top; width: 2%">&bull;</td>
    <td style="vertical-align: top; width: 1%">&nbsp;</td>
    <td style="vertical-align: top">our ability to attract and retain a qualified management team, research team, scientific advisors and other qualified personnel. </td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In some cases, you can identify forward-looking
statements by terms such as &ldquo;may,&rdquo; &ldquo;could,&rdquo; &ldquo;will,&rdquo; &ldquo;should,&rdquo; &ldquo;would,&rdquo;
&ldquo;expect,&rdquo; &ldquo;plan,&rdquo; &ldquo;intend,&rdquo; &ldquo;anticipate,&rdquo; &ldquo;believe,&rdquo; &ldquo;estimate,&rdquo;
&ldquo;predict,&rdquo; &ldquo;potential,&rdquo; &ldquo;project&rdquo; or &ldquo;continue&rdquo; or the negative of these terms
or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking
statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our
control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations
include, among other things, those listed under the heading &ldquo;Risk Factors&rdquo; and elsewhere in this prospectus. If one
or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results
may vary significantly from those implied or projected by the forward-looking statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Any forward-looking statement in this prospectus
reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions
relating to our operations, results of operations, industry and future growth. Except as required by law, we assume no obligation
to publicly update or revise any forward-looking statements contained in this prospectus, whether as a result of new information,
future events or otherwise. The Private Securities Litigation Reform Act of 1995 and Section&nbsp;27A of the Securities Act of
1933, as amended, do not protect any forward-looking statements that we make in connection with this offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>USE OF PROCEEDS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This prospectus relates to shares
of our common stock that may be offered and sold from time to time by the selling stockholders identified in this prospectus.
We will not receive any of the proceeds resulting from the sale of the shares held by the selling stockholders including
shares obtained by the selling stockholders upon exercise of the warrants. If any of the selling stockholders were to
exercise warrants to acquire the common stock to be sold pursuant to this prospectus, we would receive the cash exercise
price, if any. As of the date of this prospectus, 13,750,000 shares of our common stock are issuable upon exercise of
warrants owned by the selling stockholders and covered by this prospectus at an exercise price of $0.30 per share of common
stock. Accordingly, we would receive up to $4,125,000 in gross proceeds if all of the warrants were exercised for cash. We
expect to use the proceeds received from the cash exercise of warrants, if any, for general working capital purposes.
However, the selling stockholders may not exercise the warrants at all, or for cash, or if the selling stockholders exercise
the warrants on a cashless basis, we will not receive any proceeds from such exercise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SELLING STOCKHOLDERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The shares of common stock being offered
by the selling stockholders include those issued to the selling stockholders pursuant to the securities purchase agreement we entered
into with certain of the selling stockholders and shares of common stock issuable upon exercise of the warrants purchased pursuant
to the securities purchase agreement. The shares of common stock being offered by the selling stockholders also include common
stock underlying warrants issued to the placement agent in connection with the securities purchase agreement. For additional information
regarding the issuance of the common stock and warrants, see &quot;Private Placement of Common Stock and Warrants&quot; above.
We are registering the shares of common stock in order to permit the selling stockholders to offer the shares for resale from time
to time. Except for the ownership of the shares of common stock and the warrants issued pursuant to, or in connection with, the
securities purchase agreement, and Roth Capital Partners, LLC having acted as placement agent in connection with the private placement
of securities effected pursuant to the securities purchase agreement, the selling stockholders have not had any material relationship
with us within the past three years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The table below lists the selling stockholders
and other information regarding the beneficial ownership of the shares of common stock by each of the selling stockholders. The
second column lists the number of shares of common stock beneficially owned by each selling stockholder, based on its ownership
of the common stock and warrants, as of December 31, 2014, assuming exercise of all warrants held by the selling stockholders on
that date, without regard to any limitations on exercise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The third column lists the shares of common
stock being offered by this prospectus by the selling stockholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In accordance with the terms of a registration
rights agreement with the selling stockholders, this prospectus generally covers the resale of at least the sum of (i) the number
of shares of common stock issued pursuant to the securities purchase agreement as of the trading day immediately preceding the
date the registration statement is initially filed with the Securities and Exchange Commission, and (ii) the maximum number of
shares of common stock issued and issuable upon exercise of the warrants as of the trading day immediately preceding the date the
registration statement is initially filed with the Securities and Exchange Commission.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under the terms of the warrants, a selling
stockholder may not exercise the warrants to the extent such exercise would cause such selling stockholder, together with its affiliates,
to beneficially own a number of shares of common stock which would exceed 4.99% of the then-outstanding shares of our common stock
following such exercise, excluding for purposes of such determination shares of common stock issuable upon exercise of the warrants
which have not been exercised. The number of shares in the second column does not reflect this limitation. The selling stockholders
may sell all, some or none of their shares in this offering. See &quot;Plan of Distribution.&quot;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid; padding-left: -11pt">Name of Selling Stockholder</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Number of Shares of Common Stock Owned Prior to Offering</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Maximum Number of Shares of Common Stock to be Sold Pursuant to this Prospectus</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Number of Shares of Common Stock Owned After Offering (1)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 49%; font-weight: bold; text-align: left; padding-bottom: 1pt; padding-left: 0pt">Empery Asset Master, Ltd. (2)</TD><TD STYLE="width: 2%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">7,717,395</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">7,717,395</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">0</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt; padding-left: 0pt">Empery Tax Efficient, LP (3)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,989,280</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,989,280</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt; padding-left: 0pt">Empery Tax Efficient II, LP (4)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14,493,325</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14,493,325</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt; padding-left: 0pt">Roth Capital Partners, LLC (5)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">550,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">550,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1) Represents the number of shares of common stock that will
be beneficially owned by the selling stockholder after completion of this offering based on the assumptions that (i)&nbsp;all of
the shares of common stock registered for resale by the registration statement of which this prospectus is a part will be sold
and (ii)&nbsp;no other shares of common stock will be acquired or sold by the selling stockholder before completion of this offering.
However, the selling stockholder may sell all, part or none of its shares of common stock offered pursuant to this prospectus and
may sell all, part or none of its common stock pursuant to one or more exemptions from the registration provisions of the Securities
Act of 1933, as amended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(2) Includes 4,209,488 shares of common stock issuable upon
the exercise of a warrant to purchase shares of common stock with an exercise price of $0.30 per share, subject to customary adjustments,
which expires on December 2, 2019. Empery Asset Management LP, the authorized agent of Empery Asset Master Ltd., has discretionary
authority to vote and dispose of the shares held by Empery Asset Master Ltd. and may be deemed to be the beneficial owner of these
shares. Martin Hoe and Ryan Lane, in their capacity as investment managers of Empery Asset Management LP, may also be deemed to
have investment discretion and voting power over the shares held by Empery Asset Master Ltd. Empery Asset Management LP, Mr. Hoe
and Mr. Lane each disclaim any beneficial ownership of these shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(3) Includes 1,085,062 shares of common stock issuable upon
the exercise of a warrant to purchase shares of common stock with an exercise price of $0.30 per share, subject to customary adjustments,
which expires on December 2, 2019. Empery Asset Management LP, the authorized agent of Empery Tax Efficient, LP, has discretionary
authority to vote and dispose of the shares held by Empery Tax Efficient, LP and may be deemed to be the beneficial owner of these
shares. Martin Hoe and Ryan Lane, in their capacity as investment managers of Empery Asset Management LP, may also be deemed to
have investment discretion and voting power over the shares held by Empery Tax Efficient, LP. Empery Asset Management LP, Mr. Hoe
and Mr. Lane each disclaim any beneficial ownership of these shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(4) Includes 7,905,450 shares of common stock issuable upon
the exercise of a warrant to purchase shares of common stock with an exercise price of $0.30 per share, subject to customary adjustments,
which expires on December 2, 2019. Empery Asset Management LP, the authorized agent of Empery Tax Efficient II, LP, has discretionary
authority to vote and dispose of the shares held by Empery Tax Efficient II, LP and may be deemed to be the beneficial owner of
these shares. Martin Hoe and Ryan Lane, in their capacity as investment managers of Empery Asset Management LP, may also be deemed
to have investment discretion and voting power over the shares held by Empery Tax Efficient II, LP. Empery Asset Management LP,
Mr. Hoe and Mr. Lane each disclaim any beneficial ownership of these shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(5)&nbsp; Represents 550,000 shares of common stock issuable
upon the exercise of a warrant to purchase shares of common stock with an exercise price of $0.30 per share, subject to customary
adjustments, which expires on December 2, 2019.&nbsp; Roth Capital Partners, LLC is a Financial Industry Regulatory Authority-registered
broker-dealer and received the warrant as compensation for investment banking services in connection with the private placement
of securities referenced herein.&nbsp; The individual persons who share the power to vote and/or dispose of these securities are
Byron Roth and Gordon Roth.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PLAN OF DISTRIBUTION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are registering the shares of common
stock issued pursuant to the terms of the securities purchase agreement and upon exercise of the warrants to permit the resale
of these shares of common stock by the holders of such shares and warrants from time to time after the date of this prospectus.
We will not receive any of the proceeds from the sale by the selling stockholders of the shares of common stock. We will bear all
fees and expenses incident to our obligation to register the shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The selling stockholders may sell all or
a portion of the shares of common stock beneficially owned by them and offered hereby from time to time directly or through one
or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers,
the selling stockholders will be responsible for underwriting discounts or commissions or agent's commissions. The shares of common
stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying
prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve
crosses or block transactions,</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">on any national securities exchange or quotation service on which
the securities may be listed or quoted at the time of sale;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 2.4pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">in the over-the-counter market;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 2.4pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">in transactions otherwise than on these exchanges or systems or in
the over-the-counter market;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 2.4pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">through the writing of options, whether such options are listed on
an options exchange or otherwise;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 2.4pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 2.4pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">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;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 2.4pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 2.4pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">an exchange distribution in accordance with the rules of the applicable
exchange;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 2.4pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">privately negotiated transactions;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 2.4pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">short sales;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 2.4pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">sales pursuant to Rule 144;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 2.4pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">broker-dealers may agree with the selling securityholders to sell
a specified number of such shares at a stipulated price per share;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 2.4pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">a combination of any such methods of sale; and</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 2.4pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">any other method permitted pursuant to applicable law.</FONT></TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If the selling stockholders effect such
transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers
or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders or commissions
from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal (which discounts,
concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types
of transactions involved). In connection with sales of the shares of common stock or otherwise, the selling stockholders may enter
into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course
of hedging in positions they assume. The selling stockholders may also sell shares of common stock short and deliver shares of
common stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short
sales. The selling stockholders may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The selling stockholders may pledge or grant
a security interest in some or all of the shares of common stock or warrants 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 pursuant
to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act
of 1933, as amended, amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors
in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate the shares of
common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the
selling beneficial owners for purposes of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The selling stockholders and any broker-dealer
participating in the distribution of the shares of common stock may be deemed to be &quot;underwriters&quot; within the meaning
of the Securities Act of 1933, as amended, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer
may be deemed to be underwriting commissions or discounts under the Securities Act of 1933, as amended. At the time a particular
offering of the shares of common stock is made, a prospectus supplement, if required, will be distributed which will set forth
the aggregate amount of shares of common stock being offered and the terms of the offering, including the name or names of any
broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling stockholders and
any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under the securities laws of some states,
the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in some
states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state or
an exemption from registration or qualification is available and is complied with.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">There can be no assurance that any selling
stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement, of which this
prospectus forms a part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The selling stockholders and any other person
participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder, including, without limitation, Regulation M of the Securities Exchange Act of 1934, as
amended, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholders and
any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares
of common stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing may affect
the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with
respect to the shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We will pay all expenses of the
registration of the shares of common stock pursuant to the registration rights agreement, estimated to be approximately
$132,568 in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance
with state securities or blue sky laws; provided, however, that a selling stockholder will pay all underwriting discounts and
selling commissions, if any. We will indemnify the selling stockholders against liabilities, including some liabilities under
the Securities Act of 1933, as amended, in accordance with the registration rights agreement, or the selling stockholders
will be entitled to contribution. We may be indemnified by the selling stockholders against civil liabilities, including
liabilities under the Securities Act of 1933, as amended, that may arise from any written information furnished to us by the
selling stockholder specifically for use in this prospectus, in accordance with the related registration rights agreement, or
we may be entitled to contribution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Once sold under the registration statement,
of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our
affiliates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DESCRIPTION OF BUSINESS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Overview and Corporate History</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We create medical devices to
address unmet therapeutic needs in infectious disease, cancer and other life-threatening conditions.&nbsp;&nbsp;Our lead
product is the Aethlon Hemopurifier,&nbsp;a device that selectively targets the rapid elimination of circulating viruses
and tumor-secreted exosomes that promote cancer progression. &nbsp; We also maintain majority ownership of our
subsidiary, Exosome Sciences, Inc., a diagnostic organization developing exosome-based products to diagnose and monitor
neurological disorders and cancer. In addition, we operate under a Department of Defense contract through the Defense
Advanced Research Projects Agency related to the development of a sepsis treatment device. We also operate under a second
Department of Defense contract as a subcontractor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 10, 1999, Aethlon, Inc., a California
corporation, Hemex, Inc., a Delaware corporation and the accounting predecessor to Aethlon, Inc., and Bishop, Inc., a publicly
traded company, completed an Agreement and Plan of Reorganization structured to result in Bishop, Inc.'s acquisition of all of
the outstanding common shares of Aethlon, Inc. and Hemex, Inc. Under the plan's terms, Bishop, Inc. issued shares of its common
stock to the stockholders of Aethlon, Inc. and Hemex, Inc. such that Bishop, Inc. then owned 100% of each company. Upon completion
of the transaction, Bishop, Inc. was renamed Aethlon Medical, Inc. Our executive offices are located at 9635 Granite Ridge Drive,
Suite 100, San Diego, California 92123. Our telephone number is (858) 459-7800. All references to &ldquo;us&rdquo; or &ldquo;we&rdquo;
are references to Aethlon Medical, Inc., combined with its subsidiary.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Target Market and Strategy</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our business is divided into three areas.
First, we are advancing our lead product, the Aethlon Hemopurifier, which targets the removal of circulating viruses and shed glycoproteins
to treat infectious viral pathogens. In oncology indications, the Hemopurifier targets the removal of circulating exosomes, which
are secreted by tumors to aid in cancer progression.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The second focus is government contracting.
We operate under two Department of Defense contracts related to a program entitled &ldquo;Dialysis-Like Therapeutics.&rdquo; One
is a contract with the Defense Advanced Research Projects Agency, and the other is a subcontract with Battelle Memorial Institute.&nbsp;&nbsp;Under
these contracts, our tasks include the development of a dialysis-like device to prevent sepsis, a fatal bloodstream infection that
is often the cause of death in combat-injured soldiers.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The third facet is conducted through our
majority-owned diagnostic subsidiary, Exosome Sciences, Inc., which is leveraging lectin affinity techniques pioneered by our research
team to identify exosome-based biomarkers from bodily fluids.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have primarily positioned the Hemopurifier
as adjunct therapy to improve the benefit of infectious disease and cancer therapies marketed by pharmaceutical organizations.
For example, a clinical trial protocol administered at the Medanta Medicity Institute in India was designed to treat Hepatitis-C
patients as they began their standard of care drug regimen as a means to reduce the time it normally takes for the virus to become
undetectable in the patient&rsquo;s blood. However, we also propose Hemopurifier therapy to be a first-line therapeutic solution
against viral pathogens that are not treatable with antiviral drugs as well as viral pathogens that have evolved to become drug
resistant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Our Lead Device: The Aethlon Hemopurifier</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Aethlon Hemopurifier&nbsp;is a device
that selectively targets the rapid elimination of circulating viruses and tumor-secreted exosomes that promote cancer progression.
More specifically, the Hemopurifier addresses antiviral drug-resistance in Hepatitis-C virus and Human Immunodeficiency Virus-infected
individuals; serves as a countermeasure against viral pathogens not addressed by drug or vaccine therapies; and represents the
first therapeutic strategy to address cancer promoting exosomes. In clinical studies conducted in India, safety and efficacy observations
of Hemopurifier therapy have been observed in both Hepatitis-C virus and Human Immunodeficiency Virus-infected individuals. We
have recently initiated patient recruitment for the first U.S. Food and Drug Administration approved studies of Hemopurifier therapy
in the United States.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The Scientific Mechanism of the Hemopurifier</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In design, our Hemopurifier consists of
the affinity lectin galanthus nivalis agglutinin immobilized in the outer-capillary space of advanced plasma membrane technology.
The design allows for extracorporeal therapeutic delivery to occur on standard continuous renal replacement therapy and dialysis
instruments already located in hospitals and clinics worldwide. The mechanism of the Hemopurifier to rapidly eliminate a broad-spectrum
disease target is based on the galanthus nivalis agglutinin&rsquo;s ability to selectively bind unique high mannose signatures
that are abundant on the surface of cancer-secreted exosomes and glycoproteins that reside on the outer membrane of infectious
viral pathogens. In practice, the Hemopurifier is utilized in a manner similar to dialysis, supported by machinery that circulates
blood from the patient through the Hemopurifier and back into the patient. The blood is circulated continuously, and a full treatment,
based on current protocols, would take approximately six hours.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The Hemopurifier - Antiviral Drug-Resistance; Planned U.S.
Clinical Trials </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Hemopurifier provides a novel methodology
to target mutant viral strains that trigger antiviral drug resistance in both Human Immunodeficiency Virus and Hepatitis-C virus
infections. In Hepatitis-C virus care, the Hemopurifier is positioned to address drug resistance associated with emerging all-antiviral
therapies and also to accelerate Hepatitis-C virus depletion at the outset of peginterferon+ribavirin therapy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Based on previous studies we conducted in
India, safety and efficacy observations of Hemopurifier therapy have been observed in both disease conditions. As a result of these
outcomes, we have received an opportunity to initiate the first U.S. Food and Drug Administration-approved feasibility study of
Hemopurifier therapy in the United States. The feasibility study is now enrolling Hepatitis-C virus-infected patients to be treated
at DaVita MedCenter Dialysis in Houston, Texas. The principal investigator for the study will be Dr. Stephen Z. Fadem, who is co-medical
director of DaVita MedCenter Dialysis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Successful completion of this study will
permit us to initiate further stage studies that are required for market clearance to treat Hepatitis-C virus and other viral pathogens
in the U.S. Our feasibility study protocol calls for the enrollment of ten Hepatitis-C virus-infected end stage renal
disease patients who have not received any pharmaceutical therapy for their Hepatitis-C virus infection for at least 30 days. The
protocol will consist of a control phase of three consecutive standard dialysis treatments during week one followed by the inclusion
of our Hemopurifier during a total of six dialysis sessions conducted during weeks two and three. The rate of adverse events observed
during the Hemopurifier therapy phase will be compared to the rate experienced during the control phase. Per-treatment changes
of viral load will be observed through quantitative polymerase chain reaction analysis. Additionally, we plan to measure the number
of viral copies of Hepatitis-C virus captured within the Hemopurifier during each treatment session.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On May 19, 2014, we entered into an agreement
with Total Renal Research, Inc. (dba DaVita Clinical Research). Pursuant to the agreement, Da Vita Clinical Research is conducting
site management administrative services for a study. The agreement with DaVita Clinical Research requires us to pay certain expenses
related to the study protocol projected to be less than $200,000, including certain start-up and close-out costs, patient compensation
and project management fees. Additional activities and completion of the clinical trials will require us to pay additional costs
estimated to be $650,000. We will also be responsible for the fees for any third-party consulting physicians, including Dr. Fadem,
utilized in connection with the study and other pass-through expenses if incurred. The agreement was effective as of May 16, 2014
and will continue in effect until completion of the services being provided by DaVita Clinical Research.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The&nbsp;Hemopurifier - Antiviral</B> <B>Studies in India</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Previously, we conducted Hepatitis-C virus
treatment studies at the Apollo Hospital, Fortis Hospital, and most recently the Medanta Medicity Institute in India.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the Medanta Medicity Institute study,
twelve Hepatitis-C virus-infected individuals were enrolled to receive three six-hour Hemopurifier treatments during the first
three days of a 48-week peginterferon+ribavirin treatment regimen. The study was conducted under the leadership of Dr. Vijay Kher
at the Medanta Medicity Institute, a multi-specialty medical institute established to be a premier center for medical tourism in
India. Dr. Kher&rsquo;s staff reported that Hemopurifier therapy was well tolerated and without device-related adverse events in
the twelve treated patients.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Of these twelve patients, ten completed
the Hemopurifier-peginterferon+ribavirin treatment protocol, including eight genotype-1 patients and two genotype-3 patients. Eight
of the ten patients achieved a sustained virologic response, which is the clinical definition of treatment cure and is defined
as undetectable Hepatitis-C virus in the blood 24 weeks after the completion of the 48-week peginterferon+ribavirin drug regimen.
Both genotype-3 patients achieved a sustained virologic response, while six of the eight genotype-1 patients achieved a sustained
virologic response.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Of the ten patients who completed the full
treatment protocol, five also achieved a rapid virologic response, defined as undetectable Hepatitis-C virus in the blood at day
30 of therapy.&nbsp; Rapid virologic response represents the clinical endpoint that best predicts sustained virologic response
cure rates resulting from peginterferon+ribavirin therapy. As a point of reference, the landmark Individualized Dosing Efficacy
vs Flat Dosing to Assess Optimal Pegylated Interferon Therapy study of 3,070 Hepatitis-C virus genotype-1 patients documented that
10.35% (n=318/3070) of peginterferon+ribavirin-treated patients achieved a rapid virologic response.&nbsp; Patients who achieved
a rapid virologic response had sustained virologic response rates of 86.2% (n=274/318) versus sustained virologic response rates
of 32.5% (n=897/2752) in non- rapid virologic response patients.&nbsp; Two of the genotype-1 patients who achieved a rapid virologic
response also achieved an immediate virologic response, defined as undetectable Hepatitis-C virus in the blood seven days after
initiation of Hemopurifier-peginterferon+ribavirin treatment protocol. The earliest measured report of undetectable Hepatitis-C
virus in blood in the Individualized Dosing Efficacy vs Flat Dosing to Assess Optimal Pegylated Interferon Therapy study was on
day 14 of the study.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Data from two patients was not included
in the reported Hemopurifier-peginterferon+ribavirin dataset. One of these patients was a genotype-5 patient who discontinued peginterferon+ribavirin
therapy at day 180, yet still achieved a sustained virologic response. The second patient was a genotype-3 patient who also achieved
a sustained virologic response, yet was unable to tolerate peginterferon+ribavirin therapy and discontinued therapy at day-90.
Overall, ten of the twelve patients who enrolled in the study achieved a sustained virologic response and seven of the twelve patients
achieved a rapid virologic response.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Hemopurifier - Human Immunodeficiency Virus; Single Proof
Study</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition to treating Hepatitis-C virus-infected
individuals, we have conducted a single proof-of-principle treatment study related to the treatment of Human Immunodeficiency Virus.
In the study, Hemopurifier therapy reduced viral load by 93% in a Human Immunodeficiency Virus-Acquired Immunodeficiency Syndrome-infected
individual without the administration of antiviral drug therapy.&nbsp;&nbsp;The study protocol provided for 12 Hemopurifier treatments,
each four hours in duration, which were administered over the course of one month.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Researchers at the Morehouse School of Medicine
have since discovered that the Hemopurifier is able to capture exosomes that transport negative regulatory factor protein, which
is reported to suppress the immune response in Human Immunodeficiency Virus-infected individuals.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The Hemopurifier - Viral Pathogens Not Addressed by Drug
Therapies </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The protocol design of our forthcoming U.S.
Food and Drug Administration-approved study was originally designed as a human safety challenge and model for addressing drug and
vaccine resistant bioterror and emerging pandemic threats. <I>In vitro </I>studies conducted by leading government and non-government
researchers have demonstrated that the Hemopurifier is able to capture a broad-spectrum of some of world&rsquo;s deadliest viral
pathogens. These include: Dengue hemorrhagic fever, Ebola hemorrhagic fever, Lassa hemorrhagic fever, H5N1 avian influenza, H1N1
swine flu virus, the reconstructed 1918 influenza virus, West Nile virus and Vaccinia and Monkeypox, which serve as models for
human smallpox infection. Human efficacy studies are not permissible against high-threat bioterror and pandemic threats.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table lists some of the key
viral pathogens captured during <I>in vitro</I> studies and the name of the research institute that ran the study.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" ALIGN="CENTER" STYLE="font: 10pt Times New Roman, Times, Serif; width: 80%; border-collapse: collapse">
<tr>
    <TD STYLE="width: 35%; border: black 1pt solid; padding: 5pt; text-decoration: underline; text-align: center"><font style="font-size: 10pt"><b><u>Virus Type</u></b></font></td>
    <TD STYLE="width: 45%; border-top: black 1pt solid; border-right: black 1pt solid; border-bottom: black 1pt solid; padding: 5pt; text-decoration: underline; text-align: center"><font style="font-size: 10pt"><b><u>Collaborator</u></b></font></td></tr>
<tr>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; padding: 5pt; text-align: center"><font style="font-size: 10pt">Ebola Virus</font></td>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; padding: 4pt; text-align: center"><font style="font-size: 10pt">United States Army Medical Research Institute of Infectious Diseases/Center for Disease Control</font></td></tr>
<tr>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; padding: 5pt; text-align: center"><font style="font-size: 10pt">Dengue Fever</font></td>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; padding: 4pt; text-align: center"><font style="font-size: 10pt">National Institute of Virology/World Health Organization</font></td></tr>
<tr>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; padding: 5pt; text-align: center"><font style="font-size: 10pt">Lassa Hemorrhagic Fever&nbsp;</font></td>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; padding: 4pt; text-align: center"><font style="font-size: 10pt">Southwest Foundation for Biomedical Research</font></td></tr>
<tr>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; padding: 5pt; text-align: center"><font style="font-size: 10pt">West Nile Virus</font></td>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; padding: 4pt; text-align: center"><font style="font-size: 10pt">Battelle Memorial Institute</font></td></tr>
<tr>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; padding: 5pt; text-align: center"><font style="font-size: 10pt">H5N1 Avian Flu&#9;</font></td>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; padding: 4pt; text-align: center"><font style="font-size: 10pt">Battelle Memorial Institute</font></td></tr>
<tr>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; padding: 5pt; text-align: center"><font style="font-size: 10pt">1918-r Spanish Flu</font></td>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; padding: 4pt; text-align: center"><font style="font-size: 10pt">Battelle Memorial Institute</font></td></tr>
<tr>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; border-left: black 1pt solid; padding: 5pt; text-align: center"><font style="font-size: 10pt">2009 H1N1 Swine Flu</font></td>
    <TD STYLE="border-right: black 1pt solid; border-bottom: black 1pt solid; padding: 4pt; text-align: center"><font style="font-size: 10pt">Battelle Memorial Institute</font></td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The Hemopurifier - Cancer Treatment and Detection</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In &ldquo;Extracurricular Vesicles: Emerging
Targets for Cancer Therapy,&rdquo; a review article sponsored by the National Cancer Institute and published in the July 2014
issue of <I>Trends in Molecular Medicine</I>, we were the sole organization referenced to have a therapeutic candidate to address
tumor-secreted exosomes, which have been discovered to suppress the immune system of cancer patients, seed the creation and spread
of metastasis, promote angiogenesis, trigger resistance to chemotherapy, and transport primary cancer therapeutic targets of the
biopharmaceutical industry. To date, we have demonstrated that our Hemopurifier can capture exosomes underlying a broad-spectrum
of cancer indications and as a result of our discoveries, we have already received issued patent protection for our cancer treatment
endeavors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We believe Hemopurifier therapy can play
a central role in the emerging immuno-oncology industry as an adjunct strategy to eliminate circulating exosomes without adding
drug toxicity to established and emerging cancer therapies. The ability to inhibit exosome immune suppression in combination with
drugs designed to stimulate the immune response is an especially compelling premise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Exosome Sciences, Inc., our Subsidiary, is Focused on Cancer
Treatment and Detection</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In October 2009, we established a wholly
owned subsidiary, Exosome Sciences, Inc., a Nevada corporation, as a corporate vehicle for our exosome-related diagnostic activities.
In October 2013, Exosome Sciences, Inc. commenced operations with a focus on advancing exosome-based strategies to diagnose and
monitor neurological conditions and cancer. Exosomes represent an optimal diagnostic target as diseased cells release them into
bodily fluids such as urine and blood where they can be accessed. Exosome Sciences, Inc. is developing non-invasive liquid biopsies
based on the knowledge that these exosomes transport disease-origin markers underlying a wide range of disease conditions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In 2013, Exosome Sciences, Inc. entered
into stock purchase agreements with various accredited investors pursuant to which it sold the investors an aggregate of 300,000
shares of its common stock. As a result of these transactions, our percentage ownership of the outstanding capital stock of our
subsidiary was reduced from 100% to 80%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Since it began operations in 2013, Exosome
Sciences, Inc. researchers have successfully isolated brain-specific biomarkers associated with a variety of neurodegenerative
disorders. The discoveries may have implications in the diagnosis, monitoring and treatment of Alzheimer's Disease, Chronic Traumatic
Encephalopathy and Traumatic Brain Injury.&nbsp; The research studies provided evidence that exosomes can serve as a liquid biopsy
to diagnose neurologic conditions. While exosomes from the central nervous system have previously been identified in the cerebrospinal
fluid, Exosome Sciences, Inc. researchers were able to identify&nbsp;exosomes carrying brain-specific markers tau, beta-amyloid,
glycoprotein A2B5 and S100B protein in the peripheral circulation of affected individuals.&nbsp;These discoveries provide a basis
for an exosome-based platform that could&nbsp;enable the simultaneous identification of multiple brain specific markers that are
transported across the blood-brain barrier and into the circulatory system. Such a platform could allow physicians to monitor the
progression of neurologic conditions in their patients.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Exosome Sciences, Inc. research team
also disclosed that it has been able to identify, quantify, and characterize circulating Glioblastoma multiforme exosomes, which
hold promise as a disease biomarker to identify the early detection of this aggressive form of cancer and monitor response to therapy.
Glioblastoma multiforme exosomes represents the most common, per capita costly and uniformly lethal primary brain tumor. Glioblastoma
multiforme exosomes comprise 23% of primary brain tumors in the U.S. and is the most commonly diagnosed brain tumor in adults aged
45-74 with men being more frequently diagnosed than women. The prognosis remains poor despite aggressive treatment modalities.
Over the past decade, a median survival time of 12 months has only been marginally improved to 14.6 months as a result of advances
in chemo/radiation and the use of molecularly targeted agents. The discovery of circulating glioblastoma multiforme exosomes offers
a potential new paradigm in glioblastoma multiforme exosomes clinical management through a platform technology to predict tumor
regression or progression.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To lead our scientific endeavors at Exosome
Sciences, Inc., we retained two well-known thought leaders in the field of exosome biology: Dr. Douglas Taylor as Exosome Sciences,
Inc.&rsquo;s Chief Scientific Officer and Dr. Cicek Gercel-Taylor as Exosome Sciences, Inc.&rsquo;s Clinical Research Director.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>About Dr. Douglas Taylor</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Dr. Taylor discovered and pioneered the
field of exosome biology and its role in intercellular communication and immune regulation. He has been in the Department of Obstetrics,
Gynecology and Women's Health at the University of Louisville School of Medicine since 1992.&nbsp; Dr. Taylor published the initial
article describing circulating tumor exosomes/microvesicles in 1979 (Anal. Biochem. 98:53-59, 1979). The research in his laboratory
has primarily focused on the release and consequences of exosomes from gynecologic cancer and lung tumors. Over more than the past
30 years, Dr. Taylor has pioneered the isolation and characterization of circulating tumor-derived exosomes. His work has focused
on characterization of circulating exosomes released by tumor cells for their role in immune regulation and induction of a pro-inflammatory
tumor microenvironment. His work has demonstrated that the presence of specific circulating exosomal components have potential
use as biomarkers for cancer patients.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>About Dr. Cicek Gercel-Taylor</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Dr. Cicek Gercel-Taylor has been a pioneer
in the field of exosome biology and in defining its nucleic acid and protein cargoes. She has worked at the Department of Obstetrics,
Gynecology and Women's Health at the University of Louisville School of Medicine since 1992, and also is the Resident Research
Coordinator. Her main research interest is in gynecological cancers, where she investigates the consequences of exosomes on genetic
and epigenetic alterations induced in normal host target cells. She has explored the role of endogenous and exogenous hormones
in modulating exosomal cargoes and the resulting effects on pathologic processes. A significant part of these investigations includes
the identification and characterization of clinically relevant biomarkers, specifically proteomic and miRNA content of pathology-derived
exosomes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>U.S. Government Contract with the Defense Advanced
Research Projects Agency </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On September 30, 2011, we entered into a
$6.8 million multi-year contract with the Defense Advanced Research Projects Agency, part of the Department of Defense, resulting
from our response to a program entitled &ldquo;Dialysis-Like Therapeutics.&rdquo;&nbsp;&nbsp;Under this contract, our tasks include
the development of a dialysis-like device to prevent sepsis, a fatal bloodstream infection that is often the cause of death in
combat-injured soldiers.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The initial award from the Defense Advanced
Research Projects Agency was a fixed-price contract with potential total payments to us of $6,794,389 over the course of five years.
As noted below, such contract was subsequently reduced by $858,491. Fixed price contracts require the achievement of multiple,
incremental milestones to receive the full award during each year of the contract. Under the terms of the contract, we are required
to perform certain incremental work towards the achievement of specific milestones against which we will invoice the government
for fixed payment amounts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Originally, only the base year (year one
contract) was effective for the parties, however, the Defense Advanced Research Projects Agency subsequently exercised the option
on the second, third and fourth years of the contract. The Defense Advanced Research Projects Agency has the option to enter into
the contract for year five. The milestones are comprised of planning, engineering and clinical targets, the achievement of which
in some cases will require the participation and contribution of third party participants under the contract. There can be no assurance
that we alone, or with third party participants, will meet such milestones to the satisfaction of the government and in compliance
with the terms of the contract or that we will be paid the full amount of the contract revenues during any year of the remaining
contract term. We cannot assure you that the Defense Advanced Research Projects Agency will exercise its option to continue the
contract for year five. We commenced work under the contract in October 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Due to budget restrictions within the Department
of Defense, on February 10, 2014, the Defense Advanced Research Projects Agency reduced the scope of our contract in years three
through five of the contract. The reduction in scope focused our research on exosomes, viruses and blood processing instrumentation.
This scope reduction will reduce the possible payments under the contract by $858,491 over years three through five.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Contract Milestones and Revenues: Fiscal Year Ending March
31, 2014 to Date</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a result of achieving three milestones
to date during the fiscal year ending March 31, 2015, we have reported $444,723 in contract revenue related to our contract with
the Defense Advanced Research Projects Agency to date for the current fiscal year. The details of the three milestones achieved
during the current fiscal year are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; padding-left: -11pt; text-align: left; border-bottom: Black 1pt solid">Milestone Event</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; padding-left: -11pt; text-align: left; border-bottom: Black 1pt solid">Achievement Criteria</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Revenue</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: -11pt; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="padding-left: -11pt; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 41%; text-align: left; padding-left: 0pt">Determine capacity requirements of affinity resin to multiple simultaneous targets. .</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 40%; text-align: left; padding-left: 0pt">We demonstrated that we were able to determine the capacity requirements of affinity resin to multiple simultaneous targets.</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">197,362</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0pt; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="padding-left: 0pt; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 0pt">Finish construction and delivery of 25 experimental cartridges for testing by systems integrator.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left; padding-left: 0pt">We demonstrated that we delivered the 25 cartridges to the systems integrator.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0pt; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="padding-left: 0pt; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 0pt; padding-bottom: 1pt">Target capture &gt; 90% in 24 hours for at least 3 targets ex vivo in blood or blood components using the optimized cartridge.</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-left: 0pt; padding-bottom: 1pt">We demonstrated that we were able to capture approximately 90% in 24 hours for at least 3 targets ex vivo in blood or blood components using the optimized cartridge.</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">197,361</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0pt; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="padding-left: 0pt; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 0pt; padding-bottom: 2.5pt">Total Milestones</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-left: 0pt; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">444,723</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Contract Milestones and Revenue: Fiscal Year Ended March
31, 2014</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a result of achieving eight milestones
in the fiscal year ended March 31, 2014, we reported $1,466,467 in contract revenue for that fiscal year. The details of the eight
milestones achieved during the fiscal year ended March 31, 2014 were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; border-bottom: Black 1pt solid">Milestone Event</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; border-bottom: Black 1pt solid">Achievement Criteria</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Revenue</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 41%; text-align: left">Formulate initial design work based on work from previous phase.</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 40%; text-align: left">We demonstrated that we were able to formulate the initial design work and to build and test selected instrument design and tubing sets as part of our submission for approval.</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">195,581</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Write and test software and conduct ergonomic research. Begin discussions with the systems integrator.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">We obtained wrote and tested software and conducted ergonomic research and began discussions with the systems integrator.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">195,581</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Cartridge construction with optimized affinity matrix design for each potential target. Complete the capture agent screening.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">We completed the cartridge construction with optimized affinity matrix design for each potential target and completed the capture agent screening.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">208,781</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Target capture &gt; 90% in 24 hours for at least three targets in blood or blood components.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">We demonstrated that we were able to capture &gt; 90% in 24 hours for at least three of the agreed targets in blood or blood components.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">208,781</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Conduct a series of experiments aimed at characterizing the contribution of several alternate fluidic designs and methods of perfusing plasma filters and affinity columns in the performance of affinity plasmapheresis.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">We demonstrated that we had conducted the relevant series of experiments.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">195,576</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Evaluate contribution of manufacturing process variables to binding capacity of affinity resin.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">We demonstrated that we had evaluated the contribution of manufacturing process variables to binding capacity of affinity resin.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">197,362</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Design and fabricate optimized configuration(s) of hemopurification device(s) that contain(s) a combination of hemofilters, plasma filters and affinity columns.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">We demonstrated that we had designed and fabricated optimized configuration of hemopurification devices.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">186,164</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Perform biocompatibility tests for the combination ADAPT device to confirm the combination cartridge does not present <I>additional</I> risk.</FONT></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">We demonstrated that we had performed biocompatibility tests for the combination ADAPT device to confirm the combination cartridge does not present additional risk.</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">78,641</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total Milestones</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">1,466,467</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Contract Milestones and Revenue: Fiscal Year Ended March
31, 2013</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a result of achieving six milestones
in the fiscal year ended March 31, 2013, we reported $1,230,004 in contract revenue for that fiscal year. The details of the six
milestones achieved during the fiscal year ended March 31, 2013 were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; border-bottom: Black 1pt solid">Milestone Event</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; border-bottom: Black 1pt solid">Achievement Criteria</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Revenue</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 41%; text-align: left">Perform preliminary quantitative real time polymerase chain reaction to measure viral load, and specific DNA or ribonucleic acid targets.</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 40%; text-align: left">We demonstrated that we were able to measure viral load of one or more targets as part of our submission for approval.</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">216,747</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Obtain all necessary institutional review board documentation and obtain both institutional and Government approval in accordance with institutional review board documentation submission guidance prior to conducting human or animal testing.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">We obtained all of the required documentation from both institutional and Government authorities.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">183,367</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Target capture &gt; 50% in 24 hours for at least one target in blood or blood components.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">We demonstrated that we were able to capture &gt; 50% in 24 hours of one of the agreed targets in blood or blood components.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">216,747</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Build the ADAPT capture cartridges with the identified affinity agents. Measure the rate of capture of the specific targets from in ex vivo recirculation experiments from cell culture and blood.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">We demonstrated that we were able build the ADAPT capture cartridges with the identified affinity agents and to measure the rate of capture of the specific targets from in ex vivo recirculation experiments from cell culture and blood.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">208,781</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Demonstrate the effectiveness of the prototype device in vivo in animals preventing platelet activation or clotting in at least a 2 hour blood pumping experiment at 75 mL/min blood flow.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">The prototype device was successfully used in vivo in animals preventing platelet activation or clotting in at least a 2 hour blood pumping experiment at 75 mL/min blood flow.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">195,581</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Target capture &gt; 50% in 24 hours for at least 5 targets in blood or blood components.</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">We demonstrated that we were able to capture &gt; 50% in 24 hours for at least 5 of the agreed targets in blood or blood components.</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">208,781</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total Milestones</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">1,230,004</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Subcontract with Battelle Memorial Institute </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We entered into a
subcontract agreement with Battelle Memorial Institute in March 2013. Battelle Memorial Institute was chosen by the Defense
Advanced Research Projects Agency to be the prime contractor on the systems integration portion of the original Defense
Advanced Research Projects Agency contract, and we are one of several subcontractors on that systems integration project. We
began generating revenues under the subcontract in the three months ended September 30, 2013. Through December 31, 2014, we
have billed $322,879 and collected $307,653. Our expected future revenue from the subcontract will be at the discretion of
Battelle Memorial Institute. The Battelle Memorial Institute subcontract is our first cost-reimbursable contract.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our revenue under this contract is a function
of cost reimbursement plus an overhead mark-up for hours devoted to the project by specific employees (with specific hourly rates
for those employees), for travel expenses related to the project, for any equipment purchased for the project and for the cost
of any consultants hired by us to perform work on the project. Each payment will require approval by the program manager at Battelle
Memorial Institute.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Research and Development Costs</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A substantial portion of our operating budget
is used for research and development activities. The cost of research and development, all of which has been charged to operations,
amounted to approximately $1,509,000 and $1,440,000 in the fiscal years ended March 31, 2014 and 2013, respectively. Exosome Science
Inc.&rsquo;s research and development activities represented approximately $193,000 of our consolidated research and development
expenses in the fiscal year ended March 31, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Intellectual Property</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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. We also own certain trademarks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Patents</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have been exclusively assigned all rights
and title to and interest in an invention and related worldwide patent rights for a method to treat cancer under an assignment
agreement with the London Health Science Center Research, Inc. The invention provides for the &quot;Depression of anticancer immunity
through extracorporeal removal of microvesicular particles&quot; (including exosomes) for which the U.S. Patent and Trademark Office
allowed a patent in 2012 (patent #8,288,172) and for which we have filed additional patent applications domestically and abroad
(patent applications #13/623662, #14/180093, #14/185033, #7,752,778.6, #9,104,740.6, #8139/DELNP/2008 and #2644855). Please see
the tables below for more information regarding these patents and patent applications.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The agreement provides that we are responsible
for paying certain patent application and filing costs as well as a 2% royalty on any future net sales. Under the license agreement,
the London Health Science Center Research, Inc. sold and assigned all of its rights, title and interest in the worldwide patents
to us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table lists all of our issued
patents and patent applications, including their ownership status:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Patents Issued in the United States</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
    <TD STYLE="vertical-align: bottom; width: 13%; border-bottom: black 1pt solid; padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">PATENT #</font></td>
    <TD STYLE="vertical-align: bottom; width: 48%; border-bottom: black 1pt solid; padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">PATENT NAME</font></td>
    <TD STYLE="vertical-align: top; width: 13%; border-bottom: black 1pt solid; padding-right: 2pt; padding-left: 2pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">ISSUANCE</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">DATE</P></td>
    <TD STYLE="vertical-align: top; width: 13%; border-bottom: black 1pt solid; padding-right: 2pt; padding-left: 2pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">OWNED OR</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">LICENSED</P></td>
    <TD STYLE="vertical-align: top; width: 13%; border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">EXPIRATION</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">DATE</P></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">8,288,172 </font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt"><font style="font-size: 10pt">Extracorporeal removal of microvesicular particles (exosomes) (method patent)</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">10/16/12</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">Owned</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">3/9/27</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">7,226,429</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt"><font style="font-size: 10pt">Method for removal of viruses from blood by lectin affinity hemodialysis</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">6/05/07</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">Owned</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">1/20/24</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">6,528,057</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt"><font style="font-size: 10pt">Method for removal of Human Immunodeficiency Virus and other viruses from blood</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">3/04/03</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">Licensed</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">8/30/19</font></td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Patent Applications in the United States</B>&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
    <TD STYLE="vertical-align: bottom; width: 13%; border-bottom: black 1pt solid; text-align: center"><font style="font-size: 10pt">APPLICATION #</font></td>
    <TD STYLE="vertical-align: bottom; width: 61%; border-bottom: black 1pt solid; text-align: center"><font style="font-size: 10pt">APPLICATION NAME</font></td>
    <TD STYLE="vertical-align: top; width: 13%; border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">FILING</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">DATE</P></td>
    <TD STYLE="vertical-align: top; width: 13%; border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">OWNED OR</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">LICENSED</P></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <TD STYLE="text-align: center"><font style="font-size: 10pt">11/756543</font></td>
    <TD STYLE="padding-left: 9pt"><font style="font-size: 10pt">Method for removal of viruses from blood by lectin affinity hemodialysis </font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">5/31/07</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">Owned</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <TD STYLE="text-align: center"><font style="font-size: 10pt">12/600236</font></td>
    <TD STYLE="padding-left: 9pt"><font style="font-size: 10pt">Device and method for purifying virally infected blood</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">5/12/11</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">Owned</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <TD STYLE="text-align: center"><font style="font-size: 10pt">13/351166</font></td>
    <TD STYLE="padding-left: 9pt"><font style="font-size: 10pt">Affinity capture of circulating cancer biomarkers</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">1/16/12</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">Owned</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <TD STYLE="text-align: center"><font style="font-size: 10pt">12/810295</font></td>
    <TD STYLE="padding-left: 9pt"><font style="font-size: 10pt">Method and apparatus for increasing contaminant clearance rates during extracorporeal fluid treatment</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">9/07/10</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">Owned</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <TD STYLE="text-align: center"><font style="font-size: 10pt">13/623662</font></td>
    <TD STYLE="padding-left: 9pt"><font style="font-size: 10pt">Extracorporeal removal of microvesicular particles (medical device and system-based claims)</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">9/20/12</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">Owned</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <TD STYLE="text-align: center"><font style="font-size: 10pt">13/808561</font></td>
    <TD STYLE="padding-left: 9pt"><font style="font-size: 10pt">Methods and compositions for quantifying exosomes</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">1/04/13</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">Owned</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <TD STYLE="text-align: center"><font style="font-size: 10pt">14/180093</font></td>
    <TD STYLE="padding-left: 9pt"><font style="font-size: 10pt">Extracorporeal removal of microvesicular particles</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">2/13/14</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">Owned</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <TD STYLE="text-align: center"><font style="font-size: 10pt">14/185033</font></td>
    <TD STYLE="padding-left: 9pt"><font style="font-size: 10pt">Extracorporeal removal of microvesicular particles</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">2/20/14</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">Owned</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <TD STYLE="text-align: center"><font style="font-size: 10pt">13/808561</font></td>
    <TD STYLE="padding-left: 9pt"><font style="font-size: 10pt">Methods and compositions for quantifying exosomes</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">8/14/13</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">Owned</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <TD STYLE="text-align: center"><font style="font-size: 10pt">61/946606</font></td>
    <TD STYLE="padding-left: 9pt"><font style="font-size: 10pt">Brain specific exosome based diagnostics</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">2/28/14</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">Owned</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <TD STYLE="text-align: center"><font style="font-size: 10pt">61/947276</font></td>
    <TD STYLE="padding-left: 9pt"><font style="font-size: 10pt">Brain specific exosome based diagnostics and extracorporeal therapies</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">3/3/14</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">Owned</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <TD STYLE="text-align: center"><font style="font-size: 10pt">61/982190</font></td>
    <TD STYLE="padding-left: 9pt"><font style="font-size: 10pt">Methods for delivering regional citrate anticoagulation during extracorporeal blood treatments</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">4/21/14</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">Owned</font></td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">&nbsp;</FONT>&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>International Patents</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
    <TD STYLE="vertical-align: bottom; width: 13%; border-bottom: black 1pt solid; padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">PATENT #</font></td>
    <TD STYLE="vertical-align: bottom; width: 48%; border-bottom: black 1pt solid; padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">PATENT NAME</font></td>
    <TD STYLE="vertical-align: bottom; width: 13%; border-bottom: black 1pt solid; padding-right: 2pt; padding-left: 2pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">ISSUANCE</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">DATE</P></td>
    <TD STYLE="vertical-align: bottom; width: 13%; border-bottom: black 1pt solid; padding-right: 2pt; padding-left: 2pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">OWNED OR</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">LICENSED</P></td>
    <TD STYLE="vertical-align: top; width: 13%; border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">EXPIRATION</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">DATE</P></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">2,353,399</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 6.6pt"><font style="font-size: 10pt">Method for removal of viruses from blood by lectin affinity hemodialysis</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">1/20/04</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">Owned</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">1/20/24</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">770,344</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 6.6pt"><font style="font-size: 10pt">Method for removal of Human Immunodeficiency Virus and other viruses from blood</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">6/03/04</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">Licensed</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">8/30/19</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">69929986.1-08</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 6.6pt"><font style="font-size: 10pt">Method for removal of Human Immunodeficiency Virus and other viruses from blood</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">2/22/06</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">Licensed</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">8/30/19</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">1,109,564</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 6.6pt"><font style="font-size: 10pt">Method for removal of Human Immunodeficiency Virus and other viruses from blood</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">2/22/06</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">Licensed</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">8/30/19</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">1,109,564</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 6.6pt"><font style="font-size: 10pt">Method for removal of Human Immunodeficiency Virus and other viruses from blood</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">2/22/06</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">Licensed</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">8/30/19</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">1,109,564</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 6.6pt"><font style="font-size: 10pt">Method for removal of Human Immunodeficiency Virus and other viruses from blood</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">2/22/06</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">Licensed</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">8/30/19</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">1,109,564</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 6.6pt"><font style="font-size: 10pt">Method for removal of Human Immunodeficiency Virus and other viruses from blood</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">2/22/06</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">Licensed</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">8/30/19</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">2342203</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 6.6pt"><font style="font-size: 10pt">Method for removal of Human Immunodeficiency Virus and other viruses from blood</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">3/01/11</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">Licensed</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">8/30/19</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">EP 1624785</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 6.6pt"><font style="font-size: 10pt">Method for removal of viruses from blood by lectin affinity hemodialysis</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">7/17/13</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">Owned</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">1/20/24</font></td></tr>
<tr style="vertical-align: top">
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">2,516,403</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 6.6pt"><font style="font-size: 10pt">Method for removal of viruses from blood by lectin affinity hemodialysis</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">8/12/14</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">Owned</font></td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">1/20/24</font></td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>International Patent Applications</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <TD STYLE="width: 13%; padding-right: 2pt; padding-left: 2pt">&nbsp;</td>
    <TD STYLE="width: 61%; padding-right: 2pt; padding-left: 9pt">&nbsp;</td>
    <TD STYLE="width: 13%; padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">FILING</font></td>
    <TD STYLE="width: 13%; padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">OWNED OR</font></td></tr>
<tr style="vertical-align: top">
    <TD STYLE="border-bottom: black 1pt solid; padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">APPLICATION #</font></td>
    <TD STYLE="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 10pt">APPLICATION NAME</font></td>
    <TD STYLE="border-bottom: black 1pt solid; padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">DATE</font></td>
    <TD STYLE="border-bottom: black 1pt solid; padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">LICENSED</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">7,752,778.6</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 9pt"><font style="font-size: 10pt">Extracorporeal removal of microvesicular particles(exosomes)</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">3/09/07</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">Owned</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">9,104,740.6</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 9pt"><font style="font-size: 10pt">Extracorporeal removal of microvesicular particles(exosomes)</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">3/09/07</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">Owned</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">8139/DELNP/2008</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 9pt"><font style="font-size: 10pt">Extracorporeal removal of microvesicular particles(exosomes)</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">3/09/07</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">Owned</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">08866242.4</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 9pt"><font style="font-size: 10pt">Method and apparatus for increasing contaminant clearance rates during extra corporeal fluid treatment</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">12/19/08</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">Owned</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">2644855</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 9pt"><font style="font-size: 10pt">Extracorporeal removal of microvesicular particles</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">3/09/07</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">Owned</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">09815068.3</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 9pt"><font style="font-size: 10pt">Methods for reducing viral load of hepatitus c virus in hemodialysis patients</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">9/15/09</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">Owned</font></td></tr>
<tr style="vertical-align: top; background-color: #EEEEEE">
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">12100471.4</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 9pt"><font style="font-size: 10pt">Methods for reducing viral load of hepatitus c virus in hemodialysis patients</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">9/15/09</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">Owned</font></td></tr>
<tr style="vertical-align: top; background-color: white">
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">11804372.8</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 9pt"><font style="font-size: 10pt">Methods and compositions for quantifying exosomes</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">2/06/13</font></td>
    <TD STYLE="padding-right: 2pt; padding-left: 2pt; text-align: center"><font style="font-size: 10pt">Owned</font></td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">__________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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, including within the U.S., will provide us with
competitive advantages or will not be challenged by others, or will not expire prior to our successful commercialization of our
products. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Trademarks</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have obtained registered trademarks in
the U.S. for the marks Exosome Sciences&reg;, Hemopurifier, and Aethlon Medical, Inc. and have applied for Aethlon ADAPT and ELLSA&trade;
trademarks in the U.S., which applications are currently pending. We have applied for trademark protection on Hemopurifier in India
and that application is currently pending.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Licensing Agreements</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Effective January 1, 2000, we entered into
an agreement with a related party under which an invention and related patent rights for a method of removing Human Immunodeficiency
and other viruses from the blood using the Hemopurifier were assigned to us by the inventors in exchange for a royalty to be paid
on future sales of the patented product or process and shares of our common stock. On March 4, 2003, the related patent (patent
#6,528,057<FONT STYLE="font-size: 10pt">) </FONT>was issued and we issued 196,078 shares of restricted common stock to that related
party. The license runs for the life of the patent, which expires in August 2019.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: left">On February 9, 2006, we entered into an
option agreement with the Trustees of Boston University which provides for the right to negotiate an exclusive license for a Boston
University patent BU05-41, &quot;Method to Prevent Proliferation and Growth of Metastases.&quot; On February 8, 2007, we entered
into an amendment to this agreement to extend its term until August 9, 2007. On April 22, 2008, we entered into the actual license
agreement for this patent and as the initial payment under this license we issued shares of our common stock equivalent to 115%
of $5,000. We terminated this patent license during the fiscal year ended March 31, 2014 as we determined this license was no longer
pertinent to our core business objectives.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On November 7, 2006, we entered into an
exclusive assignment agreement with the London Health Science Center Research, Inc. and Thomas Ichim under which an invention and
related patent rights for a method to treat cancer were assigned to us. The invention provides for the &quot;Extracorporeal removal
of microvesicular particles&quot; for which the U.S. Patent and Trademark Office allowed a patent (patent #8,288,172) in the U.S.
as of June 2012. The agreement provides that we will pay certain patent application and filing costs as well as a 2% royalty on
any future net sales.&nbsp; Under the license agreement, we own the patents outright and the license runs for the life of the patent,
which expires in March 2027.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Industry</B> &nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The industry for treating infectious disease
and cancer is extremely competitive, and companies developing new treatment procedures face significant capital and regulatory
challenges. Additionally, as the Hemopurifier is a new device, we have the additional challenge of establishing medical industry
support, which will be driven by treatment data resulting from clinical studies of each disease condition that we pursue. The industry
includes pharmaceutical companies and medical device companies competing to treat illnesses on a worldwide basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Competition</B> &nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are advancing our Hemopurifier as a treatment
strategy to enhance and prolong current drug therapies by removing the viral strains that cause drug resistance. We are also advancing
the Hemopurifier as a tool for cancer treatment in conjunction with existing, and to be developed, cancer therapies. The Hemopurifier
also may prolong life for infected patients who have become drug resistant or have been infected with a viral pathogen for which
there is no drug or vaccine therapy. We believe our Hemopurifier augments the benefit of drug therapies and should not be considered
a competitor to such treatments. However, if the industry considered the Hemopurifier to be a potential replacement for drug therapy,
or a device that limited the need or volume of existing drug therapies, then the marketplace for the Hemopurifier would be extremely
competitive. We believe our Hemopurifier is the sole therapeutic device able to selectively remove viruses and immunosuppressive
proteins from circulation. However, we are aware that Asahi Kasei Kurary Medical based in Japan has created a double filtration
plasmapheresis system that indiscriminately removes particles from blood in a certain molecule range that includes Hepatitis-C
virus. Asahi Kasei Kurary Medical is now marketing this device in Japan as an adjunct therapy for Hepatitis-C virus. We may also
face competition from producers of antiviral drugs and vaccines.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Government Regulation of Medical Devices</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Hemopurifier is subject to regulation
by numerous regulatory bodies, primarily the U.S. Food and Drug Administration, and comparable international regulatory agencies.
