Irrevocable Transfer Agent Instructions

IRREVOCABLE TRANSFER AGENT INSTRUCTIONS



May 30, 2006







Continental Stock Transfer & Trust Company

17 Battery Place 8 th Floor

New York, NY 10004

Attention: William Seegraber



RE: ISONICS CORPORATION





Ladies and Gentlemen:



Reference is made to that certain Securities Purchase Agreement (the " Securities Purchase Agreement ") of even date herewith by and between Isonics Corporation, a California corporation (the " Company "), and the Buyers set forth on Schedule I attached thereto (collectively the " Buyers "). Pursuant to the Securities Purchase Agreement, the Company (and subject to the terms and conditions of the Securities Purchase Agreement) have sold to the Buyers, and the Buyers have purchased from the Company, convertible debentures (collectively, the " Debentures ") in the aggregate principal amount of Sixteen Million Dollars ($16,000,000), plus accrued interest, which are convertible into shares of the Company92s common stock, no par value per share (the " Common Stock ") in accordance with the terms of the Debentures. The Company has also issued to the Buyer three (3) warrants to purchase an aggregate of up to 8,000,000 shares of Common Stock, at the Buyer92s discretion (the " Warrant ").



These instructions relate to stock issuances or transfers of not more than a total of 6,075,785 (being 8,735,785 less 660,000 Buyer92s Shares, as defined in the Securities Purchase Agreement and 2,000,000 Warrant Shares) shares of the Company92s Common Stock unless and until after the Company92s shareholders approve the issuance of a greater number of shares of Common Stock as contemplated in Section 4(l) and has increased the Company92s authorized capitalization as contemplated in Section 4(m) of the Securities Purchase Agreement thereafter up to:



1. 64,000,000 shares of Common Stock to be issued to the Buyers upon conversion of the Debentures (" Conversion Shares ").



2. Shares of Common Stock to be issued to the Buyers upon conversion of accrued interest and liquidated damages into Common Stock if the Company has elected








to pay such accrued interest under the Convertible Debentures (" Interest ") and/or liquidated damages under the Investor92s Registration Rights Agreement dated the date hereof by and between the Company and the Buyer (" Liquidated Damages ") in shares of the Company92s Common Stock as calculated in the Convertible Debenture and the Investor92s Registration Rights Agreement, respectively (the " Interest Shares " and the " Liquidated Damages Shares ").



3. Up to 8,000,000 shares of Common Stock to be issued to the Buyers upon exercise of the Warrant (the " Warrant Shares ") in accordance with the terms of the Warrants.



This letter shall serve as our irrevocable authorization and direction to Continental Stock Transfer and Trust Company (the " Transfer Agent ") to do the following (provided that you are acting as Transfer Agent of the Company at such time):



1. Delivery of Conversion Notice or Exercise Notice and Exercise Price .



a. Delivery of Conversion Notice . In all cases where the Buyer intends to convert a portion or all of the principal amount of the Debentures, the Buyer must deliver to the Company via facsimile or electronic mail to the Company a properly completed and duly executed Conversion Notice (the " Conversion Notice ") in the form attached as Exhibit A to the Debentures.



b. Delivery of an Exercise Notice and Exercise Price . In all cases where the Buyer intends to exercise a portion or all of the Warrants, the Buyer must deliver to the Company via facsimile or electronic mail to the Company a properly completed and duly executed Exercise Notice (the " Exercise Notice ") in the form attached as Exhibit A to the Warrants as well the Exercise Price for the Warrants being exercised, if being exercised on a cash basis, via wire transfer of good and immediately available funds to such instructions provided by the Company.



c. In the event that counsel to the Company fails or refuses to render an opinion as required to issue the Conversion Shares, the Warrant Shares, the Liquidated Damages (if elected by the Company to be paid in Common Stock), or the Interest Shares (if elected by the Company to be paid in Common Stock of the Company) (either with or without restrictive legends, as applicable), then the Company irrevocably and expressly authorizes David Gonzalez, Esq. as counsel to the Buyer, or such other counsel to the Buyer chosen by the Buyer and designated by the Buyer in writing to the Transfer Agent with a copy to the Company, to render such opinion. The Transfer Agent shall accept and be entitled to rely on such opinion for the purposes of issuing the Conversion Shares, the Warrant Shares, the Liquidated Damages, or the Interest Shares.



2. Conversions, Warrant Exercises, and Issuance of Liquidated Damages Shares or Interest Shares at the Instruction of the Company . The Transfer Agent shall deliver



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Conversion Shares, Warrant Shares, Liquidated Damages Shares or Interest Shares (if the Company has elected to make such payments by the issuance of Shares of the Company92s Common Stock) (as the case may be) in accordance with the instructions given to it by the Company. Since the Transfer Agent participates in The Depository Trust Company ( " DTC ") Fast Automated Securities Transfer Program, the Transfer Agent shall credit the Conversion Shares, the Warrant Shares, Liquidated Damages Shares or Interest Shares to the Buyer92s or their designees92 balance account with DTC through its Deposit Withdrawal At Custodian (" DWAC ") system provided that the Company is an eligible security and further provided that the Buyer causes its bank or broker to initiate the DWAC transaction, unless the Conversion Shares, the Warrant Shares Liquidated Damages Shares or Interest Shares to be issued are in physical stock certificate form or restricted securities92 as that term is defined in Rule 144. When delivering physical stock certificates or restricted securities, the Transfer Agent shall issue and deliver via common carrier of overnight delivery to the address as specified in the Conversion Notice or the Exercise Notice (as the case may be) a certificate registered in the name of the Buyer or its designees for the Conversion Shares, the Warrant Shares, Liquidated Damages Shares or Interest Shares (as the case may be) and if "restricted securities" shall impose its normal legend on such certificate.



3. Failure to Deliver. If the Buyer has failed to receive the Conversion Shares, the Warrant Shares, Liquidated Damages Shares or Interest Shares within three (3) Trading Days of delivery of a Conversion Notice or Exercise Notice (as the case may be) as required by the Warrants or the Debentures or within three (3) Trading Days of the Company92s notification to the Buyer of its election to pay Liquidated Damages and/or Interest in shares of the Company92s Common Stock or failure to receive notification from the Company of its election to pay Liquidated Damages or Interest in cash or shares of the Company92s Common Stock within three (3) Trading Days of such Liquidated Damages or Interest being due (a " Failure to Timely Deliver "), the Buyer may provide written notification to the Company and to the Transfer Agent describing such failure (" Notice of Failure to Timely Deliver ") as set forth in Exhibit A attached hereto. Upon such notification, the Company irrevocably appoints David Gonzalez as its agent to instruct the Transfer Agent for all pending and future deliveries of Conversion Notices, Exercises Notices, issuances of Liquidated Damages Shares and/or Interest Shares.



The Notice of Failure to Timely Deliver and must set forth at least the following:



a. A certification that the Buyer delivered the Conversion Notice or the Exercise Notice and Exercise Price to the Company as contemplated in paragraph 1, above and/or that the Company has elected to pay Liquidated Damages and/or Interest in shares of the Company92s Common Stock or has failed to ...