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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-QSB

|(Mark One)                                      |                                                                                   
|----------------------------------------------- | ----------------------------------------------------------------------------------
|ý                                               | Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934.
|For the quarterly period ended January 31, 2003
|o                                               | Transition report under Section 13 or 15(d) of the Exchange Act.                  
|For the transition period from
 to             

Commission
file number: 001-12531

ISONICS CORPORATION(Exact name of small business issuer as specified in its charter)

California

77-0338561(State or other jurisdiction of
incorporation or organization)

(IRS Employer
Identification No.)


5906 McIntyre Street
Golden, Colorado 80403(Address of principal executive offices)

(303) 279-7900(Issuer's telephone number)

Check
whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

The
number of shares outstanding of the registrant's Common Stock, no par value, was 12,106,033 at February 28, 2003.

Transitional
Small Business Disclosure Format (check
one): Yes o    No ý

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Isonics Corporation  TABLE OF CONTENTS  FORM 10-QSB

|Part I:                                                   |  | Financial Information |  |                                                                                                                     
|--------------------------------------------------------- |  | --------------------- |  | --------------------------------------------------------------------------------------------------------------------
|                                                          |  | Item 1:               |  | Financial Statements                                                                                                
|                                                          |  |                       |  | Condensed Consolidated Balance Sheets as of January 31, 2003 and April 30, 2002                                     
|                                                          |  |                       |  | Condensed Consolidated Statements of Operations for the Three and Nine Month Periods Ended January 31, 2003 and 2002
|                                                          |  |                       |  | Condensed Consolidated Statements of Cash Flows for the Nine Month Periods Ended January 31, 2003 and 2002          
|                                                          |  |                       |  | Notes to Condensed Consolidated Financial Statements                                                                
|                                                          |  | Item 2:               |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                               
|                                                          |  | Item 3:               |  | Controls and Procedures                                                                                             
|Part II:                                                  |  | Other Information     |  |                                                                                                                     
|                                                          |  | Item 2:               |  | Changes in Securities and Use of Proceeds                                                                           
|                                                          |  | Item 4:               |  | Submission of Matters to a Vote of Security Holders                                                                 
|                                                          |  | Item 6:               |  | Exhibits and Reports on Form 8-K                                                                                    
|Signatures                                                |  | 28                   
|Certificationsprincipal executive and financial officers |  | 29                   

2

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Part I: Financial Information

Item 1: Condensed Financial Statements

ISONICS CORPORATION AND SUBSIDIARIES        CONDENSED CONSOLIDATED BALANCE SHEETS        (in thousands, except share amounts)

ASSETS

|                  |                                                                                 | (Unaudited)
January 31, 2003 |       | April 30, 2002
|----------------- | ------------------------------------------------------------------------------- | ---------------------------- | ----- | --------------
|CURRENT ASSETS:   |                                                                                 |                              |       |               
|                  | Cash and cash equivalents                                                       |                              | $     | 829           
|                  | Accounts receivable (net of allowances of $29 and $30, respectively)            |                              |       | 865           
|                  | Inventories                                                                     |                              |       | 470           
|                  | Prepaid expenses and other current assets                                       |                              |       | 472           
|                  |                                                                                 |                              |       |               
|                  |                                                                                 | Total current assets         |       |               
|                  |                                                                                 |                              |       |               
|LONG-TERM ASSETS: |                                                                                 |                              |       |               
|                  | Property and equipment, net                                                     |                              |       | 527           
|                  | Goodwill                                                                        |                              |       | 1,807         
|                  | Intangible assets (net of accumulated amortization of $49 and $0, respectively) |                              |       | 814           
|                  | Other assets                                                                    |                              |       | 99            
|                  |                                                                                 |                              |       |               
|                  |                                                                                 | Total long-term assets       |       |               
|                  |                                                                                 |                              |       |               
|TOTAL ASSETS      |                                                                                 | $                            | 5,883 |               
|                  |                                                                                 |                              |       |               

LIABILITIES AND STOCKHOLDERS' EQUITY

|                                                        |                                                                                                                                                                                      | (Unaudited)
January 31, 2003 |       | April 30, 2002 |      
|------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------- | ----- | -------------- | -----
|CURRENT LIABILITIES:                                    |                                                                                                                                                                                      |                              |       |                |      
|                                                        | Current portion of long-term debt                                                                                                                                                    |                              | $     |               |      
|                                                        | Current portion of obligation under capital leases                                                                                                                                   |                              |       | 47             |      
|                                                        | Convertible notes payable (net of discount of $0 and $546, respectively)                                                                                                             |                              |       |               |      
|                                                        | Accounts payable                                                                                                                                                                     |                              |       | 538            |      
|                                                        | Accrued liabilities                                                                                                                                                                  |                              |       | 328            |      
|                                                        |                                                                                                                                                                                      |                              |       |                |      
|                                                        |                                                                                                                                                                                      | Total current liabilities    |       |                | 913  
|                                                        |                                                                                                                                                                                      |                              |       |                |      
|OBLIGATION UNDER CAPITAL LEASES, net of current portion |                                                                                                                                                                                      |                              | 98    |                |      
|STOCKHOLDERS' EQUITY:                                   |                                                                                                                                                                                      |                              |       |                |      
|                                                        | Preferred stockno par value; 10,000,000 shares authorized; 963,666 shares issued and outstanding on January 31, 2003 and April 30, 2002                                             |                              |       | 745            |      
|                                                        | Common stockno par value; 40,000,000 shares authorized; 12,106,033 shares issued and outstanding on January 31, 2003 and 10,824,812 shares issued and outstanding on April 30, 2002 |                              |       | 11,659         |      
|                                                        | Additional paid in capital                                                                                                                                                           |                              |       | 4,348          |      
|                                                        | Deferred compensation                                                                                                                                                                |                              |       | (155           | )    
|                                                        | Accumulated deficit                                                                                                                                                                  |                              |       | (11,725        | )    
|                                                        |                                                                                                                                                                                      |                              |       |                |      
|                                                        |                                                                                                                                                                                      | Total stockholders' equity   |       |                | 4,872
|                                                        |                                                                                                                                                                                      |                              |       |                |      
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY              |                                                                                                                                                                                      | $                            | 5,883 |                | $    
|                                                        |                                                                                                                                                                                      |                              |       |                |      

See
notes to condensed consolidated financial statements.

3

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ISONICS CORPORATION AND SUBSIDIARIES        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS        (in thousands, except per share data)        (Unaudited)

|                                               |                                     | Three Months Ended
January 31,    |        | Nine Months Ended
January 31, |      
|---------------------------------------------- | ----------------------------------- | --------------------------------- | ------ | ----------------------------- | -----
|
|Revenues                                       |                                     | $                                 | 2,364  |                               | $    
|Cost of revenues                               |                                     |                                   | 1,793  |                               |      
|                                               |                                     |                                   |        |                               |      
|                                               |                                     | Gross margin                      |        |                               | 571  
|Operating expenses:                            |                                     |                                   |        |                               |      
|                                               | Selling, general and administrative |                                   |        | 1,065                         |      
|                                               | Research and development            |                                   |        | 60                            |      
|                                               |                                     |                                   |        |                               |      
|                                               |                                     | Total operating expenses          |        |                               | 1,125
|                                               |                                     |                                   |        |                               |      
|Operating loss                                 |                                     |                                   | (554   | )                             |      
|                                               |                                     |                                   |        |                               |      
|Other income (expense):                        |                                     |                                   |        |                               |      
|                                               | Gain on legal settlement, net       |                                   |        |                              |      
|                                               | Amortization of debt offering costs |                                   |        |                              |      
|                                               | Foreign exchange                    |                                   |        | (31                           | )    
|                                               | Interest and other income, net      |                                   |        | 5                             |      
|                                               | Interest expense                    |                                   |        | (4                            | )    
|                                               |                                     |                                   |        |                               |      
|                                               |                                     | Total other income (expense), net |        |                               | (30  
|                                               |                                     |                                   |        |                               |      
|Loss before income taxes                       |                                     |                                   | (584   | )                             |      
|Income tax expense                             |                                     |                                   |       |                               |      
|                                               |                                     |                                   |        |                               |      
|NET LOSS                                       |                                     | $                                 | (584   | )                             | $    
|                                               |                                     |                                   |        |                               |      
|Net loss per sharebasic and diluted           |                                     |                                   |        |                               |      
|Net loss per share                             |                                     | $                                 | (.05   | )                             | $    
|Shares used in computing per share information |                                     |                                   | 11,937 |                               |      

See
notes to condensed consolidated financial statements.