These agencies require manufacturers of medical devices to comply with applicable laws and regulations governing the development,
testing, manufacturing, labeling, marketing and distribution of medical devices. Devices are generally subject to varying levels
of regulatory control, the most comprehensive of which requires that a clinical evaluation program be conducted before a device
receives approval for commercial distribution. Failure to obtain approval or clearance to market our product and products under
development and to meet the ongoing requirements of these regulatory authorities could prevent us from commercializing the Hemopurifier
and future products in the U.S. and elsewhere.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Hemopurifier Investigational Device Exemption and Supplement</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">In 2013, the U.S. Food and Drug Administration
approved our investigational device exemption to initiate human clinical studies in the U.S. as a feasibility study. We must reach
agreement with the internal review board of DaVita MedCenter Dialysis prior to beginning our U.S. clinical trial. We are also required
to obtain patients' informed consent that complies with both U.S. Food and Drug Administration requirements and state and federal
privacy regulations. We, the U.S. Food and Drug Administration or the internal review board 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 be equivocal or may otherwise not be sufficient to obtain approval of the product. The investigational device
exemption is part of the U.S. Food and Drug Administration&rsquo;s clearance process. This process is discussed in detail in the
&ldquo;Pre-Marketing Regulations in the U.S.&rdquo; section below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">In December 2014, the U.S. Food and Drug Administration
approved our request for a supplement to our investigational device exemption to establish a protocol to clinically investigate
the use of the Hemopurifier for the treatment of Ebola-infected patients in the U.S. Under the supplement, we may treat up to 20
Ebola-infected persons, at no more than 10 institutions in the U.S., using the supplement protocol; however, this is not a clinical
trial. We must clearly distinguish data collected in the supplement protocol from data collected in our chronic Hepatitis-C virus
clinical trial (discussed above). Prior to treating Ebola-infected patients, we must comply with specified patient protection
procedures established by the applicable institution including its institutional review board. Also, we must report any unanticipated
adverse events resulting from the supplement protocol to the U.S. Food and Drug Administration within 10 working days. Even if
the protocol is established, and patients are treated, the results of such treatments may not demonstrate the safety and efficacy
of the device. In addition, we cannot assure you that any Ebola-infected individuals will be treated under this protocol.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Pre-Marketing Regulations in the U.S.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the U.S., medical devices are
regulated by the U.S. Food and Drug Administration. Unless an exemption applies, a new medical device will require either
prior clearance under Section 510(k) of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. &sect; 360(k), or approval of a
premarket approval application before it can be marketed in the U.S.&nbsp;The premarket approval application process is more
complex, costly and time consuming than the clearance procedure under Section 510(k) of the Federal Food, Drug, and Cosmetic
Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A pre-market approval application must be
supported by extensive data including, but not limited to, technical, preclinical, clinical, manufacturing, control and labeling
information to demonstrate to the U.S. Food and Drug Administration satisfaction the safety and effectiveness of the device for
its intended use. After a premarket approval application is submitted, the U.S. Food and Drug Administration has 45 days to determine
whether it is sufficiently complete to permit a substantive review. If the premarket approval application is complete, the U.S.
Food and Drug Administration will file the premarket approval application. The U.S. Food and Drug Administration is subject to
performance goal review times for premarket approval applications and may issue a decision letter as a first action on a premarket
approval application within 180 days of filing, but if it has questions, it will likely issue a first major deficiency letter within
150 days of filing. It may also refer the premarket approval application to a U.S. Food and Drug Administration advisory panel
for additional review, and will conduct a preapproval inspection of the manufacturing facility to ensure compliance with the Quality
System Regulations of the U.S. Food and Drug Administration, either of which could extend the 180-day response target. While the
U.S. Food and Drug Administration&rsquo;s ability to meet its performance goals has generally improved during the past few years,
it may not meet these goals in the future. A premarket approval application can take several years to complete and there is no
assurance that any submitted premarket approval application will ever be approved. Even when approved, the U.S. Food and Drug Administration
may limit the indication for which the medical device may be marketed or to whom it may be sold. In addition, the U.S. Food and
Drug Administration may request additional information or request the performance of additional clinical trials before it will
reconsider the approval of the premarket approval application or as a condition of approval, in which case the trials must be completed
after the is approved. Changes to the device, including changes to its manufacturing process, may require the approval of a supplemental
premarket approval application.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If a medical device is determined to present
a significant risk, the manufacturer may not begin a clinical trial until it submits an investigational device exemption to the
U.S. Food and Drug Administration and obtains approval of the investigational device exemption from the U.S. Food and Drug Administration.
The investigational device exemption must be supported by appropriate data, such as animal and laboratory testing results and include
a proposed clinical protocol. These clinical trials are also subject to the review, approval and oversight of an institutional
review board which is an independent and multi-disciplinary committee of volunteers who review and approve research proposals,
and the reporting of adverse events and experiences, at each institution at which the clinical trial will be performed. The clinical
trials must be conducted in accordance with applicable regulations, including but not limited to the U.S. Food and Drug Administration&rsquo;s
investigational device exemption regulations and current good clinical practices. A clinical trial may be suspended by the U.S.
Food and Drug Administration, the internal review board or the sponsor at any time for various reasons, including a belief that
the risks to the study participants outweigh the benefits of participation in the trial. Even if a clinical trial is completed,
the results may not demonstrate the safety and efficacy of a device, or may be equivocal or otherwise not be sufficient to obtain
approval.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Post-Marketing Regulations in the U.S.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Should our Hemopurifier device be cleared
for market use in the United States by the U.S. Food and Drug Administration, numerous regulatory requirements continue to apply.
These include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>the U.S. Food and Drug Administration's Quality System Regulation 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;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>labeling regulations and U.S. Food and Drug Administration prohibitions against the promotion of products for un-cleared, unapproved or off-label uses;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>clearance or approval of product modifications that could significantly affect safety or efficacy or that would constitute a major change in intended use;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 30px">&nbsp;</td>
    <td style="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <td>medical device reporting regulations, which require that manufacturers report to the U.S. Food and Drug Administration 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</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <TD STYLE="width: 30px">&nbsp;</td>
    <TD STYLE="width: 30px"><font style="font-family: Symbol">&middot;</font></td>
    <TD>post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device.</td></tr>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">After a device receives a premarket approval
from the U.S. Food and Drug Administration, 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. The U.S. Food and Drug Administration
requires each manufacturer to make this determination initially, but the U.S. Food and Drug Administration can review any such
decision and can disagree with a manufacturer's determination.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The regulations also require that we report
to the U.S. Food and Drug Administration 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Compliance with U.S. Health Care Laws</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We must comply with various U.S. federal
and state laws, rules and regulations pertaining to healthcare fraud and abuse, including anti-kickback regulations, as well as
other healthcare laws in connection with the commercialization of our products. Fraud and abuse laws are interpreted broadly and
enforced aggressively by various state and federal agencies, including the U.S. Department of Justice, the U.S. Office of Inspector
General for the Department of Health and Human Services and various state agencies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The U.S. federal Anti-Kickback Statute,
42 U.S.C. &sect; 1320a-7b, prohibits persons, including a medical device manufacturer (or a party acting on its behalf), from knowingly
or willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either
the referral of an individual for a service or product or the purchasing, ordering, arranging for, or recommending the ordering
of, any service or product for which payment may be made by Medicare, Medicaid or any other federal healthcare program. This statute
has been interpreted to apply to arrangements between medical device manufacturers on one hand and healthcare providers on the
other. The term &ldquo;remuneration&rdquo; is not defined in the federal Anti-Kickback Statute and has been broadly interpreted
to include anything of value, such as cash payments, gifts or gift certificates, discounts, waiver of payments, credit arrangements,
ownership interests, the furnishing of services, supplies or equipment, and the provision of anything at less than its fair market
value. Courts have broadly interpreted the scope of the law, holding that it may be violated if merely one purpose of an arrangement
is to induce referrals, irrespective of the existence of other legitimate purposes. The Anti-Kickback Statute prohibits many arrangements
and practices that are lawful in businesses outside of the healthcare industry. Although there are a number of statutory exemptions
and regulatory safe harbors protecting certain business arrangements from prosecution, the exemptions and safe harbors are drawn
narrowly, and practices that involve remuneration intended to induce prescribing, purchasing or recommending may be subject to
scrutiny if they do not qualify for an exemption or safe harbor. Our practices may not in all cases meet all of the criteria for
safe harbor protection from federal Anti-Kickback Statute liability. The reach of the Anti-Kickback Statute was broadened by the
recently enacted Patient Protection and Affordable Care Act of 2010 and the Health Care and Education Affordability Reconciliation
Act of 2010, collectively, the Affordable Care Act or ACA, which, among other things, amends the intent requirement of the federal
Anti-Kickback Statute such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to
violate it in order to have committed a violation. In addition, the ACA provides that the government may assert that a claim including
items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes
of the federal False Claims Act (discussed below) or the civil monetary penalties statute, which imposes fines against any person
who is determined to have presented or caused to be presented claims to a federal healthcare program that the person knows or should
know is for an item or service that was not provided as claimed or is false or fraudulent. In addition to the federal Anti-Kickback
Statute, many states have their own anti-kickback laws. Often, these laws closely follow the language of the federal law, although
they do not always have the same scope, exceptions, safe harbors or sanctions. In some states, these anti-kickback laws apply not
only to payments made by government healthcare programs but also to payments made by other third-party payors, including commercial
insurance companies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>International Regulation </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">International development and sales of medical
devices are subject to foreign government regulations, which vary substantially from country to country. The time required to obtain
approval by a foreign country may be longer or shorter than that required for U.S. Food and Drug Administration approval, and the
requirements may differ. For example, the primary regulatory authority with respect to medical devices in Europe is that of the
European Union. The unification of these countries into a common market has resulted in the unification of laws, standards and
procedures across these countries, which may expedite the introduction of medical devices like those we are offering and developing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The European Union has adopted numerous
directives and standards regulating the design, manufacture, clinical trials, labeling and adverse event reporting for medical
devices. Devices that comply with the requirements of relevant directives will be entitled to bear CE Conformity Marking, indicating
that the device conforms to the essential requirements of the applicable directives and, accordingly, can be commercially distributed
throughout the European Union. Actual implementation of these directives, however, may vary on a country-by-country basis. The
CE Mark is a mandatory conformity mark on medical devices distributed and sold in the European Union and certifies that a medical
device has met applicable requirements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The CE Mark is mandatory for medical
devices sold not only within the countries of the European Union but more generally within most of Europe. As many of the
European standards are converging with international standards, the CE Mark is often used on medical devices manufactured and
sold outside of Europe (notably in Asia that exports many manufactured products to Europe). CE Marking gives companies easier
access into not only the European market but also to Asian and Latin American markets, most of which recognize the CE Mark on
a medical device as a mark of quality and adhering to international standards of consumer safety, health or environmental
requirements. In September 2012, the European Commission adopted a proposal for a regulation that, if adopted, will change
the way that most medical devices are regulated in the European Union, and may subject our products to additional
requirements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To date, we have not begun any process to
obtain the CE Mark and have no immediate plans to test or commercialize the Hemopurifier in any European Union countries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Manufacturing</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Manufacturing of our Hemopurifier occurs
in collaboration with a contract manufacturer based in San Diego, California that is compliant with the Good Manufacturing Practice
regulations promulgated by the U.S. Food and Drug Administration. &nbsp;We have registered our contract manufacturing arrangement
with the U.S. Food and Drug Administration and we have since received an export license from the U.S. Food and Drug Administration
that allows the export our Hemopurifier for commercial purposes to India. To date, our manufacture of the Hemopurifier has been
limited to quantities necessary to support our clinical studies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Sources and Suppliers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are not dependent on any specific vendors
for the materials used in our Hemopurifier. The key raw materials in the Hemopurifier include the affinity lectin galanthus nivalis
agglutinin, pharmaceutical grade diatomaceous earth, plasmapheresis cartridges and certain chemical binding agents. The affinity
lectin is available from several life science supply companies in the U.S. Diatomaceous earth is available from several life science
supply companies in the U.S. To date, we have purchased plasmapheresis cartridges from one vendor in Europe however similar cartridges
are commercially available from vendors on a worldwide basis should that European vendor cease to be available for any reason,
including prohibitive pricing. The chemical binding agents are available from a number of life science supply companies on a worldwide
basis. We typically purchase our raw materials on purchase order basis. Therefore, we remain subject to risks of supply shortages
and price increases that potentially could materially adversely affect our financial condition and operating results if and when
we begin large scale manufacture of the Hemopurifier.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The key raw materials used by Exosome Sciences,
Inc. in its research are blood samples supplied by research partners and a number of chemical and lab products commercially available
from vendors on a worldwide basis. Exosome Sciences, Inc. is not dependent on any specific vendors for the materials used in its
research activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Product Liability</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Employees</B> &nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">At December 31, 2014, we had five full-time
employees, comprised of our Chief Executive Officer, our President, our Chief Science Officer, our Chief Financial Officer, and
an executive assistant. We utilize, whenever appropriate, contract and part-time professionals in order to conserve cash and resources.
We currently utilize three corporate communications groups on a part-time basis. We also use several consultants to assist us with
certain portions of the work under our Defense Advanced Research Projects Agency-related contracts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">At December 31, 2014, Exosome Sciences,
Inc. had three full-time employees, comprised of its Chief Science Officer, its Clinical Research Director, a research scientist,
and a part-time operations manager.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We believe our employee relations are good.
None of our employees are represented by a labor union or are subject to collective-bargaining agreements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DESCRIPTION OF PROPERTIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We currently lease approximately 2,576
square feet of executive office space at 9635 Granite Ridge Drive, Suite 100, San Diego<I>, </I>CA 92123 under a 39-month
gross plus utilities lease with an initial rental rate of $6,054 per month. We believe this new leased facility will
be satisfactory for our office needs over the term of the lease.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also  lease approximately
1,700 square feet of laboratory space at 11585 Sorrento Valley Road, Suite 109, San Diego, California 92121 at the rate of
$3,917 per month on a one-year gross plus utilities lease that previously was scheduled to expire in October 2014 and was
recently extended to expire in October 2015. We believe this new leased facility will be satisfactory for our laboratory
needs over the term of the lease</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Exosome Sciences, Inc.
subsidiary leases approximately 2,055 square feet of office and laboratory space at 11 Deer Park Drive, South Brunswick, NJ
at the rate of $3,596 per month on a one-year gross plus utilities lease that previously was scheduled to expire in October
2014 and was recently extended to in October 2015. We believe this new leased facility will be satisfactory for Exosome
Science, Inc.&rsquo;s operational needs over the term of the lease.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LEGAL PROCEEDINGS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We may be involved from time to time in
various claims, lawsuits, and/or disputes with third parties or breach of contract actions incidental to the normal course of our
business operations. We are currently not involved in any litigation or any pending legal proceedings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MARKET PRICE FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our common stock is quoted on the OTCQB
Marketplace under the trading symbol &quot;AEMD.&quot; Trading in our common stock historically has been volatile and often has
been thin.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth for the calendar
period indicated the quarterly high and low bid prices for our common stock as reported by the OTCQB Marketplace. The prices represent
quotations between dealers, without adjustment for retail markup, mark down or commission, and do not necessarily represent actual
transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">BID PRICE</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid">PERIOD</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">HIGH</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">LOW</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Calendar 2014:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 66%; text-align: left">Third Quarter</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">0.19</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">0.10</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Second Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.23</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.14</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">First Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.27</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.16</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Calendar 2013:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Fourth Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.18</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.13</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Third Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.29</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.10</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Second Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.14</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.08</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">First Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.15</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.06</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Calendar 2012:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Fourth Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.11</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.06</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Third Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.11</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.06</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Second Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.13</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.07</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">First Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.18</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.05</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">There were approximately 194 record holders
of our common stock at December 31, 2014. The number of registered stockholders includes any beneficial owners of common shares
held in street name.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have not declared any cash dividends
on our common stock since inception and do not anticipate any in the future. 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 our Board of Directors may deem relevant at that time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The transfer agent and registrar for our
common stock is Computershare Investor Services, located at 350 Indiana Street, Suite 800, Golden, Colorado 80401.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Equity Compensation Plans</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Summary equity compensation plan data</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth information,
as of March 31, 2014, about our equity compensation plans (including the potential effect of debt instruments convertible into
common stock) in effect as of that date:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid">Plan category</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">(a) <BR> Number of securities<BR> to be issued<BR> upon exercise<BR> of outstanding<BR> options, warrants<BR> and rights<BR> (1)(2)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">(b)<BR> Weighted-average <BR> exercise price of <BR> outstanding options,<BR> warrants and rights</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">(c)<BR> Number of securities<BR> remaining available<BR> for future issuance<BR> under equity <BR> compensation plans<BR> (excluding securities<BR> reflected in column <BR> (a))</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 49%; text-align: left; text-indent: -9pt; padding-left: 9pt">Equity compensation plans approved by security holders</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">&ndash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">&ndash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">490,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt">Equity compensation plans not approved by security holders (1)(3)(4)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">26,133,407</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0.25</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,445,626</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt">Totals</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">26,133,407</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">0.25</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: right; border-bottom: Black 2.5pt double">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">2,935,626</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1) The description of the material terms of non-plan issuances
of equity instruments is discussed in Note 6 to the accompanying consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(2) Net of equity instruments forfeited, exercised or expired.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(3) On June 8, 2009, our Board of Directors approved the grant
to Mr. James A. Joyce, our Chief Executive Officer, of 4,000,000 shares of restricted common stock. The market price of our stock
on&nbsp;the grant date was $0.24 per share and the shares vested in equal installments over a thirty-six-month period that commenced
on June 30, 2010. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(4) On March 31, 2014 we had 2,445,626 shares available under
our 2010 Stock Incentive Plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>2000 Stock Option Plan</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our 2000 Stock Option Plan provides for
the grant of incentive stock options to our full-time employees (who may also be directors) and nonstatutory stock options to non-employee
directors, consultants, customers, vendors or providers of significant services. The exercise price of any incentive stock option
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 nonstatutory stock option, 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 2000 Stock Option Plan is 500,000 options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">At March 31, 2014, all of the grants previously
made under the 200 Stock Option Plan had expired and 10,000 restricted shares had been issued under the plan, with 490,000 available
for future issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>2003 Consultant Stock Plan</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our 2003 Consultant Stock Plan 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. The plan provides for the grant of common stock. No awards
may be issued after the ten-year anniversary of the date we adopted the plan, the termination date for the plan. We have periodically
amended the plan to increase the number of shares available for issuance under the plan with the approval of our Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We filed registration statements on Form
S-8 with the Securities and Exchange Commission to register under the Securities Act of 1933, as amended, the common shares issuable
under this plan as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" ALIGN="CENTER" STYLE="width: 50%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<tr style="vertical-align: top">
    <TD STYLE="width: 25%; padding-right: 5.4pt; padding-left: 5.4pt; text-decoration: underline; text-align: center"><u>Date of Filing</u></td>
    <TD STYLE="width: 25%; padding-right: 5.4pt; padding-left: 5.4pt; text-decoration: underline; text-align: center"><u>Number of Shares Registered</u></td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">March 29, 2004</td>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">1,000,000</td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">August 29, 2005</td>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">2,000,000</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">August 9, 2007</td>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">2,000,000</td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">July 10, 2009</td>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">1,000,000</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">February 17, 2010</td>
    <TD STYLE="padding-right: 5.4pt; padding-left: 5.4pt; text-align: center">1,500,000</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We discontinued using this plan in October
2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>2010 Stock Incentive Plan</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In August 2010, we adopted the 2010 Stock
Incentive Plan, which provides incentives to attract, retain and motivate employees and directors whose present and potential contributions
are important to our success by offering them an opportunity to participate in our future performance through awards of options,
the right to purchase common stock, stock bonuses and stock appreciation rights and other awards. A total of 3,500,000 common shares
were initially reserved for issuance under the 2010 Stock Incentive Plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In August 2010, we filed a registration
statement on Form S-8 for the purpose of registering 3,500,000 common shares issuable under this plan under the Securities Act
of 1933, as amended, and in July 2012, we filed a registration statement on Form S-8 for the purpose of registering 5,000,000 common
shares issuable under this plan under the Securities Act of 1933, as amended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">At March 31, 2014, we had 2,445,626 shares
available under this plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>2012 Directors Compensation Program</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In July 2012, our Board of Directors approved
a board compensation program that modifies and supersedes the 2005 Directors Compensation Program, which was previously in effect.
Under the 2012 program, in which only non-employee directors may participate, an eligible director will receive a grant of $35,000
worth of ten year options to acquire shares of common stock, with such grant being valued at the exercise price based on the average
of the closing bid prices of the common stock for the five trading days preceding the first day of the fiscal year. In addition,
under this new program, eligible directors will receive cash compensation equal to $500 for each committee meeting attended and
$1,000 for each formal board meeting attended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the fiscal year ended March 31, 2013,
our Board of Directors granted ten-year options to acquire an aggregate of 1,667,105 shares of our common stock, all with an exercise
price of $0.076 per share, to our four outside directors under the new 2012 program.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the fiscal year ended March 31, 2014,
our Board of Directors granted ten-year options to acquire an aggregate of 1,595,536 shares of our common stock, all with an exercise
price of $0.082 per share, to our five outside directors under the new 2012 program.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">At March 31, 2014 we had issued 1,337,825
options under the old 2005 program to outside directors and 3,965,450 options to employee-directors, 514,550 outside directors&rsquo;
options had been forfeited, 250,000 outside directors&rsquo; options had been exercised and 3,671,550 options remained outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On June 6, 2014, our Board of Directors
approved certain changes to the 2012 program. Under this new program, a new eligible director will receive an initial grant of
$50,000 worth of options to acquire shares of common stock, with such grant being valued at the exercise price based on the average
of the closing bid prices of the common stock for the five trading days preceding the first day of the fiscal year. These options
will have a term of ten years and will vest 1/3 upon grant and 1/3 upon each of the first two anniversaries of the date of grant.
In addition, at the beginning of each fiscal year, each existing director eligible to participate in the modified new 2012 program
also will receive a grant of $35,000 worth of options valued at the exercise price based on the average of the closing bid prices
of the common stock for the five trading days preceding the first day of the fiscal year. Such options will vest on the first anniversary
of the date of grant. In lieu of per meeting fees, eligible directors will receive an annual board retainer fee of $30,000. The
modified new 2012 program also provides for the following annual retainer fees: Audit Committee Chair - $5,000, Compensation Committee
chair - $5,000, Audit Committee member - $4,000, Compensation Committee member - $4,000 and lead independent director - $15,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Stand-alone grants</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">From time to time our Board of Directors
grants restricted stock or common share purchase options or warrants to selected directors, officers, employees and consultants
as equity compensation to such persons on a stand-alone basis outside of any of our formal stock plans. The terms of these grants
are individually negotiated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On June 8, 2009, our Board of Directors
approved the grant to Mr. Joyce of 4,000,000 shares of restricted common stock at a price per share of $0.24, the vesting and issuance
of which occurred in equal installments over a thirty-six-month period that commenced on June 30, 2010. </P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of March 31, 2014, we had issued 22,568,158
options (of which 3,368,942 have been exercised or cancelled) and authorized the issuance of 4,000,000 shares of restricted stock
outside of the 2005 Directors Compensation Plan, the 2012 Directors Compensation Plan, the 2000 Stock Option Plan, the 2003 Consultant
Stock Plan and the 2010 Incentive Stock Plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MANAGEMENT&rsquo;S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following discussion and analysis should
be read in conjunction with the consolidated Financial Statements and Notes thereto appearing elsewhere in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are a medical device company focused
on creating innovative devices that address unmet medical needs in cancer, infectious disease and other life-threatening conditions.
At the core of our developments is the Aethlon ADAPT system, a medical device platform that converges single or multiple affinity
drug agents with advanced plasma membrane technology to create therapeutic filtration devices that selectively remove harmful particles
from the entire circulatory system without loss of essential blood components.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In June 2013, the U.S. Food and Drug Administration
approved our investigational device exemption application to initiate a ten-patient human clinical trial in one location in the
United States to treat dialysis patients who are infected with the Hepatitis-C virus. The principal investigator of that clinical
trial recently began recruiting patients. Successful outcomes of that human trial as well as at least one follow-on human trial
will be required by the U.S. Food and Drug Administration in order to commercialize our products in the U.S. The regulatory agencies
of certain foreign countries where we intend to sell this device will also require one or more human clinical trials.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Some of our patents may expire before we
receive U.S. Food and Drug Administration approval to market our products in the United States or we receive approval to market
our products in a foreign country. However, we believe that certain patent applications and/or other patents issued more recently
will help protect the proprietary nature of the Hemopurifier treatment technology.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In October 2013, our majority-owned subsidiary,
Exosome Sciences, Inc., commenced operations with a focus on advancing exosome-based strategies to diagnose and monitor the progression
of cancer, infectious disease and other life-threatening conditions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Fiscal Years Ended March 31, 2014 and 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Results of Operations</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Revenues</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We recorded government contract revenue
in the fiscal years ended March 31, 2014 and 2013.&nbsp;&nbsp;This revenue arose from work performed under our government contract
with the Defense Advanced Research Projects Agency and our subcontract with Battelle Memorial Institute as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Fiscal Year Ended 3/31/14</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Fiscal year Ended 3/31/13</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Change in Dollars</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 49%; text-align: left">Defense Advanced Research Projects Agency contract</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">1,466,482</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">1,230,004</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">236,478</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Battelle Memorial Institute subcontract</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">157,287</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">157,287</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total government contract revenue</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,623,769</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,230,004</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">393,765</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Defense Advanced Research Projects Agency Contract</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We entered into a contract with the Defense
Advanced Research Projects Agency on September 30, 2011. Under the Defense Advanced Research Projects Agency award, we have been
engaged to develop a therapeutic device to reduce the incidence of sepsis, a fatal bloodstream infection that often results in
the death of combat-injured soldiers. The award from the Defense Advanced Research Projects Agency was a fixed-price contract with
potential total payments to us of $6,794,389 over the course of five years. Fixed price contracts require the achievement of multiple,
incremental milestones to receive the full award during each year of the contract. Under the terms of the contract, we will perform
certain incremental work towards the achievement of specific milestones against which we will invoice the government for fixed
payment amounts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Originally, only the base year (year one
contract) was effective for the parties; however, the Defense Advanced Research Projects Agency subsequently exercised the option
on the second, third and fourth years of the contract. The Defense Advanced Research Projects Agency has the option to enter into
the contract for year five. The milestones are comprised of planning, engineering and clinical targets, the achievement of which
in some cases will require the participation and contribution of third party participants under the contract. There can be no assurance
that we alone, or with third party participants, will meet such milestones to the satisfaction of the government and in compliance
with the terms of the contract or that we will be paid the full amount of the contract revenues during any year of the contract
term. We commenced work under the contract in October 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Due to budget restrictions within the Department
of Defense, on February 10, 2014, the Defense Advanced Research Projects Agency reduced the scope of our contract in years three
through five of the contract. The reduction in scope focused our research on exosomes, viruses and blood processing instrumentation.
This scope reduction will reduce the possible payments under the contract by $858,491 over years three through five.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a result of achieving eight milestones
in the fiscal year ended March 31, 2014, we reported $1,466,482 in contract revenue for that fiscal year and as a result of achieving
six milestones in the fiscal year ended March 31, 2013, we reported $1,230,004 in contract revenue for that fiscal year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of March 31, 2014, we have invoiced for
twenty milestone payments under the Defense Advanced Research Projects Agency contract totaling $4,054,675.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Battelle Memorial Institute Subcontract</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We entered into a subcontract agreement
with Battelle Memorial Institute in March 2013. Battelle Memorial Institute was chosen by the Defense Advanced Research Projects
Agency to be the prime contractor on the systems integration portion of the original Defense Advanced Research Projects Agency
contract and we are one of several subcontractors on that systems integration project. The Battelle Memorial Institute subcontract
is under a time and materials basis and we began generating revenues under the subcontract in the three months ended September
30, 2013. Our expected future revenue from the subcontract will be at the discretion of Battelle Memorial Institute. The Battelle
Memorial Institute subcontract is our first cost-reimbursable contract.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our revenue under this contract is a function
of cost reimbursement plus an overhead mark-up for hours devoted to the project by specific employees (with specific hourly rates
for those employees), for travel expenses related to the project, for any equipment purchased for the project and for the cost
of any consultants hired by us to perform work on the project. Each payment will require approval by the program manager at Battelle
Memorial Institute.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Operating Expenses</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Consolidated operating expenses were $4,679,697
for the fiscal year ended March 31, 2014 compared to $4,805,358 in the fiscal year ended March 31, 2013, a decrease of $125,661.
The net decrease of $125,661 was due to a decrease in professional fees of $370,873, which was partially offset by an increase
in general and administrative expense of $185,007 and an increase in payroll and related expenses of $60,205.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The $370,873 decrease in our professional
fees primarily arose from a decrease in Defense Advanced Research Projects Agency-related professional fees of $223,930 due to
decreased use of consultants on subtask 1 of the project and a decrease in non-Defense Advanced Research Projects Agency-related
professional fees of $187,922. Those decreases were partially offset by $40,979 in professional fees at our Exosome Sciences, Inc.
subsidiary. The decrease in non-Defense Advanced Research Projects Agency-related professional fees was primarily due to decreased
activity in our Hepatitis-C trial in India.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The $185,007 increase in general and administrative
expenses primarily arose from $130,367 in general and administrative expenses from the recently launched operations at our majority-owned
Exosome Sciences, Inc. subsidiary. We also had a $65,862 increase in general and administrative expenses related to our government
contracts, which was partially offset by a $11,222 decrease in our non- Exosome Sciences, Inc., non-Defense Advanced Research Projects
Agency-related general and administrative expenses.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The $60,205 increase in payroll and related
expenses was principally driven by $232,719 in payroll and related expenses from the recently launched operations at our majority-owned
Exosome Sciences, Inc. subsidiary. That increase was partially offset by a $157,327 reduction in our stock-based compensation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Other Expense</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the fiscal year ended March 31, 2014,
we recognized other expenses of $10,383,034 compared to $1,316,686 of other expense in the fiscal year ended March 31, 2013. The
following table breaks out the various components of our other expense over the fiscal years ended March 31, 2014 and 2013:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="text-align: center; border-bottom: Black 1pt solid">Components of Other Expense <BR> in Fiscal Year Ended</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, <BR> 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, <BR> 2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Change</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; width: 49%">Loss on debt conversion and on settlement of accrued interest and damages</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">40,257</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">139,839</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(99,582</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Change in fair value of derivative liability</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,547,015</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">44,705</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,502,310</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Interest and other debt expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,287,221</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,132,314</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">154,907</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Loss on litigation settlement</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">583,601</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">583,601</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 1pt">Other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(75,060</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(172</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(74,888</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total other expense</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,383,034</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,316,686</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">9,066,348</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We recorded a loss on debt conversion
and on settlement of accrued interest and damages of $40,257 and $139,839 in the fiscal years ended March 31, 2014 and 2013,
respectively. In the both fiscal years, those losses arose from the conversion to equity of principal and accrued interest on
certain notes payable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Both periods include changes in the fair
value of derivative liability. For the fiscal year ended March 31, 2014, the change in the estimated fair value of derivative liability
was a loss of $8,547,015 and for the fiscal year ended March 31, 2013, the change in the estimated fair value of derivative liability
was a loss of $44,705.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also recorded litigation settlement expense
of $583,601 in the fiscal year ended March 31, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Other income included a gain of $75,000
related to the extinguishment of accrued damages as a result of the litigation settlement in the fiscal year ended March 31, 2014
as well as interest income in both fiscal years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our interest and other debt expense increased
by $154,907 from the fiscal year ended March 31, 2013 to the fiscal year ended March 31, 2014. The following table breaks out the
various components of our interest expense over the fiscal years ended March 31, 2014 and 2013:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="text-align: center; border-bottom: Black 1pt solid">Components of Interest Expense and Other Debt <BR> Expenses in Fiscal Year Ended</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, <BR> 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, <BR> 2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Change</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 49%; text-align: left">Interest expense</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">425,725</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">526,110</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(100,385</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Amortization of deferred financing costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">863</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">127,200</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(126,337</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Amortization of note discounts</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,284</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">467,158</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(462,874</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Note restructuring expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">856,349</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">856,349</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Non-cash interest expense</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">11,846</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(11,846</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total interest expense</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,287,221</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,132,314</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">154,907</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a result of the above factors, our net
loss before noncontrolling interests increased from $(4,892,040) for the fiscal year ended March 31, 2013 to $(13,438,962) for
the fiscal year ended March 31, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Liquidity and Capital Resources</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">At March 31, 2014, we had a cash balance
of $1,250,279 and a working capital deficit of $14,169,471. This compares to a cash balance of $125,274 and a working capital deficit
of $9,276,618 at March 31, 2013. Between April 1, 2014 and July 9, 2014, we raised aggregate proceeds of $320,800 through private
equity transactions and collected $135,376 under our Defense Advanced Research Projects Agency contract and Battelle Memorial Institute
subcontract. Significant additional financing must be obtained in order to provide a sufficient source of operating capital and
to allow the Company to continue to operate as a going concern. In addition, we will need to raise capital to complete the recently
approved human clinical trial in the U.S. During the period after March 31, 2014, we raised capital to support our operations.
See the discussions in the sections below entitled &ldquo;Three and Six-Month Periods Ended September 30, 2014 and 2013&rdquo;
and &ldquo;Material Changes During the Period September 30, 2014 to December 31, 2014.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We do not expect revenue from operations
will be sufficient to satisfy our funding requirements in the near term, and accordingly, our ability to continue operations and
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. 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 our ability to establish collaborative
arrangements, effective commercialization, marketing activities and other arrangements. We expect to continue to incur increasing
negative cash flows and net losses for the foreseeable future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Cash Flows</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Cash flows from operating, investing and
financing activities, as reflected in the accompanying Consolidated Statements of Cash Flows, are summarized as follows (in thousands):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">(In thousands) <BR> For the year ended</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, <BR> 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, <BR> 2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Cash (used in) provided by:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 66%; text-align: left">Operating activities</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(2,139</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(2,099</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Investing activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(96</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Financing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,360</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,080</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net increase (decrease) in cash</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,125</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(19</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net Cash from Operating Activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We used cash in our operating activities
due to our losses from operations. Net cash used in operating activities was approximately $2,139,000 in fiscal 2014 compared to
net cash used in operating activities of approximately $2,099,000 in fiscal 2013, an increase of $40,000.&nbsp;&nbsp;The $40,000
increase was primarily due to changes in our operating assets and liabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net Cash from Investing Activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the fiscal year ended March 31, 2014,
we used approximately $96,000 in cash for purchases of equipment. During the fiscal year ended March 31, 2013, we did not purchase
any equipment or have any other investing activities.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net Cash from Financing Activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Net cash generated from financing activities
increased from approximately $2,080,000 in the fiscal year ended March 31, 2013 to approximately $3,360,000 in the fiscal year
ended March 31, 2014. Included in net cash provided by financing activities in fiscal 2014 were approximately $3,177,000 from the
issuance of common stock and $400,000 from the issuance of notes payable, which was partially offset by approximately $217,000
in repayments of notes payable in cash.&nbsp;&nbsp;In fiscal 2013, we received approximately $2,110,000 from the issuance of common
stock, which was partially offset by approximately $30,000 in repayments of notes payable and related accrued interest in cash.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Convertible Notes Payable and Warrants</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Amended and Restated 12% Series A Convertible Notes</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In June 2010, we entered into Amended and
Restated 12% Series A Convertible Promissory Notes, in the principal amount of $900,000, with the holders of certain promissory
notes previously issued by us. These notes matured on December 31, 2010. In connection with the amendments we paid $54,001 of accrued
and default interest through the date of the restructuring, liquidated damages of $205,000 and $54,003 of prepaid interest through
the expiration date in the aggregate amount of $313,004 through the issuance of units at a fixed rate of $0.20 per unit. Each unit
consists of one share of our common stock and one common stock purchase warrant to purchase one share of our common stock at a
fixed exercise price of $0.20 per share exercisable until February 2016. &nbsp;We also increased the annual interest&nbsp;rate
from ten percent to twelve percent. We also agreed to change the exercise prices on all of the warrants held by the noteholders
to $0.20 per share, to change certain formerly contingent warrants to non-contingent warrants and to extend the expiration date
of their warrants to February 2016. As of December 31, 2013 the notes were in default. We accrued interest at the revised default
rate of 20% following December 31, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On June 24, 2014, we entered into an agreement
with the Ellen R. Weiner Family Revocable Trust, a holder of one of the notes to convert past due combined principal and interest
balance of $1,003,200 into an aggregate of 23,318,254 restricted shares of our common stock and five-year warrants to acquire up
to 6,809,524 shares of our common stock at an exercise price of $.042 per share and 397,222 shares of our common stock at an exercise
price of $.108 per share. In connection with these changes, the trust agreed to waive the anti-dilution price protection in the
warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In exchange for the trust&rsquo;s conversion
in full of the note and accrued interest and for the waivers of anti-dilution price protection in the previously issued warrants,
we also issued to the trust 75,000 restricted shares of common stock as a service fee, changed the exercise price of all of the
previously issued warrants to $.042 per share and extended the expiration date of all of the previously issued warrants to July
1, 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On July 8, 2014, we entered into an agreement
with the Estate of Allan Bird, a holder of a one of the notes that was in default. In the agreement, the estate agreed to extend
the expiration date of the note to April 1, 2016, and to convert approximately $116,970 of accrued interest into an aggregate of
2,591,846 restricted shares of our common stock. The estate received five-year warrants to acquire 2,321,429 shares of our common
stock at an exercise price of $.042 per share and 135,417 shares of our common stock at an exercise price of $.108.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also issued to the estate 25,000 restricted
shares of common stock as a service fee, changed the exercise price of all of the previously issued warrants to $.042 per share
and extended the expiration date of all of the previously issued warrants to July 1, 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">December 2006 10% Convertible Notes</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In January 2014, we paid off the remaining
December 2006 10% Note and the related accrued interest balance with a cash payment of $35,055. That payment represented the sum
of the $17,000 principal balance and $18,055 of accrued interest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="background-color: white">2008 10% Convertible Notes</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">One 2008 10% Convertible Note in the amount
of $25,000, which matured in January 2010 remained outstanding at March 31, 2014. On September 17, 2014, we issued the holder 478,188
shares of restricted common stock and warrants to acquire up to 239,094 shares of common stock at an exercise price of $0.14 per
share upon conversion of the entire outstanding principal amount of $25,000 and accrued interest of $20,906.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">October and November 2009 10% Convertible Notes</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In October and November 2009, we raised
$430,000 from the sale to accredited investors of 10% convertible notes. The notes matured at various dates between April 2011
and May 2011 and are convertible into our common stock at a fixed&nbsp;conversion price of $0.25 per share prior to maturity. The
investors also received matching three year warrants to purchase unregistered shares of our common stock at a price of $0.25 per
share. We measured the fair value of the warrants and the beneficial conversion feature of the notes and recorded a 100% discount
against the principal of the notes. We are amortizing this discount using the effective interest method over the term of the notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Deferred financing costs of $20,250 incurred
in connection with this financing were issued in the form of a convertible note with warrants on the same terms as those received
by the investors. We capitalized the $20,250 of deferred financing costs and&nbsp;amortized them over the term of the notes using
the effective interest method.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In July 2012, we issued 461,409 shares of
common stock to the holder of the one of the notes in the principal amount of $25,000 in exchange for the value of the principal
and related accrued interest of $8,000 under the same terms that we used to sell units consisting of one share of common stock
and one-half of a stock purchase warrant on June 29, 2012. The 461,409 share issuance was priced based on 80% of the trailing five
day average before issuance to be consistent with the equity unit structure. As part of that structure, the noteholder also received
seven year warrants to purchase 230,705 share of common stock at a price of $0.107 per share. The $16,149 value of the warrant
was calculated using the binomial lattice valuation methodology. We recorded a loss on conversion of $45,796 on the conversions
in the quarter ended September 30, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="background-color: white">The
following table shows the conversions into principal of the October and November 2009 Convertible Notes  by fiscal year: </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="5" STYLE="text-align: center; border-bottom: Black 1pt solid">Activity in October and November 2009 Convertible Notes</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 83%; text-align: left">Initial principal balance, including $250,000 of deferred financing costs</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">450,250</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(70,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2011</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(175,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(130,250</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(25,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Conversions during the fiscal year ended March 31, 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt">Balance as of March 31, 2014</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">50,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In September 2013, we agreed to extend the
expiration date of certain warrants of one of the note holders by two years in exchange for the extension to April 22, 2015 of
the maturity date of a $50,000 note previously issued to the holder. Management assessed the change in the value of the note and
related warrants before and after that extension and determined that the change in value related to the change in terms was not
significant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">April 2010 10% Convertible Note</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In April 2010, we raised $75,000 from the
sale to an accredited investor of a 10% convertible note. The convertible note matured in October 2011 and is convertible into
our common stock at a fixed conversion price of $0.25 per share prior to maturity. The investor also received three year warrants
to purchase 300,000 unregistered shares of our common stock at a price of $0.25 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We measured the fair value of the warrants
and the beneficial conversion feature of the notes and recorded a 100% discount against the principal of the notes. We amortized
this discount using the effective interest method over the term of the note. <FONT STYLE="background-color: white">As of March
31, 2014, there have not been any conversions of the note. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In September 2013, we agreed to extend the
expiration date of certain warrants of the note holder by two years in exchange for the extension of the maturity date of the $75,000
note to October 21, 2015. Management assessed the change in the value of the notes and related warrants before and after that extension
and determined that the change in value related to the change in terms was not significant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">September 2010 10% Convertible Notes</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On September 3, 2010, we entered into a
subscription agreement with three accredited investors providing for the issuance and sale of convertible promissory notes and
corresponding warrants in the aggregate principal amount of $1,430,000. The closing resulted in the issuance and sale of (i) convertible
promissory notes in the aggregate principal amount of $743,600, (ii) five-year warrants to purchase an aggregate of 3,718,000 shares
of our common stock at an exercise price of $0.31125 per share, and (iii) five-year warrants to purchase an aggregate of 3,718,000
shares of our common stock at an exercise price of $0.43575 per share. The convertible promissory notes bear interest compounded
monthly at the annual rate of ten percent (10%) and matured on September 3, 2011. The aggregate gross cash proceeds were $650,000,
the balance of the principal amount representing a due diligence fee and an original issuance discount. The convertible promissory
notes are convertible at the option of the holders into shares of our common stock at a price per share equal to eighty percent
(80%) of the average of the three lowest closing bid prices of the common stock as reported by Bloomberg L.P. for the principal
market on which the common stock trades or is quoted for the ten (10) trading days preceding the proposed conversion date. Subject
to adjustment as described in the notes, the conversion price may not be more than $0.30 nor less than $0.20.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 31, 2014, we amended these notes
to extend the maturity date to April 1, 2016, which permits us to classify them as long-term liabilities. The non-default interest
rate for all of the notes was set at twelve percent per annum. We also agreed to increase the outstanding principal amount of the
notes by 12% from a total of $693,260 to a total of $776,451.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the period from October 2011 to February
2014, the investors converted, at conversion prices between $.0546 and $.07 per share, portions of principal and interest outstanding
under these notes and certain other convertible promissory notes previously issued to them by us. Certain anti-dilution provisions
applicable to such notes should have resulted in such conversions being effected at a conversion price of $.042 per share. Accordingly,
we issued to the investors an additional 4,507,105 shares of our common stock, which represents the additional shares of common
stock that would have been issued to the investors had such conversions been effected at $.042 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The amendments also set the conversion price
of the notes, as well as the exercise price at which shares of our common stock can be purchased under the warrants, at $.042 per
share. By virtue of the amendments, the expiration dates of the warrants also were extended from dates between September 3, 2015
and September 23, 2016 to January 1, 2017.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="background-color: white">The
following table shows the activity in these notes by fiscal year: </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="5" STYLE="text-align: center; border-bottom: Black 1pt solid">Activity in September 2010 10% Convertible Notes</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 83%; text-align: left">Initial principal balance</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">743,600</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(405,500</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(30,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(25,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Increase in principal balance due to 12% extension fee</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">33,972</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Balance as of March 31, 2014</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">317,072</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="background-color: white">April 2011 10% Convertible
Notes</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="background-color: white">In
April 2011, we entered into a subscription agreement with two accredited investors providing for the issuance and sale of convertible
promissory notes and corresponding warrants which resulted in the issuance and sale by us of (i) convertible promissory notes in
the aggregate principal amount of $385,000, (ii) five-year warrants to purchase an aggregate of&nbsp;4,004,000 shares of our common
stock at an exercise price of $0.125 per share, and (iii) five-year warrants to purchase an aggregate of&nbsp;4,004,000 shares
of our common stock at an exercise price of $0.175 per share. The convertible promissory notes bear interest compounded monthly
at the annual rate of ten percent and matured on April 1, 2012. The aggregate gross cash proceeds to us were $350,000, the balance
of the principal amount representing a due diligence fee and an original issuance discount. The convertible promissory notes were
convertible at the option of the holders into shares of our common stock at a price per share equal to eighty percent (80%) of
the average of the three lowest closing bid prices of the common stock as reported by Bloomberg L.P. for the principal market on
which the common stock trades or is quoted for the ten (10) trading days preceding the proposed conversion date. Subject to adjustment
as described in the notes, the conversion price may not be more than $0.20 nor less than $0.10. There are no registration requirements
with respect to the shares of common stock underlying the notes or the warrants.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="background-color: white">In
addition, we issued (i) five-year warrants to purchase an aggregate of 812,500 shares of our common stock at an exercise price
of $0.125 per share, and (ii) five-year warrants to purchase an aggregate of&nbsp;812,500 shares of our common stock at an exercise
price of $0.175 per share to the purchasers. These warrants were issued as an </FONT>anti-dilution <FONT STYLE="background-color: white">adjustment
under certain common stock purchase warrants held by the purchasers that were acquired from us in September 2010.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 31, 2014, we entered into amendments
with three accredited investors with respect to notes and warrants previously issued by us on various dates between December 5,
2007 and September 23, 2011, including these notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Prior to the amendments, the notes were
past maturity and were in default, resulting in the accrual of interest at the applicable default interest rate. The amendments
extended the maturity date of each of the notes to April 1, 2016 and provided for a non-default interest rate for all of the notes
at twelve percent per annum, which represents a reduction from the default interest rates of fifteen percent at which interest
had been accruing. By entering into the amendments, we also agreed to increase the outstanding principal amount of the notes by
12% from a total of $693,260 to a total of $776,451.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the period from October 2011 to February
2014, the investors had converted, at conversion prices between $.0546 and $.07 per share, portions of principal and interest outstanding
under the Notes and certain other convertible promissory notes previously issued to them by us. Certain anti-dilution provisions
applicable to such notes should have resulted in such conversions being effected at a conversion price of $.042 per share. Thus,
we issued to the investors an aggregate of 4,507,105 shares of our common stock, which represents the additional shares of common
stock that would have been issued to the Investors had such conversions been effected at $.042 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The amendments also set the conversion price
of the notes, as well as the exercise price at which shares of our common stock can be purchased under the warrants, at $.042 per
share. In addition, the warrants also were extended from dates between September 3, 2015 and September 23, 2016 to January 1, 2017.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="background-color: white">As
of March 31, 2014, there have not been any conversions of these notes and the 12% extension fee noted above increased the principal
balance by $48,048 to a principal balance of $ 448,448.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">July and August 2011 10% Convertible Notes</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the three months ended September
30, 2011, we raised $357,656 in 10% convertible notes. Those notes had a fixed conversion price of $0.09 per share and carried
an interest rate of 10%. The convertible notes matured in July and August 2012. We also issued those investors five year warrants
to purchase 3,973,957 shares of common stock at $0.125 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We measured the fair value of the warrants
and the beneficial conversion feature of the notes and recorded a $257,926 discount against the principal of the notes. We amortized
this discount using the effective interest method over the term of the note. <FONT STYLE="background-color: white">As of September
30, 2013, there were no conversions of the notes, which were extended to July 16, 2014.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Effective July 14, 2012, holders of three
notes totaling $100,000 agreed to extend the expiration date of their notes to July 13, 2013. Subsequent to June 30, 2013, the
holders of the three notes agreed to extend their notes to July 16, 2014. As part of the extension, we agreed to capitalize accrued
interest of $20,027 into the principal balance. Effective March 31, 2014, the holders of the three notes converted all of their
principal and accrued interest into 1,438,700 shares of our common stock at the contractual conversion price of $0.09 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">At March 31, 2014, the outstanding principal
balance was $257,655, all of which was in default. We  recorded interest at the default interest rate of 15%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">September 2011 Convertible Notes</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On September 23, 2011, we entered into a
subscription agreement with two accredited investors providing for the issuance and sale of convertible promissory notes and corresponding
warrants in the aggregate principal amount of $253,760. The warrants carried a five-year term to purchase an aggregate of 3,625,143
shares of our common stock at an exercise price of $0.10 per share. The convertible promissory notes do not bear an interest rate
and matured on September 23, 2012. The aggregate net cash proceeds to us were $175,000, the balance of the principal amount representing
a due diligence fee and an original issuance discount. The convertible promissory notes are convertible at the option of the holders
into shares of our common stock at a price per share equal to $0.07. Subject to adjustments as described in the notes, the conversion
price may not be more than $0.07.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We measured the fair value of the warrants
and the beneficial conversion feature of the notes and recorded a $168,804 discount against the principal of the notes. We amortized
this discount using the effective interest method over the term of the note.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 31, 2014, we entered into separate
amendments with three accredited investors who own certain convertible promissory notes and warrants previously issued by us on
various dates between December 5, 2007 and September 23, 2011, including these notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The amendments extended the maturity date
of each of the notes to April 1, 2016, and the non-default interest rate for all of the notes was set at 12% per annum, which represents
a reduction from the default interest rates of 15% at which interest had been accruing. By entering into the amendments, we also
agreed to increase the outstanding principal amount of the notes by 12% from a total of $693,260 to a total of $776,451.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the period from October 2011 to February
2014, the investors had converted, at conversion prices between $.0546 and $.07 per share, portions of principal and interest outstanding
under the notes and certain other convertible promissory notes previously issued to them by us. Certain anti-dilution provisions
applicable to such notes should have resulted in such conversions being effected at a conversion price of $.042 per share. Accordingly,
pursuant to the amendments, we issued to the investors an aggregate of 4,507,105 shares of our common stock, which represents the
additional shares of common stock that would have been issued to the Investors had such conversions been effected at $.042 per
share.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The amendments also set the conversion price
of the notes, as well as the exercise price at which shares of our common stock can be purchased under the warrants, at $.042 per
share. Additionally, under the amendments, the expiration dates of the warrants also were extended from dates between September
3, 2015 and September 23, 2016 to January 1, 2017.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="background-color: white">The
following table shows the conversions into principal of these notes by fiscal year: </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="5" STYLE="text-align: center; border-bottom: Black 1pt solid">Activity in September 2011 Convertible Notes</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 83%; text-align: left">Initial principal balance</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">253,760</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(15,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(60,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(169,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Increase in principal balance due to extension fee</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,171</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Balance as of March 31, 2014</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,931</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Law Firm Note Number 1</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 22, 2012, we entered into a promissory
note with our corporate law firm for the amount of $75,000, which represented the majority of the amount we then owed to that firm.
