<PAGE>

EXHIBIT 10.26


                              AETHLON MEDICAL, INC.
                         NOTICE OF GRANT OF STOCK OPTION
                         -------------------------------

         Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Aethlon Medical, Inc. a Nevada
corporation (the "Company"):

                  Optionee:  Franklyn S. Barry
                  ---------

                  Grant Date:  February 23, 2005
                  -----------

                  Exercise Price:  $0.38 per share
                  ---------------

                  Number of Option Shares:  514,500
                  ------------------------

                  Expiration Date:
                  ----------------

                           February 23, 2010         205,825
                           December 31, 2010         154,362
                           December 31, 2011         154,363

                  Type of Option:   [   ] Incentive Stock Option
                  ---------------
                                    [ x ] Non-Statutory Stock Option

                  Date Exercisable:  Immediately upon fulfillment of vesting
                  -----------------  conditions.

                  Vesting Commence Date:
                  ----------------------

                           February 23, 2005         205,825
                           December 31, 2005         154,362
                           December 31, 2006         154,363

         Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the Aethlon Medical, Inc. Directors
Compensation Plan (the "Plan"). Optionee further agrees to be bound by the terms
of the Plan and the terms of the Option as set forth in the Stock Option
Agreement attached hereto as EXHIBIT A.

         NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Notice or in the
attached Stock Option Agreement or Plan shall confer upon Optionee any right to
continue in service in any capacity, including as an employee, for any period of
specific duration or interfere with or otherwise restrict in any way the rights
of the Company (or any Parent or Subsidiary employing or retaining Optionee) or
of Optionee, which rights are hereby expressly reserved by each, to terminate
Optionee's service and/or employment at any time for any reason, with or without
cause.

         DEFINITIONS. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.

<PAGE>

DATED:  FEBRUARY 23, 2005             AETHLON MEDICAL, INC.


                                      By: /s/ James A. Joyce
                                          --------------------------------------
                                      Name:  James A. Joyce, CEO



                                      OPTIONEE


                                      /s/ Franklyn S. Barry
                                      ------------------------------------------
                                      Name:  Franklyn S. Barry
                                      Address:
                                               ---------------------------------
                                               ---------------------------------


ATTACHMENTS
-----------
EXHIBIT A - STOCK OPTION AGREEMENT

<PAGE>

                                    EXHIBIT A
                                    ---------

                             STOCK OPTION AGREEMENT
                             ----------------------

<PAGE>

                              AETHLON MEDICAL, INC.
                             STOCK OPTION AGREEMENT
                             ----------------------

                                    RECITALS
                                    --------

         The Board of Directors of Aethlon Medical, Inc. (the "Company") has
adopted the Aethlon Medical, Inc. Directors Compensation Plan (the "Plan") for
the purpose of retaining the services of selected employees, officers,
directors, consultants, independent contractors and advisors of the Company and
any Parent or Subsidiary of the Company.

         The Optionee has rendered valuable services to the Company and this
Agreement is executed pursuant to, and is intended to carry out the purposes of,
the Plan in connection with the Company's grant of an option to the Optionee.

         All capitalized terms in this Agreement shall have the meaning assigned
to them in the Plan, a copy of which is attached to the Grant Notice, or in the
attached Appendix.

                                    AGREEMENT
                                    ---------

         NOW, THEREFORE, it is hereby agreed as follows:

         1. GRANT OF OPTION. The Company hereby grants to the Optionee, as of
the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.

         2. OPTION TERM. This option shall have a term of five (5) years
measured from the Vesting Schedule and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.

         3. LIMITED TRANSFERABILITY. During Optionee's lifetime, this option
shall be exercisable only by Optionee and shall not be assignable or
transferable other than by will or by the laws of descent and distribution
following Optionee's death.

         4. DATES OF EXERCISE. This option shall become exercisable for the
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.

         5. CESSATION OF SERVICE. The option term specified in Paragraph 2 shall
terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following events occur:


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<PAGE>

                  (a) If the Optionee's service is Terminated for any reason
except death or Disability, then the Optionee may exercise this option, only to
the extent that the option would have been exercisable upon the Termination
Date, no later than three (3) months after the Termination Date.

