________________________________________________________________________________

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                            SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934


Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:
[ ]  Preliminary Proxy Statement
[ ]  Confidential, for Use of the Commission Only (as permitted by 
     Rule 14a-6(e)(2))
[X]  Definitive Proxy Statement
[ ]  Definitive Additional Materials
[ ]  Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12


                           INTERNATIONAL ISOTOPES INC.
             (Exact Name of Registrant as Specified In Its Charter)

Payment of Filing Fee (Check the appropriate box):
[X]  No fee required
[ ]  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 
         1)   Title of each class of securities to which transaction applies:
         2)   Aggregate number of securities to which transaction applies:
         3)   Per unit price or other underlying  value of transaction  computed
              pursuant to Exchange  Act Rule 0-11 (set forth the amount on which
              the filing fee is calculated and state how it was determined):
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[ ]  Fee paid previously with preliminary materials.
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0-11(a)(2)  and  identify  the  filing  for  which the  offsetting  fee was paid
previously.  Identify the previous filing by registration  statement  number, or
the Form or Schedule and the date of its filing.
         1)   Amount Previously Paid:
         2)   Form, Schedule or Registration Statement No.:
         3)   Filing Party:
         4)   Date Filed:

________________________________________________________________________________







                           INTERNATIONAL ISOTOPES INC.
                              4137 Commerce Circle
                            Idaho Falls, Idaho 83401

                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                            TO BE HELD JULY 14, 2005

Time and Date:  2:00 p.m., Mountain Time, on Thursday, July 14, 2005

Place:   International Isotopes Inc.
         Shilo Inn Convention Center
         780 Lindsay Blvd
         Idaho Falls, Idaho 83402

Items of Business

1.       To elect  three  directors  to serve  for a term of one year and  until
         their successors are elected and qualified.
2.       To  ratify  the  appointment  of  Hansen,  Barnett  &  Maxwell  as  the
         independent auditors for the fiscal year ending December 31, 2005.
3.       To adopt the Company's Employee Stock Purchase Plan.
4.       To approve the Second Amended and Restated  Articles of  Incorporation,
         which   amend  and   restate  the   Company's   Restated   Articles  of
         Incorporation,  as amended, to increase the number of authorized shares
         of common stock; and
5.       To  consider  any other  business  that may  properly  come  before the
         meeting.

Adjournments and Postponements

Any action on the items of business  described  above may be  considered  at the
annual  meeting at the time and on the date  specified  above or at any time and
date to which the annual meeting may be properly adjourned and postponed.

Record Date

You are entitled to vote only if you were an International  Isotopes shareholder
as of the close of business on April 15, 2005.

Voting

Your  vote is very  important.  Whether  or not you plan to  attend  the  annual
meeting,  we encourage you to read this proxy statement and to submit your proxy
or voting instructions as soon as possible.  You may submit your proxy or voting
instructions for the annual meeting by completing, signing, dating and returning
your proxy card or voting  instructions in the pre-addressed  envelope provided.
For  specific  instructions  on how to vote  your  shares,  please  refer to the
section  entitled  Questions  and  Answers  beginning  on page 3 of  this  proxy
statement and the instructions on the proxy card or voting instruction card. You
may attend  the  meeting  in person  even  though you have sent in your proxy or
voting instruction card.

                                        BY ORDER OF THE BOARD OF DIRECTORS,

                                        Steve T. Laflin
                                        President and Chief Executive Officer
                                        Idaho Falls, Idaho
                                        April 15, 2005

This notice of annual  meeting and proxy  statement  and form of proxy are being
distributed on or about May 16, 2005.






                           INTERNATIONAL ISOTOPES INC.
                              4137 Commerce Circle
                            Idaho Falls, Idaho 83401
                               __________________

                                 PROXY STATEMENT
                               __________________

                       For Annual Meeting of Shareholders
                           To Be Held on July 14, 2005

     QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING

Q:   Why am I receiving these materials?

A:   The Board of Directors of  International  Isotopes Inc. is providing  these
     proxy materials for you in connection with  International  Isotopes' annual
     meeting of shareholders,  which will take place on Thursday, July 14, 2005.
     As a  shareholder,  you are  invited to attend the annual  meeting  and are
     entitled to and  requested  to vote on the items of business  described  in
     this proxy statement.

Q:   What information is contained in this proxy statement?

A:   The information  included in this proxy statement  relates to the proposals
     to be voted on at the annual meeting,  the voting process, the compensation
     of directors  and most highly paid  executive  officers,  and certain other
     required information.

Q:   How may I obtain International  Isotopes' annual report to shareholders and
     Form 10-KSB?

A:   A copy of our 2004  annual  report  (which  contains  our Form  10-KSB)  is
     enclosed.

     Shareholders may request any exhibit to the Form 10-KSB, for the year ended
     December 31, 2004, by specifically requesting a copy from:

                           International Isotopes Inc.
                              Attn: Steve T. Laflin
                              4137 Commerce Circle
                            Idaho Falls, Idaho 83401
                                 (208) 524-5300

     Copies of the 2004 Annual  Report on Form 10-KSB are also  available in the
     Investor Center section of our website at www.intisoid.com and at the SEC's
     EDGAR database on the SEC's website at www.sec.gov.

Q:   What items of business will be voted on at the annual meeting?

A:   The items of business scheduled to be voted on at the annual meeting are:

     o    The election of directors;
     o    The ratification of the independent auditors for the 2005 fiscal year;
     o    The approval of the Employee Stock Purchase Plan.
     o    The second  amendment  and  restatement  of the Amended  and  Restated
          Articles of Incorporation.

We will also consider any other  business that properly  comes before the annual
meeting.

Q:   How does the Board recommend that I vote?

A:   Our Board  recommends  that you vote your shares "FOR" each of the nominees
     to the Board,  "FOR" the  ratification of the independent  auditors for the
     2005 fiscal year,  "FOR" the approval of the Employee  Stock Purchase Plan;
     and "FOR" the  approval  of the Second  Amended  and  Restated  Articles of
     Incorporation.




Q:   What shares can I vote?

A:   Each share of International Isotopes common stock issued and outstanding as
     of the close of business on April 15, 2005, the Record Date, is entitled to
     be voted on all items being voted upon at the annual meeting.  You may vote
     all shares owned by you as of this time, including (1) shares held directly
     in your name as the  shareholder of record,  and (2) shares held for you as
     the beneficial  owner through a broker,  trustee or other nominee such as a
     bank. On the Record Date we had approximately  183,567,348 shares of common
     stock issued and outstanding.

Q:   What is the  difference  between  holding shares as a shareholder of record
     and as a beneficial owner?

A:   Most  shareholders  hold  their  shares  through a broker or other  nominee
     rather than directly in their own name. As summarized below, there are some
     distinctions between shares held of record and those owned beneficially.

     Shareholder of Record
     If your  shares are  registered  directly  in your name with  International
     Isotopes' transfer agent,  American Stock Transfer & Trust Company, you are
     considered,  with respect to those shares,  the shareholder of record,  and
     these  proxy  materials  are being sent  directly  to you by  International
     Isotopes.  As the  shareholder of record,  you have the right to grant your
     voting proxy directly to International Isotopes or to vote in person at the
     meeting.  International  Isotopes has enclosed or sent a proxy card for you
     to use.

     Beneficial Owner
     If your shares are held in a brokerage  account or by another nominee,  you
     are  considered  the  beneficial  owner of shares held in street name,  and
     these proxy  materials  are being  forwarded to you together  with a voting
     instruction  card. As the  beneficial  owner,  you have the right to direct
     your broker,  trustee or nominee how to vote and are also invited to attend
     the annual meeting.

     Since a beneficial owner is not the shareholder of record, you may not vote
     these  shares in person at the  meeting  unless you obtain a "legal  proxy"
     from the broker,  trustee or nominee that holds your shares, giving you the
     right to vote the shares at the meeting.  Your  broker,  trustee or nominee
     has enclosed or provided  voting  instructions  for you to use in directing
     the broker, trustee or nominee how to vote your shares.

Q:   How can I attend the annual meeting?

A:   You  are  entitled  to  attend  the  annual  meeting  only  if you  were an
     International  Isotopes  shareholder  or joint  holder  as of the  close of
     business  on  April  15,  2005 or you  hold a valid  proxy  for the  annual
     meeting.  You  should be  prepared  to  present  photo  identification  for
     admittance. In addition, if you are a shareholder of record, your name will
     be verified  against the list of  shareholders of record on the record date
     prior  to your  being  admitted  to the  annual  meeting.  If you are not a
     shareholder of record but hold shares through a broker or nominee (i.e., in
     street  name),  you should  provide  proof of  beneficial  ownership on the
     record date, such as your most recent account  statement prior to April 15,
     2005,  a copy of the  voting  instruction  card  provided  by your  broker,
     trustee or nominee,  or other similar evidence of ownership.  If you do not
     provide photo  identification or comply with the procedures  outlined above
     upon request,  you will not be admitted to the annual meeting.  The meeting
     will begin promptly at 2:00 p.m., Mountain time.

Q:   How can I vote my shares in person at the annual meeting?

A:   Shares  held in your  name as the  shareholder  of  record  may be voted in
     person at the annual meeting.  Shares held  beneficially in street name may
     be voted  in  person  only if you  obtain a legal  proxy  from the  broker,
     trustee or nominee that holds your shares  giving you the right to vote the
     shares.  Even if you plan to attend the annual  meeting,  we recommend that
     you also submit your proxy or voting  instructions  as  described  below so
     that your vote  will be  counted  if you  later  decide  not to attend  the
     meeting.

Q:   How can I vote my shares without attending the annual meeting?

A:   Whether  you  hold  shares   directly  as  the  shareholder  of  record  or
     beneficially  in street  name,  you may  direct  how your  shares are voted
     without attending the meeting.  If you are a shareholder of record, you may
     vote by submitting a proxy. If you hold shares beneficially in street name,
     you may vote by submitting voting  instructions to your broker,  trustee or
     nominee.  For directions on how to vote,  please refer to the  instructions
     below  and  those   included  on  your  proxy  card  or,  for  shares  held
     beneficially in street name, the voting  instruction  card provided by your
     broker, trustee or nominee.


                                       2


     Shareholders  of record of  International  Isotopes common stock may submit
     proxies by  completing,  signing  and dating  their proxy cards and mailing
     them in the accompanying  pre-addressed  envelopes.  International Isotopes
     shareholders  who hold shares  beneficially in street name may vote by mail
     by completing,  signing and dating the voting instruction card provided and
     mailing it in the accompanying pre-addressed envelope.

Q:   Can I change my vote?

A:   You may  change  your  vote at any time  prior  to the  vote at the  annual
     meeting.  If you are the shareholder of record, you may change your vote by
     granting a new proxy bearing a later date (which automatically  revokes the
     earlier   proxy),   by  providing  a  written   notice  of   revocation  to
     International  Isotopes'  Secretary prior to your shares being voted, or by
     attending  the  annual  meeting  and voting in  person.  Attendance  at the
     meeting will not cause your  previously  granted proxy to be revoked unless
     you  specifically  so request.  For shares you hold  beneficially in street
     name,  you may change your vote by submitting  new voting  instructions  to
     your  broker,  trustee or nominee,  or, if you have  obtained a legal proxy
     from your broker or nominee  giving you the right to vote your  shares,  by
     attending the meeting and voting in person.

Q:   Who can help answer my questions?

A:   If you have any questions about the annual meeting or how to vote or revoke
     your proxy, you should contact:

                           International Isotopes Inc.
                              Attn: Steve T. Laflin
                              4137 Commerce Circle
                            Idaho Falls, Idaho 83401
                                 (208) 524-5300

Q:   Is my vote confidential?

A.   Proxy instructions, ballots and voting tabulations that identify individual
     shareholders  are handled in a manner that  protects  your voting  privacy.
     Your vote will not be disclosed either within International  Isotopes or to
     third  parties,   except:   (1)  as  necessary  to  meet  applicable  legal
     requirements, (2) to allow for the tabulation of votes and certification of
     the  vote,  and  (3)  to  facilitate  a  successful   proxy   solicitation.
     Occasionally,  shareholders  provide written  comments on their proxy card,
     which are then forwarded to International Isotopes management.

Q:   How many shares must be present or represented  to conduct  business at the
     annual meeting?

A:   The quorum  requirement  for  holding the annual  meeting  and  transacting
     business is that holders of a majority of shares of International  Isotopes
     common stock  entitled to vote must be present in person or  represented by
     proxy. Abstentions, votes withheld and broker non-votes are counted for the
     purpose of determining the presence of a quorum.

Q:   How are votes counted?

A.   In the  election of  directors,  you may vote "FOR" all of the  nominees or
     your vote may be "WITHHELD" with respect to one or more of the nominees.

     For  the  other  items  of  business,  you may  vote  "FOR,"  "AGAINST"  or
     "ABSTAIN."  Abstentions  and votes  withheld have the same effect as a vote
     "AGAINST."  Broker  non-votes  have  no  effect.  If you  provide  specific
     instructions  with regard to a certain  item,  your shares will be voted as
     you  instruct  on such  items.  If you  sign  your  proxy  card  or  voting
     instruction card without giving specific instructions,  your shares will be
     voted in  accordance  with the  recommendations  of the Board ("FOR" all of
     International  Isotopes'  nominees to the Board,  "FOR" ratification of the
     independent  auditors,  "FOR"  the  approval  of the  2005  Employee  Stock
     Purchase Plan, "FOR" the amendment of the Amended and Restated  Articles of
     Incorporation  and in the  discretion  of the  proxy  holders  on any other
     matters that properly come before the meeting).


                                       3


Q:   What is the voting requirement to approve each of the proposals?

A:   In the  election of  directors,  the three  persons  receiving  the highest
     number of "FOR"  votes at the annual  meeting  will be  elected.  The other
     proposals  require the affirmative "FOR" vote of a majority of those shares
     present  in person or  represented  by proxy and  entitled  to vote on that
     proposal at the annual meeting.  If you hold shares  beneficially in street
     name and do not provide your broker with voting  instructions,  your shares
     may constitute "broker non-votes."  Generally,  broker non-votes occur on a
     matter  when a  broker  is not  permitted  to vote on that  matter  without
     instructions  from the  beneficial  owner and  instructions  are not given.
     Brokers are not  permitted  to vote on the proposal to approve the Employee
     Stock  Purchase  Plan  or the  Second  Amended  and  Restated  Articles  of
     Incorporation. In tabulating the voting result for any particular proposal,
     shares that constitute broker non-votes are not considered entitled to vote
     on that proposal.

Q:   Is cumulative voting permitted for the election of directors?

A:   No. International  Isotopes does not allow you to cumulate your vote in the
     election of directors.  For all matters proposed for shareholder  action at
     the annual meeting,  each share of common stock outstanding as of the close
     of business on April 15, 2005 is entitled to one vote.

Q:   What happens if additional matters are presented at the annual meeting?

A.   Other than the four items of business described in this proxy statement, we
     are not aware of any other business to be acted upon at the annual meeting.
     If you grant a proxy, the persons named as proxy holders,  Ralph M. Richart
     and Steve T. Laflin,  will have the  discretion  to vote your shares on any
     additional matters properly presented for a vote at the meeting. If for any
     unforeseen  reason any of our nominees is not  available as a candidate for
     director,  the persons named as proxy holders will vote your proxy for such
     other candidate or candidates as may be nominated by the Board.

Q:   Who will serve as inspector of elections?

A:   The  inspector  of  elections  will be a  representative  of  International
     Isotopes Inc., and will be appointed at the annual meeting.

Q:   What should I do if I receive more than one set of voting materials?

A:   You may receive more than one set of voting materials,  including  multiple
     copies  of  this  proxy  statement  and  multiple  proxy  cards  or  voting
     instruction  cards.  For example,  if you hold your shares in more than one
     brokerage  account,  you may receive a separate voting instruction card for
     each brokerage  account in which you hold shares.  If you are a shareholder
     of record and your shares are  registered  in more than one name,  you will
     receive more than one proxy card.  Please  complete,  sign, date and return
     each International Isotopes proxy card and voting instruction card that you
     receive.

Q:   How may I obtain a separate set of voting materials?

A:   If you share an address with another shareholder,  you may receive only one
     set of proxy  materials  (including our annual report to  shareholders  and
     proxy statement)  unless you have provided  contrary  instructions.  If you
     wish to receive a separate set of proxy materials now or in the future, you
     may write or call us to request a separate copy of these materials from:

                           International Isotopes Inc.
                              Attn: Steve T. Laflin
                              4137 Commerce Circle
                            Idaho Falls, Idaho 83401
                                 (208) 524-5300

     Similarly,  if you  share an  address  with  another  shareholder  and have
     received  multiple copies of our proxy materials,  you may write or call us
     at the above address and phone number to request  delivery of a single copy
     of these materials.


                                       4


Q:   Who will bear the cost of soliciting votes for the annual meeting?

A:   International  Isotopes is making this solicitation and will pay the entire
     cost of preparing,  assembling,  printing,  mailing and distributing  these
     proxy  materials and soliciting  votes. In addition to the mailing of these
     proxy  materials,  the  solicitation  of  proxies  or votes  may be made in
     person,  by  telephone or by  electronic  communication  by our  directors,
     officers and employees,  who will not receive any  additional  compensation
     for such solicitation activities. Upon request, we will reimburse brokerage
     houses and other custodians,  nominees and fiduciaries for forwarding proxy
     and solicitation materials to shareholders.

Q:   Where can I find the voting results of the annual meeting?

A:   We intend to announce  preliminary voting results at the annual meeting and
     publish final results in our report on Form 10-QSB for the third quarter of
     fiscal 2005.

Q:   What is the deadline to propose  actions for  consideration  at next year's
     annual  meeting of  shareholders  or to  nominate  individuals  to serve as
     directors?

A:   You may submit proposals, including director nominations, for consideration
     at future shareholder meetings.

     Shareholder  Proposals:  For a shareholder  proposal to be  considered  for
     inclusion in International  Isotopes proxy statement for the annual meeting
     next year, the written proposal must be received by International Isotopes'
     Secretary  at our  principal  executive  offices no later than  January 15,
     2006. If the date of next year's annual  meeting is moved more than 30 days
     before or after the  anniversary  date of this year's annual  meeting,  the
     deadline  for  inclusion  of  proposals  in  International  Isotopes  proxy
     statement is instead a reasonable  time before the company  begins to print
     and mail its proxy  materials.  Such  proposals  must also  comply with SEC
     regulations   regarding   the   inclusion  of   shareholder   proposals  in
     company-sponsored proxy materials. Proposals should be addressed to:

                           International Isotopes Inc.
                              Attn: Steve T. Laflin
                              4137 Commerce Circle
                            Idaho Falls, Idaho 83401
                                 (208) 524-5300

     For  a  shareholder  proposal  that  is  not  intended  to be  included  in
     International Isotopes' proxy statement as described above, the shareholder
     must deliver a proxy statement and form of proxy to holders of a sufficient
     number of shares of  International  Isotopes  common  stock to approve that
     proposal and give notice to International Isotopes' Secretary no later than
     April 1, 2006.

     Nomination of Director Candidates:  You may propose director candidates for
     consideration  by the Board.  Any such  recommendations  should include the
     nominee's  name and  qualifications  for  Board  membership  and  should be
     directed  to  International  Isotopes'  Secretary  at  the  address  of our
     principal executive offices set forth above.

Q:   How  may  I  communicate   with   International   Isotopes'  Board  or  the
     non-management directors on International Isotopes' Board?

A:   You may submit any communication intended for International Isotopes' Board
     or the  non-management  directors by directing  the  communication  by mail
     addressed to:

                     Ralph M. Richart, Chairman of the Board
                                 350 Shore Drive
                                Oakdale, NY 11769

                                       or

                               Christopher Grosso
                             480 Broadway, Suite 310
                           Saratoga Springs, NY 12866



                                       5


                CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS

International  Isotopes  is  committed  to  having  sound  corporate  governance
principles,  which  are  essential  to  running  our  business  efficiently  and
maintaining our integrity in the  marketplace.  International  Isotopes' Code of
Ethics is available at www.intisoid.com.

Board Independence

The Board has determined that none of the current  directors or nominees,  other
than Steve T. Laflin,  President  and Chief  Executive  Officer,  has a material
relationship  with  International  Isotopes  and that  each  such  director  and
nominee,  other than Mr.  Laflin,  is  independent  under the  standards  of the
Securities  and  Exchange  Commission  and  Nasdaq.  Furthermore,  the Board has
determined that none of the members of any of International  Isotopes'  standing
committees  has a material  relationship  with  International  Isotopes  (either
directly,  through  a  family  member  or as a  partner,  executive  officer  or
controlling shareholder of any organization that receives or makes payments from
or to International  Isotopes) and each is  "independent"  within the meaning of
International  Isotopes' director independence  standards and applicable listing
standards.

Board Structure and Committee Composition

As of the date of this proxy  statement,  our Board has three  directors and the
following two committees:  (1) Audit, and (2) Compensation.  The 2004 membership
and the  function  of each of the  committees  are  described  below.  The Audit
Committee  operates  under a written  charter  adopted  by the  Board,  which is
available  on  International   Isotopes'   website  at   www.intisoid.com.   The
Compensation Committee does not have a written charter.  During fiscal 2004, the
Board held four meetings.  Each director  attended at least 75% of all Board and
applicable  Committee  meetings.  Directors  are  encouraged  to  attend  annual
meetings of International Isotopes shareholders. All directors attended the last
annual meeting of shareholders.

________________________________________________________________________________
        Name of Director          |       Audit         |     Compensation
__________________________________|_____________________|_______________________
                                  |                     |
 Non-Employee Directors:          |                     |
__________________________________|_____________________|_______________________
                                  |                     |
 Ralph M. Richart                 |         X           |         X *
__________________________________|_____________________|_______________________
                                  |                     |
 Christopher Grosso               |        X *          |          X
__________________________________|_____________________|_______________________
                                  |                     |
 Employee Directors:              |                     |
__________________________________|_____________________|_______________________
                                  |                     |
 Steve. T. Laflin                 |                     |
__________________________________|_____________________|_______________________
                                  |                     |
 Number of Meetings in Fiscal     |                     |
 2004                             |         1           |          4
__________________________________|_____________________|_______________________
                                                        
X = Committee member; * = Chair

Audit Committee

The Audit  Committee was first  established in January 1997.  Each member of the
Audit Committee is an "independent  director" under NASD Rule 4200(a)(15) as may
be  modified  from time to time.  The Board of  Directors  has adopted a written
charter for the Audit Committee. The Audit Committee is directly responsible for
the  appointment,  compensation,  and  oversight  of the  Company's  independent
auditors. The independent auditing firm reports directly to the Audit Committee.
The  responsibility  of the Audit  Committee  includes  resolving  disagreements
between Company management and the auditor related to financial  reporting.  The
Audit  Committee  is  responsible  for  establishing  procedures  for receipt of
complaints   relating  to  accounting,   internal  control,   and  auditing  and
confidential,   anonymous   information   submitted  by  employees  relating  to
questionable  accounting  or  auditing  matters.  The  Audit  Committee  has the
authority to employ  independent  counsel and other advisors in connection  with
its duties.  Mr. Richart is an "audit  committee  financial  expert." Mr. Grosso
qualifies as an "audit  committee  financial  expert" based on his experience as
disclosed in his biography on page 8.


                                       6


The report of the Audit Committee is included on page 20of this proxy statement.
The charter of the Audit Committee is attached as Appendix A.

Compensation Committee.

The  Compensation  Committee was  established in January 1997. The  Compensation
Committee  reviews the compensation and benefits of all officers of the Company,
makes  recommendations  to the Board of  Directors  and reviews  general  policy
matters  relating to  compensation  and  benefits of  employees  of the Company,
including administration of the Company's 2002 Long Term Incentive Plan.

Nominating Committee.

International  Isotopes  does  not  have  a  standing  nominating  committee  or
committee  performing similar  functions.  The Board of Directors believes it is
appropriate  not to  have  such  a  committee  because  both  of  the  Company's
independent Board members, Ralph M. Richart and Christopher Grosso,  participate
in the consideration of director  nominees.  Dr. Richart and Mr. Grosso are both
"independent" under NASD Rule 4200(a)(15), as may be modified from time to time.
The Board will  continue to assess the  necessity of a nominating  committee and
will  establish  one if  necessary in the future.  The Board of  Directors  will
consider nominees recommended by shareholders.

