Document:

Exhibit 10.6

                          REGISTRATION RIGHTS AGREEMENT

      Registration  Rights  Agreement,  dated  as of  December  31,  2004  (this
"Agreement"),  by and among Advance Nanotech,  Inc., a Colorado corporation (the
"Company"), and the Purchasers (as defined below).

                              W I T N E S S E T H :

      WHEREAS,  the Company is offering (the  "Offering")  an aggregate of up to
Seven Million (7,000,000) shares of its Common Stock, par value $0.001 per share
(the "Common  Stock") and up to Three and One-Half  Million  (3,500,000)  of its
stock purchase warrants (the "Warrants"),  each Warrant to purchase one share of
the Common Stock (each such share underlying a Warrant,  a "Warrant Share") (the
securities  offered in the Offering being sometimes  hereinafter  referred to as
(the  "Securities"),  in each case subject to an up to 10%  overallotment at the
Company's sole discretion;

      WHEREAS,  the Company  desires to issue and sell to the persons  listed on
Schedule  A,  attached  hereto  (each  a  "Purchaser,"  and  collectively,   the
"Purchasers"),  the Securities as set forth in one or more  Securities  Purchase
Agreements  entered  into or to be entered  into by and  between the Company and
each Purchaser (the "Securities Purchase Agreement");

      WHEREAS,  the Company and the Purchasers have entered or will have entered
into a Securities Purchase Agreement;

      WHEREAS,   it  is  a  condition  precedent  to  the  consummation  of  the
transactions  contemplated by the Securities Purchase Agreement that the Company
provide for the rights set forth in this Agreement; and

      WHEREAS,  certain  terms used in this  Agreement  are defined in Section 3
hereof.

      NOW, THEREFORE,  in consideration of the foregoing premises and the mutual
covenants and agreements hereinafter contained,  and for other good and valuable
consideration,  the receipt and  sufficiency  of which are hereby  acknowledged,
intending to be legally bound, the parties hereto hereby agree as follows:

      1 Registration Rights.

      1.1  Required  Registration.  The Company  shall use its  reasonable  best
efforts to accomplish the following:

            (x) prepare and file a "Required  Registration  Statement"  (as such
term is hereafter defined) with the SEC by the date (the "Required Filing Date")
which is not more than  sixty  (60) days  after  the  first  date to occur  (the
"Commencement  Date") of the  following  dates:  the Final Closing Date (as such
term is defined in the Securities  Purchase Agreement) or the termination of the
Offering, if there is no Final Closing Date; and

            (y) cause either of the following (the  "Effectiveness  Actions") to
occur by a date (the "Required  Effectiveness  Date") which is not more than one
hundred and twenty (120) days after the Commencement  Date: (A) cause the SEC to
declare the Required Registration Statement to be effective or (B) cause the SEC
to  communicate  to  the  Company,  orally  or in  writing,  that  the  Required
Registration  Statement  will  not be  reviewed  or that the  Commission  has no
further  comments  thereupon,  whereupon  the Company  shall cause the  Required
Registration Statement to be effective.

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The failure of the Company to file a Required  Registration  Statement  prior to
the Required  Filing Date,  or to cause either of the  Effectiveness  Actions to
occur  prior  to the  Required  Effectiveness  Date,  shall  be  deemed  to be a
"Non-Registration  Event".  As  used  in  this  Agreement,  the  term  "Required
Registration  Statement" shall mean a registration statement on Form SB-1 or any
successor  form,  or any other form selected by the Company that is available to
it under  the  Securities  Act  which  conforms  with all  applicable  rules and
regulations,  with respect to all the Registrable Securities  beneficially owned
by the  Purchasers  following  the final Closing (as such term is defined in the
Securities Purchase Agreement) to permit the offer and re-sale from time to time
of such  Registrable  Securities in accordance  with the methods of distribution
provided by the Purchasers.

      The  Company  and the  Purchasers  agree that the  Purchasers  will suffer
damages if a Non-Registration Event occurs, and that it would not be feasible to
ascertain  the  extent  of  such  damages  with  precision.  Accordingly,  if  a
Non-Registration Event should occur, then for each thirty (30) day period during
the pendency of such  Non-Registration  Event, the Company shall deliver to each
Purchaser,  as liquidated  damages,  an amount equal to one and one-half percent
(1.5%)  of the  aggregate  Purchase  Price  (as  such  term  is  defined  in the
Securities  Purchase  Agreement)  paid by such Purchaser for Securities (as such
term is defined in the Securities Purchase  Agreement),  with such payment being
pro-rated  for any  Non-Registration  Event of less than thirty (30) days.  Each
such payment is  hereinafter  referred to as a  "Non-Registration  Event Penalty
Payment".  Notwithstanding  the  foregoing,  in no event  shall the  Company  be
obligated to pay more than one  Non-Registration  Event  Penalty  Payment to the
same  Purchaser  in respect of a  substantively  concurrent  failure to perform;
i.e., if a Non-Registration  Event Penalty Payment is accruing due to failure to
file a Required  Registration  Statement  prior to the  Required  Filing Date, a
separate  Non-Registration  Event  Penalty  Payment  shall  not  be  due  for  a
contemporaneous  failure to cause an Effectiveness  Action to occur prior to the
Required Effectiveness Date. The Company, at its sole discretion,  shall pay the
Non-Registration Event Penalty Payment in cash or in shares of its Common Stock,
provided, that the Company may not elect to pay some Purchasers in cash while it
pays others in Common  Stock.  In the event that the  Company  elects to pay the
Non-Registration  Event  Penalty  Payment to a Purchaser in shares of its Common
Stock, it shall deliver unregistered,  legended shares of its Common Stock whose
aggregate  Market Price is equal to the  Non-Registration  Event Penalty Payment
due to such Purchaser.

      The Company  shall use its  reasonable  best efforts to keep such Required
Registration  Statement  continuously  effective (the "Effective  Period") for a
period of two years after the  Required  Registration  Statement  first  becomes
effective plus whatever period of time as shall equal any period, if any, during
such one year period in which the Company  was not  current  with its  reporting
requirements  under  the  Exchange  Act.  To the  extent  that  the  Registrable
Securities  are  not  sold  under  the  Required  Registration  Statement,   the
Purchasers shall have the registration  rights as enumerated in Sections 1.3 and
1.4 of this Agreement.

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      1.2 Current  Public  Information.  The Company  covenants that it will use
reasonable best efforts to file all reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and regulations adopted by the
SEC thereunder, and will use reasonable best efforts to take such further action
as the Purchaser may reasonably  request,  all to the extent  required to enable
the holders of Registrable Securities to sell Registrable Securities pursuant to
Rule 144 or Rule 144A adopted by the SEC under the Securities Act or any similar
rule or regulation  hereafter  adopted by the SEC. The Company  shall,  upon the
request of a holder of Registrable  Securities  (each a "Designated  Holder" and
collectively,  the "Designated  Holders"),  deliver to such Designated  Holder a
written statement as to whether it has complied with such requirements.

