UNITED STATES

SECURlTIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-KSB/A

AMENDMENT NO. 2

(Mark One)

(X) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES 

EXCHANGE ACT OF 1934

                       For the fiscal year ended **December 31, 2004**
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES 

EXCHANGE ACT OF 1934 (No Fee Required)

                       For the Transition period from______ to_______

Commission file number 33-18582

 
**ITRONICS INC.**
(Name of small business issuer in its charter)

 

                    Texas                                   75-2198369

        (State or other jurisdiction of         (I.R.S. Employer Identification Number)

          incorporation or organization)

6490 South McCarran Boulevard, Building C, Suite 23 Reno, Nevada89509

         (Address of Principal ExecutiveOffices) Zip Code

Issuer's telephone number: (775) 689-7696
Securities registered under Section 12(b) of the Exchange Act:

          Title of each class                   Name of each exchange on

                                                     which registered

               None                                       None
Securities registered under Section 12(g) of the Exchange Act:

None

(Title of class)

Check whether the issuer (1) filed all reports required to be filed bySection 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorterperiod that the registrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. 

Yes (x) No ( )

Check if disclosure of delinquent filers in response to Item 405 ofRegulation S-B is not contained in this form, and no disclosure will be contained, to thebest of registrant's knowledge, in definitive proxy or information statements incorporatedby reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. (x)

 

State issuer's revenues for its most recent fiscal year: $1,720,049. 

The aggregate market value of the voting stock held by non-affiliates,computed by reference to the average of the bid and asked prices for such stock as ofMarch 31, 2005, was $12,357,275.

As of March 31, 2005 there were issued and outstanding 191,182,367shares of the Registrant's Common Stock.

2

 

ITRONICS INC. AND SUBSIDIARIES

2004 FORM 10-KSB ANNUAL REPORT

TABLE OF CONTENTS
PART I 
PAGEItem 1. Description of Business 
4Item 2. Description of Property 
17Item 3. Legal Proceedings
18Item 4. Submission of Matters to a    Vote of Security Holders 
19PART IIItem 5.Market for Common Equity    and Related Stockholder Matters
19Item 6.Management's Discussion and    Analysis or Plan of Operation
23Item 7. Financial Statements
32Item 8. Changes in and    Disagreements with Accountants on 
Accounting and Financial Disclosure
32Item 8AControls and procedures
33PART IIIItem 9.Directors and Executive    Officers of the Registrant
33Item 10. Executive Compensation
36Item 11. Security Ownership of    Certain Beneficial Owners and 
Management and Related Stockholder Matters
38Item 12. Certain Relationships and    Related Transactions
40Item 13. Financial Statements,    Exhibits and Reports on Form 8K
42Item 14.Principal Accountant Fees    and Services
78
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ITEM 1.DESCRIPTION OF BUSINESS.
 

**INTRODUCTION**
We are the inventor and developer of the "Beneficial UsePhotochemical, Silver, and Water Recycling" technology that produces environmentallybeneficial GOLD'n GRO fertilizers and silver bullion.

We are an environmental process technology company that has developedwhat we believe is a unique technology for photochemical recycling. We, through oursubsidiary, Itronics Metallurgical, Inc., extract more than 99% of the silver andvirtually all of the other toxic heavy metals from used photoliquids and use this"Beneficial Use Photochemical, Silver and Water Recycling" technology to produceenvironmentally beneficial chelated liquid fertilizer sold under the trademark GOLD’nGRO, animal repellant/fertilizer to be sold under the trademark GOLD’n GRO Guardian,and silver bullion. We also provide process planning and technical services to the miningindustry. 
**OUR PRODUCTS AND SERVICES**
We currently operate the following two business segments under separatewholly owned subsidiaries: 

Photochemical Fertilizer: This segment, known as ItronicsMetallurgical, Inc., operates a fertilizer manufacturing, photochemical recycling, andsilver refining facility. Revenues are generated by photochemical management services,sales of photochemical concentrators, sale of silver, and sale of GOLD’n GRO liquidfertilizer products. 

Mining Technical Services: This segment, known as Whitney &Whitney, Inc., provides mineral project planning and technical services to the miningindustry. It has specialized knowledge in all aspects of mineral project development andhas been deeply involved in gold mine development for more than 25 years. It employstechnical specialists with expertise in the areas of mining, geology, mining engineering,mineral economics, material processing, and technology development. Technical serviceshave been provided to many of the leading U.S. and foreign mining companies, severalpublic utilities with mineral interests, to various state agencies, the U.S. and foreigngovernments, and the United Nations and the World Bank. WWI was under contract with theCountry of Bolivia from 1986 through early 1992 to assist it in developing its miningindustry. In 2005 WWI launched an internet website to provide gold mining company profilesto the interested public. 

We have three wholly owned subsidiaries, Whitney & Whitney, Inc.("WWI"), Itronics Metallurgical, Inc. ("IMI"), and ItronicsCalifornia, Inc. (ICI), a 92.5% owned partnership, Nevada Hydrometallurgical Project("NHP"), and an 82.53% owned joint venture, American Hydromet. A briefdescription of each organization follows: 

Itronics Metallurgical, Inc.: 

IMI is our wholly owned subsidiary. IMI was established in 1981 tomanage the metallurgical and materials processing operations being developed under WWI andAmerican Hydromet research and development programs. IMI has been the main provider ofmanagement services to American Hydromet since 1986. IMI is now managing thephotochemical/GOLD'n GRO fertilizer segment as discussed below. 

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Nevada Hydrometallurgical Project: 

Nevada Hydrometallurgical Project ("NHP") is a research anddevelopment partnership formed in 1981 to fund research into potential commercialapplications for certain hydrometallurgical process techniques developed by the U.S.Bureau of Mines Research Center in Reno, Nevada between 1970 and 1979. A number ofpotential commercial applications were defined by NHP, one of which is the AmericanHydromet silver/gold refining technique. In late 1985, NHP assigned its interest in thesilver/gold refining technique to American Hydromet. NHP retained its proprietary interestin the other potential commercial applications for future developments. NHP continues as afinancing and technology owning partnership. We own 92.5% of NHP. 

American Hydromet: 

American Hydromet is a Nevada joint venture that was formed in 1985 todevelop certain silver and gold refining/recovery technology and to create business basedupon such technology. The photochemical fertilizer segment now being managed by IMI isowned by American Hydromet. The ownership interests in American Hydromet are: NHP for76.5%, IMI for 1%, and American Gold & Silver Limited Partnership("AG&S") for 22.5%. AG&S is a Nevada limited partnership, for which WWIserves as the general partner and owns a general and limited partnership interest totaling11%. We own a 37% limited partnership interest in AG&S. In total, we own approximately83% of American Hydromet. 

Itronics California, Inc.: 

Itronics California, Inc. (ICI) was acquired in March 1999 by ItronicsMetallurgical, Inc. ICI, originally named PD West, Inc., was acquired for its phosphoricacid recycling technology. ICI has no business operations but plans are to utilize thephosphoric acid technology and may eventually operate IMI's photochemical services andGOLD'n GRO fertilizer business in California. 

Whitney & Whitney, Inc.: 

WWI was incorporated in 1977 and is our wholly owned subsidiary. WWIwas primarily a mineral consulting firm that provides planning and technical services tothe mining industry. WWI is now developing an internet website to provide gold miningindustry data to the investing public, while maintaining a presence in the technicalconsulting field. 

SUMMARY HISTORY OF OPERATIONS 

Whitney & Whitney, Inc. was established to provide a wide range oftechnical services to the mining industry. During the 1980's, WWI completed severalmulti-client fertilizer marketing studies. Also during this time period, WWI was contactedby state and local environmental officials concerning the problem of photographic wastes,laden with silver and other toxic heavy metals, being dumped in local sewer systems. 

Over the years, the mining technical services business was highlycyclical, closely following the base and precious metals industries, and specifically, theprice of copper, other base metals and gold. This condition pointed out the necessity ofexpanding our business into new industries. When considering the fertilizer marketingstudies previously performed, along with the growing national issue of sewer systemcontamination with toxic photowastes and silver toxicity to fish, it seemed to be anatural extension of WWI's existing expertise to expand

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into the photowaste recycling business. In 1987 the decision was madeto move forward with research and development of a process to extract silver fromphotographic liquid wastes. It took until 1997 to develop and demonstrate a satisfactoryfertilizer and to complete university testing to demonstrate its agronomic viability. 

In March 1998 IMI signed a five year definitive licensing,manufacturing, and distribution agreement with Western Farm Service, Inc. (WFS), one ofthe largest liquid fertilizer bulk retailers in the western United States. The agreementwas renewed in March 2003 for another five years, subject to annual cancellationprovisions. The agreement grants WFS an exclusive license and right to manufacture andmarket IMI's GOLD'n GRO line of bulk liquid fertilizer products for the Turf &Ornamental and Specialty Agricultural markets in the states of Arizona, California,Hawaii, Idaho, Oregon, and Washington. WFS has approximately 90 agricultural retailoutlets in these states. In the discussion below, and elsewhere in this report, we referto this group of retail outlets as our licensed distributor network.

A 35,000 square foot manufacturing plant in Reno/Stead, Nevada waspurchased in 1999. Construction of the liquid processing area was completed in early 2000,and a "shake-out" period was completed in which small batches of photochemicalswere processed and small batches of fertilizer were manufactured. By late 2000 the newfacility had demonstrated the ability to "demetallize" the received photoliquids to required EPA levels, thereby proving the technical viability of the newtechnology on a commercial scale. By the first quarter of 2001 we were positioned todevelop sales for more than a dozen liquid fertilizer products.

In 2001, at the request of our licensed distributor, we developed achelated liquid micronutrient zinc fertilizer with the objective of selling the product intruckload quantities. This fertilizer development was successful and provided the basisfor the first tank truck load sales in the fourth quarter of 2001. During 2002 this newbulk liquid fertilizer was successfully introduced into the distributor network. During2002 work on a bulk liquid GOLD'n GRO fertilizer that could be used as a "baseliquid" in the distributor's proprietary field blends was commenced. In 2003development work on a second chelated liquid micronutrient zinc product for bulk sale wasinitiated. Field testing of both new bulk liquid fertilizers was conducted during 2003 andin late 2003 they were approved for introduction into the distributor sales network for2004. 

During the same 2001 to 2003 period, more than two dozen liquidfertilizer formulations were evaluated for suitability and market potential. By the end of2003, product line development had been completed, and 13 fertilizers covering twocategories have been established: chelated liquid multinutrient fertilizers and chelatedliquid micronutrient fertilizers. The fertilizers are sold both to the general public andthrough licensed and non-licensed distributors. Product improvement and new productdevelopment will continue, but our focus in 2005 and future years will be primarily onGOLD'n GRO Liquid Fertilizer sales expansion and on expansion of the services business asneeded to support increasing GOLD'n GRO fertilizer sales. 

In 2003 we participated in the development of an animalrepellent/fertilizer that will be sold under the trademark GOLD'n GRO Guardian. Using oneof the GOLD'n GRO multi-nutrient liquid fertilizers as a base liquid, which has theproperty of being taken into the plant as a fertilizer and imparting odor and tastecharacteristics that are offensive to deer and other

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animals, such as rabbits, that eat plants. The GOLD'n GRO Guardianproduct was field tested during 2003 and was approved for use by the North American DeerManagement Network in the fourth quarter of 2003. GOLD'n GRO Guardian is a repellentfertilizer product and must be registered under both the pesticide regulations and thefertilizer regulations for each state in which it will be sold. The product must also beregistered with the Federal EPA as a biopesticide. Introduction of this product forcommercial sales will be delayed until the registrations are completed. Subsequent toDecember 31, 2004, we acquired the interest in the GOLD’n GRO Guardian trademark,product rights, and the repelling product formula owned by Mr. Howland Green. We now own100% of all rights related to GOLD’n GRO Guardian. Mr. Green has become one of ourdirectors and is Northeast Manager for GOLD’n GRO Sales Development. Substantialfunding over twelve to twenty-four months will be required to complete the EPA andCalifornia registration process. 

During the period 1999 through 2003 we developed a "lowtemperature vacuum distillation" machine that operates at room temperature and isable to remove up to 80% of the water from photochemical solutions without damaging thechemicals, producing a high silver content concentrate that can be shipped as a commercialproduct in inter-state commerce. The distilled water is clean enough for re-use on siteand the reduction in volume of material needing to be shipped produces 80 percentreduction in transportation cost making shipment possible anywhere in the United States.These machines have been released for commercial sale under the trademark "ItronicsMetallurgical Photochemical Silver Concentrators". 

In 2002 we delivered five of these Photochemical Silver Concentratorsto the Department of Defense. Two additional Photochemical Silver Concentrators weredelivered in the third quarter of 2003. This program is regarded as a pilot project, whichmay lead to providing "Beneficial Use Photochemical, Silver, and WaterRecycling" services to all branches of the U.S. military and is being developed bythe Department of Defense in consultation with the Federal EPA. 

