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EXHIBIT 4.3

                          SECURITIES PURCHASE AGREEMENT

         This Securities Purchase Agreement (this "AGREEMENT") is dated as of
May __, 2004, among Aethlon Medical, Inc., a Nevada corporation (the "COMPANY"),
and the purchasers identified on the signature pages hereto (each a "PURCHASER"
and collectively the "PURCHASERS"); and

         WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act (as defined below),
and Rule 506 promulgated thereunder, the Company desires to issue and sell to
the Purchasers, and each Purchaser, severally and not jointly, desires to
purchase from the Company in the aggregate, up to $1,200,000 of the Common Stock
and certain Warrants on the Closing Date.

         NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:

                                   ARTICLE I.
                                   DEFINITIONS

         1.1 DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:

                  "ACTION" shall have the meaning ascribed to such term in
         Section 3.1(j).

                  "AFFILIATE" means any Person that, directly or indirectly
         through one or more intermediaries, controls or is controlled by or is
         under common control with a Person as such terms are used in and
         construed under Rule 144. With respect to a Purchaser, any investment
         fund or managed account that is managed on a discretionary basis by the
         same investment manager as such Purchaser will be deemed to be an
         Affiliate of such Purchaser.

                  "CLOSING" means the closing of the purchase and sale of the
         Common Stock and the Warrants pursuant to Section 2.1.

                  "CLOSING DATE" means the date of the Closing, which shall be
         the date hereof.

                  "COMMISSION" means the Securities and Exchange Commission.

                  "COMMON STOCK" means the common stock of the Company, $0.001
         par value per share, and any securities into which such common stock
         may hereafter be reclassified.

                  "COMMON STOCK EQUIVALENTS" means any securities of the Company
         or the Subsidiaries which would entitle the holder thereof to acquire
         at any time Common Stock, including without limitation, any debt,
         preferred stock, rights, options, warrants or other instrument that is
         at any time convertible into or exchangeable for, or otherwise entitles
         the holder thereof to receive, Common Stock.

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                  "COMPANY COUNSEL" means Richardson & Patel LLP, with offices
         at 10900 Wilshire Blvd., Suite 500, Los Angeles, California 90024.

                  "DISCLOSURE SCHEDULES" means the Disclosure Schedules attached
hereto.

                  "EFFECTIVE DATE" means the date that the Registration
         Statement is first declared effective by the Commission.

                  "ESCROW AGENT" shall have the meaning set forth in the Escrow
         Agreement.

                  "ESCROW AGREEMENT" shall mean the Escrow Agreement in
         substantially the form of EXHIBIT B hereto executed and delivered
         contemporaneously with this Agreement.

                  "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
         amended.

                  "FILING DATE" means, with respect to the Registration
         Statement required to be filed hereunder, the 30th calendar day
         following the date of this Agreement.

                  "INTELLECTUAL PROPERTY RIGHTS" shall have the meaning ascribed
         to such term in Section 3.1(o).

                  "LIENS" means a lien, charge, security interest, encumbrance,
         right of first refusal, preemptive right or other restriction.

                  "MATERIAL ADVERSE EFFECT" shall have the meaning ascribed to
         such term in Section 3.1(b).

                  "MATERIAL PERMITS" shall have the meaning ascribed to such
         term in Section 3.1(m).

                  "PER SHARE PURCHASE PRICE" shall be $0.44, subject to
         adjustment for reverse and forward stock splits, stock dividends, stock
         combinations and other similar transactions of the Common Stock that
         occur after the date of this Agreement.

                  "PERSON" means an individual or corporation, partnership,
         trust, incorporated or unincorporated association, joint venture,
         limited liability company, joint stock company, government (or an
         agency or subdivision thereof) or other entity of any kind.

                  "REGISTRATION STATEMENT" means a registration statement
         meeting the requirements set forth in the Registration Rights Agreement
         and covering the resale by the Purchasers of the Shares and the Warrant
         Shares.

                  "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
         Agreement, dated as of the date of this Agreement, among the Company
         and each Purchaser, in the form of EXHIBIT A hereto.

                  "REQUIRED APPROVALS" shall have the meaning ascribed to such
         term in Section 3.1(e).

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                  "RULE 144" means Rule 144 promulgated by the Commission
         pursuant to the Securities Act, as such Rule may be amended from time
         to time, or any similar rule or regulation hereafter adopted by the
         Commission having substantially the same effect as such Rule.

                  "SEC REPORTS" shall have the meaning ascribed to such term in
         Section 3.1(h).

                  "SECURITIES" means the Shares, the Warrants and the Warrant
         Shares.

                  "SECURITIES ACT" means the Securities Act of 1933, as amended.

                  "SHARES" means the shares of Common Stock issued or issuable
         to each Purchaser pursuant to this Agreement.

                  "SUBSCRIPTION AMOUNT" means, as to each Purchaser, the amounts
         set forth below such Purchaser's signature block on the signature page
         hereto, in United States dollars and in immediately available funds.

                  "SUBSIDIARY" shall mean the subsidiaries of the Company, if
         any, set forth on Schedule 3.1(a).

                  "TRADING DAY" means (i) a day on which the Common Stock is
         traded on a Trading Market, or (ii) if the Common Stock is not listed
         on a Trading Market, a day on which the Common Stock is quoted in the
         over-the-counter market as reported by the National Quotation Bureau
         Incorporated (or any similar organization or agency succeeding its
         functions of reporting prices); provided, that in the event that the
         Common Stock is not listed or quoted as set forth in (i) and (ii)
         hereof, then Trading Day shall mean a Business Day.

                  "TRADING MARKET" means the following markets or exchanges on
         which the Common Stock is listed or quoted for trading on the date in
         question: the OTC Bulletin Board, the American Stock Exchange, the New
         York Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap
         Market.

                  "TRANSACTION DOCUMENTS" means this Agreement, the Escrow
         Agreement, the Warrants and the Registration Rights Agreement and any
         other documents or agreements executed in connection with the
         transactions contemplated hereunder.

