Exhibit
10.7


WARRANT


THE SECURITIES
REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE ISSUER THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS
OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THIS WARRANT
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT.


ISONICS CORPORATION


Warrant To Purchase Common Stock


	
  Warrant No.: CCP2007-1-1

  	
   

  	
  Number of
  Shares:

  	
   

  	
  250,000

  
	
   

  	
   

  	
  Warrant Exercise
  Price:

  	
   

  	
  $5.00

  
	
   

  	
   

  	
  Expiration Date:

  	
   

  	
  April10, 2010

  



 


Date of
Issuance: April 10, 2007


Isonics
Corporation, a California corporation (the “Company”),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Cornell
Capital Partners, L.P. (the “Holder”), the registered holder
hereof or its permitted assigns, is entitled, subject to the terms set forth
below, to purchase from the Company upon surrender of this Warrant, at any time
or times on or after the date hereof, but not after 11:59 P.M. Eastern
Time on the Expiration Date (as defined herein) two hundred fifty thousand  (250,000) fully paid and nonassessable shares
of Common Stock (as defined herein) of the Company (the “Warrant Shares”)
at the exercise price per share provided in Section 1(b) below or as
subsequently adjusted; provided, however, that in no event shall the holder be
entitled to exercise this Warrant for a number of Warrant Shares in excess of
that number of Warrant Shares which, upon giving effect to such exercise, would
cause the aggregate number of shares of Common Stock beneficially owned by the
holder and its affiliates to exceed 4.99% of the outstanding shares of the
Common Stock following such exercise, except within sixty (60) days of the
Expiration Date (however, such restriction may be waived by Holder (but only as
to itself and not to any other holder) upon not less than 65 days prior notice
to the Company).  For purposes of the
foregoing proviso, the aggregate number of shares of Common Stock beneficially
owned by the holder and its affiliates shall include the number of shares of Common
Stock issuable upon exercise of this Warrant with respect to which the
determination of such proviso is being made, but shall exclude shares of Common
Stock which would be issuable upon (i) exercise of the remaining,
unexercised Warrants beneficially owned by the holder and its affiliates and
(ii) exercise or conversion of the unexercised or unconverted portion of
any other securities of the Company beneficially owned by the holder and its 



 1
 









affiliates
(including, without limitation, any convertible notes or preferred stock)
subject to a limitation on conversion or exercise analogous to the limitation
contained herein.  Except as set forth in
the preceding sentence, for purposes of this paragraph, beneficial ownership
shall be calculated in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended.  For purposes of
this Warrant, in determining the number of outstanding shares of Common Stock a
holder may rely on the number of outstanding shares of Common Stock as
reflected in (1) the Company’s most recent Form 10-Q, Form 10KSB or Form 10-K,
as the case may be, (2) a more recent public announcement by the Company or (3)
any other notice by the Company or its transfer agent setting forth the number
of shares of Common Stock outstanding. 
Upon the written request of any holder, the Company shall promptly, but
in no event later than one (1) Business Day following the receipt of such
notice, confirm in writing to any such holder the number of shares of Common
Stock then outstanding.  In any case, the
number of outstanding shares of Common Stock shall be determined after giving
effect to the exercise of Warrants (as defined below) by such holder and its
affiliates since the date as of which such number of outstanding shares of
Common Stock was reported.


Section 1.


(a)   This Warrant is issued pursuant to the
Securities Purchase Agreement (“Securities Purchase Agreement”) dated
the date hereof between the Company and the Buyers listed on Schedule I thereto
or issued in exchange or substitution thereafter or replacement thereof.  Each Capitalized term used, and not otherwise
defined herein, shall have the meaning ascribed thereto in the Securities
Purchase Agreement.


(b)   Definitions.  The following words and terms as used in this
Warrant shall have the following meanings:


(i)          “Approved Stock Plan” means a
stock option plan that has been approved by the Board of Directors of the
Company, pursuant to which the Company’s securities may be issued only to any
employee, officer or director for services provided to the Company.


(ii)          “Business Day” means any day
other than Saturday, Sunday or other day on which commercial banks in the City
of New York are authorized or required by law to remain closed.


(iii)        “Closing Bid Price” means the
closing bid price of Common Stock as quoted on the Principal Market (as
reported by Bloomberg Financial Markets (“Bloomberg”) through its “Volume
at Price” function).


(iv)        “Common Stock” means (i) the
Company’s common stock, no par value per share, and (ii) any capital stock
into which such Common Stock shall have been changed or any capital stock
resulting from a reclassification of such Common Stock.


(v)         “Event of Default” means an
event of default under the Securities Purchase Agreement or the Convertible
Debentures issued in connection therewith.



 2
 









(vi)        “Excluded Securities” means,


(a) any
issuance by the Company of securities in connection with a strategic
partnership or a joint venture (the primary purpose of which is not to raise
equity capital),


 (b) any issuance by the Company of securities
as consideration for a merger or consolidation or the acquisition of a
business, product, license, or other assets of another person or entity,


(c) options to
purchase shares of Common Stock, provided (I) such options are issued after the
date of this Warrant to employees of the Company within thirty (30) days of
such employee’s starting his employment with the Company, and (II) the exercise
price of such options is not less than the Closing Price, as quoted by
Bloomberg, LP of the Common Stock on the date of issuance of such option.