After we began producing fertilizer, we noted that the by products ofthe process were the main materials needed to manufacture glass and ceramic. Therefore, inearly 2003, we began research and development of glass and tile formulations. During 2003,the first pieces of glass/ceramic tile were produced. With the successful development of aglass/ceramic tile product, we achieve the ability to recycle 100 percent of the materialsreceived from customers, including waste that is generated internally during processing.In 2005, and future years the silver refining technology development and the glass/ceramictile products development efforts will be expanded in parallel with expansion of GOLD'nGRO fertilizer sales.

A more detailed discussion of our business, based on our two businesssegments described above, follows. 

PHOTOCHEMICAL FERTILIZER 

Operations 

We operate a commercial scale plant to receive used photochemicalliquids, recover the silver and other metals, and convert the demetallized solutions toliquid GOLD'n GRO fertilizer products. A critical component of this integratedmanufacturing system is to match, within a reasonable range, the incoming volume ofphotochemical liquids with the utilization of those liquids in fertilizer or othermanufactured products. 

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Photochemical services operates as a regional business in northernNevada, serving more than 200 customers in the northern Nevada market. A satellite serviceoperation has been established in the San Francisco Bay Area which is a large market withat least three strong competitors. We are able to compete effectively based upon pricingand service quality. 

Growth of silver bullion output is driven by photochemical processingto support GOLD'n GRO fertilizer sales. There are some opportunities to expand silveroutput separate from photochemical recycling, but profit margins for the refining servicesare very small when compared to the inventory requirements and the security risk. Becauseof these factors, gold and silver refining services are limited to categories of materialswhere our proprietary technology can be used and that offer better profit margins thanconventional precious metal refining. We will be actively looking at opportunities toexpand this segment in future years. 

In early 2003 we initiated a program to market the ItronicsMetallurgical Photochemical Silver Concentrators to large consumer photography and medicalx-ray facilities throughout the United States. This is a cost effective method for us toexpand our photochemical supply for use in GOLD'n GRO fertilizer manufacturing.Photochemical silver concentrators are expected to be a source of revenue growth in futureyears as we continue to expand nationally. Our photochemical blending technology isdesigned to utilize the concentrate in fertilizer, after it is demetallized. 

Spent photochemical liquids received from customers are logged andrecorded, then tested for silver content and contaminants. We achieve high contaminantcontrol standards by working proactively with our regular customers. Once testing iscompleted, the photographic solutions are available for processing. 

Growth Plans and Implementation

Implementation of our "Beneficial Use Photochemical and WaterRecycling" technology is continuing with expansion of the number of branches withinthe licensed distributor network selling GOLD’n GRO fertilizer. Our licenseddistributor is integrating our GOLD’n GRO fertilizer products into its proprietaryfield programs in a way that makes them essential components. Once our products are in,substitution back to prior programs becomes difficult. Because of this, we believe salesgrowth is solid and is integrated to enhance the likelihood of repeat sales as we moveinto the future.

We have been working with our licensed distributor network to identifymarket segments into which the GOLD'n GRO fertilizer products can be successfully sold.This process has identified three fundamental uses, or functions, of the GOLD’n GROfertilizers, which are (1) replace existing fertilizers that do not fully satisfy existingneeds, (2) develop new fertilizers which will satisfy presently unfulfilled needs, and (3)develop fertilizers that can be blended into existing proprietary field blends to improvetheir effectiveness. Replacement fertilizers are expected to have higher sales growthrates than fertilizers developed to fulfill the other two functions, defined asdevelopment products. The GOLD’n GRO Guardian fertilizer being developed as an animalrepellant/fertilizer fits into the second category, and the GOLD’n GRO Base Liquidfits into the third category. 

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The GOLD'n GRO fertilizer line provides several fertilizers for theturf and ornamental markets, 3 fertilizers for the nursery and specialty agriculturemarkets, and 5 high quality chelated micronutrient fertilizers which can be used in all ofthe markets. The GOLD'n GRO chelated liquid micronutrient and chelated liquidmultinutrient fertilizers are considered to be "Specialty Liquid Fertilizer" andfit into the Specialty Fertilizers segment of the national and international fertilizermarkets, generally sold in smaller quantities and at higher prices than NPK fertilizers(Nitrogen (N), Phosphate(P), and Potassium(K), which are sold as single nutrient productsin large tonnages at relatively low bulk commodity prices. We presently sell ourcommercial GOLD’n GRO fertilizers in 2.5 gallon, 55 gallon, and 250 gallon containersand partial or full truck load quantities of up to 4,800 gallons. 

We have become an important supplier of chelated micronutrient andchelated multinutrient specialty fertilizers to our licensed distributor for severalreasons, one of which is that improved nutrient uptake is being demonstrated in largescale field applications of the GOLD'n GRO fertilizers when compared to applications thatuse established chelated micronutrient fertilizers. Improved crop nutrient uptake reducesnutrient costs and increases crop yields, generating a significant economic benefit forthe grower customers. A second reason is that the photographic byproduct materials used asbase components provide the chelates at a much lower cost compared to purchasing new"unused" chelates. A third reason is that the GOLD'n GRO liquid fertilizers arespecifically designed for fertigation application in micro-sprinkler and drip irrigation,which is a growing application method and requires liquid fertilizers with superiorstability in irrigation water under widely varying conditions. 

Most of the GOLD’n GRO fertilizers are currently registered forsale in Arizona, California, Colorado, Hawaii, and Nevada, and GOLD’n GRO 9-0-1+7%Zinc and GOLD’n GRO 9-0-2+3% Zinc are registered in Idaho, Oregon, and Washington.GOLD’n GRO 8-8-8+4% Sulphur is registered in Rhode Island, Massachusetts,Connecticut, Delaware, New Jersey, Pennsylvania, and New York. GOLD'n GRO bulk productsales are established in Arizona and California, with the majority of the sales being madein California. Registration of selected GOLD’n GRO fertilizer products in Washington,Oregon, and Idaho was completed in March 2005. Implementation is underway to begin salesin those states. We are developing bulk customers in northern Nevada and have starteddiscussions with potential distributors in selected states not covered by our licenseddistributor network, including the northeastern states, Florida, and Texas. 

We have expanded the number of GOLD'n GRO liquid fertilizers beingoffered through our "e-store" catalog. This expanded offering makes GOLD'n GROavailable to two important Professional Market segments: the Landscape Maintenance Marketand the Nursery and Greenhouse Market. Internet sales are still relatively small as apercentage of total sales, but have grown in each of the past two years. 

The project to develop and sell a line of animal repellent/fertilizersunder the trademark GOLD’n GRO Guardian provides direct GOLD’n GRO marketing anddistribution for the northeastern states into the Landscape Construction and Maintenance,and the wholesale and retail Nursery and Greenhouse markets. The new GOLD’n GROGuardian animal repellent/fertilizer line presents the opportunity to develop products forthe animal repellent market, an emerging national market in which product offerings arecurrently limited. Deer and other plant eating animals are becoming a major urban problemand are now doing tens of millions of dollars in damage to urban landscaping each year. 

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We are continuing to develop new sources of used photochemical liquids,although we presently have more than adequate volume of in-coming photoliquids to supportcurrent and near term GOLD'n GRO fertilizer sales growth. We have been developing ItronicsMetallurgical Photochemical Silver Concentrator technology to reduce the cost oftransporting the used photochemical liquids to the Reno manufacturing plant. We have alsobeen identifying and qualifying both non-photochemical sources of used chelates andnon-photochemical waste streams that might be useable as substitute materials for virginadditive raw materials that we presently purchase. 

GOLD'n GRO fertilizer products are formulated to match potential newsources of secondary chelates so that as GOLD'n GRO fertilizer sales continue to expand wecan begin to use "non-photo" chelates. Replacing virgin additive materials withmaterials from secondary sources provides us with equivalent materials at lower cost. Somemanufacturing process changes will be required to accommodate these adjustments in rawmaterial sourcing, but this will be beneficial due to reductions in raw material costs andthe improved cost stability that will be achieved. 

Sales of 5 ounce "Silver Nevada Miner" bars through our"e-store" are continuing, although those sales are still relatively small. Thesales of finished silver bullion from internally recovered silver will expand, but willcontinue to fluctuate until GOLD'n GRO sales reach larger volumes. 

Our manufacturing plant is presently configured for an initialmanufacturing capacity of 7.2 million gallons per year or 36,000 tons of GOLD'n GROproducts. Planned storage and truck loading capacity expansions and automation of somemanufacturing functions, must be completed before this capacity can be achieved. Some ofthese requirements are discussed more fully below. Unexpected new market opportunitieshave already required modification of certain expansion plans. As we continue to identifyand develop our GOLD'n GRO liquid fertilizer product markets, additional unforeseenchanges could require additional plan modifications. With the introduction of additionalbulk products, additional load out facilities are needed, at a capital cost estimate of$400,000. This project is scheduled for completion in the first half of 2006. 

In 2004, we completed installation of a heat exchange system for aninstalled cost of $196,000. This system has provided more than a five times increase inmanufacturing capacity for certain GOLD’n GRO fertilizers. 

Competition 

Our GOLD’n GRO fertilizer products compete with well establishedfertilizer companies that have significantly more capital with which to market theirproducts. Our competitors include large companies such as Scotts Miracle-GRO, DowAgroSciences Company, Uniroyal Chemical Corporation, and smaller companies such as PursellTechnologies, Inc. We believe that our fertilizers compete primarily on the basis ofproduct quality and performance. 

Our photochemical recycling fees are generated primarily from removingused photochemicals from our customer’s sites. We compete for these customers withlarge national firms like Safety Kleen and Philips Environmental but our primarycompetitors are smaller regional firms like ECS Refining in Northern California. 

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We sell our silver bullion to a commercial refiner under standardindustry terms. We are a very small producer of silver; consequently the refiner willpurchase all the silver we can presently produce. For several years, there has been aglobal shortage in the supply side of the silver market. Our ability to sell our silverbullion could only be impacted if there were a dramatic negative change in the silvermarket, and only then if we grow to be a much larger silver producer than we are now. 

Markets

Fertilizer 

The total fertilizer market consists of the "AgriculturalMarket" and the "Urban Market". The Urban Market accounts for at least $9billion in annual sales in the United States. The "Specialty Ag" segment of theAgricultural Market is a $5 billion segment making the total a $14 billion market.Substantially all of our present GOLD’n GRO fertilizer sales are in the"Specialty Ag" segment.

More than 50 million tons of fertilizer products are sold annually inthe United States. This includes almost 20 million tons of multi-nutrient fertilizers andalmost 3.5 million tons of secondary nutrient and micro-nutrient products. About 38percent of the total usage is as fluid fertilizers. Our 2004 sales represent less than0.0005 percent of the 2004 multi- and micro-nutrient market.

Our GOLD'n GRO fertilizers are all liquid. There are major differencesin manufacturing, distribution, and sale of liquid fertilizers as compared to dryfertilizers. Basic differences are described here so that the investor can betterunderstand the technology, logistics, and application of liquid fertilizers and therebygain a better understanding for the market niche that we are entering.

Liquid fertilizer technology is more complex than dry technology.Typically dry solids can be readily blended into dry mixtures that can then be bagged, ortransported as dry bulk powders. In contrast, liquid fertilizers are reacted products andmust be manufactured using precise recipes so that the final product will remain stable.Dry products can be stored for years without degradation, whereas liquid productstypically have a limited storage life ranging from a few days for proprietary fieldblends, up to 4 years or longer for certain types. Liquid fertilizers can also freeze overa rather wide range of temperatures, a problem not encountered with dry fertilizers.Because of these technical factors, bringing a line of liquid fertilizers to market ismuch more complex than bringing a line of dry products to market. 

Dry fertilizers are typically applied with dry spreaders. Liquids aresprayed on with tank sprayers or aircraft, injected into the soil using specialapplicators, or applied through irrigation systems using sprinklers, micro-sprinklers, ordrip irrigation. Liquid fertilizers can also be applied with ditch irrigation by runningthe fertilizer into the water at controlled rates. The use of irrigation water to applythe liquid fertilizers is called fertigation.

Dry fertilizer packaging and transport is typically simpler and lesscostly than liquid fertilizer packaging and transport. Bulk liquids must be moved in tanktrucks or tank rail cars and stored in large bulk tanks at distribution points. Thedistributors who sell the liquids to farmers must install and operate tank farms andmaintain a fleet of specialized applicators.

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Distribution and application of liquid fertilizers typically requiresspecialized technical knowledge related to mixing and handling as compared to the use ofdry fertilizers. Liquid fertilizers are typically easier and less costly to apply whenirrigation is available, and availability of the fertilizer nutrients in the soil foruptake by crops is greater when liquid fertilizers are used. Use of fertigation to applyliquid fertilizers can reduce tractor trips through the fields, reducing cost and alsoreducing soil compaction. Because of less cost for application and improved availabilityof the liquid nutrients to the plants, liquid fertilizers in the United States arecontinuing to gain market share. Use of liquid starter mixes for dry land crops is alsoexpanding, especially for planting field crops such as cotton, corn, soybeans, and wheat.