                  "WARRANTS" means the Common Stock Purchase Warrants, in the
         form of EXHIBIT C, issuable to the Purchasers at the Closing, which
         warrants shall be exercisable immediately upon issuance for a term of 5
         years from the date of an effective registration statement covering the
         shares of common stock underlying the Warrants and have an exercise
         price of $0.76, subject to adjustment for reverse and forward stock
         splits, stock dividends, stock combinations and other similar
         transactions of the Common Stock that occur after the date of this
         Agreement.

                  "WARRANT SHARES" means the shares of Common Stock issuable
         upon exercise of the Warrants.

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                                  ARTICLE II.
                                PURCHASE AND SALE

         2.1 CLOSING. At the Closing, each Purchaser shall purchase from the
Company, and the Company shall issue and sell to each Purchaser, (a) a number of
Shares equal to such Purchaser's Subscription Amount divided by the Per Share
Purchase Price and (b) the Warrants as determined pursuant to Section
2.2(a)(iii). Upon satisfaction of the conditions set forth in Section 2.2, the
Closing shall occur at the offices of the Escrow Agent, or such other location
as the parties shall mutually agree.

         2.2 CLOSING CONDITIONS.

                  (a) At the Closing the Company shall deliver or cause to be
         delivered to the Escrow Agent with respect to each Purchaser the
         following:

                           (i) this Agreement duly executed by the Company;

                           (ii) a certificate evidencing a number of Shares
                  equal to such Purchaser's Subscription Amount divided by the
                  Per Share Purchase Price, endorsed in the name of such
                  Purchaser;

                           (iii) a Warrant, registered in the name of such
                  Purchaser, pursuant to which such Purchaser shall have the
                  right to acquire up to the number of shares of Common Stock
                  equal to 100% of the Shares to be issued to such Purchaser at
                  the Closing;

                           (iv) the Registration Rights Agreement duly executed
                  by the Company; and

                           (v) the Escrow Agreement duly executed by the
                  Company.

                  (b) At the Closing each Purchaser shall deliver or cause to be
         delivered to the Escrow Agent the following:

                           (i) this Agreement duly executed by such Purchaser;

                           (ii) such Purchaser's Subscription Amount by wire
                  transfer to the account of the Escrow Agent;

                           (iii) the Escrow Agreement duly executed by such
                  Purchaser; and

                           (iv) the Registration Rights Agreement duly executed
                  by such Purchaser.

                  (c) All representations and warranties of the other party
         contained herein shall remain true and correct as of the Closing Date.

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                  (d) As of the Closing Date, there shall have been no Material
         Adverse Effect with respect to the Company since the date hereof.

                  (e) From the date hereof to the Closing Date, trading in the
         Common Stock shall not have been suspended by the Commission (except
         for any suspension of trading of limited duration agreed to by the
         Company, which suspension shall be terminated prior to the Closing),
         and, at any time prior to the Closing Date, trading in securities
         generally as reported by Bloomberg Financial Markets shall not have
         been suspended or limited, or minimum prices shall not have been
         established on securities whose trades are reported by such service, or
         on any Trading Market, nor shall a banking moratorium have been
         declared either by the United States or New York State authorities nor
         shall there have occurred any material outbreak or escalation of
         hostilities or other national or international calamity of such
         magnitude in its effect on, or any material adverse change in, any
         financial market which, in each case, in the reasonable judgment of
         each Purchaser, makes it impracticable or inadvisable to purchase the
         Shares at the such Closing.

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

         3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth
under the corresponding section of the Disclosure Schedules delivered
concurrently herewith and/or in the SEC Reports, the Company hereby makes the
following representations and warranties as of the date hereof and as of the
Closing Date to each Purchaser:

                  (a) SUBSIDIARIES. All of the subsidiaries of the Company are
         set forth on Schedule 3.1(a). The Company owns, directly or indirectly,
         all of the capital stock or other equity interests of each Subsidiary
         free and clear of any Liens, and all the issued and outstanding shares
         of capital stock of each Subsidiary are validly issued and are fully
         paid, non-assessable and free of preemptive and similar rights. If the
         Company has no subsidiaries, then references in the Transaction
         Documents to the Subsidiaries will be disregarded.

                  (b) ORGANIZATION AND QUALIFICATION. Each of the Company and
         the Subsidiaries is an entity duly incorporated or otherwise organized,
         validly existing and in good standing under the laws of the
         jurisdiction of its incorporation or organization (as applicable), with
         the requisite power and authority to own and use its properties and
         assets and to carry on its business as currently conducted. Neither the
         Company nor any Subsidiary is in violation of any of the provisions of
         its respective certificate or articles of incorporation, bylaws or
         other organizational or charter documents. Each of the Company and the
         Subsidiaries is duly qualified to conduct business and is in good
         standing as a foreign corporation or other entity in each jurisdiction
         in which the nature of the business conducted or property owned by it
         makes such qualification necessary, except where the failure to be so
         qualified or in good standing, as the case may be, could not have or
         reasonably be expected to result in (i) a material adverse effect on
         the legality, validity or enforceability of any Transaction Document,
         (ii) a material adverse effect on the results of operations, assets,
         business or financial condition of the Company and the Subsidiaries,
         taken as a whole, or (iii) a material adverse effect on the Company's

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         ability to perform in any material respect on a timely basis its
         obligations under any Transaction Document (any of (i), (ii) or (iii),
         a "MATERIAL ADVERSE EFFECT").