Consideration of Director Nominees

Shareholder  Nominees.  The Board does not have a formal  policy  regarding  the
consideration of director candidates nominated by shareholders because the Board
is small and there is low turnover among its members.

Director   Qualifications.   Board  members   should  have  high   standards  of
professional  and  personal  ethics,  integrity  and  values.  They  should have
relevant  experience and ability with respect to making and overseeing policy in
business, technology,  government or education sectors. They should be committed
to acting in International Isotopes' best interests and to objectively assessing
Board, committee and management performance. They should have sufficient time to
carry out their  duties and should  have the  willingness  and  ability to serve
multiple  terms to develop a deeper  understanding  of  International  Isotopes'
business  affairs.  Board  members  should be  willing  to avoid  activities  or
interests   that  may  create  a  conflict  of  interest  with  the   director's
responsibilities and duties to International Isotopes.

Identifying and Evaluating Nominees for Directors.  The Board will use a variety
of methods for identifying and evaluating nominees for director. In the event of
a vacancy  on the Board,  various  potential  candidates  for  director  will be
considered.  Candidates may come to the Board's  attention through current Board
members,  professional  search  firms,  shareholders  or  other  persons.  These
candidates  will be evaluated at regular or special  meetings of the Board,  and
may be  considered  at any point  during  the  year.  As noted  above,  properly
submitted   shareholder   nominations  for  candidates  to  the  Board  will  be
considered.   Following  verification  of  the  shareholder  status  of  persons
proposing  candidates,  recommendations will be aggregated and considered by the
Board at a regularly  scheduled  meeting.  If any  materials  are  provided by a
shareholder  in connection  with the  nomination of a director  candidate,  such
materials will be forwarded to the Board. In evaluating nominees, the Board will
seek to achieve a balance of knowledge, experience and capability on the Board.

                              DIRECTOR COMPENSATION

The following  paragraph  describes  compensation and reimbursement  provided to
International Isotopes' non-employee directors. International Isotopes' employee
director does not receive any separate compensation for his Board activities.

               NON-EMPLOYEE DIRECTOR COMPENSATION FOR FISCAL 2004

Both of International Isotopes' non-employee directors were reimbursed for their
costs  associated  with  attending  Board and  committee  meetings  during 2004.
Reimbursement ranged from $1,000 to $2,000. In addition, both directors received
an option to purchase 1,000,000 shares of International Isotopes common stock on
June 2, 2003 at an  exercise  price of $.03.  The  option  was 25% vested on the
grant date and vests 25% each year.



                                       7


                            PROPOSALS TO BE VOTED ON

                                 PROPOSAL NO. 1
                              ELECTION OF DIRECTORS

International   Isotopes'  Board  of  Directors   currently  consists  of  three
directors.  At the 2004 Annual  Meeting,  each current  director will be elected
annually to serve until the next annual  meeting and until his or her  successor
is elected and qualified.  Information regarding the business experience of each
nominee to the Board is provided below. There are no family  relationships among
our executive officers and directors.

If you sign your proxy or voting  instruction card, but do not give instructions
with  respect to the  voting of  directors,  your share will be voted  "FOR" the
three  persons   recommended  by  the  Board.  If  you  wish  to  give  specific
instructions  with  respect  to  the  voting  of  directors,  you  may  do so by
indicating your instructions on your proxy or voting instruction card.

The  Board  expects  that  all of the  nominees  will be  available  to serve as
directors. In the event that any nominee should become unavailable, however, the
proxy holders,  Steve T. Laflin and Ralph M. Richart, will vote for a nominee or
nominees  designated by the Board, unless the Board chooses to reduce the number
of directors serving on the Board.

Our  Board  recommends  a vote  "FOR" the  election  to the Board of each of the
following nominees:

Ralph M. Richart, M.D., age 71, was elected to the Board of Directors on January
22,  2002.  The other  directors  elected  him to serve as Chairman on April 24,
2002.  Dr.  Richart  is a  professor  and Vice  Chairman  of the  Department  of
Pathology at Columbia  University  College of Physicians and Surgeons,  where he
has been employed since 1963. Dr. Richart has previously  served on the Board of
Directors of several  publicly  held  companies and multiple  corporate  medical
advisory  Boards  as well as  serving  as Chief  Executive  Officer  of  several
privately held companies in the fields of medicine and electronics. Additionally
his extensive  experience also includes leading clinical trials resulting in FDA
product  approval  and he  has  served  as an  advisor  to  medical  device  and
pharmaceutical companies as well as the Food and Drug Administration.

Steve T. Laflin, age 48, was elected to the Board of Directors in June 2001. Mr.
Laflin was President and General Manager of International  Isotopes' subsidiary,
International  Isotopes  Idaho Inc.,  from 1996 until  2001.  In August 2001 Mr.
Laflin was promoted to President and Chief Executive Officer of the Company. Mr.
Laflin  has a BS degree in  Physics  from Idaho  State  University  and has been
employed in various senior  engineering and management  positions in the nuclear
industry since 1992.

Christopher  Grosso,  age 37, was elected to the Board of Directors on April 24,
2002.  He is  currently a principal of Kershner  Grosso,  Inc., a New York based
money  management and investment  banking firm.  During his 14 years at Kershner
Grosso,  Mr. Grosso has been Senior Research  Analyst and Portfolio  Manager and
has led the firm's investment banking and venture capital  activities.  Prior to
joining  Kershner  Grosso,  Mr.  Grosso  was with  Howe and  Rusling  Investment
Management and Chase  Manhattan  Bank. Mr. Grosso  received his B.S. in business
administration from Skidmore College.





                                       8


                                 PROPOSAL NO. 2
                      RATIFICATION OF INDEPENDENT AUDITORS

The Audit  Committee  of the Board has  appointed  Hansen,  Barnett & Maxwell as
independent  auditors to audit International  Isotopes'  consolidated  financial
statements  for the fiscal year ending  December 31, 2005.  During  fiscal 2004,
Hansen,  Barnett  &  Maxwell  served  as  International   Isotopes'  independent
auditors.  See  "Independent  Auditors" on page 21.  Representatives  of Hansen,
Barnett & Maxwell are expected to attend the meeting, where they are expected to
be available to respond to appropriate  questions and, if they desire, to make a
statement.

Our Board recommends a vote "FOR" the ratification of the appointment of Hansen,
Barnett & Maxwell as International  Isotopes'  independent auditors for the 2005
fiscal year.  If the  appointment  is not  ratified,  the Audit  Committee  will
consider whether it should select other independent auditors.






                                       9


                                 PROPOSAL NO. 3
                     APPROVAL OF INTERNATIONAL ISOTOPES INC.
                          EMPLOYEE STOCK PURCHASE PLAN

We are asking  shareholders to approve the International  Isotopes Inc. Employee
Stock Purchase Plan (the "Employee Stock Purchase Plan"), which allows employees
to purchase shares of our common stock at a discount.

Our Board  adopted the  Employee  Stock  Purchase  Plan on  September  30, 2004,
subject to  shareholder  approval.  If the Employee  Stock  Purchase Plan is not
approved  by  our  shareholders,  the  Employee  Stock  Purchase  Plan  will  be
terminated and any payments made to date will be refunded.

The Employee  Stock Purchase Plan provides for the issuance of up to two million
shares of our  common  stock.  A copy of the  Employee  Stock  Purchase  Plan is
attached to this proxy  statement  as Appendix  B. The  description  herein is a
summary and not  intended to be a complete  description  of the  Employee  Stock
Purchase  Plan.  Please read the Employee  Stock Purchase Plan for more detailed
information.

Description of the Employee Stock Purchase Plan

The purpose of the  Employee  Stock  Purchase  Plan is to provide  employees  of
International  Isotopes and those subsidiaries  designated to participate in the
Employee  Stock  Purchase  Plan with an  opportunity  to purchase  shares of our
common stock.

Shareholder  approval of the Employee Stock  Purchase Plan enables  employees to
receive  special  tax  treatment  provided  by the  Internal  Revenue  Code (the
"Code"). The Employee Stock Purchase Plan is intended to qualify as an "employee
stock  purchase  plan" under  Section  423 of the Code.  The  provisions  of the
Employee Stock Purchase Plan, accordingly, will be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.

A total of two million shares of our common stock will be available for issuance
and purchase  under the Employee  Stock  Purchase  Plan.  If any purchase  right
terminates for any reason without  having been  exercised,  the shares of common
stock not purchased  under such purchase right shall again become  available for
the Employee Stock Purchase Plan.

The Employee Stock Purchase Plan will be administered  by a committee  appointed
by our Board to administer the Employee  Stock Purchase Plan (the  "Committee").
Currently,  the Compensation Committee serves as the Committee for the Plan. The
Committee  has the full and  exclusive  discretionary  authority to construe and
interpret the Employee  Stock  Purchase Plan and the rights granted under it and
to establish  and change rules and  regulations  for the  administration  of the
Employee  Stock  Purchase Plan and to amend the Employee  Stock Purchase Plan to
reduce or eliminate any  unfavorable  accounting  consequences  to the extent it
deems appropriate.

Eligibility

Generally,   all  employees  of   International   Isotopes  and  its  designated
subsidiaries  whose customary  employment is for more than 20 hours per week (or
such lesser number  determined by the Committee) and more than 5 months per year
(or such lesser period determined by the Committee) with International  Isotopes
or any  subsidiary  are eligible to  participate  in the Employee Stock Purchase
Plan.  However,  any  employee  who would own or have  options to  acquire  five
percent (5%) or more of the total combined  voting power or value of all classes
of  stock  of  International   Isotopes  or  any  subsidiary  is  excluded  from
participating  in the Employee Stock Purchase Plan. As of April 15, 2005,  there
were   approximately  19  employees  of  International   Isotopes   eligible  to
participate in the Employee Stock Purchase Plan.

Purchase of Shares of Common Stock

Pursuant to procedures  established  by the  Committee,  eligible  employees may
purchase   shares  of  common  stock   including  by  means  of  having  payroll
withholding.  Purchase  periods are  established  (currently  contemplated to be
successive three-month periods) and purchases of shares of common stock are made
on the last trading day of the  purchase  period with  contributions  made by or
compensation  amounts  withheld  from  employees  during  the  purchase  period.
Pursuant to procedures  established by the Committee,  employees may suspend the
amount of contributions or compensation  being withheld during a purchase period
or may withdraw prior to the end of the purchase  period any amounts  previously
contributed or withheld during the purchase period, without interest.


                                       10


On each  purchase  date (the last  trading  day of each  purchase  period),  any
amounts contributed or withheld from compensation during the applicable purchase
period for purposes of the Employee Stock Purchase Plan will be used to purchase
the greatest  number of whole shares of common stock that can be purchased  with
such amounts.  The purchase price for a share of common stock will be set by the
Committee but will not be less than  eighty-five  percent (85%) of the lesser of
the fair market  value of a share of common  stock on the  purchase  date or the
first day of the applicable  purchase period. For purposes of the Employee Stock
Purchase Plan, "fair market value" generally means the average of the high asked
and low bid price of a share of common stock for the day as reported on the Over
the Counter Bulletin Board. As of April 8, 2005, that price was $0.11 per share.

The Code limits the  aggregate  fair market  value of the shares of common stock
(determined  as of the  beginning of the purchase  period) that any employee may
purchase  under the Employee  Stock  Purchase  Plan during any calendar  year to
$25,000.  Subject  to the  overall  Employee  Stock  Purchase  Plan  limit,  the
Committee determines the number of shares of common stock employees may purchase
under the Employee Stock Purchase Plan. The Committee may impose restrictions or
limitations on the resale of shares of common stock purchased under the Employee
Stock Purchase Plan.

International  Isotopes  may deduct or withhold or require  employees  to pay to
International  Isotopes any federal,  state, local and other taxes International
Isotopes is required to withhold  with respect to any event  arising as a result
of the Employee  Stock  Purchase  Plan.  International  Isotopes may also deduct
those amounts from wages or compensation.

Effect of Certain Corporate Events

The Employee Stock Purchase Plan provides for adjustment of the number of shares
of common stock which may be granted under the Employee  Stock  Purchase Plan as
well as the purchase price per share of common stock and the number of shares of
common stock covered by each purchase  right for any increase or decrease in the
number of shares of common stock  resulting  from a stock split,  reverse  stock
split,   stock   dividend,   extraordinary   cash   dividend,   combination   or
reclassification  of  the  common  stock  or  recapitalization,  reorganization,
consolidation,  split-up,  spin-off  or any other  increase  or  decrease in the
number of shares of common stock effected  without receipt of  consideration  by
International Isotopes.

In the event of a  proposed  sale of all or  substantially  all of the assets of
International  Isotopes  or the merger of  International  Isotopes  with or into
another corporation, outstanding rights to purchase shares will be assumed or an
equivalent right to purchase shares substituted by the successor  corporation or
a parent or affiliate of the successor corporation. If the successor corporation
refuses to assume or  substitute  the right to  purchase  shares,  any  purchase
period then in progress will be shortened by setting a new purchase date and any
purchase period then in progress will end on the new purchase date.

In the  event  of  any  corporate  transaction,  the  Committee  may  make  such
adjustment it deems  appropriate to prevent dilution or enlargement of rights in
the Employee Stock Purchase Plan, in the number,  class of or price of shares of
common stock  available for purchase  under the Employee Stock Purchase Plan and
in the  number of shares  of common  stock  which an  employee  is  entitled  to
purchase and any other  adjustments  it deems  appropriate.  In the event of any
transaction,  the  Committee  may elect to have the  purchase  rights  under the
Employee  Stock Purchase Plan assumed or such purchase  rights  substituted by a
successor entity,  to terminate all outstanding  purchase rights either prior to
their expiration or upon completion of the purchase of shares of common stock on
the next purchase  date, or to take such other action deemed  appropriate by the
Committee.

Amendment or Termination

The Board may amend the Employee Stock Purchase Plan at any time,  provided such
amendment  does not cause rights issued under the portion of the Employee  Stock
Purchase  Plan to fail to meet the  requirements  of  Section  423 of the  Code.
Moreover, any amendment for which shareholder approval is required under Section
423  of  the  Code  or  such  securities  exchange  must  be  submitted  to  the
shareholders  for approval.  The Board may terminate the Employee Stock Purchase
Plan any time.


                                       11


U.S. Federal Income Tax Consequences

The following  discussion  is only a brief summary of the United States  federal
income tax  consequences  to  International  Isotopes  and  employees  under the
Employee  Stock  Purchase  Plan.  It is based on the Code as in effect as of the
date of this proxy  statement.  The  discussion  relates  only to United  States
federal income tax treatment;  state, local, foreign, estate, gift and other tax
consequences  are not  discussed.  The summary is not  intended to be a complete
analysis or discussion of all potential tax consequences.

The amounts  deducted  from an  employee's  pay pursuant to the  Employee  Stock
Purchase Plan will be included in the employee's  compensation and be subject to
federal  income and  employment  tax.  Generally,  no additional  income will be
recognized by the employee  either at the beginning of the purchase  period when
purchase  rights are granted  pursuant to the Employee Stock Purchase Plan or at
the time the employee  purchases shares of common stock pursuant to the Employee
Stock Purchase Plan.

If the shares of common stock are disposed of at least two years after the first
day of the  purchase  period to which the shares of common  stock  relate and at
least one year after the shares of common stock were acquired under the Employee
Stock  Purchase  Plan (the  "Holding  Period"),  or if the  employee  dies while
holding  the  shares  of  common  stock,  the  employee  (or in the  case of the
employee's death, the employee's  estate) will recognize  ordinary income in the
year of  disposition or death in an amount equal to the lesser of (a) the excess
of the fair market value of the shares of common stock on the first  trading day
of the purchase  period over the purchase  price of the share of common stock or
(b) the excess of fair market value of the shares of common stock at the time of
such disposition over the purchase price of the shares of common stock.

If the shares of common stock are sold or disposed of  (including by way of most
gifts) before the expiration of the Holding Period,  the employee will recognize
ordinary  income in the year of sale or  disposition  in an amount  equal to the
excess of the sales price over the purchase price.  Even if the shares of common
stock are sold for less than their fair market value on the purchase  date,  the
same amount of ordinary income is included in income.

In addition,  the employee  generally will recognize  capital gain or loss in an
amount  equal to the  difference  between the amount  realized  upon the sale of
shares of  common  stock and the  employee's  tax basis in the  shares of common
stock  (generally,  the amount the employee  paid for the shares of common stock
plus  the  amount,  if any,  taxed as  ordinary  income).  Capital  gain or loss
recognized on a disposition  of shares of common stock will be long term capital
gain or loss if the  employee's  holding  period for the shares of common  stock
exceeds one year.  The purchase date begins the holding  period for  determining
whether the gain or loss realized is short or long term.

If the  employee  disposes of shares of common stock  purchased  pursuant to the
Employee Stock Purchase Plan after the Holding  Period,  International  Isotopes
will not be entitled to any federal  income tax  deduction  with  respect to the
shares of common stock issued under the Employee  Stock  Purchase  Plan.  If the
employee  disposes of such shares of common stock prior to the expiration of the
Holding Period,  International  Isotopes generally will be entitled to a federal
income  tax  deduction  in an  amount  equal to the  amount of  ordinary  income
recognized by the employee as a result of such disposition.

New Plan Benefits

Participation  in the  Employee  Stock  Purchase  Plan is  entirely  within  the
discretion of the eligible employees.  Neither our executive  officers,  nor our
non-employee  directors  are  eligible  to  participate  in the  Employee  Stock
Purchase Plan.  Because  International  Isotopes cannot presently  determine the
participation  levels by employees,  the rate of  contributions by employees and
the eventual  purchase  price under the Employee  Stock Purchase Plan, it is not
possible  to  determine  the value of  benefits  which may be  obtained by other
employees under the Employee Stock Purchase Plan.

Our Board  recommends  a vote "FOR" the approval of the  International  Isotopes
Inc. Employee Stock Purchase Plan.



                                       12


                      EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth certain information with respect to the shares of
our common  stock that were  authorized  for  issuance  under our 2002 Long Term
Incentive Plan, the only equity compensation plan in effect as of the end of our
last  fiscal  year.  The table does not include  shares that will be  authorized
pursuant to the Employee Stock Purchase Plan (the "Purchase  Plan") submitted to
the stockholders for approval at the Annual Meeting.


_________________________________________________________________________________________________________________
                        |            (a)           |           (b)             |               (c)
________________________|__________________________|___________________________|_________________________________ 
                        |                          |                           |  Number of securities remaining
                        |  Number of securities to | Weighted-average exercise |   available for future issuance
                        |  be issued upon exercise |    price of outstanding   |  under equity compensation plans
                        |  of outstanding options, |   options, warrants and   | (excluding securities reflected
Plan Category           |    warrants and rights   |           rights          |           in column (a))
________________________|__________________________|___________________________|_________________________________
                        |                          |                           |
Equity compensation     |         18,000,000       |           $0.04           |             2,000,000
plans approved by       |                          |                           |
security holders        |                          |                           |
________________________|__________________________|___________________________|_________________________________
                        |                          |                           |
Equity compensation     |             0            |            n/a            |                 0
plans not approved by   |                          |                           |
security holders        |                          |                           |
________________________|__________________________|___________________________|_________________________________



                                       13


                                 PROPOSAL NO. 4
                       SECOND AMENDMENT AND RESTATEMENT OF
                 AMENDED AND RESTATED ARTICLES OF INCORPORATION
          TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF CAPITAL STOCK

The  Board of  Directors  has  authorized,  and  recommends  for your  approval,
International  Isotopes' Second Amended and Restated  Articles of Incorporation,
which increase the number of authorized  shares of common stock from 250 million
to 500 million shares, par value $.01 per share. The Board has also authorized a
restatement  of  the  Restated  Articles  of  Incorporation,   as  amended,   to
consolidate all previous  amendments to the Restated  Articles of Incorporation,
as amended, into one document. The restatement does not make substantive changes
and does not require shareholder approval.

A copy of the proposed Second Amended and Restated  Articles of Incorporation is
attached to this proxy statement as Appendix C.

On April 15, 2005, of the 255 million  authorized shares of the Company, a total
of 183,567,348  shares of common stock were  outstanding,  20,000,000  shares of
common stock were  reserved for potential  issuance in connection  with our 2002
Long Term Incentive  Plan and 42,421,483  shares of common stock we reserved for
potential  issuance  upon the  exercise of  outstanding  Series B  Warrants.  An
additional  2,000,000  shares of common  stock are  proposed to be reserved  for
potential  issuance under our Employee Stock Purchase Plan. A total of 4,011,169
shares of common stock are  authorized,  unissued and not reserved for issuance.
850 shares of preferred stock are currently outstanding and 4,999,150 authorized
shares  of  preferred  stock  are  authorized,  unissued  and not  reserved  for
issuance.

Although  there  are  sufficient   shares  available  to  permit  all  presently
contemplated issuances, the Board believes that the proposed amendment is in the
best interests of the Company and its shareholders because the Company currently
has a limited number of authorized and unissued  shares of common stock that are
not reserved for  issuance.  The proposed  increase in  International  Isotopes'
authorized share capital will provide International Isotopes with flexibility of
action  in the  future by  assuring  there  will be  sufficient  authorized  but
unissued  shares of common  stock  available  for  issuance in  connection  with
primary  offerings of common stock,  stock splits,  acquisitions of the stock or
assets of another company,  employee  benefit plans and other general  corporate
purposes without the necessity of further  shareholder  action at any special or
annual  meeting.  The Board will determine  whether,  when and on what terms the
issuance of shares of common stock may be warranted  in  connection  with any of
the  foregoing  purposes.   International   Isotopes  has  no  immediate  plans,
arrangements,  commitments or understandings with respect to the issuance of any
of the  additional  shares of  common  stock  that  would be  authorized  by the
proposed amendment.

An  increase in the  authorized  shares of common  stock  could,  under  certain
circumstances,  have an anti-takeover  effect. For example,  if the Board issues
additional shares in the future,  such issuance could dilute the voting power of
a person  seeking  control of the Company,  thereby  deterring or rendering more
difficult  a  merger,  a  tender  offer,   proxy  contest  or  an  extraordinary
transaction  opposed by the Board of  Directors.  This  proposal to increase the
number of authorized shares is prompted by business and financial reasons and is
not in response to any effort of which the  Company is aware to  accumulate  the
Company's  stock or obtain  control of the Company.  Nevertheless,  shareholders
should be aware that approval of the proposal could facilitate future efforts by
the  Company to deter or prevent  changes in control of the  Company,  including
transactions in which  shareholders  might otherwise receive a premium for their
shares over current market prices.

If the proposed  amendment is approved,  the additional  shares of stock will be
available for issuance from time to time without  further action by shareholders
(unless required by applicable law,  regulatory  agencies or by the rules of any
stock market on which International Isotopes' shares of common stock may then be
listed) and without first offering more shares to shareholders.  Shareholders do
not have pre-emptive rights with respect to the additional shares of stock to be
authorized.

The proposed  amendment  provides that the first  paragraph of Article IV of the
Company's  Amended  and  Restated  Articles of  Incorporation  be amended in its
entirety to read as follows:

         The total  number of shares of all  classes of capital  stock which the
         Corporation  shall have authority to issue is FIVE HUNDRED FIVE MILLION
         (505,000,000),  of which (a) FIVE HUNDRED MILLION  (500,000,000) shares
         will be designated as Common Stock, par value $.01 per shares;  and (b)
         FIVE MILLION  (5,000,000) shares will be designated as Preferred Stock,
         par value $.01 per share.


                                       14


Approval of the proposed  amendment  requires the affirmative vote of a majority
of the  outstanding  shares  of  common  stock  entitled  to vote at the  Annual
Meeting.  Neither an abstention nor a broker  non-vote is an  affirmative  vote.
Therefore,  both  abstentions and broker non-votes will have the effect of votes
cast against the proposed  amendment.  If the proposed amendment and restatement
is approved by  shareholders,  it will become  effective  upon the filing of the
Second  Amended and Restated  Articles of  Incorporation  with the  Secretary of
State of the State of Texas, which International  Isotopes plans to file as soon
as  practicable  following  the  Annual  Meeting.  The  Board of  Directors  has
unanimously  approved the proposed  amendment  and believes it to be in the best
interests of the Company and the shareholders.