Only certain fertilizer distribution companies have specialized inmarketing liquid fertilizers and have the facilities and equipment required to sell,deliver, and apply the liquid fertilizers. Our licensed distributor is such a company. 

The GOLD'n GRO fertilizers are complex and represent a new category ofliquid nutrition technology. The GOLD'n GRO fertilizers contain bulk chelating agents thatconventional liquid fertilizers do not contain. The chelating agents, which are normallyquite costly, are supplied as components of the starting photographic liquids. Thechelating agents improve the availability of micronutrient metals such as zinc, iron,manganese, and the secondary nutrients calcium, and magnesium. The photoliquids also havea natural content of sulfur, the other important secondary nutrient. These chelateenriched multinutrient characteristics distinguish the GOLD'n GRO liquids from otherliquid fertilizers and are the main reason why the GOLD'n GRO liquid fertilizers representa new type of nutrient technology.

The animal repellent/fertilizer market is a new market for us. Theusers of this product will be upscale homeowners and commercial and municipal facilities,and commercial nurseries. The deer population is growing rapidly in the northeastern U.S.and so the center of gravity for this product is the northeastern seaboard states. Theinitial sales center will be in Rhode Island. The markets being served are the CommercialLandscape and wholesale and retail Nursery segments. The GOLD'n GRO Guardian line ofproducts is strictly for non-food plant applications so the distribution channels aredifferent from the channels being developed for GOLD'n GRO fertilizers. 

The U.S. market for deer repellents is believed to be well in excess of$50 million per year. Products currently in the market are believed to have limitedeffectiveness so an opportunity exists for a line of systemic products that are effectivefor several weeks after each application. The GOLD'n GRO Guardian is demonstratingeffectiveness for 8 to 12 weeks, and may be able to provide "year round"protection. We plan to pursue development of this line of products as rapidly as possible.

Photochemical Recycling

We estimate there are more than 1,500 generators of photographichazardous waste in the State of Nevada and more than 500,000 throughout the United States.This includes printed circuit board manufacturers, photo off-set printers, photographicdevelopers, lithographers, photographers, micro-filming (banks, companies, etc.) and x-rayusers (dentists, doctors, hospitals, podiatrists, orthopedic surgeons, veterinarians,radiologists and industrial x-ray

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users). We estimate the total annual market for recycling this categoryof waste to be in the range of $400 to $500 million. 

We are aware of digital imaging and its impact on usage of conventionalphotography. The impact is different for each of the major segments; medical, colorphotography, and printing/microfiche. Digital imaging has made significant inroads intoprinting/microfiche processing with an almost 85% reduction in volume of photographicliquids over the past ten years. Over the last several years, it became clear to us thatcontrary to popular belief, digital photography is creating a new source of photowastesfrom Internet companies that combine digital imaging services with the ability to printhigh quality photographs for their customers. Digital methods are being adopted in themedical industry, and although the medical sector is relatively high growth with the agingU.S. population, digital imaging has had the effect of slowing the growth of waste photoliquids being generated and may lead to a decline in future years. 

A larger impact on photo waste generation has been the pressure forcompanies to reduce the amount of waste generated at the operating sites. In photography,water was used in copious quantities for film rinsing and large quantities of low chemicalcontent waste liquids were generated. With the tightening of regulation of discharge ofcontaminated waters the equipment manufacturers have focused on reducing water usage. Thisattention to reduction of waste water has contributed to a reduction in the quantities ofwaste liquids being generated. It is expected that efficiency of use and associated wastereduction will continue, driven by increasing waste disposal costs. On-site photochemicalrecovery using a Photochemical Silver Concentrator and re-using the recovered water isexpected to continue to become more and more attractive to photochemical waste generators.

Environmental restrictions on disposal of chemicals are continuing totighten throughout the United States with the result that now the rate of growth for ourphotochemical recycling business is dependent upon the rate and vigor of fertilizer salesgrowth.

Silver

Nationally, more than 80 million ounces of silver are consumed inphotomaterials annually. Approximately 30% of this is lost through disposal. The SilverInstitute indicates that silver usage in photography is stable, but may decline modestlyover the next several years. 

Seasonality and Working Capital 

In analyzing the market and industry competitors, it is apparent thattwo factors significantly impact our ability to penetrate these markets in a meaningfulway. First, the seasonal aspect of fertilizer sales, which directly results in the secondfactor, the need for a much higher level of working capital when compared to otherindustries. Based on experience, we expect fertilizer sales to continue to have a strongseasonal component, with the primary sales season running from April through November eachyear, with an in-season low in July and August. In addition to the general seasonal natureof sales caused by normal weather patterns, unusual weather can further affect fertilizersales, especially in winter and spring. For example, unusually cold or wet spring seasonsmay delay the growing cycle of various crops for which our fertilizer products areutilized. To overcome weather related effects on fertilizer sales, we are evaluatingmarkets in the southern areas of the United States where growing seasons are longer and,in some cases, year round. 

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Due to the seasonal nature of GOLD'n GRO fertilizer sales, we mustincrease our net working capital to a level higher than that of non-seasonal industries.For example, some of our competitors have working capital equal to their annual sales.Consequently, ongoing debt and equity funding will be required for us to grow, even aftera profitable level of operations is achieved. 

Research, Development, and Technology 

The majority of our research and technology is proprietary, which meansit has not been patented, but is protected with strict confidentiality agreements andlimited access to our research and production facilities. A U.S. patent on the silverseparation process was issued in 1987 and is now expired. We made a corporate decision tonot patent our research results as the cost of obtaining and defending patents isprohibitive. 

We conduct field trials to gather agronomic data and to developknowledge of how the GOLD'n GRO products work on different crops. This field testing willcontinue as it is the most effective method for developing the field data needed tosupport claims of product effectiveness for specific crops. On-going field trials ofGOLD’n GRO fertilizer products continue to show significant improvements in cropproduction and quality. The trials are providing agronomic data that is being used todevelop GOLD’n GRO nutrition programs for the crops being tested. 

The field trials are demonstrating that the GOLD’n GRO productsprovide both agronomic and economic benefits in the "specialty agricultural"markets. Specialty agriculture includes vegetables, cut flowers, herbs and spices, andfruits and nuts of all types. These crops are relatively high value compared to fieldgrains such as corn, wheat, and soybeans. Field trials in 2002 on cotton and on silagecorn produced positive results, opening two new large acreage crops for GOLD'n GROapplication development. Alfalfa is typically considered as a "hay" or"forage" crop and is generally of low to intermediate value when compared tospecialty agricultural crops, however, high nutrient content alfalfa for the dairy marketoften commands a significant price premium which puts it at the low end of specialtyagricultural crop values.

A 3 year field trial on Valencia orange trees being carried out withoversight from a major university in southern California was completed in 2004. Two yearcumulative results have been analyzed and significant positive results were obtained.Fruit output per tree and fruit quality were both increased.

During 2003, we completed a key phase of the research project toproduce formulated glass products. The research has identified three product categories:(1) a glass ceramic mixture that can be used to produce tile and other shapes suitable forglazing and commercial use; (2) glass formulations that can be used as "leadfree" low and intermediate temperature glazes for decorative tile and the craftpottery trade; and (3) specialty boro-silicate glass formulations. The next phase of theresearch will focus on production of small quantities of products for evaluation andmarket studies and is expected to be completed over the next two to three years.

During 2003 and 2004 we continued to be offered the opportunity toexplore the feasibility of recycling other non-photographic materials into fertilizer. Wehave concluded that certain acid waste streams generated by aerospace and electronicsmanufacturers may be able to be converted

14

to a form that will fit "Beneficial Use" recycling intofertilizer in association with the processed photochemical materials. 

Environment and Regulation 

All chemistry has a "cradle to grave" regulatory life span.This term means under Federal law, the prime generator has the ultimate liability for allgenerated waste as long as it exists. For example, conventional services, through storingand hauling, relocate the waste to a legal landfill or dispose it to sewer. Liability thenremains for the cost of cleanup if the landfill has to be reclaimed or the contaminationof groundwater develops. 

However, once the spent chemistry reaches our facility and has beenprocessed, the generator's hazardous waste liability has been removed. Using our process,virtually all metals, including most of the iron, are removed. The end result leaves uswith a non-hazardous "toxic-metal-free" liquid which is legal for use in highquality GOLD’n GRO liquid fertilizers. 

While in general our business has benefited substantially fromincreased governmental regulation of hazardous disposal by private industry, the wastemanagement and recycling industry itself has become subject to extensive, costly andevolving regulation by federal, state and local authorities. We make a continuing effortto anticipate regulatory, political and legal developments that might affect ouroperations, but may not always be able to do so. We cannot predict the extent to which anylegislation or regulation may affect future operations. 

In particular, the regulatory process requires firms in our industry toobtain and retain numerous governmental permits to conduct various aspects of theiroperations, any of which permits may be subject to revocation, modification or denial. Weare not in a position at the present time to assess the extent of the impact of suchpotential changes in governmental policies and attitudes on the permitting process. 

For several years we have been studying the various regulatoryrequirements under RCRA and have been working with state and local environmental officialsregarding the extent to which hazardous waste regulations apply to our operations. Throughthis process, we reached the conclusion that due to use of photochemicals as a beneficialingredient in our fertilizer products, the photochemicals are not "hazardouswaste" as defined in the regulations, and therefore, beneficial materials that areotherwise regulated as hazardous waste, are exempt from most of such regulations. In early1996 we received concurrence from State of Nevada environmental officials that ourphotochemical fertilizer process meets the existing RCRA requirements for exemption fromall environmental regulation with the exception that certain presently conducted labanalyses of the photochemicals will continue to be required. Certain of our large scalecustomers presently meet the exemption requirements. Present levels of fertilizer salesutilize all the photochemicals received. Once sales of all the photochemical materials arewell established in the fertilizer or other commercial products, all our Nevada customerswill be exempt from the regulations, including hazardous material transport/manifestrules. We believe that this exemption applies nationwide. Therefore, we intend to pursuesimilar concurrence from environmental officials in all applicable states, so that all ourcustomers will be recognized as exempt from the RCRA regulations. 

15

Environmental regulation of photowaste generators has strengthened overthe last several years, and that trend is expected to continue. In the past year, heavymetal contamination of fertilizers has become a significant issue in California and otherparts of the country. Public concern over this issue is expected to intensify. We believethat the GOLD’n GRO line of fertilizer products is uniquely suited to alleviatingthis environmental concern and that we are well positioned to meet future environmentalneeds. 

 

Permits and Inspections 

To the best of our knowledge, we have obtained permits from allgovernmental agencies having jurisdiction, such as the EPA, Nevada Department ofEnvironmental Protection, Washoe County Health Department and the City of Reno, Nevada. Weare not required to obtain federal permits, but are required to have, and have obtained,local permits for our photochemical recycling facility under the provisions of the FederalEPA. Similar permits will be required of all facilities that we may construct. Ourrecycling facility is subject to frequent inspections and to regulations (includingcertain requirements pursuant to federal statutes) which may govern operating proceduresfor land, water and air pollution, among other matters. In particular, our operations aresubject to the Safe Drinking Water Act, TSCA (Toxic Substances Control Act-pursuant towhich the EPA has promulgated regulations concerning the disposal of PCBs), the CleanWater Act (which regulates the discharge of pollutants into surface waters and sewers bymunicipal, industrial and other sources) and the Clean Air Act (which regulates emissionsinto the air of certain potentially harmful substances). Employee safety and healthstandards under the Occupational Safety and Health Act are also applicable to ouremployees. 

 

MINING TECHNICAL SERVICES 

Services offered 

Our Mining Technical Services segment offers a wide range of technicalservices to the mining industry, including management support, mineral projectdevelopment, ore reserve and material balance reviews, expert assistance in contractdispute or litigation, and mineral economics and cost studies 

Operations

Our Mining Technical Services segment accounted for 17% 2004consolidated revenue. Golden Phoenix Minerals, Inc. produced 75% of this revenue. Theclient is a junior mining company with three mineral properties in Nevada. WWI providedtechnical assistance in moving these properties into the development and operating stages.WWI also provided administrative support. The contract with this client expired on March1, 2005. 

The primary source of new business for the Mining Technical Servicessegment is the reputation of WWI and its key employees. In addition, WWI expands itsnetwork of contacts by attending various mining association conventions. 

Expansion Plans 

In January 1999 WWI initiated a long term R&D project to replacethe use of cyanide in the

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extraction of metals from silver/gold and gold/copper ores. The newthiosulfate leaching technology being developed under this program utilizes the sametechnology as our proprietary photochemical recycling process. The project, calledItronics Thiomet, is seeking to establish operating joint ventures at specific mine sitesto apply the thiosulfate leaching technology. This project is on hold pending furthercommercial development of fertilizer sales. 

