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<p ALIGN="CENTER">UNITED STATES</p>

<p ALIGN="CENTER">SECURlTIES AND EXCHANGE COMMISSION</p>

<p ALIGN="CENTER">Washington, DC 20549</p>
</font><font FACE="Courier New" SIZE="2">

<p ALIGN="CENTER">FORM I0-KSB</p>

<p>(Mark One)</p>

<p>(X) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES </p>

<p>EXCHANGE ACT OF 1934</p>

<p>                                    
<u>For the fiscal year ended December 31, 1999</u></p>

<p>( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES </p>

<p>EXCHANGE ACT OF 1934 (No Fee Required)</p>

<p>For the Transition period from______ to_______</p>

<p>Commission file number 33-18582</p>

<p> </p>

<p align="center"><u>ITRONICS INC.</u></p>

<p align="center">(Name of small business issuer in its charter)</p>

<p> </p>

<p align="center"><u>Texas</u>
                             
<u>75-2198369</u></p>

<p align="center">(State or other jurisdiction of   (I.R.S. Employer
Identification Number)</p>

<p align="left">           incorporation
or organization)</p>

<p align="left"> </p>

<p align="center"><u>6490 South McCarran Boulevard, Building C, Suite 23 Reno, Nevada
89509</u> </p>

<p align="center">(Address of Principal Executive Offices) Zip Code</p>

<p>Issuer's telephone number: <u>(702) 689-7696</u></p>

<p>Securities registered under Section 12(b) of the Exchange Act:</p>

<p>Title of each class
                  
Name of each exchange on</p>

<p>                                          
which registered</p>

<p><u>      None      </u>                         <u>
       None
          </u></p>

<p> </p>

<p>Securities registered under Section 12(g) of the Exchange Act:</p>

<p align="center"><u>None</u></p>

<dir>
  <dir>
    <dir>
      <dir>
        <dir>
          <dir>
            <dir>
              <dir>
                <p>(Title of class)</p>
              </dir>
            </dir>
          </dir>
        </dir>
      </dir>
    </dir>
  </dir>
</dir>

<p>Check whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (x) No ( )</p>

<p>Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is
not contained in this form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. (x)</p>

<p> </p>

<hr>

<p> </p>

<p>State issuer's revenues for its most recent fiscal year: <u>$905,884</u>. </p>

<p> </p>

<p>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 of February 29,
2000, was $73,669,900.</p>

<p>As of February 29, 2000 there were issued and outstanding 72,354,148 shares of the
Registrant's Common Stock.</p>

<p> </p>

<p align="center">2</p>

<p align="center"> </p>

<hr>

<p> </p>

<p align="center">ITRONICS INC. AND SUBSIDIARIES</p>

<p align="center">1999 FORM 10-KSB ANNUAL REPORT</p>

<p align="center">TABLE OF CONTENTS</p>

<p align="center"><u>PART I</u></p>

<p>                                          
                                    
<u>PAGE</u></p>

<p>Item 1. Description of Business
                                          
      
4</p>

<p>Item 2. Description of Property
                                          
      
22</p>

<p>Item 3. Legal Proceedings
                                          
            
22</p>

<p>Item 4. Submission of Matters to a Vote of Security Holders
                    
23</p>

<p align="center"><u>PART II</u></p>

<p>Item 5. Market for Common Equity and Related Stockholder Matters
               
24</p>

<p>Item 6. Management's Discussion and Analysis or Plan of Operation
               25</p>

<p>Item 7. Financial Statements
                                          
         
29</p>

<p>Item 8. Changes in and Disagreements with Accountants on Accounting and </p>

<p>Financial Disclosure
                                          
                 
29</p>

<p align="center"><u>PART III</u></p>

<p>Item 9. Directors, Executive Officers, Promoters and Control Persons; </p>

<p>Compliance with Section 16(a) of the Exchange Act
                              
30</p>

<p>Item 10. Executive Compensation
                                          
      
32</p>

<p>Item 11. Security Ownership of Certain Beneficial Owners and Management
         34</p>

<p>Item 12. Certain Relationships and Related Transactions
                        
36</p>

<p>Item 13. Financial Statements, Exhibits and Reports on Form 8K
                 
37</p>

<p> </p>

<p align="center">3</p>

<p align="center"> </p>

<hr>

<p> </p>

<p>ITEM 1. <u>DESCRIPTION OF BUSINESS.</u></p>

<p>Itronics Inc. (the Company), is a Texas corporation formed in 1987 and is now based in
Reno, Nevada. Through its subsidiaries, the Company specializes in photobyproduct
recycling and fertilizer manufacturing, precious metals recovery and refining, mineral
economics, and mining technical services. The Company currently operates the following two
business segments under separate wholly owned subsidiaries:

<dir>
  <dir>
    <p>1. <u>Photobyproduct Fertilizer</u>: * This segment, known as Itronics Metallurgical,
    Inc., operates a photobyproduct recycling plant and is developing new silver-gold refining
    technology. Parts of the photobyproduct process technology are patentable but are not yet
    patented. The silver-gold refining process is patented and has worldwide applicability.
    Revenues are generated by photobyproduct management services, sale of silver, and sale of
    Gold’n Gro liquid fertilizer products. Construction of a commercial scale
    photobyproduct processing and fertilizer manufacturing plant was completed in February
    2000. </p>
  </dir>
</dir>

<p></font><font FACE="Courier New" SIZE="1">           
*In 1995 Itronics initiated a legal review of various segments of RCRA (Resource Recovery
and               
Conservation Act)law that might pertain to Itronics and its customers. Itronics reached
the               
conclusion that certain of its large scale customers are exempt from RCRA since the value
of               
the customer's portion of the recovered silver exceeds the processing costs charged.
Itronics
               also
concluded that once the various photo solutions are 100% utilized in fertilizer or other
              
products, then all Itronics customers will be exempt from RCRA requirements. Itronics
               believes
it is the only organization in the U.S. with the ability to achieve this
               
distinction. Consequently, when referring to the operations of other organizations, or to
               
the general market, the term photowaste is used, and when referring to Itronics'
operations
               
the term photobyproduct is used. </p>
</font><font FACE="Courier New" SIZE="2">

<p>        2. <u>Mining Technical Services</u>: This
segment, known as Whitney & Whitney, Inc., provides
            mining and
materials management, geology, engineering and economics consulting,
            and publishes
specialized mineral economics and materials financial reports. It
            employs technical
specialists with expertise in the areas of mining, geology,
            mining
engineering, mineral economics, material processing, and technology
            development.
Technical services have been provided to many of the leading U.S. and
            foreign mining
companies, several public utilities with mineral interests, to
            various state
agencies, the U.S. and foreign governments, and the United Nations
            and the World
Bank.</p>

<p>The Company has three wholly owned subsidiaries, Whitney & Whitney, Inc.
("W&W"), Itronics Metallurgical, Inc. ("IMI"), and Itronics
California, Inc. (ICI), a 92.5% owned partnership, Nevada Hydrometallurgical Project
("NHP"), and an 81.63% owned joint venture, American Hydromet. A brief
description of each organization follows:</p>