(d) securities issued pursuant to an Approved Stock Plan;


(e) up to
1,000,000 without registration rights and not pursuant to Form S-8 (in the
event that such issuance has registration rights the Obligor shall obtain the
prior written approval of the Holder) shares that may be issued from time to
time at a price no less than the VWAP ending within three (3) Business Days
prior to the completion of the transaction (the primary purpose of which is not
to raise equity capital),


(f) except as
provided for in Section 8(a) herein, any issuance of securities to holders of
the Other Securities provided such transactions are in accordance with the
terms of such instrument (including any anti-dilution protection contained in
such instrument) or are on terms determined by the Board of Directors of the
Company to be no less favorable to the Company than the existing terms, and


               (g)           the securities issued to, or upon the
conversion or exercise of, the warrants and convertible debentures issued
through Clayton Dunning &  Co., Inc.
(the “2007A Securities”), which Isonics anticipates will be issued in April
2007 or soon thereafter, and are referenced in the Waiver Agreement between the
parties dated February 19, 2007.


(vii)       “Expiration Date” means April 10,
2010.


(viii)      “Issuance Date” means the date
hereof.


(ix)        “Options” means any rights,
warrants or options to subscribe for or purchase Common Stock or Convertible
Securities.


(x)         “Other Securities” means
(i) those convertible debentures, options and warrants of the Company
issued prior to, and outstanding on, the Issuance Date of this Warrant, (ii)
except for as provided in Section 8(a) herein or as otherwise agreed by the
Holder and the Company, the shares of Common Stock issuable on exercise of such
convertible debentures, options and warrants, provided such convertible
debentures, options and warrants are not amended after the Issuance Date of
this Warrant and, and (iii) the 660,000 shares of restricted common stock issued
or to be issued pursuant to the Securities Purchase Agreement dated May 



 3
 









30, 2006, and (iv) any other
shares of Common Stock issued or issuable pursuant to this Warrant,  the Convertible Debenture, and the
registration rights agreement entered into between the Company and the initial
holder of this Warrant.


(xi)         “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof.


(xii)       “Principal Market” means on any of
(a) the American Stock Exchange, (b) New York Stock Exchange, (c) the Nasdaq
Global  Market, (d) the Nasdaq Capital
Market, or (e) the Nasdaq OTC Bulletin Board (“OTCBB”)


(xiii)      “Securities Act” means the Securities
Act of 1933, as amended.


(xiv)      “VWAP” means the volume weighted
average price per share of the Company’s Common Stock on the Nasdaq Capital
Market or other Subsequent Market, as quoted by Bloomberg, LP.


(xv)       “Warrant” means this Warrant and
all Warrants issued in exchange, transfer or replacement thereof.


(xvi)      “Warrant Exercise Price” shall be
$5.00 or as subsequently adjusted as provided in Section 8 hereof.


(c)   Other Definitional Provisions.


(i)          Except as otherwise specified herein,
all references herein (A) to the Company shall be deemed to include the
Company’s successors and (B) to any applicable law defined or referred to
herein shall be deemed references to such applicable law as the same may have
been or may be amended or supplemented from time to time.


(ii)         When used in this Warrant, the words “herein”,
“hereof”, and “hereunder”
and words of similar import, shall refer to this Warrant as a whole and not to
any provision of this Warrant, and the words “Section”, “Schedule”,
and “Exhibit” shall refer to Sections of, and Schedules and Exhibits to,
this Warrant unless otherwise specified.


(iii)        Whenever the context so requires, the
neuter gender includes the masculine or feminine, and the singular number
includes the plural, and vice versa.


Section 2.               Exercise of Warrant.


(a)   Subject to the terms and conditions hereof,
this Warrant may be exercised by the holder hereof then registered on the books
of the Company, pro rata as hereinafter provided, at any time on any Business
Day on or after the opening of business on such Business Day, commencing with
the first day after the date hereof, and prior to 11:59 P.M. Eastern Time
on the Expiration Date (i) by delivery of a written notice, in the form of the
subscription notice attached 



 4
 









as Exhibit A hereto (the
“Exercise Notice”), of such holder’s election to exercise this Warrant,
which notice shall specify the number of Warrant Shares to be
purchased, payment to the Company of an amount equal to the Warrant
Exercise Price(s) applicable to the Warrant Shares being purchased, multiplied
by the number of Warrant Shares (at the applicable Warrant Exercise Price)
as to which this Warrant is being exercised (plus any applicable issue or
transfer taxes) (the “Aggregate Exercise Price”) in cash or wire
transfer of immediately available funds and the surrender of this Warrant (or
an indemnification undertaking with respect to this Warrant in the case of its
loss, theft or destruction) to a common carrier for overnight delivery to the
Company as soon as practicable following such date (“Cash Basis”) or
(ii) if after October 9, 2007, at the time of exercise, the Warrant Shares are
not subject to an effective registration statement or if an Event of Default
has occurred, by delivering an Exercise Notice and in lieu of making payment of
the Aggregate Exercise Price in cash or wire transfer, elect instead to receive
upon such exercise the “Net Number” of shares of Common Stock determined
according to the following formula (the “Cashless Exercise”):


	
  Net Number =

  	
  (A x B) — (A x
  C)

  	
   

  
	
   

  	
  B

  	
   

  



 


For purposes of the
foregoing formula:


A = the total number of Warrant Shares with respect to
which this Warrant is then being exercised.