In 2004 a project to establish a subscription based gold industry andgold company Internet publication was begun. The web publication, called"insidemetals.com", provides the customer with gold industry and gold companyfinancial, production, and ore profiles on key gold producing companies. Initially, thecompanies to be profiled are in the Gold Company sector, which includes gold, silver,platinum, and palladium producers. The profiled companies are publicly traded on the NewYork and American Stock Exchanges and on NASDAQ. The publication was launched in August2005 and the target market includes gold company employees, governmental agencies, bothdomestic and foreign, and individual investors interested in the gold markets. In additionto providing subscription revenue, it is anticipated that the publication will enhance ouropportunity to obtain new sources for technical consulting work. This subscription basedInternet Information Portal provides an opportunity for relatively unrestricted growth bybeing available to a diverse global base of potential customers.

Competition

Our consulting services are generally in the area of management supportand mineral economics. Management support projects include advice on mineral developmentstrategies, audits of ore reserves and appraisals on mineral properties primarily tomining companies. Our projects tend to be short term, generally less than one year, andare typically sole sourced to us based on the reputation of our president. Other companiesthat provide similar services include local and regional mineral consulting firms.

Our competition for the Internet Information Portal is other websitesthat provide gold and other precious metal information to the interested public. 

 

ITEM 2.DESCRIPTION OF PROPERTY.
I. FACILITIES.
Itronics leases approximately 3,000 square feet of office space at 6490South McCarran Blvd., Building C-23, Reno, Nevada. IMI leases approximately 2,000 squarefeet of warehouse space in Reno, Nevada. This space is being used for supply storage. 

IMI owns a 35,000 square foot manufacturing facility in Reno-Stead,Nevada. The building contains all the equipment used for treating the used photochemicals,preparing the recovered silver for sale, and manufacturing the GOLD’n GRO fertilizerproducts. 

W&W leases approximately 2,500 square feet of office space in Reno,Nevada. This office was closed in May 2005 and the lease will be discontinued.

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II. EQUIPMENT.
The equipment being used in the recycling process is proprietaryinformation. However, the plant for processing liquid photochemicals is a fairly typicalchemical process facility consisting of appropriate arrangement of tanks and pumps. Solidsproduced by processing are recovered by filtration. 

The refining operation consists of a material handling section, solidsroasting, and a melting section. The equipment arrangements are proprietary, but the mainitems are pumps, tanks, filtration equipment, drying ovens, and the melting furnaces. 

The new facility is sized to process up to 100,000 un-concentratedgallons of used photochemicals per month and to manufacture up to 200,000 gallons permonth of liquid fertilizer. Refinery capacity will be expanded as needed to produce up to50,000 ounces of silver per month. 

 

ITEM 3.LEGAL PROCEEDINGS.
We may become involved in a lawsuit or legal proceeding at any time inthe ordinary course of business. Litigation is subject to inherent uncertainties, and anunexpected adverse result may arise that may adversely affect our business. Certainlawsuits have been filed against us for collection of funds due that are delinquent, asdescribed below. We are currently not aware of any litigation pending or threatened forany reason other than collection of funds due and already recorded. We are not aware ofany additional legal proceeding or claims that we believe will have, individually or inthe aggregate, a material adverse affect on our business, financial condition or operatingresults. 

As of December 31, 2004 total recorded liabilities of $786,471including accrued interest to December 31, 2004, were subject to a total of 15 separatelawsuits for the collection of the funds due. These include 12 leases totaling $626,372(reflected in Current Maturities of Capital Lease Obligations) plus $20,260 in additionalinterest (reflected in Accrued Interest) and three trade payables totaling $131,286(reflected in Accounts Payable) plus $8,553 in additional interest (reflected in AccruedInterest). The leases are individually secured by specified equipment. 

The accrued interest noted above was recorded based on our assessmentof additional amounts we believe is probable and is related to three cases originallyseeking $251,522; the creditors have received judgments in these cases. We will continueto accrue interest until these cases are settled or paid in full. 

  We estimate an additional $58,500 interest may be reasonablypossible on other cases; however, we have not accrued this amount because we do notbelieve it is probable to be incurred. This estimate is related to six cases. In one case,there is a negotiated payment agreement with a remaining balance of approximately $19,500.Our last payment was made in December 2004 and no contact or other collection action hasbeen taken since then. A second case, claiming $35,210, was filed in March 2003. Nocontact or other collection action has taken place since then. A third case, seeking$171,853, is being actively negotiated by legal counsel and a settlement offer to pay thebalance over approximately 46 months has been received. The remaining three cases, seekinga total of $181,672, are being actively negotiated

18

with a local law firm. It has been our experience that if we are ableto pay an account in full, the creditor will accept a discount, in some cases asubstantial discount, to get the case settled. In the event we have not been able to fullypay a claim, creditors have been willing to accept extended payment terms.

We have a total of six cases, that originally sought $325,345, that wedeem to have a remote possibility of incurring an additional unrecorded loss. We havenegotiated payment agreements on these cases and, as of December 31, 2004, the recordedliability for these cases was $122,313. Three of the cases are paid current under thesettlements agreements and three are delinquent, but no further collection action has beentaken by the lenders.

As of December 31, 2004 our subsidiaries were delinquent onapproximately $206,200 in federal payroll taxes. These amounts are included Accruedexpenses in the Balance Sheet. We engaged a consultant to assist in working with the IRSto formulate a payment plan. A plan was negotiated to pay specified portions of theliability on or before January 31, 2005 and on the fifteenth of each month beginning March15, 2005 until paid off on May 15, 2005. We made the required payments in January andMarch 2005, and paid a total of $115,586, but did not make the subsequent payments as theybecame due. We received notice of intent to levy on the subsidiaries IMI and ICI for atotal amount due of $93,273. The notices were dated May 12, 2005. The IRS also filedfederal tax liens for the amounts due.

Successful settlement of the above claims is dependent on futurefinancing.

 

ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF ITS SECURITY HOLDERS.
None.

 

 

PART II

ITEM 5.MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a). Market Information. The Company’s securities are traded onthe over-the-counter market under the symbol ITRO.OB, and quoted in the National QuotationBureau, Inc.'s "pink sheets" and on the NASD Electronic Bulletin Board. In 2003the Company’s stock began trading on the Frankfurt, Germany Stock Exchange under thesymbol ITG. In March 2004 the Company’s stock began trading on the Berlin BremenStock Exchange (Germany) under the symbol ITG. 

The following table sets forth the high and low bid prices for theCompany's common stock for each quarter for 2003, 2004, and through March 31, 2005. 
High BidLow Bid3/31/03$0.16$0.096/30/03$0.14$0.089/30/03$0.23$0.1112/31/03$0.17$0.113/31/04$0.22$0.146/30/04$0.17$0.109/30/04$0.10$0.0612/31/04$0.08$0.053/31/05$0.13$0.05
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These quotations reflect inter-dealer prices without retail markup,markdown, or commissions, and may not represent actual transactions.

(b) On December 31, 2004 the number of record holders of the CommonShares was approximately 1,000.

(c) Dividends.
The Company has paid no dividends. 

Recent Sales of Unregistered Securities:

Following is a summary of unregistered securities issued during thethree months ended December 31, 2004. 
 
Shares
Value 
Issued
Received
Warrant    exercises for cash
500,000
$    40,000
Conversion    of notes payable and accrued interest
7,757,236
798,094
Private    Placement for cash
3,300,000
165,000
Consultant    labor services
550,000
38,550
Interest    on employee salary in arrears 
141,515
11,787
Director    fees
2,500
200 
12,251,251
$1,053,631
During the fourth quarter of 2004, we issued an aggregate of 3,300,000shares of common stock to eight accredited investors at $0.05 per share for a total of$165,000. In addition, we issued to these investors three year warrants to purchase anaggregate of 1,650,000 shares of common stock at an exercise price of $0.075 per shareduring the first year, $0.15 per share during the second year, and $0.225 per share duringthe third year.

During the fourth quarter of 2004, we issued an aggregate of 7,757,236shares of common stock to four accredited investors who converted $798,094 in convertiblepromissory notes, including principal and accrued interest at conversion prices rangingfrom $0.10 to $0.15 per share. 

In October 2004, we issued an aggregate of 250,000 shares of commonstock to John W. Whitney, our President, at $0.08 per share for a total of $20,000 uponthe exercise of a warrant for cash. 

In October 2004, we issued an aggregate of 200,000 shares of commonstock valued at $13,700 to Sussex Avenue Partners LLC for professional consulting servicesperformed on our behalf. 

In November 2004, we issued an aggregate of 350,000 shares of commonstock valued at $24,850 to Ken Weiner for professional consulting services performed onour behalf. 

20

In November 2004, we issued an aggregate of 2,500 shares of commonstock valued at $200 to John W. Whitney, our President, as compensation for servicesperformed on our behalf in his capacity as a director of our company for the third quarterof 2004.

In November 2004, we issued an aggregate of 141,515 shares of commonstock valued at $11,787 to John W. Whitney, our President, for accrued interest on hisunpaid salary. Interest is paid at 12% per annum and the share price is calculated monthlyusing the weighted average of the closing bid prices.

In November 2004, we issued an aggregate of 250,000 shares of commonstock to John W. Whitney, our President, at $0.08 per share for a total of $20,000 uponthe exercise of a warrant for cash. 

In 2005 we issued an aggregate of 650,000 shares of common stock tothree accredited investors at $0.05 per share for a total of $32,500 received in December2004. In addition, we issued to these investors three year warrants to purchase anaggregate of 325,000 shares of common stock at an exercise price of $0.075 per shareduring the first year, $0.15 per share during the second year, and $0.225 per share duringthe third year.

In January 2005, we issued an aggregate of 2,400,000 shares of commonstock at $0.05 per share to John W. Whitney, our President, for a total of $120,000. Mr.Whitney converted short term loans in December 2004. In addition, in December 2004 weissued to Mr. Whitney warrants to purchase an aggregate of 1,200,000 shares of commonstock at an exercise price of $0.075 per share during the first year, $0.15 per shareduring the second year, and $0.225 per share during the third year.

In January 2005, we issued an aggregate of 625,000 shares of commonstock to John W. Whitney, our President, at $0.08 per share for a total of $50,000 uponthe exercise of a warrant. Mr. Whitney exercised the warrant by converting $50,000 inshort term loans into common stock in December 2004.

During the year ended December 31, 2004, the accrued interest on the2000 through 2002 Series Convertible Promissory Notes resulted in our issuance ofadditional options to purchase an aggregate of 745,541 shares of restricted common stock.The options are exercisable at prices ranging from $0.10 to $1.18.

In February 2005, we issued an aggregate of 2,500 shares of commonstock valued at $175 to John W. Whitney, our President, as compensation for servicesperformed on our behalf in his capacity as a director of our company for the fourthquarter of 2004.

During the fourth quarter of 2004, the following shares of common stockwere earned by the following management employees for accrued interest on their unpaidsalaries. The shares are to be issued in 2005. Interest is paid at 12% per annum and theshare price is calculated monthly using the weighted average of the closing bid prices.

John W. Whitney, President              191,864 shares valued at $12,726

Michael C. Horsley, Controller           57,058 shares valued at$3,780

Duane H. Rasmussen, Vice President       133,268 shares valued at $8,835

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During the fourth quarter of 2004, an aggregate of 6,352 shares ofcommon stock, valued at $420, was earned by one employee for accrued interest on hisunpaid salary. The shares are to be issued in 2005. Interest is paid at 12% per annum andthe share price is calculated monthly using the weighted average of the closing bidprices.

We issued options to purchase an aggregate of 9,000 shares of commonstock to Michael C. Horsley, our Controller on November 1, 2004 as compensation forservices performed on behalf of our company. The options are exercisable at $0.15 pershare and expire three years after grant. 

Four other employees were granted options to purchase an aggregate of21,000 shares of common stock November 1, 2004 as compensation for services performed onbehalf of our company. The options are exercisable at $0.15 per share and expire in threeyears from grant.