              Our Board recommends a vote "FOR" the approval of the
             Second Amended and Restated Articles of Incorporation.








                                       15


         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following  table shows common stock  ownership on April 15, 2005, the record
date, except as otherwise noted, by:

         o    each person who  beneficially  owned more than 5% of International
              Isotopes common stock on that date;

         o    each  of the  current  executive  officers  named  in the  Summary
              Compensation  Table on page 18 and each of the current  directors;
              and

         o    all current International  Isotopes executive officers,  directors
              and director nominees as a group.

The number of shares  beneficially  owned by each person is determined under the
rules of the SEC. The  information is not  necessarily  indicative of beneficial
ownership for other purposes.  Under such rules,  beneficial  ownership includes
any shares as to which the  individual  has the sole or shared  voting  power or
investment  power  and also any  shares  that the  individual  has the  right to
acquire as of June 15, 2005  through the  exercise of any stock  option or other
right.



            Name and address of                  Amount and Nature of       Percent of
              Beneficial Owner                  Beneficial Ownership(1)      Class(1)
___________________________________________     _______________________     ___________
Marie C. Keane and James J. Keane(2)                  16,235,740                8.8%
     Fifty Broadway
     New York, NY 10004
John M. McCormack(3)                                  54,510,664               29.7%
     1303 Campbell Road
     Houston, TX 77055
William Nicholson(4)                                  20,473,653               11.1%
     121 Post Oak Lane, #2105
     Houston, TX 77024
Walter O'Hearn(5)                                     15,527,141                8.5%
     Fifty Broadway
     New York, NY 10004
Christopher Grosso(6)                                 10,060,069                5.5%
     480 Broadway, Suite 310
     Saratoga Springs, NY 12866
Steve T. Laflin(7)                                    11,000,125                6%
Dr. Ralph M. Richart(8)                               49,105,430               26.75%
     630 West 168th Street
     New York, NY 10032
All Executive Officers and Directors as a             70,165,624               38.22%
Group (3 persons)

_____________________

(1)  Unless otherwise indicated, to the knowledge of the Company, all shares are
     owned directly.

(2)  Includes  206,500  shares owned by Keane  Securities  Co. Inc. of which Mr.
     Keane is a principal.  Also includes  1,772,706  shares subject to warrants
     and 405,555 shares issuable upon  conversion of an outstanding  convertible
     note.

(3)  Includes an aggregate of 24,121,689 shares and warrants  beneficially owned
     by Mr.  McCormack's  children's  trusts.  Also  includes  5,361,236  shares
     subject to warrants  and 902,777  shares  issuable  upon  conversion  of an
     outstanding convertible note.

(4)  Includes  3,416,164  shares subject to warrants and 725,000 shares issuable
     upon conversion of an outstanding  convertible note. 

(5)  Includes  206,500  shares owned by Keane  Securities  Co. Inc. of which Mr.
     O'Hearn is a principal.  Also includes 1,747,506 shares subject to warrants
     and 405,555 shares issuable upon  conversion of an outstanding  convertible
     note.

(6)  Includes  1,078,700  shares subject to warrants,  750,000 shares subject to
     stock options and 144,444 shares issuable upon conversion of an outstanding
     convertible  note. Also includes  4,064,873 shares and warrants held by Mr.
     Grosso's family members.

(7)  Mr. Laflin's  address is that of the Company.  Includes  11,000,000  shares
     subject to stock options.



                                       16



(8)  Includes  18,662,534 shares subject to warrants,  750,000 shares subject to
     stock options and 866,866 shares issuable upon conversion of an outstanding
     convertible note.










                                       17


                             EXECUTIVE COMPENSATION

Summary Compensation Table

The  following  table  sets forth  compensation  information  for  International
Isotopes'  President and Chief Executive  Officer during fiscal years 2004, 2003
and 2002. International Isotopes has no other executive officers.


_________________________________________________________________________________________
                             |                                     |     Long-Term
                             |         Annual Compensation         |    Compensation
_____________________________|_____________________________________|_____________________
Name and Principal Position  |  Year  |  Salary ($)  |  Bonus ($)  |      Securities
                             |        |              |             |  Underlying Options
                             |        |              |             |         (#)
_____________________________|________|______________|_____________|_____________________
_____________________________|________|______________|_____________|_____________________
                             |        |              |             |
Steve T. Laflin              |  2004  |   131,250    |   12,000    |               -
President & Chief Executive  |  2003  |   125,000    |   10,000    |               -
Officer                      |  2002  |   120,000    |        -    |      10,000,000
_____________________________|________|______________|_____________|_____________________


Aggregated Option Exercises in Fiscal Year and Fiscal Year-End Option Values

The following  table  indicates  the number of shares  acquired upon exercise of
options during the last fiscal year and the value realized, the number of shares
subject to exercisable (vested) and unexercisable (unvested) options as of April
15, 2005, and the value of exercisable and unexercisable "in-the-money" options.


_____________________________________________________________________________________________________________________
                 |                |             | Number of Securities Underlying   |       Value of Unexercised
     Name        |                |             |           Unexercised             |     In-the-Money Options at 
                 |                |             |    Options at Fiscal Year-End     |      Fiscal Year-End ($)(1)
                 |                |             |___________________________________|________________________________
                 |     Shares     |   Value     |                 |                 |               |
                 |  Acquired On   |  Received   |                 |                 |               |
                 |  Exercise (#)  |   ($)(2)    |   Exercisable   |  Unexercisable  |  Exercisable  | Unexercisable
_________________|________________|_____________|_________________|_________________|_______________|________________
Steve T. Laflin  |            0   |         0   |    11,000,000   |              0  |      604,000  |
_________________|________________|_____________|_________________|_________________|_______________|________________
 



                                       18


                              EMPLOYMENT AGREEMENTS

In February 2001, the Company entered into an Employment Agreement with Steve T.
Laflin to serve as the Company's President and Chief Executive Officer at a base
salary of $120,000.  The terms of the agreement may be reset after 36 months and
the parties may agree to extend the term of the agreement.  If the terms are not
reset,  the parties will operate under the original terms and the agreement will
remain in place  until  February  28,  2007.  Mr.  Laflin is  entitled  to bonus
compensation  at the  discretion of the Board of Directors and the  Compensation
Committee  and is  entitled  to  benefits  generally  made  available  to  other
executives.   Mr.  Laflin  is  subject  to  nonsolicitation  and  noncompetition
provisions in favor of the Company.








                                       19


                             AUDIT COMMITTEE REPORT

The following is the report of the Audit Committee with respect to International
Isotopes'  audited  financial  statements for the fiscal year ended December 31,
2004 (the "Audited  Financial  Statements").  The information  contained in this
report shall not be deemed to be "soliciting material" or to be "filed" with the
SEC, nor shall such  information  be  incorporated  by reference into any future
filing under the Securities  Act of 1933 or the Securities  Exchange Act of 1934
except to the extent that International Isotopes specifically incorporates it by
reference in such filing.

Report of the Audit Committee

The Audit  Committee  has:  (i)  reviewed and  discussed  the audited  financial
statements  of the Company  with Company  management;  (ii)  discussed  with the
Company's independent auditors the matters required to be discussed by Statement
on  Auditing  Standards  No. 61 as may be modified  or  supplemented;  and (iii)
received the written disclosures and the letter from the independent accountants
from the  auditors  regarding  the  auditors'  independence  as  required by the
Independence Standards Board Standard No. 1, as may be modified or supplemented,
and (iv) discussed with the auditors the auditors' independence.

Based on the review  and  discussions  referred  to above,  the Audit  Committee
recommended to the Board of Directors that the audited  financial  statements be
included in the Company's  Annual Report on Form 10-KSB for the fiscal year 2004
for filing with the Securities and Exchange Commission.


                                         Audit Committee Report Submitted by:

                                         Christopher Grosso, Chairman
                                         Ralph M. Richart





                                       20


                              INDEPENDENT AUDITORS

The Audit  Committee has appointed  Hansen,  Barnett & Maxwell as  International
Isotopes'  independent  auditors  for the fiscal year ending  December 31, 2005.
Representatives  of Hansen,  Barnett & Maxwell are expected to be present at the
annual  meeting,  will  have the  opportunity  to make a  statement,  if they so
desire, and will be available to respond to appropriate questions.

The Audit  Committee  approved the  engagement  of the  independent  auditors to
provide audit services prior to the engagement.

Fees billed by Hansen,  Barnett & Maxwell in fiscal  years 2004 and 2003 were as
follows:
_______________________________________________________________________________
                                         |                 Fees
                                         |_____________________________________ 
                                         |                   |
           Services Rendered             |       FY2004      |      FY2003
_________________________________________|___________________|_________________
                                         |                   |
Audit Fees (1)                           |     $56,939.00    |    $65,496.00
_________________________________________|___________________|_________________
                                         |                   |
Audit-Related Fees                       |          0        |         0
_________________________________________|___________________|_________________
                                         |                   |
Tax Fees                                 |          0        |         0
_________________________________________|___________________|_________________
                                         |                   |
All Other Fees                           |          0        |         0
_________________________________________|___________________|_________________
                                         |                   |
Total                                    |     $56,939.00    |    $65,496.00
_________________________________________|___________________|_________________
                                                             
(1) For  professional  services  for  auditing  International  Isotopes'  annual
financial   statements  and  reviewing  the  financial  statements  included  in
International Isotopes' Quarterly Reports on Form 10-Q.




                                       21

                                                                      APPENDIX A

                              AMENDED AND RESTATED
                             AUDIT COMMITTEE CHARTER

                           INTERNATIONAL ISOTOPES INC.

                                 COMMITTEE ROLE

The purpose of the Audit  Committee (the  "Committee") is to assist the Board of
Directors  (the  "Board")  in  monitoring  (1) the  integrity  of the  financial
statements of the Company,  (2) the  independent  auditor's  qualifications  and
independence,  (3) the performance of the Company's  internal audit function and
independent  auditor,  and (4) the  compliance  by the  Company  with  legal and
regulatory requirements.

The  Committee  is also  charged  with  responsibility  to oversee all  material
aspects of the Company's  reporting,  control and audit functions,  except those
specifically  related to the  responsibilities  of another standing committee of
the Board.  The Committee's  role includes a particular focus on the qualitative
aspects of financial  reporting to shareholders and on Company processes for the
management  of  business/financial  risk  and for  compliance  with  significant
applicable legal, ethical, and regulatory requirements.

The role also includes  coordination with other Board committees and maintenance
of strong,  positive  working  relationships  with  management,  independent and
internal independent auditors, counsel and other Committee advisors.

                              COMMITTEE MEMBERSHIP

The Committee shall consist of at least two members. All Committee members shall
meet the  independence and experience  requirements of Section  10A(m)(3) of the
Securities  Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations of the Securities and Exchange Commission (the "Commission") and
any exchange on which the  Company's  common stock may then be listed.  At least
one member,  preferably the chairperson,  shall be a financial expert as defined
by the Commission. Committee appointments shall be approved annually by the full
Board upon recommendation of the nominating Committee. The Committee chairperson
shall be selected by the Committee members or by the nominating Committee.

                               COMMITTEE MEETINGS

The Committee shall meet as often as it determines, but not less frequently than
one times annually.  The Committee shall meet periodically with management,  the
internal  independent  auditor and the independent auditor in separate sessions.
The  Committee  may  request any  officer or  employee  of the  Company,  or the
Company's  outside  counsel or independent  auditor,  to attend a meeting of the
Committee or to meet with any member of, or consultants to, the Committee.

                         COMMITTEE OPERATING PRINCIPALS

The  Committee  shall  fulfill  its  responsibilities  within the context of the
following overriding principles:

Communications: The chairperson and others on the Committee shall, to the extent
the  Committee  deems  appropriate,   have  contact  throughout  the  year  with
management,  other committee  chairpersons and independent legal,  accounting or
other advisors to strengthen the Committee's  knowledge of relevant  current and
prospective business issues.

Committee  Education/Orientation:  The Committee,  along with management,  shall
develop and  participate  in a process  for review of  important  financial  and
operating  topics  that  present  potential  significant  risk  to the  Company.
Additionally,  individual  Committee  members are  encouraged to  participate in
relevant and appropriate  self-study  education to assure  understanding  of the
business and environment in which the Company operates.


                                       22


Annual Plan: The  Committee,  with input from  management and other  independent
advisors,  shall  develop an annual plan  responsive  to the "Primary  Committee
Responsibilities"  detailed  herein.  The  annual  plan  shall be  reviewed  and
approved by the full board.

Meeting Agenda:  Committee  meeting agendas shall be the  responsibility  of the
Committee  chairperson,  with input from Committee members.  It is expected that
the chairperson would also ask for management,  independent advisors and perhaps
others, to participate in this process.

Committee  Expectations and Information  Needs: The Committee shall  communicate
its  expectations  and  the  nature,  timing,  and  extent  of  the  Committee's
information needs to management and external parties,  including the independent
auditor.  Written materials,  including key performance  indicators and measures
related to key business and financial risks,  shall be received from management,
the  independent  auditor  and  others at least one week in  advance  of meeting
dates. Meeting conduct will assume board members have reviewed written materials
in sufficient  depth to  participate  in dialogue  between the Committee and the
Board.

External Resources: The Committee shall have the authority to retain independent
legal,  accounting or other  consultants  to advise the  Committee.  The Company
shall  provide  appropriate  funding,  as  determined  by  the  Committee,   for
compensating the independent auditor and any advisors employed by the Committee.
The  Committee  may  request any  officer or  employee  of the  Company,  or the
Company's  outside  counsel or independent  auditor,  to attend a meeting of the
Committee or to meet with any members of, or consultants to, the Committee.  The
Committee  may also meet with the  Company's  investment  bankers  or  financial
analysts who follow the Company.

Committee Meeting Attendees:  The Committee shall request members of management,
outside counsel and the independent  auditor,  as applicable,  to participate in
Committee meetings, as necessary,  to carry out the Committee  responsibilities.
As the Committee deems  necessary,  but not less than annually,  Committee shall
meet in private session with only the Committee members.  It shall be understood
that the  independent  auditor or outside  counsel  may, at any time,  request a
meeting with the Committee or Committee  chairperson with or without  management
attendance.  In any  case,  the  Committee  shall  meet  in  executive  sessions
separately with the independent auditor, at least annually.

Whistleblower  Procedures:  The Committee shall establish  procedures to address
"whistleblower"  communications.  These  procedures  shall include the method of
receipt, retention and treatment of complaints received by the Company regarding
questionable accounting,  internal accounting controls, or auditing matters. The
procedures  shall  also  allow for the  confidential,  anonymous  submission  by
Company  employees of concerns  regarding  questionable  accounting  or auditing
matters.

Reporting  to the Board of  Directors:  The  Committee,  through  the  Committee
chairperson,  shall  report  periodically,  as  deemed  necessary,  but at least
semi-annually,  to the Board.  In addition,  summarized  minutes from  Committee
meetings,  separately identifying monitoring activities from approvals, shall be
available to each Board member at least one week prior to the  subsequent  Board
meeting.

Committee Self  Assessment:  The Committee  shall annually  review,  discuss and
assess its own  performance as well as the Committee  role and  responsibilities
and its charter, seeking input from management, the Board and others. Changes in
role and/or  responsibilities,  if any,  shall be  recommended  to the Board for
approval.

Independent  Board  Members:  The  Board  shall be  composed  of  executive  and
non-executive members. Independent members are members who meet the independence
requirements of Section 10A(m)(3) of the Exchange Act.

                            REPORTING TO SHAREHOLDERS

The Committee shall make available to shareholders a summary report on the scope
of its  activities.  This report may be  identical to the report that appears in
the Company's annual report.

                COMMITTEE'S RELATIONSHIP WITH INDEPENDENT AUDITOR

The Committee  shall have sole  authority to appoint or replace the  independent
auditor  (subject to  stockholder  ratification,  if  applicable),  and shall be
directly  responsible for the compensation,  retention and oversight of the work
by the  independent  auditor  (including  resolution  of  disagreements  between
management and the independent  auditor regarding  financial  reporting) for the
purpose of preparing or issuing an audit report or related work. The independent
auditor shall report directly to the Committee,  and the Committee shall approve
all audit  engagement  fees and terms and all significant  non-audit  engagement
with the independent auditor.


                                       23


The Committee  shall  pre-approve  all audit  services and  permitted  non-audit
services (including the fees and terms thereof) to be performed by the Company's
independent  auditor,  subject to the de minimis exceptions contained in Section
10(A)(1)(B) of the Exchange Act for non-audit services which are approved by the
Committee prior to the completion of the audit. The Committee shall consult with
management but shall not delegate these responsibilities.

The  independent  auditor shall be responsible to the Board and the Committee as
representatives of the stockholders.

As the independent  auditor reviews financial  reports,  it will be reporting to
the Committee.  It shall report all relevant issues to the Committee  responsive
to agreed-on Committee expectations.  In executing its oversight role, the board
or Committee should review the audit plan and work of independent auditor.

The Committee shall annually review the performance (effectiveness, objectivity,
and independence) of the independent auditor. The Committee shall ensure receipt
of a formal  written  statement from the  independent  auditor  consistent  with
standards set by the Independence Standards Board.  Additionally,  the Committee
shall discuss with the auditor relationships or services that may affect auditor
objectivity  or  independence.  If the  Committee  is  not  satisfied  with  the
independent auditor's assurances of independence,  it shall take or recommend to
the full Board appropriate  action to ensure the independence of the independent
auditor.

If the independent auditor identifies significant issues relative to the overall
Board  responsibility  that have been  communicated  to management but, in their
judgment,  have not been adequately  addressed,  they should  communicate  these
issues to the Committee chairperson.

The  Committee  shall  discuss  with the  independent  auditor  certain  matters
required to be discussed by "Statement  on Auditing  Standards No. 61," relating
to the conduct of the audit.

                       PRIMARY COMMITTEE RESPONSIBILITIES

The Committee shall review and assess:

CEO/CFO Certification:  The involvement by the Chief Executive Officer and Chief
Financial  Officer in the accounting and reporting for the Company enabling them
to make the certifications required by the Sarbanes-Oxley Act of 2002.

Risk Management:  The Company's business risk management process,  including the
adequacy of the Company's  overall control  environment and controls in selected
areas representing significant financial and business risk.

Annual  Reports  and Other  Major  Regulatory  Filings:  All  audited  financial
statements in advance of filing or distribution.  The Committee's  review should
include  discussion with  management and the independent  auditor of significant
issues regarding accounting principles, practices and judgments.

Internal  Controls and Regulatory  Compliance:  The Company's system of internal
controls for detecting  accounting  and reporting  financial  errors,  fraud and
defalcations,  legal  violations  and  noncompliance  with the corporate code of
conduct.  The  Committee  shall  also  establish  procedures  for  the  receipt,
retention  and  treatment  of  complaints  received  by  the  Company  regarding
accounting,   internal  accounting   controls  or  auditing  matters,   and  the
confidential,   anonymous   submission   by  employees  of  concerns   regarding
questionable accounting or auditing matters.

Regulatory Examinations: Commission inquiries and the results of examinations by
other regulatory authorities in terms of important findings, recommendations and
management's response.

External Audit Responsibilities:  Auditor independence and the overall scope and
focus of the annual/interim audit,  including the scope and level of involvement
with unaudited quarterly or other interim-period information.

Financial  Reporting and Controls:  Key  financial  statement  issues and risks,
their  impact  or  potential  effect  on  reported  financial  information,  the
processes used by management to address such matters, related auditor views, and
the  basis  for audit  conclusions.  Important  conclusions  on  interim  and/or
year-end audit work in advance of the public release of financials.


                                       24


Auditor  Recommendations:   Important  independent  auditor  recommendations  on
financial reporting,  controls,  other matters, and management's  response.  The
views of management and independent auditor on the overall quality of annual and
interim financial reporting.

The Committee  should  review,  assess,  and approve:  

         o    The Company's code of ethical conduct.

         o    Changes in important  accounting  principles  and the  application
              thereof in both interim and annual financial reports.

         o    Significant conflicts of interest and related-party transactions.

         o    Independent  auditor  performance and changes in independent audit
              firm (subject to ratification  by the Board).  The Committee shall
              ensure the rotation of the lead (or  coordinating)  audit  partner
              having primary  responsibility for the audit and the audit partner
              responsible  for reviewing the audit as required by law.  Consider
              whether, in order to assure continuing auditor independence, it is
              appropriate to adopt a policy of rotating the independent auditing
              firm on a regular basis.





                                       25


                                                                      APPENDIX B

                           INTERNATIONAL ISOTOPES INC.
                          EMPLOYEE STOCK PURCHASE PLAN


                               ARTICLE 1. PURPOSE

         The purpose of this Plan is to provide employees of the Company and its
Designated  Subsidiaries  with an  opportunity  to purchase  Common Stock of the
Company.  It is the  intention  of the  Company  to have the Plan  qualify as an
"employee  stock purchase plan" under Section 423 of the Code. The provisions of
this  Plan,  accordingly,   shall  be  construed  so  as  to  extend  and  limit
participation  in a manner  consistent with the  requirements of that Section of
the Code.

                             ARTICLE 2. DEFINITIONS

         Certain terms used in this Plan have the meanings set forth in Appendix
I.

                       ARTICLE 3. ELIGIBILITY REQUIREMENTS

         3.1    Initial  Eligibility.  Except as provided in Section  3.2,  each
Employee shall become  eligible to  participate  in the Plan in accordance  with
Article 4 on the first Enrollment Date on or following the later of (a) the date
such individual becomes an Employee; or (b) the Effective Date. Participation in
the Plan is entirely voluntary.

         3.2    Limitations  on  Eligibility.  The  following  Employees are not
eligible to participate in the Plan:
                     

                (a)   Employees whose customary  employment is twenty (20) hours
                      or less per week or any lesser number of hours established
                      by the Committee;

                (b)   Employees whose customary  employment is for not more than
                      five (5) months in any calendar  year or any lesser period
                      in a calendar year established by the Committee; and

                (c)   Employees who,  immediately  upon purchasing  Shares under
                      the Plan,  would own directly or indirectly,  an aggregate
                      of five percent (5%) or more of the total combined  voting
                      power or value of all outstanding shares of all classes of
                      stock of the Company or any  Subsidiary  (and for purposes
                      of this paragraph, the rules of Section 424(d) of the Code
                      shall  apply,  and stock which the  Employee  may purchase
                      under outstanding  options shall be treated as stock owned
                      by the Employee).

                              ARTICLE 4. ENROLLMENT

         Any Eligible Employee may enroll in the Plan for any Offering Period by
completing and signing an enrollment election form or by such other means as the
Committee shall prescribe and submitting such enrollment election to the Company
in  accordance  with  procedures  established  by the Committee on or before the
Cut-Off Date with respect to such Offering Period.  Unless otherwise  determined
by the  Committee,  the enrollment  election and the designated  rate of payroll
deduction  shall continue for future  Offering  Periods  unless the  Participant
changes  or  cancels  the  enrollment  election  or  designated  rate of payroll
deduction prior to the Cut-Off Date in accordance with procedures established by
the Committee.

                    ARTICLE 5. GRANT OF OPTIONS ON ENROLLMENT

         5.1    Option Grant.  Enrollment by an Eligible Employee in the Plan as
of an  Enrollment  Date  will  constitute  the  grant  by the  Company  to  such
Participant  of an option on such  Enrollment  Date to purchase  Shares from the
Company pursuant to the Plan.


                                       B-1


         5.2    Option Expiration.  An option granted to a Participant  pursuant
to this Plan  shall  expire,  if not  terminated  for any reason  first,  on the
earliest to occur of (a) the end of the Offering Period in which such option was
granted;  (b) the  completion  of the  purchase of Shares under the option under
Article 7; or (c) the date on which  participation  of such  Participant  in the
Plan terminates for any reason.

         5.3    Purchase of Shares. An option granted to a Participant under the
Plan shall  give the  Participant  a right to  purchase  on a Purchase  Date the
largest number of whole Shares, as determined by the Committee,  which the funds
accumulated in the Participant's  Account as of such Purchase Date will purchase
at the applicable Purchase Price; provided,  however, that the Committee may, in
its discretion,  limit the number of Shares purchased by each Participant in any
Purchase Period.