                  (b) If the Optionee's service is Terminated because of the
Optionee's death or Disability (or the Optionee dies within three (3) months
after a Termination other than for Cause or because of the Optionee's
Disability), then this option may be exercised only to the extent that it would
have been exercisable by the Optionee on the Termination Date and must be
exercised by the Optionee (or the Optionee's legal representative) no later than
twelve (12) months after the Termination Date.

                  (c) Notwithstanding the provisions above, if the Optionee's
service is Terminated for Cause, neither the Optionee, the Optionee's estate nor
such other person who may then hold this option shall be entitled to exercise it
with respect to any Shares whatsoever.

                  (d) In the event of a Corporate Transaction, the provisions of
Paragraph 6 shall govern the period for which this option is to remain
exercisable following Optionee's cessation of Service and shall supersede any
provisions to the contrary in this paragraph.

         6. ACCELERATED VESTING.

                  (a) In the event of any Corporate Transaction, the Option
Shares at the time subject to this option but not otherwise vested shall
automatically vest in full so that this option shall, immediately prior to the
effective date of the Corporate Transaction, become fully exercisable for all of
those Option Shares and may be exercised for any or all of those Option Shares
as fully-vested shares of Common Stock. However, the Option Shares shall NOT
vest on such an accelerated basis if and to the extent: (i) this option is
assumed, converted or replaced by the successor corporation (or parent thereof)
in the Corporate Transaction or (ii) this option is replaced with an equivalent
award or with substantially similar consideration as was provided to the
stockholders in the Corporate Transaction.

                  (b) Immediately following the Corporate Transaction, this
option shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or parent thereof) in connection with the
Corporate Transaction.

                  (c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, PROVIDED the aggregate Exercise Price shall remain the same.

                  (d) This Agreement shall not in any way affect the right of
the Company to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.


                                       2
<PAGE>

         7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Company's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.

         8. SHAREHOLDER RIGHTS. The holder of this option shall not have any
shareholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.

         9. MANNER OF EXERCISING OPTION.

                  (a) In order to exercise this option with respect to all or
any part of the Option Shares for which this option is at the time exercisable,
the Optionee (or any other person or persons exercising the option) must take
the following actions:

                           (i) Execute and deliver to the Company a written
                  notice setting forth the number of Option Shares for which the
                  option is exercised.

                           (ii) Pay the aggregate Exercise Price for the
                  purchased shares in cash or in one or more of the following
                  forms:

                                    (A) by cancellation of indebtedness of the
                           Company to the Optionee;

                                    (B) if approved by the Committee, by
                           surrender of shares that either: (1) have been owned
                           by the Optionee for more than one year and have been
                           paid for within the meaning of SEC Rule 144 (and, if
                           such shares were purchased from the Company by use of
                           a promissory note, such note has been fully paid with
                           respect to such shares); or (2) were obtained by the
                           Optionee in the public market;

                                    (C) if approved by the Committee, by waiver
                           of compensation due or accrued to the Optionee for
                           services rendered;

                                    (D) with respect only to purchases upon
                           exercise of an Option, and provided that a public
                           market for the Company's stock exists:

                                            (1) through a "same day sale"
                           commitment from the Optionee and a broker-dealer that
                           is a member of the National Association of Securities
                           Dealers (an "NASD Dealer") whereby the Optionee
                           irrevocably elects to exercise the Option and to sell
                           a portion of the Shares so purchased to pay for the
                           Exercise Price, and whereby the NASD Dealer
                           irrevocably commits upon receipt of such Shares to
                           forward the Exercise Price directly to the Company;
                           or


                                       3
<PAGE>

                                            (2) through a "margin" commitment
                           from the Optionee and a NASD Dealer whereby the
                           Optionee irrevocably elects to exercise the Option
                           and to pledge the Shares so purchased to the NASD
                           Dealer in a margin account as security for a loan
                           from the NASD Dealer in the amount of the Exercise
                           Price, and whereby the NASD Dealer irrevocably
                           commits upon receipt of such Shares to forward the
                           Exercise Price directly to the Company; or