B = the VWAP of the Common Stock on the date of exercise
of the Warrant.


C = the Warrant Exercise Price then in effect for the
applicable Warrant Shares at the time of such exercise.


In the event
of any exercise of the rights represented by this Warrant in compliance with
this Section 2, the Company shall on or before the fifth (5th) Business
Day following the date of receipt of the Exercise Notice, the Aggregate
Exercise Price and this Warrant (or an indemnification undertaking with respect
to this Warrant in the case of its loss, theft or destruction) and the receipt
of the representations of the holder specified in Section 6 hereof, if
requested by the Company (the “Exercise Delivery Documents”), and if the
Common Stock is DTC eligible, credit such aggregate number of shares of Common
Stock to which the holder shall be entitled to the holder’s or its designee’s
balance account with The Depository Trust Company; provided, however, if the
holder who submitted the Exercise Notice requested physical delivery of any or
all of the Warrant Shares, or, if the Common Stock is not DTC eligible  then the Company shall, on or before the
fifth (5th)
Business Day following receipt of the Exercise Delivery Documents, issue and
surrender to a common carrier for overnight delivery to the address specified
in the Exercise Notice, a certificate, registered in the name of the holder,
for the number of shares of Common Stock to which the holder shall be entitled
pursuant to such request.  Upon delivery
of the Exercise Notice and Aggregate Exercise Price referred to in
clause (i) or (ii) above the holder of this Warrant shall be deemed for
all corporate purposes to have become the holder of record of the Warrant
Shares with respect to which this Warrant has been exercised.  In the case of a dispute as to the
determination of the Warrant Exercise Price, the VWAP or the arithmetic
calculation of the Warrant Shares, the Company 



 5
 









shall promptly issue to the holder the number
of Warrant Shares that is not disputed and shall submit the disputed
determinations or arithmetic calculations to the holder via facsimile within
one (1) Business Day of receipt of the holder’s Exercise Notice.


(b)   If the holder and the Company are unable to
agree upon the determination of the Warrant Exercise Price or arithmetic
calculation of the Warrant Shares within one (1) day of such disputed
determination or arithmetic calculation being submitted to the holder, then the
Company shall immediately submit via facsimile (i) the disputed determination
of the Warrant Exercise Price or the VWAPto an independent, reputable
investment banking firm or (ii) the disputed arithmetic calculation of the
Warrant Shares to its independent, outside accountant.  The Company shall cause the investment
banking firm or the accountant, as the case may be, to perform the determinations
or calculations and notify the Company and the holder of the results no later
than forty-eight (48) hours from the time it receives the disputed
determinations or calculations.  Such
investment banking firm’s or accountant’s determination or calculation, as the
case may be, shall be deemed conclusive absent manifest error.


(c)   Unless the rights represented by this Warrant
shall have expired or shall have been fully exercised, the Company shall, as
soon as practicable and in no event later than five (5) Business Days after any
exercise and at its own expense, issue a new Warrant identical in all respects
to this Warrant exercised except it shall represent rights to purchase the
number of Warrant Shares purchasable immediately prior to such exercise under this
Warrant exercised, less the number of Warrant Shares with respect to which such
Warrant is exercised.


(d)   No fractional Warrant Shares are to be issued
upon any pro rata exercise of this Warrant, but rather the number of Warrant
Shares issued upon such exercise of this Warrant shall be rounded up or down to
the nearest whole number.


(e)   If the Company or its Transfer Agent shall
fail for any reason or for no reason to issue to the holder within
ten (10) days of receipt of the Exercise Delivery Documents, a certificate
for the number of Warrant Shares to which the holder is entitled or to credit
the holder’s balance account with The Depository Trust Company for such number
of Warrant Shares to which the holder is entitled upon the holder’s exercise of
this Warrant, the Company shall, in addition to any other remedies under this
Warrant or otherwise available to such holder, pay as additional damages in
cash to such holder on each day the issuance of such certificate for Warrant
Shares is not timely effected an amount equal to 0.025% of the product of (A)
the sum of the number of Warrant Shares not issued to the holder on a timely
basis and to which the holder is entitled, and (B) the VWAPof the Common Stock
for the trading day immediately preceding the last possible date which the
Company could have issued such Common Stock to the holder without violating
this Section 2.