         Notwithstanding anything to the contrary herein, to the extent required
by Section  423 of the Code,  no Employee  shall be granted an option  under the
Plan (or any other plan of the Company or a Subsidiary intended to qualify under
Section  423 of the Code)  which would  permit the  Employee to purchase  Shares
under the Plan (and such other  plan) in any  calendar  year with a Fair  Market
Value  (determined  at the time such option is granted) in excess of $25,000 and
any  payments  made by a  Participant  in  excess  of this  limitation  shall be
returned to the  Participant in accordance  with  procedures  established by the
Committee.

                               ARTICLE 6. PAYMENT

         The  Committee  may designate the time and manner for payment of Shares
to be  purchased  during the  Purchase  Period,  including,  but not limited to,
through payroll deductions from Compensation,  the terms and conditions of which
are  designated  by the  Committee.  Payment  amounts  shall  be  credited  on a
bookkeeping  basis to a  Participant's  Account  under  this Plan.  All  payment
amounts may be used by the Company for any purpose and the Company shall have no
obligation  to  segregate  such  funds.  No  interest  accrues  on  payments  by
Participants.

                          ARTICLE 7. PURCHASE OF SHARES

         7.1    Option  Exercise.  Any option held by the Participant  which was
granted  under this Plan and which  remains  outstanding  as of a Purchase  Date
shall be deemed to have been  exercised on such  Purchase Date for the number of
whole Shares, as determined by the Committee, which the funds accumulated in the
Participant's  Account as of the Purchase Date will  purchase at the  applicable
Purchase Price (but not in excess of the number of Shares for which options have
been  granted to the  Participant  pursuant to Section  5.3).  Options for other
Shares for which  options have been granted  which are not purchased on the last
Purchase Date during the Offering  Period shall  terminate.  Shares shall not be
issued  with  respect to an option  unless the  exercise  of such option and the
issuance  and  delivery of such Shares  pursuant  thereto  shall comply with all
applicable   provisions  of  law,  domestic  or  foreign,   including,   without
limitation,  the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, the rules and regulations promulgated  thereunder,  and the
requirements of any stock exchange upon which the Shares may then be listed.  As
a condition to the exercise of an option,  the  Committee may require the person
exercising such option to represent and warrant at the time of any such exercise
that the Shares are being  purchased only for investment and without any present
intention to sell or distribute such Shares.

         7.2    Refund of Excess Amount.  If, after a Participant's  exercise of
an option under  Section 7.1, an amount  remains  credited to the  Participant's
Account as of a Purchase  Date,  then the  remaining  amount  shall be (a) if no
further  Purchase  Periods  are  immediately   contemplated  by  the  Committee,
distributed to the Participant as soon as administratively  feasible,  or (b) if
another Purchase Period is contemplated by the Committee, carried forward in the
Account for application to the purchase of Shares on the next following Purchase
Date.

         7.3    Employees   of   Designated   Subsidiaries.   In  the   case  of
Participants employed by a Designated Subsidiary,  the Committee may provide for
Shares to be sold through the  Subsidiary  to such  Participants,  to the extent
consistent with Section 423 of the Code.

         7.4    Pro Rata  Allocation.  If the total  number of Shares  for which
options are or could be exercised on any Purchase Date in  accordance  with this
Article  7,  when  aggregated  with all  Shares  for  which  options  have  been
previously  exercised  under this Plan,  exceeds  the  maximum  number of Shares
reserved in Article 12, the Company  shall  allocate  the Shares  available  for
delivery and  distribution  in the ratio that the balance in each  Participant's
Account bears to the aggregate balances of all Participants'  Accounts,  and the
remaining  balance of the amount  credited  to the  Account of each  Participant
under the Plan shall be returned to him or her as promptly as possible.


                                       B-2


         7.5    Notice of  Disposition.  If a Participant or former  Participant
sells,  transfers, or otherwise makes a disposition of Shares purchased pursuant
to an option  granted  under the Plan  within two (2) years  after the date such
option is  granted  or within  one (1) year  after  the date  such  Shares  were
transferred to the Participant, and if such Participant or former Participant is
subject to United States  federal  income tax, then such  Participant  or former
Participant  shall  notify the Company or a member of the Employer in writing of
such  sale,   transfer  or  other  disposition  within  ten  (10)  days  of  the
consummation of such sale, transfer, or other disposition.

       ARTICLE 8. WITHDRAWAL FROM THE PLAN, TERMINATION OF EMPLOYMENT, AND
                                LEAVE OF ABSENCE

         8.1    Withdrawal  from the Plan. A Participant  may withdraw all funds
accumulated  in the  Participant's  Account  from the Plan  during any  Purchase
Period by  delivering a notice of  withdrawal  to the Company or a member of the
Employer (in a manner prescribed by the Committee) at any time up to thirty (30)
days  prior to the  Purchase  Date  next  following  the  date  such  notice  of
withdrawal  is  delivered,  or at such shorter time in advance of such  Purchase
Date as the Committee may permit. If notice of complete  withdrawal as described
in the preceding sentence is timely received,  all funds then accumulated in the
Participant's Account shall not be used to purchase Shares, but shall instead be
distributed  to the  Participant  as soon as  administratively  feasible and the
Company  or  member  of  the  Employer  will  cease  the  Participant's  payroll
withholding  for  the  Plan in  accordance  with  timing  and  other  procedures
established  by the Committee.  An Employee who has withdrawn  during a Purchase
Period may not return  funds to the Company or a member of the  Employer  during
the same  Purchase  Period and require the Company or member of the  Employer to
apply  those funds to the  purchase of Shares.  Any  Eligible  Employee  who has
withdrawn  from  the  Plan  may,  however,  re-enroll  in the  Plan on the  next
subsequent Enrollment Date, if any.

         8.2    Termination of Participation. Unless otherwise determined by the
Committee,  participation in the Plan terminates when a Participant ceases to be
employed by the Company or a member of the Employer for any reason whatsoever or
otherwise ceases to be an Eligible Employee.  Unless otherwise determined by the
Committee,  such  Participant  shall be deemed to have elected a withdrawal from
the  Plan in  accordance  with  Section  8.1 and all  funds  accumulated  in the
Participant's Account shall be distributed to the Participant.

         8.3    Leave of  Absence.  If a  Participant  takes a leave of absence,
such Participant shall have the right, in accordance with procedures  prescribed
by the Committee,  to elect to withdraw from the Plan in accordance with Section
8.1. To the extent determined by the Committee or required by Section 423 of the
Code,  certain  leaves of absence may be treated as cessations of employment for
purposes of the Plan.

       ARTICLE 9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION,
                       LIQUIDATION, MERGER OR ASSET SALE

         9.1    Adjustments  Upon  Changes  in  Capitalization.  Subject  to any
required action by the shareholders of the Company, the right to purchase Shares
of Common Stock  covered by a current  Offering  Period and the number of Shares
which have been  authorized for issuance under the Plan for any future  Offering
Period, the maximum number of Shares each Participant may purchase each Offering
Period (pursuant to Section 5.3 hereof),  as well as the price per Share and the
number of Shares  covered by each  right  under the Plan which have not yet been
purchased  shall  be  proportionately  adjusted  in the sole  discretion  of the
Committee for any increase or decrease in the number of issued Shares  resulting
from a stock split,  reverse stock split,  stock  dividend,  extraordinary  cash
dividend,   combination   or   reclassification   of  the   Common   Stock,   or
recapitalization,  reorganization,  consolidation,  split-up,  spin-off,  or any
other increase or decrease in the number of Shares  effected  without receipt of
consideration  by the  Company.  Except as expressly  provided  otherwise by the
Committee,  no  issuance  by the  Company  of shares of stock of any  class,  or
securities  convertible into shares of stock of any class,  shall affect, and no
adjustment by reason  thereof shall be made with respect to, the number or price
of Shares.


                                       B-3


         9.2    Adjustments Upon Dissolution or Liquidation. In the event of the
proposed  dissolution or liquidation of the Company, the Offering Period then in
progress shall be shortened by setting a new Purchase Date (hereinafter the "New
Purchase Date"),  and shall terminate  immediately  prior to the consummation of
such proposed  dissolution  or  liquidation,  unless  provided  otherwise by the
Committee.  The New  Purchase  Date  shall be before  the date of the  Company's
proposed  dissolution  or  liquidation.  Each  Participant  will be  notified in
writing that the Purchase Date for the  Participant's  right to purchase  shares
has been  changed to the New  Purchase  Date and that the  applicable  number of
Shares will automatically be purchased on the New Purchase Date, unless prior to
such date the Participant has withdrawn from the Plan as provided in Section 8.1
hereof.

         9.3    Adjustment Upon Merger or Asset Sale. In the event of a proposed
sale of all or substantially all of the assets of the Company,  or the merger of
the Company with or into another corporation, each outstanding right to purchase
shares shall be assumed or an equivalent right to purchase shares substituted by
the successor corporation or a parent or affiliate of the successor corporation.
In the event that the successor  corporation refuses to assume or substitute the
right  to  purchase  shares,  any  Offering  Period  then in  progress  shall be
shortened  by  setting  a New  Purchase  Date and any  Offering  Period  then in
progress  shall end on the New Purchase  Date.  The New  Purchase  Date shall be
before the date of the Company's proposed sale or merger.  Each Participant will
be  notified  in  writing  that the  Purchase  Date has been  changed to the New
Purchase  Date  and that the  applicable  number  of  shares  will be  purchased
automatically  on  the  New  Purchase  Date,  unless  prior  to  such  date  the
Participant has withdrawn from the Plan as provided in Section 8.1 hereof.

         9.4    Committee  Adjustment.   Without  limitation  on  the  preceding
provisions,  in the event of any corporate  transaction,  the Committee may make
such  adjustment it deems  appropriate  to prevent  dilution or  enlargement  of
rights in the number and class of Shares  which may be delivered  under  Article
12, in the number,  class of or price of Shares available for purchase under the
Plan and in the number of Shares  which an Employee is entitled to purchase  and
any other  adjustments it deems  appropriate.  Without  limiting the Committee's
authority  under this Plan, in the event of any  transaction,  the Committee may
elect to have the options  hereunder  assumed or such options  substituted  by a
successor  entity,  to terminate all  outstanding  options either prior to their
expiration  or upon  completion  of the purchase of Shares on the next  Purchase
Date, or to take such other action deemed appropriate by the Committee.

                     ARTICLE 10. DESIGNATION OF BENEFICIARY

         Each  Participant  under  the Plan  may,  from  time to time,  name any
beneficiary or beneficiaries  (who may be named contingently or successively) to
whom the amount in his or her  Account is to be paid in case of his or her death
before he or she  receives  any or all of such  benefit.  Each such  designation
shall revoke all prior designations by the same Participant,  shall be in a form
prescribed  by the  Committee,  and will be  effective  only  when  filed by the
Participant in writing with the Committee during the Participant's  lifetime. In
the absence of any such designation, any Account balance remaining unpaid at the
Participant's death shall be paid to the Participant's  estate or the Committee,
in its sole discretion, may pay such Account balance to the Participant's spouse
or to any one or more  dependents  or  relatives of the  Participant  or to such
other person as the Committee may designate.

                           ARTICLE 11. ADMINISTRATION

         11.1   Administration  by Committee.  The Plan shall be administered by
the  Committee.  The Committee  shall have the  authority to delegate  duties to
officers, directors or employees of the Company.

         11.2   Authority of Committee.  The  Committee  shall have the full and
exclusive discretionary authority to construe and interpret the Plan and options
granted  under it; to establish,  amend,  and revoke rules and  regulations  for
administration of the Plan (including, without limitation, the determination and
change of  Offering  Periods,  Purchase  Periods  and  payment  procedures,  the
requirement that Shares be held by a specified broker,  and the establishment of
the exchange ratio  applicable to amounts withheld in a currency other than U.S.
dollars); to determine all questions of eligibility,  disputed claims and policy
that may arise in the  administration  of the Plan;  to make any  changes to the
Plan or its  operations  to  reduce  or  eliminate  any  unfavorable  accounting
consequences  to the  extent  deemed  appropriate  by the  Committee;  to permit
payroll  withholding  adjustments to adjust for delays or mistakes in processing
of  withholding  elections;  to  establish   administrative   procedures;   and,
generally,  to exercise such powers and perform such acts as the Committee deems
necessary or expedient to promote the best interests of the Company,  including,
but not  limited to,  designating  from time to time which  Subsidiaries  of the
Company shall be part of the Employer. The Committee's  determinations as to the
interpretation and operation of this Plan shall be final and conclusive and each
action of the Committee shall be binding on all persons.


                                       B-4


         In  exercising  the powers  described in the foregoing  paragraph,  the
Committee  may adopt  special or different  rules for the  operation of the Plan
including,  but not limited  to,  rules  which  allow  employees  of any foreign
Subsidiary to participate  in, and enjoy the tax benefits  offered by, the Plan;
provided  that such rules  shall not result in any  grantees  of options  having
different rights and/or privileges under the Plan in violation of Section 423 of
the Code nor  otherwise  cause the Plan to fail to satisfy the  requirements  of
Section 423 of the Code and the regulations thereunder.

         11.3   Administrative Modification. The Plan provisions relating to the
administration  of the Plan may be amended by the Committee from time to time as
may be desirable to satisfy any requirements of or under the federal  securities
and/or other applicable laws of the United States, to obtain any exemption under
such laws, or to reduce or eliminate any unfavorable accounting consequences.

                          ARTICLE 12. NUMBER OF SHARES

         Two million (2,000,000) Shares are reserved for sale and authorized for
issuance pursuant to the Plan,  subject to adjustment as set forth in Article 9.
If any option  granted  under the Plan shall for any  reason  terminate  without
having been  exercised,  the Shares not purchased  under such option shall again
become available for the Plan. If on a given Purchase Date, the number of Shares
with respect to which  options are to be exercised  exceeds the number of Shares
then available under the Plan, the Committee shall make a pro rata allocation of
the Shares  remaining  available for purchase in as uniform a manner as shall be
practical and as it shall determine to be equitable.

                            ARTICLE 13. MISCELLANEOUS

         13.1   Restrictions  on Transfer.  Options  granted under the Plan to a
Participant may not be exercised during the Participant's lifetime other than by
the  Participant.  Neither amounts  credited to a Participant's  Account nor any
rights with respect to the  exercise of an option or to receive  stock under the
Plan may be assigned, transferred,  pledged, or otherwise disposed of in any way
by the Participant  other than by will or the laws of descent and  distribution.
Any such attempted assignment,  transfer,  pledge, or other disposition shall be
without  effect,  except  that the  Company may treat such act as an election to
withdraw from the Plan in accordance with Section 8.1.

         13.2   Administrative Assistance. If the Committee in its discretion so
elects, it may retain a brokerage firm, bank, or other financial  institution to
assist in the purchase of Shares,  delivery of reports, or other  administrative
aspects of the Plan. If the Committee so elects,  each Participant shall (unless
prohibited  by  applicable  law) be deemed upon  enrollment  in the Plan to have
authorized  the  establishment  of an  account  on  his or her  behalf  at  such
institution.  Shares purchased by a Participant  under the Plan shall be held in
the Account in the Participant's name, or if the Participant so indicates in the
enrollment form, in the Participant's  name together with the name of his or her
spouse  in  joint  tenancy  with  right of  survivorship  or  spousal  community
property, or in certain forms of trust approved by the Committee.

         13.3   Treatment  of  Non-U.S.   Participants.   Participants  who  are
employed by non-U.S. Designated Subsidiaries,  who are paid in foreign currency,
and who contribute foreign currency to the Plan through contributions or payroll
deductions will have such contributions  converted to U.S. dollars. The exchange
rate for such conversion  will be determined as prescribed by the Committee.  In
no  event  will  any  procedure  implemented  for  dealing  with  exchange  rate
fluctuations that may occur during an Offering Period result in a purchase price
below the Purchase Date Price permitted under the Plan. Each  Participant  shall
bear the risk of any currency exchange  fluctuations (if applicable) between the
date on which any Participant  contributions  are converted to U.S.  dollars and
the following Purchase Date.

         13.4   Withholding.  The  Company or any member of the  Employer  shall
have the power and the right to deduct or withhold,  or require a Participant to
remit to the  Company or any member of the  Employer,  an amount  sufficient  to
satisfy Federal, state and local taxes, domestic or foreign,  required by law or
regulation  to be withheld with respect to any taxable event arising as a result
of this Plan.


                                       B-5


         13.5   Equal Rights and Privileges. Except as provided in Section 13.6,
all Eligible  Employees  shall have equal rights and privileges  with respect to
the Plan so that the Plan qualifies as an "employee  stock purchase plan" within
the  meaning  of  Section  423 or any  successor  provision  of the Code and the
related  regulations.  Notwithstanding  the  express  terms  of  the  Plan,  any
provision of the Plan other than Section 13.6 which is inconsistent with Section
423 or any  successor  provision  of  the  Code  shall  without  further  act or
amendment  by the  Company  or the  Committee  be  reformed  to comply  with the
requirements of Section 423 of the Code. This Section 13.5 shall take precedence
over all other provisions in the Plan except Section 13.6.

         13.6   Eligible  Employees  in Other  Countries.  Without  amending the
Plan, the Committee may grant options or establish  other  procedures to provide
benefits  to  Eligible  Employees  of  Designated   Subsidiaries  with  non-U.S.
employees on such terms and conditions  different  from those  specified in this
Plan as may, in the  judgment of the  Committee,  be  necessary  or desirable to
foster and promote  achievement  of the  purposes of the Plan and shall have the
authority to adopt such modifications,  procedures, subplans and the like as may
be  necessary  or  desirable  (a) to  comply  with  provisions  of the  laws  or
regulations or conform to the requirements to operate the Plan in a qualified or
tax or accounting  advantageous  manner in other countries or  jurisdictions  in
which the Company or any Designated  Subsidiary  may operate or have  employees,
(b) to ensure the viability of the benefits from the Plan to Eligible  Employees
employed in such  countries or  jurisdictions  and (c) to meet the objectives of
the Plan.  Notwithstanding  anything to the  contrary  herein,  any such actions
taken by the  Committee  with respect to Eligible  Employees  of any  Designated
Subsidiary  may be treated as a subplan  outside of an "employee  stock purchase
plan"  under  Section  423 of the  United  States  Code and not  subject  to the
requirements of Section 423 set forth in the United States Code and this Plan.

         13.7   Applicable  Law.  The Plan shall be governed by the  substantive
laws (excluding the conflict of laws rules) of the State of Texas.

         13.8   Amendment  and  Termination.  The Board  may  amend,  alter,  or
terminate the Plan at any time; provided,  however, that (1) the Plan may not be
amended in a way which will cause  rights  issued under the Plan to fail to meet
the  requirements  of Section 423 of the Code; and (2) no amendment  which would
amend or  modify  the  Plan in a manner  requiring  stockholder  approval  under
Section 423 of the Code or the requirements of any securities  exchange on which
the Shares are traded shall be  effective  unless such  stockholder  approval is
obtained.  In addition,  the Committee may amend the Plan as provided in Section
11.3, subject to the conditions set forth in this Section 13.8.

         If the Plan is  terminated,  the  Committee  may elect to terminate all
outstanding  options either prior to their  expiration or upon completion of the
purchase of Shares on the next Purchase  Date, or may elect to permit options to
expire in accordance  with their terms (and  participation  to continue  through
such expiration  dates). If the options are terminated prior to expiration,  all
funds  accumulated  in  Participants'  Accounts  as of the date the  options are
terminated  shall be returned to the  Participants  as soon as  administratively
feasible.

         13.9   No Right of  Employment.  Neither the grant nor the  exercise of
any rights to purchase  Shares  under this Plan nor  anything in this Plan shall
impose upon the Company or a member of the Employer any  obligation to employ or
continue  to employ any  Employee.  The right of the  Company or a member of the
Employer to terminate any Employee  shall not be diminished or affected  because
any rights to purchase Shares have been granted to such Employee.

         13.10  Rights as Shareholder.  No Participant  shall have any rights as
shareholder  unless and until  Shares of Common Stock have been issued to him or
her.

         13.11  Governmental  Regulation.  The Company's  obligation to sell and
deliver  Shares of the Company's  common stock under this Plan is subject to the
approval  of  any  governmental   authority  required  in  connection  with  the
authorization, issuance, or sale of such Shares.


                                       B-6


         13.12  Gender.  When used  herein,  masculine  terms shall be deemed to
include the feminine, except when the context indicates to the contrary.

         13.13  Condition for Participation.  As a condition to participation in
the  Plan,  Eligible  Employees  agree  to be  bound  by the  terms  of the Plan
(including,  without  limitation,  the notification and holding  requirements of
Section 7.5) and the determinations of the Committee.








                                       B-7


                                   APPENDIX I

                                   DEFINITIONS

"Account"  means a recordkeeping  account  maintained for a Participant to which
Participant  contributions  and  payroll  deductions,  if  applicable,  shall be
credited.

"Board" means the Board of Directors of the Company.

"Code" means the Internal Revenue Code of 1986, as amended.

"Committee" means the Compensation Committee or any other committee appointed by
the Board.

"Common Stock" means the Common Stock of the Company.
 
"Company" means International Isotopes Inc., a Texas corporation.
 
"Compensation" means gross earnings, including such amounts of gross earnings as
are  deferred by an Eligible  Employees  (a) under a qualified  cash or deferred
arrangement  described  in  Section  401(k)  of the  Code  or (b)  under  a plan
qualified under Section 125 of the Code. Compensation does not include severance
pay, equity compensation or gain from stock option exercises.

"Cut-Off Date" means the date  established by the Committee from time to time by
which enrollment forms must be received prior to an Enrollment Date.

"Designated  Subsidiary"  means any Subsidiary  which has been designated by the
Committee from time to time in its sole discretion as eligible to participate in
the Plan and which has adopted the Plan with the  approval of the  Committee  in
its sole and absolute discretion.

"Eligible  Employee"  means an Employee  eligible to  participate in the Plan in
accordance with Article 3.

"Effective Date" means the effective date as determined by the Committee.

"Employee"  means any  individual  who is an  employee of the  Employer  for tax
purposes.

"Employer"  means the Company or any Designated  Subsidiary by which an Employee
is employed.

"Enrollment Date" means the first Trading Day of an Offering Period.
 
"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Fair Market Value"  means,  as of any date,  the closing  trading price for the
Common Stock on any given date during regular trading, or if not trading on that
date,  such  price on the last  preceding  date on which  the  Common  Stock was
traded,  unless  determined  otherwise  by the  Committee  using such methods or
procedures as it may establish.

"Grant  Date"  means a date on which an  Eligible  Employee is granted an option
under the Plan pursuant to Article 5.

"Grant  Price" means the Fair Market Value of a Share on the Grant Date for such
option.

"Offering Period" means each period, if any,  designated by the Committee (which
period  may  be a  calendar  quarter  or  any  other  period  designated  by the
Committee);  provided,  that each  period  shall,  in no event  end  later  than
twenty-seven  (27) months from the Grant Date. The Offering  Period may but need
not be the same as the Purchase Period, as determined by the Committee.


                                       B-8


"Participant"  means an Eligible  Employee who has enrolled in the Plan pursuant
to Article 4.

"Plan" means this International Isotopes Inc. Employee Stock Purchase Plan. 

"Purchase  Date" with respect to a Purchase Period means the last Trading Day in
such Purchase Period.

"Purchase  Date Price" means the Fair Market Value of a Share on the  applicable
Purchase Date.

"Purchase Period" means the period beginning on the Effective Date and ending on
the date  designated  by the  Committee  and  each  period,  if any,  thereafter
designated by the Committee (which period may be a calendar quarter or any other
period  designated by the  Committee);  provided,  that each period shall, in no
event end later than twenty-seven (27) months from the Grant Date.

"Purchase  Price" means the price  designated  by the  Committee,  at which each
Share may be purchased under any option,  but in no event less than  eighty-five
percent (85%) of the lesser of:

         (1)   The Grant Price and

         (2)   The Purchase Date Price.

"Shares" means shares of the Company's Common Stock.

"Subsidiary"  means a corporation,  domestic or foreign,  of which not less than
50% of the combined voting power is held by the Company or a Subsidiary, whether
or not such corporation now exists or is hereafter  organized or acquired by the
Company or a Subsidiary.