<p align="center">4</p>

<p align="center"> </p>

<hr>

<p>1. <u>Itronics Metallurgical, Inc.:</u></p>

<p>IMI is a wholly owned subsidiary of the Company. IMI was established in 1981 to manage
the metallurgical and materials processing operations being developed under W&W and
American Hydromet research and development programs. IMI has been the main provider of
management services to American Hydromet since 1986. IMI is now managing the
photobyproduct fertilizer segment as discussed below. IMI is responsible for precious
metal and other material product sales, and markets a five ounce bar bearing a unique
hallmark, "Silver Nevada Miner".</p>

<p>2. <u>Nevada Hydrometallurgical Project:</u></p>

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

<p>3. <u>American Hydromet:</u></p>

<p>American Hydromet is a Nevada joint venture that was formed in 1985 to develop certain
silver and gold refining/recovery technology and to create business based upon such
technology. The photobyproduct fertilizer segment now being managed by IMI is owned by
American Hydromet. The ownership interests in American Hydromet are: NHP for 76.5%, IMI
for 1%, and American Gold & Silver Limited Partnership ("AG&S") for
22.5%. AG&S is a Nevada limited partnership, for which W&W serves as the general
partner and owns a general and limited partnership interest totaling 10.907%. The Company
owns a 32.99% limited partnership interest in AG&S. In total, the Company owns
approximately 81.63% of American Hydromet.</p>

<p>4. <u>Itronics California, Inc.</u></p>

<p>ICI was acquired in March 1999 by Itronics Metallurgical, Inc. ICI, originally named PD
West, Inc., was acquired for its phosphoric acid recycling technology. ICI had no business
operations in 1999, but plans for the company are to utilize the phosphoric acid
technology and it may eventually operate IMI's photobyproduct and fertilizer business in
California.</p>

<p>5. <u>Whitney & Whitney, Inc.:</u></p>

<p>W&W was incorporated in 1977 and is a wholly owned subsidiary of the Company.
W&W is primarily a mineral consulting firm that provides technical services to the
mining industry. The broad range of services provided by W&W includes mineral
economics, geological studies, mining and cost engineering, and project management
services. W&W has extensive experience with base metals, precious metals, such as gold
and silver, specialty minerals, such as molybdenum and tungsten, coal, and industrial
minerals. W&W has performed substantial services for small, medium, and large mining
projects. W&W has performed services for many leading U.S. and foreign mining
companies, various state agencies, for the United States and several foreign governments
and the United Nations. W&W was under contract with the Country of Bolivia from 1986
through early 1992 to assist it in developing its mining industry. </p>

<p align="center">5</p>

<p align="center"> </p>

<hr>

<p>SUMMARY HISTORY OF OPERATIONS</p>

<p>Whitney & Whitney, Inc. was incorporated in Nevada in 1977 to provide a wide range
of technical services to the mining industry. During the 1980's, W&W completed several
multi-client fertilizer marketing studies. Also during this time period, W&W was
contacted by 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.</p>

<p>Over the years, the mining technical services business was highly cyclical, closely
following the base and precious metals industries, and specifically, the price of copper,
other base metals and gold. This condition pointed out the necessity of expanding the
Company's business into new industries. When considering the fertilizer marketing studies
previously performed, along with the growing national issue of sewer system contamination
with toxic photowastes and silver toxicity to fish, it seemed to be a natural extension of
W&W's existing expertise to expand into the photowaste recycling business. In 1987 the
decision was made to move forward with research and development of a process to extract
silver from photographic wastes and the necessary permits to establish an R&D facility
under RCRA were obtained. In 1988 a patent and literature research project regarding the
use of photowastes in fertilizer was begun. During that year, experimentation with
processed run of plant liquids as fertilizer was also begun. A description of some of the
obstacles encountered and overcome over the ensuing years, follows:</p>

<p>A. In 1988 the Company acquired W&W. The acquisition was structured to obtain
approximately $1.7 million in equity financing to support the photobyproduct fertilizer
R&D project. Due to a number of factors, including a change in federal and state laws
regarding trading in penny stocks, only a small portion of this funding was received.
Consequently, the Company was undercapitalized from the time of acquisition of W&W in
1988.</p>

<p> </p>

<p>B. In the initial stages of the R&D project, it was believed that: (1) the primary
research on the integrated system for recycling photowaste into fertilizer would take
through 1992 to complete, and (2) the R&D effort would be self-supported by increasing
photowaste volume at the established service pricing. The basic research for demetallizing
photowaste solutions and for refining the silver were substantially complete by the end of
1992. However the research on the third segment of the integrated system, converting the
demetallized solutions to fertilizer, took four more years. Initially, it was believed
that "run of plant" solution, with minimal major nutrient supplementation, would
produce a quality fertilizer product. The early stages of research determined that the
product was too dilute and would need to be concentrated by supplementation with the major
nutrients, nitrogen, phosphate, and potassium, in order to produce the desired quality
product. This factor, combined with the seasonal nature of field testing the products,
resulted in the additional years required to perfect and field test the mix formulas in
the quantities needed for large scale manufacturing. </p>

<p align="center">6</p>

<p align="center"> </p>

<hr>

<p>Initially, it was believed that the R&D effort would be fully supported by
photowaste service revenue. However, two major factors prevented this from occurring.
First, during 1992 and 1993, there was reduced enforcement of applicable regulations by
various environmental agencies, and, second, during the same period, a competitor entered
the Northern Nevada market by offering free service in exchange for the contained silver
in photowaste solutions. In order to prevent loss of customers and to increase volume, the
Company instituted three price reductions of approximately 40% each during the period of
1992 to 1994. The result is that 1997 volume was 159% greater than 1992 volume, but
service revenue remained essentially the same throughout this time period, contributing to
on-going losses. </p>

<p>During this same time period, the Company worked with environmental officials to obtain
strengthened enforcement activity. Enforcement strengthened in 1996 and 1997, not only in
Northern Nevada, but in California and most of the other 48 states in the U.S. In 1996 the
Nevada regulatory authorities made changes in the Company's permit status that increased
the number of used chemical solutions that the Company can process for utilization in
fertilizer and other chemical concentrates. Tightening of regulatory enforcement also
reduced competitive price pressures by making it more difficult for service companies with
minimal compliance capability to continue to offer low cost services. The result was that
beginning in 1996 selective increases in service pricing became feasible.</p>

<p>The second major factor preventing the R&D project from being self-supporting is
that in 1991, photowaste volume limitations were placed on the Company by state and local
environmental agencies to prevent large quantities of photowaste being brought from
out-of-state to be disposed at Nevada solid waste sites. Photowaste volume reached the
threshold of these limitations in 1994. Consequently, the Company has had a limited
ability to increase photowaste volume to offset the price reductions dictated by market
conditions. These regulations are expected to remain in effect permanently. The Company is
overcoming this obstacle through utilization of the demetallized solutions in fertilizer
and other commercial products.<b> </b></p>
<b>