      1.3 Form S-3  Registration.  If the  Company is  eligible  to use Form S-3
under the Securities Act (or any similar  successor form) and shall receive from
a Purchaser  and its  permitted  transferees  (the "S-3  Initiating  Holders") a
written  request or requests that the Company effect a registration on such Form
S-3,  including without  limitation,  pursuant to Rule 415 of the Securities Act
and any related  qualification  or compliance with respect to all or part of the
Registrable  Securities  owned by the S-3  Initiating  Holders and its permitted
transferees (provided,  that the S-3 Initiating Holders registering  Registrable
Securities in such registration  (together with all other holders of Registrable
Securities  to  be  included  in  such  registration)   propose  to  sell  their
Registrable  Securities at an aggregate price  (calculated based upon the Market
Price of the  Registrable  Securities on the date of filing of the Form S-3 with
respect to such Registrable Securities) to the public of no less than the lesser
of $6,000,000 or the remaining  Registrable  Securities),  the Company shall (i)
promptly  give  written  notice of the  proposed  registration,  and any related
qualification or compliance, to all other holders of Registrable Securities; and
(ii) as soon as practicable, use reasonable best efforts to file and effect such
registration and all such  qualifications and compliances as may be so requested
and as would  permit  or  facilitate  the sale and  distribution  of all or such
portion of the Registrable Securities as are specified in such request, together
with all or such portion of the  Registrable  Securities  of any other holder in
the group of  holders  joining  in such  request  as is  specified  in a written
request  given  within  fifteen  (15) days  after the  holder's  receipt of such
written notice from the Company. No registration requested by any S-3 Initiating
Holders pursuant to this Section 1.3 shall be deemed a registration  pursuant to
Section 1.1.

      1.4 Piggyback Registrations.

      (a) Right to Piggyback.  Whenever the Company  proposes to register any of
its  securities  under the Securities Act (other than pursuant to a registration
pursuant to Section 1.3 or a registration on Form S-4 or S-8 or any successor or
similar  forms)  and  the  registration  form to be  used  may be  used  for the
registration  of  Registrable  Securities,  whether  or not for sale for its own
account,  the Company will give prompt written notice (but in no event less than
twenty  five (25) days  before the  anticipated  filing  date) to all holders of
Registrable Securities, and such notice shall describe the proposed registration
and  distribution  and  offer  to all  holders  of  Registrable  Securities  the
opportunity to register the number of Registrable Securities as each such holder
may  request.  The Company  will include in such  registration  all  Registrable
Securities with respect to which the Company has received  written  requests for
inclusion  therein  within  fifteen (15) days after the holders'  receipt of the
Company's notice (a "Piggyback Registration").

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<PAGE>

      (b) Reasonable Efforts.  The Company shall use all reasonable best efforts
to cause the managing  underwriter or  underwriters  of a proposed  underwritten
offering  to permit the  Registrable  Securities  requested  to be included in a
Piggyback  Registration  to be included on the same terms and  conditions as any
similar  securities of the Company or any other security holder included therein
and to permit the sale or other  disposition of such  Registrable  Securities in
accordance with the intended method of distribution thereof.

      (c) Withdrawal. Any Designated Holder shall have the right to withdraw its
request  for  inclusion  of  its  Registrable  Securities  in  any  Registration
Statement  pursuant to this Section 1.4 by giving  written notice to the Company
of its  request  to  withdraw;  provided,  that in the event of such  withdrawal
(other than pursuant to Section 1.4(e) hereof, the Company shall not be required
to reimburse such holder for the fees and expenses referred to in Section 1.6(t)
hereof incurred by such holder prior to such withdrawal,  unless such withdrawal
was due to a material adverse change to the Company.  The Company may withdraw a
Piggyback Registration at any time prior to the time it becomes effective.

      (d)  Priority  in  Registrations.   If  a  Piggyback  Registration  is  an
underwritten  primary  registration  on behalf of the Company,  and the managing
underwriters  advise the  Company in writing  (with a copy to each party  hereto
requesting  registration  of Registrable  Securities)  that in their opinion the
number of Registrable  Securities  requested to be included on a secondary basis
in such  registration  exceeds  the  number  which can be sold in such  offering
without materially and adversely  affecting the marketability of such primary or
secondary  offering (the  "Company  Offering  Quantity"),  then the Company will
include in such registration securities in the following priority:

                  (i) First, the Company will include the securities the Company
            proposes to sell.

                  (ii)  Second,   the  Company  will  include  all   Registrable
            Securities requested to be included by any Designated Holder, and if
            the number of such Designated  Holders'  securities  requested to be
            included  exceeds the Company  Offering  Quantity,  then the Company
            shall include only each such requesting Designated Holders' pro rata
            share of the shares  available for  registration  by the  Purchaser,
            based on the amount of securities held by such holder.

                  (iii) Third,  the Company will include other securities of the
            Company  proposed to be included in the  registration.  (e) Cutback.
            If, as a result of the proration provisions of this Section 1.4, any
            Designated  Holders shall not be entitled to include all Registrable
            Securities in a Piggyback  Registration that such Designated Holders
            has requested to be included,  such holder may elect to withdraw his
            request to include Registrable Securities in such registration.

      1.5 Holdback Agreements.

      (a) To the extent not inconsistent with applicable law, in connection with
a public offering of securities of the Company,  upon the request of the Company
or the  underwriter,  in the  case of an  underwritten  public  offering  of the
Company's securities, each holder of Registrable Securities who owns at least 5%
of the outstanding capital stock of the Company on an "as-converted"

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basis or is an officer or  director  of the  Company  will not effect any public
sale or  distribution  (other than those  included in the  registration)  of any
securities of the Company, or any securities, options or rights convertible into
or exchangeable or exercisable for such securities during the fourteen (14) days
prior to and the ninety  (90) -day  period  beginning  on such  effective  date,
unless  (in  the  case  of  an  underwritten   public   offering)  the  managing
underwriters  otherwise agree to a shorter period of time.  Notwithstanding  the
foregoing,  no Designated  Holder shall be required to enter into any such "lock
up"  agreement  unless and until all of the  Company's  executive  officers  and
directors  execute  substantially  similar "lock up"  agreements and the Company
uses commercially reasonable efforts to cause each holder of more than 5% of its
outstanding capital stock to execute substantially similar "lock up" agreements.
Neither the Company nor the underwriter shall amend,  terminate or waive a "lock
up" agreement  unless each "lock up" agreement with a Designated  Holder is also
amended or waived in a similar manner or terminated, as the case may be.

      (b) The  Company  shall  have the  right at any time to  require  that the
Designated Holders of Registrable  Securities suspend further open market offers
and sales of Registrable  Securities pursuant to a Registration  Statement filed
hereunder whenever in the reasonable  judgment of the Company after consultation
with  counsel  there is or may be in  existence a Changing  Event (as defined in
this Agreement). The Company will give the Designated Holders notice of any such
suspension  and will use all  reasonable  best efforts to minimize the length of
such suspension.