"Trading  Day"  means a day on which  the OTC  Bulletin  Board,  New York  Stock
Exchange,  Nasdaq stock market or other alternative exchange or service on which
the Common Stock is traded, listed or quoted is open for trading.



                                       B-9


                                                                      APPENDIX C

              Second Amended and Restated Articles of Incorporation
                                       of
                           International Isotopes Inc.

         International  Isotopes  Inc.  (the  "Corporation"),  pursuant  to  the
provisions of Article 4.07 of the Texas Business  Corporation Act, hereby adopts
the Second Amended and Restated  Articles of  Incorporation  which set forth the
Articles of  Incorporation  and  supersede  the  original  Restated  Articles of
Incorporation and all amendments thereto.

         The  Articles  of  Incorporation  are hereby  amended  and  restated as
follows:

                                    ARTICLE I

         The name of the  Corporation  is  "International  Isotopes  Inc."  (the
"Corporation").

                                   ARTICLE II

         The period of duration of the Corporation is perpetual.

                                   ARTICLE III

         The purpose for which the  Corporation  is organized is to transact any
and all lawful business for which a corporation  may be  incorporated  under the
Texas Business Corporation Act.

                                   ARTICLE IV

         The total  number of shares of all  classes of capital  stock which the
Corporation  shall  have  authority  to  issue  is  Five  Hundred  Five  Million
(505,000,000),  of which (a) Five Hundred Million  (500,000,000) shares shall be
designated  as Common  Stock,  par value  $.01 per share,  and (b) Five  Million
5,000,000)  shares shall be  designated as Preferred  Stock,  par value $.01 per
share.

         The  following  is  a  statement  of  the  designations,   preferences,
limitations,  and relative rights,  including  voting rights,  in respect of the
classes of stock of the  Corporation  and of the authority with respect  thereto
expressly vested in the Board of Directors of the Corporation:

                                  COMMON STOCK

         (1) Each share of Common Stock of the Corporation  shall have identical
rights and  privileges in every  respect.  The holders of shares of Common Stock
shall  be  entitled  to  vote  upon  all  matters  submitted  to a  vote  of the
shareholders of the Corporation and shall be entitled to one vote for each share
of Common Stock held.

         (2) Subject to the prior rights and preferences,  if any, applicable to
shares of the Preferred  Stock or any series  thereof,  the holders of shares of
the Common Stock shall be entitled to receive such  dividends  (payable in cash,
stock, or otherwise) as may be declared thereon by the Board of Directors at any
time and from time to time out of any funds of the Corporation legally available
therefore.

         (3)  In  the  event  of  any  voluntary  or  involuntary   liquidation,
dissolution, or winding-up of the Corporation, after distribution in full of the
preferential  amounts, if any, to be distributed to the holders of shares of the
Preferred Stock or any series thereof, the holders of shares of the Common Stock
shall be  entitled  to receive all of the  remaining  assets of the  Corporation
available for  distribution  to its  shareholders,  ratably in proportion to the
number of shares of the Common Stock held by them. A  liquidation,  dissolution,
or winding-up of the Corporation,  as such terms are used in this Paragraph (3),
shall  not be  deemed  to be  occasioned  by or to  include  any  merger  of the
Corporation  with or into  one or  more  corporations  or  other  entities,  any
acquisition  or exchange  of the  outstanding  shares of one or more  classes or
series of the Corporation, or any sale, lease, exchange, or other disposition of
all or a part of the assets of the Corporation.


                                       C-1


                                 PREFERRED STOCK

         (1) Shares of the  Preferred  Stock may be issued  from time to time in
one or more  series,  the  shares  of each  series  to have  such  designations,
preferences, limitations, and relative rights, including voting rights, as shall
be stated and expressed  herein or in a resolution or resolutions  providing for
the issue of such series  adopted by the Board of Directors of the  Corporation.
Each such series of Preferred Stock shall be designated so as to distinguish the
shares  thereof from the shares of all other  series and  classes.  The Board of
Directors of the  Corporation  is hereby  expressly  authorized,  subject to the
limitations  provided by law, to establish and designate series of the Preferred
Stock,  to fix the number of shares  constituting  each  series,  and to fix the
designations and the preferences,  limitations,  and relative rights,  including
voting  rights,  of the shares of each series and the variations of the relative
rights and  preferences as between  series,  and to increase and to decrease the
number of shares constituting each series,  provided that the Board of Directors
may not decrease the number of shares within a series to less than the number of
shares  within such series that are then issued.  The relative  powers,  rights,
preferences,  and  limitations  may vary  between and among  series of Preferred
Stock in any and all  respects  so long as all  shares  of the same  series  are
identical  in all  respects,  except that  shares of any such  series  issued at
different times may have different dates from which dividends  thereon cumulate.
The authority of the Board of Directors of the Corporation  with respect to each
series shall  include,  but shall not be limited to, the  authority to determine
the following:

                (a)   The designation of such series;

                (b)   The number of shares initially constituting such series;

                (c)   The rate or rates and the times at which  dividends on the
         shares of such  series  shall be paid,  the periods in respect of which
         dividends  are  payable,  the  conditions  upon  such  dividends,   the
         relationship  and  preferences,  if any, of such dividends to dividends
         payable  on any other  class or series of  shares,  whether or not such
         dividends shall be cumulative,  partially cumulative, or noncumulative,
         if such dividends shall be cumulative or partially cumulative, the date
         or dates from and after  which,  and the  amounts in which,  they shall
         accumulate,  whether such dividends shall be share  dividends,  cash or
         other dividends,  or any combination  thereof,  and the other terms and
         conditions, if any, applicable to dividends on shares of such series;

                (d)   Whether  or  not  the  shares  of  such  series  shall  be
         redeemable or subject to repurchase at the option of the Corporation or
         the holder thereof or upon the happening of a specified  event, if such
         shares  shall  be   redeemable,   the  terms  and  conditions  of  such
         redemption,  including  but not  limited  to the date or dates  upon or
         after which such shares shall be redeemable, the amount per share which
         shall be  payable  upon such  redemption,  which  amount may vary under
         different  conditions and at different  redemption  dates,  and whether
         such amount shall be payable in cash,  property,  or rights,  including
         securities of the Corporation or another corporation;

                (e)   The rights of the holders of shares of such series  (which
         may  vary   depending  upon  the   circumstances   or  nature  of  such
         liquidation,  dissolution, or winding up) in the event of the voluntary
         or  involuntary  liquidation,   dissolution,   or  winding  up  of  the
         Corporation and the relationship or preference,  if any, of such rights
         to  rights  of  holders  of  stock of any  other  class  or  series.  A
         liquidation,  dissolution,  or winding up of the  Corporation,  as such
         terms  are used in this  subparagraph  (e),  shall  not be deemed to be
         occasioned by or to include any merger of the Corporation  with or into
         one or more corporations or other entities, any acquisition or exchange
         of the  outstanding  shares  of one or more  classes  or  series of the
         Corporation,  or any sale, lease, exchange, or other disposition of all
         or a part of the assets of the Corporation;

                (f)   Whether or not the shares of such series shall have voting
         powers and, if such shares shall have such voting powers, the terms and
         conditions  thereof,  including,  but not  limited to, the right of the
         holders of such shares to vote as a separate class either alone or with
         the  holders of shares of one or more other  classes or series of stock
         and the right to have more (or less) than one vote per share; provided,
         however, that the right to cumulate votes for the election of directors
         is expressly denied and prohibited;

                (g)   Whether or not a sinking  fund shall be  provided  for the
         redemption  of the shares of such series  and,  if such a sinking  fund
         shall be provided, the terms and conditions thereof;

                (h)   Whether or not a purchase  fund shall be provided  for the
         shares of such series and, if such a purchase  fund shall be  provided,
         the terms and conditions thereof;


                                       C-2


                (i)   Whether or not the shares of such series, at the option of
         either  the  Corporation  or the  holder  or upon  the  happening  of a
         specified event,  shall be convertible into stock of any other class or
         series  and,  if such  shares  shall be so  convertible,  the terms and
         conditions of conversion,  including, but not limited to, any provision
         for the adjustment of the conversion rate or the conversion price;

                (j)   Whether or not the shares of such series, at the option of
         either  the  Corporation  or the  holder  or upon  the  happening  of a
         specified event, shall be exchangeable for securities, indebtedness, or
         property  of  the   Corporation   and,  if  such  shares  shall  be  so
         exchangeable,  the terms and conditions of exchange, including, but not
         limited to, any  provision  for the  adjustment of the exchange rate or
         the exchange price; and

                (k)   Any other preferences, limitations, and relative rights as
         shall not be inconsistent with the provisions of this Article IV or the
         limitations provided by law.

         (2) Except as  otherwise  required by law or in any  resolution  of the
Board of Directors creating any series of Preferred Stock, the holders of shares
of  Preferred  Stock and all series  thereof who are entitled to vote shall vote
together  with the  holders of shares of Common  Stock,  and not  separately  by
class.

         (3) The  Corporation  has  designated  up to 10,000 shares of Preferred
Stock as Series A Convertible  Redeemable  Preferred  Stock.  The  designations,
preferences  and rights of the Series A Convertible  Redeemable  Preferred Stock
are as set forth on Exhibit A.

         (4) The  Corporation  has  designated  up to 14,300 shares of Preferred
Stock as Series B Convertible  Redeemable  Preferred  Stock.  The  designations,
preferences  and rights of the Series B Convertible  Redeemable  Preferred Stock
are as set forth on Exhibit B.

                                    ARTICLE V

         At each election of  directors,  each  shareholder  entitled to vote at
such  election  shall have the right to vote in person or by proxy the number of
shares owned by such  shareholder  for as many persons as there are directors to
be elected  and for whose  election  such  shareholder  has a right to vote.  No
shareholder  shall have the right to  cumulate  their  votes in any  election of
directors.

                                   ARTICLE VI

         No holder of any shares of any class of stock of the corporation shall,
as such holder,  have any preemptive or preferential right to receive,  purchase
or subscribe to additional, unissued or treasury shares of any class of stock of
the corporation, or securities,  obligations or evidences of indebtedness of the
corporation  convertible  into or carrying a right to  subscribe  to or purchase
such shares,  or any other  securities  that may hereafter  from time to time be
issued or sold by the corporation.

                                   ARTICLE VII

         The address of the initial registered office of the corporation is 3400
Chase Tower, 600 Travis,  Houston,  Texas,  77002 and the name of its registered
agent at such address is Curtis Ashmos.

                                  ARTICLE VIII

         The  Corporation  shall  indemnify  any  person  who  was,  is,  or  is
threatened  to be made a named  defendant  or  respondent  in a  proceeding  (as
hereinafter  defined)  because the person (i) is or was a director or officer of
the  Corporation or (ii) while a director or officer of the  Corporation,  is or
was serving at the request of the Corporation as a director,  officer,  partner,
venturer,  proprietor,  trustee,  employee,  agent,  or similar  functionary  of
another  foreign or  domestic  corporation,  partnership,  joint  venture,  sole
proprietorship,  trust,  employee  benefit  plan,  or other  enterprise,  to the
fullest extent that a corporation may grant  indemnification to a director under
the Texas  Business  Corporation  Act,  as the same exists or may  hereafter  be
amended.  Such  right  shall be a  contract  right and as such  shall run to the
benefit of any  director or officer  who is elected and accepts the  position of
director  or  officer of the  Corporation  or elects to  continue  to serve as a
director or officer of the  Corporation  while this Article X is in effect.  Any
repeal or amendment of this  Article X shall be  prospective  only and shall not
limit the  rights of any such  director  or officer  or the  obligations  of the
Corporation with respect to any claim arising from or related to the services of
such  director or officer in any of the foregoing  capacities  prior to any such
repeal or amendment of this Article X. Such right shall  include the right to be
paid or reimbursed  by the  Corporation  for expenses  incurred in defending any
such  proceeding  in  advance of its final  disposition  to the  maximum  extent
permitted  under the Texas Business  Corporation  Act, as the same exists or may
hereafter be amended.  If a claim for indemnification or advancement of expenses
hereunder is not paid in full by the Corporation  within 90 days after a written
claim  has  been  received  by the  Corporation,  the  claimant  may at any time
thereafter  bring suit against the  Corporation  to recover the unpaid amount of
the claim, and if successful in whole or in part, the claimant shall be entitled
to be paid also the expenses of prosecuting such claim. It shall be a defense to
any such action that such indemnification or advancement of costs of defense are
not  permitted  under the Texas  Business  Corporation  Act,  but the  burden of
proving such  defense  shall be on the  Corporation.  Neither the failure of the
Corporation (including its Board of Directors or any committee thereof,  special
legal counsel,  or  shareholders)  to have made its  determination  prior to the
commencement of such action that  indemnification of, or advancement of costs of
defense  to, the  claimant is  permissible  in the  circumstances  nor an actual
determination  by the  Corporation  (including  its  Board of  Directors  or any
committee   thereof,   special  legal  counsel,   or  shareholders)   that  such
indemnification  or  advancement is not  permissible,  shall be a defense to the
action or create a presumption that such  indemnification  or advancement is not
permissible.  In the  event  of the  death  of any  person  having  a  right  of
indemnification  under the foregoing  provisions,  such right shall inure to the
benefit of his heirs, executors,  administrators,  and personal representatives.
The rights  conferred  above shall not be exclusive of any other right which any
person may have or hereafter  acquire  under any statute,  bylaw,  resolution of
shareholders or directors, agreement, or otherwise.


                                       C-3


         The  Corporation may  additionally  indemnify any person covered by the
grant of mandatory  indemnification contained above to such further extent as is
permitted  by law and may  indemnify  any  other  person to the  fullest  extent
permitted by law.

         To the extent  permitted by then applicable law, the grant of mandatory
indemnification  to any  person  pursuant  to this  Article  X shall  extend  to
proceedings involving the negligence of such person.

         As used herein, the term "proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal,  administrative,
arbitrative,  or  investigative,   any  appeal  in  such  an  action,  suit,  or
proceeding,  and any inquiry or investigation that could lead to such an action,
suit, or proceeding.

                                   ARTICLE IX

         Any action of the Corporation  which, under the provisions of the Texas
Business  Corporation  Act  or any  other  applicable  law,  is  required  to be
authorized  or approved by the holders of any specified  percentage  which is in
excess of fifty  percent  of the  outstanding  shares (or of any class or series
thereof)  of  the  Corporation  shall,   notwithstanding   any  law,  be  deemed
effectively and properly authorized or approved if authorized or approved by the
vote of the  holders  of more  than  fifty  percent  of the  outstanding  shares
entitled  to vote  thereon  (or,  if the  holders  of any class or series of the
Corporation's  shares shall be entitled by the Texas Business Corporation Act or
any other  applicable law to vote thereon  separately as a class, by the vote of
the holders of more than fifty  percent of the  outstanding  shares of each such
class  or  series).  Without  limiting  the  generality  of the  foregoing,  the
foregoing  provisions  of this Article Ten shall be  applicable  to any required
shareholder authorization or approval of: (a) any amendment to these articles of
incorporation;  (b) any  plan  of  merger,  share  exchange,  or  reorganization
involving the Corporation;  (c) any sale, lease,  exchange, or other disposition
of all, or substantially  all, the property and assets of the  Corporation;  and
(d) any voluntary dissolution of the Corporation.

                                    ARTICLE X

         Any action  required by the Texas Business  Corporation Act to be taken
at any annual or special  meeting of  shareholders,  or any action  which may be
taken at any annual or special meeting of  shareholders,  may be taken without a
meeting,  without prior notice,  and without a vote, if a consent or consents in
writing,  setting  forth the actions so taken,  shall be signed by the holder or
holders  of shares of the  Corporation  having  not less than a minimum of votes
that would be necessary to take such action at a meeting at which the holders of
all shares of the  Corporation  entitled to vote on the action were  present and
voted.

         International Isotopes Inc.



         By: /s/ Steve T. Laflin
         ---------------------------------
         Steve T. Laflin, President and CEO




                                       C-4


                                    EXHIBIT A

                                    ARTICLE I

           Designation, Amount, Par Value, Liquidation Value And Rank

         1.1    The series of preferred  stock shall be  designated  as Series A
Convertible   Redeemable  Preferred  Stock,   ("Series  A  Preferred  Stock"  or
"Preferred Stock"), and the number of shares so designated shall be up to 10,000
(which  shall not be  subject to  increase  without  the  consent of each of the
holders of the Series A Preferred  Stock  ("Holders")).  Each share of Preferred
Stock,  $.01 par value per share,  shall have a liquidation  value of $1,000 per
share (the "Liquidation Value").

         1.2    The Series A  Preferred  Stock  shall rank  senior to the Junior
Securities  upon  liquidation,  dissolution  or  winding  up. No class of equity
securities of the Company  shall be senior to the Series A Preferred  Stock upon
liquidation, dissolution or winding up.

                                   ARTICLE II

                                    Dividends

         2.1    Holders of Series A Preferred Stock shall be entitled to receive
dividends if, when and in such amounts as are declared by the Company's Board of
Directors from time to time,  provided that Holders shall not be entitled to any
specified  dividends and,  unless  declared by the Company,  no dividends  shall
accrue.

                                   ARTICLE III

                                  Voting Rights

         3.1    Except as otherwise provided herein and as otherwise required by
law, the Preferred  Stock shall have no voting rights.  However,  so long as any
shares of Preferred Stock are outstanding, the Company shall not and shall cause
its  subsidiaries  not to, without the  affirmative  vote of the Holders of more
than 75% of the shares of the  Preferred  Stock then  outstanding,  (a) alter or
change adversely the absolute or relative powers, preferences or rights given to
the Preferred  Stock,  (b) alter or amend this  Certificate of Designation,  (c)
amend its,  or their,  Certificate  of  Incorporation,  bylaws or other  charter
documents so as to affect adversely any rights of any Holders,  (d) increase the
authorized  number of shares of Preferred  Stock,  (e) sell all or substantially
all of its, or their,  assets,  (f) merge with or into another  company,  in the
event that the Company  will not be the  surviving  entity or (g) enter into any
agreement with respect to the foregoing.

                                   ARTICLE IV

                                   Liquidation

         4.1    Upon any liquidation,  dissolution or winding-up of the Company,
whether  voluntary  or  involuntary  (a  "Liquidation"),  the  Holders  shall be
entitled to receive out of the assets of the Company legally available therefor,
whether such assets are capital or surplus, for each share of Preferred Stock an
amount equal to the Liquidation  Value before any  distribution or payment shall
be made to the  Holders of any Junior  Securities.  If the assets of the Company
shall be  insufficient  to pay in full all amounts  due to the Holders  then the
entire assets to be distributed to the Holders and the Holders of all securities
ranking  pari  passu to the  Preferred  Stock  ratably  in  accordance  with the
respective  amounts that would be payable on such shares if all amounts  payable
thereon were paid in full. A sale, conveyance, lease, transfer or disposition of
all or substantially all of the assets of the Company or the consummation by the
Company of a transaction  or series of related  transactions  in which more than
40% of the voting  power of the Company is disposed  of, or a  consolidation  or
merger of the Company with or into any other  company or companies  shall not be
treated as a  Liquidation,  but instead  shall be subject to the  provisions  of
Article VII. The Company shall mail written notice of any such Liquidation,  not
less than 45 days prior to the payment date stated therein, to each Holder.


                                       C-5


                                    ARTICLE V

                                   Conversion

         5.1    Right of Holders to Convert Preferred Stock into Common Stock.

         (a)    Conversion  Price.  Subject  to and  upon  compliance  with  the
provisions  of this  Section 5.1,  each share of Preferred  Stock at a price per
share equal to the purchase  price as set forth in the Purchase  Agreement  plus
any and all accrued but unpaid  dividends  thereon may, at any time at or before
the close of business on May 31, 2022 be converted into duly authorized, validly
issued,  fully-paid  and  nonassessable  shares of Common  Stock at a conversion
price of $2.00 per share to be adjusted as set forth in Article VII, and subject
to the provisions of this Article V (the "Conversion Price").

         (b)    Notice of Conversion.  If an adjustment in the Conversion  Price
and, if applicable,  a change in the securities or other property  issuable upon
conversion  has taken place  pursuant to Articles V or VII, then the  conversion
described in Section 5.1(a) shall be at the applicable  Conversion  Price and in
such securities or other property as so adjusted. The Purchaser desiring to make
a conversion  shall deliver to the Company,  during usual  business hours of the
Company's office, or, at the Purchaser's option, to the Company's transfer agent
during its usual business  hours (with a copy to the Company),  a written notice
of election to convert,  as provided in the form attached hereto as Exhibit A (a
"Notice of Conversion"),  accompanied,  if required, by the stock certificate(s)
evidencing the shares of Preferred Stock which are to be converted.

         5.2    Issuance of Shares Upon Conversion.

         (a)    As promptly as practicable,  but in any event no later than five
(5) Trading Days after delivery of a Notice of Conversion and, if required,  the
surrender, as herein provided, of any certificates for shares of Preferred Stock
for conversion, the Company shall deliver or cause to be delivered to the Holder
of the Preferred Stock  delivering  such Notice of Conversion,  or such Holder's
designee,  a  certificate  or  certificates  representing  the  number  of  duly
authorized, validly issued, fully-paid and nonassessable shares of Common Stock,
into which such shares of Preferred  Stock may be converted in  accordance  with
the provisions of this Article V. Such  conversion  shall be deemed to have been
made at the time and on the date the Notice of  Conversion  is  delivered to the
Company,  as long as, if  required,  the  Preferred  Stock being  converted  are
promptly delivered to the Company and the rights of the Holder of such Preferred
Stock as a Holder  (subject to the  Company's  satisfaction  of its  obligations
hereunder with respect to such conversion) shall cease at such time with respect
to the shares of Preferred Stock that such Holder would have held had the shares
of Preferred Stock  converted into Underlying  Shares not been so converted (the
"Converted  Preferred  Stock"),  the Person or Persons  entitled  to receive the
shares of Common  Stock,  upon  conversion  of such  Preferred  Stock,  shall be
treated for all purposes as having  become the record  holder or holders of such
shares  of  Common  Stock  at such  time,  and such  conversion  shall be at the
Conversion  Price in effect at such time (the  "Conversion  Date").  Subject  to
paragraph 5.2(b), if any certificated shares of Preferred Stock are converted in
part only,  upon such  conversion  the Company  shall execute and deliver to the
Holder thereof,  as requested by such Holder, a new Preferred Stock  certificate
for the number of shares of Preferred Stock equal to the unconverted  portion of
such Preferred Stock certificate.

         (b)    Notwithstanding  anything to the contrary set forth herein, upon
conversion of shares of Preferred Stock in accordance with the terms hereof, the
Holder  shall  not be  required  to  physically  surrender  its  certificate  of
Preferred  Stock to the Company  unless the entire amount of shares of Preferred
Stock is so converted. The Holder and the Company shall maintain records showing
the number of shares of Preferred Stock already  converted and the dates of such
conversions  or shall use such  other  method,  reasonably  satisfactory  to the
Holder and the Company, so as not to require physical surrender of the Preferred
Stock  certificate(s) upon each such conversion.  In the event of any dispute or
discrepancy,  such records of the Company shall be controlling and determinative
in the absence of manifest error.  Notwithstanding the foregoing, if any portion
of shares of a Preferred  Stock  certificate  is  converted,  the Holder may not
transfer the  Preferred  Stock  certificate  unless the Holder first  physically
surrenders the certificate to the Company,  whereupon the Company shall promptly
issue and deliver upon the order of the Holder a new  certificate of like tenor,
registered as the Holder (upon payment by the Holder of any applicable  transfer
taxes) may request,  representing the number of remaining  unconverted shares of
Preferred  Stock.  The Holder and any  assignee,  by acceptance of the Preferred
Stock,  acknowledge  and  agree  that,  by  reason  of the  provisions  of  this
paragraph,  following  conversion of a portion of a Preferred Stock certificate,
the unpaid and  unconverted  shares of such Preferred  Stock  certificate may be
less than the amount stated on the face thereof.


                                       C-6


         (c)    In lieu of delivering  physical  certificates  representing  the
Conversion Shares, provided the Company's transfer agent is participating in the
Depositary Trust Company Fast Automated  Securities  Transfer  ("FAST") program,
upon request of the Holder and in compliance with the provisions of Sections 5.1
and 5.2, the Company  shall use its best efforts to cause its transfer  agent to
electronically  transmit the shares of Common Stock issuable upon  conversion of
the Preferred Stock to the Holder by crediting the account of the Holder's Prime
Broker with DTC through its Deposit Withdrawal Agent Commission system. The time
period for delivery described in the immediately preceding paragraph shall apply
to the electronic transmittals described herein.