<p></b>A more detailed discussion of the business of the Company contained in Item 1 of
this report, based on the Company's two business segments which were briefly described
above, follows. The operating results of the two segments are discussed in Note 11 to the
Consolidated Financial Statements beginning on page 59 of this report.</p>

<p>PHOTOBYPRODUCT FERTILIZER</p>

<p>1. Research and Development</p>

<p>The photobyproduct fertilizer (the American Hydromet Project) segment of the Company
has primarily been involved in research and development, with the objective of developing
integrated technology that can be used to recycle photobyproduct materials, that recovers
all of the silver and all other toxic metals from those materials, and which utilizes
"heavy-metal-free" liquid photobyproducts in a liquid multi-nutrient fertilizer
product line for turf and other applications. The status of development of the three
integrated components is more fully described below:</p>

<p align="center">7</p>

<p align="center"> </p>

<hr>

<p>The technology was developed in a semi-works plant in Reno. Development of the
integrated technology represents a major technical innovation with global potential. There
are three separate functions for handling the waste photoliquids. The first is the
solution demetallization and conditioning process. This process is used to demetallize and
recondition the metal-bearing photofixers and photodevelopers that are picked up from
photousing businesses. This portion of the process is very efficient, recovering over
99.98% of all the contained toxic metals, and a very large percentage of contained iron.
There are two products from this part of the operation: (1) a metal-bearing sludge, and
(2) the conditioned, demetallized, liquids.</p>

<p>The metal-bearing sludge is dried and passed to the refining operation for separation
of the contained silver. This operation is also very efficient. More than 99.5% of the
silver contained in the sludge is recovered for sale. The refining was developed
specifically to handle the sludges from the liquid demetallization and conditioning
process. As such, the other heavy metals and iron contained in the sludge end up in a
glass byproduct and are rendered completely inert. The Company has formulated the glass so
that with minor additions of other compounds, it can be converted into usable products,
such as wall and floor tile. The Company plans to pursue glass product development once
the fertilizer is commercially operational.</p>

<p>The process, known as the "American Hydromet Silver-Gold Refining Process" is
a technological discovery that has the potential to significantly alter the proprietary
commercial gold-silver refining industry world-wide. This proprietary technology is
presently being further developed with continuing research and development.</p>

<p>The major innovation in the technology consists of using wet chemistry
(hydrometallurgy) to quantitatively separate gold and silver in very pure form, and to
entirely eliminate the need for electrolytic refining. The process is used to treat (1)
electro-sludges and electro-chips derived from photobyproducts such as developer solutions
and scrap film, and (2) zinc precipitates and electrolytic sludges from gold and silver
mines such as those found in Nevada and other locations. Based upon the technology,
American Hydromet currently has two business activities which are being commercially
developed:(1) photobyproduct recycling, and (2) silver/gold refining. The photobyproduct
recycling is a spin-off concept and additional spin-off businesses are expected as the
American Hydromet process and other technology associated with it are further developed.</p>

<p>The American Hydromet process is proprietary information. The U.S. Patent Office has
issued a process patent on the gold/silver separation process (U.S. Patent No. 4,662,938,
dated May 5, 1987). A patent on the same process was issued by South Africa in June, 1986
and patents were issued by Canada and Australia in September, 1989. The patents are owned
by American Hydromet. Other portions of the American Hydromet process are believed to be
patentable.</p>

<p>A priority objective of American Hydromet is to establish the complete capability for
recovering all of the valuable components of photobyproducts for sale and reuse. As a
result of the technology American Hydromet has and is developing, it has the potential of
becoming a major recoverer and refiner of silver and at the same time it has the
opportunity to become a major recycler of photobyproducts.</p>

<p align="center">8</p>

<p align="center"> </p>

<hr>

<p>The reconditioned photoliquids are used as a component of turf and other fertilizers.
The fertilizers are multi-nutrient nitrogen products and produce excellent results in
application. Development of the fertilizer took more than 9 years and involved a number of
stages of development. Important steps in the development of the fertilizer were: (1)
patent and applications literature research to determine if similar materials were being
used in fertilizer products, (2) initial plot testing, and chemical analysis of "run
of plant liquid" to determine the response of turf and different plants to the
non-supplemented liquid, (3) an extended period of mix testing and then large-scale field
testing of the mixes to determine the suitability for use on turf, (4) development of
manufacturing procedures for the chosen mix, and (5) large scale field testing by
different types of users to determine acceptability and to identify problems prior to
implementing a commercial manufacturing and marketing program. A problem inherent in
fertilizer product development is the seasonal nature of the business. Each series of plot
tests requires essentially one year because of the seasonal nature of plant growth. This
lengthy product development cycle will continue to apply to new fertilizer products that
are being developed.</p>

<p>After having made the commitment to this long-term development, Itronics believes it is
the only company in the world that has successfully demonstrated the ability to
manufacture an environmentally compatible fertilizer product line from liquid
photobyproducts that produces excellent results in use. As such, Itronics now has unique
proprietary technology for completely recovering the silver and for converting the waste
liquids into usable "heavy-metal-free" products, thereby achieving
environmentally acceptable total recycle of the waste stream.</p>

<p>Through 1997, the Company was testing its Gold'n Gro 20-1-7 in various commercial
applications, including golf courses, turf farms, and  professional lawn maintenance
organizations. In 1995 the Company began participating in a controlled fertilizer product
application comparison program sponsored by the University of California at Riverside. For
the second consecutive year, Gold'n Gro 20-1-7 was rated Number 1 in the program, which
compared "top of the line" multinutrient nitrogen fertilizers produced by
leading U.S. fertilizer manufacturers. Gold'n Gro 20-1-7 is registered in California and
Nevada. In early 1997, Gold'n Gro Iron, a fully chelated liquid iron supplement
fertilizer, was registered in California and Nevada. In mid 1997, development of Gold'n
Gro Manganese was completed. The manganese, iron and zinc included in this product are in
a citrate chelated form supplemented with EDTA chelate, which makes the micro-nutrients
readily available to plants. In August 1997, the Company received a national trademark for
the name "Gold’n Gro".</p>

<p>In early 1998 development of several new Gold’n Gro fertilizer products was
completed. These include Gold’n Gro 20-0-4 for use by nurseries and for vegetables,
Gold’n Gro 8-12-9 for use as a plant starter for vegetables and field crops, and
Gold’n Gro 6-3-9 for use by nurseries and for house plants, garden vegetables,
grapes, and citrus. In addition there are three formulas each for golf course tees/greens
and golf course fairways/roughs. The formulas are designed for cool season, mid-season
(spring and fall) and warm season. In early 1999 a decision was made to focus on just
eight products in order to simplify and speed up the introduction into the marketplace. </p>

<p align="center">9</p>

<p align="center"> </p>

<hr>

<p>IMI was developing a fertilizer injector system for use by golf courses and
professional growers to inject the Gold’n Gro fertilizers into drip and sprinkler
irrigation systems. Completion of this product was deferred after IMI was introduced to a
company that had developed a prototype injector system that was almost identical to the
IMI system that was under development and that will now be sold by IMI.</p>

<p>All Gold'n Gro products are carefully engineered to provide micro-nutrient content
adequate for plant nutrition, while also being safe for the environment.</p>

<p>The Company has identified potential applications for the specially conditioned liquids
in the mining industry, and has begun to seek joint venture partners to invest in the
needed research and development. This project is more fully discussed on page 21 of this
report.</p>

<p> </p>

<p>2. Operations</p>

<p>The Company has operated a semi-works plant for the purpose of completing development
of an integrated system to receive photobyproduct materials, recover the silver and other
metals, and convert the demetallized solutions to liquid turf fertilizer and other
products. A critical component of this system is to match, within a reasonable range, the
incoming volume of photoby-product solutions with the volume of utilization of those
solutions in fertilizer or other manufactured products. At the outset of the technology
development program, regulatory constraints were imposed to limit the amount of
photobyproduct materials that the Company could handle until a commercial fertilizer was
perfected, or some other commercial use for the material was developed. Now that testing
of the basic products is complete, and a new recycling facility is in operation, the
Company is aggressively seeking new photobyproduct solution business.</p>

<p>Photobyproduct management services is operating as a regional business with northern
Nevada as the center of its activities. The Company is serving more than 200 customers in
the northern Nevada market and believes that it has the dominant position in this market.
A satellite service operation has been established in the San Francisco Bay Area. Now that
a line of commercial fertilizer products has been perfected, and the Company's new
recycling plant is operational, the Company plans to expand its San Francisco Bay Area and
Northern California service operations.</p>

<p>The San Francisco Bay Area is large, but there are at least three strong competitors in
the market. Market conditions have changed over the past several years and pricing has
adjusted upwards from the lows seen in late 1994. The Company is now able to compete
effectively based upon pricing and service quality. </p>

<p>In late 1995, the Company sold a prototype installation of low temperature vacuum
distillation equipment to a large manufacturing company in northern Nevada. This equipment
separates the water from the photochemistry without destroying the basic chemical
components, and produces a high value concentrate. The separated water is further purified
and is usable in manufacturing operations. A valuable commercial product is produced, and
nearly 100% of water reuse is achieved.</p>

<p align="center">10</p>

<p align="center"> </p>

<hr>

<p>The distillation equipment began operations in March of 1996, and has performed
effectively since then. The concentrate being produced is up to desired standards, and
water quality is proving to be excellent. This same manufacturing company bought a second
distillation unit in early 1997. </p>

<p>The distillation concentrate has a high silver content and is dominantly composed of
ammonium thiosulfate (ATS) and EDTA chelates, the basic chemicals used in photo fixer
solutions. Itronics' fertilizer blending technology is designed to utilize the concentrate
in fertilizer.</p>

<p>Itronics' plan is to seek companies that handle sufficient volumes of photographic
liquids to justify purchase of the distillation equipment. The ATS concentrate can be
shipped in interstate commerce as a commercial product, resulting in the opportunity to
serve the national market. Successful introduction of this technology will increase the
value per gallon of material handled by a factor of five to ten, and will increase the
amount of silver handled per gallon of photoliquids received. As the supply of the ATS
concentrate grows, so too will the silver refining operation. The transition from low
silver content liquids to high silver content liquids will increase the importance of the
silver refining operations and silver sales. </p>

<p>Achieving profitability for the photobyproduct fertilizer segment required expansion of
the plant from the semi-works scale facility in Reno to a commercial scale. In January
1998 IMI entered into a lease/option agreement to acquire a 35,000 square foot
manufacturing facility on three plus acres of land in the Reno-Stead, Nevada area.</p>

<p>The purchase option price was $1,000,000, including a $300,000 down payment. The owner
agreed to finance $700,000 of the purchase price and had the alternative to carry it over
25 years at commercial rates with a 5 year balloon or by taking 2,491,103 shares of the
Company’s restricted common stock. In March 1999 IMI exercised the option to purchase
the facility and the seller agreed to take the $700,000 in the Company’s restricted
common stock. </p>

<p>The Reno/Stead manufacturing plant purchase was completed on March 31, 1999.
Originally, it was planned to move the pilot plant equipment to the new facility in much
the same configuration as the existing plant, with some additional equipment for increased
production capacity. However, market acceptance of the Gold’n Gro fertilizer products
and regulatory changes in California and Oregon that are tightening liquid photochemical
waste disposal requirements have shown the need for significantly expanded production
capacity. Consequently, the basic concept for the plant configuration was redesigned and
significantly expanded.</p>

<p>In addition, the building and fire codes and federal hazardous material regulations all
changed in 1999. Consequently, the permitting process was slowed while the regulatory
agencies developed and implemented guidelines for the new rules.</p>

<p>In late October 1999, the final necessary building permits were received and regulatory
approval was obtained to start up operations in the photochemical receiving and processing
and silver refining areas. Construction of piping systems and set-up of the tanks and
related equipment was completed in February 2000 and the City of Reno issued the
certificate of occupancy at that time. A "shake-out" period was begun in which
small batches of photobyproducts were processed and small batches of fertilizer were
manufactured. The purpose of this period is to test all of the equipment to ensure it
meets operating specifications and to train the appropriate personnel in plant operation.
Minimal problems were encountered and the "shake-out" period is substantially
complete. Production is now being scaled up in progressively larger batches.</p>

<p align="center">11</p>

<p align="center"> </p>

<hr>

<p>The new facility now makes it possible for IMI to expand fertilizer manufacturing and
silver refining to commercial scale operations.</p>

<p>The Company's revenues in the photobyproduct management business are generated from
three major sources: (1) the pick up and processing of photobyproduct solutions from
customers for which they pay the Company a fee; (2) recovery of silver from photographic
solutions and film and sale of the recovered silver; and (3) sale of the demetallized
solutions in fertilizer or sale for other specialized commercial markets.</p>

<p>The photobyproduct management services are typically performed pursuant to an exclusive
one year service agreement. The fee is based upon the silver content of the waste and
competitive market factors. The Company periodically reviews and adjusts the fees charged
for its services. The annual contract and service fee provisions are necessary for the
Company to recover its substantial investment in technology, and to protect it under the
regulatory framework in which it must operate.</p>

<p>The photobyproducts presently being handled by the Company are:</p>

<p>                        
Ammonium Thiosulfate Concentrate</p>

<p>                        
Aqueous Ammonia </p>

<p>                        
Developer</p>

<p>                        
E1ectro-flake</p>

<p>                        
Film</p>

<p>                        
Fixer</p>

<p>                        
Sodium meta-bisulfite concentrate</p>

<p>                        
Stabilizer</p>

<p>                        
Steel Wool/Metallic Ion Exchange Cartridges</p>

<p>                        
Scrap paper that accompanies film</p>

<p>The Company is evaluating the potential for use of acetic acid in fertilizer. If this
proves to be technically feasible, then the Company will begin to accept used acetic acid
solutions as well. </p>

<p>The photobyproducts are transported to the Company's new recycling facility at
Reno/Stead, Nevada. All customer materials are logged and recorded. All liquid
photobyproducts are tested for silver content and for contaminants, such as chrome.<b> </b>High
chrome content wastes are specifically rejected. It has been the experience of the Company
that new customers, with limited knowledge of the rules and procedures, may submit
materials containing foreign substances. The Company achieves high contaminant control
standards by working proactively with its regular customers.</p>

<p>Once testing is completed, the photographic solutions are processed in American
Hydromet's proprietary system.</p>

<p>As part of the process, silver bearing sludges are separated from the photobyproduct
solutions, filtered, and then dried. The Company refines this material into silver matte
bars and ships them to an internationally known silver refiner for sale. </p>

<p align="center">12</p>

<p align="center"> </p>

<hr>

<p> </p>

<p>The final stage of the photobyproduct fertilizer process is to blend the
"heavy-metal-free" solution with other nutrients to create liquid turf
fertilizer and other Gold’n Gro products. Through 1995, the Company's primary focus
was on field testing the products. In 1996 the Company began small scale commercial sales.
During the third quarter of 1996, the Company initiated discussions with three large
fertilizer distribution companies regarding potential distribution arrangements for the
Company's fertilizer and chemical products. In March 1998 a manufacturing and marketing
agreement was entered into with one of these companies. A more detailed discussion of the
progress of the marketing program is on page 17 of this report.<b> </b></p>

<p>In 1999, the photobyproduct fertilizer segment produced 33% of the Company's revenue.
Over the next several years, this segment is expected to grow significantly in relation to
the mining technical services segment. Consequently a major shift in the Company's
operations toward the photobyproduct fertilizer segment is being implemented. </p>

<p>3. Markets and Competition</p>

<p>I. Photobyproduct Recycling and Silver Refining </p>

<p>There are estimated to be more than 1,500 generators of photographic hazardous 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, photographic developers,
lithographers, photographers, microfilming (banks, companies, etc.) and x-ray users
(dentists, doctors, hospitals, podiatrists, orthopedic surgeons, veterinarians,
radiologists and industrial x-ray users). The Company estimates the total market for
recycling this category of waste to be in the range of $400 to $500 million.</p>

<p>Nationally, more than 80 million ounces of silver are consumed in photomaterials
annually. Approximately 30% of this is lost through disposal in sanitary sewers
nationwide. Itronics' technology recovers 99.975% of the silver contained in these waste
solutions. Thus, as the photobyproduct recycling operation expands, silver refining will
become more significant to the Company. The Silver Institute indicates that silver usage
in photography is increasing, and will continue to do so over the next several years.</p>

<p>The photowaste management industry is not systematically organized, but is fragmented
with many small operators, or large waste haulers. The small operators typically
specialize in one or more types of photowaste, but typically prefer film. The large waste
haulers pick up all categories of waste, and may also handle film and paper. It appears
that photowaste management as a systematic business is not yet organized by any large
company in the United States. This is a niche that the Company seeks to fill.</p>

<p>Silver recovery from black and white and x-ray chemistry is an established industry.
Silver recovery is typically accomplished at a user's site by specialized recovery
equipment. The equipment is normally installed and maintained by way of a service
agreement with the vendor, or vendor representative. The service of silver recovery is
particularly entrenched in the medical field where the service business supplies a silver
recovery unit and also picks up film waste for sale to a waste film processor. Black and
white and x-ray chemistry is typically monometallic with silver being the main EP-Toxic
metal. The recovery units are only about 90% efficient in routine operation, so
significant amounts of the silver are discharged into the sewerage systems. This compares
to the Company's technology which routinely recovers 99.975% of the silver content.</p>

<p align="center">13</p>

<p align="center"> </p>

<hr>

<p>Metal recovery from color and paper processor chemistry is not as well established,
although the silver recovery units used in the medical sector are also used by color
processors. A characteristic of color chemistry and paper processing chemistry is that it
is polymetallic, and contains from four to seven of the metals listed as EP-Toxic. There
are stringent EPA discharge limits for these metals. This sector has the normal
competitive factors found in the medical sector, except that most of the companies in the
business are only focusing their recovery efforts on silver, while ignoring the other
three to six toxic metals commonly known to occur in this chemistry.</p>

<p>Waste film processing is an established competitive industry in the United States. It
is highly segmented and characterized by many small processors, most of which are located
in the eastern part of the United States. The number of processors in the West Coast is
limited. There are believed to be three companies of consequence, one in California, one
in Washington State and one in Utah. Some waste film is exported to Korea, Japan and
China. Eastman Kodak is now the largest and dominant waste film processor in the eastern
U.S. and may be the largest silver recycler in the United States. DuPont sold its silver
recovery operations and is now out of the business. Kodak purchases scrap film from its
large film processing customers.</p>

<p>The Company is aware of digital imaging and its potential impact on usage of
conventional photography. The potential impact is different for each of the major
segments; medical, color photography, and printing/microfiche. Digital imaging has made
significant inroads into printing/microfiche processing with an almost 85% reduction in
volume of photographic liquids over the past five years. There has been little visible
impact on color photography, although the new digital cameras are getting wider usage.
Digital methods are being adopted in the medical industry. The medical sector is
relatively high growth with the aging U.S. population and therefore digital imaging has
had the effect of slowing the growth rate in the amount of waste photo liquids being
generated.</p>

<p>A larger impact on photo waste generation has been the pressure for companies 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 chemical content waste
liquids were generated. With the tightening of regulation of discharge of contaminated
waters to sanitary sewers, the equipment manufacturers have focused on reducing water
usage. This attention to reduction of waste water has also contributed to a reduction in
the quantities of waste liquids being generated. It is expected that efficiency of use and
associated waste reduction will continue, driven by increasing waste disposal costs.</p>

<p>In April 1998 IMI entered into an exclusive sales agreement with Calfran International
of Springfield, Massachusetts. The contract grants IMI the exclusive right to sell
"Cold Vaporization" Vacuum Distillation equipment to its photowaste customers.
The sales territory is the United States, Canada and Mexico, with an option to expand to
other territories as demand justifies. This equipment is designed to remove the water from
used liquid photochemicals, producing two products: a commercial chemical concentrate, and
clean distilled water. Removal of the water from the photochemicals produces a relatively
high value concentrate product that can be shipped cost effectively over long distances.
The photochemical recycling sales department is concentrating on developing customer
contacts for potential distiller sales. Sale of distillers is an integral part of
expanding the supply of photochemicals needed to support expanding fertilizer sales. </p>

<p align="center">14</p>

<p align="center"> </p>

<hr>

<p>The distillation equipment now being sold by the Company will contribute to the
reduction of water usage in the photographic industry. When the distillation equipment is
used, waste water can be virtually eliminated. The chemical product is purchased by
Itronics, and so the generation of waste at the user site is completely eliminated. This
technology represents an end point for the elimination of water waste in the photographic
industry, and is expected to gain wider acceptance as the industry recognizes the benefits
inherent in the technology when combined with Itronics’ service capabilities.</p>

<p>The Company believes that it has the following competitive advantages:</p>

<p>                
* Leading position in developing "total" photobyproduct recycling technology
                    
and waste management procedures. </p>

<p>                
* Proprietary solution conditioning process and equipment with the
                    
possibility of patent rights and licensing agreements.</p>

<p>                
* Patented low cost silver refining process using wet chemistry
                    
(hydrometallurgy) to quantitatively separate silver from photobyproduct
                    
materials.

<dir>
  <dir>
    <dir>
      <p>  * Proprietary "heavy-metal-free" liquid products that eliminate the
      need to dispose of treated photographic liquid waste in sewage
      treatment        systems, or solid waste sites
      (dumps).</p>
    </dir>
  </dir>
</dir>

<p>                
* Systematic pick up services for photobyproduct generators.</p>

<p>                
* Quantitative material control procedures meeting all EPA reporting
                     
guidelines.</p>

<p>                
* Regulated as a precious metals recycler and a hazardous waste transporter,
                     
therefore, low cost and proven track record and commitment.

<dir>
  <dir>
    <dir>
      <p>  * Skilled in converting technical concepts to commercial products and
               production.</p>
    </dir>
  </dir>
</dir>

<p>As discussed under the section on Regulation, the actual rate of growth for the
photobyproduct recycling business is dependent upon the rate and vigor of environmental
enforcement. The Company's photobyproduct recycling business development will continue to
be dependent upon this fact, however, the results of continuing expansion of regulatory
enforcement are beginning to be seen on a major scale. For example, Safety Kleen entered
the business in early 1995 by acquiring three large private photowaste handling companies
on the east and west coasts of the U.S., in Boston, San Francisco, and Los Angeles. These
acquisitions include the largest photowaste handler in San Francisco, and one of the top
three photowaste handlers in Los Angeles. The entry of this large waste hauling company in
the market, along with continuing expansion of enforcement has created a very dynamic
market situation with many changes occurring. Opportunities for Itronics to build
relationships with the major photoproduct manufacturers and service companies using its
superior fully integrated technology are now opening up.</p>

<p>Toward that goal, one of the top international photoproduct manufacturing companies has
approached Itronics because of Itronics' photobyproduct fertilizer manufacturing
technology and because of Itronics' growing service capability in Northern California.
Itronics and this company are presently establishing a working service relationship in
northern Nevada and California. Itronics ability to develop a larger scale working
relationship with this and other large photoproduct manufacturers is dependent on its
ability to establish a nationwide service capability in a relatively short period of time
(2 to 3 years).</p>

<p align="center">15</p>

<p align="center"> </p>

<hr>

<p>II. Photobyproduct Fertilizer</p>

<p>The urbanization of the United States has led to the development of an "Urban
Fertilizer Market". The total fertilizer market consists of the "Agricultural
Market" and the "Urban Market". Each market accounts for at least $3
billion in annual sales in the United States making the total a $6 billion market.</p>

<p>The Urban market is divided into the "Home Lawn and Garden" segment and the
"Professional Care" segment. Neither of these markets is statistically well
defined, since both are relatively new as large commercial markets, both are highly
fragmented with many small regional suppliers and are growing rapidly. One well known
operator in the Home Lawn and Garden and the Professional Care segments is Scotts/Stern's
Miracle-Gro. Several other large companies including Monsanto and the Vigoro Corporation
are active in this market.</p>

<p>Itronics’ photobyproduct fertilizer Gold'n Gro 20-1-7 was developed for the Urban
market as a "turf" product. Its principle customers will be home owners,
professional lawn service companies, golf courses, turf farms, and large municipal and
commercial facilities. Since early 1997, IMI has completed development of an additional 14
fertilizer products. These products cover most of the applications being targeted in the
Turf, Ornamental and Professional Grower markets in the western U.S. In early 1999 the
decision was made to focus marketing efforts on eight of these products.</p>

<p>Itronics estimates that more than 100 million gallons of photowaste liquids are
generated annually in the United States. The ratio for converting one gallon of
photobyproduct to Gold'n Gro 20-1-7 fertilizer is approximately 1 gallon of photobyproduct
to 4 gallons of fertilizer. This means that there is enough supply of photobyproduct to
support the manufacture of 400 million gallons of photobyproduct fertilizer annually,
equivalent to approximately two million tons.</p>

<p>Itronics estimates that on a commercial scale, the combined revenue of photobyproduct
services, silver and fertilizer will exceed $10.00 per gallon of photobyproducts received.
Consequently, the potential market for these products and services exceeds $1.0 billion.</p>

<p>Initially, small volume sales were made intermittently to two turf farm operations, to
a regional lawn service company, and to two golf courses in northern Nevada. Making these
sales and working with the customers allowed the Company to learn the specific
requirements for each market. It also made it possible to assess the feasibility of direct
marketing the product as compared to selling to distribution companies who would do the
direct marketing. Experience to date indicates that selling to fertilizer distribution
companies will be a more efficient method of achieving large scale sales in a reasonable
period of time.</p>

<p>The Company's plan was to initially focus on regional fertilizer sales. Options for
distribution were reviewed, and discussions were initiated with fertilizer distribution
companies and with potential large users such as golf courses. These activities were
conducted as part of an ongoing market development plan for the fertilizer side of the
business. The ability to sell the fertilizer efficiently at a relatively large scale is an
important determinant of the Company's ability to grow. The business development efforts
now underway have the specific objective of achieving this goal by identifying large
acreage markets for individual Gold'n Gro products.</p>

<p align="center">16</p>

<p align="center"> </p>

<hr>

<p>Discussions regarding fertilizer distribution were completed with Western Farm
Services, Inc. (WFS), a wholly owned subsidiary of Agrium, Inc. Agrium is the largest
nitrogen fertilizer producer in North America and the second largest retailer of
agricultural fertilizer products. In April 1997 WFS initiated a test marketing program for
the Company's Gold'n Gro Iron fertilizer and purchased a bulk quantity of the product. The
WFS customer field tests were successful. WFS has committed to marketing all of the
Gold’n Gro products. Another Agrium subsidiary, Source 1, has also committed to
marketing all of the Company's commercial products. </p>

<p>In March 1998 IMI signed a definitive manufacturing and distribution agreement with
WFS. The five year agreement, with optional five year renewal periods, grants WFS an
exclusive license and right to manufacture and market IMI’s Gold’n Gro line of
fertilizer products in the states of Arizona, California, Hawaii, Idaho, Oregon and
Washington. IMI will manufacture its base products for shipment to various WFS
manufacturing and distribution facilities in those six states. In April 1998 IMI began the
introduction of the Gold’n Gro line of fertilizer products to WFS store managers and
sales staff. WFS has 45 stores in California, with one to three sales people each. Most of
these people are being briefed about the product line. Substantial company resources were
devoted to this process during 1998, and the process continued into 1999. The result of
these efforts is that now more than 100 golf courses are using or testing the Gold’n
Gro fertilizer products.</p>

<p>WFS has a manufacturing plant in south central California. The other activity related
to implementing the manufacturing and sales agreement with WFS was establishing the
logistics for movement of materials between Reno and the WFS manufacturing plant. The
logistics and warehousing locations for delivery of manufactured goods from both the IMI
Reno manufacturing plant and the WFS manufacturing plant are also being established. WFS
is in the process of designating locations that will be used to make customer deliveries.
Once these arrangements are in place, it will be possible for product to flow from the two
manufacturing plants to customer locations as customer demand requires. In July 1998 WFS
began manufacturing Gold’n Gro 8-12-9, a plant starter product, and Gold’n Gro
20-1-7, the number one ranked fertilizer in a two year University of California Riverside
study. A third product, Gold’n Gro 9-3-9, was also manufactured successfully. In 1999
Gold'n Gro 20-0-4 and Gold'n Gro 6-3-9 were also successfully manufactured by WFS.</p>

<p>The Company is developing branded products that have the Gold'n Gro trademark. The
Company is developing a plan for consumer sales through its web page and retail outlets.
Significant capital, in the form of advertising budgets and the ability to carry large
inventories of finished goods, is required to achieve meaningful retail sales. However,
the Company is presently providing photobyproduct recycling services to several large
chain stores. Because of this, the Company believes it is positioned well to be able to
sell branded fertilizer products through the chain store outlets. Implementing and growing
the retail sales program is expected to take several years.</p>

<p align="center">17</p>

<p align="center"> </p>

<hr>

<p> </p>

<p>4. Seasonality and Working Capital</p>

<p>In analyzing the market and industry competitors, it is apparent that two factors
significantly impact the Company's ability to penetrate these markets in a meaningful way.
First, the seasonal aspect of photobyproduct and fertilizer sales, which directly results
in the second factor, the need for a much higher level of working capital when compared to
other industries. </p>

<p>Based on past experience, the Company's photobyproduct hauling volume starts each year
at comparatively low levels in the first quarter, steadily increases during the second
quarter, peaking in June or July, declining during the third quarter, and reaching levels
similar to that of the first quarter by year end. Consequently, revenues from both
photobyproduct services and silver sales are significantly reduced during six months of
each year. The cause of this cyclical pattern is the tourism based economy in Northern
Nevada, which has a comparable seasonal pattern. The volume of visitors directly affects
photobyproduct volume from consumer photoprocessing companies. To mitigate the seasonal
effect on this segment of operations, the Company is focusing its marketing efforts on
larger volume customers in the medical, military, printing and industrial photo fields.
The seasonality factor for photobyproduct and silver revenues should also be reduced as
the Company expands into California and other regional markets that are not as heavily
dependent on tourism. </p>

<p>The Company expects fertilizer sales to have a seasonal component, with the primary
sales season running from February through November each year, with tapering off beginning
in September. In addition to the general seasonal nature of sales caused by normal weather
patterns, unusual weather can further affect fertilizer sales. For example, unusually cold
or wet spring seasons may delay the growth cycle of various turfs for which the Company's
fertilizer products are utilized. To overcome weather related effects on fertilizer sales,
the Company is evaluating opportunities for markets in the southwestern United States
where growing seasons are longer and, in some cases, year round.</p>

<p>Due to this seasonal nature of both photobyproduct services and fertilizer sales, the
Company must increase its net working capital to a level higher than that of non-seasonal
industries. For example, some of the Company's competitors have working capital equal to
their annual sales. Consequently, ongoing debt and equity funding will be required for the
Company to grow, even after a profitable level of operations is achieved.</p>

<p> </p>

<p>5. Environment and Regulation</p>

<p>I. Liability</p>

<p>All chemistry has a "cradle to grave" regulatory life span. This term means
under Federal law, the prime generator has the ultimate liability for all generated waste
as long as it exists. Conventional services, through storing and hauling, relocate the
waste to a legal landfill in the West. Liability then remains for the cost of cleanup if
the landfill has to be reclaimed or the contamination of groundwater develops.</p>

<p>However, once the spent chemistry reaches the Company's facility and has been
processed, the generator's hazardous waste liability has been removed. Using the Company's
process, virtually all metals, including most of the iron, are removed. The end result
leaves the Company with a non-hazardous "heavy-metal-free" solution which is
legal for discharge into the environment. As discussed above, the demetallized liquids are
being used in commercial fertilizer products, entirely safe for the environment.</p>

<p align="center">18</p>

<p align="center"> </p>

<hr>

<p>II. Increased Regulation</p>

<p>While in general the Company's business has benefited substantially from increased
governmental regulation of hazardous disposal by private industry, the waste management
and recycling industry itself has become subject to extensive, costly and evolving
regulation by federal, state and local authorities. The Company makes a continuing effort
to anticipate regulatory, political and legal developments that might affect its
operations, but may not always be able to do so. The Company cannot predict the extent to
which any legislation or regulation may affect future operations.</p>

<p>In particular, the regulatory process requires firms in the Company's industry to
obtain and retain numerous governmental permits to conduct various aspects of their
operations, any of which permits may be subject to revocation, modification or denial. The
Company is not in a position at the present time to assess the extent of the impact of
such potential changes in governmental policies and attitudes on the permitting process.</p>

<p> </p>

<p>III. Permits and Inspections</p>

<p>To the best of the Company's knowledge, it has obtained permits from governmental
agencies having jurisdiction over it, such as the EPA, Nevada Department of Environmental
Protection, Washoe County Health Department and the City of Reno, Nevada. The Company is
not required to obtain federal permits, but is required to have, and has obtained, local
permits for its photobyproduct recycling facility under the provisions of the Federal EPA.
Similar permits will be required of all facilities that the Company may construct. The
Company's recycling facility is subject to frequent inspections and to regulations
(including certain requirements pursuant to federal statutes) which may govern operating
procedures for land, water and air pollution, among other matters. In particular, the
Company's operations are subject to the Safe Drinking Water Act, TSCA (Toxic Substances
Control Act-pursuant to which the EPA has promulgated regulations concerning the disposal
of PCBs), the Clean Water Act (which regulates the discharge of pollutants into surface
waters and sewers by municipal, industrial and other sources) and the Clean Air Act (which
regulates emissions into the air of certain potentially harmful substances). Employee
safety and health standards under the Occupational Safety and Health Act are also
applicable to employees of the Company.</p>