                                    (E) Notwithstanding any provisions herein to
                           the contrary, if the Fair Market Value of one share
                           of Common Stock is greater than the Exercise Price
                           (at the date of calculation as set forth below), in
                           lieu of exercising this Option for cash, the Holder
                           may elect to receive shares equal to the value (as
                           determined below) of this Option (or the portion
                           thereof being exercised) by surrender of this Option
                           at the principal office of the Company together with
                           the properly endorsed written notice in which event
                           the Company shall issue to the Holder a number of
                           shares of Common Stock computed using the following
                           formula:


                            X = Y (A-B)

                              A
                           -------

                     Where X = the number of shares of Common Stock to be
                               issued to the Holder

                           Y = the number of shares of Common Stock purchasable
                               under the Option or, if only a portion of the
                               Option is being exercised, the portion of the
                               Option being exercised (at the date of such
                               calculation)

                           A = the Fair Market Value of one share of the
                               Company's Common Stock (at the date of such
                               calculation)

                           B = Exercise Price (as adjusted to the date of such
                               calculation)

                                    (F) by any combination of the foregoing.
                           Except to the extent the sale and remittance
                           procedure is utilized in connection with the option
                           exercise, payment of the Exercise Price must
                           accompany the written notice delivered to the Company
                           in connection with the option exercise.

                                             (iii) Furnish to the Company
                                    appropriate documentation that the person or
                                    persons exercising the option (if other than
                                    Optionee) have the right to exercise this
                                    option.

                                             (iv) Execute and deliver to the
                                    Company such written representations as may
                                    be requested by the Company in order for it
                                    to comply with the applicable requirements
                                    of federal and state securities laws.


                                       4
<PAGE>

                                             (v) Make appropriate arrangements
                                    with the Company for the satisfaction of all
                                    federal, state and local income and
                                    employment tax withholding requirements
                                    applicable to the option exercise.

                  (b) As soon as practical after the Exercise Date, the Company
shall issue to or on behalf of the Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with the
appropriate legends affixed thereto.

                  (c) In no event may this option be exercised for any
fractional shares.

         10. COMPLIANCE WITH LAWS AND REGULATIONS.

                  (a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Company and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq Stock Market or the
Over-The Counter Bulletin Board, if applicable) on which the Common Stock may be
listed for trading at the time of such exercise and issuance.

                  (b) The inability of the Company to obtain approval from any
regulatory body having authority deemed by the Company to be necessary to the
lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Company of any liability with respect to the non-issuance or sale of
the Common Stock as to which such approval shall not have been obtained. The
Company, however, shall use its best efforts to obtain all such approvals.

         11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Company and its successors and assigns and the
Optionee, the Optionee's assigns and the legal representatives, heirs and
legatees of the Optionee's estate.

         12. NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Company at its principal corporate offices. Any notice required to be given
or delivered to the Optionee shall be in writing and addressed to the Optionee
at the address indicated below the Optionee's signature line on the Grant
Notice. All notices shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, postage prepaid and properly addressed to the party to
be notified.

         13. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Committee with respect to
any question or issue arising under the Plan or this Agreement shall be
conclusive and binding on all persons having an interest in this option.


                                       5
<PAGE>

         14. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.

         15. AMENDMENT TO PLAN. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may be
issued under the Plan, then this option shall be void with respect to such
excess shares, unless an amendment sufficiently increasing the number of shares
of Common Stock issuable under the Plan is obtained in accordance with the
provisions of the Plan.

         16. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:

                  (a) This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is exercised
for one or more Option Shares: (i) more than three (3) months after the date the
Optionee ceases to be an employee for any reason other than death or Disability
or (ii) more than twelve (12) months after the date the Optionee ceases to be an
Employee by reason of Disability.

