EXHIBIT 10.7

                           [FORM OF INVESTOR WARRANT]


NEITHER THIS WARRANT NOR THE SECURITIES  ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES  ACT"),
AND SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED
OR OTHERWISE  ASSIGNED  UNLESS SO REGISTERED OR AN EXEMPTION  FROM  REGISTRATION
UNDER THE SECURITIES  ACT IS AVAILABLE.  NEITHER THIS WARRANT NOR THE SECURITIES
ISSUABLE UPON  EXERCISE  HEREOF ARE  TRANSFERABLE  EXCEPT AS EXPRESSLY SET FORTH
HERIN.  THIS LEGEND  SHALL BE ENDORSED  UPON ANY WARRANT  ISSUED IN EXCHANGE FOR
THIS WARRANT.


                                WARRANT AGREEMENT
                               FOR COMMON STOCK OF
                             ADVANCE NANOTECH, INC.

Warrant No. ____                        Warrant to purchase an aggregate of

Date of Issuance: [JANUARY __,] 2005    __________ shares of Common Stock

      THIS CERTIFIES that, for value received,  [_________________________],  or
his/her/its  permitted  transferees,  successors or assigns  (collectively,  the
"Holder"),  is entitled to purchase  from  ADVANCE  NANOTECH,  INC.,  a Colorado
corporation  (the  "Company"),  at any time,  and from time to time,  during the
exercise  period  referred to in Section 1 hereof,  [__________________________]
([____________])  fully  paid,  validly  issued and  nonassessable  shares  (the
"Warrant  Shares") of common  stock of the  Company,  par value $0.00l per share
(the "Common  Stock"),  at the exercise price of Three Dollars ($3.00) per share
(the "Warrant Share Price").  Securities  issuable upon exercise of this Warrant
and the Warrant Share Price payable therefor are subject to adjustment from time
to time as  hereinafter  set forth.  As used herein,  the term  "Warrant"  shall
include any warrant or warrants  hereafter issued in consequence of the exercise
of this  Warrant  Agreement  in part or transfer of this  Warrant in whole or in
part. Capitalized terms used herein and not defined have the respective meanings
given to them in that  certain  Securities  Purchase  Agreement,  dated the date
hereof,  by and among the Company and the other parties named  therein.  As used
herein, the term "Holders" shall include holders of all Warrants.

      The Company shall register this Warrant,  upon records to be maintained by
the Company for that purpose (the "Warrant Register"), in the name of the record
Holder hereof from time to time.  The Company may deem and treat the  registered
Holder of this  Warrant as the  absolute  owner  hereof  for the  purpose of any
exercise hereof or any  distribution to the Holder,  and for all other purposes,
and the Company shall not be affected by notice to the contrary.

      Subject to Section 4 of this Warrant and the applicable  provisions of the
Securities Purchase Agreement and applicable law, the Company shall register any
permitted transfer of any portion of this Warrant in the Warrant Register,

<PAGE>

upon surrender of this Warrant, with the Form of Assignment attached hereto duly
completed  and  signed,  to the  Transfer  Agent (as  defined  herein) or to the
Company.  Upon any such  registration  or permitted  transfer,  a new warrant to
purchase Common Stock, in  substantially  the form of this Warrant (any such new
warrant, a "New Warrant"), evidencing the portion of this Warrant so transferred
shall be issued to the permitted  transferee  and a New Warrant  evidencing  the
remaining portion of this Warrant not so transferred, if any, shall be issued to
the  transferring  Holder.  The  acceptance  of the New Warrant by the permitted
transferee  thereof shall be deemed the acceptance by such permitted  transferee
of all of the rights and  obligations  of a holder of a Warrant.  Any  permitted
transfer or assignment of this Warrant and Warrant Shares obtained by the Holder
in exercise of this Warrant is subject to any applicable  restrictions under the
Securities Purchase Agreement, if any, and the requirements that such securities
be registered  under the Securities Act and applicable  state securities laws or
exempt from  registration  under such laws,  and the  provisions of Section 5 of
this Warrant.

      2. Exercise; Payment for Ownership Interest.

      (a) Upon the terms and subject to the  conditions  set forth herein,  this
Warrant may be exercised  in whole or in part by the Holder  hereof at any time,
or from time to time, on or after the date hereof and on or prior to the earlier
to  occur  of (i) the  "Early  Expiration  Date,"  as such  term is  hereinafter
defined,  and (ii)  5:00:00  p.m. New York local time on [JANUARY __, 2008] (the
"Expiration  Date"),  by  presentation  and  surrender  of this  Warrant  to the
principal  offices of the Company,  or at the office of its Transfer  Agent,  if
any,  together  with the  Purchase  Form  annexed  hereto,  duly  executed,  and
accompanied  by payment to the Company of an amount  equal to the Warrant  Share
Price  multiplied  by the number of Warrant  Shares as to which this  Warrant is
then being exercised in immediately available funds in U.S. dollars by certified
or official bank check or wire transfer of the cash  purchase  price;  provided,
however,  that in each case,  the minimum  number of Warrant  Shares as to which
this Warrant is being  exercised shall be the lesser of (i) 5,000 Warrant Shares
or (ii) all  Warrant  Shares then held by the Holder on an as  exercised  basis;
provided, further, that in the event of any merger, consolidation or sale, lease
or transfer of all or substantially  all of the assets of the Company,  prior to
the  Expiration  Date,  the Holder shall have the right to exercise this Warrant
commencing at such time through the Expiration  Date into the kind and amount of
shares of stock and other securities and property (including cash) receivable by
a holder of the number of shares of Common Stock into which this  Warrant  might
have been exercisable  immediately prior thereto. Any transfer of Warrant Shares
obtained by the Holder in exercise of this Warrant is subject to the requirement
that such  transfer  be in  compliance  with the  applicable  provisions  of the
Securities  Purchase  Agreement,  if any, and that such securities be registered
under the Securities  Act, and applicable  state  securities laws or exempt from
registration under such laws. The Holder of this Warrant shall be deemed to be a
stockholder  of the  Warrant  Shares as to which this  Warrant is  exercised  in
accordance  herewith  effective  immediately  after the close of business on the
date on which the Holder  shall have  delivered  to the Company  this Warrant in
proper form for  exercise  and payment in U.S.  dollars by certified or official
bank check or wire transfer of immediately  available funds of the cash purchase
price for the number of Warrant  Shares as to which the  exercise is being made,
notwithstanding  that the  stock  transfer  books of the  Company  shall be then
closed or that  certificates  representing such Warrant Shares shall not then be
physically delivered to the Holder. The Company shall not enter into any merger,
consolidation  or sale,  lease or  transfer of all or  substantially  all of the
assets of the Company  unless  effective  provision  shall be made so as to give
effect to the provisions set forth in this subsection (a).

