Document:

EX. 10.29

                           CONVERTIBLE LOAN AGREEMENT

                Dated as of October 1, 2004 ("Subscription Date")

      This CONVERTIBLE LOAN AGREEMENT (this "AGREEMENT") is entered into between
NUWAY MEDICAL, INC., a corporation organized under the laws of the state of
Delaware (the "BORROWER"), and David Moon and James Burchard, the "Investor".
The Investor shall be referred to herein as the "Lender". Capitalized terms used
herein shall have the meanings ascribed to such terms in SECTION 8 of this
Agreement.

      In consideration of the mutual covenants and undertakings contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Lender hereby
agree as follows:

                                SECTION 1. LOAN

      SECTION 1.1. TERM LOAN. Subject to the terms and conditions of this
Agreement, the Lender agrees to loan to the Borrower, and the Borrower agrees to
borrow from the Lender, in the aggregate principal amount of the "Subscription
Amount", (collectively, the "TERM LOAN"). The Lender hereby agrees to make such
loan to the Borrower on the date so indicated, with such payment to be made in
immediately available funds via wire transfer or cashier's check.

      SECTION 1.2. TERM NOTE. The Term Loan shall be evidenced by a convertible
promissory note (the "CONVERTIBLE TERM NOTE"), substantially in the form of
EXHIBIT A, with appropriate insertions, dated the date hereof, payable to the
order of the Lender and in the initial principal amount of the Subscription
Amount. The Term Loan shall be due and payable one year from the "Subscription
Date", , or at an earlier date as provided in SECTION 3.2 hereof (the "TERM LOAN
MATURITY DATE").

                          SECTION 2. INTEREST AND FEES

      SECTION 2.1. INTEREST. The Borrower agrees to pay interest on the unpaid
principal amount of the Term Loan from time to time outstanding hereunder at the
following rates per year, compounded annually:

            (a) before maturity of the Term Loan, whether by acceleration or
otherwise, at the rate per annum equal to ten percent (10%).

            (b) after the maturity of the Term Loan, whether by acceleration or
otherwise, until paid, at a rate per annum equal to fifteen percent (15%).

      SECTION 2.2. INTEREST PAYMENT DATE. Accrued interest shall be paid in full
on the Term Loan Maturity Date.

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      SECTION 2.3. BASIS OF COMPUTATION. Interest shall be computed for the
actual number of days elapsed on the basis of a year consisting of 360 days,
including the date the Term Loan is made and excluding the date the Term Loan or
any portion thereof is paid or prepaid.

                       SECTION 3. CONVERSION AND PAYMENTS

      SECTION 3.1. PAYMENTS.

            (a) PLACE OF PAYMENT. Cash payments required to be made under this
      Agreement and the Convertible Term Note of principal, interest, fees and
      other amounts payable hereunder, shall be made to the Lender at its office
      located at 8290 W. Sahara, #175, Las Vegas, NV 89117 (the "Investor's
      Address").

            (b) FORM OF PAYMENT. All payments of principal and interest shall be
      made by wire transfer to the Lender.

      SECTION 3.2. PREPAYMENT.

            (a) OPTIONAL PREPAYMENT. The Borrower may from time to time prepay
      the Term Loan or any portion thereof without premium or penalty.

            (b) MANDATORY PREPAYMENT.

                  (i) Within ten (10) days of the occurrence of any of the
                  following events, the Borrower shall make a prepayment of the
                  Term Loan in an amount equal to the proceeds received by the
                  Borrower, in each case up to the total amount then due under
                  the Term Loan, from:

                        (A) the sale of any of the Borrower's assets outside the
                        ordinary course of business; and

                        (B) any insurance payouts or condemnation awards payable
                        by reason of theft, loss, destruction, damage, taking or
                        any other similar event with respect to any property or
                        assets of the Borrower (PROVIDED, HOWEVER, so long as no
                        Event of Default or Unmatured Event of Default has
                        occurred and is continuing the Borrower may use such
                        insurance payouts or condemnation awards within thirty
                        (30) days after receipt by the Borrower to replace any
                        such property with property performing the same or
                        similar function).

      SECTION 3.3. CONVERSION.

            (a) CONVERSION INTO PREFERRED STOCK. Pursuant to the conversion
      provisions set forth in the Convertible Term Note, the Term Loan may be
      converted into series A preferred stock of the Borrower pursuant to the
      terms set forth in the Convertible Term Note.

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            (b) ONE YEAR BUY BACK OF PREFERRED SHARES. At the Lender's sole
      option, the Lender may require the Borrower to repurchase the shares of
      preferred stock issued to the Lender herein at the end of a one year
      period for a price of 110% of the Subscription Amount. If the Borrower is
      unable to buy back the shares upon said terms, the Borrower's president,
      as indicated below, will buy back the shares from the Lender upon those
      terms.

                   SECTION 4. REPRESENTATIONS AND WARRANTIES

      To induce the Lender to make the Term Loan, the Borrower represents and
warrants to the Lender that (except in each case as otherwise disclosed in the
Borrower's filings with the SEC):

      SECTION 4.1. ORGANIZATION. The Borrower is a corporation existing and in
good standing under the laws of the State of Delaware; each of its subsidiaries
is a corporation, limited liability company or partnership duly existing and in
good standing under the laws of the state of its formation; the Borrower and
each of its subsidiaries are duly qualified, in good standing and authorized to
do business in each jurisdiction where, because of the nature of their
activities or properties, such qualification is required, except where the
failure to be so qualified would not have a material adverse effect on the
Borrower's business, financial condition or results of operations (a "Material
Adverse Effect"); and the Borrower and each of its subsidiaries have the power
and authority to own their properties and to carry on their businesses as now
being conducted.

      SECTION 4.2. AUTHORIZATION; NO CONFLICT. The borrowings hereunder, the
execution and delivery of this Agreement and the Convertible Term Note, the
performance by the Borrower of its obligations under this Agreement and the
Convertible Term Note are within the Borrower's corporate powers, have been
authorized by all necessary corporate action, have received all necessary
governmental approval (if any shall be required) and do not and will not
contravene or conflict with any provision of law or of the charter or by-laws of
the Borrower or any subsidiary or of any agreement binding upon the Borrower or
any subsidiary.

      SECTION 4.3. FINANCIAL STATEMENTS. The Borrower's un-audited consolidating
and consolidated financial statements as at December 31, 2003, copies of which
have been made available to the Lender, have been prepared in conformity with
GAAP applied on a basis consistent with that of the preceding fiscal year, and
accurately present the financial condition of the Borrower and its subsidiaries
as at such dates and the results of their operations for the respective periods
then ended.

      SECTION 4.4. LIENS. None of the assets of the Borrower or any subsidiary
thereof are subject to any mortgage, pledge, title retention lien, or other
lien, encumbrance or security interest.

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      SECTION 4.5. ADVERSE CONTRACTS. Neither the Borrower nor any of its
subsidiaries is a party to any agreement or instrument or subject to any charter
or other corporate restriction, nor is it subject to any judgment, decree or
order of any court or governmental body, which may have a material and adverse
effect on the business, property, assets, operations, conditions or prospects of
the Borrower and its subsidiaries taken as a whole or on the ability of the
Borrower to perform its obligations under this Agreement and the Convertible
Term Note. Neither the Borrower nor any of its subsidiaries has, nor with
reasonable diligence should have had, knowledge of or notice that it is in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any such agreement, instrument,
restriction, judgment, decree or order.

      SECTION 4.6. REGULATION U. The Borrower is not engaged principally in, nor
is one of the Borrower's important activities, the business of extending credit
for the purpose of purchasing or carrying "margin stock" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereinafter in effect.

      SECTION 4.7. LITIGATION AND CONTINGENT LIABILITIES. No litigation
(including derivative actions), arbitration proceedings or governmental
proceedings are pending or threatened against the Borrower or any of its
subsidiaries which would (singly or in the aggregate), if adversely determined,
have a material and adverse effect on the business, properties, assets,
operations, conditions or prospects of the Borrower or any subsidiary.

                              SECTION 5. COVENANTS

      Until all obligations of the Borrower hereunder and under the Convertible
Term Note are paid and fulfilled in full, the Borrower agrees that it shall, and
shall cause each of its subsidiaries to, comply with the following covenants,
unless the Lender consents otherwise in writing:

      SECTION 5.1. CORPORATE EXISTENCE, MERGERS, ETC. The Borrower and each
subsidiary shall preserve and maintain its corporate existence, rights,
franchises, licenses and privileges, and will not liquidate, dissolve, or merge,
or consolidate with or into any other corporation, or sell, lease, transfer or
otherwise dispose of all or a substantial part of its assets (except those
assets sold in the ordinary course of its business), except that:

            (a) Any subsidiary may merge or consolidate with or into the
Borrower or any one or more wholly-owned subsidiaries; and

            (b) Any subsidiary may sell, lease, transfer or otherwise dispose of
any of its assets to the Borrower or one or more wholly-owned subsidiaries.

      SECTION 5.2. INSPECTION. The Borrower and each subsidiary shall permit the
Lender and its agents at any time during normal business hours to inspect their
properties and to inspect and make copies of their books and records, provided
that the Lender agrees to enter into confidentiality agreements with respect to
the foregoing.

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      SECTION 5.3. USE OF PROCEEDS.

            (a) USE OF PROCEEDS. The Borrower shall use the proceeds from the
      Term Loan solely for operating costs, including but not limited to,
      employee salaries and costs associated with filing SEC compliance
      documents.

            (b) MARGIN REGULATIONS. Neither the Borrower nor any subsidiary
      shall use or permit any proceeds of the Term Loan to be used, either
      directly or indirectly, for the purpose, whether immediate, incidental or
      ultimate, of "purchasing or carrying any margin stock" within the meaning
      of Regulations U or X of the Board of Governors of the Federal Reserve
      System, as amended from time to time.

            (c) TENDER OFFERS AND GOING PRIVATE. Neither the Borrower nor any
      subsidiary shall use (or permit to be used) any proceeds of the Term Loan
      to acquire any security in any transaction which is subject to Section 13
      or 14 of the Securities Exchange Act of 1934, as amended, or any
      regulations or rulings thereunder.

      SECTION 5.4. COMPLIANCE WITH LAW. The Borrower and each of its
subsidiaries shall comply in all material respects with all laws and regulations
(whether federal, state or local and whether statutory, administrative, judicial
or otherwise) and with every lawful governmental order or similar action
(whether administrative or judicial) applicable to it, except in each case as
would not have a Material Adverse Effect.

      SECTION 5.5. AFFILIATE TRANSACTIONS. Not enter into any transaction with
an affiliate, except for transactions in the ordinary course of business
pursuant to the reasonable requirements of the Borrower's or each subsidiaries'
business and upon fair and reasonable terms no less favorable to the Borrower or
the subsidiaries than the Borrower or the subsidiaries would obtain in a
comparable arms-length transaction.