4

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ISONICS CORPORATION AND SUBSIDIARIES        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS        (in thousands)        (Unaudited)

|                                                                       |                                                            | Nine Months Ended January 31,                   |    
|---------------------------------------------------------------------- | ---------------------------------------------------------- | ----------------------------------------------- | ---
|
|Net cash provided by (used in) operating activities                    |                                                            | $                                               | 513
|CASH FLOWS FROM INVESTING ACTIVITIES:                                  |                                                            |                                                 |    
|                                                                       | Purchases of property and equipment                        |                                                 |    
|                                                                       |                                                            |                                                 |    
|                                                                       |                                                            | Cash used in investing activities               |    
|                                                                       |                                                            |                                                 |    
|CASH FLOWS FROM FINANCING ACTIVITIES:                                  |                                                            |                                                 |    
|                                                                       | Repayments of notes payable                                |                                                 |    
|                                                                       | Proceeds from issuance of notes payable                    |                                                 |    
|                                                                       | Proceeds from issuance of common stock                     |                                                 |    
|                                                                       |                                                            |                                                 |    
|                                                                       |                                                            | Cash provided by (used in) financing activities |    
|                                                                       |                                                            |                                                 |    
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:                  |                                                            |                                                 | 104
|                                                                       | Cash and cash equivalents at beginning of period           |                                                 |    
|                                                                       |                                                            |                                                 |    
|                                                                       | Cash and cash equivalents at end of period                 |                                                 | $  
|                                                                       |                                                            |                                                 |    
|Supplemental disclosure of cash flow information:                      |                                                            |                                                 |    
|                                                                       | Cash paid during the period for:                           |                                                 |    
|                                                                       |                                                            | Interest                                        |    
|                                                                       |                                                            |                                                 |    
|                                                                       |                                                            | Income taxes                                    |    
|                                                                       |                                                            |                                                 |    
|Supplemental disclosure of noncash investing and financing activities: |                                                            |                                                 |    
|                                                                       | Common stock issued for intangible assets                  |                                                 | $  
|                                                                       | Common stock warrants issued for services                  |                                                 |    
|                                                                       | Common stock issued for services                           |                                                 |    
|                                                                       | Common stock issued to employees for services              |                                                 |    
|                                                                       | Common stock issued to IUT for intangible assets           |                                                 |    
|                                                                       | Capital lease obligations for property and equipment       |                                                 |    
|                                                                       | Series 2002A Convertible Notes converted into common stock |                                                 |    
|                                                                       |                                                            |                                                 |    

See
notes to condensed consolidated financial statements.

5

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ISONICS CORPORATION AND SUBSIDIARIES        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation

The accompanying condensed consolidated financial statements of Isonics Corporation and Subsidiaries as of January 31, 2003, and for the
three months and nine months ended January 31, 2003, and 2002, have been prepared on the same basis as the annual audited financial statements. In the opinion of management, such
unaudited information includes all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of this interim information. Operating results and cash flows for
interim periods are not necessarily indicative of results for the entire year. The information included in this report should be read in conjunction with our audited financial statements and notes
thereto included in our Annual Report on Form 10-KSB for the year ended April 30, 2002.

Net Income (Loss) Per Share

Basic net income (loss) per share is computed using the weighted average number of common shares outstanding during the period. Contingently issued shares are
included in the computation of basic net income (loss) per share when the related conditions are satisfied. Diluted net income (loss) per share is computed using the weighted average number of common
shares and potentially dilutive securities outstanding during the period. Potentially dilutive securities consist of contingently issued shares, the common shares issuable upon conversion of preferred
stock or convertible debt (using the "if converted" method) and shares issuable upon the exercise of stock options and common stock warrants (using the "treasury stock" method). Potentially dilutive
securities are excluded from the computation if their effect is anti-dilutive.

As
of January 31, 2003, a total of 5,147,840 outstanding stock options and common stock warrants and 963,666 outstanding shares of Class A Convertible Preferred Stock were
excluded from the diluted net income (loss) per share calculation, as the inclusion would be anti-dilutive. As of January 31, 2002, a total of 6,937,278 outstanding stock options
and common stock warrants and 963,666 outstanding shares
of Class A Convertible Preferred Stock were excluded from the diluted net income (loss) per share calculation, as the inclusion would be anti-dilutive.

During
the nine month period ended January 31, 2003, we issued the following shares of Common Stock:

|Description                                       |  | Number of Common Stock Shares
|------------------------------------------------- |  | -----------------------------
|Balance as of April 30, 2002                      |  | 10,824,812                   
|Conversion of Series 2002A Convertible Notes      |  | 1,000,000                    
|Issuance of shares for consulting services        |  | 25,000                       
|Shares issued from employee stock purchase plan   |  | 6,221                        
|Issuance of shares for trace detection technology |  | 250,000                      
|                                                  |  |                              
|Balance as of January 31, 2003                    |  | 12,106,033                   
|                                                  |  |                              

The
aforementioned equity transactions increased common stock in the accompanying condensed consolidated balance sheet by $1,305,000 for the nine months ended January 31,
2003.

6

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Inventories

Inventories consist of (in thousands):

January 31, 2003

April 30, 2002Finished goods

$
107

$
248Work in progress


344


212Materials and supplies


19


Total inventories

$
470

$
460


Significant Customers

As of January 31, 2003, three customers accounted for approximately 65% of total net accounts receivable. Three customers accounted for approximately 37%
of total net accounts receivable at April 30, 2002. Two customers (Eastern Isotopes and Perkin Elmer Life Sciences) accounted for approximately 30% and 17%, respectively of revenues for the
nine months ended January 31, 2003.    Two customers (Eastern Isotopes and Perkin Elmer Life Sciences) accounted for approximately 34% and 13%, respectively of revenues for
the three months ended January 31, 2003.    Two customers (Perkin Elmer Life Sciences and Eastern Isotopes) accounted for approximately 24% and 19%, respectively of revenues
for the nine months ended January 31, 2002. Two customers (Perkin Elmer Life Sciences and Eastern Isotopes) accounted for approximately 29% and 17%, respectively of revenues for the
three months ended January 31, 2002.

Two
customers (Perkin Elmer Life Sciences and Reviss Ltd.) accounted for approximately 43% and 14%, respectively of the German operation's revenues for the nine months
ended January 31, 2003. Two customers (Perkin Elmer Life Sciences and IBT SA) accounted for approximately 37% and 11%, respectively of the German operation's revenues for the
three months ended January 31, 2003. Two customers (Perkin Elmer Life Sciences and Reviss Ltd.) accounted for approximately 38% and 10%, respectively of the German operation's
revenues for the nine months ended January 31, 2002. One customer (Perkin Elmer Life Sciences) accounted for approximately 39% of the German operation's revenues for the
three months ended January 31, 2002. Two customers accounted for approximately 50% of the German operation's accounts receivable at January 31, 2003. Two customers accounted for
approximately 37% of the German operation's accounts receivable at April 30, 2002.

Business Segments and Foreign Operations

We currently have two reportable segments: life sciences and semiconductor materials and products. Our life sciences segment sells stable and radioisotopes in
elemental and simple compound forms for use in life sciences applications. Our semiconductor materials and products segment sells silicon-on-insulator ("SOI") wafers and is
involved in several research and development projects including silicon-28. Reconciling items consist primarily of corporate expenses that have not been allocated to a specific reportable
segment.

7

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Information
by segment is set forth below (in thousands):

|                  |                                      | Three Months Ended
January 31, |   | Nine Months Ended
January 31,
|----------------- | ------------------------------------ | ------------------------------ | - | -----------------------------
|
|Segment revenues: |                                      |                                |   |                              
|                  | Life sciences                        |                                | $ | 2,304                        
|                  | Semiconductor materials and products |                                |   | 60                           
|                  |                                      |                                |   |                              
|                  |                                      | Total                          |   | $                            
|                  |                                      |                                |   |                              

|                                 |                                      | Three Months Ended
January 31, |   | Nine Months Ended
January 31, |     
|-------------------------------- | ------------------------------------ | ------------------------------ | - | ----------------------------- | ----
|
|Segment operating (loss) income: |                                      |                                |   |                               |     
|                                 | Life sciences                        |                                | $ | 293                           |     
|                                 | Semiconductor materials and products |                                |   | (317                          | )   
|                                 | Reconciling amounts                  |                                |   | (530                          | )   
|                                 |                                      |                                |   |                               |     
|                                 |                                      | Total                          |   | $                             | (554
|                                 |                                      |                                |   |                               |     

|              |                                      | January 31, 2002 |   | April 30, 2002
|------------- | ------------------------------------ | ---------------- | - | --------------
|Total Assets: |                                      |                  |   |               
|              | Life sciences                        |                  | $ | 3,575         
|              | Semiconductor materials and products |                  |   | 1,105         
|              | Reconciling amounts                  |                  |   | 1,203         
|              |                                      |                  |   |               
|              |                                      | Total            |   | $             
|              |                                      |                  |   |               

A
summary of operations by geographic area is as follows:

|          |               | Three Months Ended
January 31, |   | Nine Months Ended
January 31,
|--------- | ------------- | ------------------------------ | - | -----------------------------
|
|Revenues: |               |                                |   |                              
|          | United States |                                | $ | 1,522                        
|          | Germany       |                                |   | 842                          
|          |               |                                |   |                              
|          |               | Total                          |   | $                            
|          |               |                                |   |                              

|                         |               | Three Months Ended
January 31, |   | Nine Months Ended
January 31, |     
|------------------------ | ------------- | ------------------------------ | - | ----------------------------- | ----
|
|Operating (loss) income: |               |                                |   |                               |     
|                         | United States |                                | $ | (583                          | )   
|                         | Germany       |                                |   | 29                            |     
|                         |               |                                |   |                               |     
|                         |               | Total                          |   | $                             | (554
|                         |               |                                |   |                               |     

8

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January 31, 2003

April 30, 2002Total Assets:United States

$
3,221

$
2,402Germany


2,662


2,812Total

$
5,883

$
5,214


Sale of Depleted Zinc Business and Subsequent Dispute Settlement

On December 1, 1999, we sold our depleted zinc business to Eagle-Picher Technologies, LLC ("Eagle-Picher") for $8,230,000, including $1,500,000 due in
equal installments on November 30, 2000, 2001 and 2002. During the year ended April 30, 2001, we entered into a dispute with Eagle-Picher relating to, among other things, nonpayment of
the additional payments related to the alleged nonperformance of our former depleted zinc supplier under the terms of the supply agreement transferred to Eagle-Picher, Eagle Picher's failure to supply
us the required amount of silicon-28 to be used in our research and development activities and the validity of Eagle-Picher's exercise of the related common stock warrants into 3,130,435
shares of common stock under the net exercise provision of the warrant agreement.