                  (c) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
         corporate power and authority to enter into and to consummate the
         transactions contemplated by each of the Transaction Documents and
         otherwise to carry out its obligations thereunder. The execution and
         delivery of each of the Transaction Documents by the Company and the
         consummation by it of the transactions contemplated thereby have been
         duly authorized by all necessary action on the part of the Company and
         no further action is required by the Company in connection therewith
         other than in connection with the Required Approvals. Each Transaction
         Document has been (or upon delivery will have been) duly executed by
         the Company and, when delivered in accordance with the terms hereof,
         will constitute the valid and binding obligation of the Company
         enforceable against the Company in accordance with its terms except (i)
         as limited by applicable bankruptcy, insolvency, reorganization,
         moratorium and other laws of general application affecting enforcement
         of creditors' rights generally and (ii) as limited by laws relating to
         the availability of specific performance, injunctive relief or other
         equitable remedies.

                  (d) NO CONFLICTS. The execution, delivery and performance of
         the Transaction Documents by the Company and the consummation by the
         Company of the transactions contemplated thereby do not and will not
         (i) conflict with or violate any provision of the Company's or any
         Subsidiary's certificate or articles of incorporation, bylaws or other
         organizational or charter documents, or (ii) conflict with, or
         constitute a default (or an event that with notice or lapse of time or
         both would become a default) under, or give to others any rights of
         termination, amendment, acceleration or cancellation (with or without
         notice, lapse of time or both) of, any agreement, credit facility, debt
         or other instrument (evidencing a Company or Subsidiary debt or
         otherwise) or other understanding to which the Company or any
         Subsidiary is a party or by which any property or asset of the Company
         or any Subsidiary is bound or affected, or (iii) subject to the
         Required Approvals, result in a violation of any law, rule, regulation,
         order, judgment, injunction, decree or other restriction of any court
         or governmental authority to which the Company or a Subsidiary is
         subject (including federal and state securities laws and regulations),
         or by which any property or asset of the Company or a Subsidiary is
         bound or affected; except in the case of each of clauses (ii) and
         (iii), such as would not have or reasonably be expected to result in a
         Material Adverse Effect.

                  (e) FILINGS, CONSENTS AND APPROVALS. The Company is not
         required to obtain any consent, waiver, authorization or order of, give
         any notice to, or make any filing or registration with, any court or
         other federal, state, local or other governmental authority or other
         Person in connection with the execution, delivery and performance by
         the Company of the Transaction Documents, other than (i) filings
         required pursuant to Section 4.4 of this Agreement, (ii) the filing
         with the Commission of the Registration Statement, (iii) the notice
         and/or application(s) to each applicable Trading Market for the listing
         of the Shares and Warrant Shares for trading thereon in the time and
         manner required thereby, and (iv) the filing of Form D with the
         Commission and such filings as are required to be made under applicable
         state securities laws.

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                  (f) ISSUANCE OF THE SECURITIES. The Securities are duly
         authorized and, when issued and paid for in accordance with the
         Transaction Documents, will be duly and validly issued, fully paid and
         nonassessable, free and clear of all Liens. The Company has reserved
         from its duly authorized capital stock the maximum number of shares of
         Common Stock issuable pursuant to this Agreement and the Warrants.

                  (g) CAPITALIZATION. The capitalization of the Company is as
         described in the Company's most recent periodic report filed with the
         Commission. Except as disclosed in Schedule 3.1(g), the Company has not
         issued any capital stock since such filing other than pursuant to the
         exercise of employee and key consultant stock options under the
         Company's stock option plans, the issuance of shares of Common Stock to
         employees and key consultants pursuant to the Company's employee stock
         purchase plan and pursuant to the conversion or exercise of outstanding
         Common Stock Equivalents. No Person has any right of first refusal,
         preemptive right, right of participation, or any similar right to
         participate in the transactions contemplated by the Transaction
         Documents. Except as a result of the purchase and sale of the
         Securities, there are no outstanding options, warrants, script rights
         to subscribe to, calls or commitments of any character whatsoever
         relating to, or securities, rights or obligations convertible into or
         exchangeable for, or giving any Person any right to subscribe for or
         acquire, any shares of Common Stock, or contracts, commitments,
         understandings or arrangements by which the Company or any Subsidiary
         is or may become bound to issue additional shares of Common Stock, or
         securities or rights convertible or exchangeable into shares of Common
         Stock. The issue and sale of the Securities will not obligate the
         Company to issue shares of Common Stock or other securities to any
         Person (other than the Purchasers) and will not result in a right of
         any holder of Company securities to adjust the exercise, conversion,
         exchange or reset price under such securities.

                  (h) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed
         all reports required to be filed by it under the Securities Act and the
         Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
         the two years preceding the date hereof (or such shorter period as the
         Company was required by law to file such material) (the foregoing
         materials, including the exhibits thereto, being collectively referred
         to herein as the "SEC REPORTS") on a timely basis or has received a
         valid extension of such time of filing and has filed any such SEC
         Reports prior to the expiration of any such extension. As of their
         respective dates, the SEC Reports complied in all material respects
         with the requirements of the Securities Act and the Exchange Act and
         the rules and regulations of the Commission promulgated thereunder, and
         none of the SEC Reports, when filed, contained any untrue statement of
         a material fact or omitted to state a material fact required to be
         stated therein or necessary in order to make the statements therein, in
         light of the circumstances under which they were made, not misleading.
         The financial statements of the Company included in the SEC Reports
         comply in all material respects with applicable accounting requirements
         and the rules and regulations of the Commission with respect thereto as
         in effect at the time of filing. Such financial statements have been
         prepared in accordance with generally accepted accounting principles
         applied on a consistent basis during the periods involved ("GAAP"),
         except as may be otherwise specified in such financial statements or
         the notes thereto and except that unaudited financial statements may
         not contain all footnotes required by GAAP, and fairly present in all
         material respects the financial position of the Company and its

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         consolidated subsidiaries as of and for the dates thereof and the
         results of operations and cash flows for the periods then ended,
         subject, in the case of unaudited statements, to normal, immaterial,
         year-end audit adjustments.