Unpaid salary due two management employees in the amount of $39,200 isto be paid with an aggregate of 411,111 shares of common stock. These shares were earnedas part of the employee savings plan during the period July 1, 2003 through December 31,2004 and will be issued when sufficient cash is available to pay the required payroll taxwithholding. The number of shares are calculated each month for all employeesparticipating in the plan by using the weighted average of the closing bid prices for therespective month. The amounts and related number of shares earned by quarter for each ofthe employees follows:

Duane H. Rasmussen, Vice President 
Amount
Shares
3rd    Quarter 2004  
$6,000
72,036
4th    Quarter 2004 
6,000
90,373  
$12,000
162,409
Michael C. Horsley, Controller 
Amount
Shares
3rd    Quarter 2003 
$3,200
18,677
4th    Quarter 2003 
4,800
32,572
1st    Quarter 2004 
4,800
26,264
2nd    Quarter 2004 
4,800
41,263
3rd    Quarter 2004  
4,800
57,629
4th    Quarter 2004 
4,800
72,297  
$27,200
248,702
All of the above offerings and saleswere deemed to be exempt under rule 506 of Regulation D and Section 4(2) of the SecuritiesAct of 1933, as amended. No advertising or general solicitation was employed in offeringthe securities. The offerings and sales were made to a limited number of persons, all ofwhom were accredited investors, business associates of Itronics Inc. or executive officersof Itronics Inc., and transfer was restricted by Itronics Inc. in accordance with therequirements of the Securities Act of 1933. In addition to representations by theabove-referenced persons, we have made independent determinations that all of theabove-referenced persons were accredited or sophisticated investors, and that they werecapable of analyzing the merits and risks of their investment, and that they understoodthe speculative nature of their investment. Furthermore, all of the above-referencedpersons were provided with access to our Securities and Exchange Commission filings. 
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Except as expressly set forth above, the individuals and entities towhom we issued securities as indicated in this section of the registration statement areunaffiliated with us. 

ITEM 6.MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Some of the information in this report contains forward-lookingstatements that involve substantial risks and uncertainties. You can identify thesestatements by forward-looking words such as "may," "will,""expect," "anticipate," "believe," "estimate" and"continue," or similar words. You should read statements that contain thesewords carefully because they: 

-discuss our future expectations; 

-contain projections of our future results of operations or of our      financial condition; and 

     -state other "forward-looking"    information. 

We believe it is important to communicate our expectations. However,there may be events in the future that we are not able to accurately predict or over whichwe have no control. Our actual results and the timing of certain events could differmaterially from those anticipated in these forward-looking statements. 
**General Overview**
We are the inventor and developer of the "Beneficial UsePhotochemical, Silver, and Water Recycling" technology that produces environmentallybeneficial GOLD'n GRO fertilizers and silver bullion.

We are a process technology company that has developed what we believeis a unique technology for photochemical recycling. We, through our subsidiary, ItronicsMetallurgical, Inc., extract more than 99% of the silver and virtually all of the othertoxic heavy metals from used photoliquids and use this "Beneficial Use Photochemical,Silver and Water Recycling" technology to produce environmentally beneficial chelatedmultinutrient liquid fertilizer products sold under the trademark GOLD’n GRO, animalrepellent/fertilizer products to be sold under the trademark GOLD’n GRO Guardian, andsilver bullion. We also provide process planning and technical services to the miningindustry.

Our fertilizer is sold primarily through Western Farm Service, Inc.(WFS), a wholly owned subsidiary of Agrium, Inc. (a NYSE company). Our distributionagreement with WFS gives them exclusive rights to sell our fertilizer products in Arizona,California, Hawaii, Idaho, Oregon, and Washington, which represented 97% of our fertilizersales in 2004 and 93% of our sales in 2003. This agreement is discussed in more detail inthe Business section. Our plans to increase GOLD’n GRO fertilizer sales, includingplans to expand the product line, expand to more geographical regions in the U.S., enternew market segments, and add new distributors, are also discussed in more detail in theBusiness section.

We obtain a significant portion of our raw materials to manufacturefertilizer from used photoliquids. A byproduct of our fertilizer manufacturing process issilver. We sell three types of silver: silver bullion, 5 troy ounce 99.9% pure SilverNevada Miner numismatic bars,

23

and recycled film containing silver. Our processed silver bullion issold to a commercial refiner under standard industry terms, which include pricing thesilver based on published market quotes and applicable service fees. The Silver NevadaMiner bars sell to the consumer collectibles market. Recycled film is primarily X-ray filmfrom hospitals that we sort and sell to a commercial film recycler; we are paid based onthe value of contained silver, 45 to 60 days after shipment. 

Our fertilizer manufacturing process uses several commodities. Weseparate silver from photochemicals, then we add zinc and other raw materials to thedemetallized liquid to make our fertilizer formulations. Prices for fertilizer rawmaterials are generally increasing over time. We maintain limited quantities of thesecommodities and purchase them on a just in time basis. When prices of these commoditiesrise, we pass this cost on to our customers, so commodity price fluctuations have not hada significant impact on our results of operations.

The majority of our raw material inventory is comprised of silver inphotochemical solutions. The table below indicates that silver prices were relativelystable in 2001 to 2003, then rose dramatically in 2004 and 2005. We regularly compare ourweighted average cost of silver per ounce to current market prices; historically we havenot had impairment losses. The average London spot price of silver is shown as follows:

                Year                 6 mos June 30,
Year     2001   2002   2003   2004          2005
Silver  $4.36  $4.60  $4.88  $6.67         $7.06 

 

We also provide consulting services to the mining industry. Tosupplement this business line, we recently launched an internet website which we plan tomaintain with existing professional staff. Our plans with regard to the website arediscussed more fully in the Growth Plan and Implementation section below.
**Critical Accounting Policies and Estimates**
The preparation of financial statements in accordance with accountingprinciples generally accepted in the United States requires that management make a numberof assumptions and estimates that affect the reported amounts of assets, liabilities,revenues and expenses in our consolidated financial statements and accompanying notes.Management bases its estimates on historical information and assumptions believed to bereasonable. Although these estimates are based on management’s best knowledge ofcurrent events and circumstances that may impact the Company in the future, actual resultsmay differ from these estimates.

Our critical accounting policies are those that affect our financialstatements materially and involve a significant level of judgment by management. 

Revenue Recognition**.**
We operate two divisions: Photochemical Fertilizer and TechnicalServices. Within the fertilizer division, revenue is derived from three sources (1) salesof fertilizer, (2) photochemical recycling including pick up and transportation ofphotochemical waste and sales

24

of Photochemical Silver Concentrators, and (3) sales of silver. Revenuefrom the sale of fertilizer, Photochemical Silver Concentrators, and silver is recognizedin income when the goods are shipped. Returns since inception have been nominal;therefore, the Company has not established a returns allowance. Photochemical recyclingfees are recognized in income after the used photochemical solution is removed from ourcustomer sites and transported to our manufacturing facility.

Within the technical services division, revenue is derived fromconsulting services. Revenue is recognized in income as services are rendered. When theCompany is responsible for subcontractor services and related expenses, such pass-throughcosts are included in both revenue and cost of revenues. Markups, if any, are included inrevenues.

Inventory. 

Inventory is carried on the balance sheet at the lower of cost ormarket value using the average cost valuation method. Because a large part of ourinventory is silver contained in used photochemical solution and the market value ofsilver changes daily on the commodities market, we regularly monitor the carrying value ofour silver in solution inventory to ensure it is carried at the lower of cost or itscurrent market value. If silver on the open market were less than our carrying value, thenwe would write down the carrying value of our inventory by reducing recorded inventory andincreasing cost of sales. If the amount of the write down were material, we wouldseparately include the item in our statement of operations.
**Recent Accounting Pronouncements**
On December 16, 2004 the FASB issued SFAS No. 123R,"Share-Based Payment," which is an amendment to SFAS No. 123,"Accounting for Stock-Based Compensation." This new standard eliminates theability to account for share-based compensation transactions using Accounting PrinciplesBoard, or APB, Opinion No. 25, "Accounting for Stock Issued to Employees,"and generally requires such transactions be accounted for using a fair-value-based methodand the resulting cost recognized in our financial statements. This new standard iseffective for awards that are granted, modified or settled in cash in interim and annualperiods beginning after June 15, 2005, December 15, 2005 for small businessissuers. In addition, this statement will apply to unvested options granted prior to theeffective date. The Company will adopt this new standard effective for the first fiscalquarter of 2006 and it has not yet determined what impact this standard will have on itsfinancial position or results of operations. 

In November 2004, the FASB issued SFAS No. 151,"Inventory Costs: an amendment of ARB No. 43, Chapter 4," to clarifythe accounting for abnormal amounts of idle facility expense, freight, handling costs andwasted material. SFAS No. 151 is effective for inventory costs incurred duringfiscal years beginning after June 15, 2005. We do not believe the provisions ofSFAS No. 151, when applied, will have a material impact on our financialposition or results of operations." 
**Results of Operations**
The primary factors affecting our revenue fluctuation between periodsin fertilizer sales are seasonality and weather conditions. Sales are greater during thegrowing season, and are negatively affected by cold winter weather and rainy weather. Inmost of our markets there are two primary fertilization seasons, spring and fall, withspring being the stronger of the two.

25

The spring season generally starts in March and goes through June andthe fall season generally starts in September and runs into December. Adverse weatherconditions delay the start of, or can significantly shorten, a growing season. Farmers donot fertilize their crops in rainy or cold weather; therefore they do not buy fertilizer;consequently, our distributor does not buy fertilizer from us. Additionally, we haveexperienced varying lengths of time for acceptance in the market of our new fertilizerproducts; farmers are inherently very slow to accept new products so market penetrationtime can be lengthy. Our short history in the fertilizer market demonstrates that newproducts, if successful, obtain meaningful sales typically between two and four yearsafter product launch. 

The primary factors affecting the revenue fluctuation between periodsin photochemical recycling revenue are our need to acquire this material for use infertilizer production and our ability to store this material until it is needed. We havean unusual business model in that we need to sell our photowaste management services inorder to acquire a raw material necessary for the production of our fertilizer products,as opposed to purchasing it from suppliers as most businesses do. Our management goal isto combine the incoming volume of photowastes with existing stored photowastes to meet thepeaks in demand for fertilizer products. In the liquid fertilizer industry, the practiceof both our distributor and the ultimate consumer, the farmer, is to purchase fertilizeron a just in time basis, to minimize their storage requirements and related costs. Forthis same reason, we process our photowastes as needed for fertilizer production. Becauseof this, the need to seek new customers to expand the service side of our business isdriven by fertilizer sales. There is also a seasonal factor in the consumer photographyportion of our photowaste management services business, with the Christmas holiday seasonbeing the busiest, followed by the early summer, school graduation period. At presentvolumes of photowaste, this is not a significant factor, but it could become one as wegrow. 

The primary factor affecting the revenue fluctuation between periods insales of silver bullion is our dependence on the timing of processing used photochemicalwastes, which is primarily dependent on fertilizer manufacturing and related sales. Oursilver in solution is separated from the photowaste materials during processing of thephotowastes for use in fertilizer manufacturing. As described above, the timing ofprocessing of photowastes is dependent on fertilizer sales, therefore sales of silverbullion is also dependent on the level of fertilizer sales. Market price changes will alsocontribute to silver revenue fluctuations by increasing or decreasing revenues dependingon whether the silver price increases or decreases.
**Comparison of the Year Ended December 31, 2004 with the Year EndedDecember 31, 2003**
We reported consolidated revenues of $1,720,049 for the year endedDecember 31, 2004, compared to $1,268,787 for the prior year, an increase of 36%. Revenuesfor the Photochemical Fertilizer segment increased by $486,016, or 52%. Revenues from theMining Technical Services segment declined $34,754, or 10%. We reported a gross profit of$32,296 for the year ended December 31, 2004, compared to a gross loss of $159,853 for theyear ended December 31, 2003, an improvement of $192,149. The consolidated net loss for2004 was $2,839,872 or $0.020 per share compared to a 2003 loss of $2,752,291 or $0.026per share. 

26

To provide a more complete understanding of the factors contributing tothe changes in revenues, operating expenses and the resultant operating loss and net loss,the discussion presented below is separated into our two operating segments. 

PHOTOCHEMICAL FERTILIZER 
Year Ended    December 31, 
2004 
2003 Revenue Fertilizer
$       1,019,789
$         554,320Photochemical recycling
$         301,609
$         327,306Silver
$         101,531
$          55,287Total Segment Revenue
$       1,422,929
$         936,913Gross profit (loss) 
$       (34,687) 
$      (182,918) Operating income (loss) 
$(2,024,481)    
$(1,834,621)    Net income (loss) before    taxes 
$(2,626,694)    
$(2,849,442)    
Revenues for the Photochemical Fertilizer segment totaled $1,422,900 in2004, compared to $936,900 in 2003, an increase of $486,000, or 52%. 