As
we were unable to come to a resolution, we filed for binding arbitration on March 26, 2001 claiming damages against Eagle-Picher of $75,500,000. Eagle-Picher claimed damages of
$10,000,000 for alleged misrepresentations regarding the status of the depleted zinc business at the time of sale.

On
July 24, 2002, we entered into a settlement agreement whereby Eagle-Picher paid us $2,500,000 as full consideration for settlement of the dispute. Neither Isonics nor
Eagle-Picher acknowledged fault or liability in connection with the dispute. In addition, as a result of the settlement, no shares of our common stock were ultimately issued to Eagle-Picher. In
connection with the settlement, we recognized legal expense of $360,000 as satisfaction of the contingency portion of our legal fees, resulting in a net gain of $2,140,000.

Sale of Chemotrade Leipzig GmbH

On July 31, 2002, we sold our 75% interest in Chemotrade Leipzig GmbH ("CTL") to the 25% shareholder for 50,000 Euros (approximately
$48,000). In accordance with the sales agreement, the transaction was effective as of May 1, 2002, with the new 100% shareholder controlling the operations from that point forward. We
recognized a gain of approximately $30,000, which is recorded as other income (expense) in the accompanying condensed consolidated statements of operations.

Conversion of Series 2002A Convertible Notes

On March 20, 2002 we completed a financing arrangement whereby we issued $1,000,000 of Series 2002A Convertible Notes. The notes were convertible at
a ratio of one common share for each dollar of note outstanding, bore interest at 4% per annum and were due March 1, 2003. During the quarter ended July 31, 2002, the $1,000,000 of
convertible notes were converted to 1,000,000 shares of common stock. Due to the conversion of the notes, we incurred interest expense of $546,000 as a result of expensing the remaining unamortized
discount during the quarter ended July 31, 2002. In addition, we expensed the remaining debt offering costs of $182,000 during the quarter ended July 31, 2002.

9

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Investment Banking Agreement with vFinance, Inc.

On June 10, 2002 we terminated our then current agreement with vFinance, Inc. ("vFinance") and entered into a new agreement whereby we issued 25,000
shares of restricted common stock (valued at $26,500 based upon the fair market value of the stock) and 200,000 common stock warrants (valued at $176,000 using the Black-Scholes pricing model) for
investment banking, market making and consulting services. The common stock warrants vested immediately, are exercisable at $2.32 per share and expire on June 10, 2006. The agreement is
cancelable by either party upon 30 days notification. The value of both the restricted common stock (which vested immediately) and the common stock warrants was being amortized to consulting
expense over the twelve-month period (the expected life) of the agreement. During the quarter ended October 31, 2002 a dispute arose between the two parties whereby vFinance claimed that it is
entitled to additional cash payments along with the shares of restricted common stock and common stock warrants in order to perform the required services under the new agreement. We determined that
vFinance is not entitled to cash payments and have refused to make such payment. It is doubtful that this dispute will be resolved and thus the value of the future services to be provided over the
remaining life of the new agreement is expected to be minimal. As a result of the uncertainty of future benefit under this agreement, we expensed the remaining $169,000 of value associated with the
restricted common stock and common stock warrants to consulting services during the quarter ended October 31, 2002.

Consulting Agreement with Investor Relations Services, Inc.

On December 18, 2001 we entered into a one-year consulting agreement with Investor Relations Services, Inc. ("IRSI") whereby we issued
500,000 shares of restricted common stock for consulting services consisting of financial advisory, strategic business planning and investor and public relations services. The shares of restricted
common stock vested immediately and were considered full payment for services (including IRSI expenses) to be performed during the first six months of calendar 2002. During the last six months
of calendar 2002 IRSI was to act as an advisor but to the extent that we requested IRSI to incur any expenses on our behalf, we would have been required to reimburse IRSI for such costs.

On
July 1, 2002 we amended the agreement whereby we issued 250,000 shares of restricted common stock (valued at $247,500 based upon the fair market value of the stock) so that
IRSI would continue to perform consulting services consisting of financial advisory, strategic business planning and investor and public relations services. The shares of restricted common stock
vested immediately and were considered full payment for services (including IRSI expenses) to be performed during the last six months of calendar 2002. In August 2002, the contract was
terminated due to nonperformance by IRSI and as a result, effective as of July 1, 2002, the 250,000 shares of restricted common stock were cancelled and returned to the "authorized, unissued"
category.

During
October 2002, IRSI disputed our termination of the agreement based upon nonperformance and has requested to mediate the matter. If a solution is not reached through
mediation the next step under the terms of the agreement would be to enter into binding arbitration. We intend to vigorously defend our position and believe that the outcome will not have a material
impact on the results of our operations or financial condition.

10

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Lease Agreements Related to SOI Operations

In September 2002, we entered into several lease agreements related to building space, equipment and services in order to establish our own stand-alone
wafer manufacturing facilities ("Fab-1") in Vancouver, Washington. The various leases terminate December 31, 2003 and require minimum monthly payments totaling approximately $14,000
per month. In connection with the establishment of Fab-1, we agreed with Silicon Quest International, Inc. ("SQI") to terminate our alliance agreement effective November 22,
2002. Under the terms of the agreement, SQI is prohibited from producing SOI wafers until November 22, 2003.

Equipment Financing Agreement

In October 2002 we entered into an agreement with Fidelity Capital ("Fidelity") whereby Fidelity agreed to provide up to $1,000,000 in equipment financing.
Under the terms of the agreement, Fidelity will acquire equipment on our behalf and lease it to us over a term of 36 months at a current blended interest rate of approximately 7.5%. Each draw
down on the lease will contain a $1 bargain purchase option, payable at the end of the lease at which time title to the equipment will transfer to us, and as a result they will be accounted for as
capital leases. Principal amounts outstanding under this facility at January 31, 2002 were $145,000. Included in property and equipment, net as of January 31, 2003 is approximately
$150,000 of equipment under capital leases.

Dilution Adjustments to Preferred Shareholders

Under the terms of the Series A Convertible Preferred Stock private placement, the related shareholders had anti-dilution rights if we issued
or sold common stock after July 29, 1999 for a per share consideration less than the current exercise price of the related warrants. The 3,085,622 common stock warrants associated with this
private placement expired unexercised on July 29, 2002.

In
addition to anti-dilution rights, there are provisions associated with the Series A Convertible Preferred Stock that if triggered, would reduce the current
conversion price and effectively allow the preferred shares to convert to common stock at a ratio greater than a one for one basis. As a result of the issuance (and subsequent cancellation) of 250,000
shares of restricted common stock to IRSI (see"Consulting Agreement with Investor Relations Services, Inc.") at $.99 per share, the
Series A Convertible Preferred Stock was convertible at approximately 1.52 shares of common stock for each share of Series A Convertible Preferred Stock outstanding.

The
shareholders' of the Series A Convertible Preferred Stock asserted that our calculation of the conversion price was incorrect and that it should be convertible at a lower
price due to the issuance of the Series 2002A Convertible Notes in March 2002 while we maintained that our calculation was in accordance with the Series A Convertible Preferred
Stock agreement. In December 2002, we entered into a settlement agreement whereby both parties agreed to a conversion price of $.90 per share. As a result of the settlement, the Series A
Convertible Preferred Stock is convertible at approximately 1.67 shares of common stock for each share of Series A Convertible Preferred Stock outstanding.

Acquisition of Isotope-Based Trace Detection Technology

In December 2002 we acquired certain isotope-based trace detection technology to be used to detect explosives and chemical and biological weapons from
Institut of Umwelttechnologien GmbH ("IUT"), an entity in which we hold a 6% ownership interest. We issued to IUT 250,000 shares of restricted common stock for the isotope-based trace detection
technology. In addition, we granted IUT

11

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a 15 percent ownership interest in our newly created subsidiary, IUT Detection Technologies, Inc., that will own and commercialize the trace detection technology. The restricted common
stock was valued at $272,500 based upon the closing price of our common stock on December 4, 2002. We have determined that these intangible assets have a finite life and as a result, we are
amortizing them over their estimated useful life of ten years. We incurred amortization expense of $5,000 during the three and nine months ended January 31, 2003. Amortization
expense associated with these intangible assets is anticipated to be approximately $27,000 per year over the remaining useful life.

