UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: December 1, 1999
ISONICS CORPORATION
(Name of small business issuer as specified in its charter)
CALIFORNIA 001-12531 77-0338561
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State of Commission File IRS Employer
Incorporation Number Identification No.
5906 MCINTYRE STREET, GOLDEN, COLORADO 80403
Address of principal executive offices
303-279-7900
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Telephone number, including
Area code
NOT APPLICABLE
Former name or former address if changed since last report
ITEM 2 - ACQUISITION OR DISPOSITION OF ASSETS
GENERAL. On December 1, 1999, Isonics Corporation ("Isonics" or the
"Company") completed a sale of its depleted zinc (DZ) business to
Eagle-Picher Technologies, LLC for $8.2 million dollars, including $1.5
million to be paid over a period of three years, which amount is subject to
certain contingencies. Isonics received $6,730,303.00 from E-P at the
closing, of which approximately $1,150,570.00 was used to pay certain accrued
liabilities. DZ is used to prevent corrosion in nuclear power plants.
Corrosion is a cause of high radiation fields in nuclear power plants and can
result in radiation exposure to workers. DZ also reduces environmental
cracking in certain kinds of nuclear reactors which, if not controlled, can
require extremely costly repairs or possibly result in premature shutdown and
de-commissioning of the facility.
The Agreement executed between Isonics and Eagle-Picher (E-P)
provides for: (1) Isonics' sale of the DZ Business to E-P for a purchase
price including approximately $6,700,000 in cash plus three additional
payments of $500,000 over a three year period, (2) for E-P's sale to Isonics
of 200 kilograms of Silicon-28 in consideration for a 42 month warrant grant
to E-P for the purchase of 4,000,000 shares of Isonics common stock at a
purchase price of $3.75 per share. The Warrant is subject to a registration
rights agreement.
Related to, but separate from, the sale of the depleted zinc
business, Isonics contemporaneously signed a ten year supply agreement by
which Isonics 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 Carbon-12 and Carbon-13 produced by E-P from
its pilot plant under construction in Oklahoma for a ten year period. The
Supply Agreement locks in what Isonics believes is a favorable purchase price
for the isotopes. As partial consideration for the exclusivity provisions,
Isonics agreed to pay E-P a fee equal to 3% of the net revenues from all
sales made by Isonics of products incorporating Silicon-28, Silicon-29 or
Silicon-30 supplied by E-P. The ability of E-P to produce isotopes meeting
the specifications of the supply agreement is contingent upon E-P
successfully bringing its pilot production plant online as scheduled in March
of 2000.
In addition, Isonics purchased 200 kilograms of Silicon-28 from E-P
in consideration of a warrant to purchase 4,000,000 shares of Isonics common
stock exercisable by E-P for $3.75 per share through May 30, 2003. Isonics
granted E-P certain registration rights related to the shares of its common
stock issuable upon exercise of the warrant. E-P has an obligation to deliver
the Silicon-28 during calendar year 2000 or, if it fails to do so, it will
reduce the warrant proportionately. One of the properties of isotopically
pure Silicon-28 is its high thermal conductivity, which Isonics is currently
developing for semiconductor applications.
Isonics is an advanced materials and technology company which
develops and commercializes products based on enriched stable isotopes.
Stable isotopes can be thought of as ultra-ultra pure materials. This high
degree of purification provides enhanced performance properties compared to
normal materials. Stable isotopes have commercial uses in several areas,
including energy; research, medical diagnostics, and drug development;
product tagging and stewardship; semiconductors; lasers; and optical
materials.
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, 1999 filed with the
Securities and Exchange Commission, which include the Company's 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.
INFORMATION REQUIRED BY ITEM 701 OF REGULATION S-B.
SECURITIES SOLD. The sale described in the preceding paragraphs
occurred on December 1, 1999. The securities sold consists of one restricted
warrant ("Warrant") to purchase 4,000,000 shares of restricted common stock
issued at an exercise price of $3.75 per share.
UNDERWRITERS AND OTHER PURCHASERS.
No underwriters, agents, or placement agents participated in the
private placement.
The warrant was issued to a single accredited investor as
consideration for the purchase of assets.
The Warrant was issued in consideration for the purchase of 200
kilograms of Silicon-28 pursuant to an Asset Purchase Agreement executed
between Isonics and E-P.
The transactions were exempt from registration under the Securities
Act of 1933, as amended by reason of Sections 4(2) and 4(6) of the Securities
Act of 1933.
Terms of conversion or exercise are as follows:
The Warrant granted to E-P may be exercised to purchase 4,000,000
shares of restricted common stock issued on a warrant-for-share basis
with the Company's common stock (subject to dilution adjustment) for a
purchase price of $3.75 per share through the expiration date, May 30,
2003
The Company also entered into a registration rights agreement
relating to the shares of common stock underlying the Warrant.
The Company intends to use the 200 kilograms of Silicon-28 from the
issuance of the Warrant for the continued development and commercialization
of Silicon-28 wafers for the semiconductor industry.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Financial statements of businesses acquired. NOT APPLICABLE.
Pro forma financial statements will be filed by amendment to this
Form 8-K no later than February 15, 2000.
Exhibits:
10.1 Asset Purchase Agreement
10.2 Form of Warrant
10.3 Form of Registration Rights Agreement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 15th day of December 1999.
ISONICS CORPORATION
By: /s/ JAMES E. ALEXANDER
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James E. Alexander
President and Chief Executive Officer