                  (i) MATERIAL CHANGES. Since December 31, 2003 except as
         disclosed in the SEC Reports, (i) there has been no event, occurrence
         or development that has had or that could reasonably be expected to
         result in a Material Adverse Effect, (ii) the Company has not incurred
         any liabilities (contingent or otherwise) other than (A) trade payables
         and accrued expenses incurred in the ordinary course of business
         consistent with past practice and (B) liabilities not required to be
         reflected in the Company's financial statements pursuant to GAAP or
         required to be disclosed in filings made with the Commission, (iii) the
         Company has not altered its method of accounting, (iv) the Company has
         not declared or made any dividend or distribution of cash or other
         property to its stockholders or purchased, redeemed or made any
         agreements to purchase or redeem any shares of its capital stock and
         (v) the Company has not issued any equity securities to any officer,
         director or Affiliate, except pursuant to existing Company stock option
         plans. The Company does not have pending before the Commission any
         request for confidential treatment of information.

                  (j) LITIGATION. Except as disclosed in the SEC Reports, there
         is no action, suit, inquiry, notice of violation, proceeding or
         investigation pending or, to the knowledge of the Company, threatened
         against or affecting the Company, any Subsidiary or any of their
         respective properties before or by any court, arbitrator, governmental
         or administrative agency or regulatory authority (federal, state,
         county, local or foreign) (collectively, an "ACTION") which (i)
         adversely affects or challenges the legality, validity or
         enforceability of any of the Transaction Documents or the Securities or
         (ii) could, if there were an unfavorable decision, have or reasonably
         be expected to result in a Material Adverse Effect. Neither the Company
         nor any Subsidiary, nor any director or officer thereof, is or has been
         the subject of any Action involving a claim of violation of or
         liability under federal or state securities laws or a claim of breach
         of fiduciary duty. There has not been, and to the knowledge of the
         Company, there is not pending or contemplated, any investigation by the
         Commission involving the Company or any current or former director or
         officer of the Company. The Commission has not issued any stop order or
         other order suspending the effectiveness of any registration statement
         filed by the Company or any Subsidiary under the Exchange Act or the
         Securities Act.

                  (k) LABOR RELATIONS. No material labor dispute exists or, to
         the knowledge of the Company, is imminent with respect to any of the
         employees of the Company which could reasonably be expected to result
         in a Material Adverse Effect.

                  (l) COMPLIANCE. Except as disclosed in the SEC Reports,
         neither the Company nor any Subsidiary (i) is in default under or in
         violation of (and no event has occurred that has not been waived that,
         with notice or lapse of time or both, would result in a default by the
         Company or any Subsidiary under), nor has the Company or any Subsidiary
         received notice of a claim that it is in default under or that it is in
         violation of, any indenture, loan or credit agreement or any other
         agreement or instrument to which it is a party or by which it or any of
         its properties is bound (whether or not such default or violation has
         been waived), (ii) is in violation of any order of any court,

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         arbitrator or governmental body, or (iii) is or has been in violation
         of any statute, rule or regulation of any governmental authority,
         including without limitation all foreign, federal, state and local laws
         applicable to its business except in each case as could not have a
         Material Adverse Effect.

                  (m) REGULATORY PERMITS. The Company and the Subsidiaries
         possess all certificates, authorizations and permits issued by the
         appropriate federal, state, local or foreign regulatory authorities
         necessary to conduct their respective businesses as described in the
         SEC Reports, except where the failure to possess such permits would not
         have or reasonably be expected to result in a Material Adverse Effect
         ("MATERIAL PERMITS"), and neither the Company nor any Subsidiary has
         received any notice of proceedings relating to the revocation or
         modification of any Material Permit.

                  (n) TITLE TO ASSETS. The Company and the Subsidiaries have
         good and marketable title in fee simple to all real property owned by
         them that is material to the business of the Company and the
         Subsidiaries and good and marketable title in all personal property
         owned by them that is material to the business of the Company and the
         Subsidiaries, in each case free and clear of all Liens, except for
         Liens as do not materially affect the value of such property and do not
         materially interfere with the use made and proposed to be made of such
         property by the Company and the Subsidiaries and Liens for the payment
         of federal, state or other taxes, the payment of which is neither
         delinquent nor subject to penalties. Any real property and facilities
         held under lease by the Company and the Subsidiaries are held by them
         under valid, subsisting and enforceable leases of which the Company and
         the Subsidiaries are in compliance.

                  (o) PATENTS AND TRADEMARKS. To the knowledge of the Company
         and each Subsidiary, and except as set forth in the SEC Reports, the
         Company and the Subsidiaries have, or have rights to use, all patents,
         patent applications, trademarks, trademark applications, service marks,
         trade names, copyrights, licenses and other similar rights that are
         necessary or material for use in connection with their respective
         businesses as described in the SEC Reports and which the failure to so
         have could have or reasonably be expected to result in a Material
         Adverse Effect (collectively, the "INTELLECTUAL PROPERTY RIGHTS").
         Neither the Company nor any Subsidiary has received a written notice
         that the Intellectual Property Rights used by the Company or any
         Subsidiary violates or infringes upon the rights of any Person. To the
         knowledge of the Company, all such Intellectual Property Rights are
         enforceable.

                  (p) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as set
         forth in the SEC Reports, none of the officers or directors of the
         Company and, to the knowledge of the Company, none of the employees of
         the Company is presently a party to any transaction with the Company or
         any Subsidiary (other than for services as employees, officers and
         directors), including any contract, agreement or other arrangement
         providing for the furnishing of services to or by, providing for rental
         of real or personal property to or from, or otherwise requiring
         payments to or from any officer, director or such employee or, to the
         knowledge of the Company, any entity in which any officer, director, or
         any such employee has a substantial interest or is an officer,
         director, trustee or partner, in each case in excess of $60,000 other
         than (i) for payment of salary or consulting fees for services
         rendered, (ii) reimbursement for expenses incurred on behalf of the

                                      -9-
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         Company and (iii) for other employee benefits, including stock option
         agreements under any stock option plan of the Company.