Consulting Agreement with Park Capital Securities, LLC

In November 2002, we entered into an agreement with Park Capital Securities, LLC whereby we issued a common stock warrant (valued at $261,000 using the
Black-Scholes pricing model) to purchase 300,000 shares of common stock at $1.00 per share, for investment banking and consulting services. The common stock warrant vested immediately, expires in
November 2005 and will be expensed to consulting services over the life of the agreement. We recognized consulting services expense of $40,000 related to this agreement during the three and
nine months ended January 31, 2003. The agreement terminates on December 31, 2003.

Option Agreement to Acquire additional ownership in IUT

In December 2002, we acquired an option (at a cost of $50,000), to purchase an additional 29.1% of IUT from an unaffiliated party for an exercise price of
$450,000. The option expired unexercised on February 28, 2003.

New Accounting Standards

Effective May 1, 2002 we adopted the Financial Accounting Standards Board ("the FASB") SFAS No. 141Business
Combinations,SFAS No. 142Goodwill and Other Intangible Assetsand SFAS No. 144 Accounting for the Impairment or Disposal of Long-Lived
Assets.

SFAS
No. 141 addresses the methods used to account for business combinations and requires the use of the purchase method of accounting for all combinations after June 30,
2001. We will account for any future business combinations in accordance with SFAS No. 141. Adoption of SFAS No. 141 did not have a material impact on our financial statements.

SFAS
No. 142 addresses the methods used to amortize intangible assets and to assess impairment of those assets, including goodwill resulting from business combinations accounted
for under the purchase method. We adopted SFAS No. 142 effective May 1, 2002, except that goodwill and intangible assets other than goodwill acquired after June 30, 2001 have been
amortized or not amortized in accordance with SFAS 142. We acquired intangible assets from Silicon Evolution, Inc. ("SEI") and IUT subsequent to June 30, 2001, and have accounted
for those assets in accordance with the requirements of SFAS No. 142 (see"Amortization of SEI Intangible Assets"and "Acquisition of Isotope-Based Trace Detection
Technology"). Included in our assets at January 31, 2003, is goodwill related to the acquisition of
Chemotrade in 1998 with a net carrying value of $1,807,000. Effective with the adoption of SFAS No. 142, we no longer amortize this goodwill, decreasing our amortization expense by
approximately $110,000 per year.

In
accordance with SFAS No. 142, we have completed step one of the impairment test on our Life Sciences reporting unit, which has recorded goodwill. In completing our analysis of
the Life Sciences reporting unit, we used the Discounted Cash Flow ("DCF") Method in which the reporting unit was valued by discounting the projected cash flows over a six-year period to
its present value based upon a

12

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risk adjusted discount rate. As a result of the testing, we determined that there is no impairment of goodwill. We are required to assess goodwill and other intangibles for impairment at least
annually hereafter.

A
reconciliation of previously reported net loss and basic and diluted net loss per share to the amounts adjusted for the exclusion of amortization related to goodwill is as follows (in
thousands, except per share data):

|                  |                                 | Three Months Ended
January 31, |      | Nine Months Ended
January 31, |     
|----------------- | ------------------------------- | ------------------------------ | ---- | ----------------------------- | ----
|
|Reported net loss |                                 | $                              | (584 | )                             | $   
|                  | Add back: Goodwill amortization |                                |      |                              |     
|                  |                                 |                                |      |                               |     
|                  |                                 | Adjusted net loss              |      | $                             | (584
|                  |                                 |                                |      |                               |     

|                                     |                                 | Three Months Ended
January 31, |   | Nine Months Ended
January 31, |     
|------------------------------------ | ------------------------------- | ------------------------------ | - | ----------------------------- | ----
|
|Basic and diluted net loss per share |                                 |                                |   |                               |     
|                                     | Reported net loss               |                                | $ | (.05                          | )   
|                                     | Add back: Goodwill amortization |                                |   |                              |     
|                                     |                                 |                                |   |                               |     
|                                     |                                 | Adjusted net loss              |   | $                             | (.05
|                                     |                                 |                                |   |                               |     

SFAS
No. 144 supersedes SFAS No. 121,Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of. SFAS No. 121 did not address the accounting for a segment of a business accounted for as a discontinued operation, which resulted in two accounting models
for long-lived assets to be disposed of. SFAS No. 144 establishes a single accounting model for long-lived assets to be disposed of by sale and requires that those
long-lived assets be measured at the lower of the carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. Adoption of SFAS
No. 144 did not have a material impact on our financial statements.

In
June 2002, the FASB issued SFAS No. 146,Accounting for Costs Associated with Exit or Disposal Activities,which is
effective for exit or disposal activities initiated after December 31, 2002, with early application encouraged. This statement will require a liability for a cost associated with an exit or
disposal activity to be recognized at fair value in the period in which the liability is incurred, except for liabilities for one-time termination benefits requiring future employee
service, which is to be recognized ratably over the remaining service period. The application of this statement is not anticipated to have a material impact on our financial statements.

In
December 2002, the FASB issued SFAS No. 148,Accounting for Stock-Based CompensationTransition and
Disclosure.This statement requires all entities with stock-based employee compensation arrangements to provide additional disclosures in their summary of significant
accounting policies note. For entities that use the intrinsic value method of APB Opinion 25,Accounting for Stock Issued to Employees, to account for
employee stock compensation, their accounting policies note will be required to include a tabular presentation of pro forma net income and earnings per share using the fair value method. This
statement also permits entities changing to the fair value method of accounting for employee stock compensation to choose from one of three transition methodsthe prospective

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method, the modified prospective method, or the retroactive restatement method. The main provisions of this statement are effective for fiscal years ending after December 15, 2002. We
currently have no intention to change to the fair value method to account for employee stock-based compensation; however, the disclosure provisions will be implemented in our financial statements for
the year ending April 30, 2003.

We
have reviewed all other recently issued, but not yet effective, accounting pronouncements and do not believe any such pronouncements will have a material impact on our financial
statements.

Amortization of SEI Intangible Assets

On September 14, 2001 we entered into a perpetual, exclusive technology license agreement with SEI whereby we issued 500,000 shares of restricted common
stock (valued at $590,000 based upon the closing price of our common stock on September 14, 2001) for the right to indefinitely use intellectual property assets owned or leased by SEI. We
initially determined that the acquired intangible assets had an indefinite useful life as they were not bound by any legal time periods or otherwise limited due to competing technologies, and
therefore in accordance with SFAS No. 142Goodwill and Other Intangible Assetsthey were not amortized but rather tested annually for impairment.

During
May 2002, upon further evaluation of the uses and applications of the acquired technology and the advancement of the development of our SOI business plan, we determined
that the intangible assets no longer had an indefinite life and as a result, the assets are now being amortized over their estimated useful life of ten years. We incurred amortization expense
of $44,000 and $15,000 related to these intangible assets during the nine months and three months ended January 31, 2003, respectively. Amortization expense associated with these
intangible assets is anticipated to be approximately $59,000 per year over the remaining useful life.

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Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations

The statements contained in this Report on Form 10-QSB that are not purely historical are forward looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding our expectations, hopes, intentions
or strategies regarding the future. Forward-looking statements include: statements regarding future products or product development; statements regarding future selling, general and administrative
costs and research and development spending and our product development strategy; and statements regarding future capital expenditures and financing requirements. All forward-looking statements
included in this document are based on information available to us on the date hereof, and we undertake no obligation to update any such forward-looking statements. It is important to note that our
actual results could differ materially from those in such forward-looking statements.

General Discussion

Founded in 1992, we are an advanced materials and technology company. We are selling, developing and we anticipate commercializing additional products created
from materials whose natural isotopic ratios have been modified as well as non-isotopic (natural) materials. An isotope is one of two or more species (or nuclides) of the same chemical
element that differ from one another only in the number of neutrons in the atom's nucleus. The different number of neutrons can create significantly different nuclear properties. The most
well-known of these properties is radioactivity. Radioactive isotopes (or radioisotopes) can be found in nature. Most of our radioisotopes, however, are man-made. Stable
isotopes, as distinguished from radioisotopes, are not radioactive.

Several
manufacturers, located primarily in republics that once were part of the Soviet Union, produce radioactive and stable isotopes. We buy these isotopes from the manufacturers and
resell them in the form of common chemical compounds. For example, oxygen-18 is sold as water, and carbon-13 is sold as carbon dioxide. Today our business addresses the
material needs of two primary markets:



While
we are currently focusing on these two markets, we continue to evaluate other applications (including the homeland security market through the use of the isotope-based trace
detection technology we acquired from IUT) for both stable and radioisotopes and non-isotopic materials. We also sell isotopes for use in basic scientific research and industrial
applications. We believe our core competency is our ability to identify, develop, source, and commercialize products and services based on isotopically engineered materials as well as
non-isotopic semiconductor materials.