(f)    If within ten (10) days after the Company’s
receipt of the Exercise Delivery Documents, the Company fails to deliver a new
Warrant to the holder for the number of Warrant Shares to which such holder is
entitled pursuant to Section 2 hereof, then, in addition to any other available
remedies under this Warrant, or otherwise available to such holder, the Company
shall pay as additional damages in cash to such holder on each day after such
tenth (10th)
day that such delivery of such new Warrant is not timely effected in an amount
equal to 0.25% of the product of (A) the number of Warrant Shares
represented by the portion of this Warrant which is 



 6
 









not being exercised and
(B) the VWAPof the Common Stock for the trading day immediately preceding
the last possible date which the Company could have issued such Warrant to the
holder without violating this Section 2.


Section 3.               Covenants as to Common Stock.  The Company hereby covenants and agrees as
follows:


(a)   This Warrant is, and any Warrants issued in
substitution for or replacement of this Warrant will upon issuance be, duly
authorized and validly issued.


(b)   All Warrant Shares which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof.


(c)   During the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized
and reserved at least one hundred percent (100%) of the number of shares of
Common Stock needed to provide for the exercise of the rights then represented
by this Warrant and the par value of said shares will at all times be less than
or equal to the applicable Warrant Exercise Price.  If at any time the Company does not have a
sufficient number of shares of Common Stock authorized and available, then the
Company shall call and hold a special meeting of its stockholders within
sixty (60) days of that time for the sole purpose of increasing the number
of authorized shares of Common Stock.


(d)   If at any time after the date hereof the
Company shall file a registration statement, the Company shall include the
Warrant Shares issuable to the holder, pursuant to the terms of this Warrant
and shall maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all Warrant Shares from time to time issuable upon the
exercise of this Warrant; and the Company shall so list on each national
securities exchange or automated quotation system, as the case may be, and
shall maintain such listing of, any other shares of capital stock of the
Company issuable upon the exercise of this Warrant if and so long as any shares
of the same class shall be listed on such national securities exchange or
automated quotation system.


(e)   The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed by it hereunder, but will at all times
in good faith assist in the carrying out of all the provisions of this Warrant
and in the taking of all such action as may reasonably be requested by the
holder of this Warrant in order to protect the exercise privilege of the holder
of this Warrant against dilution or other impairment, consistent with the tenor
and purpose of this Warrant.  The Company
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Warrant Exercise Price then in effect,
and (ii) will take all such actions as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant.



 7
 









(f)    This Warrant will be binding upon any entity
succeeding to the Company by merger, consolidation or acquisition of all or
substantially all of the Company’s assets.


Section 4.               Taxes.  The Company shall pay any and all taxes,
except any applicable withholding, which may be payable with respect to the
issuance and delivery of Warrant Shares upon exercise of this Warrant.


Section 5.               Warrant Holder Not Deemed a
Stockholder.  Except as otherwise
specifically provided herein, no holder, as such, of this Warrant shall be
entitled to vote or receive dividends or be deemed the holder of shares of
capital stock of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of
this Warrant.  In addition, nothing
contained in this Warrant shall be construed as imposing any liabilities on
such holder to purchase any securities (upon exercise of this Warrant or
otherwise) or as a stockholder of the Company, whether such liabilities are
asserted by the Company or by creditors of the Company.  Notwithstanding this Section 5, the Company
will provide the holder of this Warrant with copies of the same notices and
other information given to the stockholders of the Company generally,
contemporaneously with the giving thereof to the stockholders.


Section 6.               Representations of Holder.  The holder of this Warrant, by the acceptance
hereof, represents that it is acquiring this Warrant and the Warrant Shares for
its own account for investment only and not with a view towards, or for resale
in connection with, the public sale or distribution of this Warrant or the
Warrant Shares, except pursuant to sales registered or exempted under the
Securities Act; provided, however, that by making the representations herein,
the holder does not agree to hold this Warrant or any of the Warrant Shares for
any minimum or other specific term and reserves the right to dispose of this
Warrant and the Warrant Shares at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act.  The holder of this Warrant further
represents, by acceptance hereof, that, as of this date, such holder is an “accredited
investor” as such term is defined in Rule 501(a)(1) of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
(an “Accredited Investor”).  Upon
exercise of this Warrant  the holder
shall, if requested by the Company, confirm in writing, in a form satisfactory
to the Company, that the Warrant Shares so purchased are being acquired solely
for the holder’s own account and not as a nominee for any other party, for
investment, and not with a view toward distribution or resale and that such
holder is an Accredited Investor.  If
such holder cannot make such representations because they would be factually
incorrect, it shall be a condition to such holder’s exercise of this Warrant
that the Company receive such other representations as the Company considers
reasonably necessary to assure the Company that the issuance of its securities
upon exercise of this Warrant shall not violate any United States or state
securities laws.



 8
 









Section 7.               Ownership and Transfer.


(a)   The Company shall maintain at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in
which the Company shall record the name and address of the person in whose name
this Warrant has been issued, as well as the name and address of each
transferee.  The Company may treat the
person in whose name any Warrant is registered on the register as the owner and
holder thereof for all purposes, notwithstanding any notice to the contrary,
but in all events recognizing any transfers made in accordance with the terms
of this Warrant.