                        SECTION 6. CONDITIONS OF LENDING

      The obligation of the Lender to make the Term Loan is subject to the
following conditions precedent:

      SECTION 6.1. DOCUMENTATION. In addition to the conditions precedent set
forth in SECTION 6.2 and SECTION 6.3, the obligation of the Lender to make the
Term Loan is subject to the conditions precedent that the Lender shall have
received all of the following, each duly executed and dated a date acceptable to
the Lender, in form and substance satisfactory to the Lender and its counsel, at
the expense of the Borrower, and in such number of signed counterparts as the
Lender may request (except for the Convertible Term Note, of which only the
original shall be signed):

            (a) AGREEMENT. This Agreement;

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            (b) NOTE. The Convertible Term Note;

            (c) RESOLUTION. A copy of a resolution of the Board of Directors of
      the Borrower authorizing or ratifying the execution, delivery and
      performance, respectively, of this Agreement, the Convertible Term Note
      and the other documents provided for in this Agreement, certified by the
      secretary or assistant secretary of the Borrower; and

            (d) MISCELLANEOUS. Such other documents and certificates as the
      Lender may request.

      SECTION 6.2. REPRESENTATIONS AND WARRANTIES; NO DEFAULT.

            (a) REPRESENTATIONS AND WARRANTIES. At the date of the Term Loan,
      the Borrower's representations and warranties set forth herein shall be
      true and correct in all material respects as at such date with the same
      effect as though those representations and warranties had been made on and
      as at such date.

            (b) NO DEFAULT. At the time of the Term Loan, and immediately after
      giving effect to the Term Loan, the Borrower shall be in compliance with
      all the terms and provisions set forth herein on its part to be observed
      or performed, and no Event of Default or Unmatured Event of Default shall
      have occurred and be continuing at the time of the Term Loan, or would
      result from the making of the Term Loan.

      SECTION 6.3. NO MATERIAL ADVERSE CHANGE. No material adverse change in, or
effect on, (a) the business, assets, properties, operations, condition or
prospects of the Borrower or any of its subsidiaries or (b) the ability of the
Borrower to perform its obligations under this Agreement or the Convertible Term
Note, in all cases whether due to a single circumstance or event or an
aggregation of circumstances or events, shall have occurred.

                               SECTION 7. DEFAULT

      SECTION 7.1. EVENTS OF DEFAULT. Each of the following occurrences is
hereby defined as an "Event of Default":

            (a) NONPAYMENT. The Borrower shall fail to make any payment of
      principal, interest, or other amounts payable hereunder when and as due;
      or

            (b) DEFAULT UNDER RELATED DOCUMENTS. Any default, event of default,
      or similar event shall occur or continue under any instrument, document,
      note, agreement, or guaranty delivered to the Lender in connection with
      the Term Loan (including without limitation the Convertible Term Note), or
      any such instrument, document, note, agreement, or guaranty shall not be,
      or shall cease to be, enforceable in accordance with its terms; or

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            (c) CROSS-DEFAULT. There shall occur any default or event of
      default, or any event which might become such with notice or the passage
      of time or both, or any similar event, or any event which requires the
      prepayment of borrowed money or the acceleration of the maturity thereof,
      under the terms of any evidence of indebtedness or other agreement issued
      or assumed or entered into by the Borrower, any of its subsidiaries or
      under the terms of any indenture, agreement or instrument under which any
      such evidence of indebtedness or other agreement is issued, assumed,
      secured or guaranteed, in each case in respect of an amount that exceeds
      $100,000, and such event shall continue beyond any applicable period of
      grace; or

            (d) DISSOLUTIONS, ETC. The Borrower or any subsidiary shall fail to
      comply with any provision concerning its existence or any prohibition
      against dissolution, liquidation, merger, consolidation or sale of assets;
      or

            (e) WARRANTIES. Any representation, warranty, schedule, certificate,
      financial statement, report, notice or other writing furnished by or on
      behalf of the Borrower or any of its subsidiaries to the Lender is false
      or misleading in any material respect on the date as of which the facts
      therein set forth are stated or certified; or

            (f) ERISA. (i) Institution of any steps by the Borrower or any
      subsidiary to terminate a Plan if as a result of such termination the
      Borrower or such subsidiary could be required to make a contribution to
      such Plan, or could incur a liability or obligation to such Plan, in
      either case in excess of $100,000; (ii) a contribution failure occurs with
      respect to any plan sufficient to give rise to a lien under Section 302(f)
      of ERISA with respect to any Plan; (iii) there shall occur any withdrawal
      or partial withdrawal from a Multiemployer Plan and the withdrawal
      liability (without unaccrued interest) to Multiemployer Plans as a result
      of such withdrawal (including any outstanding withdrawal liability that
      the Borrower or any subsidiary and any ERISA Affiliate have incurred on
      the date of such withdrawal) exceeds $100,000; or (iv) any "reportable"
      event shall occur under ERISA in respect of any employee benefit plan
      maintained for employees of the Borrower or any subsidiary; or

            (g) LITIGATION. Any suit, action or other proceeding (judicial or
      administrative) commenced against the Borrower or any of its subsidiaries,
      or with respect to any assets of the Borrower or such subsidiary, shall
      threaten to have a material and adverse effect on the asset, condition
      (financial or otherwise) or future operations of the Borrower or such
      subsidiary; or a final judgment or settlement in excess of $100,000 in
      excess of insurance shall be entered in, or agreed to in respect of, any
      such suit, action or proceeding; or

            (h) NONCOMPLIANCE WITH THIS AGREEMENT. The Borrower shall fail to
      comply in any material respect with any provision hereof, which failure
      does not otherwise constitute an Event of Default, and such failure shall
      continue for ten (10) days after the occurrence of such failure; or

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            (i) BANKRUPTCY. Any bankruptcy, insolvency, reorganization,
      arrangement, readjustment, liquidation, dissolution, or similar
      proceeding, domestic or foreign, is instituted by or against the Borrower
      or any of its subsidiaries, or the Borrower or any of its subsidiaries
      shall take any step toward, or to authorize, such a proceeding; or

            (j) INSOLVENCY. The Borrower or any of its subsidiaries shall become
      insolvent, generally shall fail or be unable to pay its debts as they
      mature, shall admit in writing its inability to pay its debts as they
      mature, shall make a general assignment for the benefit of its creditors,
      shall enter into any composition or similar agreement, or shall suspend
      the transaction of all or a substantial portion of its usual business.

      SECTION 7.2. REMEDIES. Upon the occurrence of any Event of Default set
forth in SUBSECTIONS (A)-(K) of SECTION 7.1 and during the continuance thereof,
the Lender or any other holder of the Convertible Term Note may declare the
Convertible Term Note and any other amounts owed to the Lender to be immediately
due and payable, whereupon the Convertible Term Note and any other amounts owed
to the Lender shall forthwith become due and payable. Upon the occurrence of any
Event of Default set forth in SUBSECTIONS (L)-(M) of SECTION 7.1, the
Convertible Term Note and any other amounts owed to the Lender shall be
immediately and automatically due and payable without action of any kind on the
part of the Lender or any other holder of the Convertible Term Note. The
Borrower expressly waives presentment, demand, notice or protest of any kind in
connection herewith. The Lender shall promptly give the Borrower notice of any
such declaration, but failure to do so shall not impair the effect of such
declaration. No delay or omission on the part of the Lender or any holder of the
Convertible Term Note in exercising any power or right hereunder or under the
Convertible Term Note shall impair such right or power or be construed to be a
waiver of any Event of Default or any acquiescence therein, nor shall any single
or partial exercise of any power or right hereunder preclude other or further
exercise thereof, or the exercise of any other power or right.

                             SECTION 8. DEFINITIONS

      SECTION 8.1. GENERAL. As used herein:

            (a) "AFFILIATE" of any Person means (a) any Person that, directly or
      indirectly, is in control of, is controlled by, or is under common control
      with such Person, (b) any Person who is a director or officer (i) of such
      Person, (ii) of any subsidiary of such Person or (iii) of any Person
      described in CLAUSE (A) above or (c) in the case of a trust, its
      protectors or trustees, any Person who is or has been a beneficiary
      thereof, or any Person who is or has been able to appoint a beneficiary
      thereof. For purposes of this definition, control of a Person shall mean
      the power, direct or indirect (i) to vote 25% or more of the securities
      having ordinary voting power for the election of directors of such Person,
      whether by ownership of securities, contract, proxy or otherwise, or (ii)
      to direct or cause the direction of the management and policies of such
      Person, whether by ownership of securities, contract, proxy or otherwise.

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            (b) "AGREEMENT" shall have the meaning set forth in the PREAMBLE.

            (c) "BORROWER" shall have the meaning set forth in the PREAMBLE.

            (d) "CODE" means the Internal Revenue Code of 1986, as amended from
      time to time.

            (e) "ERISA" means the Employee Retirement Income Security Act of
      1974, as amended from time to time.

            (f) "ERISA AFFILIATE" means any corporation or trade or business
      which is a member of the same controlled group of corporations (within the
      meaning of Section 414(b) of the Code) as such Borrower or is under common
      control (within the meaning of Section 414(c) of the Code) with the
      Borrower.

            (g) "GAAP" shall mean generally accepted accounting principles in
      the United States of America as in effect on the date of this Agreement,
      consistently applied.

            (h) "INVESTOR" shall have the meaning set forth in the PREAMBLE.

            (i) "INVESTOR'S ADDRESS" shall have the meaning set forth in Section
      3.1.

            (j) "LENDER" shall have the meaning set forth in the PREAMBLE.

            (k) "MULTIEMPLOYER PLAN" means a multiemployer plan defined as such
      in Section 3(37) of ERISA to which contributions have been made by the
      Borrower or any ERISA Affiliate as a "contributing sponsor" (within the
      meaning of Section 4001(a)(13) of ERISA).

            (l) "PBGC" means the Pension Benefit Guaranty Corporation or any
      entity succeeding to any or all of its functions under ERISA.

            (m) "PERSON" shall mean any individual, sole proprietorship,
      partnership, joint venture, trust, unincorporated organization,
      association, corporation, limited liability company, institution, public
      benefit corporation, other entity or government (whether federal, state,
      county, city, municipal, local, foreign, or otherwise, including any
      instrumentality, division, agency, body or department thereof).

            (n) "PLAN" means any plan, program or arrangement which constitutes
      an "employee benefit plan" within the meaning of Section 3(3) of ERISA and
      which is maintained or contributed to by the Borrower or its ERISA
      Affiliates for the benefit of their employees, including former employees.