Our
revenues in the future will depend on our success in developing and selling products in the semiconductor and stable and radioactive isotope markets. Consistent with our historical
experience, our quarterly results have been materially affected by the size, timing, and quantity of orders and product shipments during a given quarter. In addition, our nine-month
results have been significantly impacted by one-time events including the July 2002 settlement of the Eagle-Picher dispute and sale of CTL. We cannot offer any assurance that these
types of events will occur in the future.

SOI Operations

In September 2002, we entered into several lease agreements related to building space, equipment and services in order to establish our own stand-alone
wafer manufacturing facilities ("Fab-1") in Vancouver, Washington (See "Lease Agreements Related to SOI Operations"). In addition to leasing
the building space, we have acquired the equipment necessary to establish our operations through bankruptcy sales (of which the cost will ultimately be offset against our receivable from SEI), draws
against our equipment financing agreement (See "Equipment Financing Agreement") and approximately

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$350,000 in cash acquisitions. We currently have the ability to produce SOI wafers at Fab-1 and with the proper increase in headcount, we believe that we have the capacity to produce up
to 10,000 SOI wafers per month.

As
a result of the establishment of Fab-1, we agreed with SQI to terminate our alliance agreement effective November 22, 2002. We are currently increasing our sales
activities but the ramp-up in sales is anticipated to be a slow process as we still need to complete the certification process with most new potential customers and many potential
customers are proceeding cautiously with SOI wafers until the United States economy recovers from the current downturn. As a result, although we plan to gradually increase our revenues from the sale
of SOI wafers, we may not be able to generate significant revenue from the sale of SOI wafers until fiscal year 2004, if at all.

Results of Operations

The following table sets forth, for the periods indicated, statement of operations data expressed as a percentage of net sales. The table and the discussion below
should be read in conjunction with the condensed consolidated financial statements and the notes thereto appearing elsewhere in this report.

|                            |                                   | Three Months Ended
January 31, |      | Nine Months Ended
January 31, |     
|--------------------------- | --------------------------------- | ------------------------------ | ---- | ----------------------------- | ----
|
|Revenues                    |                                   | 100.0                          | %    | 100.0                         | %   
|Cost of revenues            |                                   | 75.8                           |      | 75.7                          |     
|                            |                                   |                                |      |                               |     
|                            | Gross margin                      |                                | 24.2 |                               | 24.3
|                            |                                   |                                |      |                               |     
|Operating expenses:         |                                   |                                |      |                               |     
|                            | Selling, general & Administrative |                                | 45.1 |                               | 44.7
|                            | Research & development            |                                | 2.5  |                               | 4.3 
|                            |                                   |                                |      |                               |     
|                            |                                   | Total operating expenses       |      | 47.6                          |     
|                            |                                   |                                |      |                               |     
|Operating loss              |                                   | (23.4                          | )    | (24.7                         | )   
|                            |                                   |                                |      |                               |     
|Other income (expense), net |                                   | (1.3                           | )    | (.4                           | )   
|                            |                                   |                                |      |                               |     
|Loss before income taxes    |                                   | (24.7                          | )    | (25.1                         | )   
|                            |                                   |                                |      |                               |     
|Income tax expense          |                                   |                               |      |                              |     
|                            |                                   |                                |      |                               |     
|NET LOSS                    |                                   | (24.7                          | )%   | (25.1                         | )%  
|                            |                                   |                                |      |                               |     

Revenues

Revenues increased from $2,334,000 for the three months ended January 31, 2002 to $2,364,000 for the three months ended January 31,
2003, an increase of $30,000 or 1.3%. The increase is due to $60,000 of semiconductor materials and products sales for the three months ended January 31, 2003 as compared to $4,000 for
the three months ended January 31, 2002 partially offset by a decrease in isotope product sales.

Revenues
from domestic isotope product sales for the three months ended January 31, 2003 were $1,462,000, an increase of 34.7%, or $377,000, from $1,085,000 for the
three months ended January 31, 2002. The increase was primarily the result of additional product sales to our existing customers and an increase in our customer base for the
three months ended January 31, 2003.

Revenues
from international isotope product sales for the three months ended January 31, 2003 were $842,000, a decrease of 32.4%, or $403,000, from $1,245,000 for the
three months ended

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January 31, 2002. The decrease was primarily the result of the sale of CTL to the 25% shareholder effective May 1, 2002.

Revenues
increased from $5,985,000 for the nine months ended January 31, 2002 to $6,861,000 for the nine months ended January 31, 2003, an increase of
$876,000 or 14.6%. The increase is due to a significant increase in domestic isotope product sales partially offset by a significant decrease in international isotope product sales. Included in
revenues for the nine months ended January 31, 2003 were $118,000 of semiconductor materials and products sales as compared to $4,000 for the nine months ended January 31,
2002.

Revenues
from domestic isotope product sales for the nine months ended January 31, 2003 were $4,566,000, an increase of 54.6%, or $1,612,000, from $2,954,000 for the
nine months ended January 31, 2002. The increase was primarily the result of additional product sales to our existing customers and an increase in our customer base for the
nine months ended January 31, 2003.

Revenues
from international isotope product sales for the nine months ended January 31, 2003 were $2,177,000, a decrease of 28.1%, or $850,000, from $3,027,000 for the
nine months ended January 31, 2002. The decrease was primarily the result of the sale of CTL to the 25% shareholder effective May 1, 2002.

Included
in revenues from international isotope product sales for the three and nine months ended January 31, 2002 was $468,000 and $1,177,000 of revenues from CTL,
respectively. Effective May 1, 2002 we sold our 75% interest in CTL to the 25% shareholder for 50,000 Euros. CTL, which primarily resells oxygen-18, was notified in the quarter
ended July 31, 2002 that its current distribution agreement (which expires on December 31, 2002) would not be renewed. The loss of this agreement is significant as it accounted for
approximately 80% of CTL's revenue and as a result, CTL's ability to generate revenues after December 31, 2002 was extremely uncertain. In conjunction with this
disposition, Chemotrade is now free to pursue other opportunities (including selling oxygen-18 throughout the European market) that may have been in conflict with the interests of CTL. We
have fully replaced the lost revenue during the nine months ended January 31, 2003 with additional product sales to new and existing customers both domestically and in Europe. We fully
anticipate that we will continue this trend during the last quarter of the year ending April 30, 2003 but we can offer no assurances that this will come to fruition.

Notwithstanding
the commencement of manufacturing SOI wafers in our own manufacturing facility in November 2002, we do not anticipate significant revenues from sales of
silicon-28 based products in fiscal 2003. We are collaborating with academia and industry to evaluate the benefits of isotopically pure silicon-28. We believe that if
evaluations demonstrate the commercial feasibility of one or more products, demand could emerge in the high-performance micro-processor segment of the semiconductor market. We can offer no
assurance, however that these evaluations will demonstrate the commercial feasibility of any products, that we will be able to commercialize any such products, or that a market will emerge for any
such products.

Gross Margin

Gross margin for the three months ended January 31, 2003 was $571,000, an increase of .7%, or $4,000, from $567,000 for the three months
ended January 31, 2002. On a percentage of revenues basis, gross margin decreased .1 percentage point to 24.2%, for the three months ended January 31, 2003, from 24.3%, for
the three months ended January 31, 2002. The dollar increase is directly attributable to an increase in higher margin domestic isotope product sales partially offset by a decrease in
lower margin international isotope sales primarily due to the disposition of CTL effective May 1, 2002. The percentage of revenues decrease is due to the combination of the zero margin achieved
on semiconductor materials and products sales partially offset by an overall increase in higher margin

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domestic isotope sales and a decrease in lower margin international isotope sales due to the disposition of CTL effective May 1, 2002.

Gross
margin for the nine months ended January 31, 2003 was $1,633,000, an increase of 9.7%, or $144,000, from $1,489,000 for the nine months ended
January 31, 2002. On a percentage of revenues basis, gross margin decreased 1.1 percentage points to 23.8%, for the nine months ended January 31, 2003, from 24.9%, for the
nine months ended January 31, 2002. The dollar increase is directly attributable to an increase in higher margin domestic isotope product sales partially offset by a decrease in lower
margin international isotope sales primarily due to the disposition of CTL effective May 1, 2002 and a $38,000 negative margin on semiconductor materials and products sales. The percentage of
revenues decrease is due to the combination of the negative margin achieved on semiconductor materials and products sales partially offset by an overall increase in higher margin domestic isotope
sales and a decrease in lower margin international isotope sales due to the disposition of CTL effective May 1, 2002.

Included
in gross margin for the three and nine months ended January 31, 2002 was $58,000 and $213,000 of gross margin from CTL, respectively. We have replaced the lost
gross margin during the nine months ended January 31, 2003 with additional product sales, at a higher gross margin percentage, to both new and existing customers, both domestically and
in Europe. We fully anticipate that we will continue this trend during the last quarter of the year ending April 30, 2003 but we can offer no assurances that this will come to fruition.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $23,000, to $1,065,000, for the three months ended January 31, 2003, from $1,042,000, for the
three months ended January 31, 2002. On a percentage of revenues basis, selling, general and administrative expenses increased .4 percentage points to 45.1%, for the three months
ended January 31, 2003, from 44.7%, for the three months ended January 31, 2002. Both the dollar and the percentage increase is primarily attributable to an increase in headcount
and facility costs related to the semiconductor materials and products business segment partially offset by a decrease in corporate usage of professional services including public relations and legal
services.