The promissory note originally had a maturity date of December 31, 2012 and bears interest at five percent per annum. The note
is convertible at the option of the holder into shares of our common stock at a 10% discount to the market price of the common
stock on the date prior to conversion with a floor price on such conversions of $0.08 per share. During the quarter ended June
30, 2013, the parties agreed to extend the maturity date of the note to October 1, 2013 and subsequent to September 30, 2013, the
expiration date of this note was again extended to October 1, 2014. On November 7, 2014, we paid in full the outstanding principal
balance and related accrued interest with a cash payment of $50,000 and an issuance of 170,020 shares of common stock upon conversion
at a conversion price of $0.21 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Law Firm Note Number 2</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On June 4, 2013, we entered into a
promissory note with our corporate law firm for the amount of $47,000, which represented approximately 50% of the amount we
owed to that firm for services in 2012. The promissory note had a maturity date of October 1, 2014 and bears interest at five
percent per annum. The note was convertible at the option of the holder into shares of our common stock at a 10% discount to
the market price of the common stock on the date prior to conversion with a floor price on such conversions of $0.07 per
share. Effective March 31, 2014, the holder converted this note and all related accrued interest into 302,043 shares of our
common stock at a conversion price of $0.16 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Securities Issued for Services</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have issued securities in payment of
services to reduce our obligations and to avoid using our cash resources. In the fiscal year ended March 31, 2014 we issued 3,071,150
common shares for services of which 1,568,124 were restricted and were for investor relations services and corporate communications
services. Included in the 3,071,150 common shares issued for services are 1,503,026 shares, registered under Form S-8 registration
statements, which were issued as follows: 71,140 for financial consulting, 419,069 for scientific consulting and 1,012,817 for
legal services. The average price discount of common shares issued for these services, weighted by the number of shares issued
for services in this period, was approximately 16.0%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Securities Issued for Debt</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have also issued securities for debt
to reduce our obligations to avoid using our cash resources. In the fiscal year ended March 31, 2014 we issued 10,574,024 restricted
common shares for repayment in full of notes, including accrued interest, in the aggregate amount of $726,776. The price discount
of the common stock issued for debt was approximately 43.2%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Prospects for Debt Conversion</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We seek, where possible, to convert our
debt and accounts payable to stock and/or warrants in order to reduce our cash liabilities. Our success at accomplishing this depends
on several factors including market conditions, investor acceptance and other factors, including our business prospects. All conversions
are done under an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Going Concern</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our independent registered public accounting
firm has stated in their audit report on our March 31, 2014 consolidated financial statements that our working capital deficiency
and our accumulated deficit are conditions that, among others, raise substantial doubt about our ability to continue as a going
concern.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Three and Six-Month Periods Ended September 30, 2014 and
2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Results of Operations</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Three Months Ended September 30, 2014 Compared to the
Three Months Ended September 30, 2013</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Revenues</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We recorded government contract revenue
in the three months ended September 30, 2014 and 2013.&nbsp;&nbsp;This revenue arose from work performed under our government contract
with the Defense Advanced Research Projects Agency and our subcontract with Battelle Memorial Institute as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Three Months Ended 9/30/14</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Three Months Ended 9/30/13</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Change in Dollars</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 49%; text-align: left">Defense Advanced Research Projects Agency contract</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">444,723</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">613,143</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(168,420</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Battelle Memorial Institute subcontract</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">34,352</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">31,744</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,608</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total government contract revenue</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">479,075</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">644,887</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(165,812</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Defense Advanced Research Projects Agency<FONT STYLE="font-size: 10pt">
Contract</FONT></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We entered into a contract with the Defense
Advanced Research Projects Agency on September 30, 2011. Under the Defense Advanced Research Projects Agency award, we have been
engaged to develop a therapeutic device to reduce the incidence of sepsis, a fatal bloodstream infection that often results in
the death of combat-injured soldiers. The award from the Defense Advanced Research Projects Agency was a fixed-price contract with
potential total payments to us of $6,794,389 over the course of five years. Fixed price contracts require the achievement of multiple,
incremental milestones to receive the full award during each year of the contract. Under the terms of the contract, we will perform
certain incremental work towards the achievement of specific milestones against which we will invoice the government for fixed
payment amounts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Originally, only the base year (year one
contract) was effective for the parties, however, the Defense Advanced Research Projects Agency subsequently exercised the option
on the second, third and fourth years of the contract. The Defense Advanced Research Projects Agency has the option to enter into
the contract for year five. The milestones are comprised of planning, engineering and clinical targets, the achievement of which
in some cases will require the participation and contribution of third party participants under the contract. There can be no assurance
that we alone, or with third party participants, will meet such milestones to the satisfaction of the government and in compliance
with the terms of the contract or that we will be paid the full amount of the contract revenues during any year of the contract
term. We commenced work under the contract in October 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Due to budget restrictions within the Department
of Defense, on February 10, 2014, the Defense Advanced Research Projects Agency reduced the scope of our contract in years three
through five of the contract. The reduction in scope focused our research on exosomes, viruses and blood processing instrumentation.
This scope reduction will reduce the possible payments under the contract by $858,491 over years three through five.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the three months ended September
30, 2014 we invoiced the Defense Advanced Research Projects Agency for three milestones totaling $444,723 while in the three months
ended September 30, 2013, we invoiced the Defense Advanced Research Projects Agency for three milestones totaling $613,143.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Operating Expenses</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Consolidated operating expenses for the
three months ended September 30, 2014 were $1,080,267 in comparison with $874,683 for the comparable quarter a year ago.&nbsp;&nbsp;This
increase of $205,584 was due to increases in payroll and related expenses of $139,505 and increases in general and administrative
expenses of $84,769, which were partially offset by a decrease in professional fees of $18,690.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The $139,505 increase in payroll and related
expenses was primarily due to the Exosome Sciences, Inc. payroll of $137,257. Other factors were an increase in stock-based compensation
of $14,980 and a decrease in cash-based compensation at Aethlon of $12,732.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The $84,769 increase in general and administrative
expenses was due to general and administrative expenses at Exosome Sciences, Inc. of $45,986. We also had an increase of $56,617
in our non-Defense Advanced Research Projects Agency-related general and administrative expenses. Those increases were partially
offset by a decrease in our Defense Advanced Research Projects Agency-related general and administrative expenses of $17,834.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The $18,690 decrease in our professional
fees was due to a decrease in our Defense Advanced Research Projects Agency-related professional fees of $48,188, which was partially
offset by increases of $20,675 in Exosome Sciences, Inc. professional fees and of $8,823 of our non- Defense Advanced Research
Projects Agency-related professional fees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Other Expense</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Other expense consists primarily of losses
on extinguishment of debt, the change in the fair value of our derivative liability, other expense and interest expense. Other
expense for the three months ended September 30, 2014 was other expense of $287,001 in comparison with other expense of $3,119,874
for the comparable quarter a year ago.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Loss on Extinguishment of Debt and Other</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We recorded a loss on extinguishment of
debt of $65,493 for the three months ended September 30, 2014 that related to the conversion to equity of $45,906 in principal
and accrued interest related to a note payable. The three months ended September 30, 2013 contained $17,467 in losses on debt conversion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The three months ended September 30, 2014
also included a charge of $143,363 for the change in fair value related to the extension of the warrants of a note holder in exchange
for a postponement in the agreed payment date of his notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Change in Fair Value of Derivative Liability</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We did not record a change in the fair value
of derivative liabilities in the three months ended September 30, 2014. For the three months ended September 30, 2013, the change
in the estimated fair value of derivative liability was a loss of $2,992,002.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest Expense</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Interest expense was $78,145 for the three
months ended September 30, 2014 compared to $110,405 in the corresponding prior period, a decrease of $32,260. The various components
of our interest expense are shown in the following table:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Quarter Ended</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Quarter Ended</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">9/30/14</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">9/30/13</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Change</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 49%; text-align: left">Interest expense</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">66,585</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">108,723</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(42,138</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Amortization of deferred financing costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,560</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,560</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Amortization of note discounts</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,682</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,682</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total interest expense</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">78,145</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">110,405</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(32,260</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As noted in the above table, the most significant
factor in the $32,260 decrease in interest expense was the $42,138 decrease in the interest expense that was primarily due to lower
levels of notes outstanding in the 2014 period. Other smaller factors in the change in our total interest were an increase in the
amortization of deferred financing costs of $11,560 and a $1,682 reduction in the amortization of note discounts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net Loss</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a result of the increased expenses noted
above, our net loss before noncontrolling interests was approximately $888,000 for the quarter ended September 30, 2014 compared
to the net loss before noncontrolling interests of approximately $3,350,000 in the quarter ended September 30, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Basic and diluted loss attributable to common stockholders were
($0.00) for the three month period ended September 30, 2014 compared to ($0.02) for the three month period ended September 30,
2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I><U>Six Months Ended September 30, 2014 Compared to the Six
Months Ended September 30, 2013</U></I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Revenues</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We recorded government contract revenue
in the six months ended September 30, 2014 and 2013.&nbsp;&nbsp;This revenue arose from work performed under our government contract
with the Defense Advanced Research Projects Agency and our subcontract with Battelle Memorial Institute as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Six Months Ended 9/30/14</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Six Months Ended 9/30/13</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Change in Dollars</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 49%; text-align: left">Defense Advanced Research Projects Agency contract</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">444,723</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">808,739</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(364,016</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Battelle Memorial Institute subcontract</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">85,648</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">31,744</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">53,904</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total government contract revenue</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">530,371</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">840,483</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(310,112</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Defense Advanced Research Projects Agency Contract</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We entered into a contract with the Defense
Advanced Research Projects Agency on September 30, 2011. Under the Defense Advanced Research Projects Agency award, we have been
engaged to develop a therapeutic device to reduce the incidence of sepsis, a fatal bloodstream infection that often results in
the death of combat-injured soldiers. The award from the Defense Advanced Research Projects Agency was a fixed-price contract with
potential total payments to us of $6,794,389 over the course of five years. Fixed price contracts require the achievement of multiple,
incremental milestones to receive the full award during each year of the contract. Under the terms of the contract, we will perform
certain incremental work towards the achievement of specific milestones against which we will invoice the government for fixed
payment amounts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Originally, only the base year (year one
contract) was effective for the parties; however, the Defense Advanced Research Projects Agency subsequently exercised the option
on the second, third and fourth years of the contract. The Defense Advanced Research Projects Agency has the option to enter into
the contract for year five. The milestones are comprised of planning, engineering and clinical targets, the achievement of which
in some cases will require the participation and contribution of third party participants under the contract. There can be no assurance
that we alone, or with third party participants, will meet such milestones to the satisfaction of the government and in compliance
with the terms of the contract or that we will be paid the full amount of the contract revenues during any year of the contract
term. We commenced work under the contract in October 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Due to budget restrictions within the Department
of Defense, on February 10, 2014, the Defense Advanced Research Projects Agency reduced the scope of our contract in years three
through five of the contract. The reduction in scope focused our research on exosomes, viruses and blood processing instrumentation.
This scope reduction will reduce the possible payments under the contract by $858,491 over years three through five.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the six months ended September 30,
2014 we invoiced the Defense Advanced Research Projects Agency for three milestones totaling $444,723 while in the six months ended
September 30, 2013, we invoiced the Defense Advanced Research Projects Agency for four milestones totaling $808,739.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Operating Expenses</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Consolidated operating expenses for the
six months ended September 30, 2014 were $2,303,571 in comparison with $1,854,075 for the comparable period a year ago.&nbsp;&nbsp;This
increase of $449,496 was due to increases in payroll and related expenses of $301,560, increases in professional fees of $58,853
and increases in general and administrative expenses of $89,083.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The $301,560 increase in payroll and related
expenses was primarily due to the Exosome Sciences, Inc. payroll of $260,968. Other factors were an increase in stock-based compensation
of $70,079 due to vesting of stock option grants while cash-based compensation at Aethlon decreased by $29,487 from the 2013 period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The $58,853 increase in our professional
fees was partially due to Exosome Sciences, Inc. professional fees of $87,719 and an increase of $69,269 for non-Defense Advanced
Research Projects Agency-related professional fees at Aethlon. Those increases at Aethlon were primarily due to a $71,432 increase
in legal fees, largely due to increased patent-related activity. Those increases were offset by a decrease in Defense Advanced
Research Projects Agency-related professional fees of $98,135.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The $89,083 increase in general and administrative
expenses was primarily due to general and administrative expenses at Exosome Sciences, Inc. of $96,987. &nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Other Expense</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Other expense consists primarily of losses
on extinguishment of debt, the change in the fair value of our derivative liability, other expense and interest expense. Other
(income) expense for the six months ended September 30, 2014 was other expense of $2,819,285 in comparison with other expense of
$2,639,576 for the comparable period a year ago.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Loss on Extinguishment of Debt and Other</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We recorded a loss on extinguishment of
debt of $2,531,123 for the six months ended September 30, 2014. That loss arose from the payments of accrued interest on our 12%
Series A convertible notes that were in the form of units (common stock plus warrants) combined with a loss that related to the
conversion to equity of $45,906 in principal and accrued interest related to a note payable. The three months ended September 30,
2013 contained $40,256 in losses on debt conversion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The three months ended September 30, 2014
also included a charge of $143,363 for the change in fair value related to the extension of the warrants of a note holder in exchange
for a postponement in the agreed payment date of his notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Change in Fair Value of Derivative Liability</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We did not record a change in the fair value
of derivative liabilities in the six months ended September 30, 2014 and all derivative liabilities were extinguished as of June
30, 2014. For the six months ended September 30, 2013, the change in the estimated fair value of derivative liability was a loss
of $2,382,877.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Interest Expense</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Interest expense was $144,799 for the six
months ended September 30, 2014 compared to $216,443 in the corresponding prior period, a decrease of $71,644. The various components
of our interest expense are shown in the following table:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Six Months Ended</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Six Months Ended</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">9/30/14</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">9/30/13</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Change</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 49%; text-align: left">Interest expense</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">123,297</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">211,865</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(88,568</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Amortization of deferred financing costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">21,502</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">863</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,639</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Amortization of note discounts</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,715</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,715</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total interest expense</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">144,799</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">216,443</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(71,644</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As noted in the above table, the most significant
factor in the $71,644 decrease in interest expense was the $88,568 decrease in the interest expense that was primarily due to lower
levels of notes outstanding in the 2014 period. Other smaller factors in the change in our total interest were an increase in the
amortization of deferred financing costs of $20,639, which was partially offset by a reduction in the amortization of note discounts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net Loss</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a result of the increased expenses noted
above, our net loss before noncontrolling interests for the six months ended September 30, 2014 was approximately $4,592,000 compared
to approximately $3,653,000 for the six month period ended September 30 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Basic and diluted loss attributable to common
stockholders were ($0.02) for the six month period ended September 30, 2014 compared to ($0.02) for the period ended September
30, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Liquidity and Capital Resources</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">At September 30, 2014, we had a cash balance
of $526,187 and a working capital deficit of $2,495,767. This compares to a cash balance of $1,250,279 and a working capital deficit
of $14,169,471 at March 31, 2014. Between October 1, 2014 and December 31, 2014, we raised aggregate proceeds of $4,083,579 through
equity issuances and raised $415,000 through the issuance of convertible notes. Over that same period, we collected $247,361 under
our Defense Advanced Research Projects Agency contract and under the Battelle Memorial Institute subcontract we billed $33,434
and collected $29,519. At December 31, 2014, we had a cash balance of approximately $2,800,000, which we believe may be sufficient
to fund the initial phase of our recently approved human clinical trial in the U.S. but will not be sufficient to fund future phases
of our human trial or potential additional human trials nor to meet our funding requirements during the next twelve months. We
must obtain significant additional financing to provide a sufficient source of operating capital in future periods and to allow
us to continue to operate as a going concern.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Cash Flows</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Cash flows from operating, investing and
financing activities, as reflected in the accompanying Condensed Consolidated Statements of Cash Flows, are summarized as follows
(in thousands):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">(In thousands) <BR> For the six months ended</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">September 30, <BR> 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">September 30, <BR> 2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Cash (used in) provided by:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 66%; text-align: left">Operating activities</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(1,394</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(745</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Investing activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Financing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">670</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">628</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net (decrease) in cash</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(724</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(117</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net Cash from Operating Activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We used cash in our operating activities
due to our losses from operations. Net cash used in operating activities was approximately $1,394,000 in the six months ended September
30, 2014 compared to $745,000 in the six months ended September 30, 2013, an increase of $649,000.&nbsp;&nbsp;The $649,000 increase
was primarily due to our increased operating loss.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net Cash from Investing Activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We did not have any investing activities
during either period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Net Cash from Financing Activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Net cash generated from financing activities
increased from approximately $628,000 in the six months ended September 30, 2013 to $670,000 in the six months ended September
30, 2014. The only financing activity in the 2014 periods was the issuance of common stock, while in the 2013 period, financing
activities included $400,000 in proceeds from the issuance of notes payable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">An increase in working capital during the
six months ended September 30, 2014 in the amount of approximately $11,684,000 changed our negative working capital position to
approximately ($2,496,000) at September 30, 2014 from a negative working capital of approximately ($14,169,000) at March 31, 2014.&nbsp;&nbsp;The
most significant factors in the increase in working capital noted above were a decrease in derivative liability of approximately
$10,679,000 and a reduction in the current portion of our convertible notes payable and notes payable of approximately $1,096,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">At the date of this filing, we plan to invest
significantly into purchases of our raw materials and into our contract manufacturing arrangement subject to successfully raising
additional capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Critical Accounting Policies</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Use of Estimates</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The preparation of consolidated financial
statements in conformity with GAAP requires us to make a number of 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. Such estimates
and assumptions affect the reported amounts of expenses during the reporting period. On an ongoing basis, we evaluate estimates
and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions
are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.
We believe that the estimates and assumptions that are most important to the portrayal of our financial condition and results of
operations, in that they require the most difficult, subjective or complex judgments, form the basis for the accounting policies
deemed to be most critical to us. These critical accounting estimates relate to revenue recognition, stock purchase warrants issued
with notes payable, beneficial conversion feature of convertible notes payable, impairment of intangible assets and long lived
assets, stock compensation, deferred tax asset valuation allowance, and contingencies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Fair Value Measurements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We measure the fair value of applicable
financial and non-financial instruments based on the following fair value hierarchy:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Level 1: Quoted market prices in active markets for identical assets
or liabilities.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 2.4pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Level 2: Observable market based inputs or unobservable inputs that
are corroborated by market data.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 2.4pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><FONT STYLE="font-family: Times New Roman, Times, Serif">Level 3: Unobservable inputs that are not corroborated by market data.</FONT></TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The hierarchy noted above requires us to
minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The fair value of derivative liabilities
is determined based on unobservable inputs that are not corroborated by market data, which is a Level 3 classification. We record
derivative liabilities on our balance sheet at fair value with changes in fair value recorded in our consolidated statements of
operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Revenue Recognition</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">With respect to revenue recognition, we
entered into a government contract with the Defense Advanced Research Projects Agency and have recognized revenue during the fiscal
years ended March 31, 2014 and 2013 of $1,466,482 and $1,230,004, respectively, under such contract. We adopted the Milestone method
of revenue recognition for the Defense Advanced Research Projects Agency contract under ASC 605-28 &ldquo;Revenue Recognition &ndash;
Milestone Method&rdquo; and we believe we meet the requirements under ASC 605-28 for reporting contract revenue under the Milestone
Method for the fiscal years ended March 31, 2014 and 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also recognize revenue under for a secondary
smaller contract under a time and materials non-fixed price basis where we recognize revenue as the services are performed.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Stock Purchase Warrants</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We grant warrants in connection with the
issuance of certain notes payable and other financing transactions. When such warrants are classified as equity, we measure the
relative estimated fair value of such warrants which represents a discount from the face amount of the notes payable. Such discounts
are amortized to interest expense over the term of the notes. We analyze such warrants for classification as either equity or derivative
liabilities, and value them based on binomial lattice models.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Beneficial Conversion Feature of Notes Payable</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 &quot;beneficial
conversion feature of which we measure the estimated fair value in circumstances in which the conversion feature is not required
to be separated from the host instrument and accounted for separately, and record that value 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Share-based Compensation</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We account for share-based compensation
awards using the fair-value method and record such expense based on the grant date fair value in the consolidated financial statements
over the requisite service period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Derivative Instruments</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We evaluate free-standing derivative instruments
(or embedded derivatives) to properly classify such instruments within equity or as liabilities in our financial statements. Our
policy is to settle instruments indexed to our common shares on a first-in-first-out basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The classification of a derivative instrument
is reassessed at each reporting date. If the classification changes as a result of events during a reporting period, the instrument
is reclassified as of the date of the event that caused the reclassification. There is no limit on the number of times a contract
may be reclassified.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Instruments classified as derivative liabilities
are remeasured each reporting period (or upon reclassification) and the change in fair value is recorded on our consolidated statement
of operations in other expense (income).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Deferred Tax Asset Valuation Allowance</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Deferred tax assets 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. We record
a valuation allowance for deferred tax assets when, based on our 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Off-Balance Sheet Arrangements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 that is
material to investors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Material Changes During the Period September 30, 2014 to
December 31, 2014</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition to the billings and collections
on our government contracts noted above, the following discussion details specific transactions we entered into after September
30, 2014 that effect our liquidity and capital resources:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Debt Reduction</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Subsequent to September 30, 2014, we paid
off the remaining principal and interest balances on the two remaining July and August 2011 10% Convertible Notes, which had been
classified as being in default, with cash payments totaling $382,748.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Subsequent to September 30, 2014, we paid
off in full the outstanding principal balance and interest balance on Law Firm Note 1 with a cash payment of $50,000 and an issuance
of 170,020 common shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Subsequent to September 30, 2014, we paid
an aggregate of $503,313 in principal and accrued interest on eight other outstanding notes. As a result, seven of the eight notes
were paid in full. We owe an additional $37,813 under the eighth note, which we expect to pay in full in January 2015.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Note Conversions</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Subsequent to September 30, 2014, we issued
an aggregate of 14,237,261 shares of common stock to two accredited investors upon the conversion of an aggregate of $597,965 of
unpaid principal and accrued interest due under promissory notes we previously issued to the investors. The conversion price per
share was $0.042</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Subsequent to September 30, 2014, we issued
an aggregate of 5,625,000 shares of common stock to convert in full the outstanding principal balance of $225,000 and interest
balance of $11,250 on the remaining note from 2010 through the issuance of 5,625,000 shares of common stock. The conversion price
per share was $0.042.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Issuance of Convertible Notes</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Subsequent to September 30, 2014, we sold
to two accredited investors (i) convertible promissory notes in the aggregate principal amount of $527,780 and (ii) five year warrants
to purchase up to 2,356,160 shares of common stock at a fixed exercise price of $0.168 per share. The convertible promissory notes
bear interest at the annual rate of 10% and mature on April 1, 2016. The aggregate gross cash proceeds to us were $415,000 after
subtracting legal fees of $35,000; the balance of the principal amount of the notes represents a $27,780 due diligence fee and
an original issuance discount. The convertible promissory notes are convertible at the option of the holders into shares of our
common stock at a fixed price of $0.112 per share, for up to an aggregate of 4,712,321 shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table provides a comparison
of our convertible notes payable at December 31, 2014 and at September 30, 2014:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Convertible Notes Payable as of December 31, 2014</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Convertible Notes Payable as of September 30, 2014</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: center; padding-left: 5.4pt; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Principal</B></TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Accrued Interest</B></TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Principal</B></TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Accrued Interest</B></TD><TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 5.4pt">Convertible Notes Payable - Current Portion:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 40%; padding-left: 5.4pt">October &amp; November 2009 10% Convertible Notes</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">&ndash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">&ndash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">50,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">28,598</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 5.4pt">April 2010 10% Convertible Note</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">75,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">35,188</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 5.4pt">July and August 2011 10% Convertible Notes, past due</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">283,421</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">96,728</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 5.4pt; padding-bottom: 1pt">Law Firm Note</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">&ndash;</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">&ndash;</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">75,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">9,479</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 5.4pt">Total - Convertible Notes Payable - Current Portion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">483,422</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">169,993</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 5.4pt">Convertible Notes Payable - Non-Current Portion:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 5.4pt">November 2014 10% Convertible Notes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">527,780</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,063</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 5.4pt">Amended and Restated Series A 12% Convertible notes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">225,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 5.4pt">September 2010 12% Convertible Notes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">317,072</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,513</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 5.4pt; padding-bottom: 1pt">April 2011 12% Convertible Notes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">202,159</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">2,680</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">448,448</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">13,454</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 5.4pt; padding-bottom: 1pt">Total - Convertible Notes Payable - Non-Current Portion</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">729,939</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">10,743</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">990,520</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">31,967</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 5.4pt; padding-bottom: 2.5pt">Total Convertible Notes Payable</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">729,939</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">10,743</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">1,473,941</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">201,860</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Common Stock Issuances</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Subsequent to September 30, 2014, we issued
374,295 shares of common stock pursuant to our S-8 registration statement covering our Amended 2010 Stock Plan at an average price
of $0.146 per share in payment for legal and scientific consulting services valued at $54,800 based on the value of the services
provided.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Equity Unit Investments</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Subsequent to September 30, 2014, we issued
and sold to eight accredited investors units consisting of (a) 100,000 restricted shares of our common stock at prices per share
ranging from $0.105 to $0.114 and (b) a five-year warrant to purchase 50,000 shares of common stock at exercise prices ranging
from $0.154 to $0.167 per share. In total, the investors purchased for cash an aggregate of $501,700 of units. The investors acquired
an aggregate of 4,506,250 shares of common stock and warrants to acquire up to an aggregate of 2,253,125 shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Subsequent to September 30, 2014, we issued
to an accredited investor units consisting of an aggregate of 1,835,798 shares of common stock and warrants to acquire up to an
aggregate of 1,837,798 shares of common stock at an exercise price of $0.103 per share. The units were issued to the investor upon
the conversion of an aggregate of $189,087 of unpaid principal and accrued interest due under two promissory notes we previously
issued to the investor. The amounts converted represented the entire principal and interest outstanding under the notes and the
notes held by that holder were retired.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Subsequent to September 30, 2014, we sold
$3,300,000 of units, comprised of common stock and warrants, to three affiliated institutional investors at a price of $0.30 per
unit. Each unit consists of one share of common stock and a warrant to purchase 1.2 shares of common stock at an exercise price
per share of $0.30. We sold a total of 11,000,000 shares of common stock and warrants to purchase 13,200,000 shares of common stock
in the financing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Roth Capital Partners, LLC served as sole
placement agent for our recent financing and received a cash fee of $231,000, expense reimbursement of $25,000, and a five-year
warrant to purchase 550,000 shares of common stock at an exercise price of $0.30 per share for its services in the financing. In
addition, we paid $10,000 in legal expenses to the investors&rsquo; counsel. We also paid $32,572 to our counsel related to this
financing. The net proceeds to us after the placement fee and legal fees were $3,001,429.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Warrant Exercises and Issuance of New Warrants upon Exercise</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Subsequent to September 30, 2014, we issued
an aggregate of 5,671,119 shares of common stock and seven-year warrants to issue up to an aggregate of 5,671,119 shares of common
stock at exercise prices ranging from $0.093 to $0.116 per share to eight accredited investors. One of the investors is Dr. Chetan
Shah, one of our directors. We issued the common stock and warrants to the investors upon the cash exercise of previously issued
warrants held by them. The investors paid an aggregate of $579,251 upon exercise of the previously outstanding warrants at exercise
prices ranging from $0.093 to $0.115 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Warrant Exercises</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Subsequent to September 30, 2014, we issued
an aggregate of 21,516,640 shares of common stock to accredited investors upon the exercise of previously issued warrants. The
warrants were exercised on a cashless or &ldquo;net&rdquo; basis. Accordingly, we did not receive any proceeds from such exercises.
The cashless exercise of such warrants resulted in the cancellation of previously issued warrants to purchase an aggregate of 30,265,208
shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Stock Option Exercises</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Subsequent to September 30, 2014, two former
employees exercised stock options to purchase 50,000 common shares through a cash payment of $9,500 with an exercise price of $0.19
per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We do not expect revenue from operations
will be sufficient to satisfy our funding requirements in the near term, and accordingly, our ability to continue operations and
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. 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 our ability to establish collaborative
arrangements, effective commercialization, marketing activities and other arrangements. We expect to continue to incur increasing
negative cash flows and net losses for the foreseeable future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Should the U.S. Government elect not to
exercise the option for year five of our Defense Advanced Research Projects Agency contract, the effect may be material to us.
The loss of revenues from the Defense Advanced Research Projects Agency contract would have a material impact on our revenues,
operating cash flows and liquidity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DIRECTORS AND EXECUTIVE OFFICERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The names, ages and positions of our directors
and executive officers as of December 31, 2014 are listed below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td style="width: 25%; border-bottom: black 1pt solid"><font style="font-size: 10pt">NAMES</font></td>
    <td style="width: 60%; border-bottom: black 1pt solid; text-align: center"><font style="font-size: 10pt">TITLE OR POSITION</font></td>
    <td style="width: 15%; border-bottom: black 1pt solid; text-align: center"><font style="font-size: 10pt">AGE</font></td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <td><font style="font-size: 10pt">James A. Joyce (1)</font></td>
    <td style="text-align: center"><font style="font-size: 10pt">Chairman, Chief Executive Officer and Secretary</font></td>
    <td style="text-align: center"><font style="font-size: 10pt">53</font></td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <td><font style="font-size: 10pt">Richard H. Tullis, PhD (2)</font></td>
    <td style="text-align: center"><font style="font-size: 10pt">Vice President, Chief Science Officer and Director</font></td>
    <td style="text-align: center"><font style="font-size: 10pt">69</font></td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <td><font style="font-size: 10pt">Rodney S. Kenley (3)</font></td>
    <td style="text-align: center"><font style="font-size: 10pt">President and Director</font></td>
    <td style="text-align: center"><font style="font-size: 10pt">64</font></td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <td><font style="font-size: 10pt">James B. Frakes&nbsp;&nbsp;(4)</font></td>
    <td style="text-align: center"><font style="font-size: 10pt">Chief Financial Officer and Senior Vice President - Finance</font></td>
    <td style="text-align: center"><font style="font-size: 10pt">57</font></td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <td><font style="font-size: 10pt">Franklyn S. Barry, Jr.</font></td>
    <td style="text-align: center"><font style="font-size: 10pt">Director</font></td>
    <td style="text-align: center"><font style="font-size: 10pt">75</font></td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <td><font style="font-size: 10pt">Edward G. Broenniman</font></td>
    <td style="text-align: center"><font style="font-size: 10pt">Director</font></td>
    <td style="text-align: center"><font style="font-size: 10pt">78</font></td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <td>&nbsp;</td>
    <td style="text-align: center">&nbsp;</td>
    <td style="text-align: center">&nbsp;</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <td><font style="font-size: 10pt">Chetan S. Shah, MD</font></td>
    <td style="text-align: center"><font style="font-size: 10pt">Director</font></td>
    <td style="text-align: center"><font style="font-size: 10pt">46</font></td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(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. Mr. Joyce resigned from
the position of President upon the appointment of Mr. Kenley to such position on October 27, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(2) Effective June 1, 2001, Dr. Tullis was appointed as our
Chief Science Officer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(3) Effective October 27, 2010, Mr. Kenley was appointed as
our President.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(4) Effective September 27, 2010, Mr. Frakes was appointed as
our Chief Financial Officer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Certain additional information concerning
the individuals named above is set forth below. This information is based on information furnished us by each individual noted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Resumes of Management</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>James A. Joyce, Chairman, CEO and Secretary.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Joyce is the founder of Aethlon Medical,
Inc. 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. Mr. Joyce also serves as the Executive Chairman of Exosome Sciences, Inc. In 1992, Mr. Joyce
founded and was the sole stockholder of James Joyce &amp; 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Richard H. Tullis, Ph.D., Vice President, Chief Science
Officer</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Dr. Tullis has been Vice President and a
director of our 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, formerly 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Rodney S. Kenley, President and Director</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Kenley has been President and a Director
since October 2010. He has 34 years of experience in healthcare, most of which have been spent in the extracorporeal blood purification
arena. Mr. Kenley held several positions at Baxter Healthcare (Travenol) from 1977 through 1990 including International Marketing
Manager, Business Unit Manager for Peritoneal and Hemodialysis products, Manager of New Business Development, Director of Worldwide
Product Planning, Director of Advanced Product Development, and VP of Electronic Drug Infusion. During this tenure he conceived
of and managed the launch of several new products that have been highly commercially successful including the HomeChoice peritoneal
dialysis cycler.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Kenley founded Aksys Ltd. in January
1991 to develop and commercialize his concept of a daily home hemodialysis system which was commercially launched in 2002 as the
PHD system. In 2004, Mr. Kenley initiated the development of a second-generation home hemodialysis system in partnership with DEKA
Research &amp; Development Corporation in Manchester, New Hampshire. In 2007, the assets of Aksys Ltd. were acquired by DEKA, where
Mr. Kenley was employed prior to joining Aethlon Medical, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Kenley is the recipient of over 30 patents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Kenley received his Bachelor of Arts
degree in Biology and Chemistry from Wabash College, a Masters of Science degree in Molecular Biology from Northwestern University
and a Masters of Management from the Kellogg School of Management, also at Northwestern University.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>James B. Frakes, Chief Financial Officer and Senior Vice
President &ndash; Finance</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Frakes joined Aethlon Medical, Inc.
in January 2008 and brought 16 consecutive years of financial responsibility for publicly traded companies, as well as specific
knowledge and experience in equity and debt transactions, acquisitions, public reporting and Sarbanes-Oxley Section 404 internal
control requirements. Mr. Frakes also serves as the Chief Financial Officer of Exosome Sciences, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">He previously served as the CFO for Left
Behind Games Inc., a start-up video game company. Prior to 2006, he served as CFO of NTN Buzztime, Inc., an interactive entertainment
company with $40 million in sales, where he played a key role in acquisitions that doubled the company's revenue.&nbsp;Mr. Frakes
received an MBA from the University of Southern California and completed his BA with Honors at Stanford University.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Franklyn S. Barry, Jr.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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, when he returned to consulting until he retired in 2013. He became
a director of Aethlon Medical, Inc. 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-D, an international distributor of personal computer products. Mr. Barry serves on the Board of
Directors of Merchants Mutual Insurance Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Edward G. Broenniman</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Broenniman became a director of Aethlon
Medical, Inc. in March 1999. Mr. Broenniman has 30 years of management and executive experience with high-tech, privately held
growth companies where he has served as a CEO, COO, or corporate advisor, using his expertise to focus management on increasing
profitability and stockholder value. He has been the Managing Director of The Piedmont Group, LLC, a venture advisory firm, since
1978. Mr. Broenniman recently served on the Board of Directors of publicly traded QuesTech (acquired by CACI International), and
currently serves on the Boards of two 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Chetan S. Shah, MD</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Dr. Shah became a director of Aethlon Medical,
Inc. in June 2013. Dr. Shah is a board certified Otolaryngologist. He is an Advisory Board Member at The Bank of Princeton, and
a partner and Board member of the Surgery Center at Hamilton as well as Physician Management Systems and Princeton Eye &amp; Ear,
which he founded in 2009. Dr. Shah serves on the board of two other private companies. He holds teaching positions and serves on
multiple hospital committees in the area and is on the Audiology and Speech Language Pathology Committee for the State of New Jersey.
He also is a member of the Board of Medical Examiners for the State of New Jersey. Dr. Shah received his Bachelor&rsquo;s degree
and Medical Degree from Rutgers University and Robert Wood Johnson Medical School.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Board of Directors</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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, President 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 our next annual meeting of stockholders. Our Board of Directors presently has an Audit Committee and a Compensation
Committee, on each of which Messrs. Barry and Broenniman and Dr. Shah serve. Mr. Barry is Chairman of the Audit Committee, and
Dr. Shah is Chairman of the Compensation Committee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In July 2012, our Board of Directors approved
a board compensation program that modifies and supersedes the 2005 Directors Compensation Program, which was previously in effect.
Under the 2012 program, in which only non-employee directors may participate, an eligible director will receive a grant of $35,000
worth of ten year options to acquire shares of common stock, with such grant being valued at the exercise price based on the average
of the closing bid prices of the common stock for the five trading days preceding the first day of the fiscal year. In addition,
under this new program, eligible directors will receive cash compensation equal to $500 for each committee meeting attended and
$1,000 for each formal board meeting attended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the fiscal year ended March 31, 2013,
our Board of Directors granted ten-year options to acquire an aggregate of 1,667,105 shares of our common stock, all with an exercise
price of $0.076 per share, to our four outside directors under the new 2012 program.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the fiscal year ended March 31, 2014,
our Board of Directors granted ten-year options to acquire an aggregate of 1,595,536 shares of our common stock, all with an exercise
price of $0.082 per share, to our five outside directors under the new 2012 program.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">At March 31, 2014 we had issued 1,337,825
options under the old 2005 program to outside directors and 3,965,450 options to employee-directors, 514,550 outside directors&rsquo;
options had been forfeited, 250,000 outside directors&rsquo; options had been exercised and 3,671,550 options remained outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On June 6, 2014, our Board of Directors
approved certain changes to the 2012 program. Under this new program, a new eligible director will receive an initial grant of
$50,000 worth of options to acquire shares of common stock, with such grant being valued at the exercise price based on the average
of the closing bid prices of the common stock for the five trading days preceding the first day of the fiscal year. These options
will have a term of ten years and will vest 1/3 upon grant and 1/3 upon each of the first two anniversaries of the date of grant.
In addition, at the beginning of each fiscal year, each existing director eligible to participate in the modified new 2012 program
also will receive a grant of $35,000 worth of options valued at the exercise price based on the average of the closing bid prices
of the common stock for the five trading days preceding the first day of the fiscal year. Such options will vest on the first anniversary
of the date of grant. In lieu of per meeting fees, eligible directors will receive an annual board retainer fee of $30,000. The
modified new 2012 program also provides for the following annual retainer fees: Audit Committee Chair - $5,000, Compensation Committee
chair - $5,000, Audit Committee member - $4,000, Compensation Committee member - $4,000 and lead independent director - $15,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Family Relationships</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">There are no family relationships between
or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">There are no arrangements or understandings
between any two or more of our directors or executive officers or 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 stockholders will exercise their voting rights to continue to elect the current
Board of Directors. There are also no arrangements, agreements or understandings between non-management stockholders that may directly
or indirectly participate in or influence the management of our affairs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Science Advisory Board</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Science Advisory Board is organized
in three groups: the Extracorporeal Therapy Advisory Board, the Sepsis and Inflammation Advisory Board and the Cancer Advisory
Board.&nbsp;&nbsp;The role of the Science Advisory Board is to provide scientific guidance related to the development of our Aethlon
ADAPT technology. Unlike the members of our Board of Directors, the Science Advisory Board members are not involved in the management
or operations of our company. Members of the Science Advisory Board are paid stipends for attending meetings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <TD STYLE="width: 35%; padding-right: 2pt; text-decoration: underline"><b><u>Extracorporeal Therapy Advisory Board</u></b></td>
    <TD STYLE="width: 35%; padding-right: 2pt; text-decoration: underline"><b><u>Sepsis and Inflammation Advisory Board</u></b></td>
    <TD STYLE="width: 30%; text-decoration: underline; text-align: left; vertical-align: bottom"><b><u>Cancer Advisory Board</u></b></td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 2pt">Gregory T. A. Kovacs, M.D., Ph.D.</td>
    <TD STYLE="padding-right: 2pt">Irshad H. Chaudry, Ph.D.</td>
    <TD>Laszlo Radvanyi, Ph.D.</td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 2pt">John A. Kellum, M.D</td>
    <TD STYLE="padding-right: 2pt">Larry D. Cowgill, D.V.M., Ph.D.</td>
    <TD>&nbsp;</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 2pt">Nathan W. Levin, M.D.&nbsp;</td>
    <TD STYLE="padding-right: 2pt">Charles J. Fisher, Jr., M.D.</td>
    <TD>&nbsp;</td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-right: 2pt">Claudio Ronco, M.D.&nbsp;</td>
    <TD STYLE="padding-right: 2pt">Geert Schmid-Sch&#1094;nbein, Ph.D.</td>
    <TD>&nbsp;</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="padding-right: 2pt">David M. Ward, M.D.</td>
    <TD STYLE="padding-right: 2pt">&nbsp;</td>
    <TD>&nbsp;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Extracorporeal Therapy Advisory Board</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Gregory T.A. Kovacs, M.D., Ph.D.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Dr. Kovacs is a Professor of Electrical
Engineering at Stanford University with a courtesy appointment in the Department of Medicine. He received a BASc degree in Electrical
Engineering from the University of British Columbia, an MS degree in Bioengineering from the University of California, Berkeley,
and a PhD and an MD degree from Stanford University. Dr. Kovacs is the Director of Medical Device Technologies for the Astrobionics
Program at the NASA Ames Research Center, and Principal Investigator for the NASA/Stanford National Center for Space Biological
Technologies. This Center is charged with developing advanced medical devices to enable extended human spaceflight and instrumentation/payloads
for biological experiments. Dr. Kovacs also has extensive industry experience including co-founding and providing technical guidance
for several companies, including Cepheid in Sunnyvale, CA, supplier of advanced instrumentation for clinical and research nucleic
acid diagnostics.&nbsp; Through Northrup Grumman, Cepheid supplies the automated biothreat detection systems in use by the United
States Postal Service.&nbsp; He is a long-standing member of the Defense Sciences Research Council (Defense Advanced Research Projects
Agency), and has served as Associate Chair and Chairman. In this capacity, he has led or co-led studies on a variety of topics
from chemical and biological agent detection and decontamination, miniaturized biological instrumentation, jungle warfare technologies,
and many others. Between 2008 and 2011, Dr. Kovacs was on leave from Stanford University to serve as director of the Microsystems
Technology Office at the Defense Advanced Research Projects Agency.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">John A. Kellum, M.D.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Dr. Kellum is a tenured professor of Critical
Care Medicine at the University of Pittsburgh.&nbsp; He is a clinician scientist whose research interests span various aspects
of Critical Care Medicine, but center in critical care nephrology (including acid-base, and renal replacement therapy), sepsis
and multi-organ failure (including blood purification), and clinical epidemiology.&nbsp; His research has received continuous funding
from the National Institutes of Health since 2001 and he has active funding from multiple different NIH Institutes.&nbsp; Dr. Kellum
has authored more than 300 publications and has also edited several major textbooks including Critical Care Nephrology 2nd Edition
(WB Saunders), and Stewart's Textbook of Acid-Base, 2nd Edition (www.acidbase.org). He has won several teaching awards, lectures
widely, and has given more than 300 seminars and invited lectures related to his research.&nbsp; Dr. Kellum has been involved in
the development of several clinical practice guidelines.&nbsp; He is a founding member and past president of the Acute Dialysis
Quality Initiative (www.ADQI.net) and is co-chair of the Kidney Diseases Improving Global Outcomes (KDIGO) clinical practice guideline
on acute kidney injury (www.kdigo.org). Finally Dr. Kellum is a leader in electronic research especially in critical illness and
is the Director of CARe (Center for Assistance in Research using the eRecord) also at the University of Pittsburgh.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Nathan W. Levin, M.D.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Dr. Levin is the Chairman, Research Board
of the Renal Research Institute and Professor of Clinical Medicine, Albert Einstein College of Medicine.&nbsp; Past Medical and
Research Director, Renal Research Institute (1997-2010).&nbsp; Dr. Levin is the Chair of the Selection Committee for the Lillian
Jean Kaplan International Prize for Advancement in the Understanding of Polycystic Kidney Disease (PKD). He is the Co-Founder of
Sustainable Kidney Care Foundation.&nbsp; Dr. Levin is an advisor to the Board of KidneyTel.&nbsp; He has lectured nationally and
internationally on topics relating to chronic kidney disease (CKD) and hemodialysis. He is the Principal Investigator of the NIH
sponsored study of Frequent Dialysis.&nbsp; Dr. Levin is currently an adjunct Professor of Medicine at the School of Medicine,
The University of North Carolina at Chapel Hill. He is the Honorary Chair, Peking University, in Beijing, China.&nbsp; Dr. Levin
contributes to the global CKD community in a variety of functions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Claudio Ronco, M.D.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Dr. Ronco is Director of the Department
of Nephrology at St. Bortolo Hospital in Vicenza.&nbsp; He is a member of the council of several scientific societies and is Editor
in Chief of the International Journal of Artificial Organs.&nbsp; He has received numerous awards and honors, including the International
Medal of Excellence from the National Kidney Foundation (NKF) and honorary membership of the Spanish Society of Nephrology (SSN).&nbsp;
Dr. Ronco has organized several congresses and meetings in the area of nephrology and intensive care and is a member of several
advisory groups for clinical trials and dialysis research.&nbsp; He has co-authored over 650 papers, 36 book chapters, 45 books
and seven monographic journal issues, and has delivered more than 450 lectures at international meetings and universities.&nbsp;
In 1989, Dr. Ronco was awarded his diploma in pediatric nephrology at the University of Naples, having achieved a specialized diploma
in medical nephrology at the Post-graduate School of Internal Medicine at the University of Padua in 1979.&nbsp; He graduated in
medicine from the University of Padua, having been an intern at the Institute of Clinical Internal Medicine at the same institution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">David M. Ward, M.D.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Dr. Ward trained in nephrology in Scotland
and did a second fellowship in renal immunopathology at Scripps Research Foundation.&nbsp; Since 1977 he has been a member of the
Division of Nephrology at UCSD. He directed the dialysis unit and clinical nephrology program at UCSD for 19 years, and has directed
the therapeutic apheresis program for the last 22 years.&nbsp; At different times he has served the UCSD Medical School as Assistant
Dean for Clinical Affairs, Chief of Staff of the Hospital, and Chairman of the UCSD Medical Group. Special interests include immunological
diseases, glomerular diseases, transplantation medicine, apheresis medicine, hemodialysis technology, innovative extracorporeal
blood circuits, and general clinical nephrology. He practices, publishes and teaches in these areas, including authoring chapters
in standard textbooks such as &quot;Rheumatology&quot; and &quot;Clinical Dialysis&quot;.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Sepsis and Inflammation Advisory Board</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Irshad H. Chaudry, Ph.D.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Dr. Chaudry is the Editor-in-Chief of the
journal SHOCK&reg;, a leading research publication that reviews novel therapeutic advances to address shock, trauma, sepsis, inflammation,
ischemia, and related pathobiological states, with particular emphasis on the biologic mechanisms that determine the response to
such injury. &nbsp;Dr. Chaudry received a B.S. as well as a M.S. with honors from Sind University, and a Ph.D. from Monash University,&nbsp;Australia.