Fertilizer sales were $1,019,800 (1,829 tons) and $554,300 (944 tons)for 2004 and 2003, respectively. This represents an increase of 84% in dollars and 94% intonnage. Our fertilizer product sales are presently grouped into two primary categories,Chelated Liquid Micro-nutrients and Chelated Liquid Multi-nutrients. The Micro-nutrientcategory includes five products, which includes the two zinc products, GOLD’n GRO9-0-1+7% Zinc and GOLD’n GRO 9-0-2+3% Zinc. These zinc products were introduced in2001 and 2004, respectively. The Multi-nutrient category has a total of six products,which includes the GOLD’n GRO 4-0-9+6.6% Sulphur Base Liquid, which was introduced in2003. Sales of Micro-nutrients were $873,600 (1,399 tons) and $474,500 (808 tons) for 2004and 2003, respectively, an increase of 84% in dollars and 73% in tonnage. Sales of theMulti-nutrients were $125,700 (430 tons) and $47,800 (136 tons) for 2004 and 2003,respectively, an increase of 163% in dollars and an increase of 216% in tonnage. Thedollar and tonnage increases are primarily attributable to increased bulk sales of theGOLD’n GRO 9-0-1+7% Zinc, but meaningful sales were also achieved with theGOLD’n GRO 9-0-2+3% Zinc and the GOLD’n GRO 4-0-9+6.6% Sulphur. Sales tonnagerose faster than sales dollars in spite of a modest price increase in the second quarterof 2004 because of the increase in tonnage of the Chelated Liquid Multi-nutrients whichsell at lower prices. The overall increase in sales tonnage is primarily due to theacceptance of our products by more of WFS’ retail branches due to successful fieldresults over the past three years, and to a lesser extent on the introduction of the twonew products.

Photochemical recycling revenue was $301,600 and $327,300 in 2004 and2003, respectively, a decrease of 8%. The recycling service fee portion of this revenuecategory increased $46,200. The increase is attributable to the rapid growth ofShutterfly, Inc., a digital imaging and processing company. This increase was offset by areduction in sales of Photochemical Silver Concentrators. In 2004 we sold one Concentratorfor $20,000 compared to two sold in 2003 for a total of $91,900. Photochemical SilverConcentrators have widely varying prices, depending on

27

the needs of the customer. Consequently, sales volumes and amounts arenot consistent from period to period. 

In December 2004, photochemical recycling services provided toShutterfly, Inc. were discontinued by mutual agreement; the photochemical volume from thiscustomer had been growing so rapidly that the supply was exceeding our need for thechemicals in fertilizer manufacturing, resulting in storage costs and plantinefficiencies. Shutterfly accounted for $201,300 or 59% of 2004 photochemical recyclingrevenue. Due to the nature of our business, our photochemical recycling customers supplythe used photochemical raw material needed for fertilizer manufacturing. Shutterflysupplied 65% of this raw material received in 2004. Based on 2004 usage of usedphotochemicals to manufacture fertilizer, our other customers supplied an overall 56% ofthe photochemicals needed to produce the fertilizer manufactured in 2004; so if we areunable to find new photowaste customers to replace Shutterfly, future fertilizer saleswould be limited to approximately that level of 2004 fertilizer sales once our inventoryof used photochemicals is depleted. It should be noted that this is only a rough estimateof future fertilizer production levels as we receive different types of photochemical rawmaterials from different customers, which are used in varying amounts in the fertilizerproducts, each fertilizer product uses a varying proportion of used photochemicals, and aswe continue to improve our fertilizer products, the proportion of used photochemical ineach product may change.

We previously developed statistical information that more than 100million gallons of used liquid silver-bearing photochemicals are generated in the UnitedStates annually. Using conversion ratios developed for the GOLD'n GRO fertilizers, this isenough volume to support manufacture and sale of more than 200 million gallons of liquidfertilizer products, or about 1 million tons, so we believe the raw material is availablein the market to meet future manufacturing needs. We estimate that current supplies ofphotochemical raw material in storage at our manufacturing plant, combined with ongoingreceipts of material from other existing customers, is sufficient to meet fertilizerproduction needs for the next twelve to eighteen months, depending on fertilizer salesvolumes. 

We are in contact with both small and large photochemical generators,and are actively marketing Photochemical Silver Concentrators. The concentrators allow usto receive the raw materials needed to manufacture our fertilizer in much smaller volume,resulting in a higher content of chemicals desirable for fertilizer manufacturing,reducing the storage problems we were facing. The Photochemical Silver Concentrators aremanufactured under contract by a third party to meet the specifications of each customer.Concentrators typically sell for $20,000 to $200,000, so part of the loss in photochemicalrecycling service revenues is expected to be offset by growth in Photochemical SilverConcentrator sales in future years. By using a third party manufacturer to produce theConcentrators, we are outsourcing the fixed and variable costs that are associated withassembling them. Primarily, these are the facilities space needed to assemble the variousparts and the specialized equipment and labor required for the assembly. Generally, wehave self financed the production of Concentrators sold in the past. In the future, weanticipate that non-governmental customers will advance the funds necessary to acquire theparts and labor needed to produce the Concentrators. For our most recent governmentalcustomer, we borrowed the funds needed to fulfill the contract from an unrelatedindividual. We anticipate using similar arrangements for future Concentrators sold togovernmental customers. 

28

During the first quarter of 2005 we received an order for twoConcentrators and requests for proposal from several other potential customers that couldlead to more than $500,000 in sales of the Photochemical Silver Concentrators. This marksthe beginning of a shift in market focus from obtaining the majority of photochemical rawmaterials by picking up the materials by truck directly from the customer’s locationto obtaining the majority of our photochemical raw materials by receiving concentratedmaterial through the interstate commercial trucking system.

Silver revenue was $101,500 and $55,300 for 2004 and 2003,respectively, an increase of $46,200, or 84%. Of this increase, $18,500 was from the saleof Silver Nevada Miner silver bars and $16,700 was from the sale of silver in recycledfilm. 

Combined cost of sales and operating expenses for the segment amountedto $3,447,400 in 2004, compared to $2,771,500 in 2003, a 24% increase. Cost of salesincreased approximately $337,800 due primarily to a $265,400 increase in direct materialcosts related to increased sales and $61,000 in payroll and related costs. The changes inrevenues and cost of sales resulted in a gross loss of $34,700 in 2004, compared to$182,900 in 2003, an improvement of $148,200. Operating costs increased $338,100 dueprimarily to increases of $228,800 in sales and marketing and $60,000 in general andadministrative costs. Sales and marketing increased due to a combination of the additionof a fertilizer sales representative in early 2004 and increased corporate marketing.General and administrative expenses increased due to a $98,000 prior year credit forexpired options. 

These changes in revenues and operating expenses resulted in a segmentoperating loss of $2,024,500 in 2004, compared to $1,834,600 in 2003, an increased loss of$189,900 or 10%. 

Other income (expense) decreased to a net expense of $602,200 for 2004,compared to a net expense of $1,014,800 in 2003, an improvement of $412,600. Interestexpense decreased $175,000 due to the conversion into common stock of convertiblepromissory notes. Other income of $187,800 was due to debt forgiveness income from thewrite off of long term leases. 

The changes in operating loss and other expenses resulted in a segmentnet loss before taxes of $2,626,700 for 2004, compared to a net loss of $2,849,400 for2003, a decreased loss of $222,700 or 8%. 

MINING TECHNICAL SERVICES 
Year Ended    December 31, 
2004 
2003 Revenue 
$      297,120 
$      331,874 Gross profit (loss) 
$       66,983 
$       23,065 Operating income (Loss) 
$(382,145)    
$(359,324)    Net income (loss) before    taxes 
$(213,178)    
$       97,151 
Mining technical services revenue totaled $297,100 for 2004 compared to$331,900 for 2003, a decrease of 10%. Included in these revenue figures are pass-throughexpenses of $108,300 and $118,700 for 2004 and 2003, respectively. Excluding theseamounts, revenues amounted to $188,900 and $213,100 for 2004 and 2003, respectively, adecrease of 11%. The number of clients we serve and the amount of work needed by thoseclients varies from period to period.

29

On March 1, 2005 the technical services contract with Golden PhoenixMinerals, Inc. expired and was not renewed. Excluding pass through revenue, revenue fromthis client was $124,300 for 2004 and $15,000 for the two months ended February 2005. Inresponse, in May 2005 we closed the satellite office for technical services and reducedstaff the equivalent of approximately three people. 

Combined cost of sales and operating expenses totaled $679,300 for 2004compared to $691,200 for 2003, a nominal decrease. Included in these operating expensefigures are pass-through expenses of $108,300 and $118,700 for 2004 and 2003,respectively. Excluding these amounts, combined cost of sales and operating expensesamounted to $571,000 and $572,500 for 2004 and 2003, respectively, a nominal decrease.Included in operating expense is $74,200 in research and development costs that were notincurred in the prior year. This expense is related to the development of theinsidemetals.com website. The majority of this expense is an allocation of personnelcosts, which was offset by an $81,000 decrease in payroll and related costs that areincluded in cost of sales expenses. 

The above changes in revenues and operating expenses resulted in asegment operating loss of $382,100 for 2004, compared to $359,300 for 2003, an increasedoperating loss of $22,800 or 6%. 

Other income (expense) decreased to $169,000 for 2004, compared to$456,500 in 2003, a decline of $287,500. The decline is due to decreased gain on sale ofGPXM shares and other marketable securities. 

The changes in operating loss and other income resulted in a segmentnet loss before taxes of $213,200 for 2004, compared to a net income of $97,200 for 2003,a decrease of $310,300. 
**Changes in Financial Condition; Capitalization**
Cash amounted to $5,200 as of December 31, 2004 compared to $34,500 asof December 31, 2003. Net cash used by operations was $1,417,900 in 2004 compared to$1,626,500 in 2003. Operating resources utilized to finance the 2004 loss of $2,839,900include approximately $681,900 in expenses paid with our common stock. Cash amounting toapproximately $56,800 was invested in property and equipment in 2004, primarily forequipment in the manufacturing plant. Sales of Golden Phoenix Minerals, Inc. stock andother marketable securities provided $356,100 in cash from investing activities. Financingsources of cash in 2004 were $843,500 in proceeds from the private placement of restrictedcommon stock, $235,000 from the exercise of warrants, and $150,000 from short term loansfrom an officer/stockholder. 

Total assets decreased from $4,440,500 at December 31, 2003 to$4,147,900 at December 31, 2004. Current assets decreased $88,300, net property andequipment decreased $38,900, and other assets decreased $165,300. The primary changes incurrent assets were a decrease in marketable securities of $387,100 due to the sale ofGPXM and other stock, an increase in accounts receivable of $92,400 due to a one-timebilling on the GPXM consulting contract, an increase of $146,200 in inventory dueprimarily to the build-up of unprocessed silver in photochemical solutions, and anincrease in prepaid expenses of $89,400 due to corporate marketing contracts. We areactively selling our GPXM shares to assist with our working capital needs. Our investmentin GPXM stock decreased to a total value of $26,200 at December 31, 2004, all of

30

which is classified in current assets. 

Total liabilities decreased from $8,142,200 at December 31, 2003 to$6,712,200 at December 31, 2004, a decrease of $1,430,000. Of this amount, currentliabilities decreased $510,600 and long-term liabilities decreased $919,400. The overalldecrease in liabilities is due primarily to the conversion of $1,962,200 in convertiblepromissory notes and accrued interest into restricted common stock. Current liabilitiesdecreased primarily due to a net reduction in convertible promissory notes of $665,300.This reduction was partially offset by increases in accounts payable of $91,800, accruedmanagement salaries of $170,900, and accrued expenses of $185,400. Nearly all of theincrease in accrued expenses is attributable to delinquent federal and state payrolltaxes. Subsequent to December 31, 2004 $115,600 of the federal payroll taxes were paid. 

The above discussion and the discussion of various legal proceedingselsewhere in this prospectus does not succinctly summarize the progress that we have madein implementing our business plan and improving our financial condition over the lastseveral years. However, there has been significant progress. First, in 2004 fertilizersales exceeded $1 million for the first time, compared to sales in the $500,000 range foreach of the two previous years. This resulted in a gross loss for the photochemicalfertilizer segment of $34,700, which was a $148,200 improvement over 2003 and a $217,100improvement over 2002. This demonstrates one of the fundamental concepts in the businessplan, that a large part of our operating cost structure is fixed or semi-fixed, whichmeans that as sales rise, many of the costs will not rise proportionally, resulting ingross profits that will contribute to paying general overhead costs. This improvement inthe photochemical fertilizer segment, combined with a gross profit from the technicalservices segment, resulted in an overall gross profit for the year, which is the firsttime that this was accomplished since before the move to the Stead manufacturing facilityin 2000. 

Addressing our financial condition, improvements have been made thereas well. The stockholders’ deficit, $4,587,900 at December 31, 2002, has been reducedto a deficit of $2,564,300 at December 31, 2004, an improvement of $2,023,600. This hasbeen achieved by the conversion of approximately $3.4 million in convertible notes andaccrued interest into common stock. One significant area of difficulty for us has beenmeeting the payments on capital lease obligations. However, the capital lease obligationat December 31, 2002 of $1,193,900 has been reduced to $807,700 at December 31, 2004, areduction of $386,200. This includes the write off five leases as debt forgiveness incomein 2004 of $187,800. We expect to make further meaningful progress expanding sales andreducing debt in 2005.
**Working Capital/Liquidity**
During the year ended December 31, 2004, the working capital deficitwas reduced by $422,200 to a deficit balance of $3,229,500`. $665,300 of the improvedworking capital is due to a net reduction in convertible notes payable and accruedinterest due to the conversion of convertible promissory notes into restricted commonstock. This improvement was partially offset by increases in various current liabilitiesas discussed above. The Company has had limited cash liquidity since the third quarter of2000. The Company has sought and obtained the funding described above, which has not beensufficient to maintain all obligations on a current basis. The cash shortage is a resultof two factors. First, fertilizer sales in 2004 and prior

31

years did not expand to the extent anticipated, so operating losseswere not reduced as much as expected. Second, the $15 million equity line of creditagreement with Swartz Private Equities, LLC (Swartz) was not available between October2001 and May 2002 due to a Securities and Exchange Commission rule change thatnecessitated renegotiating the contract with Swartz and filing a new registrationstatement which was filed and became effective on April 30, 2002. The Swartz agreementexpired on February 27, 2004. During the years ended December 31, 2004 and 2003, $-0- and$119,600, respectively, were received under the Swartz agreement. The Swartz equityfunding was not able to function to meet the Company’s ongoing working capital needs,so private placements of stock with attached three year warrants have been undertakensince the fourth quarter of 2002. $843,500 and $703,500 was raised from private placementsduring 2004 and 2003, respectively. In addition, the Company sold GPXM and other sharesduring the year ended December 31, 2004, raising a total of $356,100 and $235,000 wasreceived from the exercise of warrants. For 2003, sale of GPXM shares raised $786,400 and$185,800 was received from the exercise of warrants. Subsequent to December 31, 2004 theCompany has received $560,000 from the private placement and $6,000 from the sale of GPXMstock.

The Company is actively working to establish a longer term financingplan that will identify capital sources for the Company’s financing needs over a twoto three year period. Once this plan is established, needs for financing will be adjustedand the plan will be extended annually.

ITEM 7.FINANCIAL STATEMENTS
The response to this Item is submitted under Item 13.

 

ITEM 8.CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
        ACCOUNTING AND FINANCIAL DISCLOSURE
On November 7, 2003 Kafoury,Armstrong & Co. ("Kafoury") resigned as our independent auditors becauseKafoury had not registered with the Public Company Accounting Oversight Board (PCAOB) andwas discontinuing its SEC practice. 
For each of the two fiscal years prior to Kafoury’s resignation,the certifying accountant’s report on our financial statements was modified as to anuncertainty. The uncertainty in each of the two years was a substantial doubt about ourability to continue as a going concern. 

During the two fiscal years ended December 31, 2002 and subsequentinterim periods through November 7, 2003, there have been no disagreements between us andKafoury regarding accounting principles or practices, financial statement disclosure, orauditing scope or procedures and Kafoury has not advised us of any of the mattersidentified in paragraph (a)(1)(v) of Item 304 of Regulation S-K.

On November 7, 2003 we appointed Cacciamatta Accountancy Corporation("Cacciamatta") of Irvine, California as our independent registered publicaccounting firm. During the two fiscal years ended December 31, 2002 and through November7, 2003, we have not consulted Cacciamatta with respect to either (a) the application ofaccounting principles to a specified transaction,

32

either completed or proposed, or the type of audit opinion that mightbe rendered on our financial statements; or (b) any matter that was either subject of adisagreement (as defined in paragraph 304(a)(1)(iv) or a reportable event (as described inparagraph 304(a)(1)(v) of Item 304 of Regulation S-K). 

To our knowledge, there is no accounting or financial disclosuredispute involving any present or former accountant.

 

ITEM 8A CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. As of the end of    the period covered by this report, we conducted an evaluation, under the supervision and    with the participation of our chief executive officer and chief financial officer of our    disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the    Exchange Act). Based upon this evaluation, our chief executive officer and chief financial    officer concluded that our disclosure controls and procedures are effective to ensure that    information required to be disclosed by us in the reports that we file or submit under the    Exchange Act is recorded, processed, summarized and reported, within the time periods    specified in the Commission's rules and forms. 

(b) Changes in internal controls. There was no change in our internal    controls or in other factors that could affect these controls during our last fiscal    quarter that has materially affected, or is reasonably likely to materially affect, our    internal control over financial reporting."

 

 

PART III

ITEM 9.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
A. I. Directors and Executive Officers - Summary Information.
The following are the directors and executive officers of the Company:

Age as ofName
12/31/04PositionPosition Held SinceDr. John W. Whitney
58President/Treasurer May 1988DirectorPaul H. Durckel 
87DirectorSeptember 1995Howland S. Green
51Northeast Manager April 2005of GOLD’n GRO salesDirectorGregory S. Skinner 
50SecretaryDecember 1990Duane H. Rasmussen
74Vice President; November 1997Vice President and May 1994General Manager-IMI
1) For directors, the term of office is until the next annual meetingof shareholders. For officers, the term of office is until the next annual meeting of theBoard of Directors, presently scheduled to be held immediately following the annualmeeting of the shareholders.

33

II. Narrative Information Concerning the Directors and Executive
    Officers of the Company.

John W. Whitney:
In addition to being the President and a Director of the Company, 1988to present, Dr. Whitney is the President and a Director of each of the operatingsubsidiaries, Itronics Metallurgical, Inc. and Whitney & Whitney, Inc. Dr. Whitneyalso serves as the General Manager of American Hydromet, a joint venture.

He received his Ph.D. in Mineral Economics from Pennsylvania StateUniversity in 1976, his M.S. in Mineralogy from the University of Nebraska in 1971, andhis B.S. in Geology from the University of Nebraska in 1970. Dr. Whitney has served asPresident of Whitney & Whitney, Inc. since its formation in 1977.

Prior to his serving as W&W full-time president, Dr. Whitney workedas a consultant for the Office of Technology Assessment, U.S. Congress, doing analysis ofvarious Alaskan mineral issues (1977-1978), a consultant for various government agencies,including the office of Mineral Policy Analysis in the U.S. Department of Interior, andthe Washington office of the U.S. Bureau of Mines, consulting firms, law firms and miningcompanies on a variety of mineral planning issues (1976-1977), as a consultant for BKWAssociates, Inc. evaluating mining investment opportunities in Mexico and the Philippines(1973-1975), and as a geologist-mineralogist for Humble Oil & Refining Company andGeoTerrex Ltd. (1971-1972).

Dr. Whitney is an internationally recognized consultant in the field ofMetal and Material Resource Economics. Dr. Whitney has presented seminars for variousclients on Mining Economics, and has taught a three-credit graduate course onInternational Metal Economics for the University of Arizona's College of Mines. Dr.Whitney is an Honorary Faculty Member of the Academy for Metals and Materials under theseal of the American Society for Metals. Dr. Whitney has made numerous presentations andwritten a number of publications on various technical subjects within his broad area ofexpertise. Dr. Whitney is coinventor of the American Hydromet process technology and holdsfour patents. Dr Whitney was selected as Nevada’s Inventor of the Year for 2000 andbecame a member of the Inventor’s Hall of Fame at the University of Nevada, Reno.

Paul H. Durckel:

Mr. Durckel has served as a Director of the Company since September1995. He received a pre-legal degree from Stanford University in 1940. He has servedvarious companies involved in fertilizer manufacturing and sales for approximately 30years. He is presently an Independent Real Estate Salesman for Verus Realty. He servedMyers Realty, Inc. in varying capacities, including Broker-Salesman, Consultant, Manager,Vice President of Operations, and Director, from 1987 to 2001. His experience in thefertilizer industry includes Vice President and General Manager and Vice President-Operations for American Plant Food Corp., Executive Assistant to the Chairman for BestFertilizers Co., Vice President and General Manager for Best Fertilizer of Texas, and VicePresident and General Manager for Farm Services Co.

34

Howland S. Green

Mr. Green was appointed as our director and as the Northeast Manager ofGOLD’n GRO Sales in April 2005. He received a B.Sc. degree in plant science andlandscape architecture from the University of Rhode Island in 1981. He founded the HollyRidge Nursery in Kingston, Rhode Island in 1989 and was its owner and President until thebusiness was sold in September 2005. He is the concept creator and a founder of the NorthAmerican Deer Management Network. Mr. Green researched and developed the Mirrepel andsubsequently co-developed the GOLD’n GRO Guardian systemic deer and rabbitrepellents. Through his ownership of the Holly Ridge Nursery he has gained extensiveknowledge of the landscape construction and maintenance and wholesale and retail nurserymarkets. He has also served as consultant to "Ask This Old House".

Gregory S. Skinner, Esq.

Mr. Skinner has served as secretary and general counsel of the Companyand its subsidiaries since December 1990. He obtained his B.A. degree in Economics fromthe University of California at Berkeley in 1976. He obtained his J.D. degree fromHastings College of the Law, University of California at San Francisco in 1979. He islicensed to practice law in the states of California and Nevada. He retired from thepractice of law on January 1, 2003 and is "of counsel" to the law office ofWatson & Rounds, a Professional Corporation (WR). Prior to December 31, 2002 he was ashareholder in Skinner, Watson & Rounds, which had offices located in Reno, Las Vegas,and Incline Village, Nevada. Prior to becoming Secretary of Itronics Inc., Mr. Skinner hasprovided legal services and advice to Whitney & Whitney, Inc. since 1980.

Duane H. Rasmussen:
Mr. Rasmussen has served as Vice President and General Manager of IMIsince May 1994. He became Vice President of the Company in November 1997. He initiallyjoined the Company in 1991 as Assistant Manager and Business Consultant for W&W. Hereceived his B.S. degree in Chemical Engineering from the University of Wisconsin in 1953and his M.B.A. in Industrial Management in 1955 from the same University. He served asPresident of Screen Printing Systems, Inc. from 1987 to 1990 and from 1995 to October1998. Other business experience includes approximately 20 years with Jacobs EngineeringGroup, Inc. in varying capacities, including Project Manager, Regional Sales Manager,Regional Vice President, and Group Vice President.

B. AUDIT COMMITTEE

At present the Company does not have an audit committee andconsequently the entire Board serves as the audit committee. The Board presently consistsof three members, one of whom is independent. The Company has interviewed severalqualified individuals for the position of Audit Committee Financial Expert on the Board ofDirectors. All have declined to serve, with the primary reason being personal liabilityissues, especially the perceived view that being the "financial expert"increases the individual’s personal exposure over that of being a regular Boardmember. 

C. CODE OF ETHICS
The Board of Directors has adopted a Code of Business Conduct andEthics (Code) that is applicable to the Company’s directors, principal executive andfinancial officer, principal accounting officer or controller, and persons performingsimilar functions. A copy of the Code

35

is included in this report as Exhibit 14. A copy of the Code may beobtained by anyone, without charge, by requesting a copy either by telephoning (775)689-7696 and asking for investor relations or by e-mailing the Company atwww:itronics.com. If requesting by e-mail, please indicate a preference of a reply bye-mail or by physical mail. 

 

ITEM 10.EXECUTIVE COMPENSATION.
Summary of Cash and Certain Other Compensation

The following table sets forth information as to the compensation ofthe Chief Executive Officer and the four most highly compensated officers whosecompensation for the year ended December 31, 2004 exceeded $100,000:

Long Term
CompensationName and
SecuritiesPrincipalCalendarAnnual    Compensation
UnderlyingPositionYear
Salary
Bonus
Options    (#)Dr. John W. Whitney:
2004
$126,150
$-0-
550,000President, Treasurer 
2003
$126,375
$-0-
-0-and Director (1) (2) 
2002
$127,350
$-0-
3,250,000Duane H. Rasmussen
2004
$132,000
$-0-
425,000Vice President, VP
2003
$132,000
$-0-
-0-and General Manager 
2002
$132,000
$-0-
-0-IMI (3)
(1) The 2004, 2003 and 2002 salary amounts include $125,000, for eachyear, respectively, that were not paid currently. In 2003 Dr. Whitney converted $260,000of these amounts into the then existing private placement at $0.08 per share for a totalof 3,250,000 shares plus an equal number of three year warrants. This transaction is underthe same terms and conditions as for other investors in the current private placement,consequently, the warrants are treated as non-compensatory. These shares have not yet beenissued, pending accumulation of sufficient cash to pay required withheld payroll taxes. 

Effective January 1, 1999, Dr. Whitney was granted an option for1,000,000 restricted common shares at $0.25 per share, effective July 1, 2002 he wasgranted an option for 3,000,000 restricted common shares at $0.30 per share, and effectiveMay 7, 2004 he was granted an option for 550,000 restricted common shares at $0.15 pershare. These options are exercisable at any time until one year after Dr. Whitney leavesthe employment of the Company. Effective October 2, 2002 Dr. Whitney was granted a fiveyear option for 250,000 restricted common shares at $0.20 per share. 

(2) The salary amounts listed above include $1,150, $1,375, and $2,350for 2004, 2003, and 2002, respectively, that represent compensation paid in common stockfor service as a director of the Company. The compensation plan for all directors was2,500 shares per quarter for 2004 and previous years.

