EXHIBIT
10.3


REGISTRATION RIGHTS AGREEMENT


THIS REGISTRATION RIGHTS AGREEMENT
(this “Agreement”), dated as of April 10, 2007, by and among ISONICS CORPORATION, a California
corporation (the “Company”), and the undersigned Buyers listed on
Schedule I attached hereto (each, a “Buyer” and collectively, the “Buyers”).


WHEREAS:


A.            In
connection with the Securities Purchase Agreement by and among the parties
hereto of even date herewith (the “Securities
Purchase Agreement”), the Company has agreed, upon the terms and subject to
the conditions of the Securities Purchase Agreement, to issue and sell to the
Buyers (i) secured convertible debentures (the “Convertible Debentures”)
which shall be convertible into shares of the Company’s common stock, no par
value per share (the “Common Stock,” as converted, the “Conversion
Shares”) in accordance with the terms of the Convertible Debentures, and
(ii) warrants (the “Warrants”), which will be exercisable to purchase
shares of Common Stock (as exercised, collectively, the “Warrant Shares”).  Capitalized terms not defined herein shall
have the meaning ascribed to them in the Securities Purchase Agreement.


B.            To
induce the Buyers to execute and deliver the Securities Purchase Agreement, the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the “Securities Act”), and
applicable state securities laws.


NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and the Buyers hereby agree as follows:


1.             DEFINITIONS.


As used in this Agreement, the following terms shall
have the following meanings:


(a)           “Effectiveness
Deadline” means, with respect to the initial Registration Statement
required to be filed hereunder, the 120th calendar day following the receipt of
a written demand from the Buyers requesting the filing of such Registration
Statement and, with respect to any Subsequent Registration Statements which may
be required pursuant to Section 3(c), the 60th calendar day following the date
on which the Company first knows, or reasonably should have known, that it is
obligated to file such Subsequent Registration Statement; provided, however, in
the event the Company is notified by the U.S. Securities and Exchange
Commission (“SEC”) that one of the above Registration Statements will
not be reviewed or is no longer subject to further review and comments, the
Effectiveness Date as to such Registration Statement shall be the fifth Trading
Day following the date on which the Company is so notified if such date
precedes the dates required above.













(b)           “Filing Deadline”
means, with respect to the initial Registration Statement required hereunder,
the 30th calendar day following the receipt of a written demand from the Buyers
requesting the filing of such Registration Statement and, with respect to any
Subsequent Registration Statements which may be required pursuant to Section
3(c), the 30th day following the date on which the Company first knows, or
reasonably should have known that it is obligated to file such Subsequent
Registration Statement.


(c)           “Initial Required
Registration Amount” means shares of the Company’s Common Stock, in an
amount equal to nineteen and ninety-nine one hundredths percent (19.99%) if
such initial Registration Statement is filed prior to obtaining shareholder
approval, on or before November 30, 2007 to issue shares of the Company’s
Common Stock in excess of nineteen and ninety-nine one hundredths percent
(19.99%) or if such initial Registration Statement is filed after obtaining
shareholder approval on or before November 30, 2007 than in an amount equal to
thirty three percent (33%) of the outstanding shares of the Company’s Common
Stock excluding “insiders” as of the date the initial Registration Statement or
any Subsequent Registration Statement, issued or to be issued upon conversion
of the Convertible Debentures or exercise of the series Warrants, with amount
includes shares issued or issuable by the Company which will be aggregated by
the Securities and Exchange Commission under Rule 415(a) in calculating the
maximum number of shares that can be registered.


(d)           “Person”
means a corporation, a limited liability company, an association, a
partnership, an organization, a business, an individual, a governmental or
political subdivision thereof or a governmental agency.


(e)           “Prospectus”
means the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by a Registration
Statement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such Prospectus.


(f)            “Registrable
Securities” means all of (i) the Conversion Shares issuable upon conversion
of the Convertible Debentures, (ii) the Warrant Shares issued or issuable upon
exercise of the Warrants, (iii) any additional shares issuable in connection
with any anti-dilution provisions in the Warrants or the Convertible Debentures
(without giving effect to any limitations on exercise set forth in the Warrants
or Convertible Debentures) and (iv) any shares of Common Stock issued or
issuable with respect to the Conversion Shares, the Convertible Debentures, the
Warrant Shares, or the Warrants as a result of any stock split, dividend or
other distribution, recapitalization or similar event or otherwise, without
regard to any limitations on the conversion of the Convertible Debentures or
exercise of the Warrants.


(g)           “Registration
Statement” means the registration statements required to be filed hereunder
and any additional registration statements contemplated by Section 3(c),
including (in each case) the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and 



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all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.


(h)           “Rule 415”
means Rule 415 promulgated by the SEC pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC  having
substantially the same purpose and effect as such Rule.


2.             REGISTRATION.


(a)           On or prior to each
Filing Deadline, the Company shall prepare and file with the SEC a Registration
Statement on Form S-3 (if the Company is then eligible, on Form S-3) or other
appropriate form covering the resale of all of the Registrable Securities.  The Registration Statement prepared pursuant
hereto shall register for resale at least the number of shares of Common Stock
equal to the Required Registration Amount as of date the Registration Statement
is initially filed with the SEC.  The
Registration Statement shall contain the “Selling Stockholders” and “Plan
of Distribution” sections in substantially the form attached hereto as Exhibit
A and contain all the required disclosures set forth on Exhibit B.  The Company shall use its best efforts to
have the Registration Statement declared effective by the SEC as soon as practicable,
but in no event later than the Effectiveness Deadline.  No later than the second (2nd) trading day following the
date of effectiveness, the Company shall file with the SEC in accordance with
Rule 424 under the 1933 Act the final Prospectus to be used in connection with
sales pursuant to such Registration Statement. 
The Company shall use its best efforts to cause the Registration
Statement to remain effective until all of the Registrable Securities have been
sold or may be sold without volume restrictions pursuant to Rule 144(k), as
determined by the counsel to the Company pursuant to a written opinion letter
to such effect, addressed and acceptable to the Company’s transfer agent and
the affected Holders (“Registration Period”).  Prior to the filing of the Registration
Statement with the SEC, the Company shall furnish a draft of the Registration
Statement to the Buyers for their review and comment.  The Buyers shall furnish comments on the
Registration Statement to the Company within twenty-four (24) hours of the
receipt thereof from the Company.


(b)           Failure to File
or Obtain Effectiveness of the Registration Statement.     If: (i) a Registration Statement is not
filed on or prior to its Filing Date (if the Company files a Registration
Statement without affording the Holders the opportunity to review and comment
on the same as required by Section 2(a), the Company shall not be deemed to
have satisfied this clause (i)), or (ii) the Company fails to file with the SEC
a request for acceleration in accordance with Rule 461 promulgated under the
Securities Act, within five Trading Days of the date that the Company is
notified (orally or in writing, whichever is earlier) by the SEC that a
Registration Statement will not be “reviewed,” or not subject to further
review, or (iii) a Registration Statement filed or required to be filed
hereunder is not declared effective by the SEC by its Effectiveness Deadline,
or (iv) after the effectiveness, a Registration Statement ceases for any reason
to remain continuously effective as to all Registrable Securities for which it
is required to be effective, or the Holders are otherwise not permitted to
utilize the Prospectus therein to resell such Registrable Securities for more
than 30 consecutive calendar days or more than an aggregate of 40 calendar days
during any 12-month period (which need not be consecutive calendar days) (any
such failure or breach being referred to as an “Event”), then in
addition to any other rights the holders of the Convertible Debentures may have
hereunder or under 



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applicable
law, on each such Event date and on each monthly anniversary of each such Event
date (if the applicable Event shall not have been cured by such date) until the
applicable Event is cured, the Company shall pay to each holder of Convertible
Debentures, at the Company’s option, either an amount in cash or shares of the
Company’s Common Stock, as partial liquidated damages (“Liquidated Damages”)
and not as a penalty, equal to 1.0% of the aggregate purchase price paid by
such holder pursuant to the Securities Purchase Agreement for any Convertible
Debentures then held by such holder.  The
parties agree that (1) the Company shall not be liable for Liquidated Damages
under this Agreement with respect to any Warrants or Warrant Shares and (2) the
maximum aggregate Liquidated Damages payable to a holder of Convertible
Debentures under this Agreement shall be twelve percent (12%) of the aggregate
Purchase Price paid by such holder pursuant to the Securities Purchase
Agreement.  The partial Liquidated
Damages pursuant to the terms hereof shall apply on a daily pro-rata basis for
any portion of a month prior to the cure of an Event.


(c)           Liquidated
Damages.  The Company and the Buyer
hereto acknowledge and agree that the sums payable under subsection 2(b) above
shall constitute liquidated damages and not penalties and are in addition to
all other rights of the Buyer, including the right to call a default.  The parties further acknowledge that (i) the amount
of loss or damages likely to be incurred is incapable or is difficult to
precisely estimate, (ii) the amounts specified in such subsections bear a
reasonable relationship to, and are not plainly or grossly disproportionate to,
the probable loss likely to be incurred in connection with any failure by the
Company to obtain or maintain the effectiveness of a Registration Statement,
(iii) one of the reasons for the Company and the Buyer reaching an agreement as
to such amounts was the uncertainty and cost of litigation regarding the
question of actual damages, and (iv) the Company and the Buyer are
sophisticated business parties and have been represented by sophisticated and
able legal counsel and negotiated this Agreement at arm’s length.


3.             RELATED
OBLIGATIONS.


(a)           The Company shall,
not less than three (3) Trading Days prior to the filing of each Registration
Statement and not less than one (1) Trading Day prior to the filing of any
related amendments and supplements to all Registration Statements (except for
annual reports on Form 10-K or Form 10-KSB), furnish to each Buyer copies of
all such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to the
reasonable and prompt review of such Buyers, The Company shall not file a
Registration Statement or any such Prospectus or any amendments or supplements
thereto to which the Buyers shall reasonably object in good faith; provided that, the Company is notified of such objection in
writing no later than two (2) Trading Days after the Buyers have been so
furnished copies of a Registration Statement.


(b)           The Company shall
(i) prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and the
Prospectus used in connection with such Registration Statement, which
prospectus is to be filed pursuant to Rule 424 promulgated under the Securities
Act, as may be necessary to keep such Registration Statement effective at all
times during the Registration Period, and prepare and file with the SEC such
additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or 



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supplemented
by any required Prospectus supplement (subject to the terms of this Agreement),
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible to any comments received from the
SEC with respect to a Registration Statement or any amendment thereto and as
promptly as reasonably possible provide the Buyers true and complete copies of
all correspondence from and to the SEC relating to a Registration Statement
(provided that the Company may excise any information contained therein which
would constitute material non-public information as to any Buyer which has not
executed a confidentiality agreement with the Company); and (iv) comply with
the provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by such Registration Statement
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in such Registration Statement.  In the case of amendments and supplements to
a Registration Statement which are required to be filed pursuant to this
Agreement (including pursuant to this Section 3(b)) by reason of the Company’s
filing a report on Form 10-K, Form 10-Q or Form 8-K or any analogous report
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
the Company shall incorporate such report by reference into the Registration
Statement, if applicable, or shall file such amendments or supplements with the
SEC on the same day on which the Exchange Act report is filed which created the
requirement for the Company to amend or supplement the Registration Statement.


(c)           To the extent that
the Buyer holds any Registrable Securities that are prohibited from being
included on a the initial Registration Statement or any other Registration
Statement (the “Non-Registered Shares”) either under Rule 415, as
interpreted by the SEC, or because the Company’s shareholders had not approved
the issuance of in excess of 19.99% of the outstanding shares of the Company’s
Common Stock as contemplated in Section 4(q) of the Securities Purchase
Agreement, then the Company shall become obligated to file an additional
Registration Statement (each, a “Subsequent Registration Statement”) on
the first day after such Subsequent Registration Statement may be filed without
objection by the SEC under Rule 415 covering the resale by the Buyers of the
maximum number of such Non-Registered Shares allowed under Rule 415 as
interpreted by the SEC.


(d)           The Company shall
file with the SEC pursuant to Rule 424(b) a copy of the definitive prospectus
for each Registration Statement not later than the second (2nd) business day after the
effectiveness of such Registration Statement. 
The Company shall provide the Buyers such other documents as such Buyers
may reasonably request from time to time in order to facilitate the disposition
of the Registrable Securities owned by such Investor.


(e)           The Company shall
use its best efforts to (i) register and qualify the Registrable Securities
covered by a Registration Statement under such other securities or “blue sky”
laws of such jurisdictions in the United States as any Buyer reasonably
requests, (ii) prepare and file in those jurisdictions, such amendments
(including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during
the Registration Period, and (iv) take all other actions reasonably necessary
or advisable to qualify 



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the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (w) make any change to its articles of incorporation or by-laws, (x)
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(d), (y) subject itself to general
taxation in any such jurisdiction, or (z) file a general consent to service of
process in any such jurisdiction.  The
Company shall promptly notify each Buyer who holds Registrable Securities of
the receipt by the Company of any notification with respect to the suspension
of the registration or qualification of any of the Registrable Securities for
sale under the securities or “blue sky” laws of any jurisdiction in the United
States or its receipt of actual notice of the initiation or threat of any
proceeding for such purpose.


(f)            As promptly as
practicable after becoming aware of such event or development, the Company
shall notify each Buyer in writing of the happening of any event as a result of
which the Prospectus included in a Registration Statement, as then in effect,
includes an untrue statement of a material fact or omission to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading
(provided that in no event shall such notice contain any material, nonpublic
information), and promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and
deliver ten (10) copies of such supplement or amendment to each Buyer.  The Company shall also promptly notify each
Buyer in writing (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and when a Registration Statement or
any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to each Buyer by facsimile on the same day of
such effectiveness), (ii) of any request by the SEC for amendments or
supplements to a Registration Statement or related prospectus or related
information, and (iii) of the Company’s reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.


(g)           The Company shall
use its best efforts to prevent the issuance of any stop order or other
suspension of effectiveness of a Registration Statement, or the suspension of
the qualification of any of the Registrable Securities for sale in any
jurisdiction within the United States of America and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify each Buyer who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.


(h)           If, after the
execution of this Agreement, a Buyer believes, after consultation with its
legal counsel, that it could reasonably be deemed to be an underwriter of
Registrable Securities, at the request of any Buyer, the Company shall furnish
to such Buyer, on the date of the effectiveness of the Registration Statement
and thereafter from time to time on such dates as a Buyer may reasonably
request (i) a letter, dated such date, from the Company’s independent certified
public accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering, and (ii) an opinion, dated as of such date, of counsel representing
the Company for purposes of such Registration Statement, in form, scope and
substance as is customarily given in an underwritten public offering, addressed
to the Buyers.



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(i)            If, after the
execution of this Agreement, a Buyer believes, after consultation with its
legal counsel, that it could reasonably be deemed to be an underwriter of
Registrable Securities, at the request of any Buyer, the Company shall make
available for inspection by (i) any Buyer and (ii) one (1) firm of
accountants or other agents retained by the Buyers (collectively, the “Inspectors”)
all pertinent financial and other records, and pertinent corporate documents
and properties of the Company (collectively, the “Records”), as shall be
reasonably deemed necessary by each Inspector, and cause the Company’s
officers, directors and employees to supply all information which any Inspector
may reasonably request; provided, however, that each Inspector shall agree, and
each Buyer hereby agrees, to hold in strict confidence and shall not make any
disclosure (except to a Buyer) or use 
any Record or other information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is
otherwise required under the Securities Act, (b) the release of such Records is
ordered pursuant to a final, non-appealable subpoena or order from a court or
government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement of which the Inspector
and the Buyer has knowledge.  Each Buyer agrees
that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.


(j)            The Company shall
hold in confidence and not make any disclosure of information concerning a
Buyer provided to the Company unless (i) disclosure of such information is
necessary to comply with federal or state securities laws, (ii) the disclosure
of such information is necessary to avoid or correct a misstatement or omission
in any Registration Statement, (iii) the release of such information is ordered
pursuant to a subpoena or other final, non-appealable order from a court or
governmental body of competent jurisdiction, or (iv) such information has been
made generally available to the public other than by disclosure in violation of
this Agreement or any other agreement. 
The Company agrees that it shall, upon learning that disclosure of such
information concerning a Buyer is sought in or by a court or governmental body
of competent jurisdiction or through other means, give prompt written notice to
such Buyer and allow such Buyer, at the Buyer’s expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.


(k)           The Company shall
use its best efforts either to cause all the Registrable Securities covered by
a Registration Statement (i) to be listed on each securities exchange on which
securities of the same class or series issued by the Company are then listed,
if any, if the listing of such Registrable Securities is then permitted under the
rules of such exchange or (ii) the inclusion for quotation on the National
Association of Securities Dealers, Inc. OTC Bulletin Board for such Registrable
Securities.  The Company shall pay all
fees and expenses in connection with satisfying its obligation under this
Section 3(j).


(l)            The Company shall
cooperate with each Buyer who holds Registrable Securities being offered and,
to the extent applicable, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legend) representing the Registrable
Securities 



 7
 









to be offered
pursuant to a Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the Buyers may reasonably
request and registered in such names as the Buyers may request.


(m)          The Company shall use
its best efforts to cause the Registrable Securities covered by the applicable
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to consummate the
disposition of such Registrable Securities.


(n)           The Company shall
otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC in connection with any registration hereunder.


(o)           Within two (2)
business days after a Registration Statement which covers Registrable
Securities is declared effective by the SEC, the Company shall deliver, and
shall cause legal counsel for the Company to deliver, to the transfer agent for
such Registrable Securities (with copies to the Buyer whose Registrable
Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit C.


(p)           The Company shall
take all other reasonable actions necessary to expedite and facilitate
disposition by each Buyer of Registrable Securities pursuant to a Registration
Statement.


4.             OBLIGATIONS OF
THE BUYERS.


(a)           Each Buyer agrees
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 3(f) or the first sentence of Section 3(e),
such Buyer will immediately discontinue disposition of Registrable Securities
pursuant to any Registration Statement covering such Registrable Securities
until such Buyer’s receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(f) or the first sentence of Section 3(e)
or receipt of notice that no supplement or amendment is required.  Notwithstanding anything to the contrary, the
Company shall cause its transfer agent to deliver unlegended certificates for
shares of Common Stock to a transferee of a Buyer in accordance with the terms
of the Securities Purchase Agreement in connection with any sale of Registrable
Securities with respect to which a Buyer has entered into a contract for sale
prior to the Buyer’s receipt of a notice from the Company of the happening of
any event of the kind described in Section 3(f) or the first sentence of 3(e)
and for which the Buyer has not yet settled.


(b)           Each buyer covenants
and agrees that it will comply with the prospectus delivery requirements of the
Securities Act as applicable to it or an exemption therefrom in connection with
the sale of Registerable Securities pursuant to the Registration Statement.


5.             EXPENSES OF
REGISTRATION.


All expenses incurred in connection with
registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printers, legal and accounting fees shall be paid by the Company.



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6.             INDEMNIFICATION.


With respect to Registrable Securities which are
included in a Registration Statement under this Agreement:


(a)           To the fullest
extent permitted by law, the Company will, and hereby does, indemnify, hold
harmless and defend each Buyer, the directors, officers, partners, employees,
agents, representatives of, and each Person, if any, who controls any Buyer
within the meaning of the Securities Act or the Exchange Act (each, an “Indemnified
Person”), against any losses, claims, damages, liabilities, judgments,
fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in
settlement or expenses, joint or several (collectively, “Claims”)
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto (“Indemnified Damages”), to which any
of them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material fact
in a Registration Statement or any post-effective amendment thereto or in any
filing made in connection with the qualification of the offering under the
securities or other “blue sky” laws of any jurisdiction in which Registrable
Securities are offered (“Blue Sky Filing”), or the omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; (ii) any untrue
statement or alleged untrue statement of a material fact contained in any final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading; or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any other law, including,
without limitation, any state securities law, or any rule or regulation there
under relating to the offer or sale of the Registrable Securities pursuant to a
Registration Statement (the matters in the foregoing clauses (i) through (iii)
being, collectively, “Violations”). 
The Company shall reimburse the Buyers and each such controlling person
promptly as such expenses are incurred and are due and payable, for any legal
fees or disbursements or other reasonable expenses incurred by them in connection
with investigating or defending any such Claim. 
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (x) shall not apply
to a Claim by an Indemnified Person arising out of or based upon a Violation
which occurs in reliance upon and in conformity with information furnished in
writing to the Company by such Indemnified Person expressly for use in
connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto; (y) shall not be available to the
extent such Claim is based on a failure of the Buyer to deliver or to cause to
be delivered the prospectus made available by the Company, if such prospectus
was timely made available by the Company pursuant to Section 3(c); and
(z) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Buyers pursuant to Section 9 hereof.



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(b)           In connection with a
Registration Statement, each Buyer agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same manner
as is set forth in Section 6(a), the Company, each of its directors, each of
its officers, employees, representatives, or agents and each Person, if any,
who controls the Company within the meaning of the Securities Act or the
Exchange Act (each an “Indemnified Party”), against any Claim or
Indemnified Damages to which any of them may become subject, under the
Securities Act, the Exchange Act or otherwise, insofar as such Claim or
Indemnified Damages arise out of or is based upon any Violation, in each case
to the extent, and only to the extent, that such Violation occurs in reliance
upon and in conformity with written information furnished to the Company by
such Buyer expressly for use in connection with such Registration Statement;
and, subject to Section 6(d), such Buyer will reimburse any legal or other
expenses reasonably incurred by them in connection with investigating or defending
any such Claim; provided, however, that the indemnity agreement contained in
this Section 6(b) and the agreement with respect to contribution contained in
Section 7 shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Buyer, which
consent shall not be unreasonably withheld; provided, further, however, that
the Buyer shall be liable under this Section 6(b) for only that amount of a
Claim or Indemnified Damages as does not exceed the net proceeds to such Buyer
as a result of the sale of Registrable Securities pursuant to such Registration
Statement.  Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf
of such Indemnified Party and shall survive the transfer of the Registrable
Securities by the Buyers pursuant to Section 9. 
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
prospectus shall not inure to the benefit of any Indemnified Party if the
untrue statement or omission of material fact contained in the prospectus was
corrected and such new prospectus was delivered to each Buyer prior to such
Buyer’s use of the prospectus to which the Claim relates.


(c)           Promptly after
receipt by an Indemnified Person or Indemnified Party under this Section 6 of
notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Person
or Indemnified Party shall, if a Claim in respect thereof is to be made against
any indemnifying party under this Section 6, deliver to the indemnifying party
a written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses of
not more than one (1) counsel for such Indemnified Person or Indemnified Party
to be paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing 
interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding.  The Indemnified Party or Indemnified Person
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party
and shall furnish to the indemnifying party all information reasonably
available to the Indemnified Party or Indemnified Person which relates to such
action or claim.  The indemnifying party
shall keep the Indemnified Party or 



 10
 









Indemnified
Person fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. 
No indemnifying party shall be liable for any settlement of any action,
claim or proceeding effected without its prior written consent; provided,
however, that the indemnifying party shall not unreasonably withhold, delay or
condition its consent.  No indemnifying
party shall, without the prior written consent of the Indemnified Party or
Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such claim or
litigation.  Following indemnification as
provided for hereunder, the indemnifying party shall be subrogated to all
rights of the Indemnified Party or Indemnified Person with respect to all third
parties, firms or corporations relating to the matter for which indemnification
has been made.  The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of
any liability to the Indemnified Person or Indemnified Party under this Section
6, except to the extent that the indemnifying party is prejudiced in its
ability to defend such action.


(d)           The indemnification
required by this Section 6 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills
are received or Indemnified Damages are incurred.


(e)           The indemnity
agreements contained herein shall be in addition to (i) any cause of
action or similar right of the Indemnified Party or Indemnified Person against
the indemnifying party or others, and (ii) any liabilities the indemnifying
party may be subject to pursuant to the law.


7.             CONTRIBUTION.


To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make
the maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 6 to the fullest extent permitted by law;
provided, however, that:  (i) no seller
of Registrable Securities guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to contribution
from any seller of Registrable Securities who was not guilty of fraudulent
misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities.


8.             REPORTS UNDER
THE EXCHANGE ACT.


With a view to making available to the Buyers the
benefits of Rule 144 promulgated under the Securities Act or any similar rule
or regulation of the SEC that may at any time permit the Buyers to sell
securities of the Company to the public without registration (“Rule 144”)
the Company agrees to:


(a)           make and keep public
information available, as those terms are understood and defined in Rule 144;



 11
 









(b)           file with the SEC in
a timely manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act so long as the Company remains subject
to such requirements (it being understood that nothing herein shall limit the
Company’s obligations under Section 4(c) of the Securities Purchase Agreement)
and the filing of such reports and other documents as are  required by the applicable provisions of Rule
144; and


(c)           furnish to each
Buyer so long as such Buyer owns Registrable Securities, promptly upon request,
(i) a written statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested to permit the Buyers to sell such securities
pursuant to Rule 144 without registration.


9.             AMENDMENT
OF REGISTRATION RIGHTS.


Provisions of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of
the Company and Buyers who then hold at least two-thirds (2/3) of the
Registrable Securities.  Any amendment or
waiver effected in accordance with this Section 9 shall be binding upon
each Buyer and the Company.  No such
amendment shall be effective to the extent that it applies to fewer than all of
the holders of the Registrable Securities. 
No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.


10.           MISCELLANEOUS.


(a)           A Person is deemed
to be a holder of Registrable Securities whenever such Person owns or is deemed
to own of record such Registrable Securities or owns the right to receive the
Registrable Securities.  If the Company
receives conflicting instructions, notices or elections from two (2) or more
Persons with respect to the same Registrable Securities, the Company shall act
upon the basis of instructions, notice or election received from the registered
owner of such Registrable Securities.


(b)           No Piggyback on
Registrations.  Except as set forth
on Schedule 10(b) attached hereto, contemplated with respect to the
private placement offering being completed by Clayton Dunning & Co., Inc.,
neither the Company nor any of its security holders (other than the Buyers in
such capacity pursuant hereto) may include securities of the Company in the
initial Registration Statement other than the Registrable Securities.  The Company shall not file any other
registration statements until the initial Registration Statement required
hereunder is declared effective by the SEC, provided that this Section 10(b)
shall not prohibit the Company from filing amendments to registration
statements already filed.


(c)           Piggy-Back
Registrations.  If at any time during
the Registration Period there is not an effective Registration Statement
covering all of the Registrable Securities and the Company shall determine to
prepare and file with the SEC a registration statement relating to an 



 12
 









offering for
its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated
under the Securities Act) or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with the stock option
or other employee benefit plans, then the Company shall send to each Buyer a
written notice of such determination and, if within fifteen (15) days after the
date of such notice, any such Buyer shall so request in writing, the Company
shall include in such registration statement all or any part of such
Registrable Securities such Buyer requests to be registered; provided, however,
that, the Company shall not be required to register any Registrable Securities
pursuant to this Section 10(c) that are eligible for resale pursuant to Rule
144(k) promulgated under the Securities Act or that are the subject of a then
effective Registration Statement.


(d)           Any notices,
consents, waivers or other communications required or permitted to be given
under the terms of this Agreement 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 transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) 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 the Company, to:

  	
   

  	
  Isonics Corporation

  	
   

  	
   

  
	
   

  	
   

  	
  5906 McIntyre Street

  	
   

  	
   

  
	
   

  	
   

  	
  Golden, CO 80403

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:

  	
  John Sakys, President

  	
   

  
	
   

  	
   

  	
  Telephone:

  	
  (303) 279-7900

  	
   

  
	
   

  	
   

  	
  Facsimile:

  	
  (303) 279-7300

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  With 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 an Buyer, to its
address and facsimile number on the Schedule of Buyers attached hereto, with
copies to such Buyer’s representatives as set forth on the Schedule of Buyers
or to such other address and/or facsimile number and/or to the attention of
such other person as the recipient party has specified by written notice given
to each other party five (5) days prior to the effectiveness of such
change.  Written confirmation of receipt
(A) given by the recipient of such notice, consent, waiver or other communication,
(B) mechanically or electronically generated by the sender’s facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a courier or overnight courier
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.



 13
 









(e)           Failure of any party
to exercise any right or remedy under this Agreement or otherwise, or delay by
a party in exercising such right or remedy, shall not operate as a waiver
thereof.


(f)            The laws of the
State of New Jersey shall govern all issues concerning the relative rights of
the Company and the Buyers as 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
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New Jersey.  Each
party hereby irrevocably submits to the non-exclusive jurisdiction of the
Superior Courts of the State of New Jersey, sitting in Hudson County, New
Jersey and federal courts for the District of New Jersey sitting Newark, New
Jersey, for the adjudication of any dispute hereunder or in connection herewith
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.  If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other
jurisdiction.  EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH
OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.


(g)           This Agreement shall
inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.


(h)           The headings in this
Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.


(i)            This Agreement may
be executed in identical counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same agreement.  This Agreement, once executed by a party, may
be delivered to the other party hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.


(j)            Each party shall do
and perform, or cause to be done and performed, all such further acts and
things, and shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in order
to carry out the 



 14
 









intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.


(k)           The language used in
this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent and no rules of strict construction will be applied
against any party.


(l)            This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other Person.


[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]



 15
 









IN WITNESS WHEREOF,
each Buyer and the Company have caused their signature page to this
Registration Rights Agreement to be duly executed as of the date first above
written.


	
  

  	
  COMPANY:

  	
   

  
	
   

  	
  ISONICS CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  John Sakys

  
	
   

  	
  Title:

  	
  President and Interim Chief Executive Officer

  
					



 



 16
 









IN WITNESS WHEREOF,
each Buyer and the Company have caused their signature page to this
Registration Rights Agreement to be duly executed as of the date first above
written.


	
  

  	
  BUYER:

  	
   

  	 

	
   

  	
  CORNELL CAPITAL PARTNERS, L.P.

  
	
   

  	
   

  	
   

  	 

	
   

  	
  By:

  	
  Yorkville Advisors, LLC

  	 

	
   

  	
  Its:

  	
  Investment Manager

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Mark Angelo

  	 

	
   

  	
  Title:

  	
  Portfolio Manager

  	 

						



 


 



 17















SCHEDULE I


SCHEDULE OF BUYERS


 


	
  Buyer

  	
   

  	
  Address/Facsimile 

  Number of Buyer

  	
   

  	
  Address/Facsimile 

  Number of Buyer’s Representative

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cornell Capital Partners, L.P.

  	
   

  	
  101 Hudson Street — Suite 3700

  	
   

  	
  101 Hudson Street — Suite 3700

  
	
   

  	
   

  	
  Jersey City, NJ 07303

  	
   

  	
  Jersey City, NJ 07303

  
	
   

  	
   

  	
  Facsimile:(201) 985-8266

  	
   

  	
  Facsimile:(201) 985-8266

  
	
   

  	
   

  	
   

  	
   

  	
  Attention: David Gonzalez, Esq.

  



 













EXHIBIT
A


SELLING STOCKHOLDERS


AND PLAN OF DISTRIBUTION


Selling Stockholders


The
shares of Common Stock being offered by the selling stockholders are issuable
upon conversion of the convertible debentures and upon exercise of the
warrants.  For additional information
regarding the issuance of those convertible notes and warrants, see “Private
Placement of Convertible Debentures and Warrants” above.  We are registering the shares of Common Stock
in order to permit the selling stockholders to offer the shares for resale from
time to time.  Except as otherwise notes
and except for the ownership of the convertible Debentures and the warrants
issued pursuant to the Securities Purchase Agreement, the selling stockholders
have not had any material relationship with us within the past three years.


The
table below lists the selling stockholders and other information regarding the
beneficial ownership of the shares of Common Stock by each of the selling
stockholders.  The second column lists
the number of shares of Common Stock beneficially owned by each selling
stockholder, based on its ownership of the convertible debentures and warrants,
as of                  ,
200      , assuming conversion of all convertible
debentures and exercise of the warrants held by the selling stockholders on
that date, without regard to any limitations on conversions or exercise.


The
third column lists the shares of Common Stock being offered by this prospectus
by the selling stockholders.


In
accordance with the terms of a registration rights agreement with the selling
stockholders, this prospectus generally covers the resale of at least (i)
nineteen and ninety-nine one hundredths percent (19.99%) if such initial
Registration Statement is filed prior to obtaining shareholder approval, on or
before November 30, 2007 to issue shares of the Company’s Common Stock in
excess of nineteen and ninety-nine one hundredths percent (19.99%) or if such
initial Registration Statement is filed after obtaining shareholder approval on
or before November 30, 2007 than in an amount equal to thirty three percent
(33%) of the outstanding shares of the Company’s Common Stock excluding “insiders”
as of the date the initial Registration Statement or any Subsequent
Registration Statement, issued or to be issued upon conversion of the
Convertible Debentures (“Conversion Shares”) and (ii) 100% of the number
of warrant shares issued and issuable pursuant to the warrants as of the
trading day immediately preceding the date the registration statement is
initially filed with the SEC.  Because the conversion price of
the convertible debentures and the exercise price of the warrants may be
adjusted, the number of shares that will actually be issued may be more or less
than the number of shares being offered by this prospectus.  The fourth column assumes the sale of all of
the shares offered by the selling stockholders pursuant to this prospectus.


Under
the terms of the convertible debentures and the warrants, a selling stockholder
may not convert the convertible debentures or exercise the warrants to the
extent such conversion or 













exercise would
cause such selling stockholder, together with its affiliates, to beneficially
own a number of shares of Common Stock which would exceed 4.99% of our then
outstanding shares of Common Stock following such conversion or exercise,
excluding for purposes of such determination shares of Common Stock issuable
upon conversion of the convertible debentures which have not been converted and
upon exercise of the warrants which have not been exercised.  The number of shares in the second column
does not reflect this limitation.  The
selling stockholders may sell all, some or none of their shares in this
offering.  See “Plan of Distribution.”













 


	
  

  	
   

  	
   

  	
   

  	
  Maximum
  Number of Shares

  	
   

  	
   

  
	
   

  	
   

  	
  Number
  of Shares Owned

  	
   

  	
  to be
  Sold Pursuant to this

  	
   

  	
  Number
  of Shares Owned

  
	
  Name of Selling Stockholder

  	
   

  	
  Prior to
  Offering

  	
   

  	
  Prospectus

  	
   

  	
  After
  Offering

  
	
  Cornell Capital Partners, L.P. (1)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  







(1)             Cornell
Capital Partners, L.P. is a Cayman Island exempt limited partnership.  Cornell is managed by Yorkville Advisors,
LLC.  Investment decisions for Yorkville
Advisors are made by Mark Angelo, its portfolio manager.


 


















 


Plan of Distribution


Each Selling Stockholder
(the “Selling Stockholders”) of the common stock and any of their
pledgees, assignees and successors-in-interest may, from time to time, sell any
or all of their shares of common stock on the                
or any other stock exchange, market or trading facility on which the shares are
traded or in private transactions.  These
sales may be at fixed or negotiated prices. 
A Selling Stockholder may use any one or more of the following methods
when selling shares:


·                  ordinary brokerage transactions and
transactions in which the broker-dealer solicits purchasers;


·                  block trades in which the broker-dealer
will attempt to sell the shares as agent but may position and resell a portion
of the block as principal to facilitate the transaction;


·                  purchases by a broker-dealer as
principal and resale by the broker-dealer for its account;


·                  an exchange distribution in
accordance with the rules of the applicable exchange;


·                  privately negotiated transactions;


·                  broker-dealers may agree with
the Selling Stockholders to sell a specified number of such shares at a
stipulated price per share;


·                  through the writing or settlement of
options or other hedging transactions, whether through an options exchange or
otherwise;


·                  a combination of any such methods of
sale; or


·                  any other method permitted pursuant
to applicable law.


The Selling Stockholders
may also sell shares under Rule 144 under the Securities Act of 1933, as
amended (the “Securities Act”), if available, rather than under this
prospectus.


Broker-dealers
engaged by the Selling Stockholders may arrange for other brokers-dealers
to participate in sales.  Broker-dealers
may receive commissions or discounts from the Selling Stockholders (or, if any
broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated, but, except as set forth in a
supplement to this Prospectus, in the case of an agency transaction not in
excess of a customary brokerage commission in compliance with NASDR Rule 2440; and
in the case of a principal transaction a markup or markdown in compliance with
NASDR IM-2440.


In connection with the
sale of the common stock or interests therein, the Selling Stockholders may
enter into hedging transactions with broker-dealers or other financial
institutions, which may in turn engage in short sales of the Common Stock in
the course of hedging the positions they assume.  The Selling Stockholders may also enter into
option or other 



 4
 









transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).


The Selling Stockholders
and any broker-dealers or agents that are involved in selling the shares may be
deemed to be “underwriters” within the meaning of the Securities Act in
connection with such sales.  In such
event, any commissions received by such broker-dealers or agents and any profit
on the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.  Each Selling Stockholder has informed the
Company that it does not have any written or oral agreement or understanding,
directly or indirectly, with any person to distribute the Common Stock. In no
event shall any broker-dealer receive fees, commissions and markups which, in
the aggregate, would exceed eight percent (8%).


The Company is required
to pay certain fees and expenses incurred by the Company incident to the
registration of the shares.  The Company
has agreed to indemnify the Selling Stockholders against certain losses,
claims, damages and liabilities, including liabilities under the Securities
Act.


Because Selling
Stockholders may be deemed to be “underwriters” within the meaning of the
Securities Act, they will be subject to the prospectus delivery requirements of
the Securities Act including Rule 172 thereunder.  In addition, any securities covered by this
prospectus which qualify for sale pursuant to Rule 144 under the Securities Act
may be sold under Rule 144 rather than under this prospectus.  There is no underwriter or coordinating
broker acting in connection with the proposed sale of the resale shares by the
Selling Stockholders.


We agreed to use our best
efforts to keep this prospectus effective until the earlier of (i) the date on
which the shares may be resold by the Selling Stockholders without registration
and without regard to any volume limitations by reason of Rule 144(k) under the
Securities Act or any other rule of similar effect or (ii) all of the shares
have been sold pursuant to this prospectus or Rule 144 under the Securities Act
or any other rule of similar effect.  The
resale shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states, the resale shares may not be sold unless they have been
registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is complied
with.


Under applicable rules
and regulations under the Exchange Act, any person engaged in the distribution
of the resale shares may not simultaneously engage in market making activities
with respect to the common stock for the applicable restricted period, as
defined in Regulation M, prior to the commencement of the distribution.  In addition, the Selling Stockholders will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including Regulation M, which may limit the timing of
purchases and sales of shares of the common stock by the Selling Stockholders
or any other person.  We will make copies
of this prospectus available to the Selling Stockholders and have informed them
of the need to deliver a 



 5
 









copy of this
prospectus to each purchaser at or prior to the time of the sale (including by
compliance with Rule 172 under the Securities Act).



 6
 









EXHIBIT
B


OTHER DISCLOSURES 


See
attachment provided separately.



 7
 









EXHIBIT
C


FORM OF NOTICE OF
EFFECTIVENESS

OF REGISTRATION STATEMENT


Attention:


Re:                               ISONICS CORPORATION


Ladies and
Gentlemen:


We are counsel to Isonics Corporation, a California
corporation (the “Company”), and have represented the Company in
connection with that certain Securities Purchase Agreement (the “Securities
Purchase Agreement”) entered into by and among the Company and the Buyers
named therein (collectively, the “Buyers”) pursuant to which the Company
issued to the Buyers shares of its Common Stock, no par value per share (the “Common
Stock”).  Pursuant to the Purchase
Agreement, the Company also has entered into a Registration Rights Agreement
with the Buyers (the “Registration Rights Agreement”) pursuant to which
the Company agreed, among other things, to register the Registrable Securities
(as defined in the Registration Rights Agreement) under the Securities Act of
1933, as amended (the “Securities Act”). 
In connection with the Company’s obligations under the Registration
Rights Agreement, on                          
            , the
Company filed a Registration Statement on Form                     
(File No. 333-                         )
(the “Registration Statement”) with the Securities and Exchange
Commission (the “SEC”) relating to the Registrable Securities which
names each of the Buyers as a selling stockholder there under.


In connection with the foregoing, we advise you that a
member of the SEC’s staff has advised us by telephone that the SEC has entered
an order declaring the Registration Statement effective under the Securities
Act at [ENTER TIME OF EFFECTIVENESS]
on [ENTER DATE OF EFFECTIVENESS]
and we have no knowledge, after telephonic inquiry of a member of the SEC’s
staff, that any stop order suspending its effectiveness has been issued or that
any proceedings for that purpose are pending before, or threatened by, the SEC
and the Registrable Securities are available for resale under the Securities
Act pursuant to the Registration Statement.


	
  

  	
  Very truly yours,

  
	
   

  	
  [Law Firm]

  
	
   

  	
  By:

  	
   

  
	
  cc:

  	
  [LIST NAMES OF BUYERS]

  	
   

  
				



 



 8