After his postdoctoral training at Toronto University,&nbsp;Canada, he was&nbsp;appointed Instructor and subsequently&nbsp;an Assistant
Professor at the Jewish Hospital and&nbsp;Washington University&nbsp;School of Medicine. He then moved to&nbsp;Yale University&nbsp;as
an Associate Professor and subsequently became a Professor. He moved to&nbsp;Michigan State University&nbsp;in 1986 as Professor
and Director of Research and in 1996 became the Director of the Center for Surgical Research at&nbsp;Brown University. In 2000,
he became the Director of the Center for Surgical Research at the&nbsp;University of Alabama at Birmingham, and the Vice Chairman
of the Department of Surgery. He has over 500 publications to his credit and is a recipient of the NIH MERIT award.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Larry D. Cowgill, D.V.M., Ph.D.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Dr. Cowgill received his DVM degree from
the University of California at Davis and completed his internship and residency training at the University of Pennsylvania. He
was a National Institutes of Health Special Research Fellow at the Renal and Electrolyte Section of the University of Pennsylvania
School of Medicine and earned a PhD in Comparative Medical Sciences. He is Board Certified in Small Animal Internal Medicine and
is Associate Dean for Southern California Clinical Programs, Co-Director of the UC Veterinary Medical Center-San Diego (UCVMC-SD),
and Professor in the Department of Medicine and Epidemiology. He oversees the Clinical Nephrology programs and the Companion Animal
Hemodialysis Units at the Veterinary Medical Teaching Hospital at Davis and the UCVMC-SD. Dr. Cowgill has more than 35 years of
experience in veterinary internal medicine, nephrology, and teaching and has trained many of the leading veterinary nephrologists
throughout the world. He is a pioneer in the application of hemodialysis in companion and remains a leading authority in the development
of blood purification therapies for renal diseases in animals and people.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Charles J. Fisher, Jr., M.D.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Dr. Fisher, founder and CEO of Margaux Biologics,
Inc., is a physician scientist with a distinguished career in both academia and industry spanning over 30 years.&nbsp; Prior to
joining industry, Dr. Fisher served as Professor and Head of Critical Care Medicine at The Cleveland Clinic Foundation, and has
held professor, division chief and director positions at the&nbsp;University of California at Davis&nbsp;Medical Center,&nbsp;Case
Western Reserve University&nbsp;and The Cleveland Clinic Foundation.&nbsp; His research in sepsis, host defense and endothelial
dysfunction led to his assisting in the founding of Incyte, and his later recruitment to Eli Lilly &amp; Co, where he led the Xigris
(activated Protein C) Global Product Team and successfully registered the first drug approved for the treatment of sepsis.&nbsp;
He was recruited to Abbott Laboratories as Vice President for Global Pharmaceutical Development and, among other accomplishments,
led the registration of Humira (first fully humanized anti-TNF mab).&nbsp; Other medical firsts include his contributions to the
development of, and later approval of, sTNF:fc (Enbrel, 1st soluble anti-TNF tx) and IL-1ra (Kinneret, 1st anti-IL-1 tx).&nbsp;
Dr. Fisher has numerous patents and publications to his credit.&nbsp; Prior to founding Margaux Biologics, he was Chief Medical
Officer and Executive Vice President of Cardiome Pharma Corp. where he led the team that invented, developed, registered and sold
to Merck ($800M) vernakalant, a novel, first in class, multi-ion channel drug for atrial fibrillation (Brinavess).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Additionally, Dr. Fisher is a decorated,
multi tour combat veteran, with extensive military experience in special operations.&nbsp; He is a Life Member of the Special Operations
Medical Association, has served as a member of the Defense Science Research Council and on Defense Advanced Research Projects Agency
panels, including one focused on universal host defense. His unique background of direct patient care, basic and clinical research,
on the ground combat experience, and leadership at all levels, has led to an exemplary track record of building teams, delivering
results, medical firsts and saving lives.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Geert Schmid-Sch&#1094;nbein, Ph.D.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Dr. Schmid-Schonbein is Distinguished Professor
of Bioengineering, Adjunct Professor in Medicine at the&nbsp;University of California, San Diego&nbsp;(UCSD) and director of the
UCSD Microcirculation Laboratory where he and his team are studying organ injury mechanisms, apoptosis in hypertension, and triggers
for inflammation in the blood circulation.&nbsp; Dr. Schmid-Schonbein earned his Ph.D. in bioengineering from UCSD in 1976. After
a three-year post-doctoral fellowship at&nbsp;Columbia University, he returned to UCSD in 1979 as an assistant professor. &nbsp;Some
of Dr. Schmid-Schonbein's early research discoveries involved the behavior of infection-fighting white blood cells. Using engineering
techniques, he made the first determination of the force with which white blood cells adhere to the walls of blood vessels as part
of the initial process of inflammation. Later, Dr. Schmid-Schonbein concluded that the survival of an acutely ill patient can hinge
on the degree to which white blood cells are activated. Recently his group discovered a mechanism that leads to activation of white
blood cells, which is due to digestive enzymes and may cause cardiovascular disease. Among his many distinctions, Dr. Schmid-Schonbein
is a member of the National Academy of Engineering and a fellow of the American Heart Association. He is a founding fellow of the
American Institute for Medical and Biological Engineering, and winner of the Melville Medal from the American Society of Mechanical
Engineering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Cancer Advisory Board</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Dr. Radvanyi received his Ph.D. in clinical
biochemistry from the University of Toronto. &nbsp;His main research area is tumor immunology studying immune regulation in cancer
and identifying new antigens as targets for anti-cancer T-cell therapy. &nbsp;After completing postdoctoral work in Toronto and
at Harvard University in Boston at the Joslin Diabetes Center, Dr. Radvanyi joined the Immunology Group at Sanofi-Pasteur in Toronto
in 2000 as a Senior Scientist where he helped lead an antigen discovery program that led to the discovery of a group of over-expressed
breast cancer-specific genes that are candidates for antigen-specific vaccines against breast cancer. In 2005, Dr. Radvanyi joined
the faculty of the University of Texas, MD Anderson Cancer Center, where he also holds the additional appointment as Associate
Professor, Department of Breast Medical Oncology, Division of Cancer Medicine.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Involvement in Legal Proceedings</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To the best of our knowledge, during the
past ten years, none of the following occurred with respect to a present or former director or executive officer of our company:
(1) any bankruptcy petition filed by or against such person or 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; (4) being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission 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; and (5) being the subject of, or a party to, any federal or state judicial or administrative
order, judgment, decree or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any federal
or state securities or commodities law or regulation, law or regulation respecting financial institutions or insurance companies
or law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or (6) being the subject of,
or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as
defined in Section 3(a)(26) of the Securities Exchange Act of 1934, as amended), any registered entity (as defined in Section 1(a)(29)
of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority
over its members or associated persons.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXECUTIVE COMPENSATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following executive compensation disclosure
reflects all compensation awarded to, earned by or paid to the executive officers below for the fiscal years ended March 31, 2014
and March 31, 2013. The following table summarizes all compensation for fiscal years 2014 and 2013 received by our Chief Executive
Officer, and our three most highly compensated executive officers who earned more than $100,000 in fiscal year 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">SUMMARY COMPENSATION TABLE FOR 2014 AND
2013 FISCAL YEARS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid"><font style="font-size: 10pt">NAMED EXECUTIVE OFFICER AND PRINCIPAL POSITION</font></td>
    <TD>&nbsp;</td>
    <td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 10pt">YEAR</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <td colspan="2" style="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">SALARY</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">($)</P></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <td colspan="2" style="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">BONUS</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">($)</P></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 10pt">STOCK </font><br>
<font style="font-size: 10pt">AWARDS ($)(5)</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 10pt">OPTION </font><br>
<font style="font-size: 10pt">AWARDS ($)(5)</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 10pt">NON- </font><br>
<font style="font-size: 10pt">EQUITY </font><br>
<font style="font-size: 10pt">INCENTIVE PLAN </font><br>
<font style="font-size: 10pt">COMPEN- </font><br>
<font style="font-size: 10pt">SATION </font><br>
<font style="font-size: 10pt">($)</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 10pt">NON- QUALIFIED DEFERRED COMPEN- </font><br>
<font style="font-size: 10pt">SATION </font><br>
<font style="font-size: 10pt">EARNINGS </font><br>
<font style="font-size: 10pt">($)</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 10pt">ALL </font><br>
<font style="font-size: 10pt">OTHER COMP.</font><br>
<font style="font-size: 10pt">($)</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 10pt">TOTAL ($)</font></td>
    <TD>&nbsp;</td></tr>
<tr style="vertical-align: bottom">
    <TD STYLE="width: 21%">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 4%; text-align: center">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 6%; text-align: right">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 6%; text-align: right">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 6%; text-align: right">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 6%; text-align: right">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 6%; text-align: right">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 6%; text-align: right">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 6%; text-align: right">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td>
    <TD STYLE="width: 6%; text-align: right">&nbsp;</td>
    <TD STYLE="width: 1%">&nbsp;</td></tr>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><font style="font-size: 10pt">James A. Joyce (1)</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">2014</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">330,000</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">70,000</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">180,000</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">580,000</font></td>
    <TD>&nbsp;</td></tr>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><font style="font-size: 10pt">CHIEF EXECUTIVE OFFICER</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">2013</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">325,000</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">12,500</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">337,500</font></td>
    <TD>&nbsp;</td></tr>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: center">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td></tr>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><font style="font-size: 10pt">Richard H. Tullis, PhD (2)</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">2014</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">195,000</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">--</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">45,000</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">240,000</font></td>
    <TD>&nbsp;</td></tr>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><font style="font-size: 10pt">VICE PRESIDENT AND CHIEF SCIENCE OFFICER</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">2013</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">195,000</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">10,000</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">205,000</font></td>
    <TD>&nbsp;</td></tr>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: center">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td></tr>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><font style="font-size: 10pt">James B. Frakes (3)</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">2014</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">180,000</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">3,000</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">45,000</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">228,000</font></td>
    <TD>&nbsp;</td></tr>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><font style="font-size: 10pt">CHIEF FINANCIAL OFFICER AND SVP-FINANCE</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">2013</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">180,000</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">7,500</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">187,500</font></td>
    <TD>&nbsp;</td></tr>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: center">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: right">&nbsp;</td>
    <TD>&nbsp;</td></tr>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><font style="font-size: 10pt">Rodney S. Kenley (4)</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">2014</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">240,000</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">--</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">45,000</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">285,000</font></td>
    <TD>&nbsp;</td></tr>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><font style="font-size: 10pt">PRESIDENT</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD STYLE="text-align: center"><font style="font-size: 10pt">2013</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">240,000</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">10,000</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">&ndash;</font></td>
    <TD>&nbsp;</td>
    <TD>&nbsp;</td>
    <TD><font style="font-size: 10pt">$</font></td>
    <TD STYLE="text-align: right"><font style="font-size: 10pt">250,000</font></td>
    <TD>&nbsp;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1)&nbsp;The aggregate number of stock
awards and stock option awards issued to Mr. Joyce and outstanding as of March 31, 2014 is 3,400,000 (see share restricted stock
grant below) and 14,088,243, respectively. Mr. Joyce received a $5,000 salary increase from $325,000 to $330,000 effective July
1, 2013. In June, 2014, Mr. Joyce received a $20,000 salary increase from $330,000 to $350,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mr. Joyce was granted 4,000,000 shares of restricted
common stock, at a price per share of $0.24, which vested in equal installments over a thirty-six month period that commenced
on June 30, 2010. Mr. Joyce has accepted all 4,000,000 shares of the grant and all such shares have vested. Of these shares,
Mr. Joyce currently owns 3,400,000 shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(2)&nbsp;The aggregate number of stock awards and stock option
awards issued to Dr. Tullis and outstanding as of March 31, 2014 is zero and 3,117,175, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(3)&nbsp;Mr. Frakes was appointed as Chief Financial Officer
on September 27, 2010 after previously serving as Senior Vice President-Finance on a part-time basis. The aggregate
number of stock awards and stock option awards outstanding as of March 31, 2014 is zero and 1,000,000, respectively. In June 2014,
Mr. Frakes received a $30,000 salary increase from $180,000 to $210,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(4)&nbsp;Mr. Kenley was appointed President on October 27, 2011.&nbsp;&nbsp;The
aggregate number of stock awards and stock option awards issued to Mr. Kenley and outstanding as of March 31, 2014 is zero and
1,500,000, respectively. In June, 2014, Mr. Kenley received a $20,000 salary increase from $240,000 to $260,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(5) See note 6 to our financial statements for the years
ended March 31, 2014 and 2013 regarding the assumptions made in valuing the stock/option awards in the above table.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Employment Agreements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We entered into an employment agreement
with Mr. Joyce effective April 1, 1999. Effective June&nbsp;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. Under the terms of the agreement, his employment continues at a salary of $205,000 per year
for successive one-year periods, unless given notice of termination 60 days prior to the anniversary of his employment agreement.
Effective April 1, 2006. Mr. Joyce's salary was increased from $205,000 to $240,000. His salary was subsequently increased to $265,000
per year and effective May 1, 2008, his salary was increased from $265,000 to $290,000 per year. Effective April 1, 2010, his salary
was increased from $290,000 to $325,000 per year. Effective July 2013, his salary was increased from $325,000 to $330,000 per year.
In June 2014, his salary was increased from $330,000 to $350,000 per year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the fiscal year ended March 31, 2014,
Mr. Joyce earned a bonus of $50,000 from us that was paid to him in April 2014 and bonuses of $20,000 from Exosome Sciences, Inc.
All of those bonuses were based upon targets established by our compensation committee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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. 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 our common stock in connection the completing certain milestones,
such as the initiation and completion of certain clinical trials, the submission of proposals to the U.S. Food and Drug Administration
and the filing of a patent application. Effective April 1, 2006, Dr. Tullis&rsquo; salary was increased to $180,000 per year. Effective
April 1, 2010, his salary was increased from $180,000 to $195,000 per year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Both Mr. Joyce's and Dr. Tullis' agreements
provide for medical 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 us, for a period
of two years following the termination of their employment with us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On September 27, 2010, Mr. Frakes was appointed
our Chief Financial Officer. We have not entered into a written employment agreement with Mr. Frakes. As Chief Financial Officer,
Mr. Frakes receives an annual salary of $180,000 and medical insurance benefits. In June 2014, his salary was increased from $180,000
to $210,000 per year. During the fiscal year ended March 31, 2014, Mr. Frakes earned a bonus of $3,000 from Exosome Sciences, Inc.
based upon targets established by our compensation committee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Kenley was appointed our President on
October 27, 2010. Pursuant to a written offer of employment executed by us and Mr. Kenley, he receives an annual salary of $240,000
and medical insurance benefits. In June 2014, his salary was increased from $240,000 to $260,000 per year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Outstanding Equity Awards at 2014 Fiscal Year-End</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth certain information
concerning stock option awards granted to our named executive officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">OUTSTANDING EQUITY AWARDS AT 2014 FISCAL
YEAR END</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD COLSPAN="9" STYLE="text-align: center; border-bottom: Black 1pt solid">OPTIONS AWARDS</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">NAME</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">NUMBER OF <BR>SECURITIES <BR>UNDERLYING <BR>UNEXERCISED <BR>OPTIONS <BR>EXERCISABLE <BR>(#)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">NUMBER OF <BR>SECURITIES <BR>UNDERLYING <BR>UNEXERCISED <BR>OPTIONS <BR>UNEXERCISABLE <BR>(#)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">EQUITY <BR>INCENTIVE PLAN AWARDS <BR>NUMBER OF <BR>SECURITIES <BR>UNDERLYING <BR>UNEXERCISED <BR>UNEARNED <BR>OPTIONS <BR>UNEXERCISABLE <BR>(#)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">OPTION <BR>EXERCISE <BR>PRICE <BR>($)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">DATE OF <BR>OPTION <BR>EXPIRATION</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 15%; text-align: left">James A. Joyce</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 15%; text-align: center">1,115,550(1)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 15%; text-align: center">&ndash;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 15%; text-align: center">&ndash;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 15%; text-align: center">$0.38</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 15%; text-align: center">02/23/15</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">557,775(1)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">$0.38</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">02/23/15</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">557,775(1)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">$0.38</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">02/23/15</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">2,857,143(1)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">$0.21</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">12/18/15</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">2,500,000(2)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">$0.36</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">09/21/17</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">2,000,000(3)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">$0.25</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">02/21/19</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">2,500,000(4)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">--</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">$0.25</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">09/27/20</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;(5)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">2,000,000</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">$0.10</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">07/01/23</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Richard H. Tullis</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">433,588(6)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">$0.38</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">02/23/15</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">433,587(6)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">$0.38</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">02/23/15</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">750,000(7)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">$0.41</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">06/14/18</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">1,000,000(8)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">$0.25</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">09/27/20</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;(5)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">500,000</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">$0.10</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">07/01/23</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">James B. Frakes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">500,000(9)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">$0.25</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">09/27/20</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;(5)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">500,000</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">$0.10</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">07/01/23</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Rodney S. Kenley</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">854,157(10)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">145,843</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">$0.25</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">10/27/20</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;(5)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">500,000</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&ndash;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">$0.10</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">7/01/23</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Note: We have omitted the stock awards columns of the above
table because we have no disclosure applicable to those columns.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1) This option was fully vested as of March 31, 2010 and as
a result of the Option Suspension Agreement, the expiration date was extended by 100 days. Subsequent to March 31, 2010, the expiration
date of this option was extended to February 23, 2015 (see Item 13 to the Financial Statements).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(2) The option vested 1,000,000 shares at grant, with 500,000
shares vesting each annual anniversary date through June 13, 2010 and as a result of the Option Suspension Agreement, the expiration
date was extended by 100 days.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(3) The option vested 1,000,000 at grant, with 500,000 shares
vesting on December 31, 2009 and December 31, 2010 and as a result of the Option Suspension Agreement, the expiration date was
extended by 100 days.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(4) The option vested 1,000,000 at grant, with 500,000 vesting
on each anniversary date through September 27, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(5) This option vests ratably on July 1, 2014, July 1, 2015
and July 1, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(6) This option was fully vested as of March 31, 2010. Subsequent
to March 31, 2010, the expiration date of this option was extended to February 23, 2015 (see Item 13 to the Financial Statements).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(7) This option was fully vested as of December 15, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(8) The option was fully vested as of September 27, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(9) The option was fully vested as of September 27, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(10) The option vested 250,000 on October 27, 2011 and the remaining
750,000 vests over the 36 months following that date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have omitted the stock awards columns of the above table
because we have no disclosure applicable to those columns.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Director Compensation for 2014 Fiscal Year</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid">Fees Earned <BR>or Paid in Cash <BR>($)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Stock <BR>Awards <BR>($)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Option <BR>Awards <BR>($)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Non-Equity <BR>Incentive <BR>Plan <BR>Compensation <BR>($)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Nonqualified <BR>Deferred <BR>Compensation <BR>Earnings <BR>($)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">All <BR>Other <BR>Compensation <BR>($)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Total <BR>($)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">James A. Joyce (1)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Richard H. Tullis (2)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Rodney S. Kenley (3)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 10%; text-align: left">Edward G. Broenniman (4)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">15,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">&ndash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">93,902</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">&ndash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">&ndash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">&ndash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">108,902</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Franklyn S. Barry, Jr. (5)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">15,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">93,902</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">109,402</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Chetan S. Shah, MD (6)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">14,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">82,725</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">96,725</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Phillip A. Ward (7)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">11,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">40,244</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">51,244</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Thomas V. Wornham (8)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">10,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">40,244</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">50,244</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1) All compensation received by Mr. Joyce in fiscal year 2014
is disclosed in the Summary Compensation Table above. Mr. Joyce received no compensation as a director in fiscal year 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(2) All compensation received by Dr. Tullis in fiscal year 2014
is disclosed in the Summary Compensation Table above. Dr. Tullis received no compensation as a director in fiscal year 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(3) All compensation received by Mr. Kenley in fiscal year 2014
is disclosed in the Summary Compensation Table above. Mr. Kenley received no compensation as a director in fiscal year 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(4) The aggregate number of stock awards and options awards
issued and outstanding as of March 31, 2014 are 0 and 2,296,080. Mr. Broenniman received a stock option grant of 426,829 shares
on March 14, 2014 for his service as an outside director and also received a stock option grant of 460,526 shares on July 24, 2012
for his service as an outside director. The 2014 option vested all 426,829 shares at grant and the 2012 option vested 198,026 at
grant, with 262,500 vesting in the June 2013 quarter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(5) The aggregate number of stock awards and options awards
issued and outstanding as of March 31, 2014 are 0 and 2,151,905. Mr. Barry received a stock option grant of 426,829 shares on March
14, 2014 for his service as an outside director and also received a stock option grant of 460,526 shares on July 24, 2012 for his
service as an outside director. The 2014 option vested all 426,829 shares at grant and the 2012 option vested 198,026 at grant,
with 262,500 vesting in the June 2013 quarter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(6) The aggregate number of stock awards and options awards
issued and outstanding as of March 31, 2014 are 0 and 376,024. Dr. Shah received a stock option grant of 376,024 shares on July
24, 2012 for his service as an outside director. The 2014 option vested all 376,024 shares at grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(7) The aggregate number of stock awards and options awards
issued and outstanding as of March 31, 2014 are 0 and 555,953. Mr. Ward received a stock option grant of 182,927 shares on March
14, 2014 for his service as an outside director and also received a stock option grant of 373,026 shares on July 24, 2012 for his
service as an outside director. The 2014 option vested all 182,927 shares at grant and the 2012 option vested 198,026 at grant,
with 175,000 vesting in the June 2013 quarter.&nbsp;Mr. Ward resigned from his position as one of our directors on January 9, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(8) The aggregate number of stock awards and options awards
issued and outstanding as of March 31, 2014 are 0 and 373,026. Mr. Wornham received a stock option grant of 182,927 shares on March
14, 2014 for his service as an outside director and also received a stock option grant of 373,026 shares on July 24, 2012 for his
service as an outside director. The 2014 option vested all 182,927 shares at grant and the 2012 option vested 198,026 at grant,
with 175,000 vesting in the June 2013 quarter. Mr. Wornham exercised the 2014 stock option in full prior to March 31, 2014. &nbsp;Mr.
Wornham resigned from his position as one of our directors on January 9, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Directors Compensation Program</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We maintain a board compensation program,
in which only non-employee directors may participate. Please see the &ldquo;Equity Compensation Plans&rdquo; section of this prospectus
for more information on the program.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth information
as of December 31, 2014, with respect to the ownership of our common stock, by (i) each person known by us to be the beneficial
owner of more than five percent (5%) of the outstanding shares of each class of our capital stock, (ii) each of our directors and
director nominees (if any), (iii) each of our named executive officers and (iv) all of our executive officers and directors as
a group. The term &quot;executive officer&quot; is defined as the President/Chief Executive Officer, Secretary, Chief Financial
Officer/Treasurer, any vice-president in charge of a principal business function (such as administration or finance), or any other
person who performs similar policy making functions for us. We believe that each individual or entity named has sole investment
and voting power with respect to shares of common stock indicated as beneficially owned by them, subject to community property
laws where applicable, excepted where otherwise noted:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid; padding-left: -11pt">TITLE OF CLASS</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">NAME AND ADDRESS</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">AMOUNT AND NATURE OF<BR> BENEFICIAL OWNERSHIP (1)(2)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">PERCENT OF <BR>BENEFICIAL OWNERSHIP</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 19%; text-align: left; border-bottom: Black 1pt solid; padding-left: 0pt">Common Stock</TD><TD STYLE="width: 2%; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="width: 40%; text-align: left; border-bottom: Black 1pt solid; padding-left: 2pt">James A. Joyce, Chief Executive Officer and Director <BR>9635 Granite Ridge Drive, Suite 100 <BR>San Diego, CA 92123</TD><TD STYLE="width: 2%; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="width: 20%; border-bottom: Black 1pt solid; text-align: center">16,888,243 shares (3)</TD><TD STYLE="width: 2%; border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; border-bottom: Black 1pt solid; text-align: right">5.0%</TD><TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid; padding-left: 0pt">Common Stock</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid; padding-left: 2pt">Richard H. Tullis, PhD, Chief Scientific Officer and Director <BR>9635 Granite Ridge Drive, Suite 100 <BR>San Diego, CA 92123</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: center">3,277,592 shares (4)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1.0%</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid; padding-left: 0pt">Common Stock</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid; padding-left: 2pt">Rodney S. Kenley, President and Director <BR>9635 Granite Ridge Drive, Suite 100 <BR>San Diego, CA 92123</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: center">1,228,333 shares (5)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 10pt">*</font></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid; padding-left: 0pt">Common Stock</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid; padding-left: 2pt">James B. Frakes, Chief Financial Officer <BR>9635 Granite Ridge Drive, Suite 100 <BR>San Diego, CA 92123</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: center">718,333 shares (6)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 10pt">*</font></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid; padding-left: 0pt">Common Stock</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid; padding-left: 2pt">Franklyn S. Barry, Jr., Director <BR>9635 Granite Ridge Drive, Suite 100 <BR>San Diego, CA 92123</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: center">2,257,998 shares (7)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 10pt">*</font></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid; padding-left: 0pt">Common Stock</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid; padding-left: 2pt">Edward G. Broenniman, Director <BR>9635 Granite Ridge Drive, Suite 100 <BR>San Diego, CA 92123</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: center">2,578,254 shares (8)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><font style="font-size: 10pt">*</font></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid; padding-left: 0pt">Common Stock</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid; padding-left: 2pt">Chetan Shah, MD, Director (11)<BR> 9635 Granite Ridge Drive, Suite 100 <BR>San Diego, CA 92123</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: center">19,207,084 shares (9)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5.8%</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid; padding-left: 0pt">Common Stock</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid; padding-left: 2pt">Ellen R Weiner Family Revocable Trust (11) <BR>10645 N. Tatum Blvd., Suite 200-166 <BR>Phoenix, AZ 85028</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: center">40,510,230&nbsp;shares (10)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">11.8%</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid; padding-left: 0pt">Common Stock</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid; padding-left: 2pt">Estate of Allen S. Bird <BR>9960 West Cheyenne Avenue, Suite 110 <BR>Las Vegas, NV 89129</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: center">14,730,620 shares (10)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4.4%</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid; padding-left: 0pt"><BR>
Common Stock</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid; padding-left: 2pt">All Current Directors and Executive Officers as a Group (7 members)</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: center">46,155,837 shares</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">13.0%</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">*&nbsp;&nbsp;Less than 1%</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1)&nbsp;Based on 327,739,188 shares of common stock outstanding
on our transfer records as of December 31, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(2)&nbsp;Calculated pursuant to Rule 13d-3(d)(1) of the Securities
Exchange Act of 1934, as amended. Under Rule 13d-3(d)(1), shares not outstanding that are subject to options, warrants, rights
or conversion privileges exercisable by a person within 60 days are deemed outstanding for the purpose of calculating the number
and percentage owned by such person but not deemed outstanding for the purpose of calculating the percentage owned by each other
person listed. Except where otherwise noted, we believe that each individual or entity named has sole investment and voting power
with respect to the shares of common stock indicated as beneficially owned by such person, subject to community property laws,
where applicable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(3)&nbsp;Includes 2,231,100 stock options exercisable at $0.38
per-share, 2,857,143 stock options exercisable at $0.21 per share, 2,500,000 stock options exercisable at $0.36 per share, 4,500,000
stock options exercisable at $0.25 per share, 500,000 stock options exercisable at $0.10 per share and 500,000 stock options exercisable
at $0.19 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(4)&nbsp;Includes 867,175 stock options exercisable at $0.38
per share, 750,000 stock options exercisable at $0.41 per share, 1,000,000stock options exercisable at $0.25 per share 125,000
stock options exercisable at $0.10 per share and 16,667 stock options exercisable at $0.19 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(5)&nbsp;Includes 1,000,000 stock options exercisable at $0.25
per share, 125,000 stock options exercisable at $0.10 per share and 83,333 stock options exercisable at $0.19 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(6)&nbsp;Includes 500,000 stock options exercisable at $0.25
per share, 125,000 stock options exercisable at $0.10 per share and 83,333 stock options exercisable at $0.19 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(7)&nbsp;Includes 264,550 stock options exercisable at $0.38
per share, 500,000 stock options exercisable at $0.41 per share, 500,000 stock options exercisable at $0.25 per share. 460,526
stock options exercisable at $0.076 per share and 426,829 stock options exercisable at $0.082 per share.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(8)&nbsp;Includes 308,725 stock options exercisable at $0.38
per share, 500,000 stock options exercisable at $0.41 per share, 600,000 stock options exercisable at $0.25 per share, 460,526
stock options exercisable at $0.076 per share and 426,829 stock options exercisable at $0.082 per share.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(9)&nbsp;Includes warrants to purchase 5,465,983 shares of common
stock at exercise prices ranging from $0.093 per share to $0.132 per share and 376,024 stock options exercisable at $0.082 per
share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(10)&nbsp;Includes common stock issuable upon exercise of warrants
held by the Ellen R. Weiner Family Revocable Trust and common stock issuable upon exercise of warrants held by the Estate of Allan
S. Bird. The trust owns 15,976,643 warrants to purchase common shares at prices ranging from $0.042 to $0.108 per share. The estate
owns 5,154,916 warrants to purchase common shares at prices ranging from $0.042 to $0.108 per share. Mr. Bird was Ms. Weiner's
father-in-law. The Ellen R. Weiner Family Trust disclaims any beneficial ownership of the estate's warrants and underlying common
stock. The Estate of Mr. Bird disclaims any beneficial ownership of the trust's warrants and underlying common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(11) More-than-5% stockholder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AND DIRECTOR INDEPENDENCE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following describes all transactions
since April 1, 2012, and all proposed transactions, in which we were or are to be a participant and the amount involved exceeds
the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years, and
in which any related person had or will have a direct or indirect material interest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On June 26, 2012, prior
to joining our Board of Directors, Mr. Thomas Wornham, now one of our former directors, purchased $10,000 of units, with each unit
consisting of (i) one share of common stock at a price per share of $0.072 and (ii) a warrant to purchase such number of shares
of common stock as shall equal (a) fifty percent of the subscription amount divided by (b) $0.072 at an exercise price of $0.107
per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On July 24, 2012, our Board of Directors
granted, to our four outside directors, ten year options to acquire an aggregate of 1,667,105 shares of our common stock, all with
an exercise price of $0.076 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Between March 2012 and June 2013, Dr. Chetan
Shah, one of our directors, participated in several private equity placements with us under which he invested an aggregate amount
of $625,556 and in return received 8.5 million restricted shares of our common stock and seven year warrants to purchase 4,250,000
shares of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In June 2013, we borrowed $80,000 at a 10%
interest rate from Mr. Phillip Ward, one of our former directors. We repaid that loan and paid accrued interest of $133 to Mr.
Ward in June 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In July 2013, we borrowed $400,000 from
Mr. Ward and Dr. Shah under 90-day notes bearing 10% interest. If we did not pay back those loans by October 9, 2013, then the
notes would bear interest at a penalty rate of 12% and the noteholders would have the right at their discretion (i) to convert
their principal and accrued interest into shares of common stock at $0.088 per share and (ii) receive warrants to purchase common
stock equal to 50% of the principal converted under the notes, with an exercise price of $0.132 per share. We subsequently repaid
Mr. Ward&rsquo;s note in cash. That repayment extinguished all potential common stock and warrant issuance provisions of Mr. Ward&rsquo;s
note. On July 24, 2014, we issued to Dr. Shah an aggregate of 2,503,966 shares of restricted common stock and a seven-year warrant
to issue up to 1,251,983 shares of common stock at an exercise price of $0.132 per share upon the conversion of an aggregate of
$220,349 of unpaid principal and accrued interest due under his note. The amount converted represented the entire amount outstanding
under Dr. Shah&rsquo;s note.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 14, 2014, our Board of Directors
granted to our three outside directors ten-year options to acquire an aggregate of 1,595,536 shares of our common stock at an exercise
price of $0.082 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On June 6, 2014, our Board of Directors
granted to our directors and our Chief Financial Officer ten-year options to acquire an aggregate of 2,602,633 shares of our common
stock at an exercise price of $0.19 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In July 2014, Exosome Sciences, Inc. paid
a bonus of $15,000 to Mr. Joyce.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In October 2014, Exosome Sciences, Inc.
paid bonuses of $15,000 to Mr. Joyce and $1,500 to Mr. Frakes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On October 20, 2014, we issued to Dr. Shah
2,111,111 shares of common stock and three-year warrants to acquire up to 2,111,111 shares of common stock with exercise prices
ranging from $0.093 to $0.11 per share. The common stock and warrants were issued to Dr. Shah upon his cash exercise, for an aggregate
of $214,000, of previously issued warrants for 2,111,111 shares held by him.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On October 21, 2014 and November 7, 2014,
we paid Mr. Franklyn Barry and Mr. Edward Broenniman, two of our outside directors, an aggregate of $10,944 and $10,063, respectively,
for accrued Board of Directors fees and expenses reimbursable to them. On November 7, 2014, we paid Dr. Tullis $5,000 for accrued
expenses reimbursable to him.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In December 2014, we paid bonuses of $25,000
to Mr. Joyce, $15,000 to Mr. Kenley, $15,000 to Mr. Frakes and $5,000 to Dr. Tullis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On December 22, 2014, Exosome Sciences,
Inc. paid Mr. Joyce a bonus of $15,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Director Independence</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Each of Mr. Barry, Mr. Broenniman and Dr.
Shah is an independent director as that term is defined by NASDAQ Stock Market Rule 5605(a)(2). We currently have a compensation
and audit committee. Of the members of our Board of Directors, each of Mr. Barry, Mr. Broenniman and Dr. Shah meets the NASDAQ
Stock Market's independence standards for members of such committees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DESCRIPTION OF SECURITIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>General</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our authorized capital consists of 500,000,000
shares of common stock, par value $0.001 per share. As of December 31, 2014, there were issued and outstanding 327,739,188 shares
of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Common Shares</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The holders of our common stock are entitled
to one vote (or consent) per share on all matters to be voted on by the stockholders. Holders of common stock are entitled to receive
ratably such dividends as may be declared by the Board out of funds legally available therefore. If we liquidate, dissolve or wind
up, holders of common stock are entitled to share ratably in all assets remaining after payment of all debts and other liabilities.
Holders of common stock have no preemptive, conversion or subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are, and all shares of common stock to be outstanding upon
completion of this offering will be, validly issued, fully paid and nonassessable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Except as otherwise required by Nevada law,&nbsp;all
stockholder action is taken by the vote of a majority of common stock voting as a single class present at a meeting of stockholders
at which a quorum consisting of a majority of the outstanding shares of common stock is present in person or proxy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Options and Warrants Convertible into Common Shares</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of December 31,
2014, there were outstanding common share purchase options entitling the holders to purchase 28,956,038 common shares at a weighted
average exercise price of $0.26 per share and warrants entitling the holders to purchase up to 71,794,602 common shares at a weighted
average exercise price of $0.14 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LEGAL MATTERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The validity of the shares of common stock
offered by this prospectus has been passed upon by Raines Feldman LLP. Jennifer A. Post, a partner of the firm, owns approximately
800,000 shares of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXPERTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The financial statements included in this
prospectus as of March 31, 2014 and March 31, 2013 and for each of the years then ended have been audited by Squar, Milner, Peterson,
Miranda &amp; Williamson, LLP. Such financial statements have been so included in reliance on the report of such firm, appearing
elsewhere herein, given upon their authority as experts in accounting and auditing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>WHERE YOU CAN FIND MORE INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are a reporting company under the Securities
Exchange Act of 1934, as amended, and we file annual, quarterly and current reports and other information with the Securities and
Exchange Commission. The public may read and copy any materials that we file with the Securities and Exchange Commission at its
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the
Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission
maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the Securities and Exchange Commission.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our website address is www.aethlonmedical.com.
Our website and the information contained on our website are not incorporated into this prospectus or the registration statement
of which it forms a part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Nevada Law. </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">We are incorporated
in Nevada. Subsection 1 of Section 78.7502 of the Nevada Revised Statutes empowers a corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that
he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or other enterprise, against expenses (including attorneys&rsquo;
fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action,
suit or proceeding if he is not liable pursuant to Section 78.138 of the Nevada Revised Statutes or if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was unlawful. Subsection 7 of Section 78.138 provides that,
with certain exceptions, a director or officer is not individually liable to the corporation or its stockholders or creditors for
any damages as a result of any act or failure to act in his capacity as a director or officer unless it is proven that (i) his
act or failure to act constituted a breach of his fiduciary duties as a director or officer, and (ii) his breach of those duties
involved intentional misconduct, fraud or a knowing violation of the law.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">Subsection 2 of Section
78.7502 empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact
that such person acted in any of the capacities set forth above against expenses, including amounts paid in settlement and attorneys&rsquo;
fees actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted under
similar standards, except that no indemnification may be made in respect of any claim, issue or matter as to which such person
shall have been adjudged by a court of competent jurisdiction to be liable to the corporation or for amounts paid in settlement
to the corporation, unless and only to the extent that the court in which such action or suit was brought or other court of competent
jurisdiction determines that, in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity
for such expenses as the court deems proper.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">Section 78.7502 further
provides that to the extent a director or officer of a corporation has been successful in the defense of any action, suit or proceeding
referred to in subsections (1) and (2) thereof, or in the defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys&rsquo; fees) actually and reasonably incurred by him in connection therewith. Subsection
3 of Section 78.751 of the Nevada Revised Statutes provides that the indemnification provided for by Section 78.7502 shall not
be deemed exclusive or exclude any other rights to which the indemnified party may be entitled (except that indemnification will
generally not be available to a person if a final adjudication establishes that his acts or omissions involved intentional misconduct,
fraud or a knowing violation of the law and were material to the cause of action) and that the indemnification shall continue as
to directors, officers, employees or agents who have ceased to hold such positions, and to their heirs, executors and administrators.
Section 78.752 empowers the corporation to purchase and maintain insurance on behalf of a director, officer, employee or agent
of the corporation against any liability asserted against him or incurred by him in any such capacity or arising out of his status
as such whether or not the corporation would have the power to indemnify him against such liabilities under Section 78.7502.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>By-Laws.<I> </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">Our by-laws provide
for the elimination of the personal liability of our officers, directors, corporate employees and agents to the fullest extent
permitted by the provisions of the Nevada Law. Under such provisions, we shall indemnify a director or officer (and may indemnify
a corporate employee or agent) who in his capacity as such is made, or threatened to be made, party to any suit or proceeding,
if it is determined that such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of our company and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>Liability Insurance.<I> </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">We maintain directors&rsquo;
and officers&rsquo; liability insurance covering our directors and officers against expenses and liabilities arising from certain
actions to which they may become subject by reason of having served in such role, including insurance for claims against these
persons brought under securities laws. Such insurance is subject to the coverage amounts, exceptions, deductibles and other conditions
set forth in the policy as in effect at the time of a claim, if any. There is no assurance that we will maintain liability insurance
for our directors and officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>Public Policy Limitations.<I> </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: left">Insofar as indemnification for liabilities
arising under the Securities Act of 1933, as amended, may be permitted to our directors, officers and controlling persons pursuant
to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid
by one 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 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 of 1933, as amended, and will be
governed by the final adjudication of such issue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">AETHLON MEDICAL, INC. AND SUBSIDIARY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">INDEX TO CONSOLIDATED FINANCIAL STATEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
    <td><font style="font-size: 10pt"><b>Audited Consolidated Financial Statements</b></font></td>
    <td style="text-align: right"><font style="font-size: 10pt"><b>Page</b></font></td></tr>
<tr style="vertical-align: top">
    <td>&nbsp;</td>
    <td style="text-align: right">&nbsp;</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <td><font style="font-size: 10pt">Report of Independent Registered Public Accounting Firm</font></td>
    <td style="text-align: right">F-2</td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <td>&nbsp;</td>
    <td>&nbsp;</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <td><font style="font-size: 10pt">Consolidated Balance Sheets as of March 31, 2014 and 2013</font></td>
    <td style="text-align: right">F-3</td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <td>&nbsp;</td>
    <td>&nbsp;</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <td><font style="font-size: 10pt">Consolidated Statements of Operations for the Years Ended March 31, 2014 and 2013</font></td>
    <td style="text-align: right">F-4</td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <td>&nbsp;</td>
    <td>&nbsp;</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <td><font style="font-size: 10pt">Consolidated Statements of Deficit for the Years Ended March 31, 2014 and 2013</font></td>
    <td style="text-align: right">F-5</td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <td>&nbsp;</td>
    <td style="text-align: right">&nbsp;</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <td><font style="font-size: 10pt">Consolidated Statements of Cash Flows for the Years Ended March 31, 2014 and 2013</font></td>
    <td style="text-align: right">F-7</td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <td>&nbsp;</td>
    <td style="text-align: right">&nbsp;</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <td><font style="font-size: 10pt">Notes to Consolidated Financial Statements</font></td>
    <td style="text-align: right">F-9</td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <td>&nbsp;</td>
    <td style="text-align: right">&nbsp;</td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <td><font style="font-size: 10pt"><b> Interim Consolidated Financial Statements</b></font></td>
    <td style="text-align: right">&nbsp;</td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <td>&nbsp;</td>
    <td style="text-align: right">&nbsp;</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <td><font style="font-size: 10pt">Consolidated Balance Sheets as of September 30, 2014 (unaudited) and March 31, 2014</font></td>
    <td style="text-align: right">F-39</td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <td>&nbsp;</td>
    <td style="text-align: right">&nbsp;</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <td><font style="font-size: 10pt">Consolidated Statements of Operations for the Three and Six Months Ended September 30, 2014
    and     2013 (unaudited)</font></td>
    <td style="text-align: right">F-40</td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <td>&nbsp;</td>
    <td style="text-align: right">&nbsp;</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <td><font style="font-size: 10pt">Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2014
    and     2013 (unaudited)</font></td>
    <td style="text-align: right">F-41</td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <td>&nbsp;</td>
    <td style="text-align: right">&nbsp;</td></tr>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <td><font style="font-size: 10pt">Notes to Consolidated Financial Statements</font></td>
    <td style="text-align: right">F-43</td></tr>
<TR STYLE="vertical-align: top; background-color: White">
    <td>&nbsp;</td>
    <td style="text-align: right">&nbsp;</td></tr>
</table>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">To the Board of Directors and Stockholders</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Aethlon Medical, Inc. and Subsidiary</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">We have audited the accompanying consolidated balance sheets of
Aethlon Medical, Inc. and Subsidiary (the &quot;Company&quot;) as of March 31, 2014 and 2013 and the related consolidated statements
of operations, deficit and cash flows for each of the years in the two-year period ended March 31, 2014. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">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. The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration
of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial position of Aethlon Medical, Inc. and Subsidiary as
of March 31, 2014 and 2013 and the consolidated results of their operations and&nbsp;cash flows for each of the years in the two-year
period ended March 31, 2014 in conformity with accounting principles generally accepted in the United States of America.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">As discussed in Note 1, the accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred continuing losses
from operations and at March 31, 2014 is in default on certain debt agreements, has negative working capital of approximately $14,169,000
and an accumulated deficit of approximately $74,833,000. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt">Subsequent to March 31, 2014, as more fully discussed in
Note 16, the Company entered into amended debt agreements with certain creditors which resulted in conversion of debt into common
stock and the elimination of warrant and convertible debt price protection features. As a result, derivative liabilities of approximately
$10,679,000 were reclassified to equity and certain debt holders converted their debt and accrued interest into equity in the approximate
amount of $1,235,000.&nbsp; Due to the significance of such subsequent events, the Company has included an unaudited pro forma
balance sheet as of March 31, 2014 alongside its consolidated balance sheets to present the effect of these subsequent events&nbsp;as
if they had occurred on March 31, 2014.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">/s/ SQUAR, MILNER, PETERSON, MIRANDA &amp; WILLIAMSON, LLP</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">NEWPORT BEACH, CALIFORNIA</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">JULY 14, 2014</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center">AETHLON MEDICAL, INC.