                  (q) SARBANES-OXLEY; INTERNAL ACCOUNTING CONTROLS. The Company
         is in material compliance with all provisions of the Sarbanes-Oxley Act
         of 2002 which are applicable to it as of the Closing Date. The Company
         and each of its subsidiaries maintains a system of internal accounting
         controls sufficient to provide reasonable assurance that (i)
         transactions are executed in accordance with management's general or
         specific authorizations, (ii) transactions are recorded as necessary to
         permit preparation of financial statements in conformity with GAAP and
         to maintain asset accountability, (iii) access to assets is permitted
         only in accordance with management's general or specific authorization,
         and (iv) the recorded accountability for assets is compared with the
         existing assets at reasonable intervals and appropriate action is taken
         with respect to any differences. The Company has established disclosure
         controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
         15d-15(e)) for the Company and designed such disclosure controls and
         procedures to ensure that material information relating to the Company,
         including its subsidiaries, is made known to the certifying officers by
         others within those entities, particularly during the period in which
         the Company's Form 10-KSB or 10-QSB, as the case may be, is being
         prepared. The Company's certifying officers have evaluated the
         effectiveness of the Company's controls and procedures as of end of the
         filing period prior to the filing date of the Form 10-QSB for the
         quarter ended December 31, 2003 (such date, the "EVALUATION DATE"). The
         Company presented in its most recently filed Form 10-KSB or Form 10-QSB
         the conclusions of the certifying officers about the effectiveness of
         the disclosure controls and procedures based on their evaluations as of
         the Evaluation Date. Since the Evaluation Date, there have been no
         significant changes in the Company's internal controls (as such term is
         defined in Item 307(b) of Regulation S-K under the Exchange Act) or, to
         the Company's knowledge, in other factors that could significantly
         affect the Company's internal controls.

                  (r) CERTAIN FEES. Selected NASD member broker-dealers may
         receive a commission on the gross proceeds raised. The Purchasers shall
         have no obligation with respect to any fees or with respect to any
         claims made by or on behalf of other Persons for fees of a type
         contemplated in this Section that may be due in connection with the
         transactions contemplated by this Agreement.

                  (s) PRIVATE PLACEMENT. Assuming the accuracy of the Purchasers
         representations and warranties set forth in Section 3.2, no
         registration under the Securities Act is required for the offer and
         sale of the Securities by the Company to the Purchasers as contemplated
         hereby. The issuance and sale of the Securities hereunder does not
         contravene the rules and regulations of the Trading Market.

                  (t) INVESTMENT COMPANY. The Company is not, and is not an
         Affiliate of, an "investment company" within the meaning of the
         Investment Company Act of 1940, as amended.

                  (u) REGISTRATION RIGHTS. Except as set forth on the disclosure
         schedule to the Registration Rights Agreement, no Person has any right
         to cause the Company to effect the registration under the Securities
         Act of any securities of the Company.

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                  (v) LISTING AND MAINTENANCE REQUIREMENTS. The Company has not,
         in the 12 months preceding the date hereof, received notice from any
         Trading Market on which the Common Stock is or has been listed or
         quoted to the effect that the Company is not in compliance with the
         listing or maintenance requirements of such Trading Market. The Company
         is, and has no reason to believe that it will not in the foreseeable
         future continue to be, in compliance with all such listing and
         maintenance requirements.

                  (w) DISCLOSURE. The Company confirms that, neither the Company
         nor any other Person acting on its behalf has provided any of the
         Purchasers or their agents or counsel with any information that
         constitutes or might constitute material, non-public information. The
         Company understands and confirms that the Purchasers will rely on the
         foregoing representations and covenants in effecting transactions in
         securities of the Company. All disclosure provided to the Purchasers
         regarding the Company, its business and the transactions contemplated
         hereby, including the Disclosure Schedules to this Agreement, furnished
         by or on behalf of the Company are true and correct and do not contain
         any untrue statement of a material fact or omit to state any material
         fact necessary in order to make the statements made therein, in light
         of the circumstances under which they were made, not misleading.

                  (x) NO INTEGRATED OFFERING. Neither the Company, nor any of
         its affiliates, nor any Person acting on its or their behalf has,
         directly or indirectly, made any offers or sales of any security or
         solicited any offers to buy any security, under circumstances that
         would cause this offering of the Securities to be integrated with prior
         offerings by the Company for purposes of the Securities Act or any
         applicable shareholder approval provisions, including, without
         limitation, under the rules and regulations of any exchange or
         automated quotation system on which any of the securities of the
         Company are listed or designated.

                  (y) SOLVENCY. Based on the financial condition of the Company
         as of the Closing Date, (i) the Company's fair saleable value of its
         assets exceeds the amount that will be required to be paid on or in
         respect of the Company's existing debts and other liabilities
         (including known contingent liabilities) as they mature; (ii) the
         Company's assets do not constitute unreasonably small capital to carry
         on its business for the current fiscal year as now conducted and as
         proposed to be conducted including its capital needs taking into
         account the particular capital requirements of the business conducted
         by the Company, and projected capital requirements and capital
         availability thereof; and (iii) the current cash flow of the Company,
         together with the proceeds the Company would receive, were it to
         liquidate all of its assets, after taking into account all anticipated
         uses of the cash, would be sufficient to pay all amounts on or in
         respect of its debt when such amounts are required to be paid. The
         Company does not intend to incur debts beyond its ability to pay such
         debts as they mature (taking into account the timing and amounts of
         cash to be payable on or in respect of its debt).