                  (i) As used  herein,  "Early  Expiration  Date" means ten (10)
            business days after delivery of written notice by the Company to the
            Holder that during the  preceding  thirty (30)  consecutive  trading
            days (x) the Market Price (as defined  herein) for a share of Common
            Stock was equal to or greater  than Four Hundred  Percent  (400%) of
            the then-applicable Warrant Share Price, and (y) the average trading
            volume of the Common Stock was at least 100,000 shares per day.

                  (ii) As used herein, "Market Price" means, with respect to any
            applicable  security as of any applicable date, (i) the last closing
            trade  price  of such  security  on  whichever  national  securities
            exchange  or trading  market  (including,  without  limitation,  the
            Nasdaq and the OTC Bulletin  Board) is the principal  trading market
            where  such  security  is listed by the  Company  for  trading  (the
            "Principal  Market"),  as  reported  by  Bloomberg,  or  (ii) if the
            Principal  Market should operate on an extended hours basis and does
            not designate the closing trade price,  then the last trade price of
            such security prior to the commencement of extended trading hours on
            the  applicable  date,  but in no event later than 4:30:00 p.m., New
            York local time, as reported by Bloomberg, or (iii) if no last trade
            price is reported for such security by Bloomberg, the average of the
            bid prices,  on the one hand, and the ask prices, on the other hand,
            of all market  makers for such  security  as  reported  in the "pink
            sheets" by Pink Sheets LLC (formerly the National  Quotation Bureau,
            Inc.). The applicable  trading market for such calculation,  whether
            it is the  Principal  Market  or the  "pink  sheets",  is  hereafter
            referred to as the  "Trading  Market".  The  Company  shall make all
            determinations  pursuant to this  paragraph  in good  faith.  In the
            absence of any available public quotations for the Common Stock, the
            Board  shall  determine  in good  faith the fair value of the Common
            Stock,  which  determination  shall be set forth in a certificate by
            the Secretary of the Company.

                  (iii) As used herein,  "Trading  Day" means a day on which the
            Trading  Market  with  respect to the  Common  Stock is open for the
            transaction of business.

      (b) If this Warrant  shall be exercised  in part only,  the Company,  upon
surrender of this Warrant for cancellation,  shall execute and deliver, promptly
(but in no event  more than ten  business  days  after  such  surrender),  a new
Warrant  evidencing  the rights of the Holder thereof to purchase the balance of
the Warrant  Shares  purchasable  hereunder as to which the Warrant has not been
exercised.  If this Warrant is exercised in part,  such exercise  shall be for a
whole number of Warrant Shares. Upon any exercise and surrender of this Warrant,
the  Company  (i)  will  issue  and  deliver  to the  Holder  a  certificate  or
certificates  in the name of the Holder for the largest  whole number of Warrant
Shares to which the Holder  shall be entitled  and, if this Warrant is exercised
in whole, in lieu of any fractional  Warrant Share to which the Holder otherwise
might be entitled,  cash in an amount equal to the fair value of such fractional
Warrant Share  (determined in such reasonable and equitable  manner as the Board
of Directors of the Company (the "Board")  shall in good faith  determine),  and
(ii) will deliver  promptly  thereafter  (but in no event more than ten business
days thereafter) to the Holder such other securities,  properties and cash which
the Holder may be entitled to receive upon such exercise,  or the  proportionate
part thereof if this Warrant is exercised in part, pursuant to the provisions of
this Warrant.

                                      -2-
<PAGE>

      3. Anti-Dilution Provisions. The Warrant Share Price in effect at any time
and the number and kind of  securities  issuable  upon  exercise of this Warrant
shall be subject to  adjustment  from time to time upon the happening of certain
events as follows:

            3.1 Adjustments.

      (a) Definition of Additional Stock. The term "Additional  Shares of Common
Stock"  includes all shares of Common Stock issued by the Company after the Date
of Issuance, other than:

                  (i) Shares of Common Stock (subject to appropriate  adjustment
            for any stock  dividend,  stock split,  combination or other similar
            recapitalization  affecting  such shares)  issuable or issued to the
            Company's  employees,  directors or consultants  pursuant to a stock
            option  plan or  restricted  stock plan or other  compensation  plan
            approved by the Board;

                  (ii) Shares of Common  Stock  issued or  issuable  pursuant to
            securities  outstanding  at the Date of  Issuance or  agreements  to
            issue such  securities  or  underlying  shares of Common Stock which
            agreements are outstanding at the Date of Issuance;

                  (iii) Shares of Common  Stock  issued or issuable  pursuant to
            subsection 2.1(b)(iv) below; and

                  (iv) Shares of Common Stock  issuable upon exercise of options
            or warrants,  or upon conversion of convertible  securities or other
            rights, outstanding as of the Date of Issuance.