AND SUBSIDIARY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center">CONSOLIDATED BALANCE SHEETS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; text-align: center; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Pro Forma</TD><TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, 2014</TD><TD STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, 2013</TD><TD STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, 2014 <BR>(Note 16)</TD><TD STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt"></TD><TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">(unaudited)</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: center; padding-left: 10pt">ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">CURRENT ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 49%; padding-left: 20pt; text-indent: -10pt">Cash</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">1,250,279</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">125,274</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">1,250,279</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">Accounts receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">95,177</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">208,781</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">95,177</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">Deferred financing costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">83,191</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">863</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">83,191</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">Prepaid expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">50,699</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">29,602</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">50,699</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt; padding-bottom: 1pt">TOTAL CURRENT ASSETS</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">1,479,346</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">364,520</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">1,479,346</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">NON-CURRENT ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">Property and equipment, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">84,279</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">145</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">84,279</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">Patents, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">112,489</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">121,653</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">112,489</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">Deposits</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">18,988</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">10,376</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">18,988</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt; padding-bottom: 1pt">TOTAL NON-CURRENT ASSETS</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">215,756</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">132,174</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">215,756</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt; padding-bottom: 2.5pt">TOTAL ASSETS</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">1,695,102</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">496,694</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">1,695,102</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">LIABILITIES AND DEFICIT</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">CURRENT LIABILITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">517,651</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">822,832</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">517,651</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">Due to related parties</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">839,070</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">736,070</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">839,070</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">Notes payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">390,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">321,381</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">390,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">Convertible notes payable, current portion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,367,655</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,367,631</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">482,655</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">Derivative liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,679,067</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,588,239</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">Other current liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">1,855,374</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">1,804,985</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">1,280,124</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt; padding-bottom: 1pt">TOTAL CURRENT LIABILITIES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">15,648,817</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">9,641,138</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">3,509,500</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">NONCURRENT LIABILITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt; padding-bottom: 1pt">Convertible notes payable, noncurrent portion</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">776,451</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">&ndash;</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">1,001,451</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">TOTAL NONCURRENT LIABILITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">776,451</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,001,451</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">TOTAL LIABILITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,425,268</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,641,138</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,510,951</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">COMMITMENTS AND CONTINGENCIES (Note 13)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">STOCKHOLDERS&rsquo; DEFICIT</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">Common stock, $0.001 par value, 500,000,000 and 250,000,000 shares authorized at March 31, 2014 and 2013, respectively; 224,973,980 and 173,674,201 issued and outstanding at March 31, 2014 and 2013, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">224,984</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">173,685</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">250,994</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">59,659,137</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">52,157,196</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">74,116,754</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt">Accumulated deficit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(74,832,557</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(61,475,325</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(77,401,867</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt; padding-bottom: 1pt">TOTAL AETHLON MEDICAL, INC STOCKHOLDERS&rsquo; DEFICIT</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(14,948,436</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(9,144,444</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(3,034,119</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt; padding-bottom: 1pt">NONCONTROLLING INTERESTS</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">218,270</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">&ndash;</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">218,270</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt; padding-bottom: 1pt">TOTAL DEFICIT</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(14,730,166</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(9,144,444</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(2,815,849</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt; padding-bottom: 2.5pt">TOTAL LIABILITIES AND DEFICIT</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">1,695,102</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">496,694</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">1,695,102</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; text-align: center; margin-bottom: 0">See accompanying notes to the consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; text-align: center; margin-bottom: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; text-align: center; margin-bottom: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; text-align: center; margin-bottom: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">AETHLON MEDICAL, INC. AND SUBSIDIARY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">CONSOLIDATED STATEMENTS OF OPERATIONS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">FOR THE YEARS ENDED MARCH 31, 2014 AND 2013</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Years Ended March 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -9pt; padding-left: 9pt">REVENUES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 66%; text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt">Government contract revenue</TD><TD STYLE="width: 2%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 1pt solid; text-align: right">1,623,769</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 1pt solid; text-align: right">1,230,004</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Total revenues</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,623,769</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,230,004</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">OPERATING EXPENSES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Professional fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,521,397</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,892,270</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Payroll and related</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,227,194</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,166,989</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt">General and administrative</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">931,106</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">746,099</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,679,697</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,805,358</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">OPERATING LOSS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,055,928</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,575,354</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">OTHER (INCOME) EXPENSE</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Loss on debt conversion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,257</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">139,839</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Change in fair value of derivative liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,547,015</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">44,705</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Loss on litigation settlement</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">583,601</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Other expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(75,060</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(172</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt; padding-bottom: 1pt">Interest and other debt expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">1,287,221</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">1,132,314</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">10,383,034</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,316,686</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">NET LOSS BEFORE NONCONTROLLING INTERESTS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(13,438,962</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,892,040</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(81,730</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(13,357,232</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(4,892,040</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Basic and diluted net loss per share available to common stockholders</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.07</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.03</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Weighted average number of common shares outstanding - basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">194,058,972</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">149,223,601</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">See accompanying notes to the consolidated financial
statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"></P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">AETHLON MEDICAL, INC. AND SUBSIDIARY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">CONSOLIDATED STATEMENTS OF DEFICIT</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">FOR THE YEARS ENDED MARCH 31, 2014 AND 2013</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">ATTRIBUTABLE TO AETHLON MEDICAL, INC.</FONT></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">COMMON STOCK</FONT></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">ADDITIONAL PAID IN </TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">ACCUMULATED</FONT></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">NON-
    CONTROLLING</FONT></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">TOTAL</FONT></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">SHARES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">AMOUNT</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">CAPITAL</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">DEFICIT</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">INTERESTS</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">DEFICIT</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 28%; padding-left: 10pt; text-indent: -10pt">BALANCE - MARCH 31, 2012</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">117,515,892</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">117,518</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">47,170,146</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">(56,583,285</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&ndash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">(9,295,621</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Issuance of common stock for cash</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">29,724,545</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">29,726</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,080,108</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,109,834</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Issuances of common stock upon conversions of notes payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">21,941,154</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">21,941</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,673,118</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,695,059</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Issuance of common stock for services</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,896,181</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,896</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">256,139</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">259,035</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Patent license fees paid with issuance of common stock</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">246,429</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">246</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,004</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,250</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Reclassification of derivative liability into equity</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">45,081</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">45,081</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Issuance of common stock for interest</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">116,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">120</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,726</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,846</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Loss on debt conversion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,234,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,238</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">138,601</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">139,839</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Stock-based compensation expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">765,273</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">765,273</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Net loss</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,892,040</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,892,040</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 10pt; text-indent: -10pt">BALANCE - MARCH 31, 2013</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">173,674,201</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">173,685</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">52,157,196</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(61,475,325</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(9,144,444</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">See accompanying notes to the consolidated financial
statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"></P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">AETHLON MEDICAL, INC. AND SUBSIDIARY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">CONSOLIDATED STATEMENTS OF DEFICIT</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">FOR THE YEARS ENDED MARCH 31, 2014 AND 2013</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="14" STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">ATTRIBUTABLE TO AETHLON MEDICAL, INC.</FONT></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">COMMON STOCK</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">ADDITIONAL PAID IN </TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">ACCUMULATED</FONT></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">NON-
    CONTROLLING</FONT></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">TOTAL</FONT></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">SHARES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">AMOUNT</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">CAPITAL</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">DEFICIT</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">INTERESTS</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">DEFICIT</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 28%; padding-left: 10pt; text-indent: -10pt">BALANCE - MARCH 31, 2013</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">173,674,201</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">173,685</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">52,157,196</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">(61,475,325</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">&ndash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">(9,144,444</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Issuances of common stock upon conversions of notes payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,574,024</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,572</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">716,204</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">726,776</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Issuance of common stock for cash - Aethlon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,872,739</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,873</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,660,159</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,677,032</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Issuance of common stock for cash - ESI</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,200,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">300,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,500,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Issuance of common stock for services</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,071,150</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,071</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">389,022</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">392,093</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Issuance of common stock under convertible debt restructuring</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,507,105</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,507</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">851,842</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">856,349</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Issuance of common stock under stock option&nbsp;&nbsp;exercises for accrued expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">158,536</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">159</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,841</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Reclassification of derivative liability into equity</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,456,187</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,456,187</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Issuance of common stock under cashless warrant exercises</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,716,225</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,717</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(12,717</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Shares issued under restricted stock grant</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,400,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,400</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,400</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Issuance of common stock on litigation settlement</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">583,601</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">583,601</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Loss on debt conversion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,256</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,256</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Stock-based compensation expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">607,946</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">607,946</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Net loss</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">&ndash;</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">&ndash;</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">&ndash;</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(13,357,232</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(81,730</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">(13,438,962</TD><TD STYLE="text-align: left; padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 10pt; text-indent: -10pt">BALANCE - MARCH 31, 2014</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">224,973,980</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">224,984</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">59,659,137</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(74,832,557</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">218,270</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(14,730,166</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center">See accompanying notes to the consolidated financial
statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"></P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">AETHLON MEDICAL, INC. AND SUBSIDIARY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">CONSOLIDATED STATEMENTS OF CASH FLOWS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">FOR THE YEARS ENDED MARCH 31, 2014 AND 2013</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Cash flows from operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 66%; text-align: left; text-indent: -9pt; padding-left: 0.25in">Net loss</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(13,438,962</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(4,892,040</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -0.25in; padding-left: 27pt">Adjustments to reconcile net loss to net cash used in operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 27pt">Depreciation and amortization</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">21,087</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,484</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 27pt">Debt restructuring cost</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">856,349</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">139,839</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 27pt">Non-cash interest expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,846</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 27pt">Loss on litigation settlement</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">583,601</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 27pt">Change in estimated fair value of derivative liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,547,015</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">44,705</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 0.25in">Loss on debt conversion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,256</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 27pt">Fair market value of equity instruments issued for services</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">392,093</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">259,035</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 27pt">Stock based compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">607,946</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">765,273</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 27pt">Patent license fees paid with issuance of common stock</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,250</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 27pt">Amortization of debt discount and deferred financing costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,147</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">594,358</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 27pt">Changes in operating assets and liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 0.5in">Accounts receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">113,604</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">191,333</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 0.5in">Prepaid expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(21,097</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,850</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 0.5in">Other assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(8,612</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 0.5in">Accounts payable and other current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">46,602</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">751,210</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 0.5in">Due to related parties</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">116,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 0.25in">Net cash used in operating activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,138,971</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,098,857</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Cash flows from investing activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 0.25in">Purchases of property and equipment</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(96,056</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 0.25in">Net cash used in investing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(96,056</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">See accompanying notes to the consolidated financial
statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">AETHLON MEDICAL, INC. AND SUBSIDIARY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">CONSOLIDATED STATEMENTS OF CASH FLOWS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">FOR THE YEARS ENDED MARCH 31, 2014 AND 2013</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Cash flows from financing activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 66%; text-align: left; text-indent: -9pt; padding-left: 0.25in">Principal repayments of notes payable</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">(217,000</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">(29,610</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 0.25in">Proceeds from the issuance of notes payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">400,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 0.25in">Net proceeds from the issuance of common stock</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,177,032</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,109,834</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt">Net cash provided by financing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,360,032</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,080,224</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Net increase (decrease) in cash</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,125,005</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(18,633</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt">Cash at beginning of year</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">125,274</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">143,907</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Cash at end of year</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,250,279</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">125,274</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Supplemental disclosure of cash flow information - Cash paid during the year for:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 0.25in">Interest</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">13,950</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,821</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 0.25in">Income taxes</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Supplement information for non-cash investing and financing activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Conversion of debt, accrued liabilities and accrued interest to common stock</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">726,776</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,695,059</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Reclassification of accounts payable to convertible notes payable</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">47,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Reclassification of accrued interest to convertible notes payable</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">20,027</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Recording deferred financing costs associated with notes payable and convertible notes payable</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">83,191</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,500</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Reclassification of warrant derivative liability into equity</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,456,187</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">45,081</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Issuance of shares under cashless warrant exercises</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">12,717</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Exercise of stock option for accrued expenses</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">13,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Reclassification of note payable to convertible notes payable</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">75,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 9pt">Stock issued under restricted stock grant</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,400</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">See accompanying notes to the consolidated financial
statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">ORGANIZATION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Aethlon Medical, Inc. and subsidiary (&quot;Aethlon&quot;, the &quot;Company&quot;,
&quot;we&quot; or &quot;us&quot;) is a medical device company focused on creating innovative devices that address unmet medical
needs in cancer, infectious disease and other life-threatening conditions. At the core of our developments is the Aethlon ADAPT&trade;
(Adaptive Dialysis-Like Affinity Platform Technology) system, a medical device platform that converges single or multiple affinity
drug agents with advanced plasma membrane technology to create therapeutic filtration devices that selectively remove harmful particles
from the entire circulatory system without loss of essential blood components. On June 25, 2013, the United States Food and Drug
Administration (FDA) approved an Investigational Device Exemption (IDE) that allows us to initiate human feasibility studies of
the Aethlon Hemopurifier&reg; in the United States. Under the feasibility study protocol, we will enroll ten end-stage renal disease
patients who are infected with the Hepatitis C virus (HCV) to demonstrate the safety of Hemopurifier therapy. Successful completion
of this study will allow us the opportunity to initiate pivotal studies that are required for market clearance to treat HCV and
other disease conditions in the United States.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Successful outcomes of human trials will also be required by the
regulatory agencies of certain foreign countries where we intend to sell this device. Some of our patents may expire before FDA
approval or approval in a foreign country, if any, is obtained. However, we believe that certain patent applications and/or other
patents issued more recently will help protect the proprietary nature of the Hemopurifier(R) treatment technology.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In October 2013, our subsidiary, Exosome Sciences, Inc. (&ldquo;ESI&rdquo;),
commenced operations with a focus on advancing exosome-based strategies to diagnose and monitor the progression of cancer, infectious
disease and other life-threatening conditions.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Our common stock is quoted on the OTCQB marketplace administered
by the OTC Markets Group under the symbol &quot;AEMD.&quot;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">UNAUDITED PRO FORMA BALANCE SHEET INFORMATION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During June and July 2014, we entered into agreements with two existing
convertible note holders to convert one note into common stock and to extend the second note and to restructure warrants related
to the original note issuances removing certain price protection features from such warrants. The transaction resulted in not only
the conversion of debt to equity but also the reclassification of such warrants from derivative liabilities to equity. As further
explained in Note 16, we have presented an unaudited March 31, 2014 pro forma balance sheet to reflect such transactions as if they
had occurred on March 31, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">PRINCIPLES OF CONSOLIDATION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The accompanying consolidated financial statements include the accounts
of Aethlon Medical, Inc. and its majority-owned and controlled subsidiary, ESI. All significant intercompany balances and transactions
have been eliminated in consolidation. The Company classifies the noncontrolling interests in ESI as part of consolidated net loss
in the fiscal year ended March 31, 2014 and includes the accumulated amount of noncontrolling interests as part of stockholders&rsquo;
equity. For the fiscal year ended March 31, 2013, ESI was a wholly-owned subsidiary. During the fiscal year ended March 31, 2014,
Aethlon Medical, Inc. reduced its ownership percentage to 80% by ESI&rsquo;s issuance of 300,000 shares of ESI common stock in
exchange for cash of $1,500,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The losses at ESI during the fiscal year ended March 31, 2014 reduced
the noncontrolling interests on our consolidated balance sheet by $81,730 from $300,000 to $218,270 at March 31, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">GOING CONCERN</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The accompanying consolidated financial statements have been prepared
assuming that we 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. We have incurred continuing losses from operations and at March 31, 2014 are
in default on certain debt agreements, have negative working capital of approximately $14,169,000, and an accumulated deficit of
approximately $74,833,000. These factors, among other matters, raise substantial doubt about our ability to continue as a going
concern. A significant amount of additional capital will be necessary to advance the development of our products to the point at
which they may become commercially viable. We intend to fund operations, working capital and other cash requirements for the fiscal
year ending March 31, 2015 through debt and/or equity financing arrangements as well as through revenues and related cash receipts
under our government contracts (see Note 11).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">We are currently addressing our liquidity issue by seeking additional
investment capital through private placements of common stock and debt and by applying for additional grants issued by government
agencies in the United States. We believe that our cash on hand and funds expected to be received from additional private investment
will be sufficient to meet our liquidity needs for fiscal 2015. However, no assurance can be given that we will receive any funds
in addition to the funds we have received to date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The successful outcome of future activities cannot be determined
at this time and there is no assurance that, if achieved, we will have sufficient funds to execute our intended business plan or
generate positive operating results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Subsequent to March 31, 2014, we completed several significant transactions
related to our convertible notes (see Note 16).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The consolidated financial statements do not include any adjustments
related to this uncertainty and as to the 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">RISKS AND UNCERTAINTIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">We operate in an industry that is subject to intense competition,
government regulation and rapid technological change. Our operations are subject to significant risk and uncertainties including
financial, operational, technological, regulatory, and including the potential risk of business failure.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">USE OF ESTIMATES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">We prepare our 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 consolidated 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">CASH AND CASH EQUIVALENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Accounting standards define &quot;cash and cash equivalents&quot;
as any short-term, highly liquid investment that is both readily convertible to known amounts of cash and so near their maturity
that they present insignificant risk of changes in value because of changes in interest rates. For the purpose of financial statement
presentation, we consider all highly liquid investment instruments with original maturities of three months or less when purchased,
or any investment redeemable without penalty or loss of interest to be cash equivalents.&nbsp;&nbsp;As of March 31, 2014 and 2013,
we had no assets that were classified as cash equivalents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">FAIR VALUE OF FINANCIAL INSTRUMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The carrying amount of our cash, accounts receivable, accounts payable,
and other current liabilities approximates their estimated fair values due to the short-term maturities of those financial instruments.
The carrying amount of the notes payable approximates their fair value due to the short maturity of the notes and since the interest
rates approximate current market interest rates for similar instruments. Derivative liabilities recorded in connection with warrants
and embedded conversion features of certain convertible notes payable are reported at their estimated fair value, with changes
in fair value being reported in results of operations (see Note 10).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Management has concluded that it is not practical to determine the
estimated fair value of amounts due to related parties 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Other than our derivative liabilities, we do not have any assets
or liabilities that are measured at fair value on a recurring basis and, during the years ended March 31, 2014 and 2013, did not
have any assets or liabilities that were measured at fair value on a nonrecurring basis except as described in Note 10 under derivative
liabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">CONCENTRATIONS OF CREDIT RISKS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Cash is maintained at two financial institutions in checking accounts
and related cash management accounts. Accounts at these institutions are secured by the Federal Deposit Insurance Corporation (&quot;FDIC&quot;)
up to $250,000. Our March 31, 2014 cash balances were approximately $1,000,000 over such insured amount.<FONT STYLE="background-color: white">
We do not believe that the Company is exposed to any significant risk with respect to its cash. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">All of our accounts receivable at March 31, 2014 and 2013 and all
of our revenue in the fiscal years ended March 31, 2014 and 2013 were directly from the U.S. Department of Defense or from a subcontract
under Battelle, which is a prime contractor with the U.S. Department of Defense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">PROPERTY AND EQUIPMENT</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">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 consolidated statements of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">INCOME TAXES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">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. We record a valuation
allowance for deferred tax assets when, based on our 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">LONG-LIVED ASSETS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Long-lived assets are 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. We believe no
impairment charges were necessary during the fiscal years ended March 31, 2014 and 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">LOSS PER SHARE</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Basic loss per share is computed by dividing net income available
to common stockholders by the weighted average number of common shares outstanding during the period of computation. Diluted loss
per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional
common shares that would have been outstanding if potential common shares had been issued, if such additional common shares were
dilutive. Since we had net losses for all periods presented, basic and diluted loss per share are the same, and additional potential
common shares have been excluded as their effect would be antidilutive.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">As of March 31, 2014 and 2013, a total of 143,074,602 and 142,701,202
potential common shares, consisting of shares underlying outstanding stock options, warrants and convertible notes payable were
excluded as their inclusion would be antidilutive.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">SEGMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Historically, we operated in one segment that was based on our development
of therapeutic devices. However in the December 2013 quarter, we initiated the operations of ESI to develop diagnostic tests. As
a result, we now operate in two segments, Aethlon for therapeutic applications and ESI for diagnostic applications (See Note 14).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">DEFERRED FINANCING COSTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Costs related to the issuance of debt are capitalized and amortized
to interest expense over the life of the related debt using the effective interest method.&nbsp;&nbsp;We recorded amortization
expense related to our deferred offering costs of $863 and $127,200 during the fiscal years ended March 31, 2014 and 2013, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">REVENUE RECOGNITION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">DARPA Contract -- With respect to revenue recognition, we entered
into a government contract with DARPA and have recognized revenue of $1,466,482 and $1,230,004 under that contract during the fiscal
years ended March 31, 2014 and 2013, respectively. We adopted the Milestone method of revenue recognition for the DARPA contract
under ASC 605-28 &ldquo;Revenue Recognition &ndash; Milestone Method&rdquo; and we believe we meet the requirements under ASC 605-28
for reporting contract revenue under the Milestone Method for the fiscal years ended March 31, 2014 and 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In order to account for this contract, we identify the deliverables
included within the contract and evaluate which deliverables represent separate units of accounting based on if certain criteria
are met, including whether the delivered element has standalone value to the collaborator. The consideration received is allocated
among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">A milestone is an event having all of the following characteristics:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">(1) There is substantive uncertainty at the date the arrangement
is entered into that the event will be achieved. A vendor&rsquo;s assessment that it expects to achieve a milestone does not necessarily
mean that there is not substantive uncertainty associated with achieving the milestone.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">(2) The event can only be achieved based in whole or in part on
either: (a) the vendor&rsquo;s performance; or (b) a specific outcome resulting from the vendor&rsquo;s performance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">(3) If achieved, the event would result in additional payments being
due to the vendor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">A milestone does not include events for which the occurrence is
either: (a) contingent solely upon the passage of time; or (b) the result of a counterparty&rsquo;s performance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The policy for recognizing deliverable consideration contingent
upon achievement of a milestone must be applied consistently to similar deliverables.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The assessment of whether a milestone is substantive is performed
at the inception of the arrangement. The consideration earned from the achievement of a milestone must meet all of the following
for the milestone to be considered substantive:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">(1) The consideration is commensurate with either: (a) the vendor&rsquo;s
performance to achieve the milestone; or (b) the enhancement of the value of the delivered item or items as a result of a specific
outcome resulting from the vendor&rsquo;s performance to achieve the milestone;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">(2) The consideration relates solely to past performance; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">(3) The consideration is reasonable relative to all of the deliverables
and payment terms (including other potential milestone consideration) within the arrangement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">A milestone is not considered substantive if any portion of the
associated milestone consideration relates to the remaining deliverables in the unit of accounting (i.e., it does not relate solely
to past performance). To recognize the milestone consideration in its entirety as revenue in the period in which the milestone
is achieved, the milestone must be substantive in its entirety. Milestone consideration cannot be bifurcated into substantive and
nonsubstantive components. In addition, if a portion of the consideration earned from achieving a milestone may be refunded or
adjusted based on future performance, the related milestone is not considered substantive.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">See Note 11 for the additional disclosure information required under
ASC 605-28.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Battelle Subcontract -- We entered into a subcontract agreement
with Battelle Memorial Institute (&ldquo;Battelle&rdquo;) in March 2013. Battelle was chosen by DARPA to be the prime contractor
on the systems integration portion of the original DARPA contract and we are one of several subcontractors on that systems integration
project. The Battelle subcontract is cost-reimbursable under a time and materials basis. We began generating revenues under the
subcontract during the three months ended September 30, 2013 and for the fiscal year 2014 recorded revenue of $157,287.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Our revenue under this contract is a function of cost reimbursement
plus an overhead mark-up for hours devoted to the project by specific employees (with specific hourly rates for those employees).
Battelle engages us as needed. Each payment requires approval by the program manager at Battelle.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">STOCK-BASED COMPENSATION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Employee stock options and rights to purchase shares under stock
participation plans are accounted for under the fair value method. 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. 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 OTCBB on the date
of grant). Compensation cost recognized by the Company includes (a) compensation cost for all equity incentive awards granted prior
to April 1, 2006, but not yet vested, based on the grant-date fair value estimated in accordance with the original provisions of
the then current accounting standards, 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 subsequent accounting standards. We use
a Binomial Lattice option pricing model for estimating fair value of options granted (see Note 6).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The following table summarizes share-based compensation expenses
relating to shares and options granted and the effect on loss per common share during the years ended March 31, 2014 and 2013:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, 2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left">Vesting of Stock Options</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">541,588</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">355,578</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Incremental fair value of option Modifications</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,914</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">23,028</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Vesting Expense Associated with CEO Restricted Stock Grant</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">64,444</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">386,667</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total Stock-Based Compensation Expense</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">607,946</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">765,273</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Basic and diluted loss per common share</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.00</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.01</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">We account for transactions involving services provided by third
parties where we issue equity instruments as part of the total consideration 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.
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, we use the following methodology:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">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).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">c) For any transactions not meeting the criteria in (a) or (b) above,
we re-measure the consideration at each reporting date based on its then current stock value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">We review 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, 2014 was insignificant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">PATENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Patents include both foreign and domestic patents. There were several
patents pending at March 31, 2014. We capitalize the cost of patents and patents pending, some of which were acquired, and amortize
such costs over the shorter of the remaining legal life or their estimated economic life, upon issuance of the patent. The unamortized
costs of patents and patents pending are subject to our review for impairment under our long-lived asset policy above.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">STOCK PURCHASE WARRANTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">We grant warrants in connection with the issuance of convertible
notes payable and the issuance of common stock for cash. When such warrants are classified as equity and issued in connection with
debt, we measure the relative estimated fair value of such warrants and record it as a discount from the face amount of the convertible
notes payable. Such discounts are amortized to interest expense over the term of the notes using the effective interest method.
Warrants issued in connection with common stock for cash, if classified as equity, are considered issued in connection with equity
transactions and the warrant fair value is recorded to additional paid-in-capital. Lastly, warrants not meeting equity classification
are recorded as derivative instruments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">DERIVATIVE INSTRUMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">We evaluate free-standing derivative instruments (or embedded derivatives)
to properly classify such instruments within equity or as liabilities in our financial statements. Our policy is to settle instruments
indexed to our common shares on a first-in-first-out basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The classification of a derivative instrument is reassessed at each
reporting date. If the classification changes as a result of events during a reporting period, the instrument is reclassified as
of the date of the event that caused the reclassification. There is no limit on the number of times a contract may be reclassified.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Instruments classified as derivative liabilities are remeasured
each reporting period (or upon reclassification) and the change in fair value is recorded on our consolidated statement of operations
in other (income) expense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">BENEFICIAL CONVERSION FEATURE OF CONVERTIBLE NOTES PAYABLE</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">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 &quot;Beneficial Conversion Feature&quot;
(&quot;BCF&quot;). We measure the estimated fair value of the BCF in circumstances in which the conversion feature is not required
to be separated from the host instrument and accounted for separately, and record that value 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">REGISTRATION PAYMENT ARRANGEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">We account for contingent obligations to make future payments or
otherwise transfer consideration under a registration payment arrangement separately from any related financing transaction agreements,
and any such contingent obligations are recognized only when it is determined that it is probable that the Company will become
obligated for future payments and the amount, or range of amounts, of such future payments can be reasonably estimated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">RESEARCH AND DEVELOPMENT EXPENSES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Our research and development costs are expensed as incurred. We
incurred approximately $1,509,000 and $1,440,000 of research and development expenses for the years ended March 31, 2014 and 2013,
respectively, which are included in various operating expenses in the accompanying consolidated statements of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">OFF-BALANCE SHEET ARRANGEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">We have not entered into any off-balance sheet arrangements that
have or are reasonably likely to have a current or future material effect on our consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">SIGNIFICANT RECENT ACCOUNTING PRONOUNCEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Management is evaluating significant recent accounting pronouncements
that are not yet effective for the Company, including the new accounting standard on revenue recognition, ASU 2014-09 (Topic 606),
and has not yet concluded whether any such pronouncements will have a significant effect on the Company&rsquo;s future consolidated
financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">2. PROPERTY AND EQUIPMENT</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Property and equipment, net, consist of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, 2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left">Furniture and office equipment, at cost</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">385,088</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">289,031</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Accumulated depreciation</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(300,809</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(288,886</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">84,279</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">145</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Depreciation expense for the years ended March 31, 2014 and 2013
approximated $12,000 and $1,000, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">3. PATENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Patents consist of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, 2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%">Patents</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">157,442</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">157,442</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Patents pending and trademarks</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">54,203</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">54,203</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Accumulated amortization</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(99,156</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(89,992</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">112,489</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">121,653</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Amortization expense for patents for the years ended March 31, 2014
and 2013 approximated $9,000. Future amortization expense on patents is estimated to be approximately $9,000 per year based on
the estimated life of the patents. The weighted average remaining life of our patents is approximately 6.5 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">4. NOTES PAYABLE</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Notes payable consist of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">March 31, 2014</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">March 31, 2013</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Principal Balance</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Accrued Interest</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Principal Balance</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Accrued Interest</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 36%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">12% Notes payable, past due</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">185,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">353,813</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">185,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">326,062</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10% Note payable, past due</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">5,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">6,375</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">5,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">5,875</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Directors&rsquo; Note(s)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">200,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">14,516</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Tonaquint Note</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">131,381</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">1,629</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: 27pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Total</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">390,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">374,704</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">321,381</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">333,566</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the fiscal year ended March 31, 2014, we recorded interest
expense of $59,901 related to the contractual interest rates of our notes payable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">12% NOTES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">From August 1999 through May 2005, we entered into various borrowing
arrangements for the issuance of notes payable from private placement offerings (the &quot;12% Notes&quot;). On April 21, 2010,
a holder of $100,000 of the 12% Notes converted his principal balance and $71,758 of accrued interest into 687,033 shares of common
stock at an agreed conversion price of $0.25 per share. At March 31, 2014, the 12% Notes were past due, in default, and bearing
interest at the default rate of 15%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">10% NOTES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">At March 31, 2014,&nbsp;one 10% Note in the amount of $5,000, which
is past due and in default, remained outstanding and it bears interest at the default rate of 15%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Management's plans to satisfy the remaining outstanding balance
on these 12% and 10% Notes include converting the notes to common stock at market value or repayment with available funds.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">TONAQUINT NOTE</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On June 28, 2011, in conjunction with our satisfying all balances
owed under a convertible note, we entered into a Termination Agreement with Tonaquint, Inc. under which both parties agreed that
in consideration of the termination of a warrant, the waiving of all fees, penalties, the creation of the selling program and other
factors, we agreed to issue an unsecured non-convertible promissory note (the &quot;New Note&quot;) in the principal amount of
$360,186, which provides for annual interest at a rate of 6%, payable monthly in either cash or our stock, at our option. The New
Note originally had a maturity date of April 30, 2012. <FONT STYLE="background-color: white">We subsequently extended the note
initially to July 31, 2012 and then to July 31, 2013 and subsequently to August 31, 2013. We also recorded into principal $12,500
of the lender&rsquo;s legal fees related to documentation of the extension agreement. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="background-color: white">During the fiscal year ended
March 31, 2014, we issued 1,540,426 shares of common stock to convert $136,060 of principal and accrued interest (see Note 6).
As a result of those conversions, the Tonaquint Note was paid off in full during the September 2013 quarter. We recorded a loss
on conversion of $40,256 on those conversions during the fiscal year ended March 31, 2014.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="background-color: white">The following table shows
the conversions into principal of the Tonaquint Note by fiscal year: </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 83%; text-align: left">Initial principal balance</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">360,186</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Lender&rsquo;s legal fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,500</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(241,305</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Conversions during the fiscal year ended March 31, 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(131,381</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt">Balance as of March 31, 2014</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">DIRECTORS&rsquo; NOTES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="background-color: white">In July 2013, we borrowed
$400,000 from two of our directors under two 90 day notes for $200,000 each bearing 10% interest (the &ldquo;Notes&rdquo;). At
the discretion of the holders, if not paid off by October 9, 2013, the noteholders were entitled to (i) convert their principal
and accrued interest into shares of common stock at $0.088 per share (the &ldquo;Conversion Price&rdquo;) and (ii) receive warrants
to purchase common stock equal to 50% of the principal converted under the Notes, with an exercise price of $0.132 per share. Additionally,
there was a provision for a penalty interest rate of 12%.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="background-color: white">That potential conversion
price and warrant exercise price were based on the same pricing mechanism that we have used in prior equity unit financings since
March 2012 (see Note 6) which are based on 80% of the then current market price of our common stock and with the warrant exercise
price based on 120% of the same then current market price. We initially reserved 6,931,818 shares of common stock to support the
conversion of the Notes and accrued interest in full as well as the exercise of the warrants in full (should such conversion and/or
issuance occur).</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="background-color: white">During the fiscal year ended
March 31, 2014, the principal of $200,000 and accrued interest of $9,367 were paid on one of the notes, which extinguished all
potential common stock and warrant issuance provisions related to that Note.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="background-color: white">The holder of the second Note
agreed to extend the expiration date of his Note to July 31, 2014.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">5. CONVERTIBLE NOTES PAYABLE</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Convertible Notes Payable consisted of the following at March 31,
2014:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Principal</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Unamortized </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif">Discount</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Net </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif">Amount</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Accrued </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif">Interest</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 48%; padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Convertible Notes Payable &ndash; Current Portion:</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Amended and Restated Series A 12% Convertible Notes, past due</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">885,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">885,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">575,250</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2008 10% Convertible Notes, past due</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">25,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">25,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">19,167</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">October &amp; November 2009 10% Convertible Notes</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">50,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">50,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">26,097</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">April 2010 10% Convertible Note</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">75,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">75,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">31,438</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">July and August 2011 10% Convertible Notes, past due</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">257,655</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">257,655</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">90,256</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Law Firm Note</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">75,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">75,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">7,604</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;Total &ndash; Convertible Notes Payable &ndash; Current Portion</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">1,367,655</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&ndash;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">1,367,655</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">749,812</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Convertible Notes Payable &ndash; Non-Current Portion:</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">September 2010 12% Convertible Notes</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">317,072</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">317,072</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">35,034</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">April 2011 12% Convertible Notes</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">448,448</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">448,448</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">12,117</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">September 2011 12% Convertible Notes</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10,931</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10,931</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">--</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;Total &ndash; Convertible Notes Payable &ndash; Non-Current Portion</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">776,451</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">776,451</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">47,151</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;Total Convertible Notes Payable</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2,144,106</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2,144,106</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">796,963</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">There were no discounts remaining on any of
our Convertible Notes Payable as of March 31, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the fiscal year ended March 31, 2014, we recorded interest
expense of $354,949 related to the contractual interest rates of our convertible notes and interest expense of $4,284 related to
the amortization of debt discounts on the convertible notes for a total of $359,233.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Convertible Notes Payable consisted of the following at March 31,
2013:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Principal</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Unamortized </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif">Discount</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Net </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif">Amount</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Accrued </FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif">Interest</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 48%; padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Amended and Restated Series A 12% Convertible Notes, past due</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">885,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right">&ndash;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">885,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">398,250</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2008 10% Convertible Notes, past due</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">25,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">25,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">15,417</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">December 2006 10% Convertible Notes, past due</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">17,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">17,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">15,888</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">October &amp; November 2009 10% Convertible Notes</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">50,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">(389</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">49,611</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">20,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">April 2010 10% Convertible Note</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">75,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">(3,895</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">71,105</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">23,938</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">September 2010 10% Convertible Notes, past due</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">308,100</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">308,100</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">52,393</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">April 2011 10% Convertible Notes, past due</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">400,400</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">400,400</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">100,100</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">July and August 2011 10% Convertible Notes, $257,656 past due</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">357,655</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">357,655</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">68,704</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">September 2011 Convertible Notes, past due</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">178,760</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">178,760</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Law Firm Note</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">75,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">75,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3,854</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Total &ndash; Convertible Notes Payable</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2,371,915</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">(4,284</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2,367,631</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">698,544</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the fiscal year ended March 31, 2013, we recorded interest
expense of $459,199 related to the contractual interest rates of our convertible notes and interest expense of $467,158 related
to the amortization of debt discounts on the convertible notes for a total of $926,357.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">AMENDED AND RESTATED SERIES A 12% CONVERTIBLE NOTES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In June 2010, we entered into Amended and Restated Series A 12%
Convertible Promissory Notes (the &quot;Amended and Restated Notes&quot;) with the holders of certain promissory notes previously
issued by the Company, extending the due date to December 31, 2010 on the aggregate principal balance of $900,000. During the fiscal
year ended March 31, 2013, the holders of $15,000 of the Notes converted their principal and related accrued interest into common
stock. The balance remaining at March 31, 2014 and 2013 was $885,000 and is past due as of March 31, 2014. Such notes bear a default
annual interest rate of 20%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Subsequent to year end on June 24, 2014, we
entered into an agreement with the Ellen R. Weiner Family Revocable Trust (the &ldquo;Trust&rdquo;), a holder of a Series A 12%
Convertible Note (the &ldquo;Note&rdquo;), whereby the Trust converted a past due combined principal and interest balance of $1,003,200
(principal of $660,000 and interest of $343,200) into restricted common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Additionally, the Trust agreed to waive anti-dilution
price protection underlying warrants previously issued to the Trust. Under its agreement, the Trust converted the entire $1,003,200
past due principal and interest balance on the Note</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In exchange for the Trust&rsquo;s conversion in full of the Note
and accrued interest and for the waivers of anti-dilution price protection in previously issued warrants, we (1) issued five-year
warrants to acquire up to 6,809,524 shares of our common stock at an exercise price of $.042 per share and up to 397,222 shares
of our common stock at an exercise price of $.108 per share (collectively, the &ldquo;Conversion Securities&rdquo;); (2) issued
75,000 restricted shares of common stock as a service fee; (3) changed the exercise price of all of the previously issued warrants
to the Trust to $.042 per share; and (4) extended the expiration date of all of the previously issued warrants to the Trust to
July 1, 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">We continue to hold discussions with the holder of the remaining
note in this grouping regarding either an extension to the note or a conversion of the note but there can be no assurance that
we will be able to do so on terms that we deem acceptable or at all. We are recording interest at the default rate of 20% on the
remaining note.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">DECEMBER 2006 10% CONVERTIBLE NOTES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In January 2014, we paid off the remaining balance of the December
2006 10% Convertible Notes and the related accrued interest balance with a cash payment of $35,055. Such payment represented the
sum of the $17,000 in principal balance and $18,055 in accrued interest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;<FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="background-color: white">2008 10% CONVERTIBLE NOTES</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">One 2008 10% Convertible Note in the amount of $25,000 which matured
in January 2010 remained outstanding and past due at March 31, 2014. Such note is convertible into our common stock at $0.50 per
share. We are recording interest at the default rate of 15%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">OCTOBER &amp; NOVEMBER 2009 10% CONVERTIBLE NOTES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In October and November 2009, we raised $430,000 from the sale to
accredited investors of 10% convertible notes (&quot;October &amp; November 2009 10% Convertible Notes&quot;). The October &amp;
November 2009 10% Convertible Notes matured at various dates between April 2011 and May 2011 and are convertible into our common
stock at a fixed&nbsp;conversion price of $0.25 per share. The investors also received matching three year warrants to purchase
unregistered shares of our common stock at an exercise price of $0.25 per share. We measured the fair value of the warrants and
the beneficial conversion feature of the notes and recorded a 100% discount against the principal of the notes. Such discount was
fully amortized at March 31, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In July 2012, we issued 461,409 shares of common stock and 230,705
warrants to purchase common stock to the holder of a $25,000 note in this grouping in exchange for the conversion of such note
and related accrued interest of $8,000 (for a total of $33,000). The warrants expired in 2012 and are exercisable at $0.107 per
share (see Note 6). We recorded a loss on conversion of $45,796.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="background-color: white">The following table shows
the conversions into principal of the October and November 2009 Convertible Notes by fiscal year: </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="5" STYLE="border-bottom: black 1pt solid; padding-bottom: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">Activity in October &amp; November 2009 10% Convertible Notes</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #EEEEEE">
    <TD STYLE="width: 84%"><FONT STYLE="font-size: 10pt">Initial principal balance</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font-size: 10pt">450,250</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 10pt">Conversions during the fiscal year ended March 31, 2010</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(70,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #EEEEEE">
    <TD><FONT STYLE="font-size: 10pt">Conversions during the fiscal year ended March 31, 2011</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(175,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 10pt">Conversions during the fiscal year ended March 31, 2012</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(130,250</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #EEEEEE">
    <TD><FONT STYLE="font-size: 10pt">Conversions during the fiscal year ended March 31, 2013</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(25,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #EEEEEE">
    <TD><FONT STYLE="font-size: 10pt">Conversions during the fiscal year ended March 31, 2014</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">--</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 10pt">Balance as of March 31, 2014</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">50,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On March 31, 2012, we agreed to extend the expiration date and to
change the exercise price of certain warrants of one of the note holders by two years in exchange for the extension of $50,000
of the October &amp; November 2009 10% Convertible Notes and the $75,000 April 2010 10% Convertible Note (see below) by that same
two year period. We recorded a charge of $77,265 relating to this modification.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In September 2013, we agreed to extend the expiration date of certain
warrants of one of the note holders by two years in exchange for the extension of $50,000 of the October &amp; November 2009 10%
Convertible Notes and the $75,000 April 2010 10% Convertible Note (see below) by that same two year period. Management assessed
the change in the value of the notes and related warrants before and after that extension and determined that the change in value
related to the change in terms was not significant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">APRIL 2010 10% CONVERTIBLE NOTE</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In April 2010, we raised $75,000 from the sale to an accredited
investor of a 10% convertible note. The convertible note was originally scheduled to mature in October 2011 and is convertible
into our common stock at a fixed conversion price of $0.25 per share prior to maturity. The investor also received three year warrants
to purchase 300,000 unregistered shares of our common stock at a price of $0.25 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">We measured the fair value of the warrants and the beneficial conversion
feature of the notes and recorded a 100% discount against the principal of the notes. We amortized this discount using the effective
interest method over the term of the note. <FONT STYLE="background-color: white">As of March 31, 2014, there have not been any
conversions of the April 2010 10% Convertible Note. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On March 31, 2012, we agreed to extend the expiration date and to
change the exercise price of certain warrants of the note holder by two years in exchange for his extension of $50,000 of the October
&amp; November 2009 10% Convertible Notes and the $75,000 April 2010 10% Convertible Note by that same two year period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In September 2013, we agreed to extend the expiration date of certain
warrants of one of the note holders by two years in exchange for the extension of $50,000 of the October &amp; November 2009 10%
Convertible Notes and the $75,000 April 2010 10% Convertible Note (see below) by that same two year period. Management assessed
the change in the value of the notes and related warrants before and after that extension and determined that the change in value
related to the change in terms was not significant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">SEPTEMBER 2010 10% CONVERTIBLE NOTES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On September 3, 2010, we entered into a Subscription Agreement with
three accredited investors (the &ldquo;Purchasers&rdquo;)&nbsp;providing for the issuance and sale of convertible promissory notes
and corresponding warrants in the aggregate principal amount of $1,430,000. The initial closing under the Subscription Agreement
resulted in the issuance and sale of (i) convertible promissory notes in the aggregate principal amount of $743,600, (ii) five-year
warrants to purchase an aggregate of 3,718,000 shares of our common stock at an exercise price of $0.31125 per share, and (iii)
five-year warrants to purchase an aggregate of 3,718,000 shares of our common stock at an exercise price of $0.43575 per share.
The convertible promissory notes bear interest compounded monthly at the annual rate of ten percent (10%) and mature on April 1,
2016 (see below). The aggregate gross cash proceeds were $650,000, the balance of the principal amount representing a due diligence
fee and an original issuance discount. The convertible promissory notes are convertible at the option of the holders into shares
of our common stock at a price per share equal to eighty percent (80%) of the average of the three lowest closing bid prices of
the common stock as reported by Bloomberg L.P. for the principal market on which the common stock trades or is quoted for the ten
(10) trading days preceding the proposed conversion date. Subject to adjustment as described in the notes, the conversion price
may not be more than $0.30 nor less than $0.20. There are no registration requirements with respect to the shares of common stock
underlying the notes or the warrants.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On March 31, 2014, we entered into separate Amendments to Convertible
Notes and Warrants (collectively, the &ldquo;Amendments&rdquo;) with three accredited investors (collectively, the &ldquo;Investors&rdquo;)
who own certain convertible promissory notes (collectively, the &ldquo;Notes&rdquo;) and warrants (collectively, the &ldquo;Warrants&rdquo;)
previously issued by us on various dates between December 5, 2007 and September 23, 2011, including the September 2010 Convertible
Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Prior to the Amendments, the Notes were past maturity and were in
default, resulting in the accrual of interest at the applicable default interest rate. The Amendments extended the maturity date
of each of the Notes to April 1, 2016, which permits us to classify them as long-term liabilities. As a result of the Amendments,
the Notes are no longer in default and the non-default interest rate for all of the Notes was set at 12% per annum, which represents
a reduction from the default interest rates of fifteen percent at which interest had been accruing. By entering into the Amendments,
we also agreed to increase the currently outstanding principal amount of the Notes by 12% from a total of $693,260 to a total of
$776,451.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the period from October 2011 to February 2014, the Investors
had converted, at conversion prices between $.0546 and $.07 per share, portions of principal and interest outstanding under the
Notes and certain other convertible promissory notes previously issued to them by us. Certain antidilution provisions applicable
to such notes should have resulted in such conversions being effected at a conversion price of $.042 per share. Accordingly, pursuant
to the Amendments, we issued to the investors an aggregate of 4,507,105 shares of the Company&rsquo;s Common Stock, which represents
the additional shares of Common Stock that would have been issued to the Investors had such conversions been effected at $.042
per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The Amendments also provide that if all of our currently outstanding
promissory notes and warrants that contain antidilution adjustment provisions (other than the Investors&rsquo; Notes and Warrants)
are amended to remove, or the holders thereof waive, such provisions, then any similar antidilution provisions in the Investors&rsquo;
Notes and Warrants will automatically be deemed removed. In addition, for so long as the Investors&rsquo; Notes and Warrants are
outstanding, we will not be permitted to issue any common stock or common stock equivalents (or modify, with equivalent effect,
any outstanding common stock or common stock equivalents) at a lower price than the then-current conversion price of the Notes
and exercise price of the Warrants (with certain issuances to be excepted from this general provision). If our other note and warrant
holders agree to waive the antidilution provisions of their securities on the same basis as agreed to by the Investors, then we
will no longer be required to report a derivative liability in its financial statements with the accompanying quarterly adjustments
to its financial statements and will transfer the amount shown as a derivative liability to equity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The Amendments also set the conversion price of the Notes, as well
as the exercise price at which shares of our common stock can be purchased under the Warrants, at $.042 per share. By virtue of
the Amendments, the expiration dates of the Warrants also were extended from dates between September 3, 2015 and September 23,
2016 to January 1, 2017.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="background-color: white">The following table shows
the activity in the September 2010 10% Convertible Notes by fiscal year: </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="5" STYLE="text-align: center; border-bottom: Black 1pt solid">Activity in the September 2010 10% Convertible Notes</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 83%; text-align: left">Initial principal balance</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">743,600</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(405,500</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(30,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(25,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Increase in principal balance due to 12% extension fee</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">33,972</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Balance as of March 31, 2014</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">317,072</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="background-color: white">APRIL 2011 10% CONVERTIBLE
NOTES</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="background-color: white">In April 2011, we entered
into a Subscription Agreement with two accredited investors (the &ldquo;Purchasers&rdquo;) providing for the issuance and sale
of convertible promissory notes and corresponding warrants in the aggregate principal amount of $385,000. The closing under the
Subscription Agreement resulted in the issuance and sale by us of (i) convertible promissory notes in the aggregate principal amount
of $385,000, (ii) five-year warrants to purchase an aggregate of&nbsp;4,004,000 shares of our common stock at an exercise price
of $0.125 per share, and (iii) five-year warrants to purchase an aggregate of&nbsp;4,004,000 shares of our common stock at an exercise
price of $0.175 per share. The convertible promissory notes bear interest compounded monthly at the annual rate of 10% and mature
on April 1, 2016 (see below). The aggregate gross cash proceeds to us were $350,000, the balance of the principal amount representing
a due diligence fee and an original issuance discount. The convertible promissory notes are convertible at the option of the holders
into shares of our common stock at a price per share equal to eighty percent (80%) of the average of the three lowest closing bid
prices of the common stock as reported by Bloomberg L.P. for the principal market on which the common stock trades or is quoted
for the ten (10) trading days preceding the proposed conversion date. Subject to adjustment as described in the notes, the conversion
price may not be more than $0.20 nor less than $0.10. There are no registration requirements with respect to the shares of common
stock underlying the notes or the warrants.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="background-color: white">In addition, we issued (i)
five-year warrants to purchase an aggregate of 812,500 shares of our common stock at an exercise price of $0.125 per share, and
(ii) five-year warrants to purchase an aggregate of&nbsp;812,500 shares of our common stock at an exercise price of $0.175 per
share to the Purchasers. These warrants were issued as an antidilution adjustment under certain common stock purchase warrants
held by the Purchasers that were acquired from us in September 2010.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On March 31, 2014, we entered into separate Amendments to Convertible
Notes and Warrants (collectively, the &ldquo;Amendments&rdquo;) with three accredited investors (collectively, the &ldquo;Investors&rdquo;)
who own certain convertible promissory notes (collectively, the &ldquo;Notes&rdquo;) and warrants (collectively, the &ldquo;Warrants&rdquo;)
previously issued by us on various dates between December 5, 2007 and September 23, 2011, including the April 2011 Convertible
Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Prior to the Amendments, the Notes were past maturity and were in
default, resulting in the accrual of interest at the applicable default interest rate. The Amendments extended the maturity date
of each of the Notes to April 1, 2016, which permits us to classify them as long-term liabilities. As a result of the Amendments,
the Notes are no longer in default and the non-default interest rate for all of the Notes was set at 12% per annum, which represents
a reduction from the default interest rates of 15% at which interest had been accruing. By entering into the Amendments, we also
agreed to increase the currently outstanding principal amount of the Notes by 12% from a total of $693,260 to a total of $776,451.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the period from October 2011 to February 2014, the Investors
had converted, at conversion prices between $.0546 and $.07 per share, portions of principal and interest outstanding under the
Notes and certain other convertible promissory notes previously issued to them by us. Certain antidilution provisions applicable
to such notes should have resulted in such conversions being effected at a conversion price of $.042 per share. Accordingly, pursuant
to the Amendments, we issued to the investors an aggregate of 4,507,105 shares of the Company&rsquo;s Common Stock, which represents
the additional shares of Common Stock that would have been issued to the Investors had such conversions been effected at $.042
per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The Amendments also provide that if all of our currently outstanding
promissory notes and warrants that contain antidilution adjustment provisions (other than the Investors&rsquo; Notes and Warrants)
are amended to remove, or the holders thereof waive, such provisions, then any similar antidilution provisions in the Investors&rsquo;
Notes and Warrants will automatically be deemed removed. In addition, for so long as the Investors&rsquo; Notes and Warrants are
outstanding, we will not be permitted to issue any common stock or common stock equivalents (or modify, with equivalent effect,
any outstanding common stock or common stock equivalents) at a lower price than the then-current conversion price of the Notes
and exercise price of the Warrants (with certain issuances to be excepted from this general provision).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The Amendments also set the conversion price of the Notes, as well
as the exercise price at which shares of our common stock can be purchased under the Warrants, at $.042 per share. By virtue of
the Amendments, the expiration dates of the Warrants also were extended from dates between September 3, 2015 and September 23,
2016 to January 1, 2017.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="background-color: white">As of March 31, 2014, there
have not been any conversions of the April 2011 10% Convertible Notes and the 12% extension fee noted above increased the principal
balance by $48,048 to a principal balance of $448,448.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">JULY &amp; AUGUST 2011 10% CONVERTIBLE NOTES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the three months ended September 30, 2011, we raised $357,656
in 10% convertible notes. Those notes had a fixed conversion price of $0.09 per share and carried an interest rate of 10%. The
convertible notes matured in July and August 2012. We also issued those investors five year warrants to purchase 3,973,957 shares
of common stock at $0.125 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">We measured the fair value of the warrants and the beneficial conversion
feature of the notes and recorded a $257,926 discount against the principal of the notes. We amortized this discount using the
effective interest method over the term of the note.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Effective March 31, 2014, the holders of the three notes totaling
$100,000 converted all of their principal and accrued interest into 1,438,700 shares of our common stock at the contractual conversion
price of $0.09 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">At March 31, 2014, the remaining outstanding principal balance was
$257,655, all of which was in default. We are recording interest at the default interest rate of 15%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">SEPTEMBER 2011 CONVERTIBLE NOTES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In September 2011, we issued $253,760 of convertible notes, convertible
at $0.07 per share. Such notes originally matured in September 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On March 31, 2014, we entered into separate Amendments to Convertible
Notes and Warrants (collectively, the &ldquo;Amendments&rdquo;) with three accredited investors (collectively, the &ldquo;Investors&rdquo;)
who own certain convertible promissory notes (collectively, the &ldquo;Notes&rdquo;) and warrants (collectively, the &ldquo;Warrants&rdquo;)
previously issued by us on various dates between December 5, 2007 and September 23, 2011, including the September 2011 Convertible
Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Prior to the Amendments, the Notes were past maturity and were in
default, resulting in the accrual of interest at the applicable default interest rate. The Amendments extended the maturity date
of each of the Notes to April 1, 2016, which permits us to classify them as long-term liabilities. As a result of the Amendments,
the Notes are no longer in default and the non-default interest rate for all of the Notes was set at 12% per annum, which represents
a reduction from the default interest rates of 15% at which interest had been accruing. By entering into the Amendments, we also
agreed to increase the currently outstanding principal amount of the Notes by 12%, which in the case of the September 2011 Notes,
they increased from $9,760 to $10,931</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the period from October 2011 to February 2014, the Investors
had converted, at conversion prices between $.0546 and $.07 per share, portions of principal and interest outstanding under the
Notes and certain other convertible promissory notes previously issued to them by us. Certain antidilution provisions applicable
to such notes should have resulted in such conversions being effected at a conversion price of $.042 per share. Accordingly, pursuant
to the Amendments, we issued to the investors an aggregate of 4,507,105 shares of the Company&rsquo;s Common Stock, which represents
the additional shares of Common Stock that would have been issued to the Investors had such conversions been effected at $.042
per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The Amendments also provide that if all of our currently outstanding
promissory notes and warrants that contain antidilution adjustment provisions (other than the Investors&rsquo; Notes and Warrants)
are amended to remove, or the holders thereof waive, such provisions, then any similar antidilution provisions in the Investors&rsquo;
Notes and Warrants will automatically be deemed removed. In addition, for so long as the Investors&rsquo; Notes and Warrants are
outstanding, we will not be permitted to issue any common stock or common stock equivalents (or modify, with equivalent effect,
any outstanding common stock or common stock equivalents) at a lower price than the then-current conversion price of the Notes
and exercise price of the Warrants (with certain issuances to be excepted from this general provision). If our other note and warrant
holders agree to waive the antidilution provisions of their securities on the same basis as agreed to by the Investors, then we
will no longer be required to report a derivative liability in its financial statements with the accompanying quarterly adjustments
to its financial statements and will transfer the amount shown as a derivative liability to equity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The Amendments also set the conversion price of the Notes, as well
as the exercise price at which shares of our common stock can be purchased under the Warrants, at $.042 per share. By virtue of
the Amendments, the expiration dates of the Warrants also were extended to January 1, 2017.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="background-color: white">The following table shows
the conversions into principal of the September 2011 Convertible Notes by fiscal year: </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="5" STYLE="text-align: center; border-bottom: Black 1pt solid">Activity in the September 2011 Convertible Notes</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 83%; text-align: left">Initial principal balance</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">253,760</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(15,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(60,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(169,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Increase in principal balance due to extension fee</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,171</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Balance as of March 31, 2014</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,931</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">LAW FIRM NOTE NUMBER 1</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On March 22, 2012, we entered into a Promissory Note with our corporate
law firm for the amount of $75,000, which represented the majority of the amount we owed to that firm at that time. The Promissory
Note originally had a maturity date of December 31, 2012 and bears interest at 5% per annum. The note is convertible at the option
of the holder into shares of our common stock at a 10% discount to the market price of the common stock on the date prior to conversion
with a floor price on such conversions of $0.08 per share. The holder subsequently agreed to extend the Maturity Date of the Note
first to October 1, 2013, then to September 30, 2013, and now the expiration date of this note is again extended to October 1,
2014. <FONT STYLE="background-color: white">As of March 31, 2014, there have not been any conversions of the Law Firm Note. </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">LAW FIRM NOTE NUMBER 2</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On June 4, 2013, we entered into a Promissory Note with our corporate
law firm for the amount of $47,000, which represented approximately 50% of the amount we owed to that firm for services in 2012.