         5.3    Mandatory Redemption on May 31, 2022.

         (a)    All  outstanding  and  unconverted  shares of Series A Preferred
Stock on May 31, 2022 shall be redeemed by the Company  pursuant to this Section
5.3 from funds or shares of Common Stock legally  available  therefor at a price
per share equal to the purchase  price as set forth in the  Purchase  Agreement.
Thereafter, all shares of Series A Preferred Stock shall cease to be outstanding
and shall have the status of authorized but  undesignated  preferred  stock. The
Company,  at its option,  shall pay the  redemption  price  either in cash or in
shares of Common Stock valued at the Average Price on May 31, 2002.

         (b)    If any portion of the applicable  redemption price under Section
5.3(a) shall not be paid by the Company within seven (7) calendar days after the
date due,  interest  shall accrue thereon at the rate of 15% per annum until the
redemption  price plus all such  interest is paid in full (which amount shall be
paid as liquidated damages and not as a penalty).

                                   ARTICLE VI

                            Registration Requirements

         6.1    Reservation of Shares. The Company covenants that it will at all
times reserve and keep available out of its  authorized  shares of Common Stock,
free from preemptive rights,  solely for the purpose of issue upon conversion of
the  Preferred  Stock as herein  provided,  such  number of shares of the Common
Stock as shall then be issuable upon the conversion of all outstanding shares of
Preferred Stock into Common Stock (the "Reserved Amount"). The Company covenants
that all shares of the Common  Stock  issued upon  conversion  of the  Preferred
Stock which shall be so issuable shall,  when issued, be duly and validly issued
and fully paid and non-assessable.

                                   ARTICLE VII

                         Adjustment of Conversion Price

         7.1    Adjustment of Conversion Price. In addition to any adjustment to
the Conversion Price provided elsewhere in this Certificate of Designation,  the
Conversion  Price in effect at any time shall be subject to adjustment from time
to time upon the happening of certain events, as follows:

         (a)    Common Stock  Dividends;  Common Stock  Splits;  Reverse  Common
Stock  Splits.  If the  Company,  at any  time  while  the  Preferred  Stock  is
outstanding,  (a) shall pay a stock dividend on its Common Stock,  (b) subdivide
outstanding  shares of Common Stock into a larger number of shares,  (c) combine
outstanding shares of Common Stock into a smaller number of shares, or (d) issue
by reclassification of shares of Common Stock any shares of Capital Stock of the
Company, the Conversion Price shall be multiplied by a fraction the numerator of
which shall be the number of shares of Common Stock (excluding  treasury shares,
if any) outstanding  before such event and the denominator of which shall be the
number of shares of Common Stock  outstanding  after such event.  Any adjustment
made pursuant to this Section 7.1(a) shall become  effective  immediately  after
the record date for the  determination of stockholders  entitled to receive such
dividend  or  distribution  and shall  become  effective  immediately  after the
effective date in the case of a subdivision, combination or re-classification.

         (b)    Rounding.  All  calculations  under Section 7.1 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.

         (c)    Notice of Adjustment.  Whenever the Conversion Price is adjusted
pursuant to paragraph 7.1(a), the Company shall promptly deliver to the Holder a
notice  setting forth the  Conversion  Price after such  adjustment  and setting
forth a brief statement of the facts requiring such adjustment.


                                       C-7


         7.2    Officer's Certificate. Whenever the number of shares purchasable
upon conversion  shall be adjusted as required by the provisions of Section 7.1,
the Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal  office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted number of shares determined as herein
provided, setting forth in reasonable detail the facts requiring such adjustment
and the manner of computing such  adjustment.  Each such  officer's  certificate
shall be signed by the  chairman,  president or chief  financial  officer of the
Company and by the  secretary or any  assistant  secretary of the Company.  Each
such officer's  certificate  shall be made available at all reasonable times for
inspection by any holder of the Preferred Stock and the Company shall, forthwith
after each such  adjustment,  deliver a copy of such  certificate to the each of
the Holders.

         7.3    Compliance With Governmental Requirements. The Company covenants
that if any shares of Common  Stock  required  to be  reserved  for  purposes of
conversion of Preferred Stock hereunder require registration with or approval of
any  governmental  authority  under any  Federal or state law,  or any  national
securities  exchange,  before  such shares may be issued  upon  conversion,  the
Company will use its best efforts to cause such shares to be duly  registered or
approved, as the case may be.

         7.4    Fractional  Shares.  Upon a  conversion  hereunder,  the Company
shall not be required  to issue stock  certificates  representing  fractions  of
shares of the Common Stock, but may if otherwise permitted,  make a cash payment
in respect of any final  fraction of a share based on the Per Share Market Value
at such time.  If the  Company  elects  not,  or is unable,  to make such a cash
payment,  the holder shall be entitled to receive, in lieu of the final fraction
of a share, one whole share of Common Stock.

         7.5    Payment  of  Tax  Upon  Issue  or  Transfer.   The  issuance  of
certificates for shares of the Common Stock on conversion of the Preferred Stock
shall be made without charge to the Holders thereof for any documentary stamp or
similar  taxes that may be payable in respect of the issue or  delivery  of such
certificate, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer  involved in the issuance and delivery
of any such  certificate upon conversion in a name other than that of the Holder
of such  Preferred  Stock so converted  and the Company shall not be required to
issue or  deliver  such  certificates  unless  or until the  Person  or  Persons
requesting  the  issuance  thereof  shall have paid to the Company the amount of
such tax or shall have  established to the satisfaction of the Company that such
tax has been paid.

         7.6    Notices. Any notice or other communication required or permitted
to be given  hereunder  shall be in  writing  and  shall be  deemed to have been
received  (a) upon hand  delivery  (receipt  acknowledged)  or delivery by telex
(with correct answer back received),  telecopy or facsimile  (with  transmission
confirmation  report) at the address or number  designated below (if received by
8:00 p.m. EST where such notice is to be  received),  or the first  Business Day
following such delivery (if received after 8:00 p.m. EST where such notice is to
be received) or (b) on the second  Business Day following the date of mailing by
express  courier  service,  fully  prepaid,  addressed to such address,  or upon
actual receipt of such mailing,  whichever shall first occur.  The addresses for
such  communications  are (i) if to the Company to International  Isotopes Inc.,
4137  Commerce  Circle,  Idaho  Falls,  Idaho  83401,  Telephone:  208-524-5300,
Facsimile: 208-524-1411,  Attention: Steve Laflin with copies to Locke Liddell &
Sapp, LLP, 100 Congress,  Suite 300, Austin, Texas 78731,  Attention:  Curtis R.
Ashmos, and (ii) if to any Holder to the address set forth on Schedule II to the
Purchase  Agreement  or such  other  address  as may be  designated  in  writing
hereafter, in the same manner, by such Person.

         7.7    Allocations  of Reserved  Amount.  The Reserved  Amount shall be
allocated  pro rata among the Holders based on the number of shares of Preferred
Stock  issued to each  Holder.  Each  increase to the  Reserved  Amount shall be
allocated  pro rata among the Holders based on the number of shares of Preferred
Stock held by each Holder at the time of the increase in the Reserved Amount. In
the  event a  Holder  shall  sell or  otherwise  transfer  any of such  Holder's
Preferred  Stock,  each transferee shall be allocated a pro rata portion of such
transferor's  Reserved Amount.  Any portion of the Reserved Amount which remains
allocated to any person or entity which does not hold any Preferred  Stock shall
be allocated to the remaining  Holders,  pro rata, based on the number of shares
of Preferred Stock then held by such Holders.

         7.8    Nasdaq Limitation.  In no event shall the Company be required to
issue shares of Common  Stock upon the  conversion  of  Preferred  Stock if such
issuance would violate the rules of Nasdaq.


                                       C-8


                                  ARTICLE VIII

                               Optional Redemption

         8.1    Optional Redemption.

         (a)    The shares of  Preferred  Stock are  redeemable,  in whole or in
part, at the option of the Company during the following time periods,  from time
to time,  under the following  conditions and subject also to the conditions set
forth in Section 8.1(b) (the "Optional Redemption"):

                (i)   Prior to the first anniversary of the Original Issue Date,
         the Company  may redeem the shares of  Preferred  Stock  subject to the
         other conditions  herein, if the average closing price of the Company's
         Common  Stock over twenty (20)  consecutive  Trading  Days reaches over
         200% of the Conversion Price as at the Original Issue Date;

                (ii)  During the period  commencing  on the first  Business  Day
         immediately  after the first anniversary of the Original Issue Date and
         ending on the  second  anniversary  of the  Original  Issue  Date,  the
         Company may redeem the shares of Preferred  Stock  subject to the other
         conditions herein, if the average closing price of the Company's Common
         Stock over twenty (20)  consecutive  Trading  Days reaches over 175% of
         the Conversion Price as at the Original Issue Date; and

                (iii) After the second  anniversary  of the Original Issue Date,
         the Company  may redeem the shares of  Preferred  Stock  subject to the
         other conditions  herein, if the average closing price of the Company's
         Common  Stock over twenty (20)  consecutive  Trading  Days reaches over
         150% of the Conversion Price as at the Original Issue Date.

         (b)    Subject to the conditions set forth in Section  8.1(a),  so long
as (i) any Registration Statement required to be filed and be effective pursuant
to the  Registration  Rights  Agreement is then in effect and has been in effect
and sales of all of the  Registrable  Securities  can be made  thereunder for at
least twenty (20) days prior to the  Redemption  Notice Date (as defined  below)
and (ii) the  Company has a  sufficient  number of  authorized  shares of Common
Stock reserved for issuance upon full  conversion of the Preferred  Stock,  upon
ten (10)  Business  Days  prior  written  notice to the  Holder  (a  "Redemption
Notice"),  the full  number  of  outstanding  shares of  Preferred  Stock may be
redeemed  by the  Company,  in whole at a price equal to the  original  purchase
price  of the  Preferred  Stock  (the  "Redemption  Price"),  together  with any
declared but unpaid  dividends and all liquidated  damages and other amounts due
in respect  thereof up to the Redemption Date (as defined below) (subject to the
right of the Holder on the Record Date to receive  dividends due on the Dividend
Payment Date).

         8.2    Mechanics of Redemption. The Company shall exercise its right to
redeem by delivering its Redemption Notice by facsimile and overnight courier to
each Holder (such date that the notice is given, the "Redemption  Notice Date").
Such  Redemption  Notice  shall  indicate  (A) the  Redemption  Price,  (B) each
Holder's pro rata allocation of such maximum  amount,  and (C) a confirmation of
the date ("Redemption Date") that the Company shall effect the redemption, which
date shall be not less than  thirty (30)  Business  Days and not more than sixty
(60) calendar days after the Redemption Notice Date. Notwithstanding anything in
this Section 8.2, the Company  shall  convert any  Preferred  Stock  pursuant to
Article VIII if the Conversion  Notice for shares of Preferred  Stock  submitted
for  conversion  is  (i)  delivered  before  the  Redemption  Date,  (ii)  for a
Conversion  Price greater than or equal to the Redemption  Price  (appropriately
adjusted  in  accordance  with the  terms  hereof)  or (iii) in  excess  of such
Holder's pro rata  allocation of the maximum  Redemption  Price indicated in its
Redemption Notice.

         8.3    Payment  of  Redemption   Price.   The  Company  shall  pay  the
applicable  Optional  Redemption  Price to the Holder of the shares of Preferred
Stock being redeemed in cash on the  Redemption  Date. If the Company shall fail
to pay the applicable Redemption Price to such Holder on the Redemption Date, in
addition  to  any  remedy  such  Holder  may  have  under  this  Certificate  of
Designation and the Purchase  Agreement,  such unpaid amount shall bear interest
at the rate of 2.0% per month until paid in full.

                                   ARTICLE IX

                                   Definitions

         9.1    Definitions.  For the purposes hereof, the following terms shall
have the following meanings:


                                       C-9


         "Act" means the Securities Act of 1993, as amended.

         "Affiliate" of any Person means any other Person directly or indirectly
controlling  or  controlled by or under direct or indirect  common  control with
such  Person.  For the  purposes of this  definition,  "control"  when used with
respect to any Person means the possession, directly or indirectly, of the power
to direct or cause the direction of the  management and policies of such Person,
whether  through the ownership of voting  securities,  by contract or otherwise;
and the terms  "controlling" and "controlled"  have meanings  correlative to the
foregoing.

         "Appraiser" means a nationally  recognized or major regional investment
banking firm or firm of independent  certified public  accountants of recognized
standing.

         "Authorization Date" has the meaning set forth in Section 6.2.

         "Average  Price" on any date means (x) the sum of the Per Share  Market
Value for the five (5) Trading Days immediately  preceding such date, divided by
(z) five (5).

         "Business Day" means any day except a Saturday,  Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
to close.

         "Change of Control"  means the  occurrence of any of (i) an acquisition
after the date hereof by an  individual or legal entity or "group" (as described
in  Section  13(d)(3)  of the  Exchange  Act) of in excess of 40% of the  voting
securities  of the  Issuer,  (ii) a  replacement  of more than  one-half  of the
members of the Issuer's  Board of Directors  which is not approved by a majority
of those  individuals  who are  members  of the Board of  Directors  on the date
hereof, or their duly elected successors who are directors  immediately prior to
such transaction,  in one or a series of related transactions,  (iii) the merger
of the Issuer with or into another entity,  unless  following such  transaction,
the  Holders of the  Issuer's  securities  continue to hold at least 67% of such
securities following such transaction,  (iv) the consolidation or sale of all or
substantially  all of the  assets of the  Issuer  in one or a series of  related
transactions,  or (v) the  execution  by the Issuer of an agreement to which the
Issuer is a party or by which it is bound,  providing  for any of the events set
forth above in (i), (ii), (iii) or (iv).

         "Closing  Date" means the date of the closing of the  purchase and sale
of the Preferred Stock.

         "Commission"   means  the  United   States   Securities   and  Exchange
Commission, or any successor to such agency.

         "Common  Stock" means the Company's  common  stock,  $.01 par value per
share,  of the  Company  and stock of any other class into which such shares may
hereafter have been reclassified or changed.

         "Conversion Date" has the meaning set forth in Section 5.3(a).

         "Conversion Price" has the meaning set forth in Section 5.1.

         "Conversion   Shares"  has  the  meaning  set  forth  in  the  Purchase
Agreement.

         "Converted  Preferred  Stock"  has the  meaning  set  forth in  Section
5.3(a).

         "DTC" means the Depositary Trust Corporation.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended.

         "Holder"  or other  similar  terms means the  registered  holder of any
share of Preferred Stock.

         "Issuance  Date"  means  the  date of  first  issue  of any  shares  of
Preferred Stock.

         "Junior  Securities"  means  the  Common  Stock  and all  other  equity
securities of the Company which are junior in rights and liquidation  preference
to Preferred Stock.

         "Liquidation Value" has the meaning set forth in Section 1.1.


                                      C-10


         "Nasdaq" means the Nasdaq Smallcap Market.

         "Notice of Conversion" has the meaning set forth in Section 5.1(b).

         "Original  Issue Date" shall mean the date of the first issuance of any
shares of the  Preferred  Stock  regardless  of the number of  transfers  of any
particular   shares  of  Preferred   Stock  and  regardless  of  the  number  of
certificates which may be issued to evidence such Preferred Stock.

         "Per Share Market Value" means (i) on any  particular  date the closing
bid price per share of the Common  Stock on such date (as  reported by Bloomberg
Information Services, Inc., or any successor reporting service) on Nasdaq or, if
the Common Stock is not then quoted on Nasdaq,  any  Subsequent  Market on which
the Common Stock is then listed or if there is no such price on such date,  then
the closing bid price on such  exchange or quotation  system on the date nearest
preceding  such date or (ii) if the Common Stock is not listed then on Nasdaq or
any Subsequent  Market, the closing bid price for a share of Common Stock in the
over-the-counter   market,   as  reported  by  the  National   Quotation  Bureau
Incorporated (or similar  organization or agency  succeeding to its functions of
reporting  prices) at the close of business on such date, or (iii) if the Common
Stock is not then  publicly  traded the fair  market  value of a share of Common
Stock as determined by an Appraiser selected in good faith by the holder of this
Debenture;   provided,   however,  that  the  Company,   after  receipt  of  the
determination by such Appraiser, shall have the right to select in good faith an
additional Appraiser, in which case, the fair market value shall be equal to the
average of the determinations by each such Appraiser; and provided, further that
all determinations of the Per Share Market Value shall be appropriately adjusted
for any stock dividends,  stock splits or other similar transactions during such
period.

         "Person"  means  a   corporation,   an   association,   a  partnership,
organization,  a business, an individual,  a government or political subdivision
thereof or a governmental agency.

         "Purchase Agreement" means the Securities Purchase Agreement,  dated as
of the Original  Issue Date,  among the Company and the original  Holders of the
Preferred Stock.

         "Redemption Date" has the meaning set forth in Section 8.2.

         "Redemption  Notice"  has the  meaning  set  forth in  Section  8.1(b).
"Redemption  Notice Date" has the meaning set forth in Section 8.2.  "Redemption
Price" has the meaning set forth in Section 8.1(b).

         "Registrable  Securities" has the meaning set forth in the Registration
Rights Agreement.

         "Registration   Rights   Agreement"  means  the   Registration   Rights
Agreement, dated as of the Original Issue Date, by and among the Company and the
original Holders.

         "Registration  Statement" has the meaning set forth in the Registration
Rights Agreement,
                   
         "Reserved Amount" has the meaning set forth in Section 6.1.

         "Stock  Option Plan" means any  contract,  plan or agreement  which has
been  approved by the Board of  Directors  of the Issuer,  pursuant to which the
Issuer's  securities  may  be  issued  to any  employee,  officer,  director  or
consultant.

         "Subsidiary"  means,  with respect to any Person,  any  corporation  or
other  entity  of which a  majority  of the  Capital  Stock  or other  ownership
interests  having  ordinary  voting  power to elect a  majority  of the Board of
Directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person.

         "Subsequent  Market" means the New York Stock Exchange,  American Stock
Exchange or Nasdaq National Market.

         "Trading  Day" means (a) a day on which the  Common  Stock is traded on
Nasdaq  or,  if the  Common  Stock is not then  designated  on  Nasdaq,  on such
Subsequent  Market on which the Common  Stock is then listed or quoted or (b) if
the Common Stock is not listed on Nasdaq or a Subsequent  Market, a day on which
the Common Stock is traded in the  over-the-counter  Market,  as reported by the
OTC Bulletin Board, or (c) if the Stock is not quoted on the OTC Bulletin Board,
a day on which the  Common  Stock is quoted  in the  over-the-counter  market as
reported  by  the  National  Quotation  Bureau   Incorporated  (or  any  similar
organization or agency  succeeding its functions or reporting  prices) provided,
however  that in any event that the Common  Stock is not listed or quoted as set
forth in (a),  (b),  or (c) hereof,  then a Trading Day shall mean any  Business
Day.


                                      C-11


         "Underlying  Shares"  means the  number of shares of Common  Stock into
which the shares of Preferred Stock are convertible in accordance with the terms
hereof and the Purchase Agreement.

         "Warrant"  or  "Warrants"  has the  meaning  set forth in the  Purchase
Agreement.

                                    ARTICLE X

                                  Miscellaneous

         10.1   Modification of Certificate of Designation.  This Certificate of
Designation may be modified  without prior notice to any Holder upon the written
consent  of the  Company  and the  Holders  of more  than 75% of the  shares  of
Preferred Stock then outstanding.  The Holders of more than 75% of the shares of
Preferred Stock then  outstanding  may waive  compliance by the Company with any
provision of this Certificate of Designation without prior notice to any Holder.
However,  without the consent of each Holder affected, an amendment,  supplement
or waiver  may not (1)  reduce the  number of shares of  Preferred  Stock  whose
Holders  must consent to an  amendment,  supplement  or waiver,  or (2) make any
shares of Preferred  Stock payable in money or property  other than as stated in
the Certificate of Designation.

         10.2   Miscellaneous. This Certificate of Designation shall be governed
by and construed and enforced in accordance  with the internal laws of the State
of New York without regard to the principles of conflicts of law thereof, except
for matters of corporate  law,  which shall be governed by the laws of the State
of Texas. Each party hereby irrevocably submits to the nonexclusive jurisdiction
of the state and  federal  courts  sitting  in the City of New York,  Borough of
Manhattan,  for the  adjudication  of any  dispute  hereunder  or in  connection
herewith or with any transaction  contemplated  hereby or discussed herein,  and
hereby  irrevocably  waives,  and  agrees  not to assert in any suit,  action or
proceeding,  any claim that it is not personally  subject to the jurisdiction of
any such court,  that such suit,  action or proceeding is improper.  The parties
hereto, including all guarantors or endorsers, hereby waive presentment, demand,
notice,  protest  and all other  demands  and  notices  in  connection  with the
delivery,  acceptance,  performance  and  enforcement  of  this  Certificate  of
Designation, except as specifically provided herein, and assent to extensions of
the time of payment,  or forbearance or other  indulgence  without  notice.  The
Holder of Preferred  Stock by acceptance of a share of Preferred Stock agrees to
be  bound  by the  provisions  of this  Certificate  of  Designation  which  are
expressly binding on such Holder.

         10.3   Preferred  Stock  Owned by Company  Deemed Not  Outstanding.  In
determining  whether the holders of the requisite  number of shares of Preferred
Stock have concurred in any direction,  consent or waiver under this Certificate
of Designation,  shares of Preferred Stock which are owned by the Company or any
other  obligor on the  Preferred  Stock or by any Person  directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any other obligor on the  Preferred  Stock shall be  disregarded  and
deemed not to be outstanding for the purpose of any such determination; provided
that any  shares of  Preferred  Stock  owned by the  Purchasers  shall be deemed
outstanding  for  purposes of making such a  determination.  Shares of Preferred
Stock so owned  which  have  been  pledged  in good  faith  may be  regarded  as
outstanding if the pledgee  establishes to the  satisfaction  of the Company the
pledgee's  right so to act with  respect to such shares of  Preferred  Stock and
that the  pledgee is not the  Company or any other  obligor  upon the  Preferred
Stock or any Person directly or indirectly controlling or controlled by or under
direct or indirect  common  control with the Company or any other obligor on the
Preferred Stock.

         10.4   Notice to Holders Prior to Taking  Certain  Types of Action.  In
                case:

         (a)    the Company shall  authorize the issuance,  at any time from and
after the  Original  Issue  Date,  to all  holders of any class or series of its
Capital Stock,  of rights or warrants to subscribe for or purchase shares of its
capital stock or of any other right;

         (b)    the  Company  shall  authorize,  at any time  from and after the
Original Issue Date, the  distribution  to all holders of any class or series of
its Capital Stock, of evidences of its indebtedness or assets;

         (c)    the Company shall declare a dividend (or other  distribution) on
its Common Stock or the Company shall declare a special nonrecurring dividend on
or a redemption of its Common Stock;


                                      C-12


         (d)    of any subdivision, combination or reclassification of any class
or  series  of  Capital  Stock of the  Company  at any time  from and  after the
Original Issue Date or of any  consolidation or merger to which the Company is a
party and for which approval by the shareholders of the Company is required,  or
of the sale or transfer of all or substantially all of the assets of the Company
or any  compulsory  share  exchange  whereby the Common Stock is converted  into
other securities, cash or property; or

         (e)    of the  voluntary or  involuntary  dissolution,  liquidation  or
winding up of the  Company;  then the  Company  shall  cause to be mailed to the
Holders,  at their last  addresses  as they shall  appear upon the  registration
books of the  Company,  at least 10 days  prior to the  applicable  record  date
hereinafter  specified, a notice stating (i) the date as of which the holders of
record of such class or series of Capital  Stock are to be  entitled  to receive
any such rights, warrants or distribution are to be determined, or (ii) the date
on which any such  subdivision,  combination,  reclassification,  consolidation,
merger, sale, transfer, dissolution,  liquidation, winding up or other action is
expected  to  become  effective,  and the date as of which it is  expected  that
holders  of record of such  class or series of  Capital  Stock  record  shall be
entitled  to exchange  their stock for  securities  or other  property,  if any,
deliverable upon such subdivision, combination, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation, winding up or other action.