Selling,
general and administrative expenses increased $474,000, to $3,315,000, for the nine months ended January 31, 2003, from $2,841,000, for the nine months ended
January 31, 2002. On a percentage of revenues basis, selling, general and administrative expenses increased .7 percentage points to 48.3%, for the nine months ended
January 31, 2003, from 47.6%, for the nine months ended January 31, 2002. The dollar increase is primarily attributable to the expensing of the value of the restricted common
stock and common stock warrants issued to vFinance (See "Investment Banking Agreement with vFinance, Inc."),increased investment banking and
consulting costs associated with Park Capital Securities, LLC (See "Consulting Agreement with Park Capital Securities, LLC") and an increase in
headcount and facility costs related to the semiconductor materials and products business segment. The percentage increase is attributable to the expensing of the value of the restricted common stock
and common stock warrants issued to vFinance,increased investment banking and consulting costs associated with Park Capital Securities and an increase
in headcount and facility costs related to the semiconductor materials and products business segment partially offset by an increase in revenues.

We
anticipate that we will increase our selling, general and administrative expenses during the last three months of our fiscal year ending April 30, 2003 and into the next
fiscal year through anticipated increased marketing efforts for our semiconductor materials and products segment and in an effort to market the isotope-based trace detection technology that we
recently acquired from IUT (See "Acquisition of Isotope-Based Trace Detection Technology"). There can be no assurance that our

18

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anticipated increased selling, general and administrative expenses will result in increased revenues from product sales.

Research and Development Expenses

Consistent with our product development strategy, we are seeking to identify and evaluate new stable and radioactive isotope products and potential markets for
economic and technical feasibility. We do not anticipate incurring any research and development costs associated with the technology that we recently acquired from IUT through the end of the 2003
fiscal year. We anticipate that we may incur significant research and development costs associated with this technology in the year ending April 30, 2004 only if we are able to obtain
additional financing. We will, in addition, continue funding research and development to improve technologies for isotope separation and material processing technologies. Because of the uniqueness of
our business, the unique chemicals and processes we deal with and the handling precautions required, these expenses can be significant. We cannot offer any assurance that our current or future lines
of business or products resulting from our research and development efforts will be profitable or generate significant revenues.

Research
and development expenses decreased $41,000, to $60,000, for the three months ended January 31, 2003, from $101,000, for the three months ended January 31,
2002. On a percentage of revenues basis research and development expenses decreased 1.8 percentage points to 2.5% for the three months ended January 31, 2003, from 4.3%, for the
three months ended January 31, 2002. The dollar decrease is primarily related to an increase in the revenue generated by the sale of silicon 28
epitaxial wafers to different companies for testing purposes. This revenue is recorded as an offset to research and development expenses in the accompanying statement of operations. The percentage
decrease is also primarily related to the increase in the revenue generated by the sale of silicon 28 epitaxial wafers to different companies for testing purposes and an increase in revenues.

Research
and development expenses decreased $159,000, to $189,000, for the nine months ended January 31, 2003, from $348,000, for the nine months ended January 31,
2002. On a percentage of revenues basis research and development expenses decreased 3.0 percentage points to 2.8% for the nine months ended January 31, 2003, from 5.8%, for the
nine months ended January 31, 2002. The dollar decrease is primarily related to an increase in the revenue generated by the sale of silicon 28 epitaxial wafers to different companies for
testing purposes. This revenue is recorded as an offset to research and development expenses in the accompanying statement of operations. The percentage decrease is also primarily related to the
increase in the revenue generated by the sale of silicon 28 epitaxial wafers to different companies for testing purposes and an increase in revenues.

We
believe that the development and introduction of new product applications is critical to our future success. We expect that research and development expenses may increase assuming
sufficient cash remains available and we are able to procure necessary materials and outside services, but will likely continue to vary as a percentage of revenues because of the timing and amount of
future revenues. We operate no facilities of our own for research and development. All research and development work is performed by outside entities, none of which we control. None of the companies
that currently perform research and development work for us do so on an exclusive basis.

Other Income (Expense), net

For the three months ended January 31, 2003 and 2002, other income (expense), net includes interest income and expense and foreign currency gains
and losses. Other income (expense), net decreased $20,000, to $(30,000), for the three months ended January 31, 2003, from $(10,000), for the three months ended January 31,
2002.

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For the nine months ended January 31, 2003 and 2002, other income (expense), net includes net gains from a legal settlement, amortization of debt offering costs, gains or
losses on the sale of lines of businesses or subsidiaries, interest income and expense, and foreign currency gains and losses. Other income (expense), net increased $1,421,000, to $1,362,000, for the
nine months ended January 31, 2003, from ($59,000), for the nine months ended January 31, 2002. The increase is primarily attributable to the gain (net of the contingency
portion of legal fees) of $2,140,000 related to the settlement of the Eagle-Picher dispute (See "Sale of Depleted Zinc Business and Subsequent Dispute
Settlement") and the approximate $30,000 gain resulting from the disposition of CTL, partially offset by the expensing of $546,000 of previously unamortized discount related to
the Series 2002A Convertible Notes to interest expense and $182,000 of previously capitalized debt offering costs as a result of the conversion of the notes to common stock.

Income Taxes

We currently operate at a loss and expect to operate at a loss until the products currently under development begin to generate sufficient revenue. The losses we
anticipate incurring during the remaining portion of the current fiscal year are not expected to generate an income tax benefit because of the uncertainty of the realization of the deferred tax asset.
As such, we have also provided a valuation allowance against our net deferred tax asset as realization is uncertain.

Net Loss

We recognized a net loss of $584,000 for the three months ended January 31, 2003, as compared to a net loss of $586,000 for the three months
ended January 31, 2002. We recognized a net loss of $509,000 for the nine months ended January 31, 2003, as compared to a net loss of $1,763,000 for the nine months ended
January 31, 2002. We anticipate that losses will continue until revenues increase from our current operations or until we generate revenues from products introduced as a result of our research
and development projects.

Net
income in future years will be dependent upon our ability to increase net revenues faster than we increase our selling, general and administrative expenses, research and
development expense and other expenses. During the remainder of the year ending April 30, 2003, we anticipate expanding our SOI operations and generating additional revenues. However, because
of our continuing research and development efforts on new products (including products based on our newly-acquired homeland
security technology), we anticipate that the operations during the year ending April 30, 2003 will result in a loss since we are not likely to increase our revenues from our existing products
or generate additional sales from the new products we may develop in a sufficient amount (if at all) to offset our operating expenses.

Liquidity and Capital Resources

Our working capital and liquidity increased significantly during the nine months ended January 31, 2003 due to the resolution of our dispute with
Eagle-Picher via the July 24, 2002 settlement agreement whereby we received $2,500,000 ($2,140,000 net of the contingency portion of our legal fees). Working capital increased $657,000, to
$1,723,000 at January 31, 2003, from $1,066,000, at April 30, 2002. Our working capital has decreased since we received the funds from the Eagle-Picher settlement as we have used those
funds to finance our negative cash flow.

Our
principal source of funding for the nine months ended January 31, 2003 has been from the settlement of the Eagle-Picher dispute. Our principal sources of funding for
the nine months ended January 31, 2002 have been from the exercise of common stock warrants and proceeds from the sale of shares under our employee stock purchase program. We provided
cash from operating activities of $513,000 during the nine months ended January 31, 2003 and used cash in operating activities of

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$1,097,000 during the nine months ended January 31, 2002. Cash provided by operating activities during the nine months ended January 31, 2003 was principally the result of
the settlement of the Eagle-Picher dispute partially offset by operating losses. Cash used in operating activities for the nine months ended January 31, 2002 was principally the result
of a net loss of $1,763,000.

Our
investing activities used cash of $369,000 and $18,000 for the nine months ended January 31, 2003 and 2002, respectively. Cash used in investing activities for the
nine months ended January 31, 2003 and January 31, 2002, resulted from purchases of property and equipment.

Financing
activities used cash of $40,000 for the nine months ended January 31, 2003 and provided cash of $523,000 for the nine months ended January 31, 2002.
Cash used in financing activities for the nine months ended January 31, 2003 resulted primarily from payments on borrowings of $46,000. Cash provided by financing activities for the
nine months ended January 31, 2002 resulted primarily from the exercise of common stock warrants for $473,000, proceeds of $7,000 from the sale of shares under our employee stock
purchase program and $43,000 from the net issuance and repayments of notes payable.

In
October 2002 we entered into an agreement with Fidelity whereby Fidelity agreed to provide up to $1,000,000 in equipment financing. Under the terms of the agreement, Fidelity
will acquire equipment on our behalf and lease it to us over a term of 36 months at a current blended interest rate of approximately 7.5%. Each draw down on the lease will contain a $1 bargain
purchase option, payable
at the end of the lease at which time title to the equipment will transfer to us, and as a result they will be accounted for as capital leases. Principal amounts outstanding under this facility at
January 31, 2003 were $145,000.