(3) The 2004, 2003, and 2002 salary amounts include $55,000, $77,000,and $132,000, respectively, that were not paid currently. In 2003 Mr. Rasmussen converted$170,000 of these amounts into the then existing private placement at $0.08 per share fora total of 2,125,000 shares plus an equal number of three year warrants. This transactionis under the same terms

36

and conditions as for other investors in the current private placement,consequently, the warrants are treated as non-compensatory. These shares have not yet beenissued, pending accumulation of sufficient cash to pay required withheld payroll taxes.

Effective May 7, 2004 Mr. Rasmussen was granted a compensatory optionfor 425,000 restricted common shares at $0.15 per share. This option is exercisable at anytime until one year after Mr. Rasmussen leaves the employment of the Company.

Option Grants in Last Fiscal Year:

Number of
% of    Total
Securities
Options    to
Underlying
Employees
Exercise
Options
in Fiscal
or BaseExpirationName
Granted    (1)
Year
PriceDateDr. John W. Whitney 
550,000 
33%
$0.15One year after employment    endsDuane H. Rasmussen
425,000
25%
$0.15One year after employment    ends
(1) In addition to the above, Dr Whitney acquired a total of 1,200,000non- compensatory three year warrants by converting $120,000 of short term loans into thethen existing private placement. All transactions were under the same terms and conditionsas for other investors in current private placements and consequently the warrants aretreated as non-compensatory. 

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

Values

 

Options Exercised:

Shares    Acquired onName
Exercise    (#)
Value    RealizedDr. John W. WhitneyNon-compensatory (1)
4,750,461
$ -0-
 

(1) Dr. Whitney exercised non-compensatory warrants for 4,750,461shares by paying cash of $185,008 and converting short term debt totaling $195,029. Sincethe warrants were non-compensatory, no realized value is listed above.

 

Options Unexercised:

Number of Securities
Value of Unexercised
Underlying Unexercised
In-the-Money Options
Options at 12/31/04
At 12/31/04Name 
Exercisable
Unexerciseable
Exercisable
UnexerciseableDr. John W. Whitney Compensatory
4,800,000
-0-
$ -0- (1)
$ -0-Non-compensatory 
1,200,000
-0-
$ -0- (1)
$ -0-Duane H. RasmussenCompensatory
425,000
-0-
$ -0- (2)
$ -0-Non-compensatory
2,125,000
-0-
$ -0- (2)
$ -0-
37

(1)If value realized was based on the average of the closing bid andask prices on December 31, 2004, the value realized would have been $-0- for thecompensatory options and $-0- for the non-compensatory warrants. The securities underoption, common stock of the Company, are restricted under Rule 144 and thus are nottradable within one year of exercise. In addition, as an officer and a greater than 10%shareholder of the Company, Dr. Whitney is further restricted by SEC regulations as to thesale of the Company’s securities. The actual value realized, if and when thesecurities are sold, may be more or less than the value listed above. Consequently, thevalue of the unexercised options is reported at $-0-.

(2)If value realized was based on the average of the closing bid andask prices on December 31, 2004, the value realized would have been $-0- for thecompensatory and non-compensatory warrants. The securities under option, common stock ofthe Company, are restricted under Rule 144 and thus are not tradable within one year ofexercise. In addition, as an officer of the Company, Mr. Rasmussen is further restrictedby SEC regulations as to the sale of the Company’s securities. The actual valuerealized, if and when the securities are sold, may be more or less than the value listedabove. Consequently, the value of the unexercised options is reported at $-0-.

 

ITEM 11.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS
a) Equity Compensation Plan Information  
Number    of securities to be issued upon exercise of outstanding options, warrants and rights
Weighted-average    exercise price of outstanding options, warrants and rights
Number of    securities remaining available for future issuance under equity compensation plans    (excluding securities reflected in column (a)
Plan    Category
(a)
(b)
(c)Equity compensation plans    approved by security holders
-0-
$-0-
-0-Equity compensation plans    not approved by security holders
5,996,626
$0.25
989,000
Total
5,996,626
$0.25
989,000
 

b) Security Ownership of Certain Beneficial Owners.
The following table sets forth certain data with respect to thosepersons known to the Company, as of March 31, 2005, to be the beneficial owners of morethan 5% of the outstanding shares of common stock of the Company:

38

 

Amount and Nature of Beneficial Ownership
Common    SharesName and
Which May    Be
PercentAddress of
Common    Shares
Acquired    Within
ofBeneficial Owner
Presently    Held
60    days
Total
ClassJohn W. WhitneyP.O. Box 10725Reno, NV 89510(1)(2)(3)(4)
29,399,530
6,000,000
35,399,530
17.3
(1) Director

(2) Officer

(3) Includes 72,768 shares owned by Maureen E. Whitney, Dr. Whitney'swife. 

(4) Dr. Whitney’s options include compensatory options of1,000,000 shares at $0.25 per share, 3,000,000 shares at $0.30 per share, 250,000 sharesat $0.20 per share, and 550,000 shares at $0.15 per share. Dr. Whitney also hasnon-compensatory three year warrants for 1,200,000 shares at $0.075, $0.15, and $0.225 pershare for the first through third years of the option period. He received these warrantsby converting $120,000 in short term loans into the then existing private placement underthe same terms and conditions as other investors.

c) Security Ownership of Management.
The following table sets forth as of March 31, 2005, certaininformation, with respect to director and executive officer ownership of common stock inthe Company:

Amount and Nature of Beneficial Ownership
Common    Shares
PercentName and 
Which May    Be
ofAddress of 
Common    Shares
Acquired    Within
ClassBeneficial    Owner 
Presently Held
60 days(1)
Total
(2)Dr. John W. WhitneyP.O. Box 10725Reno, NV 89510 (3)(4)(5) 
29,399,530
6,000,000
35,399,530
17.3Paul H. Durckel1655 Highway 395Minden, NV 89423 (3)
574,668
138,400
713,068
.4Duane H. RasmussenP.O. Box 10725Reno, NV 89510 (4)
4,364,011
2,550,000
6,914,011
3.4All directors andexecutive officers asa group (4 persons) 
34,990,528
8,688,400
43,678,928
21.1
39

(1) Dr. Whitney’s options include compensatory options of1,000,000 shares at $0.25 per share, 3,000,000 shares at $0.30 per share, 250,000 sharesat $0.20 per share, and 550,000 shares at $0.15 per share. Dr. Whitney also hasnon-compensatory three year warrants for 1,200,000 shares at $0.075, $0.15, and $0.225 pershare for the first through third years of the option period. He received these warrantsby converting $120,000 in short term loans into the then existing private placement underthe same terms and conditions as other investors. Mr. Durckel has three year warrants toacquire 138,400 restricted common shares related to his cash investment in the 2002 and2003 Equity Private Placements, which are convertible at $0.08, $0.16, and $0.24 per sharefor the first through third years of the option period. Mr. Rasmussen has a three yearnon-compensatory warrant to acquire 2,125,000 shares at $0.08, $0.16, and $0.24 per sharefor the first through third years of the option period. He acquired this warrant byinvesting $170,000 of his back salary in the existing private placement. Mr. Rasmussenalso was granted a compensatory option to acquire 425,000 restricted common shares at$0.15 per share. This option is exercisable at any time until one year after Mr. Rasmussenleaves the employment of the Company.

(2) The percent of class is based on the sum of 198,389,068 sharesoutstanding or to be issued as of March 31, 2005 plus, for each individual, the number ofcommon shares as to which the named individual has the right to acquire beneficialownership within 60 days of March 31, 2005.

(3) Director

(4) Officer

(5) Includes 72,768 shares owned by Maureen E. Whitney, Dr. Whitney'swife. 

 

c) Changes in Control
The Company is not aware of any arrangement which at some later dateresults in changes in control of the Company.

 

ITEM 12.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Advances from an officer/stockholdertotaled $161,525 and $248,168 at December 31, 2004 and 2003, respectively. 
$389,127 and $218,185 of the accrued management salaries as of December31, 2004 and 2003, respectively, is for salary in arrears due to severalofficer/stockholders and employee/stockholders. In addition, salary in arrears of $523,800and $515,100 for 2004 and 2003, respectively, are included in stock to be issued at therespective year ends. These amounts represent the portion of salaries earned but unpaidthat the officers/employees/stockholders have agreed to accept in our common stock. Thenumber of shares to be issued are 6,488,021 and 6,220,624 for 2004 and 2003, respectively.Issuance of the stock is pending sufficient cash available to pay the related federalwithholding taxes. Interest accrued at 12% per annum on salaries due officer andemployee/stockholders amounted to $97,869 and $113,233, respectively, in 2004 and 2003. Ofthese amounts, $94,299 and $109,290 for 2004 and 2003, respectively, were paid (or will bepaid) by issuance of 990,187 and 808,092 shares of restricted common stock. 

40

Interest expense on related party loans amounted to $31,041 and $33,706for the years ended December 31, 2004 and 2003, respectively. Accrued interest on relatedparty loans totaled $6,307 and $42,876 at December 31, 2004 and 2003, respectively. 

After approval from our Board of Directors, in March 1999 oursubsidiary, WWI, agreed to provide technical services to Golden Phoenix Minerals, Inc.(GPXM), a junior mine exploration and development company whose common shares trade on theOTC Bulletin Board. Services were billed monthly and WWI received a combination of GPXMcommon stock, SEC Rule 144 restricted common stock, and cash. The consulting agreementexpired on March 1, 2005 and WWI no longer provides services to GPXM. 

Separately, Dr. Whitney personally agreed to acquire up to 10,000,000common shares of GPXM at $0.10 per share, making him beneficial owner of more than tenpercent of GPXM. Any unexercised options under this arrangement can be assigned to WWI.Dr. Whitney is a principal in a group that controls the mining claims underlying one ofGPXM's principal exploration and development properties. At December 31, 2004 WWI owned123,198 restricted GPXM shares. At December 31, 2003 WWI owned 736,442 restricted GPXMshares. The initial Rule 144 one year period for resale began in April 2000, and continuesmonthly thereafter. Total revenue from GPXM for 2004 and 2003 was $224,039 and $146,893,respectively. A total of $101,281 and $13,707 is included in accounts receivable atDecember 31, 2004 and 2003, respectively. At December 31, 2004, the average bid/askedprice for GPXM common was $0.213, resulting in a value of shares held on that date of$26,180. Included in the GPXM shares held at December 31, 2003 and 2002 are 300,000 and1,050,000 restricted common shares, respectively, that were acquired by WWI purchasing$0.10 options from Dr. Whitney and subsequently exercising the options by offsettingaccounts receivable due it from GPXM. The purchase price of the options was $109,275,which was determined at 85% of fair market value of the then current trading price ofGPXM, less the $0.10 option price. This valuation method is under the same terms that WWIuses to accept GPXM restricted common shares for its monthly services. Dr. Whitneyaccepted Company restricted common shares in the 2002 Equity Private Placement as paymentfor the options, which amounted to 1,365,938 shares plus an equal number of warrants withconversion prices ranging from $0.08 to $0.24 per share. The total cost to WWI of theseGPXM shares was $214,275 and the market value at December 31, 2002 was $241,500. The300,000 shares held at December 31, 2003 were valued at $135,750 and had a cost of$70,650. 

During 2004 Dr. Whitney loaned WWI 103,765 shares of GPXM stock at avalue of $28,276 The loaned shares were sold by WWI for $25,097, for a realized loss of$3,179. The loan was repaid in 2004 by conversion into the Company’s restrictedcommon stock when Dr. Whitney exercised warrants he acquired in 2003. During the firstquarter of 2002 Dr. Whitney loaned WWI 600,000 shares of GPXM stock at a value of$105,000. The loaned shares were sold by WWI for $83,045, for a realized loss of $21,955.In 2002, WWI repaid 416,463 of the GPXM shares out of shares owned by it at a value of$72,881 and a realized gain of $35,587. During 2003 the remaining balance of the loan andaccrued interest was paid by a combination of 87,283 GPXM shares, 250,000 shares of othermarketable securities, and 150,461 of our restricted common shares. The portion of theloan paid in our shares was converted into the $0.08 per share Private Placement under thesame terms and conditions as other investors, including an equal number of three yearwarrants. WWI realized a net gain of $19,369 on the transaction. 

41

During 2003 WWI’s lease of a vehicle utilized by Dr. Whitney wascompleted. Dr. Whitney purchased the vehicle by financing it through a commercial lender.The purchase price was $21,741 and the monthly payment for four years is $531. WWI isleasing the vehicle from Dr. Whitney by making the monthly payments to the commerciallender and will acquire ownership of the vehicle when the loan is paid in full.

 

ITEM 13.FINANCIAL STATEMENTS, EXHIBITS AND REPORTS ON FORM 8-K.
I. Index of Financial Statements and Exhibits1. Index of Financial    Statements:
Page    No.