         The  failure to give the notice  required by this  Section  10.4 or any
defect  therein  shall not affect the legality or validity of any  distribution,
right,  warrant,  subdivision,  combination,  reclassification,   consolidation,
merger, sale, transfer, dissolution, liquidation, winding up or other action, or
the vote upon any of the foregoing.

         10.5   Effect  of  Headings.   The  Section  headings  herein  are  for
convenience only and shall not affect the construction hereof.

         10.6   References.  References to Sections and Articles are to Sections
and Articles of this  Certificate of  Designation,  unless  otherwise  expressly
provided.

         10.7   Failure or  Indulgence  Not  Waiver.  No failure or delay on the
part of the Holder in the exercise of any power,  right or  privilege  hereunder
shall operate as a waiver thereof,  nor shall any single or partial  exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other  right,  power or  privileges.  All  rights and  remedies  existing
hereunder  are  cumulative  to, and not  exclusive  of,  any rights or  remedies
otherwise available.

         10.8   Lost or Stolen  Certificates.  Upon  receipt  by the  Company of
evidence  reasonably  satisfactory  to  the  Company  (including  any  bond  the
Company's  transfer  agent  requires  the  Holders to post) of the loss,  theft,
destruction  or  mutilation  of any stock  certificates  representing  Preferred
Stock,  and, in the case of loss, theft or destruction,  of any  indemnification
undertaking  by the Holder to the Company in customary  form and, in the case of
mutilation,  upon surrender and  cancellation  of such Series A Preferred  Stock
certificate(s),  the Company  shall  execute and  deliver  new  preferred  stock
certificate(s) of like tenor and date; provided,  however, the Company shall not
be  obligated  to  re-issue   preferred   stock   certificates   if  the  Holder
contemporaneously  requests  the Company to convert  such  Preferred  Stock into
Common Stock.

         10.9   Remedies   Characterized;   Other   Obligations,   Breaches  and
Injunctive  Relief.  The remedies  provided in this  Certificate  of Designation
shall be cumulative and in addition to all other remedies  available  under this
Certificate of Designation,  at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing  herein shall limit a Holder's  right to pursue  actual  damages for any
failure  by the  Company  to  comply  with  the  terms  of this  Certificate  of
Designation.  The Company covenants to each Holder of Preferred Stock that there
shall be no characterization  concerning this instrument other than as expressly
provided herein.  The Company further covenants that it will not take any action
which  might  materially  and  adversely  affect  the  rights of the  Holders of
Preferred  Stock.  Amounts  set forth or  provided  for herein  with  respect to
payments,  conversion  and the like (and the  computation  thereof) shall be the
amounts to be received by the Holder thereof and shall not,  except as expressly
provided  herein,  be subject to any other  obligation  of the  Company  (or the
performance  thereof).  The  Company  acknowledges  that a  breach  by it of its
obligations  hereunder  will  cause  irreparable  harm  to  the  Holders  of the
Preferred  Stock and that the remedy at law in the event of any such  breach may
be  inadequate.  The Company  therefore  agrees  that,  in the event of any such
breach or  threatened  breach,  the  Holders  of the  Preferred  Stock  shall be
entitled,  in  addition  to  all  other  available  remedies,  to an  injunction
restraining  any breach,  without the  necessity  of showing  economic  loss and
without any bond or other security being required.


                                      C-13


         10.10  Specific  Shall Not Limit  General;  Construction.  No  specific
provision contained in this Certificate of Designation shall limit or modify any
more general provision  contained herein.  This Certificate of Designation shall
be deemed to be jointly drafted by the Company and all Purchasers (as defined in
this Purchase  Agreement)  and shall not be construed  against any person as the
drafter hereof.

         10.11  Failure or  Indulgence  Not  Waiver.  No failure or delay on the
part of a Holder of  Preferred  Stock in the  exercise  of any  power,  right or
privilege  hereunder shall operate as a waiver thereof,  nor shall any single or
partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.

         10.12  Payment  of  Tax  Upon  Issue  of  Transfer.   The  issuance  of
certificates  for shares of the Common Stock upon  conversion  of the  Preferred
Shares shall be made without charge to the Holders  thereof for any  documentary
stamp or similar  taxes that may be payable in respect of the issue or  delivery
of such certificate,  provided that the Company shall not be required to pay any
tax that may be payable in respect of any transfer  involved in the issuance and
delivery of any such  certificate  upon  conversion in a name other than that of
the  Holders so  converted  and the  Company  shall not be  required to issue or
deliver such certificates  unless or until the person or persons  requesting the
issuance  thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.






                                      C-14




                                    EXHIBIT A

                              NOTICE OF CONVERSION
                            AT THE ELECTION OF HOLDER

(To be Executed by the Registered Holder in
order to convert shares of Series A
Convertible Redeemable Preferred Stock)

         The undersigned hereby elects to convert the number of shares of Series
A Convertible  Redeemable Preferred Stock ("Series A Preferred Stock") indicated
below,  into  shares of common  stock,  par value  $.01 per share  (the  "Common
Stock"),  of  International  Isotopes  Inc.  (the  "Company")  according  to the
conditions  hereof,  as of the date written below. If shares are to be issued in
the  name of a person  other  than  undersigned,  the  undersigned  will pay all
transfer  taxes  payable with respect  thereto and is  delivering  herewith such
certificates  and opinions as reasonably  requested by the Company in accordance
therewith.  No fee will be charged to the Holder for any conversion,  except for
such transfer taxes, if any.

                                   Conversion calculations:

                                   _____________________________________________
                                   Date to effect conversion

                                   _____________________________________________
                                   Number of shares of Series A Preferred Stock 
                                   to be converted

                                   _____________________________________________
                                   Number of shares of Common Stock to be issued

                                   _____________________________________________
                                   Applicable Conversion Price

                                   _____________________________________________
                                   Signature

                                   _____________________________________________
                                   Name

                                   _____________________________________________
                                   Address





                                      C-15


                                    EXHIBIT B

                                    ARTICLE I

           Designation, Amount, Par Value, Liquidation Value And Rank

         1.1    The series of preferred  stock shall be  designated  as Series B
Convertible   Redeemable  Preferred  Stock,   ("Series  B  Preferred  Stock"  or
"Preferred Stock"), and the number of shares so designated shall be up to 14,300
(which  shall not be  subject to  increase  without  the  consent of each of the
holders of the Series B Preferred  Stock  ("Holders")).  Each share of Preferred
Stock,  $.01 par value per share,  shall have a liquidation  value of $1,000 per
share (the "Liquidation Value").

         1.2    The  Series B  Preferred  Stock  shall  rank pari passu with the
Series A Preferred Stock and senior to all Junior  Securities upon  liquidation,
dissolution or winding up. No class of equity securities of the Company shall be
senior to the Series B Preferred Stock upon liquidation,  dissolution or winding
up.

                                   ARTICLE II

                                    Dividends

         2.1    Series B Preferred Stock shall be entitled to receive  dividends
if, when and in such amounts as are declared by the Company's Board of Directors
from time to time,  provided that Holders shall not be entitled to any specified
dividends  and,  unless  declared by the  Company,  no dividends  shall  accrue.
Previous dividends shall cease to accrue as of December 1, 2001.

                                   ARTICLE III

                                  Voting Rights

         3.1    Except as otherwise provided herein and as otherwise required by
law, the Preferred  Stock shall have no voting rights.  However,  so long as any
shares of Preferred Stock are outstanding, the Company shall not and shall cause
its  subsidiaries  not to, without the  affirmative  vote of the Holders of more
than 75% of the shares of the  Preferred  Stock then  outstanding,  (a) alter or
change adversely the absolute or relative powers, preferences or rights given to
the Preferred  Stock,  (b) alter or amend this  Certificate of Designation,  (c)
amend  its,  or  their,  Articles  of  Incorporation,  bylaws  or other  charter
documents so as to affect adversely any rights of any Holders,  (d) increase the
authorized  number of shares of Preferred  Stock,  (e) sell all or substantially
all of its, or their,  assets,  (f) merge with or into another  company,  in the
event that the Company  will not be the  surviving  entity or (g) enter into any
agreement with respect to the foregoing.

                                   ARTICLE IV

                                   Liquidation

         4.1    Upon any liquidation,  dissolution or winding-up of the Company,
whether  voluntary  or  involuntary  (a  "Liquidation"),  the  Holders  shall be
entitled to receive out of the assets of the Company legally available therefor,
whether such assets are capital or surplus, for each share of Preferred Stock an
amount equal to the Liquidation Value,  before any distribution or payment shall
be made to the  Holders of any Junior  Securities.  If the assets of the Company
shall be  insufficient  to pay in full all amounts  due to the Holders  then the
entire assets to be distributed to the Holders and the Holders of all securities
ranking  pari  passu to the  Preferred  Stock  ratably  in  accordance  with the
respective  amounts that would be payable on such shares if all amounts  payable
thereon were paid in full. A sale, conveyance, lease, transfer or disposition of
all or substantially all of the assets of the Company or the consummation by the
Company of a transaction  or series of related  transactions  in which more than
40% of the voting  power of the Company is disposed  of, or a  consolidation  or
merger of the Company with or into any other  company or companies  shall not be
treated as a  Liquidation,  but instead  shall be subject to the  provisions  of
Article VII. The Company shall mail written notice of any such Liquidation,  not
less than 45 days prior to the payment date stated therein, to each Holder.


                                      C-16


                                    ARTICLE V

                                   Conversion

         5.1    Right of Holders to Convert Preferred Stock into Common Stock.

         (a)    Conversion  Price.  Subject  to and  upon  compliance  with  the
provisions  of this  Section 5.1,  each share of Preferred  Stock at a price per
share  equal  to the  Original  Purchase  Price  as set  forth  in the  Purchase
Agreement  may,  at any time at or before the close of  business of the date the
Company  pays the full  redemption  price  therefor  under  Section  5.4(a),  be
converted into duly  authorized,  validly issued,  fully-paid and  nonassessable
shares of Common Stock at a conversion price of $2.00 per share,  subject to the
provisions of this Article V (the "Conversion Price").

         (b)    Notice of Conversion.  If an adjustment in the Conversion  Price
and, if applicable,  a change in the securities or other property  issuable upon
conversion  has taken place  pursuant to Articles V or VII, then the  conversion
described in Section 5.1(a) shall be at the applicable  Conversion  Price and in
such securities or other property as so adjusted. The Purchaser desiring to make
a conversion shall deliver to the Company, or, at the Purchaser's option, to the
Company's  transfer  agent  (with a copy to the  Company),  a written  notice of
election to convert,  as  provided in the form  attached  hereto as Exhibit A (a
"Notice of Conversion"),  accompanied,  if required, by the stock certificate(s)
evidencing the shares of Preferred Stock which are to be converted.

         5.2    Issuance of Shares Upon Conversion.

         (a)    As promptly as practicable,  but in any event no later than five
(5) Trading Days after delivery of a Notice of Conversion and, if required,  the
surrender, as herein provided, of any certificates for shares of Preferred Stock
for conversion, the Company shall deliver or cause to be delivered to the Holder
of the Preferred Stock  delivering  such Notice of Conversion,  or such Holder's
designee,  a  certificate  or  certificates  representing  the  number  of  duly
authorized, validly issued, fully-paid and nonassessable shares of Common Stock,
into which such shares of Preferred  Stock may be converted in  accordance  with
the provisions of this Article V. Such  conversion  shall be deemed to have been
made at the time and on the date the Notice of  Conversion  is  delivered to the
Company under Section 7.7 (the "Conversion Date"), as long as, if required,  the
Preferred  Stock being  converted are promptly  delivered to the Company and the
rights  of the  Holder  of such  Preferred  Stock  as a Holder  (subject  to the
Company's  satisfaction  of its  obligations  hereunder  with  respect  to  such
conversion)  shall  cease at such time with  respect to the shares of  Preferred
Stock  that such  Holder  would  have held had the  shares  of  Preferred  Stock
converted into Underlying Shares not been so converted (the "Converted Preferred
Stock"),  the Person or Persons  entitled to receive the shares of Common Stock,
upon  conversion of such Preferred  Stock,  shall be treated for all purposes as
having  become the record  holder or holders of such  shares of Common  Stock at
such time, and such  conversion  shall be at the  Conversion  Price in effect at
such time. Subject to paragraph 5.2(b), if any certificated  shares of Preferred
Stock are converted in part only, upon such conversion the Company shall execute
and deliver to the Holder thereof,  as requested by such Holder, a new Preferred
Stock  certificate  for the  number of shares of  Preferred  Stock  equal to the
unconverted portion of such Preferred Stock certificate.

         (b)    Notwithstanding  anything to the contrary set forth herein, upon
conversion of shares of Preferred Stock in accordance with the terms hereof, the
Holder  shall  not be  required  to  physically  surrender  its  certificate  of
Preferred  Stock to the Company  unless the entire amount of shares of Preferred
Stock is so converted. The Holder and the Company shall maintain records showing
the number of shares of Preferred Stock already  converted and the dates of such
conversions  or shall use such  other  method,  reasonably  satisfactory  to the
Holder and the Company, so as not to require physical surrender of the Preferred
Stock  certificate(s) upon each such conversion.  In the event of any dispute or
discrepancy,  such records of the Company shall be controlling and determinative
in the absence of manifest error.  Notwithstanding the foregoing, if any portion
of shares of a Preferred  Stock  certificate  is  converted,  the Holder may not
transfer the  Preferred  Stock  certificate  unless the Holder first  physically
surrenders the certificate to the Company,  whereupon the Company shall promptly
issue and deliver upon the order of the Holder a new  certificate of like tenor,
registered as the Holder (upon payment by the Holder of any applicable  transfer
taxes) may request,  representing the number of remaining  unconverted shares of
Preferred  Stock.  The Holder and any  assignee,  by acceptance of the Preferred
Stock,  acknowledge  and  agree  that,  by  reason  of the  provisions  of  this
paragraph,  following  conversion of a portion of a Preferred Stock certificate,
the unpaid and  unconverted  shares of such Preferred  Stock  certificate may be
less than the amount stated on the face thereof.

         (c)    In lieu of delivering  physical  certificates  representing  the
Conversion Shares, provided the Company's transfer agent is participating in the
Depositary Trust Company Fast Automated  Securities  Transfer  ("FAST") program,
upon request of the Holder and in compliance with the provisions of Sections 5.1
and 5.2, the Company  shall use its best efforts to cause its transfer  agent to
electronically  transmit the shares of Common Stock issuable upon  conversion of
the Preferred Stock to the Holder by crediting the account of the Holder's Prime
Broker with DTC through its Deposit Withdrawal Agent Commission system. The time
period for delivery described in the immediately preceding paragraph shall apply
to the electronic transmittals described herein.


                                      C-17


         5.3    Mandatory Redemption on May 31, 2022.

         (a)    All  outstanding  and  unconverted  shares of Series B Preferred
Stock on May 31, 2022 shall be redeemed by the Company  pursuant to this Section
5.3 from funds or shares of Common Stock legally  available  therefor at a price
per share equal to the purchase  price as set forth in the  Purchase  Agreement.
Thereafter, all shares of Series B Preferred Stock shall cease to be outstanding
and shall have the status of authorized but  undesignated  preferred  stock. The
Company,  at its option,  shall pay the  redemption  price  either in cash or in
shares of Common Stock valued at the Average Price on May 31, 2022.

         (b)    If any portion of the applicable  redemption price under Section
5.3(a) shall not be paid by the Company within seven (7) calendar days after the
date due,  interest  shall accrue thereon at the rate of 15% per annum until the
redemption  price plus all such  interest is paid in full (which amount shall be
paid as liquidated damages and not as a penalty).

                                   ARTICLE VI

                            Registration Requirements

         6.1    Reservation of Shares. The Company covenants that it will at all
times reserve and keep available out of its  authorized  shares of Common Stock,
free from preemptive rights,  solely for the purpose of issue upon conversion of
the  Preferred  Stock as herein  provided,  such  number of shares of the Common
Stock as shall then be issuable upon the conversion of all outstanding shares of
Preferred Stock into Common Stock (the "Reserved Amount"). The Company covenants
that all shares of the Common  Stock  issued upon  conversion  of the  Preferred
Stock which shall be so issuable shall,  when issued, be duly and validly issued
and fully paid and non-assessable.

                                   ARTICLE VII

                         Adjustment of Conversion Price

         7.1    Adjustment of Conversion Price. In addition to any adjustment to
the Conversion Price provided elsewhere in this Certificate of Designation,  the
Conversion  Price in effect at any time shall be subject to adjustment from time
to time upon the happening of certain events, as follows:

         (a)    Common Stock  Dividends;  Common Stock  Splits;  Reverse  Common
Stock  Splits.  If the  Company,  at any  time  while  the  Preferred  Stock  is
outstanding,  (a) shall pay a stock dividend on its Common Stock,  (b) subdivide
outstanding  shares of Common Stock into a larger number of shares,  (c) combine
outstanding shares of Common Stock into a smaller number of shares, or (d) issue
by reclassification of shares of Common Stock any shares of Capital Stock of the
Company, the Conversion Price shall be multiplied by a fraction the numerator of
which shall be the number of shares of Common Stock (excluding  treasury shares,
if any) outstanding  before such event and the denominator of which shall be the
number of shares of Common Stock  outstanding  after such event.  Any adjustment
made pursuant to this Section 7.1(a) shall become  effective  immediately  after
the record date for the  determination of stockholders  entitled to receive such
dividend  or  distribution  and shall  become  effective  immediately  after the
effective date in the case of a subdivision, combination or re-classification.

         (b)    Rounding.  All  calculations  under Section 7.1 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.

         (c)    Notice of Adjustment.  Whenever the Conversion Price is adjusted
pursuant to paragraphs  7.1(a), the Company shall promptly deliver to the Holder
a notice  setting forth the Conversion  Price after such  adjustment and setting
forth a brief statement of the facts requiring such adjustment.

         7.2    Officer's Certificate. Whenever the number of shares purchasable
upon conversion  shall be adjusted as required by the provisions of Section 7.1,
the Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal  office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted number of shares determined as herein
provided, setting forth in reasonable detail the facts requiring such adjustment
and the manner of computing such  adjustment.  Each such  officer's  certificate
shall be signed by the  chairman,  president or chief  financial  officer of the
Company and by the  secretary or any  assistant  secretary of the Company.  Each
such officer's  certificate  shall be made available at all reasonable times for
inspection by any holder of the Preferred Stock and the Company shall, forthwith
after each such  adjustment,  deliver a copy of such  certificate to the each of
the Holders.


                                      C-18


         7.3    Compliance With Governmental Requirements. The Company covenants
that if any shares of Common  Stock  required  to be  reserved  for  purposes of
conversion of Preferred Stock hereunder require registration with or approval of
any  governmental  authority  under any  Federal or state law,  or any  national
securities  exchange,  before  such shares may be issued  upon  conversion,  the
Company will use its best efforts to cause such shares to be duly  registered or
approved, as the case may be.

         7.4    Fractional  Shares.  Upon a  conversion  hereunder,  the Company
shall not be required  to issue stock  certificates  representing  fractions  of
shares of the Common Stock, but may if otherwise permitted,  make a cash payment
in respect of any final  fraction of a share based on the Per Share Market Value
at such time.  If the  Company  elects  not,  or is unable,  to make such a cash
payment,  the holder shall be entitled to receive, in lieu of the final fraction
of a share, one whole share of Common Stock.

         7.5    Payment  of  Tax  Upon  Issue  or  Transfer.   The  issuance  of
certificates for shares of the Common Stock on conversion of the Preferred Stock
shall be made without charge to the Holders thereof for any documentary stamp or
similar  taxes that may be payable in respect of the issue or  delivery  of such
certificate, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer  involved in the issuance and delivery
of any such  certificate upon conversion in a name other than that of the Holder
of such  Preferred  Stock so converted  and the Company shall not be required to
issue or  deliver  such  certificates  unless  or until the  Person  or  Persons
requesting  the  issuance  thereof  shall have paid to the Company the amount of
such tax or shall have  established to the satisfaction of the Company that such
tax has been paid.

         7.6    Notices. Any notice or other communication required or permitted
to be given  hereunder  shall be in  writing  and  shall be  deemed to have been
received  (a) upon hand  delivery  (receipt  acknowledged)  or delivery by telex
(with correct answer back delivered),  telecopy or facsimile (with  transmission
confirmation  report) at the address or number designated below (if delivered by
8:00 p.m. CST where such notice is to be  delivered),  or the first Business Day
following  such delivery (if delivered  after 8:00 p.m. CST where such notice is
to be delivered) or (b) on the second Business Day following the date of mailing
by express courier service,  fully prepaid,  addressed to such address,  or upon
actual receipt of such mailing,  whichever shall first occur.  The addresses for
such  communications  are (i) if to the Company to International  Isotopes Inc.,
4137  Commerce  Circle,  Idaho  Falls,  Idaho  83401,  Telephone:  208-524-5300,
Facsimile:  208-524-1411,  Attention:  Steve  Laflin with copies  (which are not
required for a Conversion  Notice to be effective)to  Locke Liddell & Sapp, LLP,
100 Congress,  Suite 300, Austin, Texas 78731, Attention:  Curtis R. Ashmos, and
(ii) if to any Holder to the address  set forth on  Schedule II to the  Purchase
Agreement or such other address as may be designated  in writing  hereafter,  in
the same manner, by such Person.

         7.7    Allocations  of Reserved  Amount.  The Reserved  Amount shall be
allocated  pro rata among the Holders based on the number of shares of Preferred
Stock  issued to each  Holder.  Each  increase to the  Reserved  Amount shall be
allocated  pro rata among the Holders based on the number of shares of Preferred
Stock held by each Holder at the time of the increase in the Reserved Amount. In
the  event a  Holder  shall  sell or  otherwise  transfer  any of such  Holder's
Preferred  Stock,  each transferee shall be allocated a pro rata portion of such
transferor's  Reserved Amount.  Any portion of the Reserved Amount which remains
allocated to any person or entity which does not hold any Preferred  Stock shall
be allocated to the remaining  Holders,  pro rata, based on the number of shares
of Preferred Stock then held by such Holders.

         7.8    Nasdaq Limitation.  In no event shall the Company be required to
issue shares of Common  Stock upon the  conversion  of  Preferred  Stock if such
issuance would violate the rules of Nasdaq.


                                      C-19


                                  ARTICLE VIII

                               Optional Redemption

         8.1    Optional Redemption.

         (a)    The shares of  Preferred  Stock are  redeemable,  in whole or in
part, at the option of the Company during the following time periods,  from time
to time,  under the following  conditions and subject also to the conditions set
forth in Section 8.1(b) (the "Optional Redemption"):

                (i)   Prior to the first anniversary of the Original Issue Date,
         the Company  may redeem the shares of  Preferred  Stock  subject to the
         other conditions  herein, if the average closing price of the Company's
         Common Stock over five (5)  consecutive  Trading Days reaches over 200%
         of the Conversion Price as at the Original Issue Date;

                (ii)  During the period  commencing  on the first  Business  Day
         immediately  after the first anniversary of the Original Issue Date and
         ending on the  second  anniversary  of the  Original  Issue  Date,  the
         Company may redeem the shares of Preferred  Stock  subject to the other
         conditions herein, if the average closing price of the Company's Common
         Stock over five (5)  consecutive  Trading Days reaches over 175% of the
         Conversion Price as at the Original Issue Date; and

                (iii) After the second  anniversary  of the Original Issue Date,
         the Company  may redeem the shares of  Preferred  Stock  subject to the
         other conditions  herein, if the average closing price of the Company's
         Common Stock over five (5)  consecutive  Trading Days reaches over 150%
         of the Conversion Price as at the Original Issue Date.