                  (b) This option shall not become exercisable in the calendar
year in which granted if (and to the extent) the aggregate Fair Market Value
(determined at the Grant Date) of the Common Stock for which this option would
otherwise first become exercisable in such calendar year would, when added to
the aggregate value (determined as of the respective date or dates of grant) of
the Common Stock and any other securities for which one or more other Incentive
Options granted to the Optionee prior to the Grant Date (whether under the Plan
or any other option plan of the Company or any Parent or Subsidiary) first
become exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate. To the extent the exercisability of this
option is deferred by reason of the foregoing limitation, the deferred portion
shall become exercisable in the first calendar year or years thereafter in which
the One Hundred Thousand Dollar ($100,000) limitation of this Paragraph 16(b)
would not be contravened, but such deferral shall in all events end immediately
prior to the effective date of a Corporate Transaction in which this option is
not to be assumed, whereupon the option shall become immediately exercisable as
a Non-Statutory Option for the deferred portion of the Option Shares.

                  (c) Should the Optionee hold, in addition to this option, one
or more other options to purchase Common Stock which become exercisable for the
first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.


                                       6
<PAGE>

                  IN WITNESS WHEREOF, the parties have executed this Agreement
on this 23rd Day of February, 2005

                                 AETHLON MEDICAL, INC., a Nevada corporation


                                 By: /s/ James A. Joyce
                                     -------------------------------------------
                                 Name: James A. Joyce, Chief Executive Officer


                                 OPTIONEE


                                 /s/ Franklyn S. Barry
                                 -----------------------------------------------
                                 Franklyn S. Barry


                                       7
<PAGE>

                                   APPENDIX A

                The following definitions shall be in effect under the
Agreement:

         1. AGREEMENT shall mean this Stock Option Agreement.

         2. CODE shall mean the Internal Revenue Code of 1986, as amended.

         3. COMMON STOCK shall mean the Company's common stock.

         4. CORPORATE TRANSACTION shall mean:

                  (a) a dissolution or liquidation of the Company;

                  (b) a merger or consolidation in which the Company is not the
surviving corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the stockholders of
the Company or their relative stock holdings and the Awards granted under this
Plan are assumed, converted or replaced by the successor corporation, which
assumption will be binding on all Participants);

                  (c) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company immediately prior to such merger
(other than any stockholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company;

                  (d) the sale of substantially all of the assets of the
Company; or

                  (e) the acquisition, sale, or transfer of more than 50% of the
outstanding shares of the Company by tender offer or similar transaction, any or
all outstanding Awards may be assumed, converted or replaced by the successor
corporation (if any), which assumption, conversion or replacement will be
binding on all Participants.

         5. EXERCISE DATE shall mean the date on which the option shall have
been exercised in accordance with Paragraph 9 of the Agreement.

         6. EXERCISE PRICE shall mean the exercise price payable per Option
Share as specified in the Grant Notice.

         7. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.

         8. FAIR MARKET VALUE. Fair Market Value of a share of Common Stock as
of a particular date (the "DETERMINATION DATE") shall mean:


                                       8
<PAGE>

                  (a) If the Company's Common Stock is traded on an exchange or
is quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") National Market or the NASDAQ SmallCap Market, then the
closing or last sale price, respectively, reported for the last business day
immediately preceding the Determination Date.

                  (b) If the Company's Common Stock is not traded on an exchange
or on the NASDAQ National Market or the NASDAQ SmallCap Market but is traded on
the NASD OTC Bulletin Board, then the mean of the average of the closing bid and
asked prices reported for the last business day immediately preceding the
Determination Date.

                  (c) Except as provided in clause (d) below, if the Company's
Common Stock is not publicly traded, then as the Holder and the Company agree or
in the absence of agreement by arbitration in accordance with the rules then in
effect of the American Arbitration Association, before a single arbitrator to be
chosen from a panel of persons qualified by education and training to pass on
the matter to be decided.

                  (d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Company's charter, then all amounts to be payable
per share to holders of the Common Stock pursuant to the charter in the event of
such liquidation, dissolution or winding up, plus all other amounts to be
payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of the Option are outstanding at the
Determination Date.

         9. GRANT DATE shall mean the date of grant of the option as specified
in the Grant Notice.

         10. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.

         11. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.

         12. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.

         13. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option.

         14. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.

         15. VESTING SCHEDULE shall mean the vesting schedule specified in the
Grant Notice pursuant to which the Optionee is to vest in the Option Shares in a
series of installments over his or her period of service.


                                       9