To whom it may concern:

I am a 21 year old, who has been investing into the stock market for
the last 5 months. I have some knowledge, but limited, of the stock
market.  I conduct about 18 trades per month.

I currently own stock, in a up and coming company Isonics Corp. (SYM: ISON)
Recently the CFO has put out this statement:  


GOLDEN, Colo.--(BUSINESS WIRE)--Oct. 14, 2004--Isonics Corporation
(NASDAQ: ISON) provided guidance today with respect to various classes
of warrants. Specifically, the Company noted that its Class B and
Class C warrants are not presently exercisable due to the fact that
the related Form SB-2 registration statement is not current. The
warrants may still be traded on the Nasdaq SmallCap market and are
listed under the symbols ISONL and ISONZ, respectively. The
announcement was made by John V. Sakys, vice president and CFO of
Isonics.


The Company indicated that it expects to file an updated Form SB-2
with the SEC within 10 business days. Upon effectiveness of the
post-effective amendment, the Company will announce that the warrants
are again exercisable.

A Class B warrant is exercisable for $1.50 and results in one common
share and one Class C warrant. A Class C warrant is exercisable for
$2.50 and results in one common share. Both warrants expire December
31, 2005. This announcement does not constitute the offer of any
Isonics securities for sale.
END OF STATEMENT...........................

Please explain to me the difference between the 3 different classes of
stocks that Isonic is talking about.  Also what does it mean when it
says  "A Class B warrant is exercisable for $1.50 and results in one
common share and one Class C warrant. A Class C warrant is exercisable
for $2.50 and results in one common share. Both warrants expire
December 31, 2005. This announcement does not constitute the offer of
any Isonics securities for sale"   Please explain thoroughly the
differences and advantages.


thank you

---

Clarification of Question by ryanwegner-ga on 20 Oct 2004 16:54 PDT

After the bell Monday, Isonics reported to the U.S. Securities and
Exchange THis was taken from another news source:  "Commission that
between October 12 and October 15, when the massive touts and trading
were at their zenith, some 1,722,500 warrants between at $1, $1.10,
$1.25, $1.50 and including 10,000 at $2.32, were exercised for
$2,022,367 for the "Isonics Lucky Eight" shareholders.

The company said it will use its proceeds from the warrant exercises
for "working capital purposes related to our semiconductor division,
the continued development of products in our homeland security
division and for general working capital purposes." "


what does this all mean about the warrants?  What is the difference
from a normal ISON stock?

Hi ryanwegner,

Generally, a warrant is a financial instrument that represents some
kind or promise or commitment.  Typically, a warrant gives the holder
the right to buy a certain amount of a particular stock at a fixed
price, within a time limit.

The Isonics Class C warrants work like that.  If you own one of these,
you can give it to Isonics with $2.50 and they will give you one share
of their common stock in return.  This is called "exercising" the
warrant, just like exercising an option.  If you have a warrant and
the stock price goes above the exercise price, you can exercise the
warrant and get the stock for less than the going rate, so you can
then sell it at a profit.  If the stock doesn't go above the exercise
price, you can refrain from exercising the warrant, and not lose any
more than whatever you paid for the warrant.

The Class B warrants are a little trickier.  If you have a class B
warrant, you can give it to Isonics with $1.50 and Isonics will give
you back a share of common stock and a Class C warrant.  Then you have
a choice of holding on to the Class C warrant or exercising it to buy
another share of stock for another $2.50.

Warrants may be traded, but they are not shares of stock themselves.

Both classes of warrants expire December 31, 2005, which means that
the company is only committed to this warrant plus cash for stock deal
until then.  After that, the warrant is just a piece of paper.


Additional Links

Article on stock warrants in The Investment FAQ
http://invest-faq.com/articles/stock-warrants.html

Stock warrant ABCs on SmartMoney.com
http://www.smartmoney.com/ask/index.cfm?story=19990608


I hope this explanation is helpful.  If it's not clear enough, please
ask for a clarification.

--efn

I don't understand this:
"If you own one of these, you can give it to Isonics with $2.50 and
they will give you one share of their common stock in return."

What is the value of the common stock? Will it be more than what you
paid for the warrant plus the $2.50 ?

The value of the common stock is determined by the market at the time.
 It may be more or less than the cost of the warrant plus $2.50.

can you give a hypothetical example of what would happen when a
warrant is exercised?

Let's say hypothetically that an imaginary character has a Class C
Isonics warrant for 1,000 shares and decides to exercise his warrant. 
He sends Isonics a letter saying "I want to exercise my warrant to buy
1,000 shares of common stock for $2.50 a share," and with the letter
he includes a check for $2,500.00.  Isonics checks that his warrant
and check are valid, writes him down in their books as the owner of
1,000 shares of stock, and sends him stock certificate that says that
he owns the shares.  He can then hold or sell the shares.

I invented the procedural details based on my experience with stock
options, so they may not be accurate, but the substance of the
transaction is.

I believe this is starting to make sense to me.  Since the warrants
and the common stock rise and fall in proportion to each other, is it
more beneficial to the holder of the warrants to just sell them at the
higher market price than to exercise them?  If you had bought those
warrants at $2.00 and they were exercised at $2.50 (1000) it would
have cost you $4500 for those common shares that are probably at $4.50
a share anyways.

Sorry to pester but I had found some information:

"As an example of a "condition," there may be an exchange privilege
which lets you exchange 1 warrant plus $25 in cash (or even no cash at
all) for 100 shares of common stock in the corporation, any time after
some fixed date and before some other designated date. (And often the
issuer can extend the "expiration date."

We know the exercise price of the C class warrant is $2.50 but what
are the "conditions" ? Is it one warrant for one share, or one warrant
for two shares, etc?  Anything better than 1 for 1 makes the idea of
exercising a warrant more attractive?

Sorry last one I swear!!!

If the warrant is trading above $2.50, lets $4.00.  When the warrant
is exercised are the shares converted for the exercise price or the
current market price of $4.00?

Thank you VERY much!!

> is it more beneficial to the holder of the warrants to just sell
them at the higher market price than to exercise them?

It depends on the market for the warrants.  Say the stock is selling
for $3 a share and you have a warrant to buy some shares for $2 a
share.  The warrant should be worth at least $1 per share, because you
could exercise it and immediately sell the shares for that much
profit.  But if some speculator thinks the stock is going to go up, he
may be willing to pay more than $1 a share for the opportunity to buy
the stock at $2 in the future without committing $3 a share now.

> We know the exercise price of the C class warrant is $2.50 but what
are the "conditions" ? 

I don't know what the specific conditions for the Isonics warrants are
beyond what ryanwegner posted.

> Is it one warrant for one share, or one warrant for two shares, etc?

There are two ways to talk about warrants.  If you have the right to
buy 1,000 shares at some prices, you could refer to it as one warrant
for 1,000 shares or 1,000 warrants for one share each.  I don't know
which way is standard or more common.  The news story ryanwegner
quoted used the form that assumes one warrant per share.

> If the warrant is trading above $2.50, lets $4.00.  When the warrant
is exercised are the shares converted for the exercise price or the
current market price of $4.00?

The warrant gives someone the right to buy shares at the exercise
price, so when you exercise it, that is the price you pay.  The market
price for warrants is relevant only to buying and selling warrants,
not to exercising them.

--efn