         (b)    Subject to the conditions set forth in Section  8.1(a),  so long
as (i) any Registration Statement required to be filed and be effective pursuant
to the  Registration  Rights  Agreement is then in effect and has been in effect
and sales of all of the  Registrable  Securities  can be made  thereunder for at
least twenty (20) days prior to the  Redemption  Notice Date (as defined  below)
and (ii) the  Company has a  sufficient  number of  authorized  shares of Common
Stock reserved for issuance upon full  conversion of the Preferred  Stock,  upon
ten (10)  Business  Days  prior  written  notice to the  Holder  (a  "Redemption
Notice"),  the full  number  of  outstanding  shares of  Preferred  Stock may be
redeemed  by the  Company,  in whole at a price equal to the  original  purchase
price  of the  Preferred  Stock  (the  "Redemption  Price"),  together  with any
declared but unpaid  dividends and all liquidated  damages and other amounts due
in respect  thereof up to the Redemption Date (as defined below) (subject to the
right of the Holder on the Record Date to receive  dividends due on the Dividend
Payment Date).

         8.2    Mechanics of Redemption. The Company shall exercise its right to
redeem by delivering its Redemption Notice by facsimile and overnight courier to
each Holder (such date that the notice is given, the "Redemption  Notice Date").
Such  Redemption  Notice  shall  indicate  (A) the  Redemption  Price,  (B) each
Holder's pro rata allocation of such maximum  amount,  and (C) a confirmation of
the date ("Redemption Date") that the Company shall effect the redemption, which
date shall be not less than  thirty (30)  Business  Days and not more than sixty
(60) calendar days after the Redemption Notice Date. Notwithstanding anything in
this Section 8.2, the Company  shall  convert any  Preferred  Stock  pursuant to
Article VIII if the Conversion  Notice for shares of Preferred  Stock  submitted
for  conversion  is  (i)  delivered  before  the  Redemption  Date,  (ii)  for a
Conversion  Price greater than or equal to the Redemption  Price  (appropriately
adjusted  in  accordance  with the  terms  hereof)  or (iii) in  excess  of such
Holder's pro rata  allocation of the maximum  Redemption  Price indicated in its
Redemption Notice.

         8.3    Payment  of  Redemption   Price.   The  Company  shall  pay  the
applicable  Optional  Redemption  Price to the Holder of the shares of Preferred
Stock being redeemed in cash on the  Redemption  Date. If the Company shall fail
to pay the applicable Redemption Price to such Holder on the Redemption Date, in
addition  to  any  remedy  such  Holder  may  have  under  this  Certificate  of
Designation and the Purchase  Agreement,  such unpaid amount shall bear interest
at the rate of 2.0% per month until paid in full.

                                   ARTICLE IX

                                   Definitions

         9.1    Definitions.  For the purposes hereof, the following terms shall
have the following meanings:



                                      C-20


         "Act" means the Securities Act of 1993, as amended.

         "Affiliate" of any Person means any other Person directly or indirectly
controlling  or  controlled by or under direct or indirect  common  control with
such  Person.  For the  purposes of this  definition,  "control"  when used with
respect to any Person means the possession, directly or indirectly, of the power
to direct or cause the direction of the  management and policies of such Person,
whether  through the ownership of voting  securities,  by contract or otherwise;
and the terms  "controlling" and "controlled"  have meanings  correlative to the
foregoing.

         "Appraiser" means a nationally  recognized or major regional investment
banking firm or firm of independent  certified public  accountants of recognized
standing

         "Average  Price" on any date means (x) the sum of the Per Share  Market
Value for the five (5) Trading Days immediately  preceding such date, divided by
(y) five (5).

         "Business Day" means any day except a Saturday,  Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
to close.

         "Change of Control"  means the  occurrence of any of (i) an acquisition
after the date hereof by an  individual or legal entity or "group" (as described
in  Section  13(d)(3)  of the  Exchange  Act) of in excess of 40% of the  voting
securities  of the  Issuer,  (ii) a  replacement  of more than  one-half  of the
members of the Issuer's  Board of Directors  which is not approved by a majority
of those  individuals  who are  members  of the Board of  Directors  on the date
hereof, or their duly elected successors who are directors  immediately prior to
such transaction,  in one or a series of related transactions,  (iii) the merger
of the Issuer with or into another entity,  unless  following such  transaction,
the  Holders of the  Issuer's  securities  continue to hold at least 67% of such
securities following such transaction,  (iv) the consolidation or sale of all or
substantially  all of the  assets of the  Issuer  in one or a series of  related
transactions,  or (v) the  execution  by the Issuer of an agreement to which the
Issuer is a party or by which it is bound,  providing  for any of the events set
forth above in (i), (ii), (iii) or (iv).

         "Closing  Date" means the date of the closing of the  purchase and sale
of the Preferred Stock.

         "Commission"   means  the  United   States   Securities   and  Exchange
Commission, or any successor to such agency.

         "Common  Stock" means the Company's  common  stock,  $.01 par value per
share,  of the  Company  and stock of any other class into which such shares may
hereafter have been reclassified or changed.

         "Conversion Date" has the meaning set forth in Section 5.2(a).

         "Conversion Price" has the meaning set forth in Section 5.1.

         "Converted  Preferred  Stock"  has the  meaning  set  forth in  Section
5.2(a).

         "DTC" means the Depositary Trust Corporation.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended.

         "Holder"  or other  similar  terms means the  registered  holder of any
share of Preferred Stock.

         "Junior  Securities"  means  the  Common  Stock  and all  other  equity
securities of the Company which are junior in rights and liquidation  preference
to Preferred  Stock,  but does not include the Series A Preferred  Stock,  which
shall be pari passu with the Preferred Stock.

         "Liquidation Value" has the meaning set forth in Section 1.1.

         "Nasdaq" means the Nasdaq Smallcap Market.

         "Notice of Conversion" has the meaning set forth in Section 5.1(b).


                                      C-21


         "Original  Issue Date" shall mean the date of the first issuance of any
shares of the  Preferred  Stock  regardless  of the number of  transfers  of any
particular   shares  of  Preferred   Stock  and  regardless  of  the  number  of
certificates which may be issued to evidence such Preferred Stock.

         "Original  Purchase  Price" shall mean the price per share paid for the
Preferred Stock on the Closing Date.

         "Per Share Market Value" means (i) on any  particular  date the closing
bid price per share of the Common  Stock on such date (as  reported by Bloomberg
Information Services, Inc., or any successor reporting service) on Nasdaq or, if
the Common Stock is not then quoted on Nasdaq,  any  Subsequent  Market on which
the Common Stock is then listed or if there is no such price on such date,  then
the closing bid price on such  exchange or quotation  system on the date nearest
preceding  such date or (ii) if the Common Stock is not listed then on Nasdaq or
any Subsequent  Market, the closing bid price for a share of Common Stock in the
over-the-counter   market,   as  reported  by  the  National   Quotation  Bureau
Incorporated (or similar  organization or agency  succeeding to its functions of
reporting  prices) at the close of business on such date, or (iii) if the Common
Stock is not then  publicly  traded the fair  market  value of a share of Common
Stock as  determined  by an  Appraiser  selected  in good  faith by the  Holder;
provided,  however, that the Company, after receipt of the determination by such
Appraiser, shall have the right to select in good faith an additional Appraiser,
in which  case,  the fair  market  value  shall be equal to the  average  of the
determinations  by  each  such  Appraiser;   and  provided,   further  that  all
determinations of the Per Share Market Value shall be appropriately adjusted for
any stock  dividends,  stock splits or other  similar  transactions  during such
period.

         "Person"  means  a   corporation,   an   association,   a  partnership,
organization,  a business, an individual,  a government or political subdivision
thereof or a governmental agency.

         "Purchase Agreement" means the Securities Purchase Agreement,  dated as
of the Original  Issue Date,  among the Company and the original  Holders of the
Preferred Stock.

         "Redemption Date" has the meaning set forth in Section 8.2.

         "Redemption Notice" has the meaning set forth in Section 8.1(b).

         "Redemption Notice Date" has the meaning set forth in Section 8.2.

         "Redemption Price" has the meaning set forth in Section 8.1(b).

         "Registrable  Securities" has the meaning set forth in the Registration
Rights Agreement.

         "Registration   Rights   Agreement"  means  the   Registration   Rights
Agreement, dated as of the Original Issue Date, by and among the Company and the
original Holders.

         "Registration  Statement" has the meaning set forth in the Registration
Rights Agreement.

         "Reserved Amount" has the meaning set forth in Section 6.1.

         "Series A Preferred Stock" means the Company's  Convertible  Redeemable
Preferred Stock.

         "Stock  Option Plan" means any  contract,  plan or agreement  which has
been  approved by the Board of  Directors  of the Issuer,  pursuant to which the
Issuer's  securities  may  be  issued  to any  employee,  officer,  director  or
consultant.

         "Subsidiary"  means,  with respect to any Person,  any  corporation  or
other  entity  of which a  majority  of the  Capital  Stock  or other  ownership
interests  having  ordinary  voting  power to elect a  majority  of the Board of
Directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person.

         "Subsequent  Market" means the New York Stock Exchange,  American Stock
Exchange or Nasdaq National Market.


                                      C-22


         "Trading  Day" means (a) a day on which the  Common  Stock is traded on
Nasdaq  or,  if the  Common  Stock is not then  designated  on  Nasdaq,  on such
Subsequent  Market on which the Common  Stock is then listed or quoted or (b) if
the Common Stock is not listed on Nasdaq or a Subsequent  Market, a day on which
the Common Stock is traded in the  over-the-counter  Market,  as reported by the
OTC Bulletin Board, or (c) if the Stock is not quoted on the OTC Bulletin Board,
a day on which the  Common  Stock is quoted  in the  over-the-counter  market as
reported  by  the  National  Quotation  Bureau   Incorporated  (or  any  similar
organization or agency  succeeding its functions or reporting  prices) provided,
however  that in any event that the Common  Stock is not listed or quoted as set
forth in (a),  (b),  or (c) hereof,  then a Trading Day shall mean any  Business
Day.

         "Underlying  Shares"  means the  number of shares of Common  Stock into
which the shares of Preferred Stock are convertible in accordance with the terms
hereof and the Purchase Agreement.

         "Warrant"  or  "Warrants"  has the  meaning  set forth in the  Purchase
Agreement.

                                    ARTICLE X

                                  Miscellaneous

         10.1   Modification of Certificate of Designation.  This Certificate of
Designation may be modified  without prior notice to any Holder upon the written
consent  of the  Company  and the  Holders  of more  than 75% of the  shares  of
Preferred Stock then outstanding.  The Holders of more than 75% of the shares of
Preferred Stock then  outstanding  may waive  compliance by the Company with any
provision of this Certificate of Designation without prior notice to any Holder.
However,  without the consent of each Holder affected, an amendment,  supplement
or waiver  may not (1)  reduce the  number of shares of  Preferred  Stock  whose
Holders  must consent to an  amendment,  supplement  or waiver,  or (2) make any
shares of Preferred  Stock payable in money or property  other than as stated in
the Certificate of Designation.

         10.2   Miscellaneous. This Certificate of Designation shall be governed
by and construed and enforced in accordance  with the internal laws of the State
of Texas  without  regard to the  principles  of conflicts of law thereof.  Each
party hereby irrevocably  submits to the nonexclusive  jurisdiction of the state
and federal courts sitting in Denton, County, Texas, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein,  and hereby  irrevocably  waives,  and agrees not to
assert in any suit,  action or  proceeding,  any claim that it is not personally
subject  to the  jurisdiction  of any such  court,  that  such  suit,  action or
proceeding  is  improper.  The  parties  hereto,  including  all  guarantors  or
endorsers,  hereby  waive  presentment,  demand,  notice,  protest and all other
demands and notices in connection with the delivery, acceptance, performance and
enforcement of this Certificate of Designation,  except as specifically provided
herein, and assent to extensions of the time of payment, or forbearance or other
indulgence  without  notice.  The Holder of Preferred  Stock by  acceptance of a
share  of  Preferred  Stock  agrees  to be  bound  by  the  provisions  of  this
Certificate of Designation which are expressly binding on such Holder.

         10.3   Preferred  Stock  Owned by Company  Deemed Not  Outstanding.  In
determining  whether the holders of the requisite  number of shares of Preferred
Stock have concurred in any direction,  consent or waiver under this Certificate
of Designation,  shares of Preferred Stock which are owned by the Company or any
other  obligor on the  Preferred  Stock or by any Person  directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company or any other obligor on the  Preferred  Stock shall be  disregarded  and
deemed not to be outstanding for the purpose of any such determination; provided
that any  shares of  Preferred  Stock  owned by the  Purchasers  shall be deemed
outstanding  for  purposes of making such a  determination.  Shares of Preferred
Stock so owned  which  have  been  pledged  in good  faith  may be  regarded  as
outstanding if the pledgee  establishes to the  satisfaction  of the Company the
pledgee's  right so to act with  respect to such shares of  Preferred  Stock and
that the  pledgee is not the  Company or any other  obligor  upon the  Preferred
Stock or any Person directly or indirectly controlling or controlled by or under
direct or indirect  common  control with the Company or any other obligor on the
Preferred Stock.

         10.4   Notice to Holders Prior to Taking  Certain  Types of Action.  In
case:

         (a)    the Company shall  authorize the issuance,  at any time from and
after the  Original  Issue  Date,  to all  holders of any class or series of its
Capital Stock,  of rights or warrants to subscribe for or purchase shares of its
capital stock or of any other right;

         (b)    the  Company  shall  authorize,  at any time  from and after the
Original Issue Date, the  distribution  to all holders of any class or series of
its Capital Stock, of evidences of its indebtedness or assets;


                                      C-23


         (c)    the Company shall declare a dividend (or other  distribution) on
its Common Stock or the Company shall declare a special nonrecurring dividend on
or a redemption of its Common Stock;

         (d)    of any subdivision, combination or reclassification of any class
or  series  of  Capital  Stock of the  Company  at any time  from and  after the
Original Issue Date or of any  consolidation or merger to which the Company is a
party and for which approval by the shareholders of the Company is required,  or
of the sale or transfer of all or substantially all of the assets of the Company
or any  compulsory  share  exchange  whereby the Common Stock is converted  into
other securities, cash or property; or

         (e)    of the  voluntary or  involuntary  dissolution,  liquidation  or
winding up of the  Company;  then the  Company  shall  cause to be mailed to the
Holders,  at their last  addresses  as they shall  appear upon the  registration
books of the  Company,  at least 10 days  prior to the  applicable  record  date
hereinafter  specified, a notice stating (i) the date as of which the holders of
record of such class or series of Capital  Stock are to be  entitled  to receive
any such rights, warrants or distribution are to be determined, or (ii) the date
on which any such  subdivision,  combination,  reclassification,  consolidation,
merger, sale, transfer, dissolution,  liquidation, winding up or other action is
expected  to  become  effective,  and the date as of which it is  expected  that
holders  of record of such  class or series of  Capital  Stock  record  shall be
entitled  to exchange  their stock for  securities  or other  property,  if any,
deliverable upon such subdivision, combination, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation, winding up or other action.

         The  failure to give the notice  required by this  Section  10.4 or any
defect  therein  shall not affect the legality or validity of any  distribution,
right,  warrant,  subdivision,  combination,  reclassification,   consolidation,
merger, sale, transfer, dissolution, liquidation, winding up or other action, or
the vote upon any of the foregoing.

         10.5   Effect  of  Headings.   The  Section  headings  herein  are  for
convenience only and shall not affect the construction hereof.

         10.6   References.  References to Sections and Articles are to Sections
and Articles of this  Certificate of  Designation,  unless  otherwise  expressly
provided.

         10.7   Failure or  Indulgence  Not  Waiver.  No failure or delay on the
part of the Holder in the exercise of any power,  right or  privilege  hereunder
shall operate as a waiver thereof,  nor shall any single or partial  exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other  right,  power or  privileges.  All  rights and  remedies  existing
hereunder  are  cumulative  to, and not  exclusive  of,  any rights or  remedies
otherwise available.

         10.8   Lost or Stolen  Certificates.  Upon  receipt  by the  Company of
evidence  reasonably  satisfactory  to  the  Company  (including  any  bond  the
Company's  transfer  agent  requires  the  Holders to post) of the loss,  theft,
destruction  or  mutilation  of any stock  certificates  representing  Preferred
Stock,  and, in the case of loss, theft or destruction,  of any  indemnification
undertaking  by the Holder to the Company in customary  form and, in the case of
mutilation,  upon surrender and  cancellation  of such Series B Preferred  Stock
certificate(s),  the Company  shall  execute and  deliver  new  preferred  stock
certificate(s) of like tenor and date; provided,  however, the Company shall not
be  obligated  to  re-issue   preferred   stock   certificates   if  the  Holder
contemporaneously  requests  the Company to convert  such  Preferred  Stock into
Common Stock.

         10.9   Remedies   Characterized;   Other   Obligations,   Breaches  and
Injunctive  Relief.  The remedies  provided in this  Certificate  of Designation
shall be cumulative and in addition to all other remedies  available  under this
Certificate of Designation,  at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing  herein shall limit a Holder's  right to pursue  actual  damages for any
failure  by the  Company  to  comply  with  the  terms  of this  Certificate  of
Designation.  The Company covenants to each Holder of Preferred Stock that there
shall be no characterization  concerning this instrument other than as expressly
provided herein.  The Company further covenants that it will not take any action
which  might  materially  and  adversely  affect  the  rights of the  Holders of
Preferred  Stock.  Amounts  set forth or  provided  for herein  with  respect to
payments,  conversion  and the like (and the  computation  thereof) shall be the
amounts to be received by the Holder thereof and shall not,  except as expressly
provided  herein,  be subject to any other  obligation  of the  Company  (or the
performance  thereof).  The  Company  acknowledges  that a  breach  by it of its
obligations  hereunder  will  cause  irreparable  harm  to  the  Holders  of the
Preferred  Stock and that the remedy at law in the event of any such  breach may
be  inadequate.  The Company  therefore  agrees  that,  in the event of any such
breach or  threatened  breach,  the  Holders  of the  Preferred  Stock  shall be
entitled,  in  addition  to  all  other  available  remedies,  to an  injunction
restraining  any breach,  without the  necessity  of showing  economic  loss and
without any bond or other security being required.


                                      C-24


         10.10  Specific  Shall Not Limit  General;  Construction.  No  specific
provision contained in this Certificate of Designation shall limit or modify any
more general provision  contained herein.  This Certificate of Designation shall
be deemed to be jointly  drafted by the Company and all Holders and shall not be
construed against any person as the drafter hereof.

         10.11  Failure or  Indulgence  Not  Waiver.  No failure or delay on the
part of a Holder of  Preferred  Stock in the  exercise  of any  power,  right or
privilege  hereunder shall operate as a waiver thereof,  nor shall any single or
partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.

         10.12  Payment  of  Tax  Upon  Issue  of  Transfer.   The  issuance  of
certificates  for shares of the Common Stock upon  conversion  of the  Preferred
Shares shall be made without charge to the Holders  thereof for any  documentary
stamp or similar  taxes that may be payable in respect of the issue or  delivery
of such certificate,  provided that the Company shall not be required to pay any
tax that may be payable in respect of any transfer  involved in the issuance and
delivery of any such  certificate  upon  conversion in a name other than that of
the  Holders so  converted  and the  Company  shall not be  required to issue or
deliver such certificates  unless or until the person or persons  requesting the
issuance  thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.




                                      C-25


                                    EXHIBIT A

                              NOTICE OF CONVERSION
                            AT THE ELECTION OF HOLDER

(To be Executed by the Registered Holder in
order to convert shares of Series B
Convertible Redeemable Preferred Stock)

The  undersigned  hereby  elects  to  convert  the  number of shares of Series B
Convertible  Redeemable  Preferred Stock ("Series B Preferred  Stock") indicated
below,  into  shares of common  stock,  par value  $.01 per share  (the  "Common
Stock"),  of  International  Isotopes  Inc.  (the  "Company")  according  to the
conditions  hereof,  as of the date written below. If shares are to be issued in
the  name of a person  other  than  undersigned,  the  undersigned  will pay all
transfer  taxes  payable with respect  thereto and is  delivering  herewith such
certificates  and opinions as reasonably  requested by the Company in accordance
therewith.  No fee will be charged to the Holder for any conversion,  except for
such transfer taxes, if any.


                                   Conversion calculations:

                                   _____________________________________________
                                   Date to effect conversion

                                   _____________________________________________
                                   Number of shares of Series B Preferred Stock 
                                   to be converted

                                   _____________________________________________
                                   Number of shares of Common Stock to be issued

                                   _____________________________________________
                                   Applicable Conversion Price

                                   _____________________________________________
                                   Signature

                                   _____________________________________________
                                   Name

                                   _____________________________________________
                                   Address







                                      C-26





PROXY                                                                                          PROXY

                                     INTERNATIONAL ISOTOPES INC.
                             4137 Commerce Circle, Idaho Falls, ID 83401
      Annual Meeting of Shareholders of International Isotopes Inc. to be held on July 14, 2005

                     THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS;  FOR THE RATIFICATION OF THE
INDEPENDENT  AUDITORS;  FOR THE ADOPTION OF THE INTERNATIONAL  ISOTOPES INC. EMPLOYEE STOCK PURCHASE
PLAN AND FOR THE APPROVAL OF THE SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION.

The undersigned hereby  authorize(s) the Proxies named below to vote on the matters set forth in the
Proxy Statement of the Company dated May 16, 2005, as follows:

1. ELECTION OF DIRECTORS
         [ ] FOR all nominees or, if any named nominee is unable to serve, for a substitute nominee.
         [ ] WITHHOLD AUTHORITY for all nominees
         [ ] FOR ALL EXCEPT (See instructions below).

                  STEVE T. LAFLIN             CHRISTOPHER GROSSO             RALPH M. RICHART

         INSTRUCTION:  To withhold  authority to vote for any individual  nominee(s),  mark "FOR ALL
         EXCEPT" and cross out the name of each nominee you wish to withhold.

2. RATIFICATION OF INDEPENDENT AUDITORS
         [ ] FOR the ratification of Hansen,  Barnett & Maxwell as the independent  auditors for the
             fiscal year ending December 31, 2005.
         [ ] AGAINST the ratification of Hansen,  Barnett & Maxwell as the independent  auditors for
             the fiscal year ending December 31, 2005.
         [ ] ABSTAIN

3. APPROVAL OF THE ADOPTION OF THE INTERNATIONAL ISOTOPES INC. EMPLOYEE STOCK PURCHASE PLAN 
         [ ] FOR the approval of the Employee Stock Purchase Plan.
         [ ] AGAINST the approval of the Employee Stock Purchase Plan.
         [ ] ABSTAIN

4. APPROVAL OF THE SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION 
         [ ] FOR the approval of the Second Amended and Restated Articles of Incorporation.
         [ ] AGAINST the approval of the Second Amended and Restated Articles of Incorporation.
         [ ] ABSTAIN




THIS PROXY WHEN PROPERLY  EXECUTED WILL BE VOTED IN THE MANNER  DIRECTED  HEREON BY THE  UNDERSIGNED
SHAREHOLDER(S).  IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF EACH OF THE
NOMINEES  LISTED IN THE  ACCOMPANYING  PROXY  STATEMENT;  FOR THE  RATIFICATION  OF THE  INDEPENDENT
AUDITORS;  FOR THE ADOPTION OF THE INTERNATIONAL ISOTOPES INC. EMPLOYEE STOCK PURCHASE PLAN; AND FOR
THE APPROVAL OF THE SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION.  IN THEIR DISCRETION, THE
PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.


The undersigned  shareholder(s) hereby appoint(s) Steve T Laflin and Ralph M. Richart, and either of
them, Proxies with full power of substitution in each and hereby  authorize(s) them to represent and
vote, as designated above, all the shares of Common Stock held of record by the undersigned on April
15, 2005, at the Annual Meeting of Shareholders of  International  Isotopes Inc., to be held on July
14, 2005, or any adjournments or postponements thereof.



                                                       DATE:________________________________________


                                                       _____________________________________________
                                                                          Signature


                                                       _____________________________________________
                                                                  Signature if held jointly

                                                       PLEASE INDICATE ANY CHANGES IN ADDRESS

                                                       Please  sign  name   exactly  as  it  appears
                                                       hereon.  When shares are  registered  in more
                                                       than one  name,  the  signatures  of all such
                                                       persons  are   required.   When   signing  as
                                                       attorney, executor, administrator, trustee or
                                                       guardian,  please give full title as such. If
                                                       a corporation,  please sign in full corporate
                                                       name  by   President   or  other   authorized
                                                       officer.  If a  partnership,  please  sign in
                                                       partnership name by authorized person.


               PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY. THANK YOU.





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