Section 8.               Adjustment of Warrant Exercise
Price and Number of Shares.  The
Warrant Exercise Price and the number of shares of Common Stock issuable upon
exercise of this Warrant shall be adjusted from time to time as follows:


(a)   Adjustment of Warrant Exercise Price and
Number of Shares upon Issuance of Common Stock.  If and whenever on or after the Issuance Date
of this Warrant, the Company issues or sells, or is deemed to have issued or
sold, any shares of Common Stock (other than Excluded Securities) for a
consideration per share less than a price (the “Applicable Price”) equal
to the Warrant Exercise Price in effect immediately prior to such issuance or
sale, then immediately after such issue or sale the Warrant Exercise Price then
in effect shall be reduced to an amount equal to the issuance price, exercise
price, exchange price or purchase price for such issuance (including any reset
provisions thereof) at issue. Such adjustment shall be made whenever such
issuances hereunder are made. The Company shall notify the Holder in writing,
no later than one (1) business day following such issuance subject to this
Section, indicating therein the applicable issuance price, applicable issuance
exercise price, applicable issuance conversion price or of applicable reset
price, exchange price, and other pricing terms.


Furthermore if
after the date hereof, upon the first conversion by the Holder of any
Convertible Debenture issued by the Company, including the Debenture issued
pursuant to the Securities Purchase Agreement or any other Convertible
Debenture of the Company held by the Holder, the Warrant Exercise Price then in
effect shall be reduced to an amount equal the average VWAP for the five (5)
Trading Days prior to such conversion provided that such adjusted Warrant
Exercise Price will be less than the existing Warrant Exercise Price at the
time of conversion.


(b)   Effect on Warrant Exercise Price of
Certain Events.  For purposes of
determining the adjusted Warrant Exercise Price under Section 8(a) above, the
following shall be applicable:


(i)          Issuance of Options.  If after the date hereof, the Company in any
manner grants any Options and the lowest price per share for which one share of
Common Stock is issuable upon the exercise of any such Option or upon
conversion or exchange of any convertible securities issuable upon exercise of
any such Option is less than the Applicable Price, then such share of Common
Stock shall be deemed to be outstanding and to have been issued and 



 9
 









sold by the Company at the time
of the granting or sale of such Option for such price per share.  For purposes of this Section 8(b)(i), the
lowest price per share for which one share of Common Stock is issuable upon
exercise of such Options or upon conversion or exchange of such Convertible
Securities shall be equal to the sum of the lowest amounts of consideration (if
any) received or receivable by the Company with respect to any one share of
Common Stock upon the granting or sale of the Option, upon exercise of the
Option or upon conversion or exchange of any convertible security issuable upon
exercise of such Option.  No further
adjustment of the Warrant Exercise Price shall be made upon the actual issuance
of such Common Stock or of such convertible securities upon the exercise of
such Options or upon the actual issuance of such Common Stock upon conversion
or exchange of such convertible securities.


(ii)         Issuance of Convertible Securities.  If the Company in any manner issues or sells
any convertible securities and the lowest price per share for which one share
of Common Stock is issuable upon the conversion or exchange thereof is less
than the Applicable Price, then such share of Common Stock shall be deemed to
be outstanding and to have been issued and sold by the Company at the time of
the issuance or sale of such convertible securities for such price per
share.  For the purposes of this
Section 8(b)(ii), the lowest price per share for which one share of Common
Stock is issuable upon such conversion or exchange shall be equal to the sum of
the lowest amounts of consideration (if any) received or receivable by the
Company with respect to one share of Common Stock upon the issuance or sale of
the convertible security and upon conversion or exchange of such convertible
security.  No further adjustment of the
Warrant Exercise Price shall be made upon the actual issuance of such Common
Stock upon conversion or exchange of such convertible securities, and if any
such issue or sale of such convertible securities is made upon exercise of any
Options for which adjustment of the Warrant Exercise Price had been or are to
be made pursuant to other provisions of this Section 8(b), no further
adjustment of the Warrant Exercise Price shall be made by reason of such issue
or sale.


(iii)        Change in Option Price or Rate of
Conversion.  If the purchase price
provided for in any Options, the additional consideration, if any, payable upon
the issue, conversion or exchange of any convertible securities, or the rate at
which any convertible securities are convertible into or exchangeable for
Common Stock changes at any time, the Warrant Exercise Price in effect at the
time of such change shall be adjusted to the Warrant Exercise Price which would
have been in effect at such time had such Options or convertible securities
provided for such changed purchase price, additional consideration or changed
conversion rate, as the case may be, at the time initially granted, issued or
sold and the number of Warrant Shares issuable upon exercise of this Warrant
shall be correspondingly readjusted.  For
purposes of this Section 8(b)(iii), if the terms of any Option or convertible
security that was outstanding as of the Issuance Date of this Warrant are
changed in the manner described in the immediately preceding sentence, then
such Option or convertible security and the Common Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued as
of the date of such change.  No
adjustment pursuant to this Section 8(b) shall be made if such adjustment
would result in an increase of the Warrant Exercise Price then in effect.