      (b)  Dividend,  Subdivision,  Combination  or  Reclassification  of Common
Stock.  In the  event  that the  Company  shall at any time or from time to time
after the issuance of this Warrant but prior to the exercise hereof:

            (i) make a dividend or  distribution  on the  outstanding  shares of
Common Stock payable in capital stock;

            (ii) subdivide or reclassify or reorganize its outstanding shares of
Common Stock into a greater number of shares;

            (iii) combine or reclassify or reorganize its outstanding  shares of
Common Stock into a smaller number of shares; or

            (iv)  issue,  by  reclassification  of its  Common  Stock  or  other
reorganization, any Additional Shares of Common Stock;

then the number and kind of Warrant  Shares  purchasable  upon  exercise of this
Warrant  shall be  adjusted  so that the Holder upon  exercise  hereof  shall be
entitled to receive the kind and number of Warrant Shares or other securities of
the Company  that the Holder  would have owned or have been  entitled to receive
after the happening of any of the events  described  above had this Warrant been
exercised  immediately  prior to the  happening of such event or any record date
with respect  thereto.  Whenever the number of Warrant Shares  purchasable  upon
exercise hereof is adjusted as herein provided, the Warrant Price shall be

                                      -4-
<PAGE>

adjusted by multiplying the Warrant Price by a fraction,  the numerator of which
is equal to the  number  of  shares of  Common  Stock  purchasable  prior to the
adjustment  and the  denominator  of which is equal to the  number  of shares of
Common Stock  purchasable  after the adjustment.  An adjustment made pursuant to
this Section 2.1(b) shall become effective  immediately after the record date in
the case of a dividend or distribution  and shall become  effective  immediately
after the effective date in the case of a subdivision,  combination or issuance.
If, as a result of an  adjustment  made  pursuant to this  Section  2.1(b),  the
Holder of this Warrant thereafter surrendered for exercise shall become entitled
to receive  shares of two or more  classes of capital  stock or shares of Common
Stock and any other class of capital stock of the Company, the Board (whose good
faith  determination  shall be  applied  fairly and  ratably  to all  Holders of
Warrants and shall be conclusive  and shall be described in a written  notice to
all Holders of Warrants  promptly after such adjustment) shall determine in good
faith the  allocation  of the adjusted  Warrant Share Price between or among the
shares of such classes of capital stock or shares of Common Stock and such other
class of capital stock.

      The  adjustment  to the  number of  Warrant  Shares  purchasable  upon the
exercise of this Warrant  described  in this  Section  2.1(b) shall be made each
time any event listed in  paragraphs  (i) through  (iv) of this  Section  2.1(b)
occurs.

                  (c) Issuance of Common Stock Below Warrant Share Price. If the
            Company shall issue any Additional  Shares of Common Stock after the
            date hereof  (excluding any such issuance for which an adjustment is
            made under the foregoing  subsection  (b)), for no  consideration or
            for a  consideration  per share less than the Warrant Share Price in
            effect on the date of and immediately  prior to such issue,  then in
            such event,  the Warrant Share Price shall be reduced,  concurrently
            with  such  issue,  to a price  equal to the  quotient  obtained  by
            dividing:

                  (A) an  amount  equal to (x) the  total  number  of  shares of
            Common Stock outstanding  immediately prior to such issuance or sale
            multiplied by the Warrant Share Price in effect immediately prior to
            such issuance or sale, plus (y) the aggregate  consideration (before
            deduction of  transaction  expenses or  commission  or  underwriting
            discounts or allowances in connection  therewith) received or deemed
            to be received by the Company,  if any,  upon such issuance or sale,
            by

                  (B) the total  number of  shares of Common  Stock  outstanding
            immediately after such issuance or sale.


      (d)  Issuance of Options and  Convertible  Securities  Deemed  Issuance of
Additional  Shares of Common Stock. If the Company,  at any time or from time to
time after the Date of  Issuance,  shall  issue any  options,  warrants or other
rights to purchase Common Stock (collectively, "Options") or securities that, by
their terms,  directly or indirectly,  are convertible  into or exchangeable for
shares of Common Stock ("Convertible Securities") or shall fix a record date for
the determination of holders of any class of securities  entitled to receive any
such Options or  Convertible  Securities,  then the maximum  number of shares of
Common Stock (as set forth in the instrument  relating thereto without regard to
any  provision  contained  therein for a subsequent  adjustment  of such number)
issuable  upon the  exercise  of such  Options  or,  in the case of  Convertible
Securities and Options therefor,  the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed,  as
of the close of business on such record date,  provided that in any such case in
which Additional Shares of Common Stock are deemed to be issued pursuant to this
Section 2.1(d):

                                      -5-
<PAGE>

      (i) no further  adjustment  in the Warrant  Share Price shall be made upon
      the subsequent  issue of Convertible  Securities or shares of Common Stock
      upon the  exercise  of such  Options or  conversion  or  exchange  of such
      Convertible  Securities and, upon the expiration of any such Option or the
      termination  of any such  right to convert or  exchange  such  Convertible
      Securities,  the  Warrant  Share  Price  then in  effect  hereunder  shall
      forthwith be increased to the Warrant Share Price which would have been in
      effect at the time of such  expiration or  termination  had such Option or
      Convertible  Securities,  to the extent  outstanding  immediately prior to
      such  expiration or termination,  never been issued,  and the Common Stock
      issuable thereunder shall no longer be deemed to be outstanding;