The Promissory Note had a maturity date of October 1, 2014 and bore interest at 5% per annum. The note was convertible at the option
of the holder into shares of our common stock at a 10% discount to the market price of the common stock on the date prior to conversion
with a floor price on such conversions of $0.07 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Effective March 31, 2014, our law firm converted this note and all
related accrued interest into 302,043 shares of our common stock at a conversion price of $0.16 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">6. EQUITY TRANSACTIONS&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">COMMON STOCK AND WARRANTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Aethlon Medical, Inc. Equity Transactions in the Fiscal Year
Ended March 31, 2014 </I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Common Stock Issuances in the Fiscal Year Ended March 31, 2014:</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In June 2013, we completed a unit subscription agreement with three
accredited investors pursuant to which we issued 1,580,248 shares of our common stock and 790,124 warrants to purchase our common
stock for net cash proceeds of $128,000. Such warrants have an exercise price of $0.121 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In June 2013, we issued to our CEO the remaining 3,400,000 shares
under his restricted share grant, all of which were vested.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the three months ended June 30, 2013, we issued 3,675,278
shares of restricted common stock to the holders of three notes issued by the Company in exchange for the partial conversion of
principal and interest in an aggregate amount of $246,500 at an average conversion price of $0.07 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the three months ended June 30, 2013, we issued 222,734 shares
of common stock pursuant to our S-8 registration statement covering our Amended 2010 Stock Plan at an average price of $0.10 per
share in payment for legal services valued at $21,750 based on the value of the services provided.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In August 2013, we completed a unit subscription agreement with
four accredited investors (the &ldquo;Purchasers&rdquo;) pursuant to which we issued 900,901 shares of our common stock and 450,451
warrants to purchase our common stock in exchange for net cash proceeds of $100,000. Such warrants have an exercise price of $0.167
per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the three months ended September 30, 2013, we issued 933,522
shares of common stock pursuant to our S-8 registration statement covering our Amended 2010 Stock Plan at an average price of $0.14
per share in payment for legal and scientific consulting services valued at $127,593 based on the value of the services provided.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the three months ended September 30, 2013, we issued 1,168,343
shares of restricted common stock at an average price of $0.10 per share in payment for investor relations and public relations
services valued at $115,000 based on the value of the services provided.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the three months ended September 30 2013, we issued 2,795,367
shares of restricted common stock to the holders of four notes issued by the Company in exchange for the partial or full conversion
of principal and interest in an aggregate amount of $173,960 at an average conversion price of $0.06 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the three months ended December 31, 2013, we entered into
a unit purchase agreement and subscription agreements with 32 accredited investors pursuant to which we issued 14,367,200 shares
of our common stock and warrants to purchase our common stock for gross cash proceeds of $1,795,900. Such warrants have an exercise
price of $0.22 per share. A FINRA registered broker-dealer was engaged as placement agent in connection with the above Unit Purchase
Agreement. We paid the placement agent an aggregate cash fee in the amount of $270,508 and will issue the placement agent or its
designees warrants to purchase an aggregate of 2,155,080 shares of our common stock. We also paid $78,360 in other costs and fees,
including legal fees, blue sky fees and escrow costs. The net proceeds that we received totaled $1,447,032.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the three months ended December 31 2013, we issued 1,465,200
shares of restricted common stock to the holders of two notes issued by us in exchange for the partial or full conversion of accrued
interest in an aggregate amount of $80,000 at an average conversion price of $0.05 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the three months ended March 31 2014, we issued 2,638,179
shares of restricted common stock to the holders of five notes issued by us in exchange for the partial or full conversion of accrued
interest in an aggregate amount of $226,316 at an average conversion price of $0.09 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the three months ended March 31, 2014, we issued 346,770
shares of common stock pursuant to our S-8 registration statement covering our Amended 2010 Stock Plan at an average price of $0.19
per share in payment for legal services valued at $65,250 based on the value of the services provided.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the three months ended March 31, 2014, we issued 399,781
shares of restricted common stock at an average price of $0.16 per share in payment for investor relations and public relations
services valued at $62,500 based on the value of the services provided.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On March 31, 2014, we entered into extension agreements with three
noteholders (see Note 5). In conjunction with the extension agreements, we agreed to issue to the noteholders an aggregate 4,507,105
shares of restricted common stock as a result of the noteholders invoking the antidilution protection on their notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In March 2014, a former director exercised 182,927 in vested stock
options through the contribution of $2,000 in cash and $13,000 in accrued expenses owed to him based on the exercise price of $0.082
per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the fiscal year ended March 31, 2014, we issued 12,716,225
shares of restricted common stock in connection with cashless warrant exercises discussed elsewhere in this footnote.</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Exosome Sciences, Inc. Equity Transactions in the Fiscal Year
Ended March 31, 2014</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On November 21, 2013, ESI, prior to the transaction described herein,
a wholly owned diagnostic subsidiary of ours, entered into a stock purchase agreement with twelve accredited investors pursuant
to which such investors purchased an aggregate of 220,000 shares of ESI&rsquo;s common stock at a purchase price of $5.00 per share,
for an aggregate purchase price of $1,100,000 in cash.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On December 13, 2013, ESI entered into a second stock purchase agreement
with three accredited investors , pursuant to which such investors purchased an aggregate of 80,000 shares of ESI&rsquo;s common
stock at a purchase price of $5.00 per share, for an aggregate purchase price of $400,000 in cash.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The aggregate gross proceeds received by ESI under these two transactions
above were $1,500,000. As a result of these transactions the Company&rsquo;s percentage ownership of the outstanding common stock
of ESI was reduced from 100% to 80%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">One of the investors was Dr. Chetan Shah, a director of the Company.
Dr. Shah purchased 70,000 ESI shares for an aggregate purchase price of $350,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Common Stock Issuances in the Fiscal Year Ended March 31, 2013:</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the fiscal year ended March 31, 2013, we issued 22,829,754
shares of restricted common stock to holders of notes issued by the Company in exchange for the partial or full conversion of principal
and interest of several notes payable in an aggregate amount of $1,707,052 at an average conversion price of $0.07 per share based
upon the conversion formulae in the respective notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the fiscal year ended March 31, 2013, we issued 1,932,808
restricted shares of common stock to service providers for investor relations, corporate communications and business development
services valued at $170,849 based upon the fair value of the shares issued. The average issuance price on the restricted share
issuances was approximately $0.09 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the fiscal year ended March 31, 2013, we issued 963,373 shares
of common stock pursuant to our S-8 registration statement covering our Amended 2010 Stock Plan at an average price of $0.09 per
share in payment for scientific consulting services valued at $88,186 based on the value of the services provided.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On April 5, 2012, we completed a unit subscription agreement with
one accredited investor (the &ldquo;Purchaser&rdquo;)&nbsp;pursuant to which we issued 2,500,000 shares of our common stock and
1,250,000 warrants to purchase our common stock for net cash proceeds of $200,000. Such warrants have an exercise price of $0.125
per share. &nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On June 19, 2012, we completed a unit subscription agreement whereby
we issued 8,222,222 shares of our common stock and 4,111,111 warrants to purchase our common stock at an exercise price of $0.108
per share in exchange for net cash proceeds of $592,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On June 26, 2012, we completed a unit subscription agreement whereby
we issued 139,821 shares of our common stock and 69,911 warrants to purchase our common stock at an exercise price of $0.107 per
share in exchange for net cash proceeds of $10,000. &nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In July 2012, we issued 461,409 shares of common stock to the holder
of a $25,000 October &amp; November 2009 10% Convertible Note (See Note 5) in exchange for the value of the principal and related
accrued interest of $8,000 under the same terms that we used to sell units consisting of one share of common stock and one-half
of a stock purchase warrant on June 29, 2012 (See Note 6). As part of that structure, the noteholder also received seven year warrants
to purchase 230,705 shares of our common stock at an exercise price of $0.107 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On August 29, 2012, we completed a unit subscription agreement with
seven accredited investors pursuant to which we issued 3,387,500 shares of our common stock and 1,693,750 warrants to purchase
our common stock in exchange for net cash proceeds of $271,000. Such warrants have an exercise price of $0.12 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Between October 2012 and December 2012, we completed several unit
subscription agreements with several accredited investors pursuant to which we issued 7,878,580 shares of our common stock and
3,939,292 warrants to purchase our common stock for net cash proceeds of $498,000. Such warrants have an exercise price based upon
120% of the average of the closing prices of our common stock for the five-day period immediately preceding the respective investment
transaction date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In January 2013, we issued 246,429 shares of restricted common stock
to the owner of a patent as a patent license payment valued at $17,250.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Between January 2013 and March 2013, we completed several unit subscription
agreements with several accredited investors pursuant to which we issued 7,596,423 shares of our common stock and 3,798,219 warrants
to purchase our common stock for net cash proceeds of $538,834. Such warrants have an exercise price based upon 120% of the average
of the closing prices of our common stock for the five-day period immediately preceding the respective investment transaction date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">A summary of the aggregate warrant activity for the years ended
March 31, 2014 and 2013 is presented below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="14" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Year Ended March 31,</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2014</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2013</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Warrants</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Weighted Average</FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif">Exercise Price</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Warrants</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Weighted Average</FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif">Exercise Price</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 36%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Outstanding, beginning of year</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">75,647,294</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.11</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">59,807,849</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.14</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Granted</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">14,530,519</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.18</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">16,710,445</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.11</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Exercised</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">(12,716,225</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">)&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.08</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Cancelled/Forfeited</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">(6,752,113</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">(871,000</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.25</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Outstanding, end of year</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">70,709,475</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">75,647,294</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.11</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Exercisable, end of year</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">70,709,475</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.10</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">75,647,294</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.11</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Weighted average estimated fair value of warrants granted</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.09</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.07</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The following outlines the significant weighted average assumptions
used to estimate the fair value of warrants granted utilizing the Binomial Lattice option pricing model:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Year Ended March 31,</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 55%">&nbsp;</TD>
    <TD STYLE="width: 20%; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2014</FONT></TD>
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 20%; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2013</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Risk free interest rate</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">1.3%-2.04%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.86%-1.56%</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Average expected life</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">5 to 7 years</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">5 to 7 years</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Expected volatility</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">91.2% - 98.5%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">90.3% - 94.3%</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Expected dividends</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">None</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">None</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The detail of the warrants outstanding and exercisable as of March
31, 2014 is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Warrants Outstanding</FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Warrants Exercisable</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Range of</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise Prices</P></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Number</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Outstanding</P></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted Average</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Remaining</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Life (Years)</P></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted Average</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise Price</P></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Number</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Outstanding</P></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted Average</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise Price</P></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 20%; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$0.10 or Below</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">37,094,795</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2.42</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.05</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">37,094,795</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.05</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$0.11 - $0.19</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">21,876,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4.74</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.13</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">21,876,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.13</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$0.20 - $0.25</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">11,738,680</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">5.05</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.21</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">11,738,680</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.21</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">70,709,475</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">70,709,475</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">STOCK OPTIONS:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">2000 STOCK OPTION PLAN</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Our 2000 Stock Option Plan (the &quot;Plan&quot;), adopted by us
in August 2000, provides for the grant of incentive stock options (&quot;ISOs&quot;) to our full-time employees (who may also be
directors) and nonstatutory stock options (&quot;NSOs&quot;) 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 our 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
common 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 our common stock on the date of grant. The amount reserved under the Plan
is 500,000 options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">At March 31, 2012, all of the grants previously made under the Plan
had expired and 10,000 restricted shares had been issued under the 2000 Stock Option Plan, with 490,000 available for future issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">2003 CONSULTANT STOCK PLAN</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Our 2003 Consultant Stock Plan, as amended from time to time (the
&quot;Stock Plan&quot;), 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 common
stock. Over several years, we issued 7,500,000 shares under the Stock Plan and discontinued using the Stock Plan in October 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">2010 STOCK INCENTIVE PLAN</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In August 2010, we adopted the 2010 Stock Incentive Plan (the &quot;Incentive
Plan&quot;), which provides incentives to attract, retain and motivate employees and directors whose present and potential contributions
are important to the success of the Company by offering them an opportunity to participate in our future performance through awards
of options, the right to purchase common stock, stock bonuses and stock appreciation rights and other awards. A total of 3,500,000
common shares were initially reserved for issuance under the Incentive Plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In August 2010, we filed a registration statement on Form S-8 for
the purpose of registering 3,500,000 common shares issuable under the Incentive Plan under the Securities Act of 1933 and in July
2012, we filed a registration statement on Form S-8 for the purpose of registering an additional 5,000,000 common shares issuable
under the Incentive Plan under the Securities Act of 1933.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In May 2013, we issued to a scientific advisory board member and
a scientific consultant a three year option to purchase 125,000 shares of our common stock at a price of $0.11 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">At March 31, 2014, we had 2,445,626 shares available under the Incentive
Plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">2012 DIRECTORS COMPENSATION PROGRAM</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In July 2012, our Board of Directors approved a new Board Compensation
Program (the &ldquo;New Program&rdquo;), which modifies and supersedes the 2005 Directors Compensation Program (the &ldquo;2005
Program&rdquo;) that was previously in effect. Under the New Program, in which only non-employee Directors may participate, an
eligible Director will receive a grant of $35,000 worth of ten year options to acquire shares of our common stock, with such grant
being valued at the exercise price based on the average of the closing bid prices of our common stock for the five trading days
preceding the first day of the fiscal year. In addition, under the New Program, eligible Directors will receive cash compensation
equal to $500 for each committee meeting attended and $1,000 for each formal Board meeting attended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In the fiscal year ended March 31, 2013, our Board of Directors
granted under the New Program, to our four outside directors, ten year options to acquire an aggregate of 1,667,105 shares of
our common stock, all with an exercise price of $0.076 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In the fiscal year ended March 31, 2014, our Board of Directors
granted under the New Program, to our five outside directors, ten year options to acquire an aggregate of 1,595,536 shares of our
common stock, all with an exercise price of $0.082 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">At March 31, 2014 under the 2005 Program, we had issued 1,337,825
options to outside directors and 3,965,450 options to employee-directors. Of such amounts, 514,550 outside directors&rsquo; options
had been forfeited, 250,000 outside directors&rsquo; options had been exercised, and 3,671,550 options remained outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On June 6, 2014, our Board of Directors approved certain changes
to the New Program. Under the modified New Program, a new eligible Director will receive an initial grant of $50,000 worth of options
to acquire shares of our common stock, with such grant being valued at the exercise price based on the average of the closing bid
prices of our common stock for the five trading days preceding the first day of the fiscal year. These options will have a term
of ten years and will vest 1/3 upon grant and 1/3 upon each of the first two anniversaries of the date of grant. In addition, at
the beginning of each fiscal year, each existing Director eligible to participate in the modified New Program also will receive
a grant of $35,000 worth of options valued at the exercise price based on the average of the closing bid prices of our common stock
for the five trading days preceding the first day of the fiscal year. Such options will vest on the first anniversary of the date
of grant. In lieu of per meeting fees, under the modified New Program eligible Directors will receive an annual Board cash retainer
fee of $30,000. The modified New Program also provides for the following annual cash retainer fees: Audit Committee Chair - $5,000,
Compensation Committee chair - $5,000, Audit Committee member - $4,000, Compensation Committee member - $4,000, and Lead independent
director - $15,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">STAND-ALONE GRANTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">From time to time our Board of Directors grants restricted stock
or common share purchase options or warrants to selected directors, officers, employees and consultants as equity compensation
to such persons on a stand-alone basis outside of any of our formal stock plans. The terms of these grants are individually negotiated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On June 8, 2009, our board of directors approved the grant to Mr.
Joyce of 4,000,000 shares of restricted common stock at a price per share of $0.24, the vesting and issuance of which occurred
in equal installments over a thirty-six-month period that commenced on June 30, 2010. Mr. Joyce may, from time to time, defer acceptance
of the shares. However, all shares must be issued and accepted by Mr. Joyce by the expiration of the thirty-six-month vesting period.
Mr. Joyce has accepted all 4,000,000 shares of the grant. However, the 600,000 shares previously accepted by Mr. Joyce were pledged
as collateral for a loan and have been retained and/or sold by the lender and are no longer owned by Mr. Joyce.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In July 2013, our compensation committee and Board of Directors
approved the issuance of four stock option grants to four of our executives. The options carried an exercise price of $0.10 per
share, have a ten year life and vest over the following schedule: 25% on July 1, 2014, 25% on July 1, 2015, 25% on July 1, 2016
and 25% on July 1, 2017. The numbers of shares underlying each of the stock option grants were as follows: 2,000,000 shares to
our chief executive officer and 500,000 shares each to our president, chief science officer and chief financial officer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">During
the three months ended March 31, 2014, a former director exercised 182,927 in vested stock options through the contribution of
$2,000 in cash and $13,000 in accrued expenses owed to him based on the exercise price of $0.082 per share.</FONT>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">As of March 31, 2014, we have issued 22,568,158 options (of which
3,368,942 have been exercised or cancelled) and authorized the issuance of 4,000,000 shares of restricted stock outside of the
2005 Directors Compensation Plan, the 2012 Directors Compensation Plan, the 2000 Stock Option Plan, the 2003 Consultant Stock Plan
and the 2010 Incentive Stock Plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In the fiscal year ended March 31, 2014, our Board of Directors
granted, to our five outside directors, ten year options to acquire an aggregate of 1,595,536 shares of our common stock, all with
an exercise price of $0.082 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The following is a summary of the stock options outstanding at March
31, 2014 and 2013 and the changes during the years then ended:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="14" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Year Ended March 31,</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2014</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2013</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Options</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Weighted Average</FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif">Exercise Price</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Options</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Weighted Average</FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif">Exercise Price</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 36%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Outstanding, beginning of year</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">21,095,798</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.28</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">19,428,693</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.31</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Granted</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">5,220,536</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.09</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">1,667,105</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.08</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Exercised</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">182,927</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.08</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Cancelled/Forfeited</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&ndash;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&ndash;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Outstanding, end of year</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">26,133,407</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.25</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">21,095,798</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.28</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Exercisable, end of year</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">22,487,563</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.27</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">19,141,625</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.29</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Weighted average estimated fair value of options granted</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.13</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.08</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The following outlines the significant weighted average assumptions
used to estimate the fair value with respect to stock options utilizing the Binomial Lattice option pricing model for the years
ended March 31, 2014 and March 31, 2013:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Year Ended March 31,</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 55%">&nbsp;</TD>
    <TD STYLE="width: 20%; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2014</FONT></TD>
    <TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 20%; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2013</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Risk free interest rate</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.38% to 2.65%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">1.44%</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Average expected life</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3 to 10 years</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10 years</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Expected volatility</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">91.05% to 102.67%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">117.53%</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Expected dividends</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">None</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">None</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The detail of the options outstanding and exercisable as of March
31, 2014 is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="10" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Options Outstanding</FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Options Exercisable</FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Range of</FONT><BR>
<FONT STYLE="font: 10pt Times New Roman, Times, Serif">Exercise Prices</FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Number</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Outstanding</P></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Remaining</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Life (Years)</P></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Price</P></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Number</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Outstanding</P></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Weighted</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Average</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Exercise</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Price</P></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$0.08 - $0.11</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">6,704,714</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">9.68 years</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.09</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3,204,714</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.08</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$0.21 - $0.25</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">11,207,143</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4.28 years</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.24</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">11,061,299</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.24</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$0.36 - $0.41</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">8,221,550</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2.68 years</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.38</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">8,221,550</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.38</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: center; width: 1%">&nbsp;</TD>
    <TD STYLE="text-align: center; width: 13%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; width: 1%">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right; width: 14%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">26,133,407</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="text-align: right; width: 14%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="text-align: right; width: 14%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; width: 1%">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right; width: 14%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">22,487,563</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="text-align: right; width: 14%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">We recorded stock-based compensation expense related to share issuances
and to options granted totaling $607,946 and $765,273 for the fiscal years ended March 31, 2014 and 2013, respectively. These expenses
were recorded as stock compensation included in payroll and related expenses in the accompanying consolidated statement of operations
for the years ended March 31, 2014 and 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Our total stock-based compensation for fiscal years ended March
31, 2014 and 2013 included the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, 2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left">Vesting&nbsp;&nbsp;of restricted stock grant</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">64,444</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">386,668</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Incremental fair value of option modifications</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,914</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">23,027</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Vesting of stock options</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">541,588</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">355,578</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 0.25in">Total Stock-Based Compensation</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">607,946</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">765,273</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">As of March 31, 2014, we had $270,952 of remaining unrecognized
stock option expense, which is expected to be recognized over a weighted average remaining vesting period of 2.07 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On March 31, 2014, our stock options had a negative intrinsic value
since the closing price on that date of $0.17 per share was below the weighted average exercise price of our stock options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">7. RELATED PARTY TRANSACTIONS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">DUE TO RELATED PARTIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Certain of our officers and other related parties have advanced
us funds, agreed to defer compensation and/or paid expenses on our behalf to cover working capital deficiencies. These unsecured
and non-interest-bearing liabilities have been included as due to related parties in the accompanying consolidated balance sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Other related party transactions are disclosed elsewhere in these
notes to consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">8. OTHER CURRENT LIABILITIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Other current liabilities were comprised of the following items:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">March 31,</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">March 31,</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left">Accrued interest</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">1,165,335</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">1,032,110</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Accrued legal fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">179,465</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">179,465</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Accrued liquidated damages</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">362,800</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">437,800</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Other accrued liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">147,774</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">155,610</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total other current liabilities</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,855,374</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,804,985</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">9. INCOME TAXES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">For the years ended March 31, 2014 and 2013, we had no income tax
expense due to our net operating losses and 100% deferred tax asset valuation allowance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">At March 31, 2014 and 2013, we had net deferred tax assets as detailed
below. These deferred tax assets are primarily composed of capitalized research and development costs and tax net operating loss
carryforwards. Due to uncertainties surrounding our ability to generate future taxable income to realize these assets, a 100% valuation
has been established to offset the net deferred tax assets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Significant components of our net deferred tax assets at March 31,
2014 and 2013 are shown below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">YEAR ENDED MARCH 31,</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Deferred tax assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 66%; text-align: left; padding-left: 9pt">Capitalized research and development</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">3,442,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">3,442,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Net operating loss carryforwards</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">15,193,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">14,793,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Total deferred tax assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,635,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,235,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Total deferred tax liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net deferred tax assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,635,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,235,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Valuation allowance for deferred tax assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(18,635,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(18,235,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net deferred tax assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">At March 31, 2014, we had tax net operating loss carryforwards for
federal and state purposes approximating $39 million and $30 million, which begin to expire in the year 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The provision for income taxes on earnings subject to income taxes
differs from the statutory federal rate for the years ended March 31, 2014 and 2013 due to the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left">Income taxes (benefit) at federal statutory rate of 34%</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(4,541,000</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(1,663,000</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">State income tax, net of federal benefit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(156,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(285,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Tax effect on non-deductible expenses and credits</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,297,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">215,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Change in valuation allowance<SUP>1</SUP></FONT></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">400,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,733,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Pursuant to Internal Revenue Code Sections 382, use of our tax net
operating loss carryforwards may be limited.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">ASC 740, &ldquo;Income Taxes&rdquo;, clarifies the accounting for
uncertainty in income taxes recognized in an entity's financial statements, and prescribes recognition thresholds and measurement
attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under ASC 740, the
impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not
to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has
less than a 50% likelihood of being sustained. Additionally, ASC 740 provides guidance on derecognition, classification, interest
and penalties, accounting in interim periods, disclosure and transition. Our practice is to recognize interest and/or penalties
related to income tax matters in income tax expense. During the years ended March 31, 2014 and 2013, we did not recognize any interest
or penalties relating to tax matters.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">At and for the years ended March 31, 2014 and 2013,
management does not believe the Company has any uncertain tax positions. Accordingly, there are no unrecognized tax benefits
at&nbsp;March 31, 2014 or March 31, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Our tax returns for the years 2010 and forward are subject to examination
by the Internal Revenue Service and 2009 and forward by the California Franchise Tax Board. We are currently not under examination
by any taxing authorities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">10. FAIR VALUE MEASUREMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">We follow FASB ASC 820, &quot;FAIR VALUE MEASUREMENTS AND DISCLOSURES&quot;
(&ldquo;ASC 820&rdquo;) in connection with financial assets and liabilities measured at fair value on a recurring basis subsequent
to initial recognition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">ASC 820 requires that assets and liabilities carried at fair value
will be classified and disclosed in one of the following three categories:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Level 1: Quoted market prices in active markets for identical assets
or liabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Level 2: Observable market based inputs or unobservable inputs that
are corroborated by market data.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Level 3: Unobservable inputs that are not corroborated by market
data.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The hierarchy noted above requires us to minimize the use of unobservable
inputs and to use observable market data, if available, when determining fair value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The fair value of our recorded derivative liabilities is determined
based on unobservable inputs that are not corroborated by market data, which is a Level 3 classification. We record derivative
liabilities on our balance sheet at fair value with changes in fair value recorded in our consolidated statements of operations.&nbsp;&nbsp;Our
fair value measurements at the reporting date were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">At March 31, 2014:&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Description</FONT></TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Quoted Prices in</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Active Markets for</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Identical Assets</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Level 1)</P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Significant Other</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Observable Inputs</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Level 2)</P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Significant</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Unobservable</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Inputs (Level 3)</P></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 52%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Derivative Liabilities</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 13%; border-bottom: black 2.25pt double; text-align: right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&ndash;</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 13%; border-bottom: black 2.25pt double; text-align: right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT STYLE="font: 10pt Times New Roman, Times, Serif">&ndash;</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 13%; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10,679,067</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Total Assets</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10,679,067</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">At March 31, 2013:</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Description</FONT></TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Quoted Prices in</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Active Markets for</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Identical Assets</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Level 1)</P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Significant Other</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Observable Inputs</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Level 2)</P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Significant</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Unobservable</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Inputs (Level 3)</P></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 52%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Derivative Liabilities</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 13%; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&ndash;</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 13%; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&ndash;</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 13%; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3,588,239</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Total Assets</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3,588,239</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The following outlines the significant weighted average assumptions
used to estimate the fair value information presented for the fiscal years ended March 31, 2014 and 2013, in connection with our
April 2011 convertible note, July &amp; August 2011 10% convertible notes and the September 2011 convertible note offerings&nbsp;and
with respect to warrant and embedded conversion option derivative instruments utilizing the Binomial Lattice option pricing model:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 60%; border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="width: 40%; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Fiscal Year Ended March 31, 2014</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Risk free interest rate</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.02% - 0.79%</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Average expected life</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.25 &ndash; 2.8 years</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Expected volatility</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">58.0% - 103.1%</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Expected dividends</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">None</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 60%; border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="width: 40%; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Fiscal Year Ended March 31, 2013</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Risk free interest rate</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.05% - 1.56%</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Average expected life</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.25 &ndash; 3.6 years</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Expected volatility</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">76.0% - 107.1%</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Expected dividends</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">None</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The table below sets forth a summary of changes in the fair value
of our Level 3 financial instruments for the year ended March 31, 2014:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">April 1,</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Recorded New Derivative</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Change in estimated fair value recognized in results</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Reclassification of Derivative Liability to Paid in</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">March 31,</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">of operations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">capital</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 30%">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -11pt; padding-left: 11pt">Derivative liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3,588,239</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5,729,780</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,361,048</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">10,679,067</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The table below sets forth a summary of changes in the fair value
of our Level 3 financial instruments for the year ended March 31, 2013:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">April 1,</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Recorded New Derivative</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Change in estimated fair value recognized in results</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Reclassification of Derivative Liability to Paid in</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">March 31,</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">of operations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">capital</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 30%">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -11pt; padding-left: 11pt">Derivative liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3,588,615</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(44,705</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">44,329</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3,588,239</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">11. DARPA CONTRACT AND RELATED REVENUE RECOGNITION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">As discussed in Note 1, we entered into a contract with the DARPA
on September 30, 2011. Under the DARPA award, we have been engaged to develop a therapeutic device to reduce the incidence of sepsis,
a fatal bloodstream infection that often results in the death of combat-injured soldiers. The award from DARPA was a fixed-price
contract with potential total payments to us of $6,794,389 over the course of five years. Fixed price contracts require the achievement
of multiple, incremental milestones to receive the full award during each year of the contract. Under the terms of the contract,
we will perform certain incremental work towards the achievement of specific milestones against which we will invoice the government
for fixed payment amounts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Originally, only the base year (year one contract) was effective
for the parties, however, DARPA subsequently exercised the option on the second and third years of the contract. DARPA has the
option to enter into the contract for years four and five. The milestones are comprised of planning, engineering and clinical targets,
the achievement of which in some cases will require the participation and contribution of third party participants under the contract.
There can be no assurance that we alone, or with third party participants, will meet such milestones to the satisfaction of the
government and in compliance with the terms of the contract or that we will be paid the full amount of the contract revenues during
any year of the contract term. We commenced work under the contract in October 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Due to budget restrictions within the Department of Defense, on
February 10, 2014, DARPA reduced the scope of our contract in years three through five of the contract. The reduction in scope
focused our research on exosomes, viruses and blood processing instrumentation. This scope reduction will reduce the possible payments
under the contract by $858,491 over years three through five. We recently completed a rebudgeting of the expected costs on the
remaining years of the DARPA contract based on the reduced milestones and have concluded that the reductions in our costs due to
the scaled back level of work will almost entirely offset the anticipated revenue levels based on current assumptions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Fiscal Year Ended March 31, 2014</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">As a result of achieving eight milestones in the fiscal year ended
March 31, 2014, we reported $1,466,482 in contract revenue for that fiscal year. The details of the eight milestones achieved during
the fiscal year ended March 31, 2014 were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Milestone 2.3.2.2 &ndash; Formulate initial design work based on
work from the previous phase. Begin to build and test selected instrument design and tubing sets. The milestone payment was $195,581.
Management considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on
another party's efforts. We demonstrated that we were able to formulate the initial design work and to build and test selected
instrument design and tubing sets as part of our submission for approval. The report was accepted by the contracting officer's
representative and the invoice was submitted thereafter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Milestone 2.3.2.2 &ndash; Write and test software and conduct ergonomic
research. Begin discussions with the systems integrator. The milestone payment was $195,581. Management considers this milestone
to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts. We obtained
wrote and tested software and conducted ergonomic research and began discussions with the systems integrator. The report was accepted
by the contracting officer's representative and the invoice was submitted thereafter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Milestone 2.3.3.2 &ndash; Cartridge construction with optimized
affinity matrix design for each potential target. Complete the capture agent screening. The milestone payment was $208,781. Management
considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's
efforts. We completed the cartridge construction with optimized affinity matrix design for each potential target and completed
the capture agent screening. The report was accepted by the contracting officer's representative and the invoice was submitted
thereafter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Milestone M5 &ndash; Target capture &gt; 90% in 24 hours for at
least three targets in blood or blood components. The milestone payment was $208,781. Management considers this milestone to be
substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts. We demonstrated
that we were able to capture &gt; 90% in 24 hours for at least three of the agreed targets in blood or blood components. The report
was accepted by the contracting officer's representative and the invoice was submitted thereafter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Milestone M3 &ndash; Conduct a series of experiments aimed at characterizing
the contribution of several alternate fluidic designs and methods of perfusing plasma filters and affinity columns in the performance
of affinity plasmapheresis. The milestone payment was $195,576. Management considers this milestone to be substantive as it was
not dependent on the passage of time nor was it based solely on another party's efforts. We demonstrated that we had conducted
the relevant series of experiments. The report was accepted by the contracting officer's representative and the invoice was submitted
thereafter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Milestone 2.4.2.1 &ndash; Evaluate contribution of manufacturing
process variables to binding capacity of affinity resin. The milestone payment was $197,362. Management considers this milestone
to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts. We demonstrated
that we had evaluated the contribution of manufacturing process variables to binding capacity of affinity resin. The report was
accepted by the contracting officer's representative and the invoice was submitted thereafter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Milestone 2.4.1.1 &ndash; Design and fabricate optimized configuration(s)
of hemopurification device(s) that contain(s) a combination of hemofilters, plasma filters and affinity columns. The milestone
payment was $186,164. Management considers this milestone to be substantive as it was not dependent on the passage of time nor
was it based solely on another party's efforts. We demonstrated that we had designed and fabricated optimized configuration of
hemopurification devices. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Milestone 2.4.2.3 &ndash; Perform biocompatibility tests for the
combination ADAPT device to confirm the combination cartridge does not present additional risk. The milestone payment was $78,641.
Management considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on
another party's efforts. We demonstrated that we had performed biocompatibility tests for the combination ADAPT device to confirm
the combination cartridge does not present additional risk. The report was accepted by the contracting officer's representative
and the invoice was submitted thereafter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Fiscal Year Ended March 31, 2013</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">As a result of achieving six milestones in the fiscal year ended
March 31, 2013, we reported $1,230,004 in contract revenue for that fiscal year. The details of the six milestones achieved during
the fiscal year ended March 31, 2013 were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Milestone 2.2.2.3 &ndash; Perform preliminary quantitative real
time PCR to measure viral load, and specific DNA or RNA targets. The milestone payment was $216,747. Management considers this
milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts.
We demonstrated that we were able to measure viral load of one or more targets as part of our submission for approval.&nbsp;&nbsp;The
report was accepted by the contracting officer's representative and the invoice was submitted thereafter.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Milestone 2.2.1.4 &ndash; Obtain all necessary IRB documentation
and obtain both institutional and Government approval in accordance with IRB documentation submission guidance prior to conducting
human or animal testing. The milestone payment was $183,367. Management considers this milestone to be substantive as it was not
dependent on the passage of time nor was it based solely on another party's efforts.&nbsp;&nbsp;We obtained all of the required
documentation from both institutional and Government authorities. The report was accepted by the contracting officer's representative
and the invoice was submitted thereafter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Milestone M2 &ndash; Target capture &gt; 50% in 24 hours for at
least one target in blood or blood components. The milestone payment was $216,747. Management considers this milestone to be substantive
as it was not dependent on the passage of time nor was it based solely on another party's efforts.&nbsp;&nbsp;We demonstrated that
we were able to capture &gt; 50% in 24 hours of one of the agreed targets in blood or blood components. The report was accepted
by the contracting officer's representative and the invoice was submitted thereafter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Milestone 2.3.3.1 &ndash; Build the ADAPT capture cartridges with
the identified affinity agents. Measure the rate of capture of the specific targets from in ex vivo recirculation experiments from
cell culture and blood. The milestone payment was $208,781. Management considers this milestone to be substantive as it was not
dependent on the passage of time nor was it based solely on another party's efforts.&nbsp;&nbsp;We demonstrated that we were able
build the ADAPT capture cartridges with the identified affinity agents and to measure the rate of capture of the specific targets
from in ex vivo recirculation experiments from cell culture and blood. The report was accepted by the contracting officer's representative
and the invoice was submitted thereafter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Milestone 2.3.2.1 &ndash; Demonstrate the effectiveness of the prototype
device in vivo in animals preventing platelet activation or clotting in at least a 2 hour blood pumping experiment at 75 mL/min
blood flow. The milestone payment amount was $195,581. Management considers this milestone to be substantive as it was not dependent
on the passage of time nor was it based solely on another party's efforts.&nbsp;&nbsp;The prototype device was successfully used
in vivo in animals preventing platelet activation or clotting in at least a 2 hour blood pumping experiment at 75 mL/min blood
flow. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Milestone M4 &ndash; Target capture &gt; 50% in 24 hours for at
least 5 targets in blood or blood components. The milestone payment was $208,781. Management considers this milestone to be substantive
as it was not dependent on the passage of time nor was it based solely on another party's efforts.&nbsp;&nbsp;We demonstrated that
we were able to capture &gt; 50% in 24 hours for at least 5 of the agreed targets in blood or blood components. The report was
accepted by the contracting officer's representative and the invoice was submitted thereafter.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">12. SIGNIFICANT FOURTH QUARTER ADJUSTMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">During the fourth quarter of the fiscal years ended March 31, 2014
and 2013, we did not deem any unusual or infrequently occurring items or adjustments to be material to our fourth quarter results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">13. COMMITMENTS AND CONTINGENCIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">EMPLOYMENT CONTRACTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">We entered into an employment agreement with our Chairman of the
Board (&ldquo;Chairman&rdquo;) effective April 1, 1999. The agreement, which is cancelable by either party upon sixty days&rsquo;
notice, will be in effect until the Chairman retires or ceases to be employed by us. Under the terms of the agreement, if the Chairman
is terminated he may become eligible to receive a salary continuation payment in the amount of at least twelve months' base salary,
which was increased to $350,000 per year in June 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">We entered into an employment agreement with Dr. Tullis (&ldquo;Tullis&rdquo;)
effective January 10, 2000 as our Chief Science Officer (&quot;CSO&quot;). Under the terms of the agreement, if Tullis is terminated
he may become eligible to receive a salary continuation payment in the amount of twelve months base salary, which is $195,000 per
year.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">LEASE COMMITMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">We currently rent approximately 2,300 square feet of executive office
space at 8910 University Center Lane, Suite 660, San Diego, CA 92122 at the rate of $6,475 per month on a four year lease that
expires in September 2014. We also rent approximately 1,700 square feet of laboratory space at 11585 Sorrento Valley Road, Suite
109, San Diego, California 92121 at the rate of $2,917 per month on a two year lease that expires in October 2014.&nbsp;&nbsp;We
are currently searching for new space in the greater San Diego area.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Our Exosome Sciences, Inc. subsidiary rents approximately 2,055
square feet of office and laboratory space at 11 Deer Park Drive, South Brunswick, NJ at the rate of $3,425 per month on a one
year lease that expires in October 2014. Our current plans are to renew the lease prior to expiration.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Rent expense approximated $163,000 and $123,000 for the fiscal years
ended March 31, 2014 and 2013, respectively. As of March 31, 2014, commitments under the lease agreements are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 70%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2015</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 53%; text-align: left">8910 University Center Lane, Suite 660, San Diego, CA 92122 office lease</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">43,795</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">11585 Sorrento Valley Road, Suite 109, San Diego, California 92121 office lease</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">22,755</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">11 Deer Park Drive, South Brunswick, NJ</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">23,975</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 0.25in">Total Lease Commitments</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">90,525</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">LEGAL MATTERS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">From time to time, claims are made against us 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 us from selling one or more products
or engaging in other activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The occurrence of an unfavorable outcome in any specific period
could have a material adverse effect on our results of operations for that period or future periods. Other than as mentioned here,
we are not presently a party to any pending or threatened legal proceedings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On February 24, 2014, we entered into a Settlement Agreement and
General Release (the &ldquo;Settlement Agreement&rdquo;) with Gemini Master Fund, Ltd., a Cayman Islands company (&quot;Gemini&quot;),
which, among other things, resulted in the dismissal with prejudice of the complaint filed by Gemini against us on July 5, 2012
in the Supreme Court of the State of New York, County of New York, entitled Gemini Master Fund Ltd. v. Aethlon Medical, Inc., Index
No. 652358/2012 (the &quot;Complaint&quot;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In the Complaint, Gemini sought relief both in the form of money
damages and delivery of shares of our common stock. The Complaint alleged, among other things, that we were in default of a convertible
promissory note (&quot;Convertible Note&quot;) originally issued to Gemini on February 12, 2010 by failing to pay the Convertible
Note in full and by failing to honor certain requests by Gemini to convert the principal and interest under the Convertible Note
into shares of our common stock. The Complaint also alleged that we failed to issue shares upon the presentation of exercise notices
under warrants originally issued to Gemini in 2009 and 2010 (respectively, the &quot;2009 Warrant&quot; and the &quot;2010 Warrant&quot;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In the Complaint, Gemini alleged it was entitled to 22,389,382 shares
of common stock upon conversion of the balance of the Convertible Note and Gemini alleged that it was entitled to receive 30,370,814
shares of common stock pursuant to the 2009 Warrant and the 2010 Warrant, for a combined sum of 52,760,196 common shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In response, we provided documentation that the Convertible Note
had been paid in full in cash and accepted by Gemini prior to the filing of the Complaint. In addition, we had maintained on our
books the total number of shares required to be issued under the 2009 Warrant, the 2010 Warrant and the 2008 Warrant (defined below)
combined was 6,359,999 shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The Settlement Agreement required us to issue a total of 7,522,854
shares of common stock into an escrow and those shares were to be released to Gemini ratably over a ten-month period. The shares
were issued upon partial exercise of the 2009 Warrant and 2010 Warrant as well as under a third warrant, issued by us to Gemini
in 2008 (the &quot;2008 Warrant&quot;). No shares were issued as consideration for the alleged default under the Convertible Note
or in consideration of the releases granted in the Settlement Agreement. In addition, our insurance company paid Gemini $150,000
in cash. Upon the completion of the share issuances, the 2008 Warrant, the 2009 Warrant and the 2010 Warrants were canceled. In
addition, under the Settlement Agreement, the Convertible Note (and any other agreement to pay Gemini or issue stock or anything
else of value to Gemini) was extinguished and fully satisfied.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">As we previously had 6,359,999 shares of common stock reserved for
issuance under the three Warrants described above, the settlement increased our fully diluted shares outstanding by 1,162,855 shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Following the performance of the settlement terms described above,
a Stipulation of Dismissal was filed with the Court, permanently terminating the litigation. The Settlement Agreement also provided
for mutual and full releases of all other claims between Gemini and us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company accrued an estimate of $1,000,000 for such matter at
December 31, 2013 and expensed such amount during the quarter ended December 31, 2013. Upon final settlement, management determined
that the expense was approximately $583,000. Accordingly, during the fourth quarter of the year ended March 31, 2014, the Company
recorded a credit to expense of approximately $417,000 related to this matter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">14. SEGMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">We operate our businesses principally through two reportable segments:
Aethlon, which represents our therapeutic business activities, and ESI, which represents our diagnostic business activities. Our
reportable segments have been determined based on the nature of the potential products being developed. ESI did not have any operations
in the fiscal year ended March 31, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Aethlon&rsquo;s revenue is generated primarily from government contracts
to date and ESI does not yet have any revenues. We have not included any allocation of corporate overhead to the ESI segment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The following tables set forth certain information regarding our
segments and other operations that conforms to the consolidated balance sheet and statement of operations presented in this Report:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Fiscal Years Ended March 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>Revenues:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 66%">&nbsp;&nbsp;Aethlon</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">1,623,769</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">1,230,004</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 1pt">&nbsp;&nbsp;ESI</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;&nbsp;&nbsp;&nbsp;Total Revenues</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,623,769</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,230,004</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Operating Losses:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;&nbsp;Aethlon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(2,651,863</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(3,575,354</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;&nbsp;ESI</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(404,065</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;&nbsp;&nbsp;&nbsp;Total Operating Loss</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(3,055,928</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(3,575,354</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Net Losses:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;&nbsp;Aethlon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(13,357,232</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(4,892,040</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 1pt">&nbsp;&nbsp;ESI</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(81,730</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;&nbsp;&nbsp;&nbsp;Net Loss Before Non-Controlling Interests</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(13,438,962</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(4,892,040</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Cash:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;&nbsp;Aethlon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">208,259</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">125,274</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;&nbsp;ESI</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,042,020</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;&nbsp;&nbsp;&nbsp;Total Cash</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,250,279</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">125,274</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Total Assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;&nbsp;Aethlon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">597,026</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">496,694</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 1pt">&nbsp;&nbsp;ESI</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,098,076</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;&nbsp;&nbsp;&nbsp;Total Assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,695,102</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">496,694</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Capital Expenditures:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;&nbsp;Aethlon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">37,313</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;&nbsp;ESI</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">58,743</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;&nbsp;&nbsp;&nbsp;Capital Expenditures</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">96,056</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Depreciation and Amortization:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;&nbsp;Aethlon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">11,549</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">10,484</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 1pt">&nbsp;&nbsp;ESI</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,538</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;&nbsp;&nbsp;&nbsp;Total Depreciation and Amortization</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">21,087</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,484</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Interest Expense:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;&nbsp;Aethlon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,282,638</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,132,314</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">&nbsp;&nbsp;ESI</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,583</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;&nbsp;&nbsp;&nbsp;Total Interest Expense</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,287,221</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,132,314</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">15. SUBSEQUENT EVENTS (UNAUDITED)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Management has evaluated events subsequent to March 31, 2014 through
the date that the accompanying condensed consolidated financial statements were filed with the Securities and Exchange Commission
for transactions and other events which may require adjustment of and/or disclosure in such financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Government Contracts</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Subsequent to March 31, 2014, we billed $197,362 under our DARPA
contract and billed $62,696 under the Battelle subcontract and we collected $135,376 under both contracts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Common Stock Issuances</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Subsequent to March 31, 2014, we issued 219,127 shares of common
stock pursuant to our S-8 registration statement covering our Amended 2010 Stock Plan at an average price of $0.17 per share in
payment for internal controls, legal and scientific consulting services valued at $38,268 based on the value of the services provided.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Subsequent to March 31, 2014, we completed unit subscription agreements
with seven accredited investors (the &ldquo;Purchasers&rdquo;) pursuant to which the Purchasers purchased an aggregate of $320,800
of restricted common stock at an average price of $0.15 per share. The common stock purchase price under the subscription agreement
was determined to be 80% of the average closing price of our common stock for the five-day period immediately preceding the date
of each subscription agreement, resulting in the issuance of 2,192,444 shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Each Purchaser also received one common stock purchase warrant for
each two shares of common stock purchased under his subscription agreement. The warrant exercise price was calculated based upon
120% of the average of the closing prices of our common stock for the five-day period immediately preceding the parties entering
into their subscription agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Stock Option Grants</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On June 6, 2014, our Board of Directors approved the following grants
of options to certain officers and directors of the Company:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.5in">&nbsp;</TD>
    <TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">To Mr. James A. Joyce, an option to acquire an aggregate of 1,500,000 shares of our common stock at an exercise price of $0.19 per share, the closing price of our common stock on the date of grant. The option vested as to 500,000 shares on the grant date and will vest as to an additional 500,000 shares on each of the first two anniversaries of the grant date. Unless earlier exercised or terminated, the option will expire June 6, 2024.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 1in; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.5in">&nbsp;</TD>
    <TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">To Mr. Rodney S. Kenley, an option to acquire an aggregate of 250,000 shares of our common stock at an exercise price of $0.19 per share, the closing price of our common stock on the date of grant. The option vested as to 83,333 shares on the grant date and will vest as to an additional 83,333 shares on the first anniversary of the grant date and 83,334 shares on the second anniversary of the grant date. Unless earlier exercised or terminated, the option will expire June 6, 2024.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.5in; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.5in">&nbsp;</TD>
    <TD STYLE="width: 0.25in"><FONT STYLE="font: 10pt Symbol">&middot;</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">To Mr. James B. Frakes, an option to acquire an aggregate of 250,000 shares of our common stock at an exercise price of $0.19 per share, the closing price of our common stock on the date of grant. The option vested as to 83,333 shares on the grant date and will vest as to an additional 83,333 shares on the first anniversary of the grant date and 83,334 shares on the second anniversary of the grant date. Unless earlier exercised or terminated, the option will expire June 6, 2024.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Changes to 2012 Board Compensation Program</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In July 2012, the Board approved a Board Compensation Program (the
&ldquo;2012 Program&rdquo;), which modified and superseded the 2005 Directors Compensation Program that had been in effect previously.