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            (o) "SUBSIDIARY" means any corporation, partnership, joint venture,
      trust, or other legal entity of which the Borrower owns directly or
      indirectly 50% or more of the outstanding voting stock or interest, or of
      which the Borrower has effective control, by contract or otherwise.

            (p) "SUBSCRIPTION AMOUNT" shall equal $50,000.

            (q) "SUBSCRIPTION DATE" shall have the meaning set forth in the
      PREAMBLE.

            (r) "TERM LOAN MATURITY DATE" shall have the meaning set forth in
      SECTION 1.2.

            (s) "CONVERTIBLE TERM NOTE" shall have the meaning set forth in
      SECTION 1.2.

            (t) "UNMATURED EVENT OF DEFAULT" means an event or condition, which
      would become an Event of Default with notice or the passage of time or
      both.

Except as and unless otherwise specifically provided herein, all accounting
terms in this Agreement shall have the meanings given to them by GAAP and shall
be applied and all reports required by this Agreement shall be prepared, in a
manner consistent with the audited financial statements referred to in SECTION
4.3.

      SECTION 8.2. APPLICABILITY OF SUBSIDIARY AND AFFILIATE REFERENCES. Terms
hereof pertaining to any subsidiary or affiliate shall apply only during such
times as the Borrower has any subsidiary or affiliate.

                            SECTION 9. MISCELLANEOUS

      SECTION 9.1. WAIVER OF DEFAULT. The Lender may, by written notice to the
Borrower, at any time and from time to time, waive any Event of Default or
Unmatured Event of Default, which shall be for such period and subject to such
conditions as shall be specified in any such notice. In the case of any such
waiver, the Lender and the Borrower shall be restored to their former position
and rights hereunder and under the Convertible Term Note, respectively, and any
Event of Default or Unmatured Event of Default so waived shall be deemed to be
cured and not continuing; but no such waiver shall extend to or impair any right
consequent thereon or to any subsequent or other Event of Default or Unmatured
Event of Default.

      SECTION 9.2. NOTICES. All notices, requests and demands to or upon the
respective parties hereto shall be deemed to have been given or made when
deposited in the mail, postage prepaid, addressed:

            (a) if to the Lender to the Investor's Address,

            (b) if to the Borrower to NuWay Medical, Inc., 2603 Main Street,
      Suite 1150, Irvine, California 92614 Attention: Chief Executive Officer.

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or to such other address as may be hereafter designated in writing by the
respective parties hereto.

      SECTION 9.3. NONWAIVER; CUMULATIVE REMEDIES. No failure to exercise, and
no delay in exercising, on the part of the Lender of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies of the
Lender herein provided are cumulative and not exclusive of any rights or
remedies provided by law.

      SECTION 9.4. SURVIVAL OF AGREEMENTS. All agreements, representations and
warranties made herein shall survive the delivery of the Convertible Term Note
and the making of the Term Loan.

      SECTION 9.5. SUCCESSORS. This Agreement shall, upon execution and delivery
by the Borrower and acceptance by the Lender, become effective and shall be
binding upon and inure to the benefit of the Borrower, the Lender and their
respective successors and assigns, except that the Borrower may not transfer or
assign any of its rights or interest hereunder without the prior written consent
of the Lender.

      SECTION 9.6. CAPTIONS. Captions in this Agreement are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof. References herein to Sections or provisions without reference to the
document in which they are contained are references to this Agreement.

      SECTION 9.7. SINGULAR AND PLURAL. Unless the context requires otherwise,
wherever used herein the singular shall include the plural and vice versa, and
the use of one gender shall also denote the others where appropriate.

      SECTION 9.8. COUNTERPARTS. This Agreement may be executed by the parties
on any number of separate counterparts, and by each party on separate
counterparts; each counterpart shall be deemed an original instrument; and all
of the counterparts taken together shall be deemed to constitute one and the
same instrument.

      SECTION 9.9. FEES. The Borrower agrees to pay or reimburse the Lender for
all costs and expenses of enforcing this Agreement or the Convertible Term Note,
or preserving its rights hereunder or under any document or instrument executed
in connection herewith (including legal fees and reasonable time charges of
attorneys who may be employees of the Lender, whether in or out of court, in
original or appellate proceedings or in bankruptcy).

      SECTION 9.10. CONSTRUCTION. This Agreement, the Convertible Term Note, and
any other document or instrument executed in connection herewith shall be
governed by, and construed and interpreted in accordance with, the internal laws
of the State of California and shall be deemed to have been executed in the
State of California.

                            [SIGNATURE PAGE FOLLOWS]

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      IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.

                                      BORROWER

                                      NUWAY MEDICAL, INC.

                                      /s/
                                      ------------------------------
                                      Dennis Calvert, President

                                      LENDER

                                      DAVID MOON

                                      /S/
                                      ------------------------------

                                      LENDER

                                      JAMES BURCHARD

                                      /S/
                                      ------------------------------

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                                    EXHIBIT A
                              CONVERTIBLE TERM NOTE

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR APPLICABLE
STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THERE IS AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

Subscription Amount: $50,000                              Irvine, California
                                                          Dated: October 1, 2004

      FOR VALUE RECEIVED, NUWAY MEDICAL, INC., a corporation organized under the
laws of the state of Delaware ("BORROWER"), promises to pay to the order of
"Investor", as that term is defined in the Convertible Loan Agreement by and
between Borrower and Investor ("CONVERTIBLE LOAN AGREEMENT") (hereafter,
together with any subsequent holder hereof, called "LENDER"), at its office at
"Investor's Address", as that term is defined in the Convertible Loan Agreement,
or at such other place as Lender may direct, the "Subscription Amount", noted
above (the "LOAN"), payable in full one year from the "Subscription Date", or at
an earlier date as provided in Section 3.2 of the Convertible Loan Agreement
(the "MATURITY DATE"). This Convertible Term Note is duly authorized issue of
the Borrower (the "ISSUER"), issued on October 1, 2004 (the "ISSUANCE DATE"),
and designated as its Convertible Term Note due one year from the Issuance Date
(the "NOTE").

      Borrower agrees to pay interest on the unpaid principal amount from time
to time outstanding hereunder on the dates and at the rate or rates as set forth
in the Convertible Loan Agreement.

      Payments of both principal and interest are to be made in immediately
available funds in lawful money of the United States of America, or in Preferred
Stock of the Borrower as set forth below.

      Accrual of interest shall commence as of the Issuance Date. Interest shall
be payable by the Issuer, at the Issuer's option, in cash or in that number of
shares of preferred stock of the Issuer (the "PREFERRED STOCK") (at a price per
share calculated pursuant to the conversion formula contained below), upon the
earlier to occur of (i) upon conversion of this Note pursuant to the conversion
features set forth below, or (ii) upon an Event of Default as defined below, and
if an Event of Default occurs interest due hereunder shall be payable in cash or
stock as set forth herein at the option of the Holder. Unless otherwise agreed
in writing by both parties hereto, the interest so payable will be paid to the
person in whose name this Note (or one or more predecessor Notes) is registered
on the records of the Issuer regarding registration and transfers of the Note
(the "NOTE Register"), provided, however, that the Issuer's obligation to a
transferee of this Note arises only if such transfer, sale or other disposition
is made in accordance with the terms and conditions contained in the Agreement
and this Note.

                                     - 1 -
<PAGE>

      The Note is subject to the following additional provisions:

      1. The Issuer shall be entitled to withhold from all payments of principal
and/or interest of this Note any amounts required to be withheld under the
applicable provisions of the U.S. Internal Revenue Code of 1986, as amended, or
other applicable laws at the time of such payments.

      2. This Note has been issued subject to investment representations of the
original Holder hereof and may be transferred or exchanged only in compliance
with the Securities Act and applicable state securities laws and in compliance
with the restrictions on transfer provided in the Agreement. Prior to the due
presentment for such transfer of this Note, the Issuer and any agent of the
Issuer may treat the person in whose name this Note is duly registered on the
Issuer's Note register as the owner hereof for the purpose of receiving payment
as herein provided and all other purposes, whether or not this Note is overdue,
and neither the Issuer nor any such agent shall be affected by notice to the
contrary. The transferee shall be bound, as the original Holder by the same
representations and terms described herein and under the Agreement.

      3. The Holder or Issuer may, at its option, at any time up to and
including December 31, 2004, convert the principal amount of this Note or any
portion thereof, and any accrued interest thereon, into 10,000,000 shares of
fully paid and non assessable Series A Preferred Stock of the Issuer
("CONVERSION SHARES"). The right to convert the Note may be exercised by
telecopying an executed and completed notice of conversion (the "NOTICE OF
CONVERSION") to the Holder or Issuer. Each business day on which a Notice of
Conversion is telecopied in accordance with the provisions hereof shall be
deemed a "Conversion Date". The Issuer will transmit the certificates
representing Conversion Shares issuable upon such conversion of the Note
(together with the certificates representing the Note not so converted) to the
Holder via express courier, by electronic transfer (if applicable) or otherwise
within ten Business Days after the Conversion Date, provided, the Issuer has
received the original Note being so converted from the Holder. If the Company
has not received the original Note being converted within three Business Days
after Conversion Date, then the Issuer shall transmit the certificates
representing the Conversion Shares issuable upon such conversion of the Note
(together with the certificates representing the Note not so converted) to the
Holder via express courier, by electronic transfer (if applicable) or otherwise
within five business days after receipt of the original Notice of Conversion and
original Note being converted.

      4. The principal amount of this Note, and any accrued interest thereon,
shall be reduced as per that principal amount indicated on the Notice of
Conversion upon the proper receipt by the Holder of such Conversion Shares due
upon such Notice of Conversion.

                                     - 2 -
<PAGE>

      5. The number of Conversion Shares shall be adjusted as follows:

            a. If the Issuer shall at any time subdivide its outstanding shares
of Common Stock into a greater number of shares of Common Stock, the number of
Conversion Shares in effect immediately prior to such subdivision shall be
proportionately increased, and conversely, in case the outstanding shares of
Common Stock shall be combined into a smaller number of shares of Common Stock,
the Conversion Price in effect immediately prior to such combination shall be
proportionately reduced.

      6. No provision of this Note shall alter or impair the obligation of the
Issuer, which is absolute and unconditional, upon an Event of Default (as
defined below), to pay the principal of, and interest on this Note at the place,
time, and rate, and in the coin or currency herein prescribed.

      7. The Issuer hereby expressly waives demand and presentment for payment,
notice on nonpayment, protest, notice of protest, notice of dishonor, notice of
acceleration or intent to accelerate, and diligence in taking any action to
collect amounts called for hereunder and shall be directly and primarily liable
for the payment of all sums owing and to be owing hereon, regardless of and
without any notice, diligence, act or omission as or with respect to the
collection of any amount called for hereunder.