At
January 31, 2003, we had $829,000 of cash and cash equivalents, an increase of $104,000, compared to $725,000, at April 30, 2002.

In
November 2002, we entered into an agreement with Park Capital Securities, LLC whereby we issued a common stock warrant to purchase 300,000 shares of common stock at $1.00 per
share, for investment banking and consulting services. The common stock warrant vested immediately and expires in November 2005. The agreement terminates on December 31, 2003.

On
March 20, 2002 we completed a financing arrangement whereby we issued $1,000,000 of Series 2002A Convertible Notes. The notes were convertible at a ratio of one common
share for each dollar of note outstanding, bore interest at 4% per annum and were due March 1, 2003. During the nine months ended January 31, 2003, the $1,000,000 of convertible
notes were converted to 1,000,000 shares of common stock.

Under
the terms of the Series A Convertible Preferred Stock private placement, the related shareholders had anti-dilution rights if we issued or sold common stock
after July 29, 1999 for a per share consideration less than the current exercise price of the related warrants. The 3,085,622 common stock warrants associated with this private placement
expired unexercised on July 29, 2002.

In
addition to anti-dilution rights, there are provisions associated with the Series A Convertible Preferred Stock that if triggered, would reduce the current
conversion price and effectively allow the preferred shares to convert to common stock at a ratio greater than a one for one basis. As a result of a December 2002 settlement with the holders of
the Series A Convertible Preferred Stock over the proper calculation of the conversion ratio, the conversion price is currently $.90 per share and, as a result, the Series A Convertible
Preferred Stock is now convertible at approximately 1.67 shares of common stock for each share of Series A Convertible Preferred Stock outstanding.

In
general (and even though our working capital increased during the nine-months ended January 31, 2003 due, primarily due to the Eagle-Picher settlement), we expect
that our working capital will decrease over time as we continue to use our capital and revenues for operations, research and development and investing activities (including the expansion of our SOI
operations). We do not expect

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working capital to increase until we are able to increase our revenues to exceed our cash out-flow (assuming we are able to increase our revenues) or complete a financing arrangement. We
cannot offer any assurance that we will be able to do so in the near term. With our anticipated revenues from operations during the period and projecting our cash flow on the basis of our historical
expenditures,
we have sufficient cash available to fund our short-term working capital requirements for the balance of the current fiscal year and through July, 2003.

We
are currently working with several different sources, including both strategic and financial investors, in order to raise sufficient capital to finance both our continuing operations
and our proposed homeland security business through the use of the isotope-based trace detection technology we acquired from IUT. Although there is no assurance that funding will be available, we
believe that our current business plan, if successfully funded, will significantly improve our operating results and cash flow in the future.

Critical Accounting Policies

In accordance with recent Securities and Exchange Commission guidance, those material accounting policies that we believe are the most critical to an investor's
understanding of our financial results and condition and require complex management judgment have been expanded and are discussed below.

Goodwill and Intangible Assets

Effective May 1, 2002 we adopted SFAS No. 142Goodwill and Other Intangible Assets.SFAS
No. 142 addresses the methods used to amortize intangible assets and to assess impairment of those assets, including goodwill resulting from business combinations accounted for under the
purchase method. Although we adopted SFAS No. 142 effective May 1, 2002, goodwill and intangible assets other than goodwill acquired after June 30, 2001 have been amortized or not
amortized in accordance with SFAS 142. We acquired intangible assets from SEI and IUT subsequent to June 30, 2001, and have accounted for those assets in accordance with the requirements
of SFAS No. 142 (See"Amortization of Intangible Assets"and"Acquisition of Isotope-Based Trace Detection
Technology"). Included in our assets at January 31, 2003, is goodwill related to the acquisition of Chemotrade in 1998 with a net carrying value of $1,807,000. Effective
with the adoption of SFAS No. 142, we no longer amortize this goodwill, decreasing our amortization expense by approximately $110,000 per year.

In
accordance with SFAS No. 142, we have completed step one of the impairment test on our Life Sciences reporting unit, which has recorded goodwill. In completing our analysis of
the Life Sciences reporting unit, we used the DCF Method in which the reporting unit was valued by discounting the projected cash flows to its present value based upon a risk adjusted discount rate.
As a result of the testing, we determined that there is no impairment of goodwill. We are required to assess goodwill and other intangibles for impairment at least annually hereafter.

In
performing the calculation under SFAS No. 142, we made several assumptions, including the use of the DCF Method, the number of years used in the projection, the discount
rate and growth
assumptions. Had we elected to use different variables, the outcome of the calculation could have been different.

We
utilized the DCF Method in order to calculate the fair value of our Life Sciences reporting unit. We had the option to utilize the market capitalization method but given the
complexity of our business, we determined that we couldn't reasonably bifurcate the market value of the Life Sciences reporting unit from our other operations based upon our market value as a whole.
In utilizing the DCF method, we based our calculation over a conservative six-year life with no projected growth over the final four years. The final four years were kept
constant in order to ensure that we did not overestimate the potential of the reporting unit. The six-year life was utilized as a result of the fact that

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the Life Sciences reporting unit has been selling isotopes for over fifteen years and that demand for isotopes is projected to increase over the next ten years. Given the history of the
reporting unit and the projected future of the industry, we determined that it was reasonable to utilize a six-year life. Had we utilized a life of less than six years, the
calculation may have suggested that impairment was present. In addition, we discounted the projected cash flows at a rate of 12%. The 12% was deemed reasonable given the current low market interest
rate and the extremely low risk of the Life Sciences business offset by the higher cost of capital for a small company and the related difficulties we have had in raising necessary capital over
the years. Had we utilized a discount rate that was substantially larger than 12%, the calculation may have suggested that impairment was present.

Our
intangible assets result from the perpetual, exclusive technology license agreement with SEI that we entered into on September 14, 2001 and the isotope-based trace detection
technology we acquired from IUT in December 2002. As the intangible assets were acquired after June 30, 2001, we adhere to the guidance provided by SFAS No. 142 Goodwill and Other Intangible Assets.We initially determined that the intangible assets acquired from SEI had an indefinite useful life as they were
not bound by any legal time periods or otherwise limited due to competing technologies and, therefore in accordance with SFAS No. 142 they were not amortized but rather tested annually for
impairment. During the nine months ended January 31, 2003, upon further evaluation of the uses and applications of the acquired technology and the advancement of the development of our
SOI business plan, we determined that the intangible assets no longer had an indefinite life and as a result, the assets are now being amortized over their estimated useful life of ten years. The
isotope-based trace detection technology is also being amortized over its estimated useful life of ten years. We will continue to evaluate each reporting period whether events and circumstances
continue to support our assessment of a ten-year life for these intangible assets. Additionally, if indicators of impairment do arise in the future, the intangible assets will be tested
for impairment and may result in an impairment charge in the future.

Valuation of Equity Transactions

We value transactions associated with common or preferred stock that is convertible into common stock based on the market value of the underlying common stock on
the date of the signing of the agreement. We value transactions associated with common stock warrants at the appropriate measurement date utilizing the Black-Scholes pricing model, with assumptions as
to volatility (150%), risk-free interest rate (4.0%) and estimated life of the warrants based on historical information. If the
assumptions used, as they relate to volatility, risk-free interest rate and estimated life of the warrants, were materially different, the overall valuation of these transactions could
change significantly.

Item 3: Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, within the 90 days prior to the filing date of this report, the
company carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures. This evaluation was carried out under the supervision and with
the participation of the Company's principal executive officer as well as the Company's principal financial officer, who concluded that the Company's disclosure controls and procedures are effective.
There have been no significant changes in the Company's internal controls or in other factors, which could significantly affect internal controls subsequent to the date the Company carried out its
evaluation.

Disclosure
controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company reports filed or submitted under
the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and
communicated to management, including the Company's principal executive officer and the Company's principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

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Part II: Other Information

Item 2: Changes in Securities and Use of Proceeds

1.IUTIn December 2002, we acquired from IUT, certain isotope-based trace detection technology to be
used to detect explosives and chemical and biological weapons. We issued 250,000 shares of our restricted common stock as consideration for the technology. In addition, we granted IUT a
15 percent ownership interest in a newly created subsidiary, IUT Detection Technologies, Inc. that will own and commercialize the trace detection technology. The following sets forth the
information required by Item 701 in connection with that transaction:

(a)  The
transaction was effective December 4, 2002. We issued 250,000 shares of restricted common stock.

(b)  The
transaction occurred without the use of any underwriters or finders. The only entity that had the contractual right to receive securities from us in this transaction
was IUT.

(c)  The
restricted common stock was not sold for cash. The securities were issued to IUT as consideration for the acquisition of certain isotope-based detection technology.