On June 6, 2014, the Board approved certain changes to the 2012 Program. Under the modified 2012 Program, in which only non-employee
Directors may participate, a new eligible Director will receive an initial grant of $50,000 worth of options to acquire shares
of common stock, with such grant being valued at the exercise price based on the average of the closing bid prices of our common
stock for the five trading days preceding the first day of the fiscal year. These options will have a term of ten years and will
vest 1/3 upon grant and 1/3 upon each of the first two anniversaries of the date of grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">At the beginning of each fiscal year, each existing Director eligible
to participate in the 2012 Program also will receive a grant of $35,000 worth of options valued at the exercise price based on
the average of the closing bid prices of the Common Stock for the five trading days preceding the first day of the fiscal year.
Such options will vest on the first anniversary of the date of grant. In lieu of per meeting fees, under the 2012 Program eligible
Directors will receive an annual Board retainer fee of $30,000. The modified 2012 Program also provides for the following annual
retainer fees: Audit Committee Chair - $5,000, Compensation Committee chair - $5,000, Audit Committee member - $4,000, Compensation
Committee member - $4,000 and Lead independent director - $15,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">All of the foregoing actions - the changes in base salaries, the
option grants and the changes to the Directors Compensation Program discussed herein - were approved and recommended by the Company&rsquo;s
Compensation Committee prior to approval by the Board.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Convertible Notes Payable &ndash; See Note 16 below</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">NOTE 16 &ndash; PRO FORMA BALANCE SHEET (UNAUDITED)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Management has presented unaudited pro forma balance sheet information
as if the subsequent events discussed below had occurred on March 31, 2014. Such pro forma information is subject to future adjustment
as management determines the final accounting for such transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Weiner Note Conversion</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On June 24, 2014, we entered into an agreement
with the Ellen R. Weiner Family Revocable Trust (the &ldquo;Trust&rdquo;), a holder of a Series A 12% Convertible Note (the &ldquo;Note&rdquo;)
(see Note 5), which previously was classified as being in default. As per the agreement, the Trust converted a past due combined
principal and interest balance of $1,003,200 into restricted common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Additionally, the Trust agreed to waive anti-dilution
price protection underlying warrants previously issued to the Trust. On June 26, 2014, three other parties who held similar warrants
also agreed to waive their anti-dilution price protection. As a result of the debt conversion and elimination of warrant anti-dilution
price protection, $3.7 million of our previously classified derivative liability will convert into equity based on the fair value
of securities on our fiscal year-end date of March 31, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As a result of the note conversion and derivative
liability reclassification into equity, our balance sheet equity will increase by approximately $4.7 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Under its agreement, the Trust converted the entire $1,003,200 past
due principal and interest balance on the Note, which previously was in default, into an aggregate of 23,318,254 restricted shares
of our common stock and five-year warrants to acquire up to 6,809,524 shares of our common stock at an exercise price of $.042
per share and up to 397,222 shares of our common stock at an exercise price of $.108 per share (collectively, the &ldquo;Conversion
Securities&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">In exchange for the Trust&rsquo;s conversion in full of the Note
and accrued interest and for the waivers of anti-dilution price protection in the previously issued warrants, in addition to the
Conversion Securities, we issued to the Trust 75,000 restricted shares of common stock as a service fee, changed the exercise price
of all of the previously issued warrants to $.042 per share and extended the expiration date of all of the previously issued warrants
to July 1, 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Bird Estate Extension</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On July 8, 2014, we entered into a restructuring
agreement (the &ldquo;Agreement&rdquo;) with the Estate of Allan Bird (the &ldquo;Estate&rdquo;), a holder of a Series A 12% Convertible
Note (the &ldquo;Note&rdquo;), which previously was classified as being in default. In the Agreement, the Estate agreed to extend
the expiration date of the Note to April 1, 2016, to convert approximately $116,970 of accrued interest to equity, and to waive
anti-dilution price protection underlying the Note and warrants previously issued to the Estate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">As a result of the waiver of all anti-dilution
price protection by the Estate, we will reclassify to equity $1,238,292 from derivative liability.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">Also, the execution of the Agreement results
in the waiver of anti-dilution price protection under agreements with three other note and warrant holders, which will cause an
additional $5,724,761 of derivative liability to be reclassified from liability to equity.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">In addition, as a result of a note conversion
and waiver of anti-dilution price protection previously reported on Form 8-K on June 30, 2014, a combined $4,719,214 of principal,
accrued interest and derivative liability has been reclassified into equity.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">Based on the Agreement, the elimination
of antidilution provisions and the note and accrued interest conversions, all previously reported derivative liabilities will be
reclassified into equity.&nbsp;</FONT></TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Under the Agreement, the Estate converted the
entire $116,970 past due interest balance on the Note, which previously was in default, into an aggregate of 2,591,846 restricted
shares of our common stock. The Estate received five-year warrants to acquire up to 2,321,429 shares of our common stock at an
exercise price of $.042 per share (which exercise price was the result of certain contractual price adjustments previously made
during 2011). Based on our common stock prices during a period of negotiation with the Estate including during calendar year 2013,
the Estate also received five-year warrants to acquire up to 135,417 shares of our common stock at an exercise price of $.108 (collectively
known as the &ldquo;Conversion Securities&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In exchange for the Estate&rsquo;s extension
of the Note, conversion of accrued interest and for the waivers of anti-dilution price protection in the previously issued warrants,
in addition to the Conversion Securities, we also issued to the Estate 25,000 restricted shares of common stock as a service fee
and extended the expiration date of all of the previously issued warrants to July 1, 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>AETHLON MEDICAL, INC. AND SUBSIDIARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>MARCH 31, 2014 AND 2013</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Pro Forma References</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The unaudited pro forma balance sheet information as of March&nbsp;31,
2014 assumes (1)&nbsp;conversion of one of the Amended and Restated Series A 12% Convertible Notes (the Trust Note) in the principal
amount of $660,000 as well as $343,200 of related accrued interest into 23.3&nbsp;million shares of common stock, (2)&nbsp;the
extension of the other Amended and Restated Series A 12% Convertible Note (the Estate Note) and conversion of $116,970 of related
accrued interest into 2.6 million shares of common stock, (3) reduction of accrued interest balance by $85,800 for the Trust Note
and by $29,280 for the Estate Note, (4) the waiver of price antidilution protection on certain warrants in exchange for an extension
on those warrants with a corresponding fair value change based on June 24, 2014 inputs of $96,469 for the Trust warrant extension
and based on July 8, 2014 inputs of $29,679 for the Estate warrants, (5)&nbsp;the reclassification of $10,679,067 of our derivative
liability into paid in capital based upon the fair value of those derivatives at March 31, 2014, (6) calculation of a loss on the
payment of shares and warrants as part of the conversion of accrued interest with an estimated fair value of $1,876,421 to the
Trust and $665,571 to the Estate, and (7) the payment of 75,000 restricted shares of common stock to the Trust as a fee, valued
at $12,000 and the payment of 25,000 restricted shares of common stock, valued at $4,250.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">The following unaudited pro forma information has been prepared
as though these subsequent event transactions had occurred on March&nbsp;31, 2014. The pro forma references refer to the above
paragraph.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Aethlon
    Medical, Inc.</B></FONT><BR><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Consolidated</B></FONT></TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Pro
    Forma</B></FONT><BR><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Consolidated</B></FONT></TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Balance Sheet</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Pro Forma Adjustments</B></FONT></TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Balance Sheet</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March 31, 2014</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Reference</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March 31, 2014</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>ASSETS</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 5.4pt">CURRENT ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 30%; padding-left: 10pt">Cash</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">1,250,279</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">&ndash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: center">&nbsp;</TD><TD STYLE="width: 18%; text-align: center">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">1,250,279</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt">Accounts receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">95,177</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">95,177</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt">Deferred financing costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">83,191</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">83,191</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt">Prepaid expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">50,699</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">50,699</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">TOTAL CURRENT ASSETS</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,479,346</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,479,346</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 5.4pt">NON-CURRENT ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt">Property and equipment, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">84,279</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">84,279</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt">Patents, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">112,489</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">112,489</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; padding-left: 10pt">Deposits</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">18,988</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">18,988</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">TOTAL NONCURRENT ASSETS</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">215,756</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">215,756</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt">TOTAL ASSETS</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,695,102</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,695,102</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt">LIABILITIES AND DEFICIT</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 5.4pt">CURRENT LIABILITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">517,651</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">517,651</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt">Due to related parties</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">839,070</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">839,070</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt">Notes payable, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">390,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">390,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt">Convertible notes payable, current portion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,367,655</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(885,000</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">(1) &amp; (2)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">482,655</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt">Derivative liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,679,067</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(10,679,067</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">(5)</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt">Other current liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,855,374</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(575,250</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">(1), (2) &amp;(3)</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,280,124</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">TOTAL CURRENT LIABILITIES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">15,648,817</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(12,139,317</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,509,500</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 5.4pt">NONCURRENT LIABILITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt">Convertible notes payable, non-current portion</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">776,451</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">225,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">(2)</TD><TD STYLE="padding-bottom: 1pt; text-align: left"></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,001,451</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">TOTAL NONCURRENT LIABILITIES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">776,451</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">225,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,001,451</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">TOTAL LIABILITIES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">16,425,268</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(11,914,317</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,510,951</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 5.4pt">COMMITMENTS AND CONTINGENCIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 5.4pt">STOCKHOLDERS' DEFICIT</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt">Common stock</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">224,984</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">26,010</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">(1), (5), (6) &amp; (7)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">250,994</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt">Additional paid in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">59,659,137</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14,457,617</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">(1),
(4), (5), (6) &amp; (7)</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">74,116,754</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 10pt">Accumulated deficit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(74,832,557</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,569,310</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">(2), (3), (4), (5), (6) &amp; (7)</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(77,401,867</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">TOTAL AETHLON MEDICAL, INC. STOCKHOLDERS' DEFICIT</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(14,948,436</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">11,914,317</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,034,119</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Noncontrolling interests</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">218,270</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">218,270</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">TOTAL DEFICIT</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(14,730,166</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">11,914,317</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,815,849</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt">TOTAL LIABILITIES AND&nbsp;&nbsp;DEFICIT</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,695,102</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,695,102</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">AETHLON MEDICAL, INC. AND SUBSIDIARY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">CONDENSED CONSOLIDATED BALANCE SHEETS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">September 30, <BR> 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, <BR> 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">(Unaudited)</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; padding-left: 9pt">Cash</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">526,187</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">1,250,279</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Accounts receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">258,672</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">95,177</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 9pt">Deferred financing costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">66,189</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">83,191</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Prepaid expenses and other current assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">41,141</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">50,699</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 27pt">Total current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">892,189</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,479,346</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Property and equipment, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">70,185</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">84,279</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Patents and patents pending, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">107,907</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">112,489</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 1pt">Deposits</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">18,988</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">18,988</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 27pt">Total assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,089,269</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,695,102</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">LIABILITIES AND STOCKHOLDERS' DEFICIT</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 9pt">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">609,153</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">517,651</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Due to related parties</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">888,778</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">839,070</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 9pt">Notes payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">190,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">390,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Convertible notes payable, current portion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">483,421</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,367,655</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 9pt">Derivative liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,679,067</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Other current liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,216,604</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,855,374</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 27pt">Total current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,387,956</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15,648,817</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -27pt; padding-left: 27pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -27pt; padding-left: 27pt">Noncurrent liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.25in; padding-left: 27pt">Convertible notes payable, noncurrent portion</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">990,520</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">776,451</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 27pt">&nbsp;Total noncurrent liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">990,520</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">776,451</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: 9pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: 31.5pt">Total liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,378,476</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">16,425,268</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: 9pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Commitments and Contingencies (Note 13)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Stockholders' Deficit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -9pt; padding-left: 0.25in">Common stock, par value $0.001 per share; 500,000,000 shares authorized as of September 30, 2014 and March 31, 2014; 262,713,781 and 224,973,980 shares issued and outstanding as of September 30, 2014 and March 31, 2014, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">262,712</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">224,984</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 9pt">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">75,654,853</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">59,659,137</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Accumulated deficit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(79,335,907</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(74,832,557</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -10pt; padding-left: 37pt">Total Aethlon Medical, Inc. stockholders&rsquo; deficit before noncontrolling interests</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,418,342</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(14,948,436</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 27pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt">Noncontrolling interests</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">129,135</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">218,270</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 27pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt">Total deficit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,289,207</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(14,730,166</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; padding-left: 27pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 27pt">Total liabilities and deficit</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,089,269</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,695,102</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">AETHLON MEDICAL, INC. AND SUBSIDIARY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">For the Three and Six Month Periods Ended
September 30, 2014 and 2013</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Unaudited)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Three Months <BR> Ended <BR> September 30, <BR> 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Three Months <BR> Ended <BR> September 30, <BR> 2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Six Months <BR> Ended <BR> September 30, <BR> 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Six Months <BR> Ended <BR> September 30, <BR> 2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -7pt; padding-left: 7pt">REVENUES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 32%; text-align: left; text-indent: -7pt; padding-left: 14pt">Government contract revenue</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">479,075</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">644,887</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">530,371</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">840,483</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -7pt; padding-left: 7pt">OPERATING EXPENSES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -7pt; padding-left: 14pt">Professional fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">308,821</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">327,511</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">710,434</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">651,581</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -7pt; padding-left: 14pt">Payroll and related expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">544,354</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">404,849</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,165,040</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">863,480</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 7pt">General and administrative</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">227,092</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">142,323</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">428,097</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">339,014</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -7pt; padding-left: 28pt">Total operating expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,080,267</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">874,683</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,303,571</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,854,075</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -7pt; padding-left: 7pt">OPERATING LOSS</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(601,192</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(229,796</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,773,200</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,013,592</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -7pt; padding-left: 7pt">OTHER EXPENSE</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -7pt; padding-left: 14pt">Loss on debt conversion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">65,493</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,467</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,531,123</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,256</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -7pt; padding-left: 14pt">(Gain)/loss on change in fair value of derivative liability</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,992,002</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,382,877</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -7pt; padding-left: 14pt">Interest and other debt expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">78,145</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">110,405</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">144,799</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">216,443</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -7pt; padding-left: 14pt">Loss on extension of warrants</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">143,363</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">143,363</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -7pt; padding-left: 21pt">Total other expense</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">287,001</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,119,874</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,819,285</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,639,576</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -7pt; padding-left: 7pt">NET LOSS BEFORE NONCONTROLLING INTERESTS</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(888,193</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,349,670</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,592,485</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,653,168</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -7pt; padding-left: 7pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -7pt; padding-left: 7pt">LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(40,784</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(89,135</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(847,409</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(3,349,670</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(4,503,350</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(3,653,168</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -7pt; padding-left: 7pt">BASIC AND DILUTED LOSS PER COMMON SHARE</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.00</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.02</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.02</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.02</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -7pt; padding-left: 7pt">WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING &ndash; BASIC AND DILUTED</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">259,369,911</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">187,643,582</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">243,494,916</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">182,004,220</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">AETHLON MEDICAL, INC. AND SUBSIDIARY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">For the Six Months Ended September 30, 2014
and 2013</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Unaudited)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Six Months <BR> Ended <BR> September 30, <BR> 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Six Months <BR> Ended <BR> September 30, <BR> 2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Cash flows from operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 66%; text-align: left; padding-left: 9pt">Net loss</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(4,592,485</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(3,653,168</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -27pt; padding-left: 0.5in">Adjustments to reconcile net loss to net cash used in operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 27pt">Depreciation and amortization</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,676</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,727</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 27pt">Stock based compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">260,680</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">190,601</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.25in; padding-left: 45pt">Fair market value of common stock, warrants and options issued for services</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">162,358</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">264,343</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 0.5in">Change in fair value of derivative liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,382,877</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 0.5in">Loss on extension of warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">143,363</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 0.5in">Loss on debt conversion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,531,123</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,256</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 0.5in">Amortization of debt discount and deferred financing costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">21,502</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,578</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 45pt">Changes in operating assets and liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 63pt">Accounts receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(162,495</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(11,404</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 63pt">Prepaid expenses and other current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,558</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(25,202</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 63pt">Accounts payable and other current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">163,646</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(33,170</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 63pt">Due to related parties</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">49,708</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">91,042</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Net cash used in operating activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,394,366</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(744,520</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Cash flows from financing activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 0.25in">Proceeds from the issuance of notes payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">400,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Proceeds from the issuance of common stock</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">670,274</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">228,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Net cash provided by financing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">670,274</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">628,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Net decrease in cash</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(724,092</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(116,520</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 1pt">Cash at beginning of period</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,250,279</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">125,274</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt">Cash at end of period</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">526,187</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">8,754</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">AETHLON MEDICAL, INC. AND SUBSIDIARY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (CONTINUED)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">For the Six Months Ended September 30, 2014
and 2013</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Unaudited)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Six Months <BR> Ended <BR> September 30, <BR> 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Six Months <BR> Ended <BR> September 30, <BR> 2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Supplemental disclosures of cash flow information:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Cash paid during the period for:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 9pt">Interest</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Supplemental disclosures of non-cash investing and financing activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Debt and accrued interest converted to common stock</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 2.5pt double; text-align: right">1,007,631</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 2.5pt double; text-align: right">420,460</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Reclassification of warrant derivative liability into equity</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,679,067</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">106,501</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Reclassification of accounts payable to convertible notes payable</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">47,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Deferred financing costs recorded in connection with debt amendment</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">5,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 9pt">Reclassification of accrued interest to convertible notes payable</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">25,766</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">20,027</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">AETHLON MEDICAL, INC. AND SUBSIDIARY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">September 30, 2014</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">1. NATURE OF BUSINESS AND BASIS OF PRESENTATION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">ORGANIZATION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Aethlon Medical, Inc. and subsidiary (&quot;Aethlon&quot;, the
&quot;Company&quot;, &quot;we&quot; or &quot;us&quot;) is a medical device company focused on creating innovative devices that
address unmet medical needs in cancer, infectious disease and other life-threatening conditions. At the core of our developments
is the Aethlon ADAPT&trade; (Adaptive Dialysis-Like Affinity Platform Technology) system, a medical device platform that converges
single or multiple affinity drug agents with advanced plasma membrane technology to create therapeutic filtration devices that
selectively remove harmful particles from the entire circulatory system without loss of essential blood components. On June 25,
2013, the United States Food and Drug Administration (FDA) approved an Investigational Device Exemption (IDE) that allows us to
initiate human feasibility studies of the Aethlon Hemopurifier&reg; in the United States. Under the feasibility study protocol,
we will enroll ten end-stage renal disease patients who are infected with the Hepatitis C virus (HCV) to demonstrate the safety
of Hemopurifier therapy. Successful completion of this study will allow us the opportunity to initiate pivotal studies that are
required for market clearance to treat HCV and other disease conditions in the United States.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Successful outcomes of human trials will also be required by
the regulatory agencies of certain foreign countries where we intend to sell this device. Some of our patents may expire before
FDA approval or approval in a foreign country, if any, is obtained. However, we believe that certain patent applications and/or
other patents issued more recently will help protect the proprietary nature of the Hemopurifier(R) treatment technology.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In October 2013, our subsidiary, Exosome Sciences, Inc. (&ldquo;ESI&rdquo;),
commenced operations with a focus on advancing exosome-based strategies to diagnose and monitor the progression of cancer, infectious
disease and other life-threatening conditions.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our common stock is quoted on the OTCQB marketplace administered
by the OTC Markets Group under the symbol &quot;AEMD.&quot;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (&ldquo;GAAP&rdquo;)
for interim financial information and with the instructions to Form 10-Q and applicable sections of Regulation S-X. 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&nbsp;necessary to make the financial statements not misleading have been included. The condensed consolidated
balance sheet as of March 31, 2014 was derived from our audited financial statements. Operating results for the six months ended
September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending March 31, 2015. For further
information, refer to our Annual Report on Form 10-K for the year ended March 31, 2014, which includes audited financial statements
and footnotes as of March 31, 2014 and 2013 and for the years then ended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NOTE 2. LIQUIDITY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The accompanying consolidated financial statements have been
prepared assuming that we 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. We have incurred continuing losses from operations and at September
30, 2014 are in default on certain debt agreements, have negative working capital of approximately $2,496,000, and have an accumulated
deficit of approximately $79,336,000. These factors, among other matters, raise substantial doubt about our ability to continue
as a going concern. A significant amount of additional capital will be necessary to advance the development of our products to
the point at which they may become commercially viable. We intend to fund operations, working capital and other cash requirements
for the fiscal year ending March 31, 2015 through debt and/or equity financing arrangements as well as through revenues and related
cash receipts under our government contracts (see Note 12).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the six months ended September 30, 2014, we
converted a past due convertible note in the amount of $660,000 and related accrued interest into equity and also
restructured and extended a formerly past due convertible note in the amount of $225,000. We also eliminated the antidilution
price protection on all the remaining outstanding notes and warrants which held such price protection. The combination of all
of those actions allowed us to reclassify our derivative liability in the amount of $10,679,067 into equity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We are currently addressing our liquidity issue by seeking additional
investment capital through private placements of common stock and debt and by applying for additional grants issued by government
agencies in the United States. We believe that our cash on hand and funds expected to be received from additional private investments
will be sufficient to meet our liquidity needs for fiscal 2015. However, no assurance can be given that we will receive any funds
in the form of revenues or in connection with capital raising activities in addition to the funds we have already received.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The successful outcome of future contract-based and fundraising
activities cannot be determined at this time and there is no assurance that, even if achieved, we will have sufficient funds to
execute our intended business plan or generate positive operating results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The consolidated financial statements do not include any adjustments
related to this uncertainty and as to the 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The summary of our significant accounting policies presented
below is designed to assist the reader in understanding our condensed consolidated financial statements. Such financial statements
and related notes are the representations of our management, who are 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&nbsp;condensed
consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">PRINCIPLES OF CONSOLIDATION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The accompanying condensed consolidated financial statements
include the accounts of Aethlon Medical, Inc. and its majority-owned and controlled subsidiary, ESI. All significant intercompany
balances and transactions have been eliminated in consolidation. The Company classifies the noncontrolling interests in ESI as
part of consolidated net loss in the six months ended September 30, 2014 and includes the accumulated amount of noncontrolling
interests as part of stockholders&rsquo; equity. During the fiscal year ended March 31, 2014, ESI raised capital in the amount
of $1,500,000 in exchange for the issuance of 300,000 shares of ESI common stock to ESI&rsquo;s investors, representing 20% of
ESI&rsquo;s issued and outstanding capital stock. As a result, Aethlon Medical, Inc.&rsquo;s ownership of ESI was reduced to 80%.
If a further change in Aethlon Medical Inc.&rsquo;s ownership of ESI results in loss of control and deconsolidation, any retained
ownership interest will be remeasured with the gain or loss reported in our statement of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The losses at ESI during the six months ended September 30,
2014 reduced the noncontrolling interests on our consolidated balance sheet by $89,135 from $218,270 at March 31, 2014 to $129,135
at September 30, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">USE OF ESTIMATES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We prepare our condensed 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 consolidated 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, estimating fair value associated with debt and equity transactions and valuation of deferred
tax assets. Actual results could differ from those estimates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">CASH AND CASH EQUIVALENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Accounting standards define &quot;cash and cash equivalents&quot;
as any short-term, highly liquid investment that is both readily convertible to known amounts of cash and so near their maturity
that they present insignificant risk of changes in value because of changes in interest rates. For the purpose of financial statement
presentation, we consider all highly liquid investment instruments with original maturities of three months or less when purchased,
or any investment redeemable without penalty or loss of interest to be cash equivalents. As of September 30, 2014 and March 31,
2014, we had no assets that were classified as cash equivalents.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">CONCENTRATIONS OF CREDIT RISKS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Cash is maintained at two financial institutions in checking
accounts and related cash management accounts. Accounts at these institutions are secured by the Federal Deposit Insurance Corporation
(&quot;FDIC&quot;) up to $250,000. Our September 30, 2014 cash balances were approximately $276,000 over such insured amount. We
do not believe that the Company is exposed to any significant risk with respect to its cash.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">All of our accounts receivable at September 30, 2014 and March
31, 2014 and all of our revenue in the six month periods ended September 30, 2014 and 2013 were directly from the U.S. Department
of Defense or from a subcontract under Battelle (defined herein), which is a prime contractor with the U.S. Department of Defense,
and as such no allowance for uncollectable accounts receivable is deemed necessary at September 30, 2014 or March 31, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">FAIR VALUE OF FINANCIAL INSTRUMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The carrying amount of our cash, accounts receivable, accounts
payable, and other current liabilities approximate their estimated fair values due to the short-term maturities of those financial
instruments. The carrying amount of the notes payable approximates their fair value due to the short maturity of the notes and
since the interest rate approximates current market interest rates for similar instruments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Management has concluded that it is not practical to determine
the estimated fair value of amounts due to related parties 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">See Note 9 with respect to derivative liabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">PROPERTY AND EQUIPMENT</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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 consolidated statements of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">INCOME TAXES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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. We record a valuation
allowance for deferred tax assets when, based on our 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Long-lived assets are 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. We believe
no impairment charges were necessary during the three and six month periods ended September 30, 2014 and 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">LOSS PER COMMON SHARE</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Basic loss per share is computed by dividing net income available
to common stockholders by the weighted average number of common shares outstanding during the period of computation. Diluted loss
per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional
common shares that would have been outstanding if potential common shares had been issued, if such additional common shares were
dilutive. Since we had net losses for all periods presented, basic and diluted loss per share are the same, and additional potential
common shares have been excluded as their effect would be antidilutive.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of September 30, 2014 and 2013, a total of 139,672,815 and
137,935,529 potential common shares, consisting of shares underlying outstanding stock options, warrants and convertible notes
payable were excluded as their inclusion would be antidilutive.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">SEGMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Historically, we operated in one segment that was based on our
development of therapeutic devices. However in the December 2013 quarter, we initiated the operations of ESI to develop diagnostic
tests. As a result, we now operate in two segments, Aethlon for therapeutic applications and ESI for diagnostic applications (See
Note 14).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">DEFERRED FINANCING COSTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Costs related to the issuance of debt are capitalized and amortized
to interest expense over the life of the related debt using the effective interest method.&nbsp;&nbsp;We recorded amortization
expense related to our deferred offering costs of $21,502 and $863 during the six month periods ended September 30, 2014 and 2013,
respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">REVENUE RECOGNITION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">DARPA Contract -- With respect to revenue recognition, we entered
into a government contract with DARPA and have recognized revenue under such contract. We adopted the Milestone method of revenue
recognition for the DARPA contract under ASC 605-28 &ldquo;Revenue Recognition &ndash; Milestone Method&rdquo; and we believe we
meet the requirements under ASC 605-28 for reporting contract revenue under the Milestone Method.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In order to account for this contract, we identify the deliverables
included within the contract and evaluate which deliverables represent separate units of accounting based on if certain criteria
are met, including whether the delivered element has standalone value to the collaborator. The consideration received is allocated
among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A milestone is an event having all of the following characteristics:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1) There is substantive uncertainty at the date the arrangement
is entered into that the event will be achieved. A vendor&rsquo;s assessment that it expects to achieve a milestone does not necessarily
mean that there is not substantive uncertainty associated with achieving the milestone.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(2) The event can only be achieved based in whole or in part
on either: (a) the vendor&rsquo;s performance; or (b) a specific outcome resulting from the vendor&rsquo;s performance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(3) If achieved, the event would result in additional payments
being due to the vendor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A milestone does not include events for which the occurrence
is either: (a) contingent solely upon the passage of time; or (b) the result of a counterparty&rsquo;s performance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The policy for recognizing deliverable consideration contingent
upon achievement of a milestone must be applied consistently to similar deliverables.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The assessment of whether a milestone is substantive is performed
at the inception of the arrangement. The consideration earned from the achievement of a milestone must meet all of the following
for the milestone to be considered substantive:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1) The consideration is commensurate with either: (a) the vendor&rsquo;s
performance to achieve the milestone; or (b) the enhancement of the value of the delivered item or items as a result of a specific
outcome resulting from the vendor&rsquo;s performance to achieve the milestone;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(2) The consideration relates solely to past performance; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(3) The consideration is reasonable relative to all of the deliverables
and payment terms (including other potential milestone consideration) within the arrangement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A milestone is not considered substantive if any portion of
the associated milestone consideration relates to the remaining deliverables in the unit of accounting (i.e., it does not relate
solely to past performance). To recognize the milestone consideration in its entirety as revenue in the period in which the milestone
is achieved, the milestone must be substantive in its entirety. Milestone consideration cannot be bifurcated into substantive and
non-substantive components. In addition, if a portion of the consideration earned from achieving a milestone may be refunded or
adjusted based on future performance, the related milestone is not considered substantive.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">See Note 12 for the additional disclosure information required
under ASC 605-28.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Battelle Subcontract -- We entered into a subcontract agreement
with Battelle Memorial Institute (&ldquo;Battelle&rdquo;) in March 2013. Battelle was chosen by DARPA to be the prime contractor
on the systems integration portion of the original DARPA contract and we are one of several subcontractors on that systems integration
project. The Battelle subcontract is cost-reimbursable under a time and materials basis. We began generating revenues under the
subcontract during the six months ended September 30, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our revenue under this contract is a function of cost reimbursement
plus an overhead mark-up for hours devoted to the project by specific employees (with specific hourly rates for those employees).
Battelle engages us as needed. Each payment requires approval by the program manager at Battelle.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">STOCK-BASED COMPENSATION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Employee stock options and rights to purchase shares under stock
participation plans are accounted for under the fair value method. 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. 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 OTCBB on the date
of grant). Compensation cost recognized by the Company includes (a) compensation cost for all equity incentive awards granted prior
to April 1, 2006, but not yet vested, based on the grant-date fair value estimated in accordance with the original provisions of
the then current accounting standards, 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 subsequent accounting standards. We use
a Binomial Lattice option pricing model for estimating fair value of options granted (see Note 10).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">The following table summarizes share-based compensation expenses
relating to shares and options granted and the effect on loss per common share during the six month periods ended September 30,
2014 and 2013:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Six Months Ended September 30, 2014</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Six Months Ended</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">September 30, 2013</P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 68%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Vesting of Stock Options</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">260,680</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">124,243</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Incremental fair value of option Modifications</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">1,914</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Vesting Expense Associated with CEO Restricted Stock Grant</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">&ndash;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">64,444</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Total Stock-Based Compensation Expense</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">260,680</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">190,601</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Weighted average number of common shares outstanding &ndash; basic and diluted</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">243,494,916</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">182,004,220</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Basic and diluted loss per common share</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">(0.00</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">)</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">(0.00</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">)</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We account for transactions involving services provided by third
parties where we issue equity instruments as part of the total consideration 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.
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, we use the following methodology:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">c) For any transactions not meeting the criteria in (a) or (b)
above, we re-measure the consideration at each reporting date based on its then current stock value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We review 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 months ended September 30, 2014 was insignificant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">PATENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Patents include both foreign and domestic patents. There were
several patents pending at September 30, 2014. We capitalize the cost of patents and patents pending, some of which were acquired,
and amortize such costs over the shorter of the remaining legal life or their estimated economic life, upon issuance of the patent.
The unamortized costs of patents and patents pending are subject to our review for impairment under our long-lived asset policy
above.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">STOCK PURCHASE WARRANTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We grant warrants in connection with the issuance of convertible
notes payable and the issuance of common stock for cash. When such warrants are classified as equity and issued in connection with
debt, we measure the relative estimated fair value of such warrants and record it as a discount from the face amount of the convertible
notes payable. Such discounts are amortized to interest expense over the term of the notes using the effective interest method.
Warrants issued in connection with common stock for cash, if classified as equity, are considered issued in connection with equity
transactions and the warrant fair value is recorded to additional paid-in-capital. Lastly, warrants not meeting equity classification
are recorded as derivative instruments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">DERIVATIVE INSTRUMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We evaluate free-standing derivative instruments (or embedded
derivatives) to properly classify such instruments within equity or as liabilities in our financial statements. Our policy is to
settle instruments indexed to our common shares on a first-in-first-out basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The classification of a derivative instrument is reassessed
at each reporting date. If the classification changes as a result of events during a reporting period, the instrument is reclassified
as of the date of the event that caused the reclassification. There is no limit on the number of times a contract may be reclassified.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Instruments classified as derivative liabilities are remeasured
each reporting period (or upon reclassification) and the change in fair value is recorded on our consolidated statement of operations
in other (income) expense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">BENEFICIAL CONVERSION FEATURE OF CONVERTIBLE NOTES PAYABLE</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">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 &quot;Beneficial Conversion Feature&quot;
(&quot;BCF&quot;). We measure the estimated fair value of the BCF in circumstances in which the conversion feature is not required
to be separated from the host instrument and accounted for separately, and record that value 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">REGISTRATION PAYMENT ARRANGEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We account for contingent obligations to make future payments
or otherwise transfer consideration under a registration payment arrangement separately from any related financing transaction
agreements, and any such contingent obligations are recognized only when it is determined that it is probable we will become obligated
for future payments and the amount, or range of amounts, of such future payments can be reasonably estimated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">RESEARCH AND DEVELOPMENT EXPENSES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We incurred research and development expenses during the three
and six month periods ended September 30, 2014 and 2013, which are included in various operating expense line items in the accompanying
condensed consolidated statements of operations. Our research and development expenses in those periods were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">September 30,</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">September 30,</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; padding-bottom: 2.5pt">Three months ended</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 2.5pt double; text-align: right">250,388</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 2.5pt double; text-align: right">293,580</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Six months ended</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">637,723</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">626,638</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">OFF-BALANCE SHEET ARRANGEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have not entered into any off-balance sheet arrangements
that have or are reasonably likely to have a current or future material effect on our consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">SIGNIFICANT RECENT ACCOUNTING PRONOUNCEMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Management is evaluating significant recent accounting pronouncements
that are not yet effective for the Company, including the new accounting standard on revenue recognition, ASU 2014-09 (Topic 606),
and has not yet concluded whether any such pronouncements will have a significant effect on the Company&rsquo;s future consolidated
financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">NOTE 4. NOTES PAYABLE</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Notes payable consist of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">September 30, 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Principal Balance</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Accrued Interest</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Principal Balance</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Accrued Interest</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 32%; text-align: left">12% Notes payable, past due</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">185,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">367,687</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">185,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">353,813</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">10% Note payable, past due</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,625</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,375</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Directors&rsquo; Note(s)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">200,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">14,516</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt; text-indent: 27pt">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">190,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">374,312</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">390,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">374,704</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the six months ended September 30, 2014, we recorded
interest expense of $19,959 related to the contractual interest rates of our notes payable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">12% NOTES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">From August 1999 through May 2005, we entered into various borrowing
arrangements for the issuance of notes payable from private placement offerings (the &quot;12% Notes&quot;). On April 21, 2010,
a holder of $100,000 of the 12% Notes converted the principal balance and $71,758 of accrued interest into 687,033 shares of common
stock at an agreed conversion price of $0.25 per share. At September 30, 2014, the 12% Notes in the principal amount of $185,000
were past due, in default, and bearing interest at the default rate of 15%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">10% NOTES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">At September 30, 2014,&nbsp;one 10% Note in the amount of $5,000
is past due and in default, remains outstanding and bears interest at the default rate of 15%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Management's plans to satisfy the remaining outstanding balance
on these 12% and 10% Notes include converting the notes to common stock at market value or repayment when funds are available.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">DIRECTORS&rsquo; NOTES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In July 2013, we borrowed $400,000 from two of our directors
under two 90 day notes for $200,000 each bearing 10% interest (the &ldquo;Notes&rdquo;). At the discretion of the holders, if not
paid off by October 9, 2013, the noteholders were entitled to (i) convert the principal and accrued interest under the Notes into
shares of common stock at $0.088 per share (the &ldquo;Conversion Price&rdquo;) and (ii) receive warrants to purchase common stock
equal to 50% of the principal converted under the Notes, with an exercise price of $0.132 per share. Additionally, there was a
provision for a penalty interest rate of 12%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">That potential conversion price and warrant exercise price were
based on the same pricing mechanism that we have used in prior equity unit financings since March 2012 (see Note 6) which are based
on 80% of the then current market price of our common stock and with the warrant exercise price based on 120% of the same then
current market price. We initially reserved 6,931,818 shares of common stock to support the conversion of the Notes and accrued
interest in full as well as the exercise of the warrants in full (should such conversion and/or issuance occur).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the fiscal year ended March 31, 2014, the principal of
$200,000 and accrued interest of $9,367 were paid on one of the Notes, which extinguished all potential common stock and warrant
issuance provisions related to that Note.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the six months ended September 30, 2014, the holder of
the second Note converted the principal of $200,000 and accrued interest of $20,349 into 2,503,966 shares of our common stock per
the conversion formula of the Note (see Note 6).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">5. CONVERTIBLE NOTES PAYABLE</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Convertible Notes Payable consisted of the following at September
30, 2014:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Principal</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Unamortized <BR> Discount</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Net <BR> Amount</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Accrued <BR> Interest</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Convertible Notes Payable &ndash; Current Portion:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 40%; text-indent: -9pt; padding-left: 9pt">October &amp; November 2009 10% Convertible Notes</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">50,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">&ndash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">50,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">28,598</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -9pt; padding-left: 9pt">April 2010 10% Convertible Note</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">75,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">75,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">35,188</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">July and August 2011 10% Convertible Notes, past due</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">283,421</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">283,421</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">96,728</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Law Firm Note</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">75,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">75,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,479</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 22pt">Total &ndash; Convertible Notes Payable &ndash; Current Portion</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">483,422</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">483,422</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">169,993</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -9pt; padding-left: 9pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Convertible Notes Payable &ndash; Non-Current Portion:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Amended and Restated Series A 12% Convertible Notes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">225,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">225,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -9pt; padding-left: 9pt">September 2010 12% Convertible Notes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">317,072</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">317,072</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,513</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt">April 2011 12% Convertible Notes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">448,448</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">448,448</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">13,454</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 22pt">Total &ndash; Convertible Notes Payable &ndash; Non-Current Portion</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">990,520</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">990,520</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">31,967</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 44pt">Total Convertible Notes Payable</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,473,941</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,473,941</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">201,960</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There were no discounts remaining on any of our Convertible
Notes Payable as of September 30, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the six months ended September 30, 2014, we recorded
interest expense of $97,362 related to the contractual interest rates of our convertible notes and interest expense of $21,502
related to the amortization of deferred financing costs related to the convertible notes for a total interest related to convertible
notes of $118,864.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Convertible Notes Payable consisted of the following at March
31, 2014:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Principal</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Unamortized <BR> Discount</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Net <BR> Amount</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Accrued <BR> Interest</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Convertible Notes Payable &ndash; Current Portion:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 40%; text-align: left; text-indent: -9pt; padding-left: 9pt">Amended and Restated Series A 12% Convertible Notes, past due</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">885,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">&ndash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">885,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">575,250</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">2008 10% Convertible Notes, past due</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">25,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">25,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">19,167</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -9pt; padding-left: 9pt">October &amp; November 2009 10% Convertible Notes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">26,097</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -9pt; padding-left: 9pt">April 2010 10% Convertible Note</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">75,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">75,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">31,438</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">July and August 2011 10% Convertible Notes, past due</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">257,655</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">257,655</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">90,256</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Law Firm Note</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">75,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">75,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,604</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 22pt">Total &ndash; Convertible Notes Payable &ndash; Current Portion</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,367,655</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,367,655</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">749,812</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -9pt; padding-left: 9pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -9pt; padding-left: 9pt">Convertible Notes Payable &ndash; Non-Current Portion:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -9pt; padding-left: 9pt">September 2010 12% Convertible Notes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">317,072</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">317,072</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">35,034</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -9pt; padding-left: 9pt">April 2011 12% Convertible Notes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">448,448</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">448,448</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,117</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt">September 2011 12% Convertible Notes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">10,931</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">10,931</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -9pt; padding-left: 22pt">Total &ndash; Convertible Notes Payable &ndash; Non-Current Portion</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">776,451</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">776,451</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">47,151</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -9pt; padding-left: 44pt">Total Convertible Notes Payable</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,144,106</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,144,106</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">796,963</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There were no discounts remaining on any of our Convertible
Notes Payable as of March 31, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">AMENDED AND RESTATED SERIES A 12% CONVERTIBLE NOTES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In June 2010, we entered into Amended and Restated Series A
12% Convertible Promissory Notes (the &quot;Amended and Restated Notes&quot;) with the holders of certain promissory notes previously
issued by us, extending the due date to December 31, 2010 on the aggregate principal balance of $900,000. During the fiscal year
ended March 31, 2013, the holders of $15,000 of the Notes converted their principal and related accrued interest into common stock.
The balance remaining at March 31, 2014 was $885,000 and past due.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Weiner Note Conversion</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">On June 24, 2014, we entered into an agreement
with the Ellen R. Weiner Family Revocable Trust (the &ldquo;Trust&rdquo;), a holder of a Series A 12% Convertible Note (the &ldquo;Note&rdquo;),
which previously was classified as being in default. As per the agreement, the Trust converted past due principal of $660,000 and
accrued interest balance of $343,200 into restricted common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">Additionally, the Trust agreed to waive
anti-dilution price protection underlying warrants previously issued to the Trust. On June 26, 2014, three other parties who held
similar warrants also agreed to waive their anti-dilution price protection.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under its agreement, the Trust converted the entire $1,003,200
past due principal and interest balance on the Note, which previously was in default, into an aggregate of 23,318,254 restricted
shares of our common stock and five-year warrants to acquire up to 6,809,524 shares of our common stock at an exercise price of
$.042 per share (which exercise price was the result of certain contractual price adjustments previously made during 2011) and
up to 397,222 shares of our common stock at an exercise price of $.108 per share (collectively, the &ldquo;Conversion Securities&rdquo;).
Based on the fair value of the warrants and shares issued to the Trust for the accrued interest, we recorded a loss on settlement
of notes of $1,791,421.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In exchange for the Trust&rsquo;s conversion in full of the
Note and accrued interest and for the waivers of anti-dilution price protection in the previously issued warrants, in addition
to the Conversion Securities, we issued to the Trust 75,000 restricted shares of common stock as a service fee, changed the exercise
price of all of the previously issued warrants to $.042 per share and extended the expiration date of all of the previously issued
warrants to July 1, 2018. We valued the 75,000 share service fee at $12,000 based on our closing price on the date of the agreement
and recorded that value as interest expense during the June 2014 period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Bird Estate Extension</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On July 8, 2014, we executed a written restructuring agreement
(the &ldquo;Agreement&rdquo;) with the Estate of Allan Bird (the &ldquo;Estate&rdquo;), a holder of a Series A 12% Convertible
Note (the &ldquo;Note&rdquo;), which previously was classified as being in default. Since the negotiations for the Agreement were
completed in the month of June, we recorded the impact of the Agreement as of June 30, 2014. In the Agreement, the Estate agreed
to extend the expiration date of the Note to April 1, 2016, to convert approximately $116,970 of accrued interest to equity, and
to waive anti-dilution price protection underlying the Note and warrants previously issued to the Estate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under the Agreement, the Estate converted the entire $116,970
past due interest balance on the Note, which previously was in default, into an aggregate of 2,591,846 restricted shares of our
common stock. The Estate received five-year warrants to acquire up to 2,321,429 shares of our common stock at an exercise price
of $.042 per share (which exercise price was the result of certain contractual price adjustments previously made during 2011).
Based on our common stock prices during a period of negotiation with the Estate including during calendar year 2013, the Estate
also received five-year warrants to acquire up to 135,417 shares of our common stock at an exercise price of $.108 (collectively
known as the &ldquo;Conversion Securities&rdquo;). Based on the fair value of the warrants and shares issued to the Estate for
the accrued interest, we recorded a loss on settlement of notes of $663,209.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In exchange for the Estate&rsquo;s extension of the Note, conversion
of accrued interest and for the waivers of anti-dilution price protection in the previously issued warrants, in addition to the
Conversion Securities, we also issued to the Estate 25,000 restricted shares of common stock as an extension fee and extended the
expiration date of all of the previously issued warrants to July 1, 2018. We valued the 25,000 share extension fee at $4,500 based
on our closing price and recorded that value as a deferred financing cost, which we will amortize over the extended two year life
of the note.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">2008 10% CONVERTIBLE NOTES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On September 17, 2014, we issued to the holder of the remaining
2008 10% Convertible Note units consisting of an aggregate of 478,188 shares of restricted common stock and unit warrants to acquire
up to an aggregate of 239,094 shares of common stock at an exercise price of $0.096 per share (see Note 6). The units were issued
to the Note holder upon the conversion of an aggregate of $45,906 of unpaid principal and accrued interest due under the Note,
which represented the entire amount outstanding under the Note and the Note was retired. We recorded a loss on debt conversion
of $65,493 on this transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">OCTOBER &amp; NOVEMBER 2009 10% CONVERTIBLE NOTES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In October and November 2009, we raised $430,000 from the sale
to accredited investors of 10% convertible notes (&quot;October &amp; November 2009 10% Convertible Notes&quot;). The October &amp;
November 2009 10% Convertible Notes matured at various dates between April 2011 and May 2011 and are convertible into our common
stock at a fixed&nbsp;conversion price of $0.25 per share. The investors also received matching three year warrants to purchase
unregistered shares of our common stock at an exercise price of $0.25 per share. We measured the fair value of the warrants and
the beneficial conversion feature of the Notes and recorded a 100% discount against the principal of the notes. Such discount was
fully amortized at March 31, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">In July 2012, we issued 461,409 shares of common stock and 230,705
warrants to purchase common stock to the holder of a $25,000 note in this grouping in exchange for the conversion of such note
and related accrued interest of $8,000 (for a total of $33,000). The warrants expired in 2012 and are exercisable at $0.107 per
share (see Note 6). We recorded a loss on conversion of $45,796.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table shows the conversions into principal of
the October and November 2009 10% Convertible Notes by fiscal year:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="5" STYLE="text-align: center; border-bottom: Black 1pt solid">Activity in October &amp; November 2009 10% Convertible Notes</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 83%; text-align: left">Initial principal balance</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">450,250</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(70,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2011</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(175,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(130,250</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(25,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 1pt">Conversions during the six months ended September 30, 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Balance as of September 30, 2014</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">50,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 31, 2012, we agreed to extend the expiration date and
to change the exercise price of certain warrants of one of the note holders by two years in exchange for the extension of $50,000
of the October &amp; November 2009 10% Convertible Notes and the $75,000 April 2010 10% Convertible Note (see below) by that same
two year period. We recorded a charge of $77,265 relating to this modification.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In September 2013, we agreed to extend the expiration date of
certain warrants of one of the note holders by two years in exchange for the extension of $50,000 of the October &amp; November
2009 10% Convertible Notes and the $75,000 April 2010 10% Convertible Note (see below) by that same two year period. Management
assessed the change in the value of the notes and related warrants before and after that extension and determined that the change
in value related to the change in terms was not significant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subsequent to September 30, 2014, we issued to the holder of
the remaining October &amp; November 2009 10% Convertible Note and the April 2010 10% Convertible Note units consisting of an aggregate
of 1,835,798 shares of common stock and unit warrants to acquire up to an aggregate of 1,837,798 shares of common stock at an exercise
price of $0.103 per share. The units were issued to the note holder upon the conversion of an aggregate of $189,087 of unpaid principal
and accrued interest due under two promissory notes (the remaining October &amp; November 2009 10% Convertible Note and the April
2010 10% Convertible Note). The amounts converted represented the entire principal and interest outstanding under the notes and
the notes held by that holder were retired (see Note 15).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">APRIL 2010 10% CONVERTIBLE NOTE</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In April 2010, we raised $75,000 from the sale to an accredited
investor of a 10% convertible note. The convertible note was originally scheduled to mature in October 2011 and is convertible
into our common stock at a fixed conversion price of $0.25 per share prior to maturity. The investor also received three year warrants
to purchase 300,000 unregistered shares of our common stock at a price of $0.25 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We measured the fair value of the warrants and the beneficial
conversion feature of the notes and recorded a 100% discount against the principal of the notes. We amortized this discount using
the effective interest method over the term of the note. As of September 30, 2014, there have not been any conversions of the April
2010 10% Convertible Note.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 31, 2012, we agreed to extend the expiration date and
to change the exercise price of certain warrants of the note holder by two years in exchange for his extension of $50,000 of the
October &amp; November 2009 10% Convertible Notes and the $75,000 April 2010 10% Convertible Note by that same two year period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In September 2013, we agreed to extend the expiration date of
certain warrants of one of the note holders by two years in exchange for the extension of $50,000 of the October &amp; November
2009 10% Convertible Notes and the $75,000 April 2010 10% Convertible Note (see below) by that same two year period. Management
assessed the change in the value of the notes and related warrants before and after that extension and determined that the change
in value related to the change in terms was not significant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subsequent to September 30, 2014, we issued to the holder of
the remaining October &amp; November 2009 10% Convertible Note and the April 2010 10% Convertible Note units consisting of an aggregate
of 1,835,798 shares of common stock and unit warrants to acquire up to an aggregate of 1,837,798 shares of common stock at an exercise
price of $0.103 per share. The units were issued to the note holder upon the conversion of an aggregate of $189,087 of unpaid principal
and accrued interest due under two promissory notes (the remaining October &amp; November 2009 10% Convertible Note and the April
2010 10% Convertible Note). The amounts converted represented the entire principal and interest outstanding under the notes and
the notes held by that holder were retired (see Note 15).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">SEPTEMBER 2010 10% CONVERTIBLE NOTES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On September 3, 2010, we entered into a Subscription Agreement
with three accredited investors (the &ldquo;Purchasers&rdquo;)&nbsp;providing for the issuance and sale of convertible promissory
notes and corresponding warrants in the aggregate principal amount of $1,430,000. The initial closing under the Subscription Agreement
resulted in the issuance and sale of (i) convertible promissory notes in the aggregate principal amount of $743,600, (ii) five-year
warrants to purchase an aggregate of 3,718,000 shares of our common stock at an exercise price of $0.31125 per share, and (iii)
five-year warrants to purchase an aggregate of 3,718,000 shares of our common stock at an exercise price of $0.43575 per share.