      8. If one or more "Events of Default" shall occur, as that term is used in
the Convertible Loan Agreement, then, or at any time thereafter, and in each and
every such case, unless such Event of Default shall have been waived in writing
by the Holder (which waiver shall not be deemed to be a waiver of any subsequent
default) or cured as provided herein, at the option of the Holder, and in the
Holder's sole discretion, the Holder may consider this Note (and all interest
through such date) immediately due and payable in cash, without presentment,
demand protest or notice of any kind, all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary
notwithstanding, and Holder may immediately, and without expiration of any
period of grace, enforce any and all of the Holder's rights and remedies
provided herein or any other rights or remedies afforded by law (including but
not limited to consequential damages if any). It is agreed that in the event of
such action, such Holder shall be entitled to receive all reasonable fees, costs
and expenses incurred, including without limitation such reasonable fees and
expenses of attorneys. The parties acknowledge that a change in control of the
Issuer shall not be deemed to be an Event of Default as set forth herein.

      9. In case any provision of this Note is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is
enforceable to the maximum extent possible, and the validity and enforceability
of the remaining provisions of this Note will not in any way be affected or
impaired thereby.

                                     - 3 -
<PAGE>

      10. The Holder shall have the right, if applicable, to include all of the
Conversion Shares underlying this Note (the "Registrable Securities") as part of
any registration of securities filed by the Issuer (other than in connection
with a transaction contemplated by Rule 145(a) promulgated under the Act or
pursuant to Form S-4 or S-8) and must be notified in writing of such filing as
soon as reasonably practicable; PROVIDED, HOWEVER, that the Holder agrees it
shall not have any piggy-back registration rights pursuant to this Note if the
Conversion Shares underlying this Note may be sold in the United States pursuant
to the provisions of Rule 144 without any restriction on resale. Holder shall
have five business days after receipt of the aforementioned notice from the
Issuer, to notify the Issuer in writing as to whether the Issuer is to include
Holder or not include Holder as part of such registration; PROVIDED, HOWEVER,
that if any registration pursuant to this paragraph shall be underwritten, in
whole or in part, the Issuer may require that the Registrable Securities
requested for inclusion pursuant to this paragraph be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters. If in the good faith judgment of the underwriter
evidenced in writing of such offering only a limited number of Registrable
Securities should be included in such offering, or no such shares should be
included, the Holder, and all other selling stockholders, shall be limited to
registering such proportion of their respective shares as shall equal the
proportion that the number of shares of selling stockholders permitted to be
registered by the underwriter in such offering bears to the total number of all
shares then held by all selling stockholders desiring to participate in such
offering. All registration expenses incurred by the Issuer in complying with the
terms of this Note shall be paid by the Issuer, exclusive of underwriting
discounts, commissions and legal fees and expenses for counsel to the Holder.

      11. This Note does not entitle the Holder hereof to any voting rights or
other rights as a shareholder of the Issuer prior to the conversion into
Preferred Stock thereof, except as provided by applicable law. If, however, at
the time of the surrender of this Note and conversion the Holder hereof shall be
entitled to convert this Note, the Conversion Shares so issued shall be and be
deemed to be issued to such holder as the record owner of such shares as of the
close of business on the Conversion Date.

      12. Except as expressly provided herein or as required by law, so long as
this Note remains outstanding, the Issuer shall not, without the approval by
vote or written consent by the Holder, take any action that would adversely
affect the rights, preferences or privileges of this Note.

      IN WITNESS WHEREOF, the Issuer has caused this Convertible Term Note to be
duly executed by an officer thereunto duly authorized.

NUWAY MEDICAL, INC.

By /s/
   ------------------------
Name: Dennis Calvert, its President

                                     - 4 -
<PAGE>

NOTICE OF CONVERSION

     (To be Executed by the Registered Holder in order to Convert the Note)

      The undersigned hereby irrevocably elects to convert ___________ of the
principal amount of the above Note into ___________ Shares of Series A Preferred
Stock of NuWay Medical, Inc. according to the conditions hereof, as of the date
written below.

Date of Conversion:
                    ------------------------------------------

Signature:
           ---------------------------------------------------

Name:
     ---------------------------------------------------------

Address:
        ------------------------------------------------------

Date of Conversion:
                    ------------------------------------------

Signature:
           ---------------------------------------------------

Name:
     ---------------------------------------------------------

Address:
        ------------------------------------------------------

                                     - 5 -Exhibit 4.1

THIS  WARRANT AND THE  SECURITIES  REPRESENTED  HEREBY HAVE NOT BEEN  REGISTERED
UNDER THE  SECURITIES  ACT OF 1933, AS AMENDED,  OR UNDER THE SECURITIES OR BLUE
SKY LAWS OF ANY  STATE AND MAY NOT BE SOLD,  OR  OTHERWISE  TRANSFERRED,  IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION  THEREFROM UNDER SUCH ACT AND UNDER
ANY SUCH  APPLICABLE  STATE LAWS,  OR IN  VIOLATION  OF THE  PROVISIONS  OF THIS
WARRANT.

THIS WARRANT AND THE SECURITIES  REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A REGISTRATION RIGHTS AGREEMENT DATED AS OF November 11, 2004.

                                     WARRANT

                           To Purchase Common Stock of

                             Essential Reality, Inc.
                              A Nevada Corporation

                        Issuance Date: November 11, 2004

                     Issued To: ROSENTHAL & ROSENTHAL, INC.

No. of Shares of Common Stock: 500,000
<PAGE>

                                TABLE OF CONTENTS

                                                                            Page

1.    DEFINITIONS..............................................................1

2.    EXERCISE OF WARRANT......................................................4
      2.1.     Manner of Exercise..............................................4
      2.2.     Payment of Taxes................................................5
      2.3.     Fractional Shares...............................................6
      2.4.     Continued Validity..............................................6

3.    TRANSFER, DIVISION AND COMBINATION.......................................6
      3.1.     Transfer........................................................6
      3.2.     Division and Combination........................................7
      3.3.     Expenses........................................................7
      3.4.     Maintenance of Books............................................7

4.    ADJUSTMENTS..............................................................7
      4.1.     Stock Dividends, Subdivisions and Combinations..................7
      4.2.     Certain Other Distributions.....................................8
      4.3.     Issuance of Additional Shares of Common Stock...................8
      4.4.     Issuance of Warrants or Other Rights............................9
      4.5.     Issuance of Convertible Securities..............................9
      4.6.     Superseding Adjustment..........................................9
      4.7.     Other Provisions Applicable to Adjustments Under
               This Section....................................................9
      4.8.     Reorganization, Reclassification, Liquidation, Dissolution,
               Merger, Consolidation or Disposition of Assets..................9
      4.9.     Other Action Affecting Common Stock............................10
      4.10.    Certain Limitations............................................10

5.    NOTICES TO WARRANTHOLDERS...............................................10
      5.1.     Notice of Adjustments..........................................10
      5.2.     Notice of Certain Corporate Action.............................10

6.    NO IMPAIRMENT...........................................................11

7.    RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
      APPROVAL OF ANY GOVERNMENTAL AUTHORITY..................................11

8.    TAKING OF A RECORD; STOCK AND WARRANT TRANSFER BOOKS....................12

                                       i
<PAGE>

9.    RESTRICTIONS ON TRANSFERABILITY.........................................12
      9.1.     Restrictive Legends............................................12
      9.2.     Notice of Proposed Transfers; Requests for Registration........13
      9.3.     Termination of Restrictions....................................13

10.   SUPPLYING INFORMATION...................................................14

11.   LOSS OR MUTILATION......................................................14

12.   OFFICE OF THE COMPANY...................................................14

13.   REGISTRATION RIGHTS.....................................................14

14.   LIMITATION OF LIABILITY.................................................15

15.   MISCELLANEOUS...........................................................15
      15.1.    Nonwaiver and Expenses.........................................15
      15.2.    Notice Generally...............................................15
      15.3.    Indemnification................................................16
      15.4.    Successors and Assigns.........................................16
      15.5.    Amendment......................................................16
      15.6.    Severability...................................................16
      15.7.    Headings.......................................................16
      15.8.    Governing Law; Consent to Jurisdiction and Venue. .............17
      15.9.    Mutual Waiver of Jury Trial....................................17

                                       ii
<PAGE>

THIS  WARRANT AND THE  SECURITIES  REPRESENTED  HEREBY HAVE NOT BEEN  REGISTERED
UNDER THE  SECURITIES  ACT OF 1933, AS AMENDED,  OR UNDER THE SECURITIES OR BLUE
SKY LAWS OF ANY  STATE AND MAY NOT BE SOLD,  OR  OTHERWISE  TRANSFERRED,  IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION  THEREFROM UNDER SUCH ACT AND UNDER
ANY SUCH  APPLICABLE  STATE LAWS,  OR IN  VIOLATION  OF THE  PROVISIONS  OF THIS
WARRANT.

THIS WARRANT AND THE SECURITIES  REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A REGISTRATION RIGHTS AGREEMENT DATED AS OF November 11, 2004.

Warrant Number: ___________                           Date of Issuance: 11/11/04
No. of Shares of Common Stock: 500,000

                                     WARRANT

                           To Purchase Common Stock of

                             Essential Reality, Inc.

            THIS  IS  TO  CERTIFY  THAT  Rosenthal  &  Rosenthal,  Inc.  or  its
registered  assigns,  is entitled,  at any time during the  Exercise  Period (as
hereinafter  defined),  to  purchase  from  Essential  Reality,  Inc.,  a Nevada
corporation  (the "Company"),  five hundred thousand  (500,000) shares of Common
Stock (as hereinafter  defined and subject to adjustment as provided herein), in
whole or in part,  including  fractional parts, at a purchase price of ten cents
per share  (subject to  adjustment  as set forth  herein),  all on the terms and
conditions and pursuant to the provisions hereinafter set forth.

1.    DEFINITIONS

            As used in this  Warrant,  the following  terms have the  respective
meanings set forth below:

            "Additional  Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company  after the Closing Date,  other than Warrant  Stock,
whether now authorized or not.

            "Business  Day" shall mean any day that is not a Saturday  or Sunday
or a day on which banks are  required or  permitted to be closed in the State of
New York.

            "Closing Date" shall mean November 11, 2004

            "Commission"  shall mean the Securities  and Exchange  Commission or
any other federal agency then administering the Securities Act and other federal
securities laws.
<PAGE>

            "Common  Stock"  shall  mean  (except  where the  context  otherwise
indicates)  the  common  stock,  par value  $.001 per share,  of the  Company as
constituted  on the Closing  Date,  and any capital stock into which such Common
Stock may thereafter be changed, and shall also include (i) capital stock of the
Company of any other class (regardless of how denominated) issued to the holders
of shares of Common Stock upon any  reclassification  thereof  which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to  redemption  and (ii) shares of common  stock of any
successor or acquiring  corporation  (as defined in Section 4.8)  received by or
distributed  to the holders of Common Stock of the Company in the  circumstances
contemplated by Section 4.8.

