Isonics Completes $22 Million Debt Financing to Accelerate Growth in H

    Business Editors

    GOLDEN, Colo.--(BUSINESS WIRE)--Feb. 25, 2005--Isonics Corporation (Nasdaq:ISON), committed to the development of next-generation technology for the homeland security and semiconductor markets, has announced closing of a $22 million convertible debt private placement financing. The Company will use the proceeds to continue its revenue growth strategy through acquisitions of profitable and/or cash-flow positive companies, primarily in the homeland security space. The announcement was made by James E. Alexander, Chairman and CEO of Isonics.
    "We anticipate that the proceeds from this financing will enable Isonics to accelerate its growth and acquisition strategy, particularly in the homeland security sector," said Mr. Alexander. "These funds will also provide additional support for commercialization efforts with respect to our NeutroTest(TM) explosive detection prototype device. We recently announced the formal commencement of our calendar 2005 NeutroTest(TM) marketing campaign, and we intend to focus all necessary company resources on completing the commercial development and initiating sales of the device."
    Isonics intends to allocate 50% of the net proceeds from the financing to leverage strategic acquisitions of companies with significant revenue and/or positive cash flow in the homeland security, defense and security industries. Isonics may also target acquisitions that can bring important technologies and products that complement and extend the Company's existing intellectual property portfolio and strategic direction.
    Under the terms of the placement agreement, Isonics issued accredited investors 8% convertible debentures in the aggregate principal amount of $22 million convertible into common stock at $5.00 per share and 1,540,000 common stock purchase warrants, each of which can be exercised for $6.25 per share for a period of three years. After payment of the expenses of the offering and commissions to a broker dealer, Isonics received net proceeds of approximately $21.3 million. The Company issued an additional $770,000 in convertible debentures and an additional 53,900 warrants to an unaffiliated party who provided services in connection with completing the transaction.
    The Company may cause the investors to convert the debentures into common stock at a price of $5.00 per share if the closing bid price exceeds $7.50 for 20 out of 30 consecutive trading days. According to the terms of the agreement, the Company has the sole option to pay interest and repay the principle in common stock if certain conditions are met. Further terms are summarized in the Form 8-K and detailed in the documents filed with the SEC.
    In related news with respect to Isonics homeland security division, the Company is continuing due diligence toward its announced acquisition of Protection Plus Security Consultants. The Company also recently announced the appointment of Dennis Koehler to the post of Vice President of Government Sales and Marketing. Mr. Koehler is a specialist in the homeland security industry and a longtime former executive with the Federal Aviation Administration.

    About Isonics Corporation

    Isonics Corporation has three business divisions: (1) Isonics Semiconductor, (2) Isonics Life Sciences, and (3) Homeland Security and Defense. Isonics is a world leader in isotopically engineered materials and through its semiconductor division produces isotopically pure silicon-28 chemicals and wafers for the semiconductor industry. Isonics' Life Sciences division markets and sells isotopes to the health care industry for the imaging and treatment of cancer. Stable isotopes can be thought of as ultra pure materials. This high degree of purification provides enhanced properties as compared to natural materials. Our efforts in the Homeland Security segment are nascent at the present time as we proceed to develop further our neutron-based detection technologies. Additional information may be obtained at the Company's Web site at http://www.isonics.com. A presentation about Isonics' NeutroTest(TM) explosive detection prototype can be found at http://www.tril03.com/isonics/madrid.pdf. A video demonstrating the functioning NeutroTest prototype can be viewed at http://www.trilogy-capital.com.edgesuite.net/.

    Cautionary Statement

    Except for historical information contained herein, this document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks and uncertainties that may cause the Company's actual results or outcomes to be materially different from those anticipated and discussed herein. Further, the Company operates in industries where securities values may be volatile and may be influenced by regulatory and other factors beyond the Company's control. Other important factors that the Company believes might cause such differences are discussed in the risk factors detailed in the Company's 10-KSB for the year ended April 30, 2004, and its quarterly report on Form 10-QSB for the six months ended October 31, 2004, both as filed with the Securities and Exchange Commission, which include the Company's historical cash flow difficulties, dependence on significant customers, and rapid development of technology, among other risks. In assessing forward-looking statements contained herein, readers are urged to carefully read all cautionary statements contained in the Company's filings with the Securities and Exchange Commission. Isonics cautions investors that there are currently no commercial NeutroTest products, and no guarantee there will be. Isonics has made no NeutroTest sales and no government agency or other person has expressed an interest in purchasing NeutroTest. There can be no assurance that Isonics will be able to manufacture the NeutroTest for the market at a cost and with capabilities that meet the needs of prospective customers.

    This announcement may contain forward-looking statements made by senior management of Isonics that involve risks and uncertainties, such as statements about plans, objectives, expectations, assumptions or future events. These statements involve estimates, assumptions, known and unknown risks, uncertainties and performances, or achievements expressed or implied by the forward-looking statements. Actual future results and trends may differ materially from those made in -- or suggested by -- statements made in this announcement due to a variety of factors. Consequently, you should not place undue reliance on any forward-looking statements made in this announcement. For more information about Isonics and risks arising from investing in Isonics, you are directed to the Company's most recent Form 10-KSB filed with the Securities and Exchange Commission.

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CONTACT: Isonics Corporation James E. Alexander, 303-279-7900 or Investor Relations: Trilogy Capital Partners, Inc. for Isonics Corporation Paul Karon, 800-592-6067 paul@trilogy-capital.com

KEYWORD: COLORADO INDUSTRY KEYWORD: CHEMICALS/PLASTICS COMPUTERS/ELECTRONICS AEROSPACE/DEFENSE GOVERNMENT SOURCE: Isonics Corporation

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