         3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:

                                      -11-
<PAGE>

                  (a) ORGANIZATION; AUTHORITY. Such Purchaser is an individual
         or entity duly organized, validly existing and in good standing under
         the laws of the jurisdiction of its organization with full right,
         corporate or partnership power and authority to enter into and to
         consummate the transactions contemplated by the Transaction Documents
         and otherwise to carry out its obligations thereunder. The execution,
         delivery and performance by such Purchaser of the transactions
         contemplated by this Agreement have been duly authorized by all
         necessary corporate action on the part of such Purchaser. Each
         Transaction Document to which it is party has been duly executed by
         such Purchaser, and when delivered by such Purchaser in accordance with
         the terms hereof, will constitute the valid and legally binding
         obligation of such Purchaser, enforceable against it in accordance with
         its terms except (i) as limited by general equitable principles and
         applicable bankruptcy, insolvency, reorganization, moratorium and other
         laws of general application affecting enforcement of creditors' rights
         generally, (ii) as limited by laws relating to the availability of
         specific performance, injunctive relief or other equitable remedies and
         (iii) insofar as indemnification and contribution provisions may be
         limited by applicable law.

                  (b) INVESTMENT INTENT. Such Purchaser understands that the
         Securities are "restricted securities" and have not been registered
         under the Securities Act or any applicable state securities law and is
         acquiring the Securities as principal for its own account for
         investment purposes only and not with a view to or for distributing or
         reselling such Securities or any part thereof, has no present intention
         of distributing any of such Securities and has no arrangement or
         understanding with any other persons regarding the distribution of such
         Securities (this representation and warranty not limiting such
         Purchaser's right to sell the Securities pursuant to the Registration
         Statement or otherwise in compliance with applicable federal and state
         securities laws). Such Purchaser is acquiring the Securities hereunder
         in the ordinary course of its business. Such Purchaser does not have
         any agreement or understanding, directly or indirectly, with any Person
         to distribute any of the Securities.

                  (c) PURCHASER STATUS. At the time such Purchaser was offered
         the Securities, it was, and at the date hereof it is an "accredited
         investor" as defined in Rule 501(a) under the Securities Act. Such
         Purchaser is not required to be registered as a broker-dealer under
         Section 15 of the Exchange Act.

                  (d) EXPERIENCE OF SUCH PURCHASER. Such Purchaser, either alone
         or together with its representatives, has such knowledge,
         sophistication and experience in business and financial matters so as
         to be capable of evaluating the merits and risks of the prospective
         investment in the Securities, and has so evaluated the merits and risks
         of such investment. Such Purchaser is able to bear the economic risk of
         an investment in the Securities and, at the present time, is able to
         afford a complete loss of such investment.

                  (e) GENERAL SOLICITATION. Such Purchaser is not purchasing the
         Securities as a result of any advertisement, article, notice or other
         communication regarding the Securities published in any newspaper,
         magazine or similar media or broadcast over television or radio or
         presented at any seminar or any other general solicitation or general
         advertisement.

                                      -12-
<PAGE>

                  (f) REGISTRATION REQUIRED. Such Purchaser hereby covenants
         with the Company not to make any sale of the Shares and Warrant Shares
         without complying with the provisions hereof and of the Registration
         Rights Agreement, and without effectively causing the prospectus
         delivery requirement under the Securities Act to be satisfied (unless
         such Purchaser is selling such Shares and Warrant Shares in a
         transaction not subject to the prospectus delivery requirement), and
         such Purchaser acknowledges that the certificates evidencing the Shares
         and Warrant Shares will be imprinted with a legend that prohibits their
         transfer except in accordance therewith.

                  (g) NO TAX OR LEGAL ADVICE. Such Purchaser understands that
         nothing in this Agreement, any other Transaction Document or any other
         materials presented to such Purchaser in connection with the purchase
         and sale of the Securities constitutes legal, tax or investment advice.
         Such Purchaser has consulted such legal, tax and investment advisors as
         it, in its sole discretion, has deemed necessary or appropriate in
         connection with its purchase of Securities.

                  (h) DISCLOSURE OF INFORMATION. Such Purchaser believes it has
         received all the information it considers necessary or appropriate for
         deciding whether to purchase the Shares and Warrants. Such Purchaser
         further represents that it has had an opportunity to ask questions and
         receive answers from the Company regarding the terms and conditions of
         the offering of the Shares and Warrants and the business, properties,
         prospects and financial condition of the Company. Such Purchaser has
         reviewed the Company's Annual Report on Form 10K-SB for the fiscal year
         ended March 31st, 2003 (the "10K-SB"). Each such Purchaser understands
         and accepts all of the risks in connection with such Purchaser's
         investment in the Securities. In addition, each Purchaser has reviewed
         and is aware of the information set forth in all SEC Reports filed with
         the SEC since the filing of the 10K-SB. The foregoing, however, does
         not limit or modify the representations and warranties of the Company
         in Section 3 of this Agreement or the right of the Purchasers to rely
         thereon.

                  (i) LEGAL COUNSEL. Purchaser understands that the law firm of
         Richardson and Patel, LLP and its attorneys represent the Company and
         Purchaser has had the opportunity to retain its own legal counsel in
         connection with transactions contemplated herewith.

         The Company acknowledges and agrees that each Purchaser does not make
or has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 3.2.

                                  ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

         4.1 TRANSFER RESTRICTIONS.

                  (a) The Securities may only be disposed of in compliance with
         state and federal securities laws. In connection with any transfer of
         Securities other than pursuant to an effective registration statement,
         to the Company, to an Affiliate of a Purchaser or in connection with a
         pledge as contemplated in Section 4.1(b), the Company may require the
         transferor thereof to provide to the Company an opinion of counsel

                                      -13-
<PAGE>

         selected by the transferor, the form and substance of which opinion
         shall be reasonably satisfactory to the Company, to the effect that
         such transfer does not require registration of such transferred
         Securities under the Securities Act. As a condition of transfer, any
         such transferee shall agree in writing to be bound by the terms of this
         Agreement and shall have the rights of a Purchaser under this Agreement
         and the Registration Rights Agreement.

                  (b) The Purchasers agree to the imprinting, so long as is
         required by this Section 4.1(b), of a legend on any of the Securities
         in the following form:

                  THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES
                  AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
                  STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
                  THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
                  AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
                  TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
                  ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
                  TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
                  THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
                  SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
                  THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
                  REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE
                  PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
                  REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
                  INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN
                  RULE 501(a) UNDER THE SECURITIES ACT.