            "Convertible  Securities"  shall  mean  evidences  of  indebtedness,
shares of stock or other  securities which are convertible into or exchangeable,
with or without  payment of additional  consideration  in cash or property,  for
Additional Shares of Common Stock,  either immediately or upon the occurrence of
a specified date or a specified event.

            "Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein  specified,  the average of the daily market prices for
the 20  consecutive  Trading Days  immediately  preceding  such date.  The daily
market  price for each such Trading Day shall be (i) the last sale price on such
day on the principal stock exchange on which such Common Stock is then listed or
admitted  to  trading,  (ii) if no sale  takes  place  on such  day on any  such
exchange,  the  last  reported  sale  price  as  officially  quoted  on any such
exchange, (iii) if the Common Stock is not then listed or admitted to trading on
any stock  exchange but is traded on the Nasdaq Stock Market,  the last reported
sale price as officially  quoted on the Nasdaq Stock Market,  (iv) if the Common
Stock is not then traded on the Nasdaq  Stock  Market,  the last  reported  sale
price on the  over-the-counter  market,  as reported by the  National  Quotation
Bureau  Incorporated  (or any similar  organization or agency  succeeding to its
functions of reporting  prices),  or if such sale price is not available on such
date,  the average of the closing bid and asked  prices on such date as reported
by the National  Quotation Bureau  Incorporated (or any similar  organization or
agency  succeeding to its  functions of reporting  prices) or (v) if there is no
such  organization  or agency,  as furnished by any member of the NASD  selected
mutually  by the  Holder  and the  Company  or, if they  cannot  agree upon such
selection,  by a member  selected by two such members of the NASD,  one of which
shall be  selected  by the  Holder  and one of which  shall be  selected  by the
Company.

            "Current  Warrant Price" shall mean, in respect of a share of Common
Stock at any date herein  specified,  the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date. On the Closing Date, the
Current Warrant Price is ten cents per share of Common Stock,  and is subject to
adjustment pursuant to Section 4.

            "Exercise  Period"  shall mean the period  beginning  on the Closing
Date and ending at 5:00  P.M.,  New York  time,  on the  earlier to occur of (i)
November 30, 2010;  and (ii) the date which is 10 business  days after  Holder's
receipt of notice from the Company  that the Current  Market Price of the Common
Stock of the  Company is no less than an amount  equal to four times the Current
Warrant Price, as adjusted pursuant to Section 4 hereof.

                                       2
<PAGE>

            "Fully Diluted  Outstanding" shall mean, when used with reference to
Common  Stock,  at any date as of which the  number of shares  thereof  is to be
determined,  all shares of Common Stock  Outstanding at such date and all shares
of Common Stock issuable in respect of this Warrant outstanding on such date and
other options or warrants to purchase, or securities convertible into, shares of
Common Stock outstanding on such date, whether or not such options,  warrants or
other securities are presently convertible or exercisable.

            "Holder"  shall mean, as the context  requires,  the Person in whose
name this Warrant is registered on the books of the Company  maintained for such
purpose and/or the Person holding any Warrant Stock.

            "Independent  Counsel"  shall mean counsel to the Holder  reasonably
acceptable to the Company.

            "NASD" shall mean the National  Association  of Securities  Dealers,
Inc., or any successor corporation thereto.

            "Other Property" shall have the meaning set forth in Section 4.8.

            "Outstanding"  shall mean, when used with reference to Common Stock,
at any date as of which the number of shares  thereof is to be  determined,  all
issued  shares of Common  Stock,  except shares then owned or held by or for the
account of the Company or any Subsidiary,  and shall include all shares issuable
in respect of  outstanding  scrip or any  certificates  representing  fractional
interests in shares of Common Stock.

            "Permitted  Issuances"  shall  mean (i) the  issuance  of  shares of
Common Stock pursuant to an underwritten public offering,  and (ii) the issuance
of shares of Common Stock upon exercise of this Warrant.

            "Person"   shall   mean   any   individual,   sole   proprietorship,
partnership,  joint  venture,  trust,  incorporated  organization,  association,
corporation,  institution,  public  benefit  corporation,  entity or  government
(whether  federal,  state,  county,  city,  municipal or  otherwise,  including,
without limitation,  any instrumentality,  division,  agency, body or department
thereof).

            "Registration  Rights Agreement" shall mean the Registration  Rights
Agreement  dated as of the Closing  Date  between  the  Company and  Rosenthal &
Rosenthal, Inc.

            "Reorganization" shall have the meaning set forth in Section 4.8.

                                       3
<PAGE>

            "Restricted  Common  Stock"  shall mean shares of Common Stock which
are, or which upon their  issuance on the  exercise  of this  warrant  would be,
evidenced by a certificate  bearing the restrictive  legend set forth in Section
9.1(a).

            "Securities  Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute,  and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.

            "Subsidiary"  shall mean any  corporation  of which an  aggregate of
more than 50% of the  outstanding  stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether,
at the time, stock of any other class or classes of such corporation  shall have
or might have voting power by reason of the happening of any  contingency) is at
the time,  directly or indirectly,  owned legally or beneficially by the Company
and/or one or more Subsidiaries of the Company.

            "Trading Day" shall mean (i) any day on which stock is traded on the
principal  stock  exchange  on which the Common  Stock is listed or  admitted to
trading,  (ii) if the Common  Stock is not then listed or admitted to trading on
any stock  exchange but is traded on the Nasdaq Stock  Market,  any day on which
stock is traded on the Nasdaq Stock Market,  or (iii) if the Common Stock is not
then traded on the Nasdaq Stock Market,  any day on which stock is traded in the
over-the  counter  market,   as  reported  by  the  National   Quotation  Bureau
Incorporated (or any similar  organization or agency succeeding to its functions
of reporting prices).

            "Transfer"  shall  mean any  disposition  of any  Warrant or Warrant
Stock or of any  interest  in either  thereof,  which  would  constitute  a sale
thereof within the meaning of the Securities Act.

            "Warrant  Price"  shall  mean an amount  equal to (i) the  number of
shares of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.

            "Warrant  Stock" shall mean the shares of Common Stock  purchased by
the Holder of this Warrant upon the exercise hereof.

            "Warrants"  shall mean this  warrant,  and all warrants  issued upon
transfer,  division or combination  of, or in substitution or exchange for, this
warrant.

2.    EXERCISE OF WARRANT

            2.1 Manner of Exercise.  At any time during the Exercise Period, the
Holder may exercise  this  Warrant,  on any Business Day, for all or any part of
the number of shares of Common Stock purchasable hereunder.

                                       4
<PAGE>

            In order to exercise this Warrant,  in whole or in part,  the Holder
shall deliver to the Company at its office at 15-15 132nd Street, College Point,
New York , or at the office or agency  designated  by the  Company  pursuant  to
Section 12, (i) a written  notice of the  Holder's  election  to  exercise  this
Warrant,  which notice shall  specify the number of shares of Common Stock to be
purchased,  (ii) payment of the Warrant Price in the manner provided below,  and
(iii)  this  Warrant.  Such  notice  shall be  substantially  in the form of the
subscription  form  appearing  at the end of this  Warrant  as  Exhibit  A, duly
executed by the Holder or its duly  appointed  agent or  attorney.  Upon receipt
thereof, the Company shall, as promptly as practicable,  and in any event within
five (5) Business Days  thereafter,  execute or cause to be executed and deliver
or  cause  to  be  delivered  to  the  Holder  a  certificate  or   certificates
representing  the aggregate  number of full shares of Common Stock issuable upon
such  exercise,  together  with  cash in lieu of any  fraction  of a  share,  as
hereinafter  provided.  The stock certificate or certificates so delivered shall
be, to the extent possible,  in such denomination or denominations as the Holder
shall  request in the notice and shall be  registered  in the name of the Holder
or,  subject to Section 9, such other name as shall be designated in the notice.
This Warrant  shall be deemed to have been  exercised  and such  certificate  or
certificates  shall be deemed to have been  issued,  and the Holder or any other
Person so designated to be named therein shall be deemed to have become a holder
of record of such shares for all purposes,  as of the date the notice,  together
with the cash or check or checks, if any, and this Warrant,  are received by the
Company as described  above and all taxes required to be paid by the Holder,  if
any,  pursuant  to Section  2.2 prior to the  issuance  of such shares have been
paid. If this Warrant shall have been exercised in part,  the Company shall,  at
the time of delivery of the  certificate or  certificates  representing  Warrant
Stock,  deliver to the Holder a new Warrant  evidencing the rights of the Holder
to purchase the  unpurchased  shares of Common Stock called for by this Warrant,
which new Warrant  shall in all other  respects be identical  with this Warrant,
or, at the  request  of the  Holder,  appropriate  notation  may be made on this
Warrant  and the same  returned  to the Holder.  Notwithstanding  any  provision
herein to the contrary,  the Company shall not be required to register shares in
the name of any Person who acquired this Warrant (or part hereof) or any Warrant
Stock otherwise than in accordance with this Warrant.

            Payment  of the  Warrant  Price  shall be made at the  option of the
Holder by (i) cash,  (ii) wire  transfer to an account in a bank  located in the
United States  designated  for such purpose by the Company,  (iii)  certified or
official  bank  check,  or (iv)  any  combination  of the  foregoing;  provided,
however,  that the  Holder  shall have the right,  at its  election,  in lieu of
delivering the Warrant Price in cash, to instruct the Company in the form of the
subscription  form  appearing at the end of this Warrant as Exhibit A to retain,
in payment of the Warrant Price, a number of shares of Common Stock equal to the
quotient of the  aggregate  Warrant Price of the shares as to which this Warrant
is then being exercised divided by the Current Market Price.

            2.2.  Payment of Taxes. All shares of Common Stock issuable upon the
exercise of this Warrant  pursuant to the terms hereof shall be validly  issued,
fully paid and  nonassessable  and without any  preemptive  rights.  The Company
shall pay all expenses in connection with, and all taxes and other  governmental
charges  that may be imposed  with  respect to, the issue or  delivery  thereof,
unless such tax or charge is imposed by law upon the Holder,  in which case such

                                       5
<PAGE>

taxes or charges shall be paid by the Holder. The Company shall not be required,
however,  to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any  certificate  for shares of Common  Stock  issuable
upon exercise of this Warrant in any name other than that of the Holder,  and in
such  case the  Company  shall not be  required  to issue or  deliver  any stock
certificate  until  such  tax or  other  charge  has  been  paid or it has  been
established to the  satisfaction of the Company that no such tax or other charge
is due.