The convertible promissory notes bear interest compounded monthly at the annual rate of ten percent (10%) and mature on April 1,
2016 (see below). The aggregate gross cash proceeds were $650,000, the balance of the principal amount representing a due diligence
fee and an original issuance discount. The convertible promissory notes are convertible at the option of the holders into shares
of our common stock at a price per share equal to eighty percent (80%) of the average of the three lowest closing bid prices of
the common stock as reported by Bloomberg L.P. for the principal market on which the common stock trades or is quoted for the ten
(10) trading days preceding the proposed conversion date. Subject to adjustment as described in the notes, the conversion price
may not be more than $0.30 nor less than $0.20. There are no registration requirements with respect to the shares of common stock
underlying the notes or the warrants.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 31, 2014, we entered into separate Amendments to Convertible
Notes and Warrants (collectively, the &ldquo;Amendments&rdquo;) with three accredited investors (collectively, the &ldquo;Investors&rdquo;)
who own certain convertible promissory notes (collectively, the &ldquo;Notes&rdquo;) and warrants (collectively, the &ldquo;Warrants&rdquo;)
previously issued by us on various dates between December 5, 2007 and September 23, 2011, including the September 2010 Convertible
Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Prior to the Amendments, the Notes were past maturity and were
in default, resulting in the accrual of interest at the applicable default interest rate. The Amendments extended the maturity
date of each of the Notes to April 1, 2016, which permits us to classify them as long-term liabilities. As a result of the Amendments,
the Notes are no longer in default and the non-default interest rate for all of the Notes was set at 12% per annum, which represents
a reduction from the default interest rates of fifteen percent at which interest had been accruing. By entering into the Amendments,
we also agreed to increase the currently outstanding principal amount of the Notes by 12% from a total of $693,260 to a total of
$776,451.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the period from October 2011 to February 2014, the Investors
had converted, at conversion prices between $.0546 and $.07 per share, portions of principal and interest outstanding under the
Notes and certain other convertible promissory notes previously issued to them by us. Certain antidilution provisions applicable
to such notes should have resulted in such conversions being effected at a conversion price of $.042 per share. Accordingly, pursuant
to the Amendments, we issued to the investors an aggregate of 4,507,105 shares of the Company&rsquo;s Common Stock, which represents
the additional shares of Common Stock that would have been issued to the Investors had such conversions been effected at $.042
per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Amendments also set the conversion price of the Notes, as
well as the exercise price at which shares of our common stock can be purchased under the Warrants, at $.042 per share. By virtue
of the Amendments, the expiration dates of the Warrants also were extended from dates between September 3, 2015 and September 23,
2016 to January 1, 2017.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table shows the activity in the September 2010
10% Convertible Notes by fiscal year:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="5" STYLE="text-align: center; border-bottom: Black 1pt solid">Activity in the September 2010 10% Convertible Notes</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 83%; text-align: left">Initial principal balance</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">743,600</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(405,500</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(30,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(25,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Increase in principal balance due to 12% extension fee</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">33,972</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Conversions during the six months ended September 30, 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt">Balance as of September 30, 2014</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">317,072</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">APRIL 2011 10% CONVERTIBLE NOTES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In April 2011, we entered into a Subscription Agreement with
two accredited investors (the &ldquo;Purchasers&rdquo;) providing for the issuance and sale of convertible promissory notes and
corresponding warrants in the aggregate principal amount of $385,000. The closing under the Subscription Agreement resulted in
the issuance and sale by us of (i) convertible promissory notes in the aggregate principal amount of $385,000, (ii) five-year warrants
to purchase an aggregate of&nbsp;4,004,000 shares of our common stock at an exercise price of $0.125 per share, and (iii) five-year
warrants to purchase an aggregate of&nbsp;4,004,000 shares of our common stock at an exercise price of $0.175 per share. The convertible
promissory notes bear interest compounded monthly at the annual rate of 10% and mature on April 1, 2016 (see below). The aggregate
gross cash proceeds to us were $350,000, the balance of the principal amount representing a due diligence fee and an original issuance
discount. The convertible promissory notes are convertible at the option of the holders into shares of our common stock at a price
per share equal to eighty percent (80%) of the average of the three lowest closing bid prices of the common stock as reported by
Bloomberg L.P. for the principal market on which the common stock trades or is quoted for the ten (10) trading days preceding the
proposed conversion date. Subject to adjustment as described in the notes, the conversion price may not be more than $0.20 nor
less than $0.10. There are no registration requirements with respect to the shares of common stock underlying the notes or the
warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition, we issued (i) five-year warrants to purchase an
aggregate of 812,500 shares of our common stock at an exercise price of $0.125 per share, and (ii) five-year warrants to purchase
an aggregate of&nbsp;812,500 shares of our common stock at an exercise price of $0.175 per share to the Purchasers. These warrants
were issued as an antidilution adjustment under certain common stock purchase warrants held by the Purchasers that were acquired
from us in September 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 31, 2014, we entered into separate Amendments to Convertible
Notes and Warrants (collectively, the &ldquo;Amendments&rdquo;) with three accredited investors (collectively, the &ldquo;Investors&rdquo;)
who own certain convertible promissory notes (collectively, the &ldquo;Notes&rdquo;) and warrants (collectively, the &ldquo;Warrants&rdquo;)
previously issued by us on various dates between December 5, 2007 and September 23, 2011, including the April 2011 Convertible
Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Prior to the Amendments, the Notes were past maturity and were
in default, resulting in the accrual of interest at the applicable default interest rate. The Amendments extended the maturity
date of each of the Notes to April 1, 2016, which permits us to classify them as long-term liabilities. As a result of the Amendments,
the Notes are no longer in default and the non-default interest rate for all of the Notes was set at 12% per annum, which represents
a reduction from the default interest rates of 15% at which interest had been accruing. By entering into the Amendments, we also
agreed to increase the currently outstanding principal amount of the Notes by 12% from a total of $693,260 to a total of $776,451.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the period from October 2011 to February 2014, the Investors
had converted, at conversion prices between $.0546 and $.07 per share, portions of principal and interest outstanding under the
Notes and certain other convertible promissory notes previously issued to them by us. Certain antidilution provisions applicable
to such notes should have resulted in such conversions being effected at a conversion price of $.042 per share. Accordingly, pursuant
to the Amendments, we issued to the investors an aggregate of 4,507,105 shares of the Company&rsquo;s Common Stock, which represents
the additional shares of Common Stock that would have been issued to the Investors had such conversions been effected at $.042
per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Amendments also set the conversion price of the Notes, as
well as the exercise price at which shares of our common stock can be purchased under the Warrants, at $.042 per share. By virtue
of the Amendments, the expiration dates of the Warrants also were extended from dates between September 3, 2015 and September 23,
2016 to January 1, 2017.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of September 30, 2014, there have not been any conversions
of the April 2011 10% Convertible Notes and the 12% extension fee noted above increased the principal balance by $48,048 to a principal
balance of $448,448.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">JULY &amp; AUGUST 2011 10% CONVERTIBLE NOTES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the three months ended September 30, 2011, we raised
$357,656 in five separate 10% convertible notes. Those notes had a fixed conversion price of $0.09 per share and carried an interest
rate of 10%. The convertible notes matured in July and August 2012. We also issued those investors five year warrants to purchase
3,973,957 shares of common stock at $0.125 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We measured the fair value of the warrants and the beneficial
conversion feature of the notes and recorded a $257,926 discount against the principal of the notes. We amortized this discount
using the effective interest method over the term of the note.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Effective March 31, 2014, the holders of three of the five notes
totaling $100,000 converted all of their principal and accrued interest into 1,438,700 shares of our common stock at the contractual
conversion price of $0.09 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In September 2014, we entered into a forbearance agreement with
the holder of the remaining two notes in which we agreed to repay his notes by October 31, 2014 and in which we also agreed to
extend his warrants by two years. We recorded a charge of $143,363 in the September 2014 period related to this warrant extension
due to the change in the fair value of the warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subsequent to September 30, 2014, we paid off in full the remaining
outstanding principal balance and interest balances on the two remaining notes with cash payments of $382,748 (see Note 15).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">SEPTEMBER 2011 CONVERTIBLE NOTES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In September 2011, we issued $253,760 of convertible notes,
convertible at $0.07 per share. Such notes originally matured in September 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 31, 2014, we entered into separate Amendments to Convertible
Notes and Warrants (collectively, the &ldquo;Amendments&rdquo;) with three accredited investors (collectively, the &ldquo;Investors&rdquo;)
who own certain convertible promissory notes (collectively, the &ldquo;Notes&rdquo;) and warrants (collectively, the &ldquo;Warrants&rdquo;)
previously issued by us on various dates between December 5, 2007 and September 23, 2011, including the September 2011 Convertible
Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Prior to the Amendments, the Notes were past maturity and were
in default, resulting in the accrual of interest at the applicable default interest rate. The Amendments extended the maturity
date of each of the Notes to April 1, 2016, which permits us to classify them as long-term liabilities. As a result of the Amendments,
the Notes are no longer in default and the non-default interest rate for all of the Notes was set at 12% per annum, which represents
a reduction from the default interest rates of 15% at which interest had been accruing. By entering into the Amendments, we also
agreed to increase the currently outstanding principal amount of the Notes by 12%, which in the case of the September 2011 Notes,
they increased from $9,760 to $10,931</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the period from October 2011 to February 2014, the Investors
had converted, at conversion prices between $.0546 and $.07 per share, portions of principal and interest outstanding under the
Notes and certain other convertible promissory notes previously issued to them by us. Certain antidilution provisions applicable
to such notes should have resulted in such conversions being effected at a conversion price of $.042 per share. Accordingly, pursuant
to the Amendments, we issued to the investors an aggregate of 4,507,105 shares of the Company&rsquo;s Common Stock, which represents
the additional shares of Common Stock that would have been issued to the Investors had such conversions been effected at $.042
per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Amendments also set the conversion price of the Notes, as
well as the exercise price at which shares of our common stock can be purchased under the Warrants, at $.042 per share. By virtue
of the Amendments, the expiration dates of the Warrants also were extended to January 1, 2017.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table shows the conversions into principal of
the September 2011 Convertible Notes by fiscal year:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="5" STYLE="text-align: center; border-bottom: Black 1pt solid">Activity in the September 2011 Convertible Notes</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 83%; text-align: left">Initial principal balance</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">253,760</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(15,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(60,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Conversions during the fiscal year ended March 31, 2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(169,000</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Increase in principal balance due to extension fee</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,171</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Conversions during the six months ended September 30, 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(10,931</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt">Balance as of September 30, 2014</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As noted in the above table, the remaining balance of the September
2011 Convertible Notes converted into equity during the six months ended September 30, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">LAW FIRM NOTE</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 22, 2012, we entered into a Promissory Note with our
corporate law firm for the amount of $75,000, which represented the majority of the amount we owed to that firm at that time. The
Promissory Note originally had a maturity date of December 31, 2012 and bears interest at 5% per annum. The note is convertible
at the option of the holder into shares of our common stock at a 10% discount to the market price of the common stock on the date
prior to conversion with a floor price on such conversions of $0.08 per share. The holder subsequently agreed to extend the Maturity
Date of the Note first to October 1, 2013, then to September 30, 2013, and now the expiration date of this note is again extended
to October 1, 2014. As of September 30, 2014, there have not been any conversions of the Law Firm Note.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subsequent to September 30, 2014, we paid off in full the
outstanding principal balance and interest balance on the note with a cash payment of $50,000 and an issuance of 170,020
common shares (see Note 15).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">6. EQUITY TRANSACTIONS&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">COMMON STOCK AND WARRANTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following are Aethlon Medical, Inc.&rsquo;s Equity Transactions
in the Six Months Ended September 30, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In the three months ended June 30, 2014, we completed unit subscription
agreements with seven accredited investors pursuant to which we issued 2,192,444 shares of our common stock and 1,096,222 warrants
to purchase our common stock for net cash proceeds of $320,800. Such warrants have exercise prices ranging from $0.193 to $0.236
per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As discussed above in Note 5, during the three months ended
June 30, 2014, we issued 15,714,286 shares of restricted common stock to the holder of one of the Series A 12% Convertible Notes
in exchange for the conversion in full of the $660,000 principal balance of that note, 7,603,968 shares of restricted common stock
in exchange for conversion of $343,200 of accrued interest and 75,000 shares of restricted common stock as a restructuring fee.
During that period, we also issued the other holder of the Series A 12% Convertible Notes 2,591,846 shares of restricted common
stock in exchange for conversion of $116,970 of accrued interest and 25,000 shares of restricted common stock as a restructuring
fee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the three months ended June 30, 2014, we issued 219,127
shares of common stock pursuant to our S-8 registration statement covering our Amended 2010 Stock Plan at an average price of $0.17
per share in payment for legal services, internal controls consulting services and regulatory consulting services collectively
valued at $38,268 based on the value of the services provided.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the three months ended September 30, 2014, we issued
359,956 shares of common stock pursuant to our S-8 registration statement covering our Amended 2010 Stock Plan at an average price
of $0.14 per share in payment for legal and scientific consulting services valued at $49,090 based on the value of the services
provided.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the three months ended September 30, 2014, we issued
390,301 shares of restricted common stock at an average price of $0.19 per share in payment for investor relations consulting services
valued at $75,000 based on the value of the services provided.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the three months ended September 30, 2014, we issued
1,937,505 shares of restricted common stock to the holders of three convertible notes in exchange for the partial or full conversion
of principal and interest in the aggregate amount of $81,375 at a conversion price of $0.042 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On July 24, 2014, we issued an aggregate of 2,503,966 shares
of restricted common stock and a seven-year warrant to issue up to 1,251,983 shares of common stock at an exercise price of $0.132
per share to Dr. Chetan Shah, a director. The common stock and warrant were issued to Dr. Shah upon the conversion of an aggregate
of $220,349 of unpaid principal and accrued interest due under a 10% Convertible Note previously issued to Dr. Shah by us on July
9, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On September 17, 2014, we issued to the holder of the remaining
2008 10% Convertible Note units consisting of an aggregate of 478,188 shares of restricted common stock and unit warrants to acquire
up to an aggregate of 239,094 shares of common stock at an exercise price of $0.096 per share (see Note 5). The units were issued
to the note holder upon the conversion of an aggregate of $45,906 of unpaid principal and accrued interest due under the promissory
note, which represented the entire amount outstanding under the note. We recorded a loss on debt conversion of $65,493 on this
transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the three months ended September 30, 2014, we issued
to four investors 2,673,231 shares of restricted common stock through the cash exercise of eight warrants for $259,474 of cash
at an average exercise price of approximately $0.10 per share. As an inducement to those investors, we issued them replacement
warrants to acquire up to an aggregate of 2,673,231 shares of common stock on the same terms as the warrants they exercised.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the three months ended September 30, 2014, we issued
and sold to three accredited investors units consisting of (a) one hundred thousand (100,000) restricted shares of our common stock,
par value $.001 per share, at prices per share ranging from $0.091 to $0.094 and (b) a five-year warrant to purchase fifty thousand
(50,000) shares of common stock at exercise prices ranging from $0.136 to $0.143 per share. In total, the investors purchased for
cash an aggregate of $90,000 of units. The investors acquired an aggregate of 974,982 shares of common stock and warrants to acquire
up to an aggregate of 487,491 shares of Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">7. RELATED PARTY TRANSACTIONS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">DUE TO RELATED PARTIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Certain of our officers and other related parties have advanced
us funds, agreed to defer compensation and/or paid expenses on our behalf to cover working capital deficiencies. These unsecured
and non-interest-bearing liabilities have been included as due to related parties in the accompanying consolidated balance sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Other related party transactions are disclosed elsewhere in
these notes to consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">8. OTHER CURRENT LIABILITIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Other current liabilities were comprised of the following items:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">September 30,</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">March 31,</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left">Accrued interest</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">570,741</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">1,165,335</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Accrued legal fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">179,465</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">179,465</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Accrued liquidated damages</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">362,800</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">362,800</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Other accrued liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">103,598</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">147,774</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total other current liabilities</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,216,604</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,855,374</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of the date of this report, various promissory and convertible
notes payable in the aggregate principal amount of $473,422 (as identified in Notes 4 and 5 above) have reached maturity and are
past due. We are continually reviewing other financing arrangements to retire all past due notes. At September 30, 2014, we had
accrued interest in the amount of $471,041 associated with these defaulted notes in accrued liabilities payable (see Notes 4 and
5).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">9. FAIR VALUE MEASUREMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We follow FASB ASC 820, &quot;FAIR VALUE MEASUREMENTS AND DISCLOSURES&quot;
(&ldquo;ASC 820&rdquo;) in connection with assets and liabilities measured at fair value on a recurring basis subsequent to initial
recognition. The guidance applies to our derivative liabilities. We had no assets or liabilities measured at fair value on a non-recurring
basis for any period reported.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">ASC 820 requires that assets and liabilities carried at fair
value will be classified and disclosed in one of the following three categories: We measure the fair value of applicable financial
and non-financial assets based on the following fair value hierarchy:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Level 1: Quoted market prices in active markets for identical
assets or liabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Level 2: Observable market based inputs or unobservable inputs
that are corroborated by market data.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Level 3: Unobservable inputs that are not corroborated by market
data.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The hierarchy noted above requires us to minimize the use of
unobservable inputs and to use observable market data, if available, when determining fair value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The fair value of our recorded derivative liabilities is determined
based on unobservable inputs that are not corroborated by market data, which is a Level 3 classification. We record derivative
liabilities on our balance sheet at fair value with changes in fair value recorded in our consolidated statements of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">At September 30, 2014, we no longer had any derivative liabilities
as all of the holders of the financial instruments that had price antidilution protection waived such price antidilution protection.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our fair value measurements at the March 31, 2014 reporting
date are classified based on the valuation technique level noted in the table below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid">Description</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, <BR> 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Quoted Prices <BR> in Active Markets for <BR> (Level 1)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Significant Other Observable <BR> (Level 2)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Significant <BR> Unobservable <BR> (Level 3)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 32%; text-align: left; padding-bottom: 2.5pt">Derivative Liabilities</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 2.5pt double; text-align: right">10,679,067</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 2.5pt double; text-align: right">10,679,067</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total Assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,679,067</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,679,067</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following outlines the significant weighted average assumptions
used to estimate the fair value information presented, in connection with our warrant and embedded conversion option derivative
instruments utilizing the Binomial Lattice option pricing model:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="background-color: white">The following outlines
the significant weighted average assumptions used to estimate the fair value information presented, in connection with our warrant
and embedded conversion option derivative instruments utilizing the Binomial Lattice option pricing model:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid">&nbsp;</TD>
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">Six Months Ended September 30, 2013</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 73%; text-align: left">Risk free interest rate</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 25%; text-align: center">0.02% - 0.62%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Average expected life</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">0.25 &ndash; 3 years</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Expected volatility</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">78.9% - 104.5%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Expected dividends</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">None</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The table below sets forth a summary of changes in the fair
value of our Level 3 financial instruments for the six months ended September 30, 2014: &nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">April 1, <BR> 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Recorded New Derivative <BR> Liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Change in estimated fair value recognized in results of operations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Reclassification <BR> of Derivative <BR> Liability to Paid <BR> in capital</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">September 30, <BR> 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 25%">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 11%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 11%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 11%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 11%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 11%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Derivative liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">10,679,067</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(10,679,067</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The table below sets forth a summary of changes in the fair
value of our Level 3 financial instruments for the six months ended September 30, 2013:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Change in</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Reclassification</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">estimated fair</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">of Derivative</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Recorded</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">value recognized</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Liability to</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">April 1,</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">New Derivative</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">in results</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Paid in</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">September 30,</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">of operations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">capital</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 25%">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 11%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 11%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 11%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 11%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 11%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -11pt; padding-left: 11pt">Derivative liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3,588,239</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2,382,877</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(106,501</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5,864,615</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">10. STOCK COMPENSATION&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table breaks out the components of our share-based
compensation expenses relating to shares and options granted and the effect on basic and diluted loss per common share during the
three and six months ended September 30, 2014 and 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Three Months Ended</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Three Months Ended</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Six Months Ended</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Six Months Ended</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">September 30, 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">September 30, 2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">September 30, 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">September 30, 2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 32%; text-align: left">Vesting of stock options</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">89,793</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">73,856</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">260,680</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">124,243</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -11pt; padding-left: 11pt">Incremental fair value of option modifications</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">957</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,914</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -11pt; padding-left: 11pt">Vesting expense associated with CEO restricted stock grant</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">64,444</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -11pt; padding-left: 11pt">Total share-based compensation expense</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">89,793</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">74,813</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">260,680</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">190,601</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -11pt; padding-left: 11pt">Total share-based compensation expense included in net loss</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">89,793</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">73,856</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">260,680</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">190,601</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 11pt; text-indent: -11pt">Weighted average number of common shares outstanding &ndash; basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">259,369,911</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">187,643,582</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">243,494,916</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">182,004,220</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -11pt; padding-left: 11pt">Basic and diluted loss per common share</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.00</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.00</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.00</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.00</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">All of the stock-based compensation expense recorded during
the six months ended September 30, 2014 and 2013, which totaled $260,680 and $190,601, respectively, is included in payroll and
related expense in the accompanying condensed consolidated statements of operations.&nbsp; Stock-based compensation expense recorded
during the six months ended September 30, 2014 and 2013 had no impact on basic and diluted loss per common share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We review share-based compensation on a quarterly basis for
changes to the estimate of expected award forfeitures based on actual forfeiture experience. The cumulative effect of adjusting
the forfeiture rate for all expense amortization is recognized in the period the forfeiture estimate is changed. The effect of
forfeiture adjustments for the three and six month periods ended September 30, 2014 was insignificant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On June 6, 2014, our Board of Directors approved the following
grants of options to certain officers and directors of the Company:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 60px">&nbsp;</TD>
    <TD STYLE="width: 30px"><FONT STYLE="font: 10pt Wingdings">o</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">To Mr. James A. Joyce, an option to acquire an aggregate of 1,500,000 shares of our common stock at an exercise price of $0.19 per share, the closing price of our common stock on the date of grant. The fair value of this stock option at the date of grant was $246,000.&nbsp;&nbsp;The option vested as to 500,000 shares on the grant date for a vesting expense of $82,000 and will vest as to an additional 500,000 shares on each of the first two anniversaries of the grant date. Unless earlier exercised or terminated, the option will expire June 6, 2024.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 60px">&nbsp;</TD>
    <TD STYLE="width: 30px"><FONT STYLE="font: 10pt Wingdings">o</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">To Mr. Rodney S. Kenley, an option to acquire an aggregate of 250,000 shares of our common stock at an exercise price of $0.19 per share, the closing price of our common stock on the date of grant. The fair value of this stock option at the date of grant was $41,000.&nbsp;&nbsp;The option vested as to 83,333 shares on the grant date for a vesting expense of $13,667 and will vest as to an additional 83,333 shares on the first anniversary of the grant date and 83,334 shares on the second anniversary of the grant date. Unless earlier exercised or terminated, the option will expire June 6, 2024.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 60px">&nbsp;</TD>
    <TD STYLE="width: 30px"><FONT STYLE="font: 10pt Wingdings">o</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">To Mr. James B. Frakes, an option to acquire an aggregate of 250,000 shares of our common stock at an exercise price of $0.19 per share, the closing price of our common stock on the date of grant. The fair value of this stock option at the date of grant was $41,000. The option vested as to 83,333 shares on the grant date for a vesting expense of $13,667 and will vest as to an additional 83,333 shares on the first anniversary of the grant date and 83,334 shares on the second anniversary of the grant date. Unless earlier exercised or terminated, the option will expire June 6, 2024.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 60px">&nbsp;</TD>
    <TD STYLE="width: 30px"><FONT STYLE="font: 10pt Wingdings">o</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">To Dr. Richard H. Tullis, an option to acquire an aggregate of 50,000 shares of our common stock at an exercise price of $0.19 per share, the closing price of our common stock on the date of grant. The fair value of this stock option at the date of grant was $8,200. The option vested as to 16,667 shares on the grant date for a vesting expense of $2,733 and will vest as to an additional 16,667 shares on the first anniversary of the grant date and 16,666 shares on the second anniversary of the grant date. Unless earlier exercised or terminated, the option will expire June 6, 2024. </FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition to the above grants to our officers, on June 6,
2014, our Board of Directors also approved the grant of options to five employees to acquire an aggregate of 370,000 shares of
our common stock at an exercise price of $0.19 per share, the closing price of our common stock on the date of grant. The aggregate
fair value of those stock options at the date of grant was $60,680. Those options vested as to 123,333 shares on the grant date
for a vesting expense of $20,227 and will vest as to an additional 123,333 shares on the first anniversary of the grant date and
123,334 shares on the second anniversary of the grant date. Unless earlier exercised or terminated, the option will expire June
6, 2024.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In addition to the share-based compensation expense for the
specific stock option grants noted above, our total share-based compensation expense for the three and six months ended September
30, 2014 includes ongoing vesting expense associated with stock grants from prior periods.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Changes to 2012 Board Compensation Program</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In July 2012, the Board approved a Board Compensation Program
(the &ldquo;2012 Program&rdquo;), which modified and superseded the 2005 Directors Compensation Program that had been in effect
previously. On June 6, 2014, the Board approved certain changes to the 2012 Program. Under the modified 2012 Program, in which
only non-employee Directors may participate, a new eligible Director will receive an initial grant of $50,000 worth of options
to acquire shares of common stock, with such grant being valued at the exercise price based on the average of the closing bid prices
of our common stock for the five trading days preceding the first day of the fiscal year. These options will have a term of ten
years and will vest 1/3 upon grant and 1/3 upon each of the first two anniversaries of the date of grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">At the beginning of each fiscal year, each existing Director
eligible to participate in the 2012 Program also will receive a grant of $35,000 worth of options valued at the exercise price
based on the average of the closing bid prices of the Common Stock for the five trading days preceding the first day of the fiscal
year. Such options will vest on the first anniversary of the date of grant. In lieu of per meeting fees, under the 2012 Program
eligible Directors will receive an annual Board retainer fee of $30,000. The modified 2012 Program also provides for the following
annual retainer fees: Audit Committee Chair - $5,000, Compensation Committee chair - $5,000, Audit Committee member - $4,000, Compensation
Committee member - $4,000 and Lead independent director - $15,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a result of the modified 2012 Program on June 6, 2014, we
issued 184,211 stock options to each of our three outside directors. Those grants vest over the fiscal year ending March 31, 2015
and have an exercise price of $0.19 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">All of the foregoing actions - the changes in base salaries,
the option grants and the changes to the Directors Compensation Program discussed herein - were approved and recommended by the
Company&rsquo;s Compensation Committee prior to approval by the Board.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following outlines the significant weighted average assumptions
used to estimate the fair value information presented, with respect to stock option grants utilizing the Binomial Lattice option
pricing models at, and during the six months ended September 30, 2014:&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 73%; text-align: left">Risk free interest rate</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 25%; text-align: center">2.6%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Average expected life</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">10 years</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Expected volatility</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">90.23%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Expected dividends</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">None</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The expected volatility was based on the historic volatility.
The expected life of options granted was based on the &quot;simplified method&quot; as described in the SEC's guidance due to changes
in the vesting terms and contractual life of current option grants compared to our historical grants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In May 2013, we granted to a scientific advisory board member
and a scientific consultant a three year option to purchase 125,000 shares of our common stock at a price of $0.11 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In July 2013, <FONT STYLE="background-color: white">our compensation
committee and Board of Directors approved the issuance of four stock option grants to four of our executives. The options carried
an exercise price of $0.10 per share, have a ten year life and vest over the following schedule: 25% on July 1, 2014, 25% on July
1, 2015, 25% on July 1, 2016 and 25% on July 1, 2017. The numbers of shares underlying each of the stock option grants were as
follows: 2,000,000 shares to our chief executive officer and 500,000 shares each to our president, chief science officer and chief
financial officer (see Note 10).</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following outlines the significant weighted average assumptions
used to estimate the fair value information, which is based on historical data, with respect to stock option grants utilizing the
Binomial Lattice option pricing models at, and during the six months ended September 30, 2013:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 73%; text-align: left">Risk free interest rate</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 25%; text-align: center">0.38% - 2.50%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Average expected life</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">3 years - 10 years</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Expected volatility</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">94.6% - 102.7%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Expected dividends</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">None</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The expected volatility was based on the historic volatility.
The expected life of options granted was based on the &quot;simplified method&quot; as described in the SEC's guidance due to changes
in the vesting terms and contractual life of current option grants compared to our historical grants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Options outstanding that have vested and are expected to vest
as of September 30, 2014 are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Number of Options</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Weighted Average Exercise Price</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Weighted Average Remaining Contractual Term in Years</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 49%">Vested</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">24,294,227</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">0.26</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">3.96</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Expected to vest</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,711,811</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.14</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9.15</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 0.25in">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">29,006,038</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A summary of stock option activity during the six months ended
September 30, 2014 is presented below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Number of Options</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Range of<BR> Exercise Price</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted Average <BR> Exercise Price</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 49%; text-align: left">Stock options outstanding at March 31, 2014</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">26,133,407</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$0.076 - $0.41</FONT></TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">0.25</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Exercised</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>Granted</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,972,631</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.19</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.19</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Cancelled/Expired</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(100,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0.19</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0.19</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Stock options outstanding at September 30, 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">29,006,038</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$0.076 - $0.41</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0.24</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Stock options exercisable at September 30, 2014</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">24,294,227</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$0.076 - $0.41</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">0.26</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


<!-- Field: Page; Sequence: 155; Value: 1 -->
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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">At September 30, 2014, there was approximately $497,783 of unrecognized
compensation cost related to share-based payments, which is expected to be recognized over a weighted average period of 2.19 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On September 30, 2014, our stock options had a negative intrinsic
value since the closing price of our common stock on that date of $0.12 per share was below the weighted average exercise price
of our stock options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">11. WARRANTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A summary of warrant activity during the six months ended September
30, 2014 is presented below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Range of<BR> Exercise Price</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted Average<BR> Exercise Price</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 49%">Warrants outstanding at March 31, 2014</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">70,709,475</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 15%; text-align: center">$0.042 - $0.25</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">0.13</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Exercised</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,166,104</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">$0.086 &ndash; $0.12</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.10</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>Issued</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15,375,614</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">$0.042 - $0.24</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.07</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Cancelled/Expired</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,136,364</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center; padding-bottom: 1pt">$0.13</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0.13</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 1pt">Warrants outstanding at September 30, 2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">82,782,621</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center; padding-bottom: 1pt">$0.042 - $0.25</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0.10</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Warrants exercisable at September 30, 2014</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">82,782,621</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: center; padding-bottom: 2.5pt">$0.042 - $0.25</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">0.10</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following outlines the significant weighted average assumptions
used to estimate the fair value information presented, with respect to warrants utilizing the Binomial Lattice option pricing models
at, and during, the six months ended September 30, 2014:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="background-color: rgb(238,238,238)">
    <TD STYLE="width: 73%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Risk free interest rate</FONT></TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 25%; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">0.79% - 2.29%&nbsp;&nbsp;</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Average expected life&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">5 years &ndash; 7 years</FONT></TD></TR>
<TR STYLE="background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Expected volatility&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">90.1% - 95.8%</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Expected dividends&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">None</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">12. DARPA CONTRACT AND RELATED REVENUE RECOGNITION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As discussed in Note 1, we entered into a contract with the
DARPA on September 30, 2011. Under the DARPA award, we have been engaged to develop a therapeutic device to reduce the incidence
of sepsis, a fatal bloodstream infection that often results in the death of combat-injured soldiers. The award from DARPA was a
fixed-price contract with potential total payments to us of $6,794,389 over the course of five years. Fixed price contracts require
the achievement of multiple, incremental milestones to receive the full award during each year of the contract. Under the terms
of the contract, we will perform certain incremental work towards the achievement of specific milestones against which we will
invoice the government for fixed payment amounts.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Originally, only the base year (year one contract) was effective
for the parties, however, DARPA subsequently exercised the option on the second, third and fourth years of the contract. DARPA
has the option to enter into the contract for year five. The milestones are comprised of planning, engineering and clinical targets,
the achievement of which in some cases will require the participation and contribution of third party participants under the contract.
There can be no assurance that we alone, or with third party participants, will meet such milestones to the satisfaction of the
government and in compliance with the terms of the contract or that we will be paid the full amount of the contract revenues during
any year of the contract term. We commenced work under the contract in October 2011.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Due to budget restrictions within the Department of Defense,
on February 10, 2014, DARPA reduced the scope of our contract in years three through five of the contract. The reduction in scope
focused our research on exosomes, viruses and blood processing instrumentation. This scope reduction will reduce the possible payments
under the contract by $858,491 over years three through five. We recently completed a re-budgeting of the expected costs on the
remaining years of the DARPA contract based on the reduced milestones and have concluded that the reductions in our costs due to
the scaled back level of work will almost entirely offset the anticipated revenue levels based on current assumptions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the six months ended September 30, 2014, we invoiced
DARPA for three milestones totaling $444,723. The details of those milestones were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Milestone 2.4.2.2 &ndash; Determine capacity requirements of
affinity resin to multiple simultaneous targets. The milestone payment was $197,362. Management considers this milestone to be
substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts.&nbsp;&nbsp;We demonstrated
that we were able to determine the capacity requirements of affinity resin to multiple simultaneous targets.&nbsp;&nbsp;The report
was accepted by the contracting officer's representative and the invoice was submitted thereafter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Milestone 2.4.2.4 &ndash; Finish construction and delivery of
25 experimental cartridges for testing by the system integrator. The milestone payment was $50,000. Management considers this milestone
to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts.&nbsp;&nbsp;We
demonstrated that we delivered the 25 cartridges to the systems integrator as part of our submission for approval.&nbsp;&nbsp;The
report was accepted by the contracting officer's representative and the invoice was submitted thereafter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Milestone M9 &ndash; Target capture &gt; 90% in 24 hours for
at least 3 targets ex vivo in blood or blood components using the optimized cartridge. The milestone payment was $197,361. Management
considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's
efforts.&nbsp;&nbsp;We demonstrated that we were able to capture approximately 90% in 24 hours for at least 3f targets ex vivo
in blood or blood components using the optimized cartridge.&nbsp;&nbsp;The report was accepted by the contracting officer's representative
and the invoice was submitted thereafter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In the six months ended September 30, 2013, we invoiced DARPA
for four milestones totaling $808,739.&nbsp;&nbsp;The details of those milestones were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Milestone 2.3.2.2 &ndash; Formulate initial design work based
on work from the previous phase. Begin to build and test selected instrument design and tubing sets. The milestone payment was
$195,581. Management considers this milestone to be substantive as it was not dependent on the passage of time nor was it based
solely on another party's efforts.&nbsp;&nbsp;We demonstrated that we were able to formulate the initial design work and to build
and test selected instrument design and tubing sets as part of our submission for approval.&nbsp;&nbsp;The report was accepted
by the contracting officer's representative and the invoice was submitted thereafter.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Milestone 2.3.2.2 &ndash; Write and test software and conduct
ergonomic research. Begin discussions with the systems integrator. The milestone payment was $195,581. Management considers this
milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts.&nbsp;&nbsp;We
obtained wrote and tested software and conducted ergonomic research and began discussions with the systems integrator. The report
was accepted by the contracting officer's representative and the invoice was submitted thereafter.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Milestone 2.3.3.2 &ndash; Cartridge construction with optimized
affinity matrix design for each potential target. Complete the capture agent screening. The milestone payment was $208,781. Management
considers this milestone to be substantive as it was not dependent on the passage of time nor was it based solely on another party's
efforts.&nbsp;&nbsp;We completed the cartridge construction with optimized affinity matrix design for each potential target and
completed the capture agent screening. The report was accepted by the contracting officer's representative and the invoice was
submitted thereafter.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Milestone M5 &ndash; Target capture &gt; 90% in 24 hours for
at least three targets in blood or blood components. The milestone payment was $208,781. Management considers this milestone to
be substantive as it was not dependent on the passage of time nor was it based solely on another party's efforts.&nbsp;&nbsp;We
demonstrated that we were able to capture approximately 90% in 24 hours for at least three of the agreed targets in blood or blood
components. The report was accepted by the contracting officer's representative and the invoice was submitted thereafter.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">13. COMMITMENTS AND CONTINGENCIES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">LEASE COMMITMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We rented approximately 2,300 square feet of executive office
space at 8910 University Center Lane, Suite 660, San Diego, CA 92122 at the rate of $6,475 per month on a four year lease that
expired in September 2014. We continued leasing that space for the month of October and, effective November 1, 2014, moved into
a new facility of approximately 2,576 square feet located at 9635 Granite Ridge Drive, San Diego<I>, </I>CA 92123 under a 39 month
lease with an initial rental rate of $6,054 per month. We believe this new leased facility will be satisfactory for our office
needs over the term of the lease.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We also rent approximately 1,700 square feet of laboratory space
at 11585 Sorrento Valley Road, Suite 109, San Diego, California 92121 at the rate of $3,917 per month on a one year lease that
previously was scheduled to expire in October 2014 and was recently extended to in October 2015. We believe this new leased facility
will be satisfactory for our laboratory needs over the term of the lease</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our Exosome Sciences, Inc. subsidiary rents approximately 2,055
square feet of office and laboratory space at 11 Deer Park Drive, South Brunswick, NJ at the rate of $3,596 per month on a one
year lease that previously was scheduled to expire in October 2014 and was recently extended to in October 2015. We believe this
new leased facility will be satisfactory for ESI&rsquo;s operational needs over the term of the lease.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Rent expense approximated $84,000 and $68,000 for the six month
periods ended September 30, 2014 and 2013, respectively.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">LEGAL MATTERS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">From time to time, claims are made against us 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 us from selling one or
more products or engaging in other activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The occurrence of an unfavorable outcome in any specific period
could have a material adverse effect on our results of operations for that period or future periods. Other than as mentioned here,
we are not presently a party to any pending or threatened legal proceedings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">14. SEGMENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We operate our businesses principally through two reportable
segments: Aethlon, which represents our therapeutic business activities, and ESI, which represents our diagnostic business activities.
Our reportable segments have been determined based on the nature of the potential products being developed. ESI did not have any
operations in the six months ended September 30, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Aethlon&rsquo;s revenue is generated primarily from government
contracts to date and ESI does not yet have any revenues. We have not included any allocation of corporate overhead to the ESI
segment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following tables set forth certain information regarding
our segments and other operations that conforms to the consolidated balance sheet and statement of operations presented in this
Report:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Six Months Ended September 30,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2014</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>Revenues:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 66%; text-indent: -10pt; padding-left: 20pt">Aethlon</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">530,371</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">840,483</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 1pt; text-indent: -10pt; padding-left: 20pt">ESI</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -10pt; padding-left: 30pt">Total Revenues</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">530,371</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">840,483</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Operating Losses:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -10pt; padding-left: 20pt">Aethlon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(1,294,453</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(1,013,592</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; text-indent: -10pt; padding-left: 20pt">ESI</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(445,674</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -10pt; padding-left: 30pt">Total Operating Loss</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(1,773,200</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(1,013,592</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Net Losses:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -10pt; padding-left: 20pt">Aethlon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(4,202,873</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(3,653,168</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 1pt; text-indent: -10pt; padding-left: 20pt">ESI</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(356,539</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -10pt; padding-left: 30pt">Net Loss Before Non-Controlling Interests</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(4,592,485</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(3,653,168</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Cash:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -10pt; padding-left: 20pt">Aethlon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">47,865</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">8,754</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; text-indent: -10pt; padding-left: 20pt">ESI</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">478,322</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -10pt; padding-left: 30pt">Total Cash</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">526,187</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">8,754</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Total Assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -10pt; padding-left: 20pt">Aethlon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">443,027</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">411,190</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 1pt; text-indent: -10pt; padding-left: 20pt">ESI</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">646,242</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -10pt; padding-left: 30pt">Total Assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,089,269</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">411,190</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Capital Expenditures:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -10pt; padding-left: 20pt">Aethlon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; text-indent: -10pt; padding-left: 20pt">ESI</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -10pt; padding-left: 30pt">Capital Expenditures</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Depreciation and Amortization:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -10pt; padding-left: 20pt">Aethlon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">8,885</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4,727</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 1pt; text-indent: -10pt; padding-left: 20pt">ESI</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,791</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -10pt; padding-left: 30pt">Total Depreciation and Amortization</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">18,676</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,727</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Interest Expense:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -10pt; padding-left: 20pt">Aethlon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">156,799</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">216,502</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; text-indent: -10pt; padding-left: 20pt">ESI</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -10pt; padding-left: 30pt">Total Interest Expense</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">156,799</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">216,502</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">15. SUBSEQUENT EVENTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Management has evaluated events subsequent to September 30,
2014 through the date that the accompanying condensed consolidated financial statements were filed with the Securities and Exchange
Commission for transactions and other events which may require adjustment of and/or disclosure in such financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Government Contracts</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subsequent to September 30, 2014, we collected $247,361 under
our DARPA contract, and under the Battelle subcontract we billed $33,434 and we collected $29,519.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Debt Reduction</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subsequent to September 30, 2014, we paid off the remaining
principal and interest balances on the two remaining July &amp; August 2011 10% Convertible Notes, which had been classified as
being in default, with cash payments totaling $382,748 (see Note 5).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subsequent to September 30, 2014, we paid off in full the outstanding
principal balance and interest balance on the Law Firm Note with a cash payment of $50,000 and an issuance of 170,020 common shares
(see Note 5).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subsequent to September 30, 2014, we paid an aggregate of $503,313
in principal and accrued interest on eight other outstanding notes. As a result, seven of the eight notes were paid in full. We
owe an additional $37,813 under the eighth note, which we expect to pay in full in January 2015.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note Conversions</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subsequent to September 30, 2014, we issued an aggregate of
14,237,261 shares of common stock to two accredited investors upon the conversion of an aggregate of $597,965 of unpaid principal
and accrued interest due under promissory notes previously issued to the investors by the Company. The conversion price per
share was $0.042.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subsequent to September 30, 2014, we issued an aggregate of
5,625,000 shares of common stock to convert in full the outstanding principal balance of $225,000 and interest balance of $11,250
on the remaining Amended and Restated Series A 12% Convertible Note through the issuance of 5,625,000 shares of common stock. The
conversion price per share was $0.042.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Issuance of Convertible Notes</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subsequent to September 30, 2014, we entered into a Subscription
Agreement with two accredited investors providing for the issuance and sale of (i) convertible promissory notes in the aggregate
principal amount of $527,780 and (ii) five year warrants to purchase up to 2,356,160 shares of common stock at a fixed exercise
price of $0.168 per share. The convertible promissory notes bear interest at the annual rate of 10% and mature on April 1, 2016.
The aggregate gross cash proceeds to us were $415,000 after subtracting legal fees of $35,000; the balance of the principal amount
of the notes represents a $27,780 due diligence fee and an original issuance discount. The convertible promissory notes are convertible
at the option of the holders into shares of our common stock at a fixed price of $0.112 per share, for up to an aggregate of 4,712,321
shares of common stock. There are no registration requirements with respect to the shares of common stock underlying the notes
or the warrants.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Common Stock Issuances</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subsequent to September 30, 2014, we issued 374,295 shares of
common stock pursuant to our S-8 registration statement covering our Amended 2010 Stock Plan at an average price of $0.146 per
share in payment for legal and scientific consulting services valued at $54,800 based on the value of the services provided.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Equity Unit Investments</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subsequent to September 30, 2014, we issued and sold to eight
accredited investors units (the &ldquo;Units&rdquo;) consisting of (a) one hundred thousand (100,000) restricted shares of common stock, par value $.001 per share at prices per share ranging from $0.105
to $0.114 and (b) a five-year warrant to purchase fifty thousand (50,000) shares of common stock at exercise prices ranging from
$0.154 to $0.167 per share (the &ldquo;Unit Warrants&rdquo;). In total, the investors purchased for cash an aggregate of $501,700
of Units. The investors acquired an aggregate of 4,506,250 shares of common stock and Unit Warrants to acquire up to an aggregate
of 2,253,125 shares of common stock.</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subsequent to September 30, 2014, we issued to an accredited
investor Units consisting of an aggregate of 1,835,798 shares of common stock and Unit Warrants to acquire up to an aggregate of
1,837,798 shares of common stock at an exercise price of $0.103 per share. The Units were issued to the investor upon the conversion
of an aggregate of $189,087 of unpaid principal and accrued interest due under two promissory notes (the remaining October &amp;
November 2009 10% Convertible Note and the April 2010 10% Convertible Note &ndash; see Note 5) previously issued to the investor
by the Company. The amounts converted represented the entire principal and interest outstanding under the notes and the notes
held by that holder were retired.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subsequent to September 30, 2014, we sold $3,300,000 of units,
comprised of common stock and warrants (the &ldquo;Units&rdquo;), to three affiliated institutional investors (collectively the
&ldquo;Purchaser&rdquo;) at a price of $0.30 per Unit pursuant to a Securities Purchase Agreement (the &ldquo;Agreement&rdquo;).
Each Unit consists of one share of common stock, $0.001 par value per share, and five-year warrants to purchase 120% of the shares
of common stock in the Unit (the &ldquo;Warrants&rdquo;), at an exercise price per share of $0.30 (the &ldquo;Financing&rdquo;).
Accordingly, a total of 11,000,000 shares of common stock and Warrants to purchase 13,200,000 shares of common stock were issued
and sold pursuant to the Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As part of the terms of the Agreement, we entered into a Registration
Rights Agreement with the Purchaser pursuant to which we agreed to file a registration statement to register for resale the shares
of common stock sold in the Financing, including the shares of common stock underlying the Warrants, within 20 calendar days following
the closing of the Financing. Subject to certain exceptions, in the event the registration statement does not become effective
within certain time periods set forth in the Registration Rights Agreement, we would be required to pay the Purchaser in the Financing
an amount in cash equal to two percent (2.0%) of the aggregate purchase price every month until such time as the registration statement
becomes effective or the shares of common stock (and shares of common stock underlying the Warrants) sold in the Financing may
be sold by the Purchaser pursuant to Rule 144 without any restrictions or limitations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Roth Capital Partners served as sole placement agent for the
Financing and received a cash fee of $231,000, expense reimbursement of $25,000, and a five-year warrant to purchase 550,000 shares
of common stock at an exercise price of $0.30 per share (the &ldquo;Purchase Agent Warrant&rdquo;) for its services in the Financing.
In addition, we paid $10,000 in legal expenses to the Purchaser&rsquo;s counsel. We also paid $32,572 to our counsel related to
this financing. The net proceeds to us after the placement fee and legal fees were $3,001,429.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Warrant Exercises and Issuance of New Warrants Upon Exercise
</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subsequent to September 30, 2014, we issued an aggregate of
5,671,119 shares of common stock and seven-year warrants (the &ldquo;Exchange Warrants&rdquo;) to issue up to an aggregate of 5,671,119
shares of common stock at exercise prices ranging from $0.093 to $0.116 per share to eight accredited investors. One of the investors
is Dr. Chetan Shah, a director of the Company. The common stock and Exchange Warrants were issued to the investors upon the
cash exercise of previously issued warrants held by them. The investors paid an aggregate of $579,251 upon exercise of the previously
outstanding warrants at exercise prices ranging from $0.093 to $0.115 per share. The foregoing transaction was privately negotiated
with the group of participating warrant holders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Warrant Exercises</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subsequent to September 30, 2014, we issued an aggregate of
21,516,640 shares of common stock to accredited investors upon the exercise of previously issued warrants. The warrants were exercised
on a cashless or &ldquo;net&rdquo; basis. Accordingly, we did not receive any proceeds from such exercises. The cashless exercise
of such warrants resulted in the cancellation of previously issued warrants to purchase an aggregate of 30,265,208 shares of common
stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Stock Option Exercises</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subsequent to September 30, 2014, two former employees exercised
stock options to purchase 50,000 common shares through a cash payment of $9,500 with an exercise price of $0.19 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Restricted Stock Issuance to Service Provider</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Subsequent to September 30, 2014, we issued 39,024 shares of
restricted common stock in payment for investor relations services valued at $8,000 based on the value of the services provided.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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