      (ii) if such Options or  Convertible  Securities  by their terms  provide,
      with  the  passage  of  time  or  otherwise,   for  any  increase  in  the
      consideration  payable to the Company, or decrease in the number of shares
      of Common  Stock  issuable,  upon the  exercise,  conversion  or  exchange
      thereof,  the Warrant Share Price computed upon the original issue thereof
      (or upon the  occurrence of a record date with respect  thereto),  and any
      subsequent  adjustments  based thereon,  shall,  upon any such increase or
      decrease  becoming  effective,  be  recomputed to reflect such increase or
      decrease insofar as it affects such Options or the rights of conversion or
      exchange under such Convertible Securities,  provided that no readjustment
      pursuant  to this  clause  (ii) shall have the  effect of  increasing  the
      Warrant  Share  Price to an  amount  which  exceeds  the  lower of (A) the
      Warrant  Share Price on the original  adjustment  date, or (B) the Warrant
      Share  Price that would have  resulted  from any  issuance  of  Additional
      Shares of Common  Stock  between  the  original  adjustment  date and such
      readjustment date;

      (iii) if such Options or  Convertible  Securities by their terms  provide,
      with  the  passage  of  time  or  otherwise,   for  any  decrease  in  the
      consideration  payable to the Company, or increase in the number of shares
      of Common  Stock  issuable,  upon the  exercise,  conversion  or  exchange
      thereof,  the Warrant Share Price computed upon the original issue thereof
      (or upon the  occurrence of a record date with respect  thereto),  and any
      subsequent  adjustments  based thereon,  shall,  upon any such decrease or
      increase  becoming  effective,  be  recomputed to reflect such decrease or
      increase insofar as it affects such Options or the rights of conversion or
      exchange under such Convertible Securities,  provided that no readjustment
      pursuant to this  clause  (iii)  shall have the effect of  decreasing  the
      Warrant  Share  Price to an  amount  which  exceeds  the  lower of (A) the
      Warrant  Share Price on the original  adjustment  date, or (B) the Warrant
      Share  Price that would have  resulted  from any  issuance  of  Additional
      Shares of Common  Stock  between  the  original  adjustment  date and such
      readjustment date; and

      (iv) if such  Options or  Convertible  Securities  cover  shares which are
      excluded  from the  definition  of  Additional  Shares of Common  Stock by
      Section  2.1(a),  then  this  Section  2.1(d)  shall  not  apply  to those
      underlying shares.

                                      -6-
<PAGE>

      (e) Determination of Consideration. For purposes of Subsections 2.1(c) and
2.1(d),  the  consideration  received  by  the  Company  for  the  issue  of any
Additional Shares of Common Stock shall be computed as follows:

            (A) Cash and Property: Such consideration shall:

                  (1)   insofar  as it  consists  of cash,  be  computed  at the
                        aggregate  of cash  received by the  Company,  excluding
                        amounts paid or payable for accrued  interest or accrued
                        dividends;

                  (2)   insofar as it consists of property  other than cash,  be
                        computed at the fair market value thereof at the time of
                        such issue,  as  determined  in good faith by the Board;
                        and

in the event  Additional  Shares of Common Stock are issued  together with other
shares or  securities  or other  assets of the Company for  consideration  which
covers both, be the proportion of such  consideration  so received,  computed as
provided in clauses (1) and (2) above, as determined in good faith by the Board.


                  (B) Options and Convertible Securities.  The consideration per
            share received by the Company for Additional  Shares of Common Stock
            deemed to have been issued pursuant to Subsection  2.1(d),  relating
            to  Options  and  Convertible  Securities,  shall be  determined  by
            dividing

                  (1)   the total amount,  if any, received or receivable by the
                        Company as  consideration  for the issue of such Options
                        or Convertible  Securities,  plus the minimum  aggregate
                        amount of additional  consideration (as set forth in the
                        instruments  relating  thereto,  without  regard  to any
                        provision contained therein for a subsequent  adjustment
                        of such  consideration)  payable to the Company upon the
                        exercise of such Options or the  conversion  or exchange
                        of  such  Convertible  Securities,  or in  the  case  of
                        Options for Convertible Securities, the exercise of such
                        Options for Convertible Securities and the conversion or
                        exchange of such Convertible Securities, by

                  (2)   the  maximum  number of  shares of Common  Stock (as set
                        forth  in  the  instruments  relating  thereto,  without
                        regard  to  any  provision   contained   therein  for  a
                        subsequent  adjustment of such number) issuable upon the
                        exercise of such Options or the  conversion  or exchange
                        of such Convertible Securities.

      In the event that at any time, as a result of an adjustment  made pursuant
to this Section 2.1, the Holder of this Warrant thereafter shall become entitled
to receive any shares of the Company,  other than Common Stock,  thereafter  the
number of such other shares so receivable upon exercise of this Warrant shall be
subject  to  adjustment  from  time to time in a manner  and on terms as  nearly
equivalent as  practicable  to the  provisions  with respect to the Common Stock
contained herein.