            2.3. Fractional Shares. The Company shall not be required to issue a
fractional  share of Common  Stock  upon  exercise  of this  Warrant.  As to any
fraction of a share which the Holder of a Warrant would otherwise be entitled to
purchase upon  exercise,  the Company shall pay a cash  adjustment in respect of
such final  fraction  in an amount  equal to the same  fraction  of the  Current
Market Price per share of Common Stock on the date of exercise.

            2.4. Continued  Validity.  A holder of shares of Common Stock issued
upon the exercise of this Warrant,  in whole or in part (other than a holder who
acquires  such  shares  after the same have been  publicly  sold  pursuant  to a
registration  statement  under the  Securities  Act or sold pursuant to Rule 144
thereunder),  shall  continue to be entitled  with respect to such shares to all
rights to which it would have been entitled as the Holder under  Sections 6, 10,
13, 14, 15 and 17 of this Warrant,  subject to the obligations  thereunder.  The
Company will, at the time of each exercise of this Warrant, in whole or in part,
upon the  request of the holder of the shares of Common  Stock  issued upon such
exercise hereof, acknowledge in writing, in form reasonably satisfactory to such
holder,  its  continuing  obligation  to afford to such holder all such  rights;
provided, however, that if such holder shall fail to make any such request, such
failure shall not affect the  continuing  obligation of the Company to afford to
such holder all such rights.

3.    TRANSFER, DIVISION AND COMBINATION

            3.1.  Transfer.  Subject to  compliance  with Section 9, transfer of
this Warrant and all rights hereunder,  in whole or in part, shall be registered
on the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the principal  office of the Company  referred to in Section 2.1
or the office or agency  designated  by the  Company  pursuant  to  Section  12,
together with a written assignment of this Warrant  substantially in the form of
Exhibit B hereto duly  executed by the Holder or its agent or attorney and funds
sufficient to pay any transfer  taxes payable upon the making of such  transfer.
Upon such surrender and, if required,  such payment,  the Company shall, subject
to Section 9,  execute  and  deliver a new Warrant or Warrants in the name(s) of
the  assignee  or  assignees  and  in  the  denomination(s)  specified  in  such
instrument  of  assignment,  and  shall  issue  to the  assignor  a new  Warrant
evidencing  the portion of this Warrant not so assigned,  and this Warrant shall
promptly be  cancelled.  A Warrant,  if properly  assigned  in  compliance  with
Section 9, may be exercised by a new Holder for the purchase of shares of Common
Stock without having a new Warrant  issued.  If requested by the Company,  a new
Holder shall  acknowledge in writing,  in form  reasonably  satisfactory  to the
Company, such Holder's continuing obligation under Section 9.

                                       6
<PAGE>

            3.2.  Division and  Combination.  Subject to Section 9, this Warrant
may be divided or combined with other Warrants upon  presentation  hereof at the
aforesaid  office or  agency  of the  Company,  together  with a written  notice
specifying the names and  denominations  in which new Warrants are to be issued,
signed by the  Holder or its  agent or  attorney.  Subject  to  compliance  with
Section 3.1 and with Section 9, as to any transfer which may be involved in such
division or combination,  the Company shall execute and deliver a new Warrant or
Warrants  in  exchange  for the Warrant or Warrants to be divided or combined in
accordance with such notice.

            3.3. Expenses.  The Company shall prepare,  issue and deliver at its
own expense  (other than transfer  taxes) the new Warrant or Warrants under this
Section 3.

            3.4.  Maintenance of Books.  The Company agrees to maintain,  at its
aforesaid  office or agency,  books for the registration and the registration of
transfer of the Warrants.

4.    ADJUSTMENTS

            The  number  of shares of Common  Stock for which  this  Warrant  is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant,  shall be subject to adjustment  from time to time as set forth in
this Section 4. The Company shall give the Holder notice of any event  described
below which  requires an  adjustment  pursuant to this  Section 4 at the time of
such event.

            4.1. Stock Dividends,  Subdivisions and Combinations. If at any time
the Company shall:

                  (a) take a record of the  holders of its Common  Stock for the
            purpose of entitling them to receive a dividend payable in, or other
            distribution of, Additional Shares of Common Stock,

                  (b)  subdivide its  outstanding  shares of Common Stock into a
            larger number of shares of Common Stock, or

                  (c)  combine  its  outstanding  shares of Common  Stock into a
            smaller  number of shares of Common Stock,  by a reverse stock split
            or otherwise

then (i) the  number  of  shares of Common  Stock  for  which  this  Warrant  is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record  holder of the same
number of  shares  of  Common  Stock  for  which  this  Warrant  is  exercisable
immediately  prior to the  occurrence  of such event would own or be entitled to
receive  after the happening of such event,  and (ii) the Current  Warrant Price
shall be adjusted  to equal (A) the  Current  Warrant  Price  multiplied  by the
number of  shares  of  Common  Stock  for  which  this  Warrant  is  exercisable
immediately  prior to the  adjustment  divided  by (B) the  number of shares for
which this Warrant is exercisable  immediately after such adjustment except that
the number of shares of Common Stock for which this warrant is exercisable shall
not be  reduced or  otherwise  adjusted  by reason of the 1 to 44 reverse  stock
split contemplated in the Company's SEC Form 14C filed on October 26, 2004.

                                       7
<PAGE>

            4.2. Certain Other  Distributions.  If at any time the Company shall
take a record of the holders of its Common  Stock for the  purpose of  entitling
them to receive any dividend or other distribution of:

                  (a) cash;

                  (b) any evidences of its indebtedness, any shares of its stock
            or any other securities or property of any nature  whatsoever (other
            than cash,  Convertible  Securities or  Additional  Shares of Common
            Stock); or

                  (c) any warrants or other rights to subscribe  for or purchase
            any  evidences of its  indebtedness,  any shares of its stock or any
            other  securities or property of any nature  whatsoever  (other than
            cash, Convertible Securities or Additional Shares of Common Stock);

then (i) the  number  of  shares of Common  Stock  for  which  this  Warrant  is
exercisable  shall be adjusted to equal the product  obtained by multiplying the
number of  shares  of  Common  Stock  for  which  this  Warrant  is  exercisable
immediately  prior to such  adjustment  by a fraction (A) the numerator of which
shall be the  Current  Market  Price per  share of  Common  Stock at the date of
taking such record and (B) the denominator of which shall be such Current Market
Price per share of Common  Stock,  minus the  amount  allocable  to one share of
Common  Stock of (x) any such cash so  distributable  and (y) the fair value (as
determined  in good  faith by the Board of  Directors  of the  Company  and,  if
requested by the Holder, supported by an opinion from an investment banking firm
of recognized national standing reasonably  acceptable to the Holder) of any and
all such  evidences  of  indebtedness,  shares of  stock,  other  securities  or
property or warrants or other  subscription or purchase rights so distributable,
and (ii) the  Current  Warrant  Price shall be adjusted to equal (A) the Current
Warrant Price  multiplied by the number of shares of Common Stock for which this
Warrant is exercisable  immediately  prior to the adjustment  divided by (B) the
number of shares for which this Warrant is  exercisable  immediately  after such
adjustment.  A reclassification  of the Common Stock (other than a change in par
value, or from par value to no par value or from no par value to par value) into
shares of Common  Stock and shares of any other class of stock shall be deemed a
distribution by the Company to the holders of its Common Stock of such shares of
such other  class of stock  within the  meaning of this  Section 4.2 and, if the
outstanding  shares of Common  Stock  shall be changed  into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such change
shall be  deemed  a  subdivision  or  combination,  as the  case may be,  of the
outstanding shares of Common Stock within the meaning of Section 4.1.

            4.3. Intentionally Omitted

                                       8
<PAGE>

            4.4. Intentionally Omitted

            4.5. Intentionally Omitted

            4.6. Intentionally Omitted

            4.7. Intentionally Omitted

            4.8.  Reorganization,  Reclassification,  Liquidation,  Dissolution,
Merger,  Consolidation  or  Disposition  of Assets.  In case the  Company  shall
reorganize  its capital,  reclassify  its capital  stock,  liquidate its assets,
dissolve,  consolidate  or merge  with or into  another  corporation  (where the
Company  is not the  surviving  corporation  or where  there  is a change  in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or  otherwise  dispose  of all or  substantially  all its  property,  assets  or
business   to   another   corporation   or   other   entity   (hereinafter,    a
"Reorganization")  and, pursuant to the terms of such Reorganization,  shares of
common stock of the successor or acquiring  corporation,  or any cash, shares of
stock or other  securities  or  property  of any  nature  whatsoever  (including
warrants or other  subscription or purchase rights) in addition to or in lieu of
common stock of the successor or acquiring  corporation ("Other Property"),  are
to be received by or  distributed to the holders of Common Stock of the Company,
then the  Holder  shall  have the  right  following  the  effectiveness  of such
Reorganization to receive,  upon exercise of such Warrant,  or, in the case of a
liquidation  of assets or a dissolution  to receive,  upon such  liquidation  or
dissolution,  without taking any further action,  the number of shares of common
stock of the successor or acquiring  corporation or of the Company, if it is the
surviving corporation, and Other Property receivable upon or as a result of such
Reorganization  by a holder of the  number  of shares of Common  Stock for which
this Warrant is exercisable  immediately  prior to such event (without regard to
the number of shares of Common Stock  available  or set aside for issuance  upon
such exercise).  In case of any such Reorganization,  the successor or acquiring
corporation  (if other  than the  Company)  shall  expressly  assume the due and
punctual  observance and performance of each and every covenant and condition of
this Warrant to be performed and observed by the Company and all the obligations
and liabilities  hereunder,  subject to such  appropriate  modifications  as are
satisfactory  to the Holder in order to provide for adjustments of shares of the
Common  Stock for which this  Warrant is  exercisable  which  shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 4. For
purposes  of this  Section  4.8  "common  stock of the  successor  or  acquiring
corporation"  shall include stock of such  corporation of any class which is not
preferred  as to  dividends  or  assets  over any  other  class of stock of such
corporation  and which is not subject to  redemption  and shall also include any
evidences  of  indebtedness,  shares  of  stock or other  securities  which  are
convertible into or exchangeable for any such stock,  either immediately or upon
the arrival of a specified  date or the  happening of a specified  event and any
warrants  or other  rights to  subscribe  for or purchase  any such  stock.  The
foregoing  provisions  of this Section 4.8 shall  similarly  apply to successive
Reorganizations.

                                       9
<PAGE>

            4.9.  Other Action  Affecting  Common Stock.  In case at any time or
from time to time the  Company  shall  take any  action in respect of its Common
Stock,  other than any action  described  in this Section 4 for which a specific
adjustment  is  provided,  then,  unless such action will not have a  materially
adverse  effect  upon the rights of the  Holder,  the number of shares of Common
Stock or other stock for which this Warrant is  exercisable  and/or the purchase
price  thereof  shall be  adjusted  in such  manner as may be  equitable  in the
circumstances.