(iv)        Calculation of Consideration Received.  If any Common Stock, Options or convertible
securities are issued or sold or deemed to have been issued or sold for cash,
the consideration received therefore will be deemed to be the net amount received
by the Company therefore.  If any Common
Stock, Options or convertible securities are issued or sold 



 10
 









for a consideration other than
cash, the amount of such consideration received by the Company will be the fair
value of such consideration, except where such consideration consists of
marketable securities, in which case the amount of consideration received by
the Company will be the market price of such securities on the date of receipt
of such securities.  If any Common Stock,
Options or convertible securities are issued to the owners of the non-surviving
entity in connection with any merger in which the Company is the surviving
entity, the amount of consideration therefore will be deemed to be the fair
value of such portion of the net assets and business of the non-surviving
entity as is attributable to such Common Stock, Options or convertible
securities, as the case may be.  The fair
value of any consideration other than cash or securities will be determined
jointly by the Company and the holders of Warrants representing at least
two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants
then outstanding.  If such parties are
unable to reach agreement within ten (10) days after the occurrence of an
event requiring valuation (the “Valuation Event”), the fair value of
such consideration will be determined within five (5) Business Days after the
tenth (10th)
day following the Valuation Event by an independent, reputable appraiser
jointly selected by the Company and the holders of Warrants representing at
least two-thirds (b) of the Warrant Shares issuable upon exercise of the
Warrants then outstanding.  The
determination of such appraiser shall be final and binding upon all parties and
the fees and expenses of such appraiser shall be borne jointly by the Company
and the holders of Warrants.


(v)         Integrated Transactions.  In case any Option is issued in connection
with the issue or sale of other securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Options will be deemed to have been
issued for a consideration of $.01.


(vi)        Treasury Shares.  The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or for
the account of the Company, and the disposition of any shares so owned or held
will be considered an issue or sale of Common Stock.


(vii)       Record Date.  If the Company takes a record of the holders
of Common Stock for the purpose of entitling them (1) to receive a
dividend or other distribution payable in Common Stock, Options or in
convertible securities or (2) to subscribe for or purchase Common Stock,
Options or convertible securities, then such record date will be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.


(c)   Adjustment of Warrant Exercise Price upon
Subdivision or Combination of Common Stock. 
If the Company at any time after the date of issuance of this Warrant
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater
number of shares, any Warrant Exercise 



 11
 









Price in effect immediately
prior to such subdivision will be proportionately reduced and the number of
shares of Common Stock obtainable upon exercise of this Warrant will be
proportionately increased.  If the
Company at any time after the date of issuance of this Warrant combines (by
combination, reverse stock split or otherwise) one or more classes of its outstanding
shares of Common Stock into a smaller number of shares, any Warrant Exercise
Price in effect immediately prior to such combination will be proportionately
increased and the number of Warrant Shares issuable upon exercise of this
Warrant will be proportionately decreased. 
Any adjustment under this Section 8(c) shall become effective at
the close of business on the date the subdivision or combination becomes
effective.


(d)   Distribution of Assets.  If the Company shall declare or make any
dividend or other distribution of its assets (or rights to acquire its assets)
to holders of Common Stock, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, stock or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement or other similar transaction) (a “Distribution”),
at any time after the issuance of this Warrant, then, in each such case:


(i)          any Warrant Exercise Price in effect
immediately prior to the close of business on the record date fixed for the
determination of holders of Common Stock entitled  to receive the
Distribution shall be reduced, effective as of the close of business on such
record date, to a price determined by multiplying such Warrant Exercise Price
by a fraction of which (A) the numerator shall be the Closing Sale Price of the
Common Stock on the trading day immediately preceding such record date minus
the value of the Distribution (as determined in good faith by the Company’s
Board of Directors) applicable to one share of Common Stock, and (B) the
denominator shall be the Closing Sale Price of the Common Stock on the trading
day immediately preceding such record date; and


(ii)         either (A) the number of Warrant Shares
obtainable upon exercise of this Warrant shall be increased to a number of
shares equal to the number of shares of Common Stock obtainable immediately
prior to the close of business on the record date fixed for the determination
of holders of Common Stock entitled to receive the Distribution multiplied by
the reciprocal of the fraction set forth in the immediately preceding clause
(i), or (B) in the event that the Distribution is of common stock of a company
whose common stock is traded on a national securities exchange or a national
automated quotation system, then the holder of this Warrant shall receive an
additional warrant to purchase Common Stock, the terms of which shall be
identical to those of this Warrant, except that such warrant shall be
exercisable into the amount of the assets that would have been payable to the
holder of this Warrant pursuant to the Distribution had the holder exercised
this Warrant immediately prior to such record date and with an exercise price
equal to the amount by which the exercise price of this Warrant was decreased
with respect to the Distribution pursuant to the terms of the immediately
preceding clause (i).