                                      -7-
<PAGE>

      (f) Extraordinary Distributions.  In case the Company shall at any time or
from time to time,  after the  issuance of the Warrant but prior to the exercise
hereof,  distribute  to all  holders of its  Common  Stock  (including  any such
distribution  made in  connection  with a  consolidation  or merger in which the
Company is the continuing or surviving  corporation  and the Common Stock is not
changed or  exchanged)  cash,  evidences of  indebtedness,  securities  or other
property or assets  (excluding any such event for which adjustment is made under
Section  2) or  rights or  warrants  to  subscribe  for or  purchase  any of the
foregoing,  then,  and in each  such  case,  the  Holder  shall be  entitled  to
participate  in any such  distribution  based on the  number of shares of Common
Stock it would have been  entitled  to receive had the  Warrant  been  exercised
immediately prior to the occurrence of such distribution,  as if the Holder were
the  owner of such  shares  of  Common  Stock at the time of such  distribution.
Notwithstanding  the  foregoing,  this  Section  2.1(f)  shall be of no force or
effect until and unless such time as the Company  shall grant a similar right to
holders of  warrants  issued  after the date  hereof,  at which time the Holders
shall be entitled to the same protection for extraordinary  dividends as granted
to such future holders of warrants, if any.

      3.2 Other Action Affecting Warrant Shares. If the Company takes any action
affecting  its  shares of Common  Stock  after the date  hereof,  that  would be
covered  by  Section  2.1 but for the  manner in which  such  action is taken or
structured,  which would in any way diminish the value of this Warrant, then the
Warrant  Share Price shall be adjusted in such manner as the Board shall in good
faith determine to be equitable under the circumstances.

      3.3 Notice of  Adjustments.  Upon the  occurrence  of each  adjustment  or
readjustment  of the Warrant Share Price pursuant to this Section 2, the Company
at its expense  will as promptly as  possible,  but in any event within ten (10)
business days,  compute such  adjustment or  readjustment in accordance with the
terms of this Warrant and prepare a certificate setting forth such adjustment or
readjustment,  including  a statement  of the  adjusted  Warrant  Share Price or
adjusted  number of shares of Common  Stock,  if any,  issuable upon exercise of
each Warrant,  describing in reasonable  detail the  transaction  giving rise to
such  adjustments  and showing in detail the facts upon which such adjustment or
readjustment  is based.  The Company will  forthwith  mail, by first class mail,
postage  prepaid,  a copy of each such certificate to the Holder of this Warrant
at the address of such Holder as shown on the books of the  Company,  and to its
Transfer Agent.

      3.4 Other Notices. If at any time:

      (a) the Company shall (i) offer for  subscription  pro rata to the holders
of shares of the  Common  Stock any  additional  equity in the  Company or other
rights;  or (ii) pay a dividend  in  additional  shares of the  Common  Stock or
distribute  securities  or other  property or assets to the holders of shares of
the Common Stock (including, without limitation, cash, evidences of indebtedness
and equity and debt securities);

      (b) there  shall be any  capital  reorganization  or  reclassification  or
consolidation  or merger of the Company with, or sale,  transfer or lease of all
or substantially all of its assets to, another entity; or

                                      -8-
<PAGE>

      (c) there shall be a voluntary or involuntary dissolution,  liquidation or
winding up of the Company;

then,  in any one or more of said cases,  the Company shall give, by first class
mail,  postage  prepaid,  to the Holder of this  Warrant at the  address of such
Holder as shown on the books of the Company, (x) at least 10 days' prior written
notice  of the date on which the books of the  Company  shall  close or a record
shall be taken for such subscription rights, dividend, distribution or issuance;
provided that such ten (10) day period shall be increased to thirty (30) days in
the case of Section 2.4(a)(ii),  and (y) in the case of any such reorganization,
reclassification,  consolidation,  merger,  sale,  dissolution,  liquidation  or
winding  up, at least 10 days'  prior  written  notice of the date when the same
shall take place if no stockholder  vote is required and at least 10 days' prior
written  notice of the record date for  stockholders  entitled to vote upon such
matter if a stockholder  vote is required.  Such notice in  accordance  with the
foregoing  clause (x) shall also specify,  in the case of any such  subscription
rights,  the date on which  the  holders  of shares  of  Common  Stock  shall be
entitled  to exercise  their  rights with  respect  thereto,  and such notice in
accordance  with the  foregoing  clause (y) shall also specify the date on which
the holders of shares of Common Stock shall be entitled to exchange their shares
of  Common  Stock  for  securities  or  other  property  deliverable  upon  such
reorganization,  reclassification,  consolidation,  merger,  sale,  dissolution,
liquidation or winding up, as the case may be.

      3.5  Adjustment  Calculations.  No  adjustment  in the Warrant Share Price
shall be required unless such  adjustment  would require an increase or decrease
of at  least  one  cent  ($0.01)  in such  price;  provided,  however,  that any
adjustments  which by reason of this  Section  2.5 are not  required  to be made
shall be carried  forward and taken into  account in any  subsequent  adjustment
required to be made hereunder.  All  calculations  under this Section 2 shall be
made to the nearest cent or to the nearest one-hundredth of a share, as the case
may be.

      2.6  Appraisal.  If a  majority  in  interest  of the  Holders  reasonably
disagrees with any of the Board's  determinations  referred to in this Section 2
(each, a "Determination"), and such majority of Holders shall notify the Company
of its  disagreement by furnishing to the Company a written notice setting forth
in reasonable detail the fact of such dispute,  the basis for such dispute,  and
such Holders'  alternative  calculation  (such notice, a "Determination  Dispute
Notice"),  and such  Determination  Dispute  Notice is  received  by the Company
within seven (7) days of the Company having given notice of the Determination to
the  Holders,  then the Company and a majority in interest of such  Holders (the
"Warrant Representative") shall resolve such Determination Dispute in accordance
with the terms and  provisions  of this Section 2.6. The Holders agree that this
Section 2.6 sets forth the exclusive  mechanism for the Holders to make any such
dispute  and to resolve  the same,  and shall not be  entitled  to make any such
dispute in any other manner.  The Company and the Warrant  Representative  shall
use good  faith  efforts to  mutually  agree  upon the  designation  of a single
Qualified  Appraiser  (as defined  below)  within seven (7) business days of the
receipt by the Company of a valid  Determination  Dispute Notice received by the
Company in within the time period set forth above in this Section 2.6. If such a
single   Qualified   Appraiser   is   designated,   that  person  shall  make  a
Determination.  If the Company and the  Warrant  Representative  do not so agree
upon the designation of a single Qualified  Appraiser  within such period,  then
within five (5) business  days  following  the end of such  period,  each of the
Company  and the  Warrant  Representative  by written  notice to the other shall
designate a Qualified  Appraiser (or if any party fails to so select a Qualified
Appraiser  within the time period  specified,  the Person  selected by the other
party shall be the Qualified Appraiser) and the two Qualified Appraisers so

                                      -9-
<PAGE>

designated  shall within ten (10)  business  days of their  designation  jointly
designate a third Qualified  Appraiser,  and such third  Qualified  Appraiser so
designated,  solely,  shall independently make a Determination.  The parties may
submit the basis for their respective views to the Appraiser in writing. In such
event,  each party shall  furnish its  submission to the other party at the same
time as the  submission is furnished to the Qualified  Appraiser,  and the other
party shall have two (2) business days within which to furnish a single rebuttal
to  such  original  submission.   The  Qualified  Appraiser  may  consider  such
submissions in reaching the  Determination.  If there is only a single Qualified
Appraiser,  the fees  and  expenses  of the  Qualified  Appraiser  shall be paid
equally  by the  Company  and the  Warrant  Representative.  If three  Qualified
Appraisers  are  appointed,  the Company  shall pay the fees and expenses of the
Qualified Appraiser which it appoints,  the Warrant Representative shall pay the
fees and expenses of the Qualified Appraiser which it appoints, and the fees and
expenses of the third Qualified Appraiser shall be shared equally by the Company
and the Warrant  Representative.  The designated  Qualified Appraiser shall make
the   Determination  not  later  than  ten  (10)  business  days  following  the
appointment  of  the  Qualified   Appraiser   making  the   Determination.   The
Determination  made  by the  applicable  Qualified  Appraiser  shall  be  final,
conclusive and binding on the parties hereto.  None of the Qualified  Appraisers
shall be  affiliated  with any of the  Company,  the Warrant  Representative  or
another  Qualified  Appraiser.  For the purposes of this  Agreement,  "Qualified
Appraiser"  shall mean an individual who is engaged on a regular basis (although
not necessarily full time) in valuing securities or arrangements similar to this
Agreement,  as the case may be, and may  include  (but shall not be limited  to)
professional business appraisers, investment bankers or accountants.

      4. No Voting Rights as Stockholders  or  Liabilities.  Except as otherwise
provided herein,  this Warrant shall not be deemed to confer upon the Holder any
right  to vote or to  consent  to or  receive  notice  as a  stockholder  of the
Company, as such, in respect of any matters  whatsoever,  or any other rights or
liabilities as a stockholder, prior to the exercise hereof. Nothing contained in
this  Warrant  shall be deemed as  imposing  any  liabilities  on the  Holder to
purchase any securities  whether such liabilities are asserted by the Company or
by creditors or stockholders of the Company or otherwise.

      5.  Warrants  and  Warrant  Shares Not  Transferable  Except as  Expressly
Provided in This Section. This Warrant and the underlying shares of Common Stock
may not be offered, sold or transferred except in compliance with the applicable
terms of the Securities Purchase Agreement,  if any, and the Securities Act, and
any applicable state securities laws, or an exception  therefrom,  and then only
against  receipt  of an  agreement  of the  person to whom such offer or sale or
transfer is made to comply with the  provisions  of this Warrant with respect to
any  resale  or other  disposition  of such  securities;  provided  that no such
agreement  shall be  required  from any person  purchasing  this  Warrant or the
underlying shares of Common Stock pursuant to a registration statement effective
under the Securities Act. No such disposition  shall occur without an opinion of
such Holder's  counsel,  which opinion shall be reasonably  satisfactory  to the
Company's counsel.  Notwithstanding the foregoing,  Also, this Warrant shall not
be transferable..

      6. Warrants Exchangeable;  Assignment; Loss, Theft, Destruction, Etc. This
Warrant is exchangeable,  without  expense,  upon surrender hereof by the Holder
hereof at the principal offices of the Company, or at the office of its Transfer
Agent, if any, for new Warrants of like tenor  representing in the aggregate the
right to subscribe for and purchase the Warrant Shares which may