            4.10. Certain  Limitations.  Notwithstanding  anything herein to the
contrary,  the Company agrees not to enter into any transaction which, by reason
of any adjustment  hereunder,  would cause the Current  Warrant Price to be less
than the par value per share of Common Stock.

5.    NOTICES TO WARRANTHOLDERS

            5.1. Notice of Adjustments.  Whenever the number of shares of Common
Stock or the class or type of stock or other  property for which this Warrant is
exercisable,  or whenever the price at which a share of such Common Stock may be
purchased upon exercise of this Warrant,  shall be adjusted  pursuant to Section
4, the Company shall forthwith prepare a certificate to be executed by the chief
financial officer of the Company setting forth, in reasonable  detail, the event
requiring the adjustment and the method by which such  adjustment was calculated
(including  a  description  of the basis on which the Board of  Directors of the
Company  determined the fair value of any evidences of  indebtedness,  shares of
stock,  other  securities  or  property or  warrants  or other  subscription  or
purchase rights referred to in Section 4.2 or 4.7(a)),  specifying the number of
shares of Common Stock for which this Warrant is exercisable  and describing the
number and kind of any other  shares of stock or Other  Property  for which this
Warrant is exercisable,  and any change in the purchase price or prices thereof,
after giving  effect to such  adjustment or change.  The Company shall  promptly
cause a  signed  copy of such  certificate  to be  delivered  to the  Holder  in
accordance  with Section  15.2.  The Company  shall keep at its office or agency
designated  pursuant to Section 12 copies of all such certificates and cause the
same to be available for inspection at said office during normal  business hours
by the  Holder  or any  prospective  purchaser  of a Warrant  designated  by the
Holder.

            5.2.  Notice  of  Certain  Corporate  Action.  The  Holder  shall be
entitled to the same rights to receive notice of corporate  action as any holder
of Common Stock.

                                       10
<PAGE>

6.    NO IMPAIRMENT

            The Company shall not by any action including,  without  limitation,
amending  its  certificate  of  incorporation  or  through  any  reorganization,
transfer  of  assets,  consolidation,  merger,  dissolution,  issue  or  sale of
securities or any other voluntary action,  avoid or seek to avoid the observance
or  performance  of any of the terms of this  Warrant,  but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such  actions as may be necessary  or  appropriate  to protect the rights of the
Holder against impairment. Without limiting the generality of the foregoing, the
Company  will (a) not  increase  the par value of any  shares  of  Common  Stock
receivable  upon the exercise of this Warrant  above the Current  Warrant  Price
immediately prior to such increase in par value, (b) take all such action as may
be  necessary or  appropriate  in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock, free and clear of any
liens,  claims,  encumbrances and  restrictions  (other than as provided herein)
upon the  exercise of this  Warrant  and (c) use its best  efforts to obtain all
such  authorizations,  exemptions  or consents from any public  regulatory  body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.

            Upon the request of the Holder,  the Company will at any time during
the  period  this  Warrant  is  outstanding  acknowledge  in  writing,  in  form
satisfactory  to the Holder,  the  continuing  validity of this  Warrant and the
obligations of the Company hereunder.

7.    RESERVATION  AND  AUTHORIZATION  OF  COMMON  STOCK;  REGISTRATION  WITH OR
      APPROVAL OF ANY GOVERNMENTAL AUTHORITY

            From and after the  Closing  Date,  the  Company  shall at all times
reserve and keep  available  for issue upon the exercise of warrants such number
of its authorized  but unissued  shares of Common Stock as will be sufficient to
permit the  exercise  in full of all  outstanding  Warrants.  If at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to permit the  exercise in full of all  outstanding  Warrants,  the Company will
take such corporate  action as may, in the opinion of its counsel,  be necessary
to increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose,  including,  without limitation,
taking appropriate board action, recommending such an increase to the holders of
Common Stock,  holding  shareholders  meetings,  soliciting votes and proxies in
favor of such  increase to obtain the  requisite  shareholder  approval and upon
such  approval,  the Company shall reserve and keep  available  such  additional
shares solely for the purpose of permitting the exercise of Warrants.

            All shares of Common Stock which shall be so  issuable,  when issued
upon exercise of any Warrant and payment  therefor in accordance  with the terms
of such Warrant,  shall be duly and validly issued, fully paid and nonassessable
and free and clear of any liens, claims and restrictions (other than as provided
herein).  Except as provided in this Warrant,  no stockholder of the Company has
or shall  have any  preemptive  rights to  subscribe  for such  shares of Common
Stock.

            Before  taking any action which would result in an adjustment in the
number of shares of Common  Stock or the type of  consideration  for which  this
Warrant is exercisable or in the Current Warrant Price, the Company shall obtain
all such  authorizations or exemptions  thereof,  or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction thereof.

                                       11
<PAGE>

            If any shares of Common  Stock  required to be reserved for issuance
upon  exercise  of  Warrants  require  registration  or  qualification  with any
governmental  authority  under  any  federal  or state  law  (otherwise  than as
provided in Section 9) before such shares may be so issued,  the Company will in
good faith and as expeditiously as possible and at its expense endeavor to cause
such shares to be duly registered.

8.    TAKING OF A RECORD; STOCK AND WARRANT TRANSFER BOOKS

            In the case of all dividends or other  distributions  by the Company
to the  holders of its  Common  Stock with  respect  to which any  provision  of
Section 4 refers to the taking of a record of such holders,  the Company will in
each such case take such a record  and will take such  record as of the close of
business  on a Business  Day.  The  Company  will not at any time,  except  upon
dissolution,  liquidation or winding up of the Company, close its stock transfer
books or Warrant  transfer  books so as to result in  preventing or delaying the
exercise or transfer of any Warrant.

9.    RESTRICTIONS ON TRANSFERABILITY

            The  Warrants  and  the  Warrant  Stock  shall  not be  transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9. The Holder, by acceptance of this Warrant,  agrees to be bound by the
provisions of this Section 9.

            9.1.  Restrictive  Legends. (a) Except as otherwise provided in this
Section 9, each certificate for Warrant Stock initially issued upon the exercise
of this Warrant, and each certificate for Warrant Stock issued to any subsequent
transferee of any such certificate, shall be stamped or otherwise imprinted with
legends in substantially the following form:

                  "The  shares  represented  by this  certificate  have not been
            registered  under the Securities  Act of 1933, as amended,  or under
            the  securities or blue sky laws of any state and are subject to the
            conditions  specified in a certain  Warrant dated November 11, 2004,
            originally issued by Essential  Reality,  Inc. (the "Company").  The
            shares represented by this certificate may not be sold, or otherwise
            transferred,  in the absence of such  registration  or an  exemption
            therefrom under such Act and under any such  applicable  state laws,
            or in violation of the provisions of the Warrant. A copy of the form
            of said Warrant is on file with the  Secretary  of the Company.  The
            holder  of this  certificate,  by  acceptance  of this  certificate,
            agrees to be bound by the provisions of such Warrant."

                                       12
<PAGE>

                  The shares  represented by this certificate are subject to the
            terms and conditions of a Registration Rights Agreement, dated as of
            November 11, 2004.

            (b) Except as  otherwise  provided in this  Section 9, each  Warrant
shall be stamped or  otherwise  imprinted  with  legends  in  substantially  the
following form:

                  "This Warrant and the securities  represented  hereby have not
            been  registered  under the Securities  Act of 1933, as amended,  or
            under  the  securities  or blue sky laws of any state and may not be
            sold, or otherwise transferred,  in the absence of such registration
            or an  exemption  therefrom  under  such  Act  and  under  any  such
            applicable  state laws,  or in violation of the  provisions  of this
            Warrant."

                  This Warrant and the securities represented hereby are subject
            to the terms and  conditions  of a  Registration  Rights  Agreement,
            dated as of November 11, 2004.

            9.2. Notice of Proposed Transfers; Requests for Registration.  Prior
to any  Transfer  or  attempted  Transfer  of any  Warrants  or  any  shares  of
Restricted  Common Stock, the Holder of such Warrants or Restricted Common Stock
shall deliver to the Company either a written opinion  reasonably  acceptable to
the  Company of  Independent  Counsel  addressed  to the  Company or a no-action
letter  from the  Commission  to the effect that the  proposed  Transfer of such
Warrants or such Restricted  Common Stock may be effected  without  registration
under the Securities Act and applicable state securities or blue sky laws. After
delivery of the written  opinion or the  no-action  letter to the Company,  such
Holder shall  thereupon be entitled to Transfer such Warrants or such Restricted
Common Stock.  Each  certificate,  if any,  evidencing such shares of Restricted
Common Stock issued upon such  Transfer  shall bear the  restrictive  legend set
forth in Section  9.1(a),  and each Warrant issued upon such Transfer shall bear
the  restrictive  legend  set forth in  Section  9.1(b),  unless in the  written
opinion of  Independent  Counsel  addressed  to the  Company  such legend is not
required in order to ensure compliance with the Securities Act.

            9.3.  Termination  of  Restrictions.  Notwithstanding  the foregoing
provisions  of Section 9, the  restrictions  imposed  by this  Section  upon the
transferability  of the Warrants,  the Warrant Stock and the  Restricted  Common
Stock (or Common  Stock  issuable  upon the  exercise of the  Warrants)  and the
legend  requirements of Section 9.1 shall terminate as to any particular Warrant
or share of Warrant Stock or Restricted  Common Stock (or Common Stock  issuable
upon the exercise of the Warrants)  (i) when and so long as such security  shall
have been  effectively  registered  under the  Securities  Act and  disposed  of
pursuant thereto, or (ii) when the Company shall have delivered to the Holder or
Holders of  Warrants,  Warrant  Stock or  Restricted  Common  Stock the  written
opinion of Independent Counsel stating that such legend is not required in order
to ensure compliance with the Securities Act. Whenever the restrictions  imposed
by Section 9 shall terminate as to this Warrant,  as hereinabove  provided,  the
Holder  hereof shall be entitled to receive from the Company,  at the expense of
the Company,  a new Warrant  bearing the following  legend in place of the first
restrictive legend set forth hereon:

            "THE  RESTRICTIONS  ON  TRANSFERABILITY  OF  THE  WITHIN
            WARRANT  CONTAINED  IN  SECTION 9 HEREOF  TERMINATED  ON
            ____________,  20__,  AND ARE OF NO  FURTHER  FORCE  AND
            EFFECT."

                                       13
<PAGE>

            All  Warrants  issued upon  registration  of  transfer,  division or
combination of, or in substitution for, any Warrant or Warrants entitled to bear
such  legend  shall  have  a  similar  legend  endorsed  thereon.  Whenever  the
restrictions  imposed  by  this  Section  shall  terminate  as to any  share  of
Restricted  Common Stock, as hereinabove  provided,  the Holder thereof shall be
entitled  to  receive  from  the  Company,  at  the  Company's  expense,  a  new
certificate  representing  such Common Stock not bearing the restrictive  legend
set forth in Section 9.1(a).