(e)   Certain Events.  If any event occurs of the type contemplated
by the provisions of this Section 8 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company’s Board of Directors will make an appropriate adjustment in the Warrant
Exercise Price and the number of shares of Common Stock obtainable upon
exercise of this Warrant so as to protect the rights of the holders of the
Warrants; provided, except as set forth in section 8(c),that no such adjustment
pursuant to this Section 8(e) will increase the Warrant Exercise Price or
decrease the number of shares of Common Stock obtainable as otherwise
determined pursuant to this Section 8.



 12
 









(f)    Notices.


(i)          Immediately upon any adjustment of the
Warrant Exercise Price, the Company will give written notice thereof to the
holder of this Warrant, setting forth in reasonable detail, and certifying, the
calculation of such adjustment.


(ii)         The Company will give written notice to
the holder of this Warrant at least ten (10) days prior to the date on which
the Company closes its books or takes a record (A) with respect to any
dividend or distribution upon the Common Stock, (B) with respect to any
pro rata subscription offer to holders of Common Stock or (C) for
determining rights to vote with respect to any Organic Change (as defined below),
dissolution or liquidation, provided that such information shall be made known
to the public prior to or in conjunction with such notice being provided to
such holder.


(iii)        The Company will also give written
notice to the holder of this Warrant at least ten (10) days prior to the date
on which any Organic Change, dissolution or liquidation will take place,
provided that such information shall be made known to the public prior to or in
conjunction with such notice being provided to such holder.


Section 9.               Purchase Rights;
Reorganization, Reclassification, Consolidation, Merger or Sale.


(a)   In addition to any adjustments pursuant to
Section 8 above, if at any time the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the “Purchase Rights”), then the holder of this Warrant
will be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which such holder could have acquired if such
holder had held the number of shares of Common Stock acquirable upon complete
exercise of this Warrant immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.


(b)   Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of
the Company’s assets to another Person or other transaction in each case which
is effected in such a way that holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation) stock, securities or assets
with respect to or in exchange for Common Stock is referred to herein as an “Organic
Change.”  Prior to the consummation
of any (i) sale of all or substantially all of the Company’s assets to an
acquiring Person or (ii) other Organic Change following which the Company is
not a surviving entity, the Company will secure from the Person purchasing such
assets or the successor resulting from such Organic Change (in each case, the “Acquiring
Entity”) a written agreement (in form and substance satisfactory to the
holders of Warrants representing at least two-thirds (iii) of the Warrant
Shares issuable upon exercise of the Warrants then outstanding) to deliver to
each holder of Warrants in exchange for such Warrants, a security of the
Acquiring Entity evidenced by a written instrument substantially similar in
form and substance to this Warrant and satisfactory to the holders of the
Warrants (including an adjusted warrant exercise price equal to 



 13
 









the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, and exercisable
for a corresponding number of shares of Common Stock acquirable and receivable
upon exercise of the Warrants without regard to any limitations on exercise, if
the value so reflected is less than any Applicable Warrant Exercise Price
immediately prior to such consolidation, merger or sale).  Prior to the consummation of any other
Organic Change, the Company shall make appropriate provision (in form and
substance satisfactory to the holders of Warrants representing a majority  of the Warrant Shares issuable upon exercise of the
Warrants then outstanding) to insure that each of the holders of the Warrants
will thereafter have the right to acquire and receive in lieu of or in addition
to (as the case may be) the Warrant Shares immediately theretofore issuable and
receivable upon the exercise of such holder’s Warrants (without regard to
any limitations on exercise), such shares of stock, securities or assets that
would have been issued or payable in such Organic Change with respect to or in
exchange for the number of Warrant Shares which would have been issuable and
receivable upon the exercise of such holder’s Warrant as of the date of such
Organic Change (without taking into account any limitations or restrictions on
the exercisability of this Warrant).


Section 10.             Lost, Stolen, Mutilated or
Destroyed Warrant.  If this Warrant
is lost, stolen, mutilated or destroyed, the Company shall promptly, on receipt
of an indemnification undertaking (or, in the case of a mutilated Warrant, the
Warrant), issue a new Warrant of like denomination and tenor as this Warrant so
lost, stolen, mutilated or destroyed.


Section 11.             Notice.  Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Warrant must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of receipt is received by the sending party transmission is mechanically
or electronically generated and kept on file by the sending party); or
(iii) one Business Day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same.  The addresses and
facsimile numbers for such communications shall be:


	
  If to Holder:

  	
   

  	
  Cornell Capital Partners, L.P.

  
	
   

  	
   

  	
  101 Hudson Street — Suite 3700

  
	
   

  	
   

  	
  Jersey City, NJ 07302

  
	
   

  	
   

  	
  Attention:Mark A. Angelo

  
	
   

  	
   

  	
  Telephone: (201) 985-8300

  
	
   

  	
   

  	
  Facsimile:  (201) 985-8266

  
	
   

  	
   

  	
   

  
	
  With Copy to:

  	
   

  	
  David Gonzalez, Esq.