      1.6  Registration  Procedures.  Whenever any  Registrable  Securities  are
required to be  registered  pursuant  to this  Agreement,  the Company  will use
reasonable  best  efforts  to  effect  the  registration  and  the  sale of such
Registrable  Securities in accordance  with the intended  methods of disposition
thereof, and pursuant thereto the Company will as expeditiously as possible:

      (a)  prepare  and  file  with  the SEC on any  form,  if not so  otherwise
provided for, for which the Company qualifies,  as soon as practicable after the
end of the period  within which  requests for  registration  may be given to the
Company,  a  Registration  Statement  with respect to the offer and sale of such
Registrable  Securities and thereafter use reasonable best efforts to cause such
Registration  Statement  to become  effective  and  remain  effective  until the
completion of the distribution  contemplated thereby or the required time period
under this Agreement,  whichever is shorter (and before filing such Registration
Statement,  the Company will furnish to the counsel selected by the holders of a
majority of the Registrable  Securities  initiating such Registration  Statement
copies of all such documents proposed to be filed); provided,  however, that the
Company may  postpone for not more than sixty (60)  calendar  days the filing or
effectiveness of any registration  statement required pursuant to this Agreement
other than a Required  Registration  Statement  required to be filed pursuant to
Section  1.1 of this  Agreement  if the Board of  Directors,  in its good  faith
judgment, determines that such registration could reasonably be expected to have
a material adverse effect on the Company and its stockholders including, but not
limited to, any proposal or plan by the Company to engage in any  acquisition of
assets  (other  than  in  the  ordinary  course  of  business)  or  any  merger,
consolidation,  tender offer or similar transaction then under consideration (in
which event, the Designated  Holders shall be entitled to withdraw such request,
and if such request is withdrawn such registration will not count as a

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<PAGE>

registration  statement pursuant to this Agreement) by delivering written notice
to the Designated Holders who requested  inclusion of Registrable  Securities in
such  Registration  Statement of its determination to postpone such Registration
Statement;  provided,  further,  that (i) the  Company  shall not  disclose  any
information that could be deemed material  non-public  information to any holder
of Registrable  Securities included in a Registration  Statement that is subject
to such  postponement,  (ii) in no  event  may the  Company  postpone  a  filing
requested  hereunder more than twice in any twelve (12) month period;  provided,
that any two  postponements  must be at least three (3) months apart;  provided,
further, that the Company shall delay the effectiveness of any such registration
statement if the SEC rules and regulations prohibit the Company from declaring a
Registration Statement effective because its financial statements are stale at a
time when its  fiscal  year has ended or it has made an  acquisition  reportable
under Item 2 of Form 8-K or any other similar  situation until the earliest time
in which the SEC would  allow the  Company to declare a  Registration  Statement
effective  (provided that the Company shall use its  reasonable  best efforts to
cure any such situation as soon as possible so that the  Registration  Statement
can be made effective at the earliest possible time);

      (b) prepare and file with the SEC such  amendments and supplements to such
Registration Statement and the prospectus used in connection therewith as may be
necessary to keep such  Registration  Statement  effective for a period provided
for in the  applicable  Section  above,  or if not so provided,  for a period of
twelve (12) (for a registration  pursuant to Rule 415 of the Securities Act) or,
if such Registration Statement relates to an underwritten offering,  such period
as in the opinion of counsel for the  underwriters  a prospectus  is required by
law to be delivered in  connection  with sales of  Registrable  Securities by an
underwriter  or dealer or (ii) such shorter period as will terminate when all of
the securities  covered by such Registration  Statement have been disposed of in
accordance  with the intended  methods of  disposition  by the seller or sellers
thereof set forth in such  Registration  Statement  (but in any event not before
the expiration of any longer period  required under the Securities  Act), and to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such Registration  Statement until such time as all
of such securities have been disposed of in accordance with the intended methods
of disposition by the seller or sellers  thereof set forth in such  Registration
Statement.  In the event the Company  shall give any notice  pursuant to Section
1.5(b), the applicable time period mentioned in this Section 1.6(b) during which
a Registration  Statement is to remain effective shall be extended by the number
of days  during the  period  from and  including  the date of the giving of such
notice  pursuant to Section 1.5(b) to and including the date when each seller of
a  Registrable  Security  covered  by such  Registration  Statement  shall  have
received the copies of the  supplemented or amended  prospectus  contemplated by
Section 1.6(e);

      (c) furnish to each seller of  Registrable  Securities,  prior to filing a
Registration  Statement,  such number of copies of such Registration  Statement,
each  amendment  and  supplement  thereto,   the  prospectus  included  in  such
Registration  Statement  (including each preliminary  prospectus) and such other
documents  as such  seller may  reasonably  request in order to  facilitate  the
disposition of the Registrable Securities owned by such seller;

      (d)  register  or qualify  such  Registrable  Securities  under such other
securities  or blue  sky laws of such  jurisdictions  as any  seller  reasonably
requests  and do any and all  other  acts and  things  which  may be  reasonably
necessary or advisable to enable such seller to consummate  the  disposition  in
such  jurisdictions  of the Registrable  Securities  owned by such seller and to
keep each such registration or qualification (or exemption  therefrom) effective
during  the period  which the  Registration  Statement  is  required  to be kept
effective (provided, that the

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Company  will not be  required to (i)  qualify  generally  to do business in any
jurisdiction  where it would not  otherwise  be required to qualify but for this
subparagraph,  (ii) subject itself to taxation in any such jurisdiction or (iii)
consent to general service of process in any such jurisdiction);

      (e) notify each seller of such Registrable Securities,  at any time when a
prospectus  relating  thereto is required to be delivered  under the  Securities
Act, of the  happening of any event (a  "Changing  Event") as a result of which,
the  prospectus  included  in such  Registration  Statement  contains  an untrue
statement of a material fact or omits any fact  necessary to make the statements
therein not misleading in the light of the  circumstances  under which they were
made,  and,  at the  request of any such  seller,  the  Company  will as soon as
possible prepare and furnish to such seller (a "Correction  Event") a reasonable
number of copies of a supplement  or amendment to such  prospectus  so that,  as
thereafter  delivered to the  purchasers of such  Registrable  Securities,  such
prospectus  will not contain an untrue  statement of a material  fact or omit to
state any fact  necessary to make the  statements  therein not misleading in the
light of the circumstances under which they were made;

      (f) cause all such Registrable  Securities to be listed on each securities
exchange on which similar  securities issued by the Company are then listed and,
if not so listed, to be listed on The Nasdaq Stock Market or the Nasdaq SmallCap
trading system or the Nasdaq OTC Bulletin Board;

      (g)  provide a  transfer  agent  and  registrar  for all such  Registrable
Securities not later than the effective date of such Registration Statement;

      (h)  enter  into  such  customary   agreements   (including   underwriting
agreements  in  customary  form with any  underwriter,  if any  selected  by the
Company)  and take all such other  actions as the  holders of a majority  of the
Registrable  Securities  being  sold or the  underwriters,  if  any,  reasonably
request in order to expedite or facilitate the  disposition of such  Registrable
Securities,  including  causing its officers to  participate in "road shows" and
other information  meetings  organized by an underwriter,  if any, provided that
any underwriter shall have been selected by the Company;

      (i) make available for inspection by any seller of Registrable Securities,
any underwriter  participating in any disposition  pursuant to such Registration
Statement  and any  attorney,  accountant  or other  agent  retained by any such
seller or  underwriter,  all financial and other  records,  pertinent  corporate
documents and properties of the Company,  and cause the Company's  employees and
independent  accountants to supply all information  reasonably  requested by any
such seller, underwriter,  attorney, accountant or agent in connection with such
Registration Statement;

      (j) before filing a Registration Statement or prospectus or any amendments
or  supplements  thereto,  the Company  shall  provide  counsel  selected by the
Designated  Holders  holding a  majority  of the  Registrable  Securities  being
registered in such registration ("Holders' Counsel") and any other Inspector (as
defined  below)  with an  adequate  and  appropriate  opportunity  to review and
comment on such Registration Statement and each prospectus included therein (and
each amendment or supplement  thereto) to be filed with the SEC, subject to such
documents  being under the Company's  control,  and the Company shall notify the
Holders'  Counsel and each seller of  Registrable  Securities  of any stop order
issued or threatened by the SEC;

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      (k) otherwise comply with all applicable rules and regulations of the SEC,
and make available to its security holders,  as soon as reasonably  practicable,
an earnings  statement  covering the period of at least twelve months  beginning
with the  first day of the  Company's  first  full  calendar  quarter  after the
effective date of the  Registration  Statement,  which earnings  statement shall
satisfy  the  provisions  of Section  11(a) of the  Securities  Act and Rule 158
thereunder;

      (l) in the  event  of  the  issuance  of any  stop  order  suspending  the
effectiveness  of a  Registration  Statement,  or of  any  order  suspending  or
preventing the use of any related  prospectus or suspending the qualification of
any  securities  included  in  such  Registration  Statement  for  sale  in  any
jurisdiction,  the Company  will use its  reasonable  best  efforts  promptly to
obtain the withdrawal of such order;

      (m) obtain one or more comfort  letters,  dated the effective date of such
Registration  Statement  (and,  if such  registration  includes an  underwritten
offering,  dated  the date of the  closing  under the  underwriting  agreement),
signed by the Company's  independent  public  accountants  in customary form and
covering such matters of the type customarily  covered by comfort letters as the
holders of a  majority  of the  Registrable  Securities  being  sold  reasonably
request;

      (n) provide a legal opinion of the Company's  outside  counsel,  dated the
effective  date of  such  Registration  Statement  (and,  if  such  registration
includes  an  underwritten  offering,  dated the date of the  closing  under the
underwriting  agreement),  with  respect  to the  Registration  Statement,  each
amendment and supplement thereto, the prospectus included therein (including the
preliminary  prospectus) and such other documents  relating thereto in customary
form and covering such matters of the type customarily covered by legal opinions
of such nature;

      (o)  subject  to   execution   and   delivery  of  mutually   satisfactory
confidentiality agreements, make available at reasonable times for inspection by
any seller of Registrable Securities,  any managing underwriter participating in
any  disposition  of such  Registrable  Securities  pursuant  to a  Registration
Statement, Holders' Counsel and any attorney, accountant or other agent retained
by  any  managing  underwriter  (each,  an  "Inspector"  and  collectively,  the
"Inspectors"),  during normal  business hours of Company at Company's  corporate
office in New York,  New York and without  unreasonable  disruption of Company's
business  or  unreasonable  expense to Company and solely for the purpose of due
diligence with respect to the registration statement, non-confidential,  legally
disclosable,  financial and other records and pertinent  corporate  documents of
the Company  and its  subsidiaries  (collectively,  the  "Records")  as shall be
reasonably   necessary   to  enable  them  to  exercise   their  due   diligence
responsibility,   and  cause  the  Company's  and  its  subsidiaries'  officers,
directors and employees,  and the independent public accountants of the Company,
to  make  available  for  inspection,  at such  parties'  offices  during  their
respective  normal business hours and without  unreasonable  disruption of their
business  or  unreasonable  expense to Company and solely for the purpose of due
diligence with respect to the Registration  Statement all information reasonably
requested by any such Inspector in connection with such Registration Statement;

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<PAGE>

      (p)  subject  to   execution   and   delivery  of  mutually   satisfactory
confidentiality  agreements,  keep Holders' Counsel advised as to the initiation
and  progress  of any  registration  hereunder  including,  but not  limited to,
providing Holders' Counsel with all correspondence with the SEC;

      (q)  cooperate  with  each  seller  of  Registrable  Securities  and  each
underwriter  participating in the disposition of such Registrable Securities and
their respective counsel in connection with any filings required to be made with
the NASD; and

      (r) take all other steps  reasonably  necessary to effect the registration
of the Registrable Securities contemplated hereby.

      (s)  Conditions  Precedent  to  Company's  Obligations  Pursuant  to  this
Agreement.  It shall be a condition  precedent to the  obligations of Company to
take any  action  pursuant  to this  Agreement  that each of the  holders  whose
Registrable  Securities are to be registered  pursuant to this  Agreement  shall
furnish such holder's written  agreement to be bound by the terms and conditions
of this Agreement prior to performance by Company of its obligations  under this
Agreement.  By executing and delivering this Agreement,  each holder  represents
and warrants that the information concerning, and representations and warranties
by, such holder,  including information concerning the securities of the Company
held,  beneficially  or of record,  by such  holder,  furnished  to the  Company
pursuant to the Securities  Purchase Agreement and the Purchasers  Questionnaire
delivered pursuant thereto, are true and correct as if the same were represented
and warranted on the date of any registration  statement by the Company pursuant
to this  Agreement  or any  amendment  thereto,  and each  holder  covenants  to
immediately notify the Company in writing of any change in any such information,
representation  or warranty  and to refrain  from  offering or  disposing of any
securities  pursuant to any such  registration  statement  until the Company has
reflected such change in the registration statement. By executing and delivering
this  Agreement,  each such  holder  further  agrees to furnish  any  additional
information as the Company may reasonably  request in connection with any action
to be taken by the Company  pursuant  to this  Agreement,  to pay such  holder's
expenses  which are not  required  to be paid by the  Company  pursuant  to this
Agreement.

      (t) All expenses  incident to the Company's  performance  of or compliance
with this Agreement including,  without limitation,  all registration and filing
fees payable by the Company, fees and expenses of compliance by the Company with
securities  or blue sky laws,  printing  expenses of the Company,  messenger and
delivery expenses of the Company,  and fees and disbursements of counsel for the
Company  and  all  independent  certified  public  accountants  of the  Company,
underwriters  (excluding  discounts and  commissions,  which will be paid by the
sellers of  Registrable  Securities)  and other Persons  retained by the Company
will be borne by the Company,  and the Company  will pay its  internal  expenses
(including,  without  limitation,  all salaries  and  expenses of its  Employees
performing  legal or  accounting  duties),  the  expense of any annual  audit or
quarterly review, the expense of any liability  insurance of the Company and the
expenses and fees for listing the securities to be registered on each securities
exchange on which similar securities issued by the Company are then listed or on
The Nasdaq  National  Market,  Nasdaq  SmallCap Market or the OTC Bulletin Board
trading  system.  The Company shall have no  obligation to pay any  underwriting
discounts or commissions  attributable to the sale of Registrable Securities and
any of the expenses  incurred by any holder of Registrable  Securities which are
not payable by the Company, such costs to be borne by such holder or holders,

                                       9
<PAGE>

including,  without limitation,  underwriting fees,  discounts and expenses,  if
any, applicable to any holder's Registrable  Securities;  fees and disbursements
of  counsel  or other  professionals  that any  holder  may  choose to retain in
connection  with the  registration  statement  filed pursuant to this Agreement;
selling  commissions  or stock  transfer  taxes  applicable  to the  Registrable
Securities registered on behalf of any holder; any other expenses incurred by or
on behalf of such holder in connection  with the offer and sale of such Holder's
Registrable  Securities  other than  expenses  which the  Company  is  expressly
obligated to pay pursuant to this Agreement.

      1.7 Indemnification.

      (a) The Company  agrees to  indemnify  and hold  harmless,  to the fullest
extent  permitted by law, each holder of Registrable  Securities and its general
or  limited  partners,  officers,   directors,   members,  managers,  employees,
advisors,   representatives,    agents   and   Affiliates   (collectively,   the
"Representatives")  from  and  against  any  loss,  claim,  damage,   liability,
attorney's  fees,  cost or expense and costs and expenses of  investigating  and
defending any such claim (collectively, the "Losses"), joint or several, and any
action in respect thereof to which such holder of Registrable  Securities or its
Representatives  may  become  subject  under the  Securities  Act or  otherwise,
insofar  as such  Losses  (or  actions  or  proceedings,  whether  commenced  or
threatened, in respect thereto) arise out of or are based upon (i) any untrue or
alleged  untrue  statement  of a material  fact  contained  in any  Registration
Statement,  prospectus or preliminary or summary  prospectus or any amendment or
supplement  thereto or (ii) any omission or alleged  omission to state therein a
material fact required to be stated  therein or necessary to make the statements
therein not  misleading,  and the Company  shall  reimburse  each such holder of
Registrable  Securities  and its  Representatives  for any  legal  or any  other
expenses  incurred by them in  connection  with  investigating  or  defending or
preparing  to defend  against  any such Loss,  action or  proceeding;  provided,
however,  that the  Company  shall  not be  liable  to any such  holder or other
indemnitee  in any such  case to the  extent  that any such  Loss (or  action or
proceeding,  whether commenced or threatened,  in respect thereof) arises out of
or is based upon an untrue  statement or alleged untrue statement or omission or
alleged omission,  made in such Registration  Statement,  any such prospectus or
preliminary  or summary  prospectus or any amendment or supplement  thereto,  in
reliance  upon,  and  in  conformity  with,  written  information  prepared  and
furnished  to the  Company  by  any  holder  of  Registrable  Securities  or its
Representatives  expressly  for use  therein  or by  failure  of any  holder  of
Registrable  Securities  to  deliver  a copy of the  Registration  Statement  or
prospectus  or any  amendments  or  supplements  thereto  after the  Company has
furnished  such holder of  Registrable  Securities  with a sufficient  number of
copies of the same.  In no event,  however,  shall  the  Company  be liable  for
indirect,  incidental  or  consequential  or  special  damages  of any kind.  In
connection  with an  underwritten  offering,  the Company  will  indemnify  such
underwriters,  their  officers and  directors  and each Person who controls such
underwriters  (within the meaning of the  Securities  Act) to the same extent as
provided above with respect to the indemnification of the holders of Registrable
Securities.

      (b) In connection with any Registration  Statement in which the holders of
Registrable Securities are participating pursuant to this Agreement, the holders
of  Registrable   Securities  will  furnish  to  the  Company  in  writing  such
information as the Company  reasonably  requests for use in connection  with any
such  Registration  Statement or prospectus and, to the fullest extent permitted
by law,  each such holder of  Registrable  Securities  will  indemnify  and hold
harmless the Company and its Representatives from and against any Losses,

                                       10
<PAGE>

severally  but not  jointly,  and any  action in  respect  thereof  to which the
Company and its  Representatives  may become subject under the Securities Act or
otherwise, insofar as such Losses (or actions or proceedings,  whether commenced
or  threatened,  in  respect  thereof)  arise out of or are  based  upon (i) the
purchase or sale of Registrable  Securities  during a suspension as set forth in
Section  1.5(b) after  written  receipt of notice of such  suspension,  (ii) any
untrue  or  alleged  untrue  statement  of a  material  fact  contained  in  the
Registration  Statement,  prospectus or preliminary or summary prospectus or any
amendment or supplement  thereto, or (iii) any omission or alleged omission of a
material fact required to be stated  therein or necessary to make the statements
therein not misleading,  but, with respect to clauses (ii) and (iii) above, only
to  the  extent  that  such  untrue  statement  or  omission  is  made  in  such
Registration Statement, any such prospectus or preliminary or summary prospectus
or any amendment or supplement  thereto, in reliance upon and in conformity with
written  information  prepared  and  furnished  to the Company by such holder of
Registrable Securities expressly for use therein or by failure of such holder of
Registrable  Securities  to  deliver  a copy of the  Registration  Statement  or
prospectus  or any  amendments  or  supplements  thereto  after the  Company has
furnished  such holder of  Registrable  Securities  with a sufficient  number of
copies of the same, and such holder of Registrable Securities will reimburse the
Company and each  Representative for any legal or any other expenses incurred by
them in  connection  with  investigating  or  defending  or  preparing to defend
against any such Loss, action or proceeding; provided, however, that such holder
of  Registrable  Securities  shall not be liable in any such case to the  extent
that prior to the filing of any such  Registration  Statement or  prospectus  or
amendment or  supplement  thereto,  such holder of  Registrable  Securities  has
furnished  in  writing  to the  Company  information  expressly  for use in such
Registration  Statement or prospectus  or any  amendment or  supplement  thereto
which corrected or made not misleading  information  previously furnished to the
Company.  In no event,  however,  shall  any  holder  be  liable  for  indirect,
incidental or consequential or special damages of any kind.

      (c) Promptly after receipt by any Person in respect of which indemnity may
be sought  pursuant  to  Section  1.7(a) or 1.7(b) (an  "Indemnified  Party") of
notice of any claim or the  commencement of any action,  the  Indemnified  Party
shall,  if a claim in respect  thereof is to be made against the Person  against
whom such indemnity may be sought (an "Indemnifying Party"), promptly notify the
Indemnifying  Party in writing of the claim or the  commencement of such action;
provided,  that the failure to notify the  Indemnifying  Party shall not relieve
the  Indemnifying  Party from any liability  which it may have to an Indemnified
Party  otherwise than under Section 1.7(a) or 1.7(b) except to the extent of any
actual  prejudice  resulting  therefrom.  If any such  claim or action  shall be
brought against an Indemnified Party, and it shall notify the Indemnifying Party
thereof, the Indemnifying Party shall be entitled to participate  therein,  and,
to the  extent  that it  wishes,  jointly  with  any  other  similarly  notified
Indemnifying  Party,  to assume the  defense  thereof  with  counsel  reasonably
satisfactory to the Indemnified  Party. After notice from the Indemnifying Party
to the Indemnified  Party of its election to assume the defense of such claim or
action,  the Indemnifying Party shall not be liable to the Indemnified Party for
any legal or other expenses  subsequently  incurred by the Indemnified  Party in
connection   with  the  defense   thereof   other  than   reasonable   costs  of
investigation;  provided,  that the  Indemnified  Party  shall have the right to
employ   separate   counsel  to  represent   the   Indemnified   Party  and  its
Representatives  who may be subject  to  liability  arising  out of any claim in
respect of which  indemnity may be sought by the  Indemnified  Party against the
Indemnifying  Party,  but the fees and expenses of such counsel shall be for the
account of such Indemnified Party unless (i) the Indemnifying Party and the

                                       11
<PAGE>

Indemnified Party shall have mutually agreed to the retention of such counsel or
(ii) in the written opinion of counsel to such Indemnified Party, representation
of both  parties by the same  counsel  would be  inappropriate  due to actual or
potential conflicts of interest between them, it being understood, however, that
the  Indemnifying  Party  shall not,  in  connection  with any one such claim or
action or separate but substantially similar or related claims or actions in the
same jurisdiction  arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate  firm of attorneys
(together  with  appropriate  local  counsel)  at any time  for all  Indemnified
Parties.  No Indemnifying Party shall,  without the prior written consent of the
Indemnified  Party,  effect any settlement of any claim or pending or threatened
proceeding  in  respect of which the  Indemnified  Party is or could have been a
party and indemnity could have been sought hereunder by such Indemnified  Party,
unless such settlement  includes an  unconditional  release of such  Indemnified
Party from all liability  arising out of such claim or proceeding other than the
payment  of  monetary  damages  by  the  Indemnifying  Party  on  behalf  of the
Indemnified Party.  Whether or not the defense of any claim or action is assumed
by the Indemnifying  Party, such  Indemnifying  Party will not be subject to any
liability for any settlement made without its consent, which consent will not be
unreasonably withheld.

      (d) If the indemnification provided for in this Section 1.7 is unavailable
to the  Indemnified  Parties in respect of any Losses  referred to herein,  then
each Indemnifying  Party, in lieu of indemnifying such Indemnified  Party, shall
contribute to the amount paid or payable by such  Indemnified  Party as a result
of such Losses in such  proportion  as is  appropriate  to reflect the  relative
benefits  received  by the  Company  on the  one  hand  and the  holders  of the
Registrable  Securities  on the  other  from  the  offering  of the  Registrable
Securities,  or if such  allocation is not permitted by applicable  law, in such
proportion as is appropriate to reflect not only the relative  benefits but also
the  relative  fault  of the  Company  on the one hand  and the  holders  of the
Registrable  Securities  on the  other  in  connection  with the  statements  or
omissions which resulted in such Losses, as well as any other relevant equitable
considerations.  The  relative  fault of the Company on the one hand and of each
holder  of the  Registrable  Securities  on the  other  shall be  determined  by
reference to, among other things, whether any action taken, including any untrue
or alleged  untrue  statement  of a material  fact,  or the  omission or alleged
omission to state a material fact relates to information supplied by such party,
and  the  parties'  relative  intent,  knowledge,   access  to  information  and
opportunity to correct or prevent such statement or omission.

      The Company and the holders of the  Registrable  Securities  agree that it
would not be just and equitable if contribution  pursuant to this Section 1.7(d)
were  determined  by pro rata  allocation  or by any other method of  allocation
which does not take account of the equitable  considerations  referred to in the
immediately  preceding  paragraph.  The amount paid or payable by an Indemnified
Party  as a  result  of the  Losses  referred  to in the  immediately  preceding
paragraph  shall be deemed to  include,  subject  to the  limitations  set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in  connection  with  investigating  or  defending  any such  action  or  claim.
Notwithstanding the provisions of this Section 1.7, no holder of the Registrable
Securities shall be required to contribute any amount in excess of the amount by
which the total price at which the  Registrable  Securities  of such holder were
offered to the public  exceeds  the amount of any Losses  which such  holder has
otherwise paid by reason of such untrue or alleged untrue  statement or omission
or alleged omission.  No Person guilty of fraudulent  misrepresentation  (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to

                                       12
<PAGE>

contribution   from  any  Person   who  was  not   guilty  of  such   fraudulent
misrepresentation.  Each holder's  obligations  to  contribute  pursuant to this
Section  1.7 is several in the  proportion  that the  proceeds  of the  offering
received  by such  holder  of the  Registrable  Securities  bears  to the  total
proceeds  of  the  offering  received  by all  the  holders  of the  Registrable
Securities and not joint.

      1.8 Participation in Registrations.

      (a) No Person  may  participate  in any  registration  hereunder  which is
underwritten  unless such Person (i) agrees to sell such Person's  securities on
the basis provided in any  underwriting  arrangements  approved by the Person or
Persons  entitled  hereunder to approve such  arrangements  (including,  without
limitation,  pursuant to the terms of any  over-allotment or "green shoe" option
requested  by  the  managing  underwriter(s),  provided,  that  each  holder  of
Registrable  Securities  shall not be  required  to sell more than the number of
Registrable  Securities that such holder has requested the Company to include in
any registration) and (ii) completes and executes all questionnaires,  powers of
attorney,  indemnities,  underwriting  agreements and other documents reasonably
required under the terms of such underwriting arrangements and this Agreement.

      (b) Each  Person  that is  participating  in any  registration  under this
Agreement  agrees  that,  upon  receipt  of any notice  from the  Company of the
happening  of any event of the kind  described  in Section  1.6(e)  above,  such
Person will forthwith discontinue the disposition of its Registrable  Securities
pursuant to the Registration Statement and all use of the Registration Statement
or any prospectus or related  document until such Person's receipt of the copies
of a supplemented  or amended  prospectus as contemplated by such Section 1.6(e)
and,  if so  directed  by the  Company,  will  deliver  to the  Company  (at the
Company's  expense)  all  copies,  other than  permanent  file  copies,  then in
holder's  possession  of such  documents  at the time of receipt of such notice.
Furthermore,  each  holder  agrees  that if such  holder  uses a  prospectus  in
connection with the offering and sale of any of the Registrable Securities,  the
holder will use only the latest version of such prospectus provided by Company.

      2 Transfers of Certain Rights.

      2.1 Transfer. The rights granted to the Purchaser under this Agreement are
non-transferable except for a transfer, without any consideration whatsoever, to
a  person  or  entity  which is an  Affiliate  of the  transferor,  and any such
transfer,  in any case,  shall be subject to the  provisions of Sections 2.2 and
2.3;  provided  that  nothing  contained  herein  shall be  deemed  to permit an
assignment,  transfer or disposition of the Registrable  Securities in violation
of the terms and conditions of the Securities Purchase Agreement,  or applicable
law.

      2.2  Transferees.  Any  permitted  transferee  to whom  rights  under this
Agreement are transferred shall, as a condition to such transfer, deliver to the
Company a written  instrument by which such transferee agrees to be bound by the
obligations  imposed upon the Purchaser  under this Agreement to the same extent
as if such transferee were a Purchaser hereunder.

      2.3 Subsequent  Transferees.  A transferee to whom rights are  transferred
pursuant  to this  Section 2 may not  again  transfer  such  rights to any other
person or entity, other than as provided in Sections 2.1 or 2.2 above.

                                       13
<PAGE>

      3 Certain  Definitions.  The  following  capitalized  terms shall have the
meanings ascribed to them below:

            "Affiliate"  means any Person that directly or indirectly  controls,
or is under  control  with,  or is  controlled  by such Person.  As used in this
definition,  "control" (including with its correlative meanings, "controlled by"
and  "under  common  control  with")  shall  mean the  possession,  directly  or
indirectly,  of the power to direct or cause the direction of the  management or
policies of a Person (whether through  ownership of securities or partnership or
other ownership interests, by contract or otherwise).

            "Closing Price" means,  with respect to the  Registrable  Securities
(a) if the shares are listed or admitted for trading on any national  securities
exchange or included in The Nasdaq National  Market or Nasdaq  SmallCap  Market,
the last reported sales price as reported on such exchange or market; (b) if the
shares  are not  listed or  admitted  for  trading  on any  national  securities
exchange or included in The Nasdaq National  Market or Nasdaq  SmallCap  Market,
the average of the last reported  closing bid and asked quotation for the shares
as  reported  on  the  National  Association  of  Securities  Dealers  Automated
Quotation System ("NASDAQ") or a similar service if NASDAQ is not reporting such
information;  (c) if the shares are not listed or  admitted  for  trading on any
national securities exchange or included in The Nasdaq National Market or Nasdaq
SmallCap  Market or quoted by NASDAQ or a similar  service,  the  average of the
last reported bid and asked quotation for the shares as quoted by a market maker
in the  shares  (or if there is more than one  market  maker,  the bid and asked
quotation shall be obtained from two market makers and the average of the lowest
bid and  highest  asked  quotation).  In the  absence  of any  available  public
quotations  for the Common Stock,  the Board and a majority of the Holders shall
determine in good faith the fair value of the Common Stock.

            "Common  Stock" means the common stock,  par value $0.001 per share,
of the Company.

            "Employees" means any current,  former, or retired employee,  office
consultant,  advisor, independent contractor,  agent, officer or director of the
Company.

            "Exchange  Act"  means  the  Securities  Exchange  Act of  1934,  as
amended, and the rules and regulations of the SEC promulgated thereunder.

            "Market Price" means, on any date of  determination,  the average of
the  daily  Closing  Price of the  Registrable  Securities  for the  immediately
preceding  five (5) on which  the  national  securities  exchanges  are open for
trading.

            "Person" means any individual,  company,  partnership,  firm,  joint
venture,  association,  joint-stock company, trust, unincorporated organization,
governmental body or other entity.

            "Registrable Securities" means, subject to the immediately following
sentence,  (i) shares of Common  Stock and the  Warrant  Shares  underlying  the
Warrants  acquired by the applicable  Purchaser from the Company in the Offering
pursuant to the  Securities  Purchase  Agreement,  and (ii) any shares of Common
Stock issued or issuable  pursuant to this  Agreement or directly or  indirectly
with  respect  to the  securities  referred  to in  clause  (i) by way of  stock
dividend  or  stock  split  or in  connection  with  a  combination  of  shares,
recapitalization, merger, consolidation or other reorganization. As to any

                                       14
<PAGE>

particular  shares of Common Stock  constituting  Registrable  Securities,  such
shares of Common  Stock will cease to be  Registrable  Securities  when they (x)
have been  effectively  registered  under the  Securities Act and disposed of in
accordance  with a Registration  Statement  covering them, (y) have been sold to
the public  pursuant to Rule 144 (or by similar  provision  under the Securities
Act), or (z) are eligible for resale under Rule 144(k) (or by similar  provision
under the  Securities  Act) without any  limitation  on the amount of securities
that may be sold under paragraph (e) thereof.

            "Registration  Statement"  means any  registration  statement of the
Company  filed  under the  Securities  Act which  covers any of the  Registrable
Securities  pursuant  to  the  provisions  of  this  Agreement,   including  the
prospectus, amendments and supplements to such registration statement, including
post-effective  amendments,  all  exhibits  and  all  material  incorporated  by
reference in such registration statement.

            "SEC" means the United States Securities and Exchange  Commission or
any other federal agency at the time administering the Securities Act.

            "Securities  Act" means the Securities Act of 1933, as amended,  and
the rules and regulations of the SEC promulgated thereunder.

      4 Miscellaneous.

            4.1  Recapitalizations,  Exchanges,  etc.  The  provisions  of  this
Agreement  shall apply to the full extent set forth  herein with  respect to (i)
the Registrable  Securities,  (ii) any and all shares of Common Stock into which
the  Registrable  Securities  are  converted,  exchanged or  substituted  in any
recapitalization  or other capital  reorganization  by the Company and (iii) any
and all  equity  securities  of the  Company or any  successor  or assign of the
Company  (whether by merger,  consolidation,  sale of assets or otherwise) which
may  be  issued  in  respect  of,  in  conversion  of,  in  exchange  for  or in
substitution of, the Registrable  Securities and shall be appropriately adjusted
for any stock dividends, splits, reverse splits, combinations, recapitalizations
and the like  occurring  after the date  hereof.  The  Company  shall  cause any
successor  or  assign  (whether  by  merger,  consolidation,  sale of  assets or
otherwise) to enter into a new registration rights agreement with the Designated
Holders on terms  substantially the same as this Agreement as a condition of any
such transaction.

            4.2 No  Inconsistent  Agreements.  The Company has not and shall not
enter into any agreement  with respect to its  securities  that is  inconsistent
with the  rights  granted  to the  Purchasers  in this  Agreement  or grant  any
additional  registration  rights to any Person or with respect to any securities
which are not Registrable  Securities  which are prior in right to or materially
inconsistent with the rights granted in this Agreement.  The Parties acknowledge
and agree that the Company has granted  registration  rights  heretofore and may
grant registration  rights hereafter,  which are or shall be pari passu with the
registration rights of the Purchasers,  and shall not be deemed to conflict with
this covenant.

            4.3 Amendments and Waivers.  The provisions of this Agreement may be
amended and the Company may take action  herein  prohibited,  or omit to perform
any act herein  required to be performed by it, if, but only if, the Company has
obtained  the  written  consent  of  holders  of at  least  a  majority  of  the
Registrable Securities then in existence.

                                       15
<PAGE>

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

            4.5  Counterparts.  This  Agreement  may be  executed in one or more
counterparts  each of  which  shall  be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.

            4.6 Notices.  All notices,  requests and other communications to any
party  hereunder  shall be in  writing  (including  telecopy,  telex or  similar
writing)  and  shall  be  deemed  given  or made as of the  date  delivered,  if
delivered personally or by telecopy (provided that delivery by telecopy shall be
followed by delivery of an  additional  copy  personally,  by mail or  overnight
courier),  one day after being  delivered by overnight  courier or four business
days after being mailed by registered or certified mail (postage prepaid for the
most expeditious form of delivery,  return receipt requested), to the parties at
the following addresses (or to such other address or telex or telecopy number as
a party may have  specified by notice given to the other party  pursuant to this
provision):

             If to the Company, to:

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

             If to the Purchaser, to:

             The address or facsimile number of each Purchaser as recorded in
             the stockholders records of the Company.

            4.7 Governing Law. This Agreement shall be governed by and construed
in  accordance  with the laws of the  State of New York,  without  regard to the
conflicts of laws rules or provisions.

            4.8 Forum;  Service of Process. Any legal suit, action or proceeding
brought by any party or any of its affiliates  arising out of or based upon this
Agreement  shall be instituted in any federal or state court in New York County,
New York, and each party waives any objection which it may now or hereafter have
to the laying of venue or any such  proceeding,  and irrevocably  submits to the
jurisdiction of such courts in any such suit, action or proceeding.

            4.9 Captions.  The captions,  headings and arrangements used in this
Agreement  are for  convenience  only and do not in any way limit or amplify the
terms and provisions hereof.

                                       16
<PAGE>

            4.10  No  Prejudice.  The  terms  of  this  Agreement  shall  not be
construed  in favor of or against any party on account of its  participation  in
the preparation hereof.

            4.11 Words in Singular and Plural  Form.  Words used in the singular
form in this Agreement shall be deemed to import the plural,  and vice versa, as
the sense may require.

            4.12 Remedy for Breach. The Company hereby  acknowledges that in the
event of any breach or threatened breach by the Company of any of the provisions
of this  Agreement,  the  holders of the  Registrable  Securities  would have no
adequate  remedy at law and could suffer  substantial  and  irreparable  damage.
Accordingly,  the Company hereby agrees that, in such event,  the holders of the
Registrable  Securities shall be entitled,  and  notwithstanding any election by
any holder of the Registrable Securities to claim damages, to obtain a temporary
and/or permanent  injunction to restrain any such breach or threatened breach or
to obtain specific performance of any such provisions,  all without prejudice to
any and all other  remedies which any holder of the  Registrable  Securities may
have at law or in equity.

            4.13  Successors  and  Assigns;  Third  Party  Beneficiaries.   This
Agreement  and all of the  provisions  hereof shall be binding upon and inure to
the benefit of the parties  hereto,  each  subsequent  holder of the Registrable
Securities and their respective  permitted successors and assigns and executors,
administrators  and heirs.  Holders of the  Registrable  Securities are intended
third party  beneficiaries  of this Agreement and this Agreement may be enforced
by such holders.

            4.14  Entire  Agreement.   This  Agreement  sets  forth  the  entire
agreement and understanding  between the parties as to the subject matter hereof
and merges and supersedes all prior  discussions,  agreements and understandings
of any and every nature among them.

                  [Remainder of page intentionally left blank.]

                                       17
<PAGE>

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

                                          ADVANCE NANOTECH, INC.

                                          By:_________________________________
                                             Name:
                                             Title:

                                           By:_________________________________
                                           Name:    ______________
                                           Title:   Secretary

                                       18
<PAGE>

      IN WITNESS WHEREOF, the undersigned Purchaser has caused this Registration
Rights Agreement to be duly executed as of the date and year first above written
and to be bound hereby.

Shares of Common Stock and Warrants

are in:

<TABLE>
<S>                                                          <C>
                                                             Print Name of Investor

                                                             __________________ shares of Common Stock
____ individual name
                                                             _____________ Warrants

____ tenants in the entirety                                 __________________________________________
                                                             Print Name of Joint Investor
                                                             (if applicable)

____ corporation (an officer must sign)                      __________________________________________
                                                             Signature of Investor

____ partnership (all general partners must sign)            __________________________________________
                                                             Signature of Joint Investor

____ trust                                                   __________________________________________

                                                             __________________________________________
                                                             (with a copy to:)

                                                             __________________________________________

                                                             __________________________________________
                                                             Address of Investor

____ limited liability company

</TABLE>

                                       19EXHIBIT 10.7

                           [FORM OF INVESTOR WARRANT]

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

                                WARRANT AGREEMENT
                               FOR COMMON STOCK OF
                             ADVANCE NANOTECH, INC.

Warrant No. ____                        Warrant to purchase an aggregate of

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

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

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

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

<PAGE>

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

      2. Exercise; Payment for Ownership Interest.

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

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

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

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

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

                                      -2-
<PAGE>

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

            3.1 Adjustments.

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

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

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

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

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

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

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

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

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

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

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

                                      -4-
<PAGE>

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

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

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

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

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

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

                                      -5-
<PAGE>

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

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

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

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

                                      -6-
<PAGE>

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

            (A) Cash and Property: Such consideration shall:

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

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

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

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

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

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

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

                                      -7-
<PAGE>

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

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

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

      3.4 Other Notices. If at any time:

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

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

                                      -8-
<PAGE>

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

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

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

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

                                      -9-
<PAGE>

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

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

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

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

                                      -10-
<PAGE>

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

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

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

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

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

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

                                      -11-
<PAGE>

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

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

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

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

      15. Miscellaneous.

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

                                      -12-
<PAGE>

                           If to the Company:

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

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

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

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

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

                                      -13-
<PAGE>

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

             [the balance of this page is intentionally left blank]

                                      -14-
<PAGE>

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

                                     ADVANCE NANOTECH, INC.

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

                                      -15-
<PAGE>

                                  PURCHASE FORM

Dated: __________

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

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

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

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

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

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

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

<PAGE>

                               FORM OF ASSIGNMENT

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

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

Dated:   __________________   ___,  200__

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

                              Address of Transferee:

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

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

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

In the presence of:

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

                               CONSENT OF ASSIGNEE

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

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

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

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