10.   SUPPLYING INFORMATION

            The Company shall  cooperate  with each Holder of a Warrant and each
Holder of  Restricted  Common  Stock in  supplying  such  information  as may be
reasonably  requested by such Holder or reasonably  necessary for such Holder to
complete  and  file any  information  reporting  forms  presently  or  hereafter
required by the  Commission as a condition to the  availability  of an exemption
from the Securities Act for the sale of any Warrant or Restricted Common Stock.

11.   LOSS OR MUTILATION

            Upon receipt by the Company  from the Holder of evidence  reasonably
satisfactory  to it of the  ownership  of and the loss,  theft,  destruction  or
mutilation of this Warrant and indemnity  reasonably  satisfactory  to it and in
case of mutilation  upon  surrender and  cancellation  hereof,  the Company will
execute  and  deliver in lieu  hereof a new Warrant of like tenor to the Holder;
provided,  in the case of  mutilation,  no  indemnity  shall be required if this
Warrant in identifiable form is surrendered to the Company for cancellation.

12.   OFFICE OF THE COMPANY

            As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency  (which may be the principal  executive  offices of
the Company) where the warrants may be presented for exercise,  registration  of
transfer, division or combination as provided in this Warrant.

13.   REGISTRATION RIGHTS

            This Warrant is entitled to the benefits of the registration  rights
provisions  contained in the Registration  Rights  Agreement.  The Company shall
keep a copy of the Registration Rights Agreement, and any amendments thereto, at
the office or agency  designated by the Company pursuant to Section 12 and shall
furnish copies thereof to the Holder upon request.

                                       14
<PAGE>

14.   LIMITATION OF LIABILITY

            No provision  hereof,  in the absence of  affirmative  action by the
Holder to purchase  shares of Common  Stock,  and no  enumeration  herein of the
rights or privileges of the Holder  hereof,  shall give rise to any liability of
the Holder for the purchase price of any Common Stock or as a stockholder of the
Company,  whether  such  liability is asserted by the Company or by creditors of
the Company.

15.   MISCELLANEOUS

            15.1.  Nonwaiver and Expenses.  No course of dealing or any delay or
failure to exercise any right  hereunder on the part of the Holder shall operate
as a waiver of such right or otherwise prejudice the Holder's rights,  powers or
remedies.  If the Company  fails to make,  when due, any  payments  provided for
hereunder,  or fails to comply with any other  provision  of this  Warrant,  the
Company shall pay to the Holder such amounts as shall be sufficient to cover any
costs and expenses  including,  but not limited to, reasonable  attorneys' fees,
including those of appellate  proceedings,  incurred by the Holder in collecting
any amounts due  pursuant  hereto or in otherwise  enforcing  any of its rights,
powers or remedies hereunder.

            15.2. Notice Generally.  All notices,  demands,  requests,  or other
communications  which may be or are required to be given, served, or sent by any
party to any other party  pursuant to this Warrant shall be in writing and shall
be  mailed  by  first-class,   registered  or  certified  mail,  return  receipt
requested,  postage prepaid, or transmitted by hand delivery (including delivery
by courier), or facsimile transmission, addressed as follows:

                  (a)   If to the Company:

                        Essential Reality, Inc.
                        15-15 132nd Street, College Point NY
                        Attention: Jay Gelman
                        Facsimile: ______________

                        with a copy to:

                        Oscar Folger, Esq.
                        521 Fifth Avenue, New York NY
                        Facsimile: ______________

                                       15
<PAGE>

                  (b) If to the Holder,  at its last known address  appearing on
the books of the Company maintained for such purpose.

Each party may designate by notice in writing a new address to which any notice,
demand,  request or  communication  may thereafter be so given,  served or sent.
Each notice,  demand, request or communication shall be deemed to have been duly
given five business days after being deposited in the mail, postage prepaid,  if
mailed;  when delivered by hand, if personally  delivered;  or upon receipt,  if
sent by facsimile  (followed by a confirmation  copy sent by either overnight or
two (2) day courier).

            15.3.  Indemnification.  The Company  agrees to  indemnify  and hold
harmless the Holder, its officers,  directors,  employees, agents, and attorneys
from and against  any  liabilities,  obligations,  losses,  damages,  penalties,
actions,   judgments,  suits,  claims,  costs,  attorneys'  fees,  expenses  and
disbursements  of any kind which may be imposed  upon,  incurred  by or asserted
against the Holder  relating to or arising  out of any  litigation  to which the
Holder is made a party in its capacity as a stockholder or  warrantholder of the
Company; provided, however, that the Company will not be liable hereunder to the
extent that any liabilities,  obligations,  losses, damages, penalties, actions,
judgments,  suits, claims, costs, attorneys' fees, expenses or disbursements are
found in a final,  non-appealable  judgment by a court of competent jurisdiction
to have resulted from (i) the Holder's gross  negligence or willful  misconduct,
(ii) actions or omissions taken or not taken by the Holder in any capacity other
than as a  stockholder  or  warrantholder  of the  Company  or (iii)  actions or
omissions  taken  or  not  taken  by  the  Holder  solely  as a  stockholder  or
warrantholder of the Company and for which stockholders or warrantholders may be
held liable under Utah law.

            15.4. Successors and Assigns.  Subject to the provisions of Sections
3.1 and 9, (i) this Warrant and the rights  evidenced  hereby shall inure to the
benefit of and be binding upon the  successors of the Company and the successors
and assigns of the Holder,  and (ii) the provisions of this Warrant are intended
to be for the  benefit of all  Holders  from time to time of this  Warrant,  and
shall be enforceable by any such Holder.

            15.5.  Amendment.  The  Warrants  may be  modified or amended or the
provisions  thereof  waived  with the  written  consent of the  Company  and the
Holder.

            15.6.  Severability.  Wherever  possible,  each  provision  of  this
Warrant shall be  interpreted  in such manner as to be effective and valid under
applicable  law, but if any  provision of this Warrant shall be prohibited by or
invalid under  applicable law, such provision shall be ineffective to the extent
of such  prohibition or invalidity,  without  invalidating the remainder of such
provision or the remaining provisions of this Warrant.

            15.7.  Headings.  The  headings  used  in this  Warrant  are for the
convenience of reference  only and shall not, for any purpose,  be deemed a part
of this Warrant.

                                       16
<PAGE>

            15.8.  Governing  Law;  Consent to  Jurisdiction  and Venue.  In all
respects, including all matters of construction,  validity and performance, this
Agreement  and the  obligations  arising  hereunder  shall be  governed  by, and
construed  and enforced in  accordance  with,  the laws of the State of New York
applicable to contracts made and performed in such state,  without regard to the
principles  thereof  regarding  conflict of laws, and any applicable laws of the
United  States of America.  EACH OF THE COMPANY AND HOLDER  CONSENTS TO PERSONAL
JURISDICTION,  WAIVES ANY OBJECTION AS TO JURISDICTION OR VENUE,  AND AGREES NOT
TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE, IN THE CITY OF NEW
YORK, STATE OF NEW YORK.  Service of process on the Company or the Holder in any
action arising out of or relating to this Agreement shall be effective if mailed
to such party in accordance  with the procedures and  requirements  set forth in
Section  15.2.  Nothing  herein  shall  preclude  the Holder or the Company from
bringing suit or taking other legal action in any other jurisdiction.

            15.9.  Mutual  Waiver of Jury  Trial.  BECAUSE  DISPUTES  ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN  EXPERIENCED  AND EXPERT  PERSON AND THE PARTIES WISH  APPLICABLE
STATE AND FEDERAL LAWS TO APPLY  (RATHER THAN  ARBITRATION  RULES),  THE PARTIES
DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE,  TO ACHIEVE THE BEST  COMBINATION  OF THE  BENEFITS  OF THE  JUDICIAL
SYSTEM AND OF  ARBITRATION,  THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY
IN ANY  ACTION,  SUIT OR  PROCEEDING  BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER THIS WARRANT.

                                       17
<PAGE>

            IN WITNESS  WHEREOF,  the Company has caused this Warrant to be duly
executed by its duly  authorized  officer and its corporate seal to be impressed
hereon and attested by its Secretary or Assistant Secretary.

Dated: November 15, 2004

                                            Essential Reality, Inc.

                                            By:
                                               ---------------------------------
                                               Name:
                                               Title:

Attest:

By:
   ------------------------------
   Name:
   Title:
<PAGE>

                                    EXHIBIT A

                                SUBSCRIPTION FORM

                 [To be executed only upon exercise of Warrant]

            The  undersigned   registered  owner  of  this  Warrant  irrevocably
exercises  this  Warrant for the  purchase of _______  shares of Common Stock of
Essential  Reality,  Inc. and herewith makes payment therefor,  all at the price
and on the terms and  conditions  specified in this  Warrant and  requests  that
certificates for the shares of Common Stock hereby purchased (and any securities
or other  property  issuable  upon such  exercise)  be issued in the name of and
delivered to  __________________  whose  address is  ___________________________
and,  if such  shares of Common  Stock  shall not  include  all of the shares of
Common Stock  issuable as provided in this  Warrant,  that a new Warrant of like
tenor and date for the balance of the shares of Common Stock issuable  hereunder
be delivered to the undersigned.

                                             (Name of Registered Owner)
-----------------------------

                                             (Signature of Registered Owner)
-----------------------------

                                             (Street Address)
-----------------------------

                                             (City) (State) (Zip Code)
-----------------------------

NOTICE:     The signature on this  subscription must correspond with the name as
            written  upon the face of the within  Warrant  in every  particular,
            without alteration or enlargement or any change whatsoever.
<PAGE>

                                    EXHIBIT B

                                 ASSIGNMENT FORM

            FOR VALUE RECEIVED the undersigned  registered owner of this Warrant
hereby  sells,  assigns and transfers  unto the Assignee  named below all of the
rights of the  undersigned  under this  Warrant,  with  respect to the number of
shares of Common Stock set forth below:

Name and Address of Assignee        No. of Shares of Common Stock
----------------------------        -----------------------------

and   does   hereby   irrevocably    constitute   and   appoint   ______________
attorney-in-fact  to register such  transfer on the books of Essential  Reality,
Inc.  maintained  for the  purpose,  with  full  power  of  substitution  in the
premises.

Dated:
          --------------------------
Name:
          --------------------------
Signature:
          --------------------------
Witness:
          --------------------------

NOTICE:     The signature on this  assignment  must  correspond with the name as
            written  upon the face of the within  Warrant  in every  particular,
            without alteration or enlargement or any change whatsoever.

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