(d)  We
relied on the exemption from registration provided by Sections 4(2) and 4(6) under the Securities Act of 1933 and Regulation S for this
transaction. We did not engage in any public advertising or general solicitation in connection with this transaction. We provided IUT with disclosure of all aspects of our business, including
providing IUT and its management with our reports filed with the Securities and Exchange Commission, our press releases, access to our auditors, and other financial, business, and corporate
information. Based on our investigation, we believe that the management and the board of
directors of IUT obtained all information regarding Isonics they requested, received answers to all questions they posed, and otherwise understood the risks of accepting our securities in exchange for
the isotope-based detection technology.

(e)  There
are no conversion rights or exchange rights associated with the common stock.

(f)    We
have not received and do not expect to receive any proceeds from the issuance of the restricted common stock to IUT and, therefore, we have no use of proceeds.

2.Park Capital Securities, LLC.In November 2002, we entered into an agreement with Park Capital
Securities, LLC whereby we issued a common stock warrant to purchase 300,000 shares of common stock at $1.00 per share, for investment banking and consulting services through December 31, 2003.
The common stock warrant vested immediately and expires in November 2005. The following sets forth the information required by Item 701 in connection with that transaction:

(a)  The
transaction was effective November 22, 2002. We issued a warrant to purchase 300,000 shares of restricted common stock as described above.

(b)  No
underwriters were involved in the transaction. The only entities who received securities from us in this transaction was Park Capital Securities, LLC.

(c)  The
securities were not sold for cash. The securities were issued to Park Capital Securities as part of the consideration for Park Capital Securities entering into the
agreement and providing the services thereunder.

(d)  The
issuance of the shares was accomplished pursuant to the exemptions from registration contained in Sections 4(2) and 4(6) of the Securities Act
of 1933. We did not engage in any public advertising or general solicitation in connection with this transaction. We provided Park Capital Securities with disclosure of all aspects of our business,
including providing Park Capital Securities and its management with our reports filed with the Securities and Exchange Commission, our press releases, access to our auditors, and other financial,
business, and corporate information. Based on our

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investigation, we believe that the management and the board of directors of Park Capital Securities obtained all information regarding Isonics they requested, received answers to all questions they
posed, and otherwise understood the risks of accepting our securities in exchange for services to be provided.

(e)  There
are no conversion rights or exchange rights associated with the shares. The warrants are exercisable to purchase shares of restricted common stock of Isonics until
November 22, 2005 at $1.00 per share.

(f)    We
received no proceeds from the issuance of these warrants and, therefore, we have no use of proceeds.

3.Employee Offerings.

(a)Securities Sold.Following their reelection as directors on November 19, 2002, we issued options to
purchase 10,000 shares of our common stock to each of Lindsay Gardner and Richard Parker pursuant to our 1998 Directors' Plan, which plan has been approved by our shareholders.

(b)Names of Principal Underwriters.None

(c)Consideration Received.The stock options were issued pursuant to our 1998 Directors' Plan in consideration
of services rendered and to induce future performance of services.

(d)Exemption Claimed.The securities were not offered or sold in a manner that constituted a "sale" of
securities as that term is defined in Section 2(a)(3) of the Securities Act. Where a "sale" occurred, the transactions were exempt from registration under the Securities Act of 1933, as
amended by reason of Sections 4(2) and 4(6) of the Securities Act of 1933 inasmuch as each of the directors is an accredited investor.

(e)Not applicable.

(f)Use of Proceeds.Where proceeds were received, the proceeds were and will be utilized for working capital
purposes.

4.Investor Relations Services, Inc.Effective July 1, 2002, we agreed to pay 250,000 shares of our
restricted common stock as consideration for consulting services consisting of financial advisory, strategic business planning and investor and public relations to be provided by IRSI of New Smyrna
Beach, Florida. IRSI never rendered any such services and we have terminated the agreement and have advised IRSI that the Company has no obligation to issue the shares (see
"Consulting Agreement With Investor Relations
Services, Inc."). The following sets forth the information required by Item 701 in connection with that transaction:

(a)  The
transaction and the rescission were both completed effective July 1, 2002. The contract called for the issuance of 250,000 shares of our restricted common
stock to IRSI, but we terminated that obligation, although IRSI has advised us that it disputes the termination.

(b)  The
transaction occurred without the use of any underwriters or finders. The only person who had the contractual right to receive securities from us in this transaction
was IRSI.

(c)  The
restricted common stock was not sold for cash. As described above, we contracted to issue the common stock in consideration for consulting services.

(d)  We
relied on the exemption from registration provided by Sections 4(2) and 4(6) under the Securities Act of 1933 for this transaction. We did not engage in
any public advertising or general solicitation in connection with this transaction that was in negotiation for more than two months. We provided IRSI with disclosure of all aspects of our
business, including providing IRSI and its management with our reports filed with the Securities and Exchange Commission, our press releases, access to our auditors, and other financial, business, and
corporate information. Based on our investigation, we believe that the management and the board of directors of IRSI obtained all

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information regarding Isonics they requested, received answers to all questions they posed, and otherwise understood the risks of accepting our securities in exchange for services to be provided.

(e)  There
are no conversion rights or exchange rights associated with the common stock.

(f)    We
have not received and do not expect to receive any proceeds from the issuance of the restricted common stock to IRSI and, therefore, we have no use of proceeds.

5.vFinance, Inc.On June 10, 2002, we entered into an agreement with vFinance of Boca Raton,
Florida, a member of the National Association of Securities Dealers, Inc. The agreement provided for the issuance to vFinance of 25,000 shares of common stock and a warrant to purchase 200,000
shares of common stock in exchange for vFinance's agreement to provide financial advisory and other services to Isonics. The following sets forth the information required by Item 701 in connection
with that transaction:

(a)  The
transaction was effective June 10, 2002. We issued 25,000 shares of restricted common stock and a warrant to acquire 200,000 shares of common stock.

(b)  No
underwriters were involved in the transaction. The only entities who received securities from us in this transaction was vFinance, although vFinance transferred its
right to a portion of those shares to persons who are directors or executive officers of vFinance.

(c)  The
securities were not sold for cash. The securities were issued to vFinance as part of the consideration for vFinance entering into the agreement and providing the
services thereunder.

(d)  The
issuance of the shares was accomplished pursuant to the exemptions from registration contained in Sections 4(2) and 4(6) of the Securities Act
of 1933. We did not engage in any public advertising or general solicitation in connection with this transaction. We provided vFinance with disclosure of all aspects of our business, including
providing vFinance and its management with our reports filed with the Securities and Exchange Commission, our press releases, access to our auditors, and other financial, business, and corporate
information. Based on our investigation, we believe that the management and the board of directors of vFinance obtained all information regarding Isonics they requested, received answers to all
questions they posed, and otherwise understood the risks of accepting our securities in exchange for services to be provided.

(e)  There
are no conversion rights or exchange rights associated with the shares. The warrants are exercisable to purchase shares of common stock of Isonics until
June 10, 2006 at $2.32 per share.

(f)    We
received no proceeds from the issuance of these shares and, therefore, we have no use of proceeds.

Item 4: Submission of Matters to a Vote of Security Holders.

The Company held its annual meeting of shareholders on November 19, 2002, after the date covered by this report. The shareholders relected the following
directors:

Name

Shares FOR

Shares WITHHELDJames E. Alexander

8,706,040

73,527Boris Rubizhevsky

8,704,540

75,027Lindsay A. Gardner

8,706,040

73,527Richard Parker

8,706,040

73,527


Larry
Wells, formerly a director of the Company, did not stand for relection. The shareholders did not vote on any other matters at the meeting.

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Item 6: Exhibits and Reports on Form 8-K

None



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Golden, County of Jefferson, State of Colorado, on the fourteenth day of March, 2003.

| |  | Isonics Corporation
(Registrant)
| |  | --------------------------------
| |  | By:                             
| |  | By:                             

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CERTIFICATIONSprincipal executive and financial officers

I, James E. Alexander, Chief Executive Officer of Isonics Corporation, certify that:

1.    I
have reviewed this quarterly report on Form 10-QSB of Isonics Corporation;

2.    Based
on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.    Based
on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.    The
registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have:

a)    designed
such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)    evaluated
the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report
(the "Evaluation Date"); and

c)    presented
in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.    The
registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent functions):

a)    all
significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and
report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)    any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.    The
registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material
weaknesses.

|Date: March 14, 2003 |  | /s/JAMES E. ALEXANDERJames E. Alexander, Chief Executive Officer
(principal executive officer)
|-------------------- |  | ----------------------------------------------------------------------------------------------

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I, John V. Sakys, Chief Financial Officer of Isonics Corporation, certify that:

1.    I
have reviewed this quarterly report on Form 10-QSB of Isonics Corporation;

2.    Based
on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.    Based
on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.    The
registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have:

a)    designed
such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)    evaluated
the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report
(the "Evaluation Date"); and

c)    presented
in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.    The
registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent functions):

a)    all
significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and
report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)    any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.    The
registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material
weaknesses.

|Date: March 14, 2003 |  | /s/JOHN V. SAKYSJohn V. Sakys, Chief Financial Officer
(principal financial officer)
|-------------------- |  | ------------------------------------------------------------------------------------

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