                                      -10-
<PAGE>

be subscribed  for and purchased  hereunder,  each such new Warrant to represent
the  right  to  subscribe  for and  purchase  such  Warrant  Shares  as shall be
designated by such Holder hereof at the time of such  surrender.  Upon surrender
of this Warrant to the Company at its principal  office, or at the office of its
Transfer Agent, if any, with an instrument of assignment duly executed and funds
sufficient to pay any transfer tax, the Company shall,  without charge,  execute
and deliver a new Warrant in the name of the assignee  named in such  instrument
of assignment  and this Warrant shall promptly be cancelled;  provided,  that no
such  assignment  shall be  effected  except  in  accordance  with the terms and
conditions of the Securities  Purchase  Agreement and Section 4 of this Warrant.
This Warrant may be divided or combined with other warrants which carry the same
rights upon  presentation  hereof at the principal office of the Company,  or at
the  office of its  Transfer  Agent,  if any,  together  with a  written  notice
specifying  the names and  denominations  in which new Warrants are to be issued
and signed by the Holder hereof; provided, that no such assignment,  transfer or
other  disposition of this Warrant shall be effected  except in accordance  with
the terms and conditions of the Securities  Purchase  Agreement and Section 4 of
this Warrant. The term "Warrant" as used herein includes any Warrants into which
this Warrant may be divided or  exchanged.  Upon receipt of evidence  reasonably
satisfactory  to the Company of the loss,  theft,  destruction  or mutilation of
this  Warrant  and,  in the case of any such loss,  theft or  destruction,  upon
delivery of indemnity reasonably satisfactory to the Company, or, in the case of
any such mutilation, upon surrender or cancellation of this Warrant, the Company
will issue to the Holder  hereof a new  Warrant of like  tenor,  in lieu of this
Warrant, representing the right to subscribe for and purchase the Warrant Shares
which  may be  subscribed  for and  purchased  hereunder.  Any such new  Warrant
executed and delivered shall constitute an additional  contractual obligation of
the  Company,  whether  or not this  Warrant  so  lost,  stolen,  destroyed,  or
mutilated shall be at any time enforceable by anyone.

      7. Legends;  Investment  Representations.  Any certificate  evidencing the
securities  issued  upon  exercise  of  this  Warrant  shall  bear a  legend  in
substantially the following form:

      THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE  HAVE NOT BEEN REGISTERED
UNDER THE  SECURITIES  ACT OF 1933, AS AMENDED (THE  "SECURITIES  ACT"),  OR ANY
OTHER  SECURITIES   LAWS,  AND  SUCH  SECURITIES  MAY  NOT  BE  OFFERED,   SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED UNLESS SO REGISTERED OR
AN  EXEMPTION  FROM  REGISTRATION  UNDER  SAID  ACT  AND  ANY  OTHER  APPLICABLE
SECURITIES LAWS IS AVAILABLE.

      8. Modifications and Waivers.  The Holder of this Warrant acknowledges and
agrees that the terms of this Warrant may be amended, modified or waived only by
the written agreement between the Holder and the Company.

      9. Expenses.  The Company shall pay all expenses and other charges payable
in connection  with the  preparation,  issuance and delivery of this Warrant and
all substitute  Warrants.  The Holder shall pay all taxes in connection with any
sale, assignment or other transfer of this Warrant.

      10.  Books.  The Company  shall  maintain,  at the office or agency of the
Company  maintained by the Company,  books for the  registration and transfer of
the Warrant.

                                      -11-
<PAGE>

      11.  Reservation of Warrant Shares.  The Company covenants and agrees that
it will at all times reserve and keep available,  free from  preemptive  rights,
out  of the  aggregate  of its  authorized  but  unissued  Common  Stock  or its
authorized and issued Common Stock held in its treasury,  solely for the purpose
of enabling it to satisfy any  obligation to issue Warrant  Shares upon exercise
of this Warrant,  the maximum number of shares of Common Stock which may then be
deliverable upon the exercise of this Warrant. The Company or, if appointed, the
transfer agent for the Common Stock (the "Transfer Agent"), and every subsequent
transfer  agent for any shares of the Company's  capital stock issuable upon the
exercise  of any  of the  rights  of  purchase  aforesaid  will  be  irrevocably
authorized and directed at all times to reserve such number of authorized shares
as shall be required  for such  purpose.  The  Company  will keep a copy of this
Warrant on file with the Transfer Agent and with every subsequent transfer agent
for any shares of the Company's  capital stock issuable upon the exercise of the
rights of purchase  represented  by this Warrant.  The Company will furnish such
Transfer Agent a copy of all notices of  adjustments  and  certificates  related
thereto  transmitted  to the Holder  pursuant  to Section 2 hereof.  The Company
covenants  that all Warrant  Shares  which may be issued  upon  exercise of this
Warrant will, upon issue, be validly issued,  fully paid and nonassessable,  not
subject  to any  preemptive  rights,  and free from all taxes,  liens,  security
interests, charges, and other encumbrances with respect to the issuance thereof.

      12.  Registration.  Pursuant to a certain Registration Rights Agreement of
even date herewith between the Company and the Holder,  among other parties, the
Company is required  to register  under the  Securities  Act the Warrant  Shares
which may be acquired by such Holder.  Any  permitted  transferee  must become a
party to said Registration  Rights Agreement in order to have the benefit of the
same.

      13. Listing on Securities Exchanges; Registration. If, and so long as, any
class of the Company's  Common Stock shall be listed on any national  securities
exchange (as defined in the Exchange  Act) or NASDAQ or the OTC Bulletin  Board,
the Company shall use its reasonable best efforts to, at its expense, obtain and
maintain  the  approval  for  listing  upon  official  notice of issuance of all
Warrant Shares and maintain the listing of Warrant Shares after their  issuance;
and the Company will so list on such national  securities  exchange or NASDAQ or
the OTC Bulletin Board, if applicable,  will register under the Exchange Act (or
any similar  statute  then in effect),  and will  maintain  such listing of, any
other  securities that at any time are issuable upon exercise of this Warrant if
and at the time  any  securities  of the same  class  shall  be  listed  on such
national securities exchange or NASDAQ or OTC Bulletin Board by the Company.

      14. No Dilution or Impairment. The Company will not act for the purpose of
avoiding or seeking to avoid the  observance or  performance of any of the terms
of this Warrant, by amendment of its certificate or articles of incorporation or
other  organizational  documents  or through  any  reorganization,  transfer  of
assets, consolidation,  merger, dissolution,  issue or sale of securities or any
other action, but will, at all times, in good faith,  assist in the carrying out
of all such terms. Without limiting the generality of the foregoing, the Company
will not  increase  the par  value of any  shares  of  stock  receivable  on the
exercise of this Warrant above the amount payable therefor on such exercise.

      15. Miscellaneous.

            15.1 Notices.  All notices and other  communications shall be mailed
by first-class  certified or registered mail, postage prepaid, sent by reputable
overnight delivery, delivered by hand or sent by facsimile as follows:

                                      -12-
<PAGE>

                           If to the Company:

                           Advance Nanotech, Inc.
                           712 Fifth Avenue, 19th Floor
                           New York, New York  10019
                           Attention:  Chief Executive Officer
                           Telephone:  ((646) 723 8962
                           Facsimile:  (212) 581 1922

                           If to the Holder:
                           The address and/or facsimile furnished to the Company
                           in writing by the last registered Holder of this
                           Warrant who shall have furnished an address and/or
                           facsimile to the Company in writing;

except that any of the foregoing may from time to time by written  notice to the
other  designate  another  address  which shall  thereupon  become its effective
address for the purposes of this  paragraph.  Any notices,  requests or consents
hereunder shall be deemed given, and any instruments delivered,  five days after
they have been mailed by  first-class  certified or registered  mail U.S.  Mail,
postage prepaid,  or upon receipt if delivered by a reputable  overnight courier
or if delivered personally or by facsimile transmission.

      15.2 Entire Agreement. This Warrant,  including the exhibits and documents
referred to herein which are a part hereof,  contain the entire understanding of
the parties hereto with respect to the subject matter and may be amended only by
a written  instrument  executed by the  parties  hereto or their  successors  or
assigns.  Any paragraph  headings  contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or  interpretation  of
this Warrant.

      15.3  Governing  Law.  This Warrant  shall be governed by and construed in
accordance with the laws of the State of New York with respect to contracts made
and to be fully  performed  therein,  without  regard to the  conflicts  of laws
principles thereof.  The parties hereto hereby agree that any suit or proceeding
arising  under this  Warrant,  or in  connection  with the  consummation  of the
transactions  contemplated hereby, shall be brought solely in a federal or state
court  located in the County of New York and State of New York. By its execution
hereof,  both the Company and the  undersigned  hereby  consent and  irrevocably
submit to the in personam  jurisdiction  of the federal and state courts located
in the  County of New York and State of New York and agree  that any  process in
any suit or proceeding commenced in such courts under this Warrant may be served
upon it personally or by certified or registered mail, return receipt requested,
or by Federal Express or other courier  service,  with the same force and effect
as if personally served upon the applicable party in New York and in the city or
county in which such other court is located.  The parties  hereto each waive any
claim that any such  jurisdiction is not a convenient forum for any such suit or
proceeding  and any defense of lack of in  personam  jurisdiction  with  respect
thereto.

                                      -13-
<PAGE>

      15.4 Headings.  The headings of this Warrant are for purposes of reference
only and shall not limit or  otherwise  affect the meaning of any  provision  of
this Warrant.



             [the balance of this page is intentionally left blank]


                                      -14-
<PAGE>

      IN WITNESS  WHEREOF,  this Warrant  Agreement  has been executed as of the
date first written above.


                                     ADVANCE NANOTECH, INC.


                                     By:/s/  Magnus Gittins
                                        ---------------------------------------
                                        Name:  Magnus Gittins
                                        Title:  Chief Executive Officer

                                      -15-
<PAGE>

                                  PURCHASE FORM


Dated: __________

The undersigned  hereby irrevocably elects to exercise the within Warrant to the
extent of purchasing  _____ Warrant Shares and hereby makes full cash payment of
$_____________ in payment of the exercise price thereof. The undersigned has had
the  opportunity  to ask  questions of and receive  answers from the officers of
Advance Nanotech,  Inc. (the "Company") regarding the affairs of the Company and
related matters,  and has had the opportunity to obtain  additional  information
necessary  to  verify  the  accuracy  of  all  information  so  obtained.   [The
undersigned  understands  that the  shares  have not been  registered  under the
Securities  Act of  1933,  as  amended,  or the  securities  laws  of any  other
jurisdiction,  and hereby  represents  to the Company  that the  undersigned  is
acquiring the shares for its own account,  for  investment,  and not with a view
to, or for sale in connection  with, the distribution of any such shares.] [This
may not apply depending upon whether a registration statement is effective.]



                                         ---------------------------------------
                                                  (Signature)



                                         ---------------------------------------
                                                  (Print or type name)



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



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



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


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

<PAGE>

                               FORM OF ASSIGNMENT


[To be completed and signed only upon transfer of Warrant)

      FOR VALUE RECEIVED,  the undersigned  hereby sells,  assigns and transfers
unto  ______________________  the right  represented  by the  within  Warrant to
purchase  ________ shares of Common Stock of  _____________  to which the within
Warrant  relates and appoints  _____________  attorney to transfer said right on
the  books  of  ___________________  with  full  power  of  substitution  in the
premises.

Dated:   __________________   ___,  200__



                                        --------------------------------------
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant)


                              Address of Transferee:

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

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

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

In the presence of:


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



                               CONSENT OF ASSIGNEE

      I HEREBY  CONSENT  to abide by the  terms  and  conditions  of the  within
Warrant.

Dated:
       ----------------------               ------------------------------------
                                            (Signature of Assignee)

                                            ------------------------------------
                                            (Print or type name)