  
	
   

  	
   

  	
  101 Hudson Street — Suite 3700

  
	
   

  	
   

  	
  Jersey City, NJ 07302

  
	
   

  	
   

  	
  Telephone: (201) 985-8300

  
	
   

  	
   

  	
  Facsimile:  (201) 985-8266

  



 



 14
 









 


	
  If to the Company, to:

  	
   

  	
  Isonics Corporation

  
	
   

  	
   

  	
  5906 McIntyre Street

  
	
   

  	
   

  	
  Golden, CO 80403

  
	
   

  	
   

  	
  Attention:John Sakys

  
	
   

  	
   

  	
  Telephone: (303) 279-7900

  
	
   

  	
   

  	
  Facsimile:  (303) 279-7300

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Burns, Figa & Will, P.C.

  
	
   

  	
   

  	
  6400 South Fiddler’s Green Circle — Suite 1000

  
	
   

  	
   

  	
  Greenwood Village, CO 80111

  
	
   

  	
   

  	
  Attention:Herrick K. Lidstone, Jr., Esq.

  
	
   

  	
   

  	
  Telephone: (303) 796-2626

  
	
   

  	
   

  	
  Facsimile:  (303) 796-2777

  



 


If to a holder of
this Warrant, to it at the address and facsimile number set forth on Exhibit C
hereto, with copies to such holder’s representatives as set forth on Exhibit C,
or at such other address and facsimile as shall be delivered to the Company
upon the issuance or transfer of this Warrant. 
Each party shall provide five days’ prior written notice to the other
party of any change in address or facsimile number.  Written confirmation of receipt
(A) given by the recipient of such notice, consent, facsimile, waiver or
other communication, (or (B) provided by a nationally recognized overnight
delivery service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.


Section 12.             Date.  The date of this Warrant is set forth on page
1 hereof.  This Warrant, in all events,
shall be wholly void and of no effect after the close of business on the
Expiration Date, except that notwithstanding any other provisions hereof, the
provisions of Section 8(b) shall continue in full force and effect after
such date as to any Warrant Shares or other securities issued upon the exercise
of this Warrant.


Section 13.             Amendment and Waiver.  Except as otherwise provided herein, the
provisions of the Warrants may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed
by it, only if the Company has obtained the written consent of the holders of
Warrants representing at least two-thirds of the Warrant Shares issuable upon
exercise of the Warrants then outstanding; provided that, except for Section
8(d), no such action may increase the Warrant Exercise Price or decrease the
number of shares or class of stock obtainable upon exercise of any Warrant
without the written consent of the holder of such Warrant.


Section 14.             Descriptive Headings; Governing
Law.  The descriptive headings of the
several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant.  The corporate laws of the State of New Jersey
shall govern all issues concerning the relative rights of the Company and its
stockholders.  All other questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New Jersey,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New Jersey or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the 



 15
 









State of New Jersey.  Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in Hudson County
and the United States District Court for the District of New Jersey, for the
adjudication of any dispute hereunder or in connection herewith or therewith,
or with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is brought in an inconvenient forum
or that the venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to
limit in any way any right to serve process in any manner permitted by law.


Section
15.            Waiver
of Jury Trial.  AS A
MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS WARRANT, THE
PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS
ASSOCIATED WITH THIS TRANSACTION.


REMAINDER OF PAGE INTENTIONALLY LEFT BLANK



 16
 









IN
WITNESS WHEREOF, the Company has caused this Warrant to be
signed as of the date first set forth above.


	
  

  	
  ISONICS CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  John Sakys

  
	
   

  	
  Title:

  	
  President and Interim Chief Executive Officer

  
				



 



 17















EXHIBIT A TO WARRANT


EXERCISE NOTICE


TO
BE EXECUTED 

BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT


ISONICS
CORPORATION INC.


The undersigned holder hereby exercises the right to
purchase                    of the shares of Common
Stock (“Warrant Shares”) of Isonics Corporation (the “Company”),
evidenced by the attached Warrant (the “Warrant”).  Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.


Specify Method of exercise by check mark:


1.          Cash Exercise


(a) Payment of Warrant
Exercise Price. The holder shall pay the Aggregate Exercise Price of $                  to
the Company in accordance with the terms of the Warrant.


(b) Delivery of
Warrant Shares.  The Company shall
deliver to the holder                 Warrant Shares in
accordance with the terms of the Warrant.


2.          Cashless Exercise


(a) Payment of Warrant
Exercise Price.  In lieu of making
payment of the Aggregate Exercise Price, the holder elects to receive upon such
exercise the Net Number of shares of Common Stock determined in accordance with
the terms of the Warrant.


(b) Delivery of
Warrant Shares.  The Company shall
deliver to the holder                    Warrant Shares
in accordance with the terms of the Warrant.


Date:               
      ,             


Name of Registered Holder


	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  



 


















EXHIBIT B TO WARRANT


FORM OF WARRANT POWER


FOR VALUE RECEIVED,
the undersigned does hereby assign and transfer to                   ,
Federal Identification No.                   , a
warrant to purchase                    shares of the
capital stock of Isonics Corporation represented by warrant certificate no.             ,
standing in the name of the undersigned on the books of said corporation.  The undersigned does hereby irrevocably
constitute and appoint                   , attorney to
transfer the warrants of said corporation, with full power of substitution in
the premises.


	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title: