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As filed with the Securities and Exchange Commission on September 25, 2000
File No. 333-_______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ISONICS CORPORATION
-------------------
(Exact name of Registrant as specified in charter)
California 77-0338561
---------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5906 McIntyre Street
Golden, Colorado 80403
(303) 279-7900
----------------------
(Address, including zip code and telephone number, including area code
of registrant's principal executive offices)
James E. Alexander, President
5906 McIntyre Street
Golden, Colorado 80403
(303) 279-7900
----------------------
(Name, address, including zip code and telephone number, including area code,
of agent for service)
It is requested that copies of all correspondence be sent to:
Herrick K. Lidstone, Jr., Esq.
Norton - Lidstone, P.C.
5445 DTC Parkway, Suite 850
Englewood, Colorado 80111-3053
Telephone Number (303) 221-5552
Facsimile Number (303) 221-5553
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [xx]
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If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Shares to Amount to be Proposed maximum Proposed maximum Amount of
be registered registered aggregate price aggregate offering price Registration Fee
per unit
<S> <C> <C> <C> <C>
Common (1) 3,304,471 $ 3.812500 $ 12,598,295.69 $ 4,345
Common (2) 1,180,333 $ 3.812500 4,500,019.56 1,552
Common (3) 690 $ 0.177101 122.20 1
Common (3) 304,098 $ 0.578800 176,011.92 61
Common (3) 50,000 $ 1.250000 62,500.00 22
Common (3) 2,761 $ 1.416515 3,911.00 1
Common (3) 50,000 $ 1.500000 75,000.00 26
Common (3) 70,000 $ 3.000000 210,000.00 72
Common (3) 2,296,667 $ 3.750000 8,612,501.25 2,970
Common (3) 39,578 $ 5.800000 229,552.40 79
Common (4) 20,000 $ 1.187500 23,750.00 8
Common (4) 20,000 $ 1.650000 33,000.00 11
Common (4) 30,000 $ 2.080000 62,400.00 22
Common (4) 20,000 $ 2.375000 47,500.00 16
Common (4) 50,000 $ 3.500000 175,000.00 60
Common (4) 30,000 $ 6.125000 183,750.00 63
Common (4) 20,000 $ 7.312500 146,250.00 50
--------- --------------- -------
Total 7,488,598 $ 27,139,564.02 $ 9,359
</TABLE>
Pursuant to Rule 416 of the Securities Act of 1933 and as required by
Section 2(a) of the registration rights agreement between the Company and the
Selling Stockholder, this registration statement shall be deemed to cover such
additional shares as may be issued to the Selling Shareholder to prevent
dilution resulting from future dividends, stock distributions, stock splits or
similar transactions.
(1) Shares which are held by certain persons referred to as "Selling
Shareholders" herein. The registration fee is based on the last sale
price quoted on the Nasdaq SmallCap Market on August 28, 2000,
($3-13/16, or in decimal form $3.8125) pursuant to Rule 457(c).
(2) Shares which are issuable pursuant to conversion rights for Series A
Preferred Stock that are outstanding. The registration fee is based on
the last sale price quoted on the Nasdaq SmallCap Market on August 28,
2000, ($3-13/16, or in decimal form $3.8125) pursuant to Rule
457(g)(3).
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(3) Shares which are issuable pursuant to the exercise of outstanding
common stock purchase warrants. The registration fee is based on the
exercise price of the Warrants pursuant to Rules 457(a) and (g).
(4) Shares which are issuable pursuant to the exercise of outstanding
options to purchase common stock. The registration fee is based on the
exercise price of the Warrants pursuant to Rules 457(a) and (g).
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
Subject to Completion, Dated September 25, 2000
PROSPECTUS
----------
ISONICS CORPORATION
7,488,598 Shares of Common Stock
Offered for Resale by Selling Shareholders
This Prospectus relates to the sale to the public of up to 7,488,598 shares
of common stock of Isonics Corporation, a California corporation (the "Company"
or "Isonics"), which are being offered and sold by the selling shareholders
named on page 19 below, collectively referred to herein as the "Selling
Shareholders." The shares being offered by the Selling Shareholders include:
<TABLE>
<S> <C>
3,304,471 shares currently outstanding;
1,180,333 shares issuable upon conversion of outstanding shares of our
Series A Preferred Stock;
2,813,794 shares issuable upon the exercise of outstanding common
stock purchase warrants exercisable at prices ranging from
$0.177101 to $5.800000; and
190,000 shares issuable upon the exercise of outstanding common
stock purchase options exercisable at prices ranging from
$1.187500 to $7.312500.
</TABLE>
Our common stock is listed for trading on the Nasdaq SmallCap Market
under the symbol "ISON." On September 22, 2000, our common stock's last
reported sale price on the Nasdaq SmallCap Market was $3.00 per share.
We will not receive any money from the sale of the shares, although we will
receive from $0 to approximately $10,000,000 to the extent any of the Selling
Shareholders exercise outstanding warrants or options for cash. We will pay all
expenses incurred in connection with this offering except commissions and
discounts, which any of the Selling Shareholders may pay to underwriters,
dealers, brokers or agents.
The Selling Shareholders have advised us that none of them has made any
commitments with respect to the sale of the shares, but that they may sell the
shares from time-to-time on the Nasdaq SmallCap Market; in the over-the-counter
market outside of Nasdaq; or in negotiated transactions other than the Nasdaq
SmallCap Market or the over-the-counter market. Any of these sales may involve
block transactions. The Selling Shareholders have advised us that any of them
may sell the Shares at market prices at the time of sale, at prices related to
prevailing market prices at the time of sale, or at other negotiated prices.
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES
ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING ON PAGE 7.
We have not authorized
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anyone to give information or to make any representation other than as contained
in this prospectus in connection with the offering described herein.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is September ____, 2000.
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HOW TO OBTAIN ADDITIONAL INFORMATION
We file annual, quarterly, proxy statements, and other information with the
Securities and Exchange Commission (the "SEC"). You may read and copy any
document we have filed with the SEC in its public reference room at 450 Fifth
Street N.W. Washington, D.C. 20549. You may obtain information on the operation
of the public reference room by calling the SEC at 1-800-432-0330. The SEC
maintains a World Wide Web site on the Internet at http://www.sec.gov that
contains reports, proxy and information statements, and other information
regarding companies, including those that Isonics files electronically with the
SEC.
We also furnish Annual Reports to our shareholders that contain audited
financial information.
This prospectus is part of a registration statement (on Form S-3) we have
filed with the SEC relating to this exchange offer and our Common Stock
described in this prospectus. As permitted by the SEC rules, this prospectus
does not contain all of the information contained in the registration,
accompanying exhibits and schedules we file with the SEC. You may refer to the
registration, the exhibits and schedules for more information about our Company
and our Common Stock. The registration statement, exhibits, and schedules are
also available at the SEC's public reference rooms or through its EDGAR database
on the Internet.
You should rely only on the information contained or incorporated by
reference in this prospectus. Isonics has not authorized anyone to provide you
with information that is different from what is contained in this prospectus.
You should not assume that the information contained in this prospectus is
accurate as of any date other than the date set forth on the front cover of this
prospectus.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information in
documents we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus, and
information that we file later with the SEC will automatically update and
supersede this information. These documents provide a significant amount of
information about us. We incorporate by reference the documents listed below and
any future filings we will make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934.
(1) Our Annual Report on Form 10-KSB for the fiscal year ended April 30, 2000,
as amended.
(2) Our Quarterly Report on Form 10-QSB for the quarter ended July 31, 2000,
filed on September 18, 2000.
(3) Our Current Report on Form 8-K, reporting an event of August 17, 2000,
describing the Company's extension of its exchange offer regarding its
Class A Warrants.
(4) Our proxy statement for our annual meeting of shareholders scheduled to be
held October 11, 2000.
(5) Our Registration Statement on Form 8-A filed on August 20, 1997,
registering our common stock and Class A Redeemable Common Stock Purchase
Warrants under the Securities Exchange Act of 1934, as amended by a Form
8-A/A1 filed on March 10, 2000.
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(6) Our Registration Statement on Form 8-A filed on May 30, 2000, registering
our Class B Common Stock purchase Warrants and our Class C Redeemable
Common Stock Purchase Warrants under the Securities Exchange Act of 1934.
We also incorporate by reference any future filings we may make with the
Securities and Exchange Commission under Sections 13(a), 13(c), 14, and 15(d) of
the Securities Exchange Act before the termination of this offering.
We have not authorized any person to give any information, which is
inconsistent with information contained in or incorporated into this prospectus.
You should not rely on any inconsistent information.
Neither the delivery of this Prospectus nor any sale made hereunder shall
under any circumstances create any implication that the information contained
herein is correct as of any time subsequent to the date hereof.
You may request a copy of these filings or a copy of any or all of the
documents referred to above which have been or may be incorporated in this
Prospectus by reference, at no cost, by writing us or calling us at the
following address and telephone number:
Isonics Corporation
5906 McIntyre Street
Golden, CO 80403
Telephone No.: (303) 279-7900
Facsimile No.: (303) 279-7300
Additionally, the documents are available electronically in the EDGAR database
on the web site maintained by the SEC. You can find this information at
http://www.sec.gov.
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NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS
In our effort to make the information in this prospectus more meaningful,
this prospectus contains both historical and forward-looking statements. All
statements other than statements of historical fact are forward-looking
statements within the meanings of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking statements
in this prospectus are not based on historical facts, but rather reflect the
current expectations of our management concerning future results and events.
The forward-looking statements generally can be identified by the use of
terms such as "believe," "expect," "anticipate," "intend," "plan," "foresee,"
"likely," "will" or other similar words or phrases. Similarly, statements that
describe our objectives, plans or goals are, or may be, forward-looking
statements.
Forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or achievements
of Isonics to be different from any future results, performance and achievements
expressed or implied by these statements. You should review carefully all
information, including the financial statements and the notes to the financial
statements included in this prospectus. In addition to the factors discussed
under "Risk Factors," the following important factors could affect future
results, causing the results to differ materially from those expressed in the
forward-looking statements in this prospectus:
- demand for, and acceptance of, our materials;
- changes in development, distribution and supply relationships;
- the impact of competitive products and technologies;
- the risk of operations in Russia, the Republic of Uzbekistan, and the
Republic of Georgia;
- dependence on future product development;
- the possibility of future customer concentration;
- our dependence on key personnel;
- the volatility of our stock price; and
- the impact of new technologies.
These factors are not necessarily all of the important factors that could
cause actual results to differ materially from those expressed in the
forward-looking statements in this prospectus. Other unknown or unpredictable
factors also could have material adverse effects on the future results of
Isonics. The forward-looking statements in this prospectus are made only as of
the date of this prospectus and Isonics does not have any obligation to publicly
update any forward-looking statements to reflect subsequent events or
circumstances. Isonics cannot assure you that projected results will be
achieved.
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PROSPECTUS SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION REGARDING OUR COMPANY AND THE COMMON STOCK BEING OFFERED BY THE
SELLING SHAREHOLDERS, AS WELL AS OUR FINANCIAL STATEMENTS AND NOTES TO THOSE
STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS AND IN THE DOCUMENTS
INCORPORATED BY REFERENCE.
ISONICS CORPORATION
Isonics is an advanced materials and technology company, which develops and
commercializes products based on enriched stable and radioactive isotopes. The
Common Stock of Isonics is traded on the Nasdaq SmallCap Market under the symbol
"ISON." The market for our stock has historically been characterized generally
by low volume and broad price and volume volatility. We cannot give any
assurance that a stable trading market will develop for our stock.
The address of our principal executive offices and our telephone and
facsimile numbers at that address are:
Isonics Corporation
5906 McIntyre Street
Golden, Colorado 80403
Telephone No.: (303) 279-7900
Facsimile No.: (303) 279-7300
THE SECURITIES
Currently the only class of our securities for which there is a public
market is our Common Stock. As of September 20, 2000, there were 11,439,326
shares of our Common Stock outstanding. If all of the options and warrants
described in this Prospectus are exercised, and all of the shares of Series A
Preferred Stock described herein are converted (of which there can be no
assurance), there would be an additional 4,184,127 shares outstanding. See
"Description of Securities" commencing on page 35, of this Prospectus.
THE OFFERING
The Selling Shareholders are offering up to 7,488,598 shares of Common
Stock (the "Shares"). Of these:
- 3,304,471 shares are currently issued and outstanding, and are held by
thirty-one (31) Selling Shareholders;
- 1,180,333 shares are issuable pursuant to conversion of 1,180,333
shares of our Series A Preferred Stock which is currently outstanding
and held by thirteen (13) Selling Shareholders;
- 2,813,794 shares are issuable to twenty-six (26) Selling Shareholders
should they exercise outstanding common stock purchase warrants
exercisable at prices ranging from $0.177101 to $5.800000; and
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- 190,000 shares are issuable to seven (7) Selling Shareholders
(including three who are directors) should they exercise outstanding
options to purchase common stock exercisable at prices ranging from
$1.187500 to $7.312500.
The Selling Shareholders will receive all of the proceeds from the offer
and sale of the Shares. The Company will receive proceeds to the extent any of
the Selling Shareholders exercise the Warrants or Options for cash.
The Company will pay the costs related to the filing of the registration
statement in which this Prospectus is included. The Selling Shareholders will
pay their own expenses related to the offer and sale of the Shares, including
any underwriter discounts or commissions.
RISK FACTORS
An investment in Isonics Corporation common stock is one of high risk. You
should carefully consider the risks described below before deciding whether to
invest in Isonics Corporation. If any of the contingencies discussed in the
following paragraphs or other materially adverse events actually materialize,
the business, financial condition and results of operations could be materially
and adversely affected. In such a case, the trading price of our Common Stock
could decline, and you could lose all or part of your investment.
HISTORY OF LOSSES; ENGAGING IN NEW LINES OF BUSINESS
We have not operated profitably to date since inception. Through October
31, 1999 (the end of our fiscal quarter immediately preceding the sale of our
depleted zinc business to Eagle-Picher), we recognized accumulated losses of
more than $4,500,000 notwithstanding receiving substantial revenues from the
sale of depleted zinc and other products, and we recognized operating losses for
the year ended April 30, 2000 of $2,401,000, and for the quarter ended July 31,
2000, of $993,000. We recognized net income for the year ended April 30, 2000
only because of the gain recognized on the sale of our depleted zinc assets to
Eagle-Picher.
The depleted zinc business had accounted for a significant portion of our
revenues during the past fiscal years. Following the sale of our depleted zinc
business, our primary risk is our reliance on products that have to date not
produced significant revenues. We have historically, and expect to continue to,
operate with little backlog and a significant portion of our net revenues have
been, and we believe will continue to be, derived from a limited number of
orders that are processed and shipped in the same quarter in which the orders
are received. These orders are primarily for radioisotopes. The timing of such
orders and their fulfillment has caused, and is likely to continue to cause,
material fluctuations in our operating results. Our expense levels are
relatively fixed, and prior quarters have indicated these factors will affect
our operating results for future periods.
We are engaging in research and development to diversify our business and
to expand other lines of our business. We are now seeking to identify and
evaluate a variety of new stable isotope products and potential markets for
economic and technical feasibility. We will continue to fund research and
development to improve technologies for isotope separation and materials
processing technologies. During fiscal 2000, 1999, and 1998, research and
development expenses were $1,224,000, $1,155,000, and
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$811,000, respectively. We cannot offer any assurance that our current or future
lines of business and our research and development efforts will be profitable.
See "Management's Discussion and Analysis."
RELATIONSHIP WITH CERTAIN SUPPLIERS AND AVAILABILITY OF RAW MATERIALS
Related to, but separate from, the sale of the depleted zinc business, we
contemporaneously signed a ten-year Supply Agreement by which we will have the
exclusive right to purchase quantities of isotopically pure silicon-28,
silicon-29, and silicon-30, and a non-exclusive right to purchase quantities of
isotopically pure carbon-12 and carbon-13 produced by Eagle-Picher from its
current and planned facilities in Oklahoma. The Supply Agreement locks-in what
we believe is a favorable purchase price for the aforementioned isotopes. As
partial consideration for the exclusivity provision, we agreed to pay
Eagle-Picher a fee equal to 3.0% of the net revenues from all sales made by us
of products incorporating enriched silicon isotopes supplied by Eagle-Picher. We
can offer no assurance that Eagle-Picher will be able to produce isotopes
meeting the specifications of the Supply Agreement for delivery to Isonics by
December 31, 2000. A delay in Eagle-Picher's ability to begin production could
force us to seek other suppliers. As of September 20, 2000, Eagle-Picher had not
delivered any silicon-28. Eagle-Picher representatives have informed us that
they intend to honor their delivery commitment of 200 kilograms by December 31,
2000.
LIMITED SOURCES FOR RAW MATERIALS
Stable isotopes constitute the principal raw material required for the
manufacture of our products. The principal sources for enriched stable isotopes
are suppliers in Russia, Uzbekistan, and the Republic of Georgia. Oak Ridge
National Laboratory in Oak Ridge, Tennessee, which relies on government funding
for continuing production, and certain foreign facilities in the world including
private and pseudo-governmental organizations in Great Britain, Germany, The
Netherlands and the Republic of South Africa, have the potential to produce
stable isotopes, and in certain cases, actually produce isotopes. Although
currently enriched stable isotopes are also available from additional foreign
sources, there can be no assurance that there will continue to be an adequate
supply of enriched stable isotopes. Although we expect that our current supply
contracts will be sufficient to produce most isotopes, the production processes
require various proprietary separation techniques, which although developed by
our suppliers, may not have all been tested to date and as to the success of
which there can be no assurance. These limited sources of raw materials may
result in an inability to deliver radioisotopes or other isotopes in accordance
with our contractual requirements (whether or not the failure is our fault) and
possibly resulting in liability related to such failure.
OPERATIONS IN RUSSIA, THE REPUBLIC OF UZBEKISTAN, AND THE REPUBLIC OF GEORGIA
Operations in Russia, Republic of Uzbekistan ("Uzbekistan"), and the
Republic of Georgia ("Georgia") entail certain risks. Recently, the former
republics of the Soviet Union including Uzbekistan and Georgia have experienced
political, social and economic change as they obtained independence from the
former central government in Moscow. Certain of the republics, including Russia,
Uzbekistan, and Georgia, have attempted to transition from a central-controlled
economy toward a market-based economy. These changes have involved, in certain
cases, armed conflict. The political or economic instability in these republics
may continue or even worsen. The supply of stable isotopes could be directly
affected by political, economic and military conditions in Russia, Uzbekistan,
and Georgia. Accordingly, our operations could be materially adversely affected
if hostilities in Russia, Uzbekistan, or Georgia should occur, if trade between
Russia, Uzbekistan, or Georgia and the United States were interrupted, if
political conditions in Russia, Uzbekistan, or Georgia disrupt transportation or
processing concerning our goods, if
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laws or government policies concerning foreign business operations in Russia,
Uzbekistan, or Georgia change substantially, or if tariffs are introduced.
DEPENDENCE ON FUTURE PRODUCT DEVELOPMENT
On December 1, 1999, we sold our depleted zinc business, which provided 21%
and 35% of our revenues in fiscal 2000 and 1999, respectively. As a result our
future operations will be more heavily dependent upon our ability to develop new
products using stable and radioisotopes and to market and sell those products
profitably. While we have a high degree of confidence we can be successful, we
can expect to incur significant operating losses until we are able to do so. Our
ability to develop, market and sell these products will depend on our suppliers'
(including Eagle-Picher) ability to meet our demand for stable and
radioisotopes, as well as, other suppliers who modify the chemical and physical
forms of these isotopes. There can be no assurance that we will be able to
develop products that can be profitably marketed and sold.
CUSTOMER CONCENTRATION
Prior to fiscal 1999, substantially all of our net revenues in any
particular period have been attributable to a limited number of customers,
primarily General Electric Corporation. Consistent with our historical
experience, our quarterly results during fiscal year 2000 were affected
materially by the level of orders received from a limited number of significant
depleted zinc users during such quarters and product shipments by us to our
depleted zinc customers during such period. Despite the sale of the depleted
zinc business, we continue to be subject to a certain degree of variability
based on the timing of sales of our stable and radioisotopes orders. We cannot
be assured that our principal customers will continue to purchase our products.
A decrease in or loss of orders from one or more major customers would have a
material and adverse effect on our financial condition and results of
operations.
While our goal is to diversify our customer base, we expect to continue to
depend upon a relatively small number of customers for a significant percentage
of our revenues for the foreseeable future. Significant reductions in sales to
any of our large customers have had and may in the future have a material
adverse effect on us. We cannot guarantee that present or future customers will
not terminate their arrangements with us or significantly change, reduce or
delay the amount of manufacturing services ordered from us. A termination of a
manufacturing relationship or change, reduction or delay in orders could harm
us.
FACTORS AFFECTING OPERATING RESULTS; VARIABILITY OF ORDERS
We operate with little backlog. A significant portion of our net revenues
have been, and we believe will continue to be, derived from a limited number of
orders that are processed and shipped in the same quarter in which the orders
are received. The timing of such orders and their fulfillment has caused, and is
likely to continue to cause, material fluctuations in our operating results. Our
expense levels are relatively fixed, and as has been the case in prior quarters,
these factors will affect our operating results for future periods.
MANAGEMENT OF GROWTH
We have experienced periods of rapid growth that have placed a significant
strain on our financial and managerial resources. Our ability to manage growth
effectively, particularly given our increasing scope of operations, will require
us to continue to implement and improve our management, operational,
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and financial information systems, as well as to develop the management skills
of our personnel and to train, motivate and manage our employees. Our failure to
effectively manage growth could have a material adverse effect on our business,
financial condition and results of operations.
DEPENDENCE ON KEY PERSONNEL
Our future success will depend in significant part upon the continued
service of our key technical, sales and senior management personnel, including
James E. Alexander, our President and Chief Executive Officer; Boris
Rubizhevsky, our Senior Vice President, Isotope Production and Supply; Robert
Cuttriss, President of Interpro; and Herbert Hegener, Managing Director of
Chemotrade. We maintain $1,000,000 of key man life insurance on the lives of
Messrs. Alexander, Rubizhevsky and Cuttriss and all are covered by employment
agreements extending through September 2001, 2002, and 2003, respectively
(although the individuals may terminate these agreements prematurely, in their
discretion). Mr. Hegener is covered by an employment agreement extending through
the year 2001. We believe that our future success will depend in large part upon
our ability to attract and retain qualified personnel for our operations. The
failure to attract or retain such persons could materially adversely affect our
business, financial condition and results of operations.
POSSIBLE NEED FOR ADDITIONAL FINANCING
We anticipate no need for additional financing in the next twelve months,
but we do anticipate a need for a substantial amount of financing after our
current fiscal year ending April 30, 2001. Factors that may lead to a need for
additional financing include:
- delays in Eagle-Picher's production of silicon and carbon isotopes
from its plant in Oklahoma, and the resulting delays in their delivery
of the isotopes to us under the terms of the supply agreement;
- unanticipated expenses in developing our new products or in producing
or marketing our existing products;
- the necessity of having to protect and enforce our intellectual
property rights;
- technological and market developments; and
- a corporate decision to expand our production capacity through capital
investment or acquisition.
The exercise of the Class A Warrants, the Class B Warrants, or the Class C
Warrants will provide us with some additional financing, but we cannot offer any
assurance that any warrants will be exercised. The unavailability of additional
financing, when needed, could have a material adverse effect on our business.
NO ASSURANCE AS TO VALIDITY OF INTELLECTUAL PROPERTY RIGHTS
We rely primarily on a combination of trade secrets, confidentiality
procedures and contractual provisions to protect our technology. Despite our
efforts to protect our rights, unauthorized parties may attempt to copy aspects
of our products or to obtain and use information that we regard as
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proprietary. Policing unauthorized use of our technology and products is
difficult. In addition, the laws of many countries do not protect our rights in
information, materials and intellectual property that we regard as proprietary
and that are protected under the laws of the United States. There can be no
assurance that our means of protecting our rights in proprietary information,
materials and technology will be adequate or that our competitors will not
independently develop similar information, technology, or intellectual property.
We currently have no patents in our own name and have not filed any patent
applications. We have rights to several isotopically engineered innovations
regarding electronic and optical materials that we believe may be patentable.
Ongoing work in the area of isotope separation by chemical means may also lead
to patentable inventions. In such cases, we intend to file patent applications
for some of these modifications, improvements, and inventions and to protect
others as trade secrets. There can be no assurance, however, that patents on
such modifications, improvements or inventions will be issued or, if issued,
that such patents or modifications and improvements protected as trade secrets
will provide meaningful protection.
Third parties may have filed applications for or have been issued patents
and may obtain additional patents and proprietary rights related to products or
processes competitive with or similar to those of Isonics. We may not be aware
of all patents potentially adverse to our interests that may have been issued to
others and there can be no assurance that such patents do not exist or have not
been filed or may not be filed or issued. If patents have been or are issued to
others containing preclusive or conflicting claims and such claims are
ultimately determined to be valid, we may be required to obtain licenses thereto
or to develop or obtain alternate technology. There can be no assurance that
such licenses, if required, would be available on commercially acceptable terms,
if at all, or that we would be able to develop or obtain alternate technology,
which would have a material adverse effect on our business.
There can be no assurance that the validity of any of the patents licensed
to, or that may in the future be owned by us would be upheld if challenged by
others in litigation or that our products or technologies, even if covered by
our patents, would not infringe patents owned by others. We could incur
substantial costs in defending suits brought against us, or any of our
licensors, for infringement, in suits by us against others for infringement, or
in suits contesting the validity of a patent. Any such proceedings may be
protracted. In any suit contesting the validity of a patent, the patent being
contested would be entitled to a presumption of validity and the contesting
party would be required to demonstrate invalidity of such patent by clear and
convincing evidence. If the outcome of any such litigation were adverse to our
interests, our business would be materially adversely affected.
In certain instances, we may choose not to seek patent protection and may
rely on trade secrets and other confidential know-how to protect our
innovations. There can be no assurance that protectable trade secrets or
know-how will be established, or if established, that they will remain protected
or that others will not independently and lawfully develop similar or superior
innovations. We require all employees to sign intellectual property assignment
and non-disclosure agreements. In certain instances, we will enter into
agreements with our employees pursuant to which the employee will be entitled to
a small royalty with respect to products developed by Isonics based upon the
employee's inventions. In addition, all directors, consultants and other parties
to whom confidential information has been or will be disclosed have or will
execute agreements containing confidentiality provisions. There can be no
assurance, however, that any such intellectual property assignment agreements
and confidentiality agreements will be complied with or will be enforceable.
COMPETITION AND RISK OF TECHNOLOGICAL OBSOLESCENCE
Within the United States, we believe there currently is no producer of a
full range of stable enriched isotopes for commercial sale. The U.S. government
produces isotopes, but primarily for research
11
<PAGE>
purposes. There can be no assurance that a third party will not contract with
the U.S. government to acquire isotopes for commercial sale. Outside the United
States, many countries and businesses produce stable and radioactive isotopes.
Some of these businesses have substantially greater capital and other resources
than do we.
Further, it is possible that future technological developments may occur,
and these developments may render our radioisotopes and stable isotopes obsolete
or non-competitive.
Rapidly changing technology and continuing process development characterize
the market for our manufacturing services. We believe that our future success
will depend in large part upon our ability to develop and market manufacturing
services which meet changing customer needs, maintain technological leadership
and successfully anticipate or respond to technological changes in manufacturing
processes on a cost-effective and timely basis. We cannot guarantee that our
process development efforts will be successful.
In the future, we may face substantial competition, and we may not be able
to compete successfully against present or future competitors.
ENVIRONMENTAL COMPLIANCE
We are subject to a variety of federal, state, and local environmental
regulations relating to the use, storage, discharge and disposal of hazardous
chemicals used during the manufacturing process. While we believe that we are in
compliance with all environmental regulations, if we fail to comply with present
and future regulations we could be subject to future liabilities or the
suspension of production. In addition, these regulations could restrict our
ability to expand our facilities or could require us to acquire costly equipment
or to incur other significant expenses to comply with governmental regulations.
Historically, our costs of compliance with environmental regulations have not
been material.
CONTROL BY DIRECTORS AND OFFICERS
Even if all of the Class A Warrants are exercised (which we cannot assure),
our directors and officers will beneficially own 44.0% of the outstanding shares
of Common Stock as of August 29, 2000, the date of this prospectus, and,
accordingly, will have the ability to elect a majority of the directors of
Isonics and otherwise control the company.
PRODUCT LIABILITY EXPOSURE AND INSURANCE
The use of our radioisotopes in radiopharmaceuticals and in clinical trials
may expose us to potential product liability risks that are inherent in the
testing, manufacture, marketing and sale of human diagnostic and therapeutic
products. We currently have product liability insurance; however, there can be
no assurance that a product liability or other claim would not materially and
adversely affect our business or financial condition.
PRICE VOLATILITY
The trading price of our securities has been subject to wide fluctuations
in response to quarter-to-quarter variations in operating results, our
announcements of technological innovations or new products by us or our
competitors, and other events or factors. The securities markets have from time
to time experienced significant price and volume fluctuations that may be
unrelated to the operating performance
12
<PAGE>
of particular companies. Announcements of delays in our testing and development
schedules, technological innovations or new products by Isonics or our
competitors, developments or disputes concerning patents or proprietary rights,
regulatory developments in the United States and foreign countries, public
concern as to the safety of products containing radioactive compounds and
economic and other external factors, as well as period-to-period fluctuations in
our financial results, may have a significant impact on the market price of our
securities. In addition, the realization of any of the risks described in these
"Risk Factors" could have a significant and adverse impact on such market prices
PENNY STOCK REGULATIONS
Although our Common Stock is currently quoted on the Nasdaq SmallCap
Market, our Common Stock has been subject to additional disclosure requirements
for penny stocks mandated by the Securities Enforcement Remedies and Penny Stock
Reform Act of 1990. The SEC Regulations generally define a penny stock to be an
equity security that has a market price of less than $5.00 per share, subject to
certain exceptions. Unless an exception is available, the regulations require
the delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated therewith.
We have, at times in the recent past, been included within the SEC Rule 3a-51
definition of a penny stock. When our common stock is considered to be a "penny
stock", trading is covered by Rule 15g-9 promulgated under the Securities
Exchange Act of 1934 for non-Nasdaq and non-national securities exchange listed
securities. Under such rule, broker-dealers who recommend such securities to
persons other than established customers and accredited investors must make a
special written suitability determination for the purchaser and receive the
purchaser's written agreement to a transaction prior to sale. The regulations on
penny stocks limit the ability of broker-dealers to sell our Common Stock and
thus the ability of purchasers of our Common Stock to sell their securities in
the secondary market. To the extent we are able to maintain our listing on the
Nasdaq SmallCap Market, we will not be subject to these penny stock rules.
POTENTIAL ADVERSE MARKET IMPACT OF SHARES ELIGIBLE FOR FUTURE SALE
Our stock price may be hurt by future sales of our shares or the perception
that such sales may occur. As of the date of this Prospectus, approximately
9,084,237 shares of Common Stock held by existing stockholders constitute
"restricted shares" as defined in Rule 144 under the Securities Act. These
shares may only be sold if they are registered under the Securities Act or sold
under Rule 144 or another exemption from registration under the Securities Act.
Sales under Rule 144 are subject to the satisfaction of certain holding periods,
volume limitations, manner of sale requirements, and the availability of current
public information about us. Of the aforementioned 9,084,237 "restricted
shares", 2,609,580 shares will become unrestricted because of their inclusion in
this prospectus. The number of "restricted shares" after this prospectus will be
6,474,657.
A substantial portion all of our restricted shares of Common Stock are
either eligible for sale pursuant to Rule 144 or have been registered under the
Securities Act for resale by the holders, including the Common Stock covered by
this Prospectus. This will permit the sale of registered shares of Common Stock
in the open market or in privately negotiated transactions without compliance
with the requirements of Rule 144. We are unable to estimate the amount, timing
or nature of future sales of outstanding Common Stock. Sales of substantial
amounts of our Common Stock in the public market may hurt the stock's market
price.
EFFECT OF OUTSTANDING CONVERTIBLE PREFERRED STOCK, OPTIONS, AND WARRANTS
13
<PAGE>
As of September 20, 2000, we had outstanding preferred stock convertible
into and options and warrants to purchase an aggregate of 5,872,479 shares of
Common Stock. As long as these shares of convertible preferred stock remain
outstanding and the options and warrants remain unexercised, the terms under
which we could obtain additional capital may be adversely affected. Moreover,
the holders of the convertible preferred stock, options and warrants may be
expected to exercise them at a time when we would, in all likelihood, be able to
obtain any needed capital by a new offering of our securities on terms more
favorable than those provided by these securities.
ANTI-TAKEOVER PROVISIONS
Our Articles of Incorporation authorize the issuance of "blank check"
preferred stock with such designations, rights, and preferences as may be
determined by our Board of Directors. Accordingly, the Board of Directors may,
without stockholder approval, issue shares of preferred stock with dividend,
liquidation, conversion, voting or other rights that could adversely affect the
voting power or other rights of the holders of our Common Stock. Preferred stock
could also be issued to discourage, delay or prevent a change in our control,
although we do not currently intend to issue any additional series of our
preferred stock.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our Bylaws provide for indemnification of officers and directors to the
full extent permitted by California law. We may be required to pay certain
judgments, fines and expenses incurred by an officer or director, including
reasonable attorneys' fees, as a result of actions or proceedings in which such
officers and directors are involved by reason of being or having been an officer
or director.
NO DIVIDENDS ANTICIPATED TO BE PAID
We have never paid any cash dividends on our Common Stock and we do not
anticipate paying cash dividends on our Common Stock in the future. The future
payment of dividends is directly dependent upon our future earnings, capital
requirements, financial requirements and other factors to be determined by our
Board of Directors. It is anticipated that future earnings if any, which may be
generated from our operations will be used to finance our growth, and that cash
dividends will not be paid to our stockholders
RISK OF FORWARD-LOOKING INFORMATION
We have included a significant amount of forward-looking information in
this prospectus. Because it is not possible to predict the future, there is a
significant risk that the forward-looking information will prove to be
incorrect, and perhaps materially incorrect.
14
<PAGE>
WHO WE ARE
Our corporate name is "Isonics Corporation." We are an advanced materials
and technology company, which develops and commercializes products created from
materials whose natural isotopic ratios have been modified. An isotope is one of
two or more species (or nuclides) of the same chemical element, which differ
from one another only in the number of neutrons in the atom's nucleus. The
different number of neutrons can create significantly different nuclear
properties; the most well known of these properties is radioactivity.
Radioactive isotopes (or radioisotopes) can be found in nature; however, most of
our radioisotopes are man-made. Stable isotopes are not radioactive.
To take advantage of some of these different nuclear properties--and to
create our products--it is usually necessary to increase ("enrich") or decrease
("deplete") the concentration of a particular isotope or isotopes. There are
over 280 naturally occurring stable isotopes of 83 different elements. The
number of isotopes of any given element varies widely. Stable isotopes of a
given element typically do not differ significantly in their chemical behavior.
Stable isotopes of an element differ in mass and diameter, as well as several
nuclear properties, such as cross-section, spin and magnetic moment. Differences
in these properties can result in substantially different effects, and some of
these different effects have the potential for commercial application. (Isotopes
are typically referred to by their atomic mass number, which is the sum of the
number of protons and neutrons in the atom's nucleus, e.g., oxygen-18 has eight
protons and ten neutrons in its nucleus, and silicon-28 has fourteen protons and
fourteen neutrons in its nucleus.)
For example, in ultra chemically pure crystals, grown for electronics or
optical applications, isotopic impurities are the greatest contributor to
crystal disorder because of mass and diameter variations. Eliminating this
disorder by using a single enriched isotope (i.e. an isotopically pure
substance) results in increased thermal conductivity and optical transparency,
and thus in improved product performance. Similarly, enriching or depleting
isotopes based upon their nuclear cross-sections allows materials to be
engineered for applications in the nuclear power industry, for controlled doping
of some semiconductors in the computer industry, and for use as targets to
produce radioisotopes for the life sciences and other industries.
Another example is labeling or tagging of materials. By varying the natural
abundance of isotopes present in the material, the material acquires its own
unique mass and/or nuclear magnetic signature. This process "tags" the material,
and most importantly, does not change a given material's chemical properties.
Though chemically equivalent, the "tagged" material is discernible from
unlabeled materials through the use of several types of instruments including
mass spectrometers.
Enriched stable isotopes may be thought of as extremely pure materials. Not
only are they chemically pure, but also consist primarily of only one isotope
depending on the level of enrichment. This extra degree of purification,
accomplished on the sub-atomic level, provides enhanced performance properties
compared to normal (chemical only) purity materials. Depleted isotopes are
typically processed further, and the elimination (or reduction in level) of an
isotope, or isotopes, prevents the creation of undesirable byproducts in these
subsequent processing steps. In some instances the undesirable byproducts are
produced during the intended use of the non-depleted isotope material.
Stable isotopes have commercial uses in several areas, including: energy
generation; medical research, diagnostics, and drug development; product tagging
and stewardship; semiconductors; and optical materials. We have successfully
developed and commercialized several isotope products and intend to promote the
emergence and growth of new stable isotope applications. The radioactive
isotopes
15
<PAGE>
(or radioisotopes) we produce and sell are typically used in medical diagnostic,
treatment, and therapy applications. In most cases we first produce an enriched
or depleted stable isotope "target," which is then exposed to an appropriate
form of radiation to create a specific radioisotope.
A key property of a radioisotope is its half-life. The half-life is a
measure of how fast a radioisotope decays into either a stable isotope or
another radioisotope. Since most radioisotopes used in life science applications
have short half-lives, they are rarely found in nature. Therefore these isotopes
have to be made from a target material, usually in a nuclear reactor or a
cyclotron, and usually used immediately. A nuclear reactor or a cyclotron
generates the appropriate form of radiation required to convert the target
material into the desired radioisotope.
Today our isotope business addresses the material needs of two primary
markets: life sciences and semiconductor materials. While we currently are
focusing on these two markets, we continually evaluate other applications for
both stable and radioisotopes. We also sell isotopes for use in basic scientific
research and certain specific industrial applications. We believe our core
competency is our ability to identify, develop, source, and commercialize
products and services based on isotopically engineered materials.
We were formed in March 1992, as a partnership, and were subsequently
incorporated in California in March 1993, as A&R Materials, Inc. In September
1996, we changed our name to Isonics Corporation. Our principal executive
offices are located at 5906 McIntyre Street, Golden, Colorado 80403. Our
telephone number is (303) 279-7900, and our facsimile number is (303) 279-7300.
Our web site can be found at www.isonics.com.
USE OF PROCEEDS
The Selling Shareholders named in this Prospectus will receive all proceeds
from the sale of the Shares offered and sold under this Prospectus.
If and to the extent any Selling Shareholder exercises any of the
outstanding warrants and options for cash, we will receive proceeds equal to the
aggregate exercise price of the warrants and options, which may be $0.00 or as
much as $10,000,000, if all of the warrants and options are exercised for cash.
Some of the warrants allow the holder to effect a "cashless" exercise of the
warrants which would eliminate the cash we may receive, but which would also
reduce the number of shares issuable upon exercise. The warrants and options are
described under the caption "Selling Shareholders." Any proceeds we may receive
from the exercise of any warrants or options will be used for working capital.
We cannot offer any assurance that any warrants or options will be exercised.
We will not receive any proceeds should any holder of our Series A
Preferred Stock elect to convert their shares of Series A Preferred Stock into
shares of common stock for sale under this Prospectus.
The Selling Shareholders will pay any selling commissions and expenses they
may incur for brokerage, accounting, tax, legal services or other expenses
relating to the disposition of their shares, as well as any transfer taxes on
the shares that they sell. We will bear all other costs, fees and expenses
relating to the registration of the shares, including, without limitation, all
registration and filing fees, Nasdaq listing fees, fees and expenses of our
counsel, fees of our accountants, and blue sky fees and expenses.
16
<PAGE>
SELLING SHAREHOLDERS
This Prospectus includes:
- 3,304,471 shares of common stock which are already outstanding;
- an additional 1,180,333 shares issuable upon conversion of shares of
our outstanding Series A Preferred Stock.
- an additional 2,813,794 shares issuable upon exercise of warrants, at
prices ranging from $0.177101 to $5.800000, which have been
outstanding for more than one year; and
- an additional 190,000 shares issuable upon exercise of options, at
prices ranging from $1.187500 to $7.312500, which have been
outstanding for up to more than three (3) years; and
We have issued the shares, warrants and Series A Preferred Stock in a
series of private placements during a period starting in January 1996 through
July 2000. The options have been issued to employees and others who have
performed services for us during the same period. We have set forth in the
following table, to our knowledge, information about the selling stockholders as
of September 20, 2000, or such later date as the selling stockholders have
provided the information. We have calculated beneficial ownership based on SEC
requirements, and the information we have included regarding beneficial
ownership is not necessarily indicative of beneficial ownership for any other
purpose. Unless we otherwise indicate below, each stockholder named in the table
has sole voting and investment power with respect to all shares he, she or it
beneficially owns, subject to applicable community property laws. We have based
the percentage calculated for each selling stockholder upon the sum of the
"Common Stock" and "Common Stock Issuable Upon Exercise of Warrants and
Conversion of Preferred Stock" columns.
Any material relationship the selling stockholders have had with Isonics
during the past three years is described in the notes to the Table below
We do not know when or in what amounts the Selling Shareholders may offer
Shares for sale. The Selling Shareholders may decide not to sell all or any of
the shares that this prospectus covers. Because the Selling Stockholders may
offer all or some of the shares pursuant to this offering, and because there are
currently no agreements, arrangements or understandings with respect to the sale
of any of the shares that the Selling Shareholders will hold after completion of
the offering, we cannot estimate the number of the shares that the Selling
Shareholders will hold after completion of the offering. However, for purposes
of this table, we have assumed that, after completion of the offering, the
Selling Shareholders will hold none of the shares that this prospectus covers.
17
<PAGE>
<TABLE>
<CAPTION>
--------------------- ----------- ------------------------------------ ------------------ ----------------------------------
Name of Selling Material Common Stock Beneficially Common Stock Common Stock to be
Shareholder(s) Relationship Owned Prior to Offering Offered Pursuant Beneficially Owned After
to Issuer (or to this Offering Assuming All
predecessor Prospectus Shares Offered are Sold
or affiliate)
within past
three years
--------------------- ----------------- ---------------------------------------- -------------------- --------------- --------------
Common Common Common Common Stock Percent
Stock Stock Stock
owned Issuable Issuable
upon upon
exercise Conversion
of of
Warrants Preferred
or Options Stock
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mr. James C. Estep, None. 38,490 None. None. 38,490 common None. 0.0%.
Jr. & Mrs. Virginia common shares
Estep (1) shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. James C. Estep, None. 38,490 None. None. 38,490 common None 0.0%.
III (2) common shares
shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. & Mrs. Paul None. 2,071 4,755 None. 6,826 common None 0.0%.
Catuna, Sr. (3) common common shares
shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. & Mrs. Paul Yes. 58,726 2,274 None. 59,877 common 1,123 common Less than
Catuna, Jr. (4) See Note (5). common common shares shares 0.1%.
shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. & Mrs. Manny & None. 38,626 None. None. 38,626 common None. 0.0%.
Phyllis Eiden (6) common shares
shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. & Mrs. Gutel & None. 37,626 None. None. 37,626 common None. 0.0%.
Maria Rubirzewski (7) common shares
shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Dr. & Mrs. Stephen Yes. 96,325 192,887 None. 94,337 common 194,875 common Approximately
J. & Jacqueline See Note (9). common common shares shares. 1.2%.
Burden (8) shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
The Jacques Delente Yes. 329,974 None. None. 329,974 common None. 0.0%
Revocable Trust, See Note (11). common shares
Mr. Jacques Delente, shares
Trustee (10)
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Martin Laurent (12) Yes. 81,378 None. None. 34,641 common 46,737 common Approximately
See Note (13). common shares shares 0.3%
shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
</TABLE>
18
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Ms. Lindsay Gardner Yes. 249,761 40,000 None. 289,761 common None. 0.0%
& Mr. Henry Eng (14) See Note (15). common common shares
shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Simera None. 155,317 86,000 None. 240,817 common 500 common Less than
International, Inc. common common shares shares 0.1%.
(16) shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Deere Park Capital, None. 99,392 None. None. 99,391 common 1 common share Less than
LLC, (17) common shares 0.1%.
shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. Larry J. Wells, Yes. 77,241 30,000 None. 107,241 common None. 0.0%
DayStar Partners, See Note (19). common common shares
L.P. (18) shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Growth Capital None. 99,332 None. None. 99,332 common None. 0.0%
Resources (20) common shares
shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. Don Hateley (21) None. None. 231,529 None. 231,529 common None. 0.0%
common shares
shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. Alan Nopar (22) None. None. 60,820 None. 60,820 common None. 0.0%
common shares
shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. Jonathan Blau None. None. 11,749 None. 11,749 common None. 0.0%
(23) common shares
shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Adam-Cedlinden Co. None. None. 66,667 66,667 133,334 common None. 0.0%
General Partnership common common shares
II (24) shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Adam Smith Yes. None. 113,334 113,334 226,668 common None. Not Applicable
Investments, Ltd. See Note (26). common common shares
(25) shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Adam Smith Yes. None. 553,334 553,334 1,106,668 common None. Not Applicable
Investment See Note (26). common common shares
Partners, L.P. (27) shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Adam-The Fisher None. None. 100,000 100,000 200,000 common None. 0.0%
Fund General common common shares
Partnership II (28) shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Anfel Trading, Ltd. Yes. 333,334 333,334 None. 666,668 common None. 0.0%
(29) See Note (30). common common shares
shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
</TABLE>
19
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. Herschel P. None. None. 6,666 6,666 13,332 common None. 0.0%
Berkowitz (31) common common shares
shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Fairway Investors, None. None. 200,000 200,000 400,000 common None. 0.0%
LLC (32) common common shares
shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
FBE Finvest LLC (33) None. None. 66,667 66,667 133,334 common None. 0.0%
common common shares
shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. Adolph Grossman None. None. 6,666 6,666 13,332 common None. 0.0%
(34) common common shares
shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. & Mrs. Richard Yes. None. 20,000 20,000 40,000 common None. 0.0%
and Ana Grossman, See Note (26). common common shares
JTWROS (35) shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. Orin Hirschman None. None. 20,000 20,000 40,000 common None. 0.0%
(36) common common shares
shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. James Kardon (37) None. 3,000 6,666 3,666 13,332 common None. 0.0%
common common common shares
shares shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Dr. Harry Lawroski None. None. 16,667 16,667 33,334 common None. 0.0%
(38) common common shares
shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. Paul Packer (39) None. None. 6,666 6,666 13,332 common None. 0.0%
common common shares
shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Adam Smith & Co. Yes. None. 500,000 None. 500,000 common None. Not Applicable
(40) See Note (26). common shares
shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Pictet & Cie. None. 133,333 183,333 None. 316,666 common None. 0.0%
Asignee for Anne common common shares
Marie Barth (41) shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. Herbert Hegener Yes. 143,365 35,000 None. 178,365 common None. 0.0%
(42) See Note (43) shares shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. Helmut Swyen None. 127,865 35,000 None. 162,865 common None. 0.0%
(44) shares common shares
shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
</TABLE>
20
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. Michael None. None. 15,000 None. 15,000 common None. 0.0%
Alferieff (45) common shares
shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Dr. Eugene Haller None. None. 30,000 None. 30,000 common None. 0.0%
(46) common shares
shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. Steven Nagler None. None. 15,000 None. 15,000 common None. 0.0%
(47) common shares
shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. Mammen Thomas None. None. 20,000 None. 20,000 common None. 0.0%
(48) common shares
shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Cameron Associates, None. 25,000 None. None. 25,000 common None. 0.0%
Inc. (49) common shares
shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. James E. Yes. 2,076,779 25,000 None. 228,738 common 1,848,041 Approximately
Alexander (50) See Note (51). common common shares common shares 11.5%
shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. & Mrs. Boris Yes. 1,822,460 55,833 None. 331,768 common 1,546,525 Approximately
and Nancy See Note (53). common common shares common stock 9.9%
Rubizhevsky, JTWROS shares shares
(52)
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. Richard Parker Yes. None. 40,000 None. 40,000 common None. 0.0%
(54) See Note (55). common shares
shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Isoserve, Inc. (56) None. 51,699 46,667 None. 98,366 common None. 0.0%
common common shares
shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. John P. de None. 266,667 66,667 None. 133,334 common 200,000 common Approximately
Neufville (57) common common shares shares 1.3%
shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. Joe Friscia (58) Yes. 126,563 None. None. 126,563 common None. 0.0%
See Note (59). common shares
shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Mr. Soren Bilde (60) None. 137,594 None. None. 137,594 common None. 0.0%
common shares
shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Dr. Robert Cuttriss Yes. 287,982 20,000 None. 287,982 common 20,000 common Approximately
(61) See Note (62). common common shares shares 0.1%
shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
Dr. Daniel J. Grady Yes. 18,804 222,965 None. 14,545 common 227,224 common Approximately
(63) See Note (64). common common shares shares 1.5%
shares shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
</TABLE>
21
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
The James & Carol Yes. 45,455 None. None. 45,455 common None. 0.0%
Foundation, Inc. See Note (66). common shares
(65) shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
The Geneva Group, None. 4,000 None. None. 4,000 common None. 0.0%
Inc. (67) common shares
shares
--------------------- ----------------- ---------- -------------- -------------- -------------------- --------------- --------------
</TABLE>
Percentages in the above table were calculated using the following
denominator:
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
<S> <C>
Current Common Stock Shares Outstanding 11,439,326
Shares Outstanding based on conversion of Class A Preferred Stock 1,180,333
Shares Outstanding based on exercise of Common Stock purchase warrants 2,813,794
Shares Outstanding based on exercise of options to purchase Common Stock 190,000
----------
Total Common Stock Shares Outstanding 15,623,453
</TABLE>
Based on information the Selling Shareholders have given to us, none of the
Selling Shareholders own, directly or indirectly, shares of our Common Stock
other than listed above.
1) Mr. James C. Estep, Jr. & Mrs. Virginia Estep acquired 38,490 shares of
Common Stock in March 2000 by exercising three warrants granted on
September 30, 1997. The warrants were exercised in part by surrendering
shares of Common Stock and in part by using the inherent value of the
warrants. Mr. and Mrs. Estep, Jr. own no additional shares of our Common
Stock
2) Mr. James C. Estep, III acquired 38,490 shares of Common Stock in March
2000 by exercising three warrants granted on September 30, 1997. The
warrants were exercised in part by surrendering shares of Common Stock and
in part by using the inherent value of the warrants. Mr. Estep, III, owns
no additional shares of our Common Stock.
3) Mr. & Mrs. Paul J. Catuna, Sr., acquired 2,071 shares of Common Stock in
July 1998 by exercising for cash one warrant granted on September 30, 1997.
The Selling Shareholder also owns 4,755 warrants granted on September 30,
1997 per the following terms: a) Bridge Loan Warrant (#W2-14), 2,071
warrants, exercise price = $1.416515, granted on September 30, 1997, and
expires on September 27, 2001. b) Bridge Loan Warrant (#W4-14), 2,684
warrants, exercise price = $5.800000, granted on September 30, 1997, and
expires on September 27, 2001.
4) Mr. & Mrs. Paul J. Catuna, Jr., holds 58,726 shares of Common Stock and
2,274 warrants to purchase shares of Common Stock. Of the 58,726 shares of
Common Stock owned by the Selling Shareholder, 57,603 shares of Common
Stock are included herein and were issued in March 2000. In addition, the
Selling Shareholder continues to own 2,274 warrants, which are included
herein, that were granted on September 30, 1997, and expire on September
27, 2001, according to the following terms:
a) Bridge Loan Warrant (#W1-13), 690 warrants, exercise price = $0.177101
b) Bridge Loan Warrant (#W2-13), 690 warrants, exercise price = $1.416515
c) Bridge Loan Warrant (#W4-13), 894 warrants, exercise price = $5.800000
5) Mr. Paul J. Catuna, Jr. was the Chief Financial Officer of the Company from
July 1996 until February 1999.
22
<PAGE>
6) Mr. Manny & Mrs. Phyllis Eiden currently hold 38,626 shares of Common Stock
as a result of Warrant exercises in July 1998 and March 2000. The warrants
were exercised in part by payment of cash and in part by using the inherent
value of the warrants. Mr. and Mrs. Eiden own no additional shares of our
Common Stock
7) Mr. Gutel & Mrs. Maria Rubirzewski currently hold 37,626 shares of Common
Stock as a result of Warrant exercises in July 1998 and March 2000. The
warrants were exercised in part by payment of cash and in part by using the
inherent value of the warrants. Mr. and Mrs. Rubirzewski own no additional
shares of our Common Stock.
8) Dr. Stephen J. & Mrs. Jacqueline Burden currently hold 96,325 shares of
Common Stock and options to purchase 192,887 shares of Common Stock. Of
these holdings, 94,337 shares of Common Stock are included herein. Dr. and
Mrs. Burden acquired 61,004 shares of Common Stock as a result of warrant
exercises in March 2000. The warrants were exercised in part by surrender
of shares and in part by using the inherent value of the warrants. Dr. and
Mrs. Burden acquired an additional 33,333 shares of Common Stock in June
2000 upon conversion of 33,333 shares of Class A Convertible Preferred
Stock (received in a private placement of Class A Convertible Preferred
Stock and Warrants described in our FY 2000 Annual Report on Form 10-KSB,
which is incorporated into this prospectus by reference) at a conversion
rate of one share of Preferred Stock to one share of Common Stock.
9) Dr. Stephen J. Burden is currently an affiliate of Isonics Corporation. Dr.
Burden is the Vice-President - Semiconductor Materials.
10) The Jacques Delente Revocable Trust, Mr. Jacques J. Delente, Trustee,
currently holds 329,974 shares of Common Stock all of which are being
included herein. These shares of Common Stock were obtained by the exercise
of options and warrants. The options were exercised in part by payment of
cash and in part by the surrender of shares of Common Stock. The warrants
were exercised in part by payment of cash, and in part by using the
inherent value of the warrants. The Jacques Delente Revocable Trust owns no
additional shares of our Common Stock.
11) Mr. Jacques J. Delente is currently an employee, and has been an affiliate
of, Isonics Corporation in the past three years.
12) Mr. Martin S. & Mrs. Leslie J. Laurent currently holds 81,378 shares of
Common Stock, of which 34,641 shares of Common Stock are being included
herein. The 34,641 shares of Common Stock included herein were obtained by
the exercise of warrants. The warrants were exercised in part by using the
inherent value of the warrants, and in part by the surrender of shares of
Common Stock. The other 46,737 shares of Common Stock were obtained by the
exercise of options by payment of cash. Mr. and Mrs. Laurent own no
additional shares of our Common Stock.
13) Mr. Martin S. Laurent was an employee of Isonics Corporation from November
1995 through December 1999.
14) Ms. Lindsay A. Gardner & Mr. Henry Eng currently hold 249,761 shares of
Common Stock and options to purchase 40,000 shares of Common Stock. Ms.
Gardner and Mr. Eng acquired 172,783 shares of Common Stock by payment in
cash upon the incorporation of the Company in March 1993, and 76,978 shares
of Common Stock as a result of warrant exercises in March 2000. The
warrants
23
<PAGE>
were exercised in part by surrender of shares and in part by using the
inherent value of the warrants. The options were granted to Ms. Gardner in
her capacity as a director as follows: a) 20,000 options granted May 21,
1998, exercisable at $2.3750 per share, expiring May 21, 2003. b) 10,000
options granted October 5, 1998, exercisable at $1.1875 per share, expiring
October 5, 2003. c) 10,000 options granted April 26, 2000, exercisable at
$6.1250 per share, expiring April 26, 2005.
15) Ms. Lindsay A. Gardner is an affiliate as a member of the Company's Board
of Directors.
16) Simera International, Inc. currently holds 155,317 shares of Common Stock,
of which 154,817 shares of Common Stock are included herein, and 86,000
warrants to purchase shares of Common Stock, all of which are included
herein. The Selling Shareholder acquired 127,209 shares of Common Stock
upon the conversion of $127,209.00 of debt owed by the Company to the
Selling Shareholder in April 1999, and 27,608 shares of Common Stock from
the exercise of warrants by payment of cash in July 1998. The warrants
owned by the Selling Shareholder are described as follows:
a) 36,000 warrants at an exercise price of $5.8000, granted on September
27, 1996, and which expire on September 27, 2001
b) 25,000 warrants at an exercise price of $2.2500, granted on March 1,
1999, and which expire on February 28, 2004
c) 25,000 warrants at an exercise price of $1.5000, granted on April 22,
1999, and which expire on April 21, 2004.
17) Deere Park Capital, LLC. currently holds 99,392 shares of Common Stock, of
which 99,391 shares of Common Stock are included herein. The Selling
Shareholder acquired 99,391 shares of Common Stock from the exercise of
warrants by payment of cash in January 2000.
18) Mr. Larry J. Wells and DayStar Partners, L.P. currently hold 77,241 shares
of Common Stock and options to purchase 30,000 shares of Common Stock. The
Selling Shareholder acquired 77,241 shares of Common Stock as a result of
warrant exercises in March 2000. The warrants were exercised by using the
inherent value of the warrants. The warrants were in the name of DayStar
Partners, L.P., of which an affiliate owned by Mr. Wells is general partner
and in which Mr. Wells owns a 9.9% equity interest. The options were
granted to Mr. Wells in his capacity as a director as follows: a) 20,000
options granted January 30, 2000, exercisable at $7.3125 per share,
expiring January 29, 2005 b) 10,000 options granted April 26, 2000,
exercisable at $6.1250 per share, expiring April 26, 2005
19) Mr. Larry J. Wells is an affiliate as a member of the Company's Board of
Directors as of January 2000. Mr. Wells previously served on the Company's
Board of Directors from 1996 to 1998.
20) Growth Capital Resources currently holds 99,332 shares of Common Stock. The
Selling Shareholder obtained the 99,332 shares of Common Stock through the
exchange of three warrants in September 2000.
21) Mr. Don Hateley currently holds a warrant for 231,529 shares of common
stock granted on October 1, 1996, and expiring on September 30, 2001,
exercisable at $0.57876 per share.
22) Mr. Alan Nopar currently holds a warrant for 60,820 shares of common stock
granted on October 1, 1996, and expiring on September 30, 2001, exercisable
at $0.57876 per share.
24
<PAGE>
23) Mr. Jonathan Blau currently holds a warrant for 11,749 shares of common
stock granted on October 1, 1996, and expiring on September 30, 2001,
exercisable at $0.57876 per share.
24) Adam-Cedlinden Co. General Partnership II holds 66,667 warrants and 66,667
shares of Class A Convertible Preferred Stock. The warrants and shares were
received in a private placement of Class A Convertible Preferred Stock and
Warrants described in our FY 2000 Annual Report on Form 10-KSB, which is
incorporated into this prospectus by reference, as set forth below:
a) 66,667 warrants exercisable at $3.75 per share, granted July 29, 1999,
and expire July 29, 2002.
b) 66,667 shares of Class A Convertible Preferred Stock, with a
conversion rate of one share of preferred stock to one share of Common
Stock, and a liquidation preference of $1.50 per share.
25) Adam Smith Investments, Ltd. holds 113,334 warrants and 113,334 shares of
Class A Convertible Preferred Stock. The warrants and shares were received
in a private placement of Class A Convertible Preferred Stock and Warrants
described in our FY 2000 Annual Report on Form 10-KSB, which is
incorporated into this prospectus by reference, as set forth below:
a) 113,334 warrants exercisable at $3.75 per share, granted July 29,
1999, and expire July 29, 2002.
b) 113,334 shares of Class A Convertible Preferred Stock with a
conversion rate of one share of preferred stock to one share of Common
Stock and a liquidation preference of $1.50 per share.
26) Mr. Richard Grossman is a beneficial owner of approximately 16.3% of the
Company's common stock. Mr. Grossman's beneficial ownership includes
beneficial ownership of 1,186,668 warrants and 686,668 shares of Class A
Convertible Preferred Stock. The warrants exercisable at $3.75 per share,
granted July 29, 1999, and expire July 29, 2002. The shares of Class A
Convertible Preferred Stock have a conversion rate of one share of
preferred stock to one share of Common Stock and a liquidation preference
of $1.50 per share. These shares are distributed as follow:
a) 20,000 shares of Class A Convertible Preferred Stock and 20,000
warrants owned of record and beneficially by Richard Grossman.
b) 553,334 shares of Class A Convertible Preferred Stock and 553,334
warrants owned of record and beneficially by Adam Smith Investment
Partners, L.P.
c) 113,334 shares of Class A Convertible Preferred Stock and 113,334
warrants owned of record and beneficially by Adam Smith Investments,
Ltd.
d) 500,000 warrants owned of record and beneficially by Adam Smith &
Company, Inc.
27) Adam Smith Investment Partners, L.P. holds 553,334 warrants and 553,334
shares of Class A Convertible Preferred Stock. The warrants and shares were
received in a private placement of Class A Convertible Preferred Stock and
Warrants described in our FY 2000 Annual Report on Form 10-KSB, which is
incorporated into this prospectus by reference, as set forth below:
a) 553,334 warrants exercisable at $3.75 per share, granted July 29,
1999, and expire July 29, 2002.
b) 553,334 shares of Class A Convertible Preferred Stock with a
conversion rate of one share of preferred stock to one share of Common
Stock and a liquidation preference of $1.50 per share.
28) Adam-The Fisher Fund General Partnership II, holds 100,000 warrants and
100,000 shares of Class A Convertible Preferred Stock. The warrants and
shares were received in a private placement of Class A Convertible
Preferred Stock and Warrants described in our FY 2000 Annual Report on Form
10-KSB, which is incorporated into this prospectus by reference, as set
forth below:
a) 100,000 warrants exercisable at $3.75 per share, granted July 29,
1999, and expire July 29, 2002.
b) 100,000 shares of Class A Convertible Preferred Stock with a
conversion rate of one share of preferred stock to one share of Common
Stock and a liquidation preference of $1.50 per share.
25
<PAGE>
29) Anfel Trading, Ltd. holds 333,334 warrants and 333,334 shares of Common
Stock. The warrants were received in a private placement of Class A
Convertible Preferred Stock and Warrants described in our FY 2000 Annual
Report on Form 10-KSB, which is incorporated into this prospectus by
reference. The 333,334 warrants are exercisable at $3.75 per share, granted
July 29, 1999, and expire July 29, 2002. The 333,334 shares of Common Stock
were issued upon the conversion of 333,334 shares of Class A Convertible
Preferred Stock with a conversion rate of one share of preferred stock to
one share of Common Stock and a liquidation preference of $1.50 per share,
in September 2000.
30) Anfel Trading, Ltd. Anfel Trading, Ltd. is a beneficial owner of
approximately 5.7% of the Company's common stock.
31) Mr. Herschel P. Berkowitz holds 6,666 warrants and 6,666 shares of Class A
Convertible Preferred Stock. The warrants and shares were received in a
private placement of Class A Convertible Preferred Stock and Warrants
described in our FY 2000 Annual Report on Form 10-KSB, which is
incorporated into this prospectus by reference, as set forth below:
a) 6,666 warrants exercisable at $3.75 per share, granted July 29, 1999,
and expire July 29, 2002.
b) 6,666 shares of Class A Convertible Preferred Stock with a conversion
rate of one share of preferred stock to one share of Common Stock and
a liquidation preference of $1.50 per share.
32) Fairway Investors, LLC. holds 200,000 warrants and 200,000 shares of Class
A Convertible Preferred Stock. The warrants and shares were received in a
private placement of Class A Convertible Preferred Stock and Warrants
described in our FY 2000 Annual Report on Form 10-KSB, which is
incorporated into this prospectus by reference, as set forth below:
a) 200,000 warrants exercisable at $3.75 per share, granted July 29,
1999, and expire July 29, 2002.
b) 200,000 shares of Class A Convertible Preferred Stock with a
conversion rate of one share of preferred stock to one share of Common
Stock and a liquidation preference of $1.50 per share.
33) FBE Finvest LLC. holds 66,667 warrants and 66,667 shares of Class A
Convertible Preferred Stock. The warrants and shares were received in a
private placement of Class A Convertible Preferred Stock and Warrants
described in our FY 2000 Annual Report on Form 10-KSB, which is
incorporated into this prospectus by reference, as set forth below:
a) 66,667 warrants exercisable at $3.75 per share, granted July 29, 1999,
and expire July 29, 2002.
b) 66,667 shares of Class A Convertible Preferred Stock with a conversion
rate of one share of preferred stock to one share of Common Stock and
a liquidation preference of $1.50 per share.
34) Adolph Grossman holds 6,666 warrants and 6,666 shares of Class A
Convertible Preferred Stock. The warrants and shares were received in a
private placement of Class A Convertible Preferred Stock and Warrants
described in our FY 2000 Annual Report on Form 10-KSB, which is
incorporated into this prospectus by reference, as set forth below:
a) 6,666 warrants exercisable at $3.75 per share, granted July 29, 1999,
and expire July 29, 2002.
b) 6,666 shares of Class A Convertible Preferred Stock with a conversion
rate of one share of preferred stock to one share of Common Stock and
a liquidation preference of $1.50 per share.
35) Mr. Richard Grossman holds 20,000 warrants and 20,000 shares of Class A
Convertible Preferred Stock. The warrants and shares were received in a
private placement of Class A Convertible Preferred Stock and Warrants
described in our FY 2000 Annual Report on Form 10-KSB, which is
incorporated into this prospectus by reference, as set forth below:
a) 20,000 warrants exercisable at $3.75 per share, granted July 29, 1999,
and expire July 29, 2002.
26
<PAGE>
b) 20,000 shares of Class A Convertible Preferred Stock with a conversion
rate of one share of preferred stock to one share of Common Stock and
a liquidation preference of $1.50 per share.
36) Mr. Orin Hirschman holds 20,000 warrants and 20,000 shares of Class A
Convertible Preferred Stock. The warrants and shares were received in a
private placement of Class A Convertible Preferred Stock and Warrants
described in our FY 2000 Annual Report on Form 10-KSB, which is
incorporated into this prospectus by reference, as set forth below:
a) 20,000 warrants exercisable at $3.75 per share, granted July 29, 1999,
and expire July 29, 2002.
b) 20,000 shares of Class A Convertible Preferred Stock with a conversion
rate of one share of preferred stock to one share of Common Stock and
a liquidation preference of $1.50 per share.
37) Mr. James Kardon holds 6,666 warrants, 3,666 shares of Class A Convertible
Preferred Stock, and 3,000 shares of Common Stock. The 3,000 shares of
Common Stock were obtained upon the conversion of 3,000 shares of Class A
Convertible Preferred Stock in September 2000. The warrants and shares of
Class A Convertible Preferred Stock were received in a private placement of
Class A Convertible Preferred Stock and Warrants described in our FY 2000
Annual Report on Form 10-KSB, which is incorporated into this prospectus by
reference, as set forth below:
a) 6,666 warrants exercisable at $3.75 per share, granted July 29, 1999,
and expire July 29, 2002.
b) 3,666 shares of Class A Convertible Preferred Stock with a conversion
rate of one share of preferred stock to one share of Common Stock and
a liquidation preference of $1.50 per share.
38) Dr. Harry Lawroski holds 16,667 warrants and 16,667 shares of Class A
Convertible Preferred Stock. The warrants and shares were received in a
private placement of Class A Convertible Preferred Stock and Warrants
described in our FY 2000 Annual Report on Form 10-KSB, which is
incorporated into this prospectus by reference, as set forth below:
a) 16,667 warrants exercisable at $3.75 per share, granted July 29, 1999,
and expire July 29, 2002.
b) 16,667 shares of Class A Convertible Preferred Stock with a conversion
rate of one share of preferred stock to one share of Common Stock and
a liquidation preference of $1.50 per share.
39) Mr. Paul Packer holds 6,666 warrants and 6,666 shares of Class A
Convertible Preferred Stock. The warrants and shares were received in a
private placement of Class A Convertible Preferred Stock and Warrants
described in our FY 2000 Annual Report on Form 10-KSB, which is
incorporated into this prospectus by reference, as set forth below:
a) 6,666 warrants exercisable at $3.75 per share, granted July 29, 1999,
and expire July 29, 2002.
b) 6,666 shares of Class A Convertible Preferred Stock with a conversion
rate of one share of preferred stock to one share of Common Stock and
a liquidation preference of $1.50 per share.
40) Adam Smith & Co holds 500,000 warrants. The warrant were received in a
private placement of Class A Convertible Preferred Stock and Warrants
described in our FY 2000 Annual Report on Form 10-KSB, which is
incorporated into this prospectus by reference. The 500,000 warrants are
exercisable at $3.75 per share, were granted July 29, 1999, and expire July
29, 2002.
41) Pictet & Cie. (Assignee for Ms. Anne-Marie Barth) holds 183,333 warrants
and 133,333 shares of Common Stock. Of the 183,333 warrants, 133,333
warrants were received in a private placement of Class A Convertible
Preferred Stock and Warrants described in our FY 2000 Annual Report on Form
10-KSB, which is incorporated into this prospectus by reference. The
133,333 warrants are exercisable at $3.75 per share, granted July 29, 1999,
and expire July 29, 2002. The 133,333 shares of Common Stock were issued
upon the conversion of 133,333 shares of Class A Convertible Preferred
Stock with a conversion rate of one share of preferred stock to one share
of Common Stock and a
27
<PAGE>
liquidation preference of $1.50 per share, in May 2000. Of the 183,333
warrants, the remaining 50,000 warrants are outstanding as follows:
a) 25,000 warrants at an exercise price of $2.2500, granted on March 1,
1999, and which expire on February 28, 2004.
b) 25,000 warrants at an exercise price of $1.5000, granted on April 22,
1999, and which expire on April 21, 2004.
42) Mr. Herbert Hegener holds 143,365 shares of Common Stock as a result of the
purchase of Chemotrade by Isonics in June 1998, and warrants to purchase
35,000 shares of common stock with an exercise price of $3.00, that were
granted on June 30, 1999, and expire June 30, 2004.
43) Mr. Herbert Hegener has been an affiliate of Isonics since June 1998, as
the Managing Director of the Company's wholly-owned subsidiary, Chemotrade
GmbH & Co. KG, in Dusseldorf, Germany.
44) Mr. Helmut Swyen holds 127,865 shares of Common Stock as a result of the
purchase of Chemotrade by Isonics in June 1998, and warrants to purchase
35,000 shares of common stock with an exercise price of $3.00, that were
granted on June 30, 1999, and expire June 30, 2004.
45) Mr. Michael Alferieff holds options for 15,000 shares of Common Stock, with
an exercise price of $3.50, granted July 31, 1997, and expire on July 31,
2007.
46) Dr. Eugene Haller holds options for 30,000 shares of Common Stock, with an
exercise price of $2.08, granted July 31, 1997, and expire on July 31,
2007.
47) Mr. Steven Nagler holds options for 15,000 shares of Common Stock, with an
exercise price of $3.50, granted July 31, 1997, and expire on July 31,
2007.
48) Mr. Mammen Thomas holds options for 20,000 shares of Common Stock, with an
exercise price of $3.50, granted July 31, 1997, and expire on July 31,
2007.
49) Cameron Associates holds 25,000 shares of Common Stock granted in April
2000. The shares vest on a pro rata basis over two years beginning in April
2000.
50) Mr. James E. Alexander holds 2,076,779 shares of Common Stock and 25,000
options, of which 228,738 shares of Common Stock are included herein. The
228,738 shares of Common Stock included herein were acquired by the
exercise options in October 1996.
51) Mr. Alexander has been an affiliate of Isonics since the Company's
inception, and is the President, Chief Executive Officer and Chairman of
the Board of Directors.
52) Mr. and Mrs. Boris and Nancy Rubizhevsky hold 1,822,460 shares of Common
Stock, options to obtain 22,500 shares of Common Stock, and warrants to
obtain 33,333 shares of Common Stock. The 33,333 warrants were received in
a private placement of Class A Convertible Preferred Stock and Warrants
described in our FY 2000 Annual Report on Form 10-KSB, which is
incorporated into this prospectus by reference. Of the 298,435 shares of
Common Stock included herein
a) 33,333 shares were received by conversion of 33,333 shares Class A
Convertible Preferred Stock received in a private placement of Class A
Convertible Preferred Stock and Warrants described in our FY 2000
Annual Report on Form 10-KSB, which is incorporated into this
prospectus by reference.
28
<PAGE>
b) 228,738 shares were obtain upon the exercise of options in October
1996. c) 36,364 shares of Common Stock were receive as a bonus in
January 1999
53) Mr. Rubizhevsky has been an affiliate of Isonics since the Company's
inception, and is a Senior Vice President and Vice Chairman of the Board of
Directors.
54) Mr. Richard Parker holds 40,000 options to acquire shares of Common Stock.
The options granted for his service as a director as follows:
i) 20,000 options granted August 1, 1998, exercisable at $1.6500 per
share, expiring August 1, 2003
ii) 10,000 options granted October 5, 1998, exercisable at $1.1875
per share, expiring October 5, 2003
iii) 10,000 options granted April 26, 2000, exercisable at $6.1250 per
share, expiring April 26, 2005
55) Mr. Richard Parker is an affiliate as a member of the Company's Board of
Directors.
56) Isoserve, Inc. holds 51,699 shares of Common Stock and 46,667 warrants to
acquire Common Stock. Of the shares of Common Stock, 5,032 shares were
obtained through the sale of Isoserve, Inc.'s depleted zinc business to
Isonics Corporation, and 46,667 shares were obtained upon the conversion of
46,667 shares of Class A Convertible Preferred Stock (received in a private
placement of Class A Convertible Preferred Stock and Warrants described in
our FY 2000 Annual Report on Form 10-KSB, which is incorporated into this
prospectus by reference) at a conversion rate of one share of preferred
stock to one share of Common Stock.upon the conversion of preferred stock,
in June 2000. The 46,667 warrants were received in a private placement of
Class A Convertible Preferred Stock and Warrants described in our FY 2000
Annual Report on Form 10-KSB, which is incorporated into this prospectus by
reference.
57) Mr. John P. de Neufville holds 66,667 warrants and 266,667 shares of Common
Stock. The warrants were received in a private placement of Class A
Convertible Preferred Stock and Warrants described in our FY 2000 Annual
Report on Form 10-KSB, which is incorporated into this prospectus by
reference. The 66,667 warrants are exercisable at $3.75 per share, granted
July 29, 1999, and expire July 29, 2002. Of the 266,667 shares of Common
Stock, the 66,667 shares of Common Stock included herein were issued upon
the conversion of 66,667 shares of Class A Convertible Preferred Stock with
a conversion rate of one share of preferred stock to one share of Common
Stock and a liquidation preference of $1.50 per share
58) Mr. Joe Friscia holds 126,563 shares of Common Stock. The 126,563 shares of
Common Stock were issued in May 2000, for the exercise in January 1999 of
options.
59) Mr. Joe Friscia was on officer of the Company until October 1998.
60) Mr. Soren Bilde holds 137,594 shares of Common Stock granted for services
rendered to the Company in 1996.
61) Dr. Robert Cuttriss and Metallurgy International, Inc. hold 287,982 shares
of Common Stock and 20,000 options to obtain Common Stock. The shares of
Common Stock were obtained through the sale of Interpro, Inc. by Metallurgy
International, Inc. (an affiliate of Dr. Cuttriss') to Isonics Corporation
in May 1998, and the granting of 20,000 options on May 1, 1998, expiring
May 1, 2003,
29
<PAGE>
and currently exercisable at $2.00 per share.
62) Dr. Cuttriss is an affiliate of the Company as President of Interpro, a
wholly owned subsidiary of Isonics Corporation, and Vice President-Zinc
Recovery.
63) Dr. Daniel J. Grady holds 18,804 shares of Common Stock and 222,965 options
to acquire shares of Common Stock. Of the 18,804 shares, 14,545 shares of
Common Stock Shares, acquired as a bonus in January 1999, are included
herein.
64) Dr. Grady is currently an affiliate of Isonics Corporation. Dr. Grady is
the Vice-President - Life Sciences.
65) The James & Carol Alexander Foundation, Inc. holds 45,455 shares of Common
Stock obtained through the gift of Common Stock by James E. Alexander in
December 1999.
66) Please see note 52. The James & Carol Alexander Foundation is an affiliate
of Mr. Alexander's.
67) The Geneva Group, Inc. holds 4,000 shares of Common Stock. The shares of
Common Stock were obtained through a compensation agreement to perform
certain Investor Relations services granted in July 2000.
PLAN OF DISTRIBUTION
The Selling Shareholders may, from time to time, offer and sell the shares
included in this prospectus. The term "Selling Stockholders" includes pledgees,
donees, transferees or other successors in interest selling shares that they
acquired after the date of this prospectus from the Selling Shareholders as a
pledge, gift or other non-sale related transfer. To the extent required, we may
amend and supplement this prospectus from time to time to describe a specific
plan of distribution.
The Selling Shareholders will act independently of us in making decisions
with respect to the timing, manner and size of each sale. The Selling
Shareholders may make these sales at prices and under terms then prevailing or
at prices related to the then current market price. The Selling Shareholders may
also make sales in negotiated transactions, including pursuant to one or more of
the following methods:
- purchases by a broker-dealer as principal and resale by such
broker-dealer for its own account pursuant to this prospectus;
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- an over-the-counter distribution in accordance with the rules of the
Nasdaq SmallCap Market; and
- in privately negotiated transactions.
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<PAGE>
In connection with distributions of the shares or otherwise, the Selling
Shareholders may:
- enter into hedging transactions with broker-dealers or other financial
institutions, which may in turn engage in short sales of the shares in
the course of hedging the positions they assume;
- sell the shares short and redeliver the shares to close out such short
positions;
- enter into option or other transactions with broker-dealers or other
financial institutions which require the delivery to them of shares
that this prospectus offers, which they may in turn resell; and
- pledge shares to a broker-dealer or other financial institution,
which, upon a default, they may in turn resell.
In addition, the Selling Shareholders may sell any shares that qualify for
sale pursuant to Rule 144 under Rule 144 rather than pursuant to this
prospectus.
In effecting sales, broker-dealers or agents that the Selling Shareholders
engage may arrange for other broker-dealers to participate. Broker-dealers or
agents may receive commissions, discounts or concessions from the Selling
Shareholders, in amounts that the parties may negotiate immediately prior to the
sale.
In offering shares that this prospectus covers, the Selling Shareholders,
and any broker-dealers and any other participating broker-dealers who execute
sales for the Selling Shareholders, may qualify as "underwriters" within the
meaning of the Securities Act in connection with these sales. Any profits that
the Selling Shareholders realize, and the compensation that they pay to any
broker-dealer, may qualify as underwriting discounts and commissions.
In order to comply with the securities laws of some states, the Selling
Shareholders must sell the shares in those states only through registered or
licensed brokers or dealers. In addition, in some states the Selling
Shareholders must sell the shares only if we have registered or qualified those
shares for sale in the applicable state or an exemption from the registration or
qualification requirement is available and the Selling Shareholder complies with
the exemption.
We have advised the Selling Shareholders that the anti-manipulation
rules of Regulation M under the Exchange Act may apply to sales of shares in
the market and to the activities of the Selling Shareholders and their
affiliates. In addition, we will make copies of this prospectus available to
the Selling Shareholders for the purpose of satisfying the prospectus
delivery requirements of the Securities Act. The Selling Shareholders may
indemnify any broker-dealer that participates in transactions involving the
sale of the shares against liabilities, including liabilities arising under
the Securities Act.
At the time a Selling Shareholder makes a particular offer of shares, if
required, we will distribute a prospectus supplement that will set forth:
- the number of shares that the Selling Shareholder is offering;
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<PAGE>
- the terms of the offering, including the name of any underwriter,
dealer or agent;
- the purchase price paid by any underwriter;
- any discount, commission and other underwriter compensation;
- any discount, commission or concession allowed or reallowed or paid to
any dealer; and
- the proposed selling price to the public.
We have agreed to indemnify the Selling Shareholders against certain
liabilities, and each of the Selling Shareholders have agreed to indemnify us
against certain liabilities, in both cases including liabilities under the
Securities Act.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 20,000,000 shares of Common Stock
and 10,000,000 shares of Preferred Stock. As of September 20, 2000, there were
outstanding 11,439,326 shares of Common Stock and 1,180,333 shares of Series A
Convertible Preferred Stock. As of September 20, 2000, there were also
outstanding options issued pursuant to our employee benefit plans to purchase a
total of 878,352 shares, and other options and warrants to purchase a total of
3,813,794 shares of Common Stock. The number of outstanding shares includes
3,130,435 shares issued to Eagle-Picher pursuant to an exercise of a warrant to
purchase 4,000,000; these shares are subject to forfeiture to the extent that
Eagle-Picher does not deliver 200 kilograms of silicon-28 meeting certain
specifications to Isonics by December 31, 2000. Eagle-Picher believes that we
should issue it an additional 155,279 shares, although we dispute this
calculation and we are continuing to discuss this matter.
COMMON STOCK
Subject to preferences that may be applicable to any Preferred Stock
outstanding at the time, the holders of outstanding shares of Common Stock are
entitled to receive dividends out of assets legally available therefor at such
times and in such amounts as the Board of Directors may from time to time
determine.
Each shareholder is entitled to one vote for each share of Common Stock
held on all matters submitted to a vote of shareholders.
Cumulative voting for the election of directors is specifically authorized
by the Bylaws. Under cumulative voting for the election of directors, upon a
proper and timely request by a shareholder, each shareholder is entitled to cast
a number of votes equal to the number of shares held multiplied by the number of
directors to be elected. The votes may be cast for one or more candidates. Thus,
under cumulative voting, a majority of the outstanding shares will not
necessarily be able to elect all of the directors, and minority shareholders may
be entitled to greater voting power with respect to election of directors than
if cumulative voting did not apply.
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The Bylaws provide that so long as we are a "listed company" as defined by
applicable California law, there will not be cumulative voting in connection
with the election of directors. At the present time, we are not a "listed
company" as defined in California law, and therefore cumulative voting will
continue to apply in connection with the election of directors.
The Common Stock is not entitled to preemptive rights and is not subject to
conversion or redemption. Upon liquidation, dissolution or winding up of
Isonics, the remaining assets legally available for distribution to
shareholders, after payment of claims or creditors and payment of liquidation
preferences, if any, on outstanding Preferred Stock, are distributable ratably
among the holders of the Common Stock and any participating Preferred Stock
outstanding at that time. Each outstanding share of Common Stock is fully paid
and nonassessable.
PREFERRED STOCK
The Board of Directors is authorized, subject to any limitations prescribed
by California law, to provide for the issuance of shares of Preferred Stock in
one or more series, to establish from time to time the number of shares to be
included in each such series, to fix the rights, preferences and privileges of
the shares of each unissued series and any qualifications, limitations or
restrictions thereon, and to increase or decrease the number of shares of any
such series (but not below the number of shares of such series then
outstanding), without any further vote or action by the shareholders. The Board
of Directors may authorize the issuance of Preferred Stock with voting or
conversion rights that could adversely affect the voting power or other rights
of the holders of Common Stock. Thus, the issuance of Preferred Stock may have
the effect of delaying, deferring or preventing a change in control of Isonics.
We have issued 1,830,000 shares of our Series A Convertible Preferred
Stock. This Preferred Stock may be converted to common shares of Isonics stock
at a fixed conversion price of $1.50 per share, which would result in the
exchange of one share of Common Stock for each share of Series A Convertible
Preferred Stock. This conversion ratio is subject to dilution adjustments. The
Series A Convertible Preferred Stock is entitled to receive dividends on a
share-for-share basis with the shares of Common Stock except in the case of a
"Silicon Isotope Transaction" as defined in the Certificate of Determination
that was filed with the California Secretary of State to create the Series A
Convertible Preferred Stock. If a "Silicon Isotope Transaction" occurs, the
holders of Series A Convertible Preferred Stock have certain additional rights.
The Series A Convertible Preferred Stock is entitled to a liquidation preference
of $1.50 per share.
CLASS A WARRANTS
Class A Warrants to purchase Common Stock were issued in September 1997 and
are registered pursuant to Section 12(g) of the Securities Exchange Act of 1934,
as amended. The following is a brief summary of certain provisions of the
Warrants.
We issued Class A Warrants to purchase an aggregate of 810,000 shares of
Common Stock. We have also reserved 810,000 shares for issuance upon exercise of
the Class A Warrants. Each Class A Warrant entitles the registered holder
thereof to purchase one share of Common Stock at a price of $5.80, subject to
adjustment, through September 21, 2001. After expiration, the Warrants will be
void and of no value.
We may redeem the Warrants at a price of $0.10 per Warrant on not less than
30 days' prior written notice if the average of the last reported bid and asked
prices of the Common Stock (if the
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<PAGE>
Common Stock is then traded in the over-the-counter market) or the last reported
sale price of the Common Stock (if the Common Stock is then traded on a national
securities exchange or the Nasdaq National Market or SmallCap Market) has been
at least $14.50 per share (subject to adjustment) for at least 20 consecutive
trading days ending within three days prior to the date on which notice of
redemption is given.
The Warrants contain provisions that protect the holders thereof against
dilution by adjustment of the exercise price and number of shares issuable upon
exercise, on the occurrence of certain events, such as stock dividends, stock
splits and recapitalizations. We are not required to issue fractional shares. In
lieu of the issuance of such fractional shares, we will pay cash to such holders
of the Warrants. In computing the cash payable to such holders, a share of
Common Stock will be valued at its price immediately prior to the close of
business on the expiration date. The holder of a Warrant will not possess any
rights as a shareholder of Isonics unless such shareholder exercises such
Warrant.
THE EXCHANGE OFFER
On June 13, 2000, we offered to the holders of the outstanding warrants
issued in our public offering (the "Class A Warrants") the opportunity to
exchange their Class A Warrants for Class B Warrants. The exercise price for the
Class B Warrants, $5.80 per share, is the same as that of the Class A Warrant.
If a Class B Warrant is exercised before its expiration date (April 30, 2001),
we will issue one share of Common Stock and one Class C Warrant. The Class C
Warrants expire June 15, 2003, are exercisable for one share of Common Stock at
a price of $10.00 per share, and are redeemable if our Common Stock trades at or
above $15.00 per share for any 20 of 30 consecutive trading days.
CLASS B WARRANTS AND CLASS C WARRANTS
No Class B Warrants have yet been issued, but they will be issued to
holders of our Class A Warrants who accept the exchange offer.
No Class C Warrants have yet been issued, but they will be issued to
persons who exercise their Class A Warrants prior to the expiration of the
exchange offer, or who exercise their Class B Warrants prior to their
expiration. The Class C Warrants will also be registered pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended.
The Class B Warrants and the Class C Warrants contain provisions that
protect the holders thereof against dilution by adjustment of the exercise price
and number of shares issuable upon exercise, on the occurrence of certain
events, such as stock dividends, stock splits and recapitalizations. We are not
required to issue fractional shares. In lieu of the issuance of such fractional
shares, we will pay cash to such holders of the Warrants. In computing the cash
payable to such holders, a share of Common Stock will be valued at its price
immediately prior to the close of business on the expiration date. The holder of
a Warrant will not possess any rights as a shareholder of Isonics unless such
shareholder exercises such Warrant.
The material terms and conditions of the Class B Warrants and the Class C
Warrants are summarized above. See "THE EXCHANGE OFFER."
TRANSFER AGENT
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The transfer agent for our Common Stock is Continental Stock Transfer & Trust
Co., 2 Broadway, New York, NY 10004.
SECURITIES AND EXCHANGE POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
The Articles of Incorporation of Isonics require it to indemnify its
officers, directors, employees and agents against certain liabilities incurred
by them in those capacities if they acted in good faith and reasonably believed
their conduct was in the best interests of Isonics or not opposed to it. Isonics
is also required to indemnify a person who is or was a director, officer,
employee or agent of Isonics and who was successful, on the merits or otherwise,
in defense of any proceeding to which he was a party, against reasonable
expenses, which include attorneys' fees, incurred by him or her in connection
with the proceeding.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
Isonics under the provisions discussed in the previous paragraph, or otherwise,
Isonics has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in that
Act and is, therefore, unenforceable.
EXPERTS
The consolidated financial statements incorporated by reference to the
annual Report on Form 10-KSB of Isonics Corporation for the year ended April 30,
2000, have been so incorporated in reliance on the report of Grant Thornton LLP,
independent certified public accounts, given on the authority of said firm as
experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters have been passed upon for Isonics by Norton-Lidstone,
P.C., Englewood, Colorado. The validity of the shares of Common Stock offered
hereby have been passed upon as to matters of California law by Arter & Hadden,
LLP, Los Angeles, California.
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<PAGE>
Back Cover Page of Prospectus
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY ISONICS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES TO ANY PERSON IN ANY JURISDICTION WHERE
SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT
ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following is an itemization of all expenses (subject to future
contingencies) incurred or to be incurred by the Registrant in connection with
the issuance and distribution of the securities being offered. All expenses are
estimated except the registration fee.
<TABLE>
<S> <C>
Registration and filing fee $ 9,970
Printing 5,000
Accounting fees and expenses 20,000
Legal fees and expenses 20,000
Blue sky filing fees and expenses 5,000
Transfer and Warrant Agent fees 10,000
Miscellaneous 10,030
-------
Total $80,000
</TABLE>
Item 15. Indemnification of Directors and Officers.
The Articles of Incorporation of Isonics include a provision that
eliminates to the fullest extent permitted by law the personal liability of its
directors to Isonics and its shareholders for monetary damages for breach of the
directors' fiduciary duties. This limitation has no effect on a director's
liability
(i) for acts or omissions that involve intentional misconduct or a
knowing and culpable violation of law;
(ii) for acts or omissions that a director believes to be contrary to the
best interests of Isonics or its shareholders or that involved the
absence of good faith on the part of the director;
(iii) for any transaction from which the director derived an improper
personal benefit;
(iv) for acts or omissions that show a reckless disregard for the
director's duty to Isonics or its shareholders in circumstances in
which the director was aware, or should have been aware, in the
ordinary course of performing a director's duties, of a risk of
serious injury to Isonics or its shareholders; and
(v) for acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to
Isonics or its shareholders, under Section 310 of the California
Corporations Code (the "California Code") concerning contracts or
transactions between Isonics and a director or under Section 316 of
the California Code concerning directors liability for improper
dividends, loans and guarantees.
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The provision does not extend to acts or omissions of a director in his
capacity as an officer. Further, the provision will not affect the availability
of injunctions and other equitable remedies available to Isonics' shareholders
for any violation of a director's fiduciary duty to Isonics or its shareholders.
The Articles of Incorporation further authorize Isonics to indemnify its
agents (as defined in Section 317(a) of the Code which includes directors and
officers) through Bylaw provisions, agreements with agents, votes of
shareholders or disinterested directors or otherwise, to the fullest extent
permissible under California law. Pursuant to this provision, the Bylaws of
Isonics provide for indemnification of directors and officers. The Bylaws also
permit Isonics to enter into indemnity agreements with individual directors,
officers, employees and other agents. Isonics intends to enter into such
agreements with its directors and executive officers effective upon the closing
of this offering. These Agreements, together with the Bylaws and Articles of
Incorporation, may require Isonics, among other things, to indemnify directors
or officers against certain liabilities that may arise by reason of their status
or service as directors (other than liabilities resulting from willful
misconduct of a culpable nature), to advance expenses to them as they are
incurred, provided that they undertake to repay the amount advanced if it is
ultimately determined by a court that they are not entitled to indemnification,
and to obtain and maintain directors' and officers' insurance if available on
reasonable terms.
In addition to the rights to indemnification provided under California law,
in the Articles of Incorporation and in the Bylaws, the 1996 Stock Option Plan
provides indemnification to members of the Board of Directors, officers, or
employees of Isonics to whom authority to act for the Board in connection with
the Existing Plan is delegated shall be indemnified against all reasonable
expenses, including attorneys' fees, actually and necessarily incurred in
defense of any proceeding to which he or she is made a party because of any
action allegedly taken or alleged failure to act in connection with the Plan,
and against amounts paid in settlement (if approved by independent legal
counsel), or in satisfaction of any judgment in such proceeding, unless the
director, officer, or employee, as the case may be, is adjudged to have behaved
in bad faith, in a grossly negligent manner, or with intentional misconduct as
to duties.
Isonics currently has directors and officers' liability insurance.
At present, there is no pending litigation or proceeding involving a
director, officer or employee of Isonics pursuant to which indemnification is
sought, nor is Isonics aware of any threatened litigation that may result in
claims for indemnification.
Section 317 of the Code and the Bylaws of Isonics make provision for the
indemnification of officers, directors and other corporate agents in terms
sufficiently broad to indemnify such persons, under certain circumstances, for
liabilities (including reimbursement of expenses incurred) arising under the
Securities Act. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, Isonics has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
Document Exhibit Number
-------- --------------
<S> <C>
Underwriting Agreement 1.01
Registrant's Certificate of Incorporation 3.01
Registrant's Bylaws 3.02
</TABLE>
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<TABLE>
<S> <C>
Form of Indemnity Agreement 10.09
</TABLE>
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits Pursuant to Item 601 of Regulation S-B:
<TABLE>
<CAPTION>
Exhibit No. Title
----------- -----
<S> <C>
1.01* Form of Underwriting Agreement.(1)
3.01* Registrant's Amended and Restated Articles of Incorporation. (1)
3.02* Registrant's Bylaws. (1)
3.03* Certificate of Determination of Preferences and Rights of the
Series A Preferred Stock. (SEE EXHIBIT 10.18)
4.01* Specimen Common Stock Certificate. (1)
4.02* Form of Representatives' Warrant Agreement. (1)
4.03* Form of Warrant Agreement between the Registrant and Continental
Stock Transfer & Trust Company, Monroe Parker Securities. (1)
4.04* Specimen Class A Warrant Certificate (1)
4.05* Form of Warrant Agreement between the Registrant and Continental
Stock Transfer & Trust Company(7)
4.06* Specimen Class B Warrant Certificate (included as a part of
exhibit 4.05)
4.07* Specimen Class C Warrant Certificate (included as a part of
exhibit 4.05)
5.01+ Opinion of Arter & Hadden LLP
10.01* Registrant's 1996 Stock Option Plan. (1)(2)
10.02* Form of Employment Agreement between the Registrant and certain
officers of the Registrant. (1)(2)
10.03* Registrant's 1996 Executives Equity Incentive Plan. (1)(2)
10.04* Registrant's 1996 Equity Incentive Plan. (1)(2)
10.05* Memorandum of Agreement between Electrochemical Plant, AO
Techsnabexport, Co., Ltd. and Registrant. (1)
10.06* Option Agreement between the Registrant and Yale University. (1)
10.07* Office Lease Agreement between Paulsen Properties and the
Registrant dated as of January 1, 1996, as amended. (1)
10.08* Letter from Yale University to Registrant dated February 10,
1996. (1)
10.09* Form of Indemnity Agreement entered into by Registrant with each
of its directors and investors. (2)
10.10* Stock Purchase Agreement, dated as of April 30, 1998, among
Isonics Corporation, a California corporation, Metallurgy
International, Inc., a Nevada corporation, and International
Process Research Corporation, a Colorado corporation. (3)
10.10.1* Escrow Agreement, dated as of May 15, 1998, among Isonics
Corporation, a California corporation, Metallurgy International,
Inc., a Nevada corporation, Robert H. Cuttriss (as Agent), and
Colorado Business Bank, as Escrow Agent. (3)
10.11* Registration Rights Agreement dated as of September 27, 1996 by
and between Registrant and certain investors. (1)
10.12* Employment Agreement between the Registrant and James E.
Alexander. (1)(2)
</TABLE>
39
<PAGE>
<TABLE>
<S> <C>
10.13* Employment Agreement between the Registrant and Boris
Rubizhevsky. (1)(2)
10.14* Security Agreement dated March 31, 1995 between Isonics and
Isoserve, Inc. (1)
10.15 Omitted
10.16* February 1997 Agreement between the Registrant, Electrochemical
Plant and AO Techsnabexport, Co., Ltd. (1)
10.17* Letter from Yale University to Registrant dated January 28, 1997.
(1)
10.18* Certificate of Determination of Preferences and Rights of the
Series A Preferred Stock. (4)
10.19* Form of Subscription Agreement. (4)
10.20* Form of Warrant. (4)
10.21* Investment Banking Agreement. (4)
10.22* Form of Registration Rights Agreement. (4)
10.23* Asset Purchase Agreement dated December 1, 1999 between the
Registrant and Eagle-Picher Technologies, LLC. (5)
10.24* Registration Rights Agreement dated December 1, 1999 between the
Registrant and Eagle-Picher Technologies, LLC. (5)
10.25* Warrant Agreement dated December 1, 1999 between the Registrant
and Eagle-Picher Technologies, LLC. (5)
10.26* Supply Agreement between the Registrant and Eagle-Picher
Technologies, LLC. (6)
20.01* Form of Letter of Transmittal (7)
23.10+ Consent of independent accountants.
23.11+ Consent of Arter & Hadden, LLP (see exhibit 5.01)
24.01+ Power of Attorney (see signature page).
27.01* Financial Statement Schedule
</TABLE>
(1) Incorporated herein by reference to exhibit filed with Isonics'
Registration Statement on Form SB-2 ("Registration Statement") (Commission
file No. 333-13289) in which this exhibit bears the same number except
exhibit 3.01 which was numbered 3.03 in that registration statement.
(2) Items that are management contracts or compensatory plans or arrangements
required to be filed as exhibits pursuant to Item 13(a) of Form 10-KSB.
(3) Filed with Isonics' Current Report on Form 8-K (File No. 001-12531), dated
May 15 and filed May 27, 1998, and incorporated herein by reference.
(4) Filed with Isonics' Current Report on Form 8-K (File No. 001-12531), dated
July 29 and filed August 12, 1999, and incorporated herein by reference.
(5) Filed with Isonics' Current Report on Form 8-K (File No. 001-12531) dated
December 1, 1999 and filed December 10, 1999, and amendment thereto filed
February 10, 2000, and incorporated herein by reference.
(6) Confidential treatment requested.
(7) Filed with Isonics Registration Statement on Form S-4 (File No. 333-37696)
* Previously filed.
+ Filed herewith.
Item 17. Undertakings.
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The undersigned Registrant hereby undertakes: (1) to file, during any
period in which offers or sales are being made, a post-effective amendment to
the Registration Statement: (i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any
facts or events arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
the Registration Statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to the information in the Registration
Statement, including (but not limited to) any addition or deletion of a managing
underwriter; (2) that for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of securities at that time shall be deemed to be the initial bona fide
offering thereof; and (3) to remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's Annual Report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of securities at
that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered, to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the Registrant's Articles of Incorporation, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by a director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Golden, Jefferson County, State of Colorado, on September 25,
2000.
ISONICS CORPORATION
By: /s/ James E. Alexander
-------------------------------
James E. Alexander, President
In accordance with the requirements of the Securities Act of 1933, the
following persons in their capacities and on the dates stated signed this
registration statement.
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears constitutes and appoints James E. Alexander and Boris Rubizhevsky, or
either of them, as true and lawful attorneys-in-fact and agents with full power
of substitution and re-substitution, for him and in his name, place and stead,
in any and all capacities to sign the Registration Statement file herewith and
any or all amendments to said Registration Statement (including post-effective
amendments and registration statements filed pursuant to Rule 462 and
otherwise), and to file the same, with all exhibits thereto, and other documents
in connection therewith, the Securities and Exchange Commission granting unto
said attorney-in-fact and agents the full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
foregoing, as to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agents or any of them, or his substitute, may lawfully do or cause to be done by
virtue hereof.
<TABLE>
<S> <C> <C>
President, Chief Executive
Officer, Chairman and
/s/ James E. Alexander Director September 25, 2000
------------------------
Vice Chairman,
/s/ Boris Rubizhevsky Director September 25, 2000
------------------------
/s/ Lindsay A. Gardner Director September 25, 2000
------------------------
/s/ Richard Parker Director September 25, 2000
------------------------
/s/ Larry J. Wells Director September 25, 2000
------------------------
Chief Financial Officer and
/s/ Brantley J. Halstead Principal Accounting Officer September 25, 2000
------------------------
</TABLE>
42