                  The Company acknowledges and agrees that a Purchaser may from
         time to time pledge pursuant to a bona fide margin agreement with a
         registered broker-dealer or grant a security interest in some or all of
         the Securities to a financial institution that is an "accredited
         investor" as defined in Rule 501(a) under the Securities Act and, if
         required under the terms of such arrangement, such Purchaser may
         transfer pledged or secured Securities to the pledgees or secured
         parties. Such a pledge or transfer would not be subject to approval of
         the Company and no legal opinion of legal counsel of the pledgee,
         secured party or pledgor shall be required in connection therewith.
         Further, no notice shall be required of such pledge. At the appropriate
         Purchaser's expense, the Company will execute and deliver such
         reasonable documentation as a pledgee or secured party of Securities
         may reasonably request in connection with a pledge or transfer of the
         Securities, including, if the Securities are subject to registration
         pursuant to the Registration Rights Agreement, the preparation and
         filing of any required prospectus supplement under Rule 424(b)(3) under
         the Securities Act or other applicable provision of the Securities Act
         to appropriately amend the list of Selling Stockholders thereunder.

                  (c) Certificates evidencing the Shares and Warrant Shares
         shall not contain any legend (including the legend set forth in Section
         4.1(b)), (i) while a registration statement (including the Registration
         Statement) covering the resale of such security is effective under the
         Securities Act, or (ii) following any sale of such Shares or Warrant

                                      -14-
<PAGE>

         Shares pursuant to Rule 144, or (iii) if such Shares or Warrant Shares
         are eligible for sale under Rule 144(k), or (iv) if such legend is not
         required under applicable requirements of the Securities Act (including
         judicial interpretations and pronouncements issued by the Staff of the
         Commission). The Company shall cause its counsel to issue a legal
         opinion to the Company's transfer agent promptly after the Effective
         Date if required by the Company's transfer agent to effect the removal
         of the legend hereunder. If all or any portion of a Warrant is
         exercised at a time when there is an effective registration statement
         to cover the resale of the Warrant Shares, such Warrant Shares shall be
         issued free of all legends. The Company agrees that following the
         Effective Date or at such time as such legend is no longer required
         under this Section 4.1(c), it will, no later than five Trading Days
         following the delivery by a Purchaser to the Company's transfer agent
         of a certificate representing Shares or Warrant Shares, as the case may
         be, issued with a restrictive legend (such date, the "LEGEND REMOVAL
         DATE"), deliver or cause to be delivered to such Purchaser a
         certificate representing such Securities that is free from all
         restrictive and other legends. The Company may not make any notation on
         its records or give instructions to any transfer agent of the Company
         that enlarge the restrictions on transfer set forth in this Section.

                  (d) Each Purchaser, severally and not jointly with the other
         Purchasers, agrees that the removal of the restrictive legend from
         certificates representing Securities as set forth in this Section 4.1
         is predicated upon the Company's reliance that the Purchaser will sell
         any Securities pursuant to either the registration requirements of the
         Securities Act, including any applicable prospectus delivery
         requirements, or an exemption therefrom.

         4.2 FURNISHING OF INFORMATION. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as any Purchaser owns Securities, if the Company is not
required to file reports pursuant to such laws, it will prepare and furnish to
the Purchasers and make publicly available in accordance with Rule 144(c) such
information as is required for the Purchasers to sell the Securities under Rule
144. The Company further covenants that it will take such further action as any
holder of Securities may reasonably request, all to the extent required from
time to time to enable such Person to sell such Securities without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144.

         4.3 INTEGRATION. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.

         4.4 SHAREHOLDERS RIGHTS PLAN. No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring Person" under any shareholders rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by

                                      -15-
<PAGE>

virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers.

         4.5 NON-PUBLIC INFORMATION. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Purchaser shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.

         4.6 USE OF PROCEEDS. Except as set forth on Schedule 4.6 attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital purposes and no more than 20% of the net proceeds
for the satisfaction of any portion of the Company's debt (other than payment of
trade payables in the ordinary course of the Company's business and prior
practices), to redeem any Company equity or equity-equivalent securities or to
settle any outstanding litigation.

         4.7 INDEMNIFICATION. Each party to this Agreement ("INDEMNIFYING
PARTY") will indemnify and hold the other parties and their directors, officers,
shareholders, partners, employees and agents (each, an "INDEMNIFIED Party")
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys' fees and costs of
investigation that any such Indemnified Party may suffer or incur as a result of
or relating to any misrepresentation, breach or inaccuracy, of any of the
representations, warranties, covenants or agreements made by the Indemnifying
Party in this Agreement or in the other Transaction Documents. If any action
shall be brought against any Indemnified Party in respect of which indemnity may
be sought pursuant to this Agreement, such Indemnified Party shall promptly
notify the Indemnifying Party in writing, and the Indemnifying Party shall have
the right to assume the defense thereof with counsel of its own choosing. Any
Indemnified Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party except to the extent
that the employment thereof has been specifically authorized by the Indemnifying
Party in writing, the Indemnifying Party has failed after a reasonable period of
time to assume such defense and to employ counsel or in such action there is, in
the reasonable opinion of such separate counsel, a material conflict on any
material issue between the position of the Indemnifying Party and the position
of such Indemnified Party. The Indemnifying Party will not be liable to any
Indemnified Party under this Section 4.7 for any settlement by an Indemnified
Party effected without the Indemnifying Party's prior written consent, which
shall not be unreasonably withheld or delayed; or to the extent, but only to the
extent that a loss, claim, damage or liability is attributable to any
Indemnified Party's breach of any of the representations, warranties, covenants
or agreements made by the Purchasers in this Agreement or in the other
Transaction Documents. In no event shall the liability of any Purchaser be
greater in amount than the dollar amount of the net proceeds received by such
Purchaser upon the sale of the Shares and Warrant Shares and in no event shall
the liability of the Company be greater in amount than the dollar amount of the
net proceeds received by the Company from the Sale of the Shares and Warrant
Shares to the Purchasers.

                                      -16-
<PAGE>

         4.8 RESERVATION OF COMMON STOCK. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to any exercise of the Warrants.

         4.9 LISTING OF COMMON STOCK. The Company agrees, if the Company applies
to have the Common Stock traded on any Trading Market, it will include in such
application all of the Shares and Warrant Shares, and will take such other
action as is necessary to cause the Shares and Warrant Shares to be listed on
such Trading Market as promptly as possible. The Company will take all action
reasonably necessary to continue the listing and trading of its Common Stock on
a Trading Market and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Trading Market.

         4.10 SUBSEQUENT EQUITY SALES. From the date hereof until after the
Effective Date (the "RESTRICTED PERIOD"), the Company shall not issue shares of
Common Stock or Common Stock Equivalents at a price lower than the Per Share
Purchase Price (such lower price is the "Reset Price") except in connection with
any sales to Fusion Capital Fund II, LLC. During the Restricted Period, none of
such Common Stock or Common Stock Equivalents issued shall be registered
pursuant to registration statement filed in connection with this transaction.
Notwithstanding anything to the contrary herein, this Section 4.10 shall not
apply to the following: (a) the granting of Common Stock or Common Stock
equivalents to employees, officers, directors or key consultants of the Company
pursuant to any stock plan, or (b) the exercise of any security issued by the
Company in connection with the offer and sale of this Company's securities
pursuant to this Agreement, or (c) the exercise of or conversion of any
convertible securities, options or warrants issued and outstanding on the date
hereof, provided such securities have not been amended since the date hereof, or
(d) acquisitions, strategic investments or call and/or put options issued in
connection with the sale of securities of a Subsidiary, the primary purpose of
which is not to raise capital of the Company, or (f) any issuance of the
Company's securities to any lender of the Company or its Subsidiaries in
connection with a settlement of, or waiver of a default under, debt (provided
such debt is not, and never has been, a Common Stock Equivalent) or (g) issuance
of the Company's securities to non-affiliates for non-cash transactions or
similar issuances. During the Restrictive Period, only for so long as the
Purchaser shall hold the Shares, if the Company issues shares of Common Stock or
Common Stock Equivalents at a price lower than the Per Share Purchase Price, the
Company shall issue to Purchase the number of additional shares of restricted
common stock (the "Additional Shares") necessary to bring the effective price
per share equal to the Reset Price. The number of Additional Shares to be issued
shall be calculated by the following formula:

  Additional Shares = (Shares * Per Share Purchase Price/reset Price) - Shares
  ----------------------------------------------------------------------------

  Shares as used in this formula does not include the Warrant Shares.

                                      -17-
<PAGE>

                                   ARTICLE V.
                                  MISCELLANEOUS

         5.1 FEES AND EXPENSES. Except as otherwise set forth in this Agreement,
each party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement. The Company shall pay all stamp and other taxes and duties
levied in connection with the sale of the Securities.

         5.2 ENTIRE AGREEMENT. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

         5.3 NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile or e-mail at the
facsimile number or e-mail address set forth on the signature pages attached
hereto prior to 6:30 p.m. (Los Angeles time) on a Trading Day, (b) the next
Trading Day after the date of transmission, if such notice or communication is
delivered via facsimile or e-mail at the facsimile number or e-mail address set
forth on the signature pages attached hereto on a day that is not a Trading Day
or later than 6:30 p.m. (Los Angeles time) on any Trading Day, (c) the second
Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom such
notice is required to be given. The address for such notices and communications
shall be as set forth on the signature pages attached hereto.

         5.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each Purchaser or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.

         5.5 CONSTRUCTION. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

         5.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser. Any Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Purchasers".

                                      -18-
<PAGE>

         5.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.8.

         5.8 GOVERNING LAW. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
California, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of Los Angeles. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of
Los Angeles, California for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by delivering a copy thereof via overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Each party hereto (including its affiliates, agents, officers, directors and
employees) hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby. If either party shall commence an action or proceeding to enforce any
provisions of a Transaction Document, then the prevailing party in such action
or proceeding shall be reimbursed by the other party for its attorneys fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.

         5.9 SURVIVAL. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and delivery of the Shares and
Warrant Shares.

         5.10 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

         5.11 SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid

                                      -19-
<PAGE>

and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

         5.12 REPLACEMENT OF SECURITIES. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.

         5.13 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.

         5.14 PAYMENT SET ASIDE. To the extent that the Company makes a payment
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

         5.15 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. The Company has
elected to provide all Purchasers with the same terms and Transaction Documents
for the convenience of the Company and not because it was required or requested
to do so by the Purchasers.

                            (SIGNATURE PAGE FOLLOWS)

                                      -20-
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

AETHLON MEDICAL, INC.                                 ADDRESS FOR NOTICE:
                                                      -------------------

                                                      7825 Fay Avenue, Suite 200
                                                      La Jolla, CA 92037

By:________________________________________________
     Name:
     Title:

With a copy to (which shall not constitute notice):



                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                     SIGNATURE PAGES FOR PURCHASERS FOLLOW]

                                      -21-
<PAGE>

         IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.


                                                       ADDRESS FOR NOTICE:
                                                       ------------------


By:________________________________________________
     Name:
     Title:                                            Attn:
                                                       Fax:
                                                       e-mail:


Subscription Amount:  $
Shares:
Warrant Shares:

WITH A COPY TO:
--------------


                                      -22-
<PAGE>

                                    EXHIBIT A
                                    ---------

                          Registration Rights Agreement


                                      -23-
<PAGE>

                                    EXHIBIT B
                                    ---------

                                Escrow Agreement


                                      -24-
<PAGE>

                                    EXHIBIT C
                                    ---------

                                 Form of Warrant


                                      -25-