<p> </p>

<p>IV. Regulatory Direction</p>

<p>For several years the Company has been studying the various regulatory requirements
under RCRA and has been working with state and local environmental officials regarding the
extent to which hazardous waste regulations apply to the Company's operations. Through
this process, the Company reached the conclusion that due to use of photobyproducts as a
beneficial ingredient in its fertilizer products, the photobyproducts are not
"hazardous waste" as defined in the regulations, and therefore, beneficial
materials that are otherwise regulated as hazardous waste, are exempt from most of such
regulations. In early 1996 the Company received concurrence from State of Nevada
environmental officials that the Company's photobyproduct fertilizer process meets the
existing RCRA requirements for exemption from all environmental regulation with the
exception that certain presently conducted lab analyses of the photobyproducts will
continue to be required. Certain of the Company's large scale customers presently meet the
exemption requirements. Present levels of fertilizer sales utilize all the photobyproducts
received. Once sales of all the photobyproduct materials are well established in the
fertilizer or other commercial products, all the Company's Nevada customers will be exempt
from the regulations, including hazardous material transport/manifest rules. The Company
believes that this exemption applies nationwide. Therefore, the Company intends to pursue
similar concurrence from environmental officials in all applicable states, so that all its
customers will be recognized as exempt from the RCRA regulations.</p>

<p align="center">19</p>

<p align="center"> </p>

<hr>

<p> </p>

<p>MINING TECHNICAL SERVICES</p>

<p>1. Services offered</p>

<p>The Mining Technical Services segment of the Company offers a wide range of technical
services to the mining industry. These include the following:</p>

<p>Management Support:</p>

<p>- Assistance in assembling mineral project development agreements and ongoing technical
support during project development and after operations begin.</p>

<p>- Advice on mineral development strategy, economic aspects of tax policy, long term
investment strategy and infrastructure development related to large and small scale
mineral development.</p>

<p>- Complete project development plans.</p>

<p>- Expert assistance in contract disputes pertaining to various technical aspects of
mineral projects and the development of the technical aspects for contracts.</p>

<p>- Ore reserve audits, metallurgical audits and material balance reviews, and operations
reviews on producing mines for senior management, outside investors, or underlying land
owners.</p>

<p>- Mineral property appraisals for sale, acquisition, merger or financing.</p>

<p>Other Specialized Technical Services:

<dir>
  <dir>
    <p>- Mineral economics and cost studies.</p>
    <p>- Metallurgical process development.</p>
    <p>- Open pit and underground mine planning. </p>
    <p>- Ore reserve development.</p>
    <p align="center">20</p>
    <p align="center"> </p>
    <hr>
  </dir>
</dir>

<p>2. Operations</p>

<p>The Mining Technical Services segment accounted for 67% of the Company's 1999
consolidated revenue. Two major clients produced 99% of this revenue. At present one of
these clients has two ongoing projects. The first involves project management of a Nevada
mine property, including sampling, mapping and data compilation and property acquisition
services. The purpose of these services is to acquire and organize the land and
information necessary to prepare the property for presentation to major mining companies
for potential investment for exploration and development activities. The second project
involves locating water resources in Southern California. The Company has provided
technical services for this client for many years and expects such services to be ongoing.</p>

<p>The second client is a junior mining company with two mineral properties in Nevada.
W&W is providing technical assistance in moving these properties into the development
and operating stages. W&W is also providing administrative support. </p>

<p>The primary source of new business for the Mining Technical Services segment is the
reputation of W&W and its key employees. In addition, W&W expands its network of
contacts by attendance at various mining association conventions.</p>

<p>In the past W&W has published specialized mineral economics and materials financial
reports. W&W is evaluating re-entry into this market, with a goal of producing mining
publications targeted for general investors interested in mining.</p>

<p>  </p>

<p>3.  Expansion Plans</p>

<p>Prior to 1991, the Company had plans to directly invest or joint venture in mining
projects and had formed a subsidiary to enter that market. Those plans were put on hold
until completion of the photobyproduct fertilizer R&D program. Now that the R&D
program is being converted to commercial operations, the Company has recently taken steps
to expand the mining technical services presence in the mining industry, both from a
services perspective and from a mining operations perspective.</p>

<p>In December 1998 a new Manager of Mining Technical Services was appointed to lead
W&W’s efforts to expand its operations on several fronts. First, it had been
previously identified that in order to compete for technical services projects, W&W
needed mine planning computer software and the appropriate hardware and personnel to
operate it. With completion of the first and second tranche of the 1998 Private Placement,
W&W acquired the needed software and equipment and hired an experienced computer
specialist to assist in marketing the new services. Second, in January 1999 W&W
initiated a long term R&D project to replace the use of cyanide in the extraction of
metals from silver/gold and gold/copper ores. The new thiosulfate leaching technology
being developed under this program utilizes the same technology as the Company’s
proprietary photochemical recycling process. The project, called Itronics Thiomet, is
seeking to establish operating joint ventures at specific mine sites to apply the
thiosulfate leaching technology. Third, in March 1999 W&W signed a consulting
agreement with Golden Phoenix Minerals, Inc. (GPXM). Under the agreement, W&W will
provide management, merger and property acquisition, and technical services to GPXM.</p>

<p align="center">21</p>

<p align="center"> </p>

<hr>

<p>ITEM 2. <u>DESCRIPTION OF PROPERTY.</u></p>

<p>I. <u>FACILITIES.</u></p>

<p>Itronics leases approximately 3,000 square feet of office space at 6490 South McCarran
Blvd., Building C-23, Reno, Nevada. The Company shares offices with W&W and IMI.
W&W has the office equipment and furniture and technical library typically found in a
consulting business. IMI leases approximately 7,000 square feet of warehouse space in
Reno, Nevada. This space contained the plant for the photobyproduct recycling business,
laboratory and research facilities, fertilizer manufacturing and inventory, and the
Company's prototype silver refining operation. All the equipment has now been moved to the
Reno/Stead facility. The Company is now using some of the leased space for storage. The
unneeded portion of the space will be turned back to the landlord over the next several
months</p>

<p>As previously discussed, IMI has acquired a 35,000 square foot manufacturing facility
in Reno-Stead, Nevada. Through December 31, 1999 IMI has expended approximately $681,000
for design and construction of the equipment plumbing and related building improvements.
In addition, approximately $600,000 in equipment has been leased for the facility.
Construction was completed in February 2000 and the Certificate of Occupancy was received
at that time. The plant is now in operation. </p>

<p>In March 1999 W&W leased approximately 2,500 square feet of office space in Reno,
Nevada. The W&W technical services group was relocated to this space in April 1999.</p>

<p> </p>

<p>II. <u>EQUIPMENT.</u></p>

<p>The actual equipment being used in the recycling process is proprietary information.
However, the plant for processing liquid photobyproducts is a fairly typical chemical
process facility consisting of appropriate arrangement of tanks and pumps. Solids produced
by processing are recovered by filtration. </p>

<p>The refining operation consists of a material handling section, solids roasting, and a
melting section. The actual equipment arrangements are proprietary, but the main items are
pumps, tanks, filtration equipment, drying ovens, and the melting furnaces. </p>

<p>Capacity at the new facility is now capable of processing up to 60,000 gallons of used
photochemicals per month and to manufacture up to 100,000 gallons per month of liquid
fertilizer. Refinery capacity is now expanded to produce up to 20,000 ounces of silver per
month. </p>

<p> </p>

<p>ITEM 3. <u>LEGAL PROCEEDINGS.</u></p>

<p>1. The former president of Seahawk, Inc.(Seahawk) filed suit in June 1995 in the
Superior Court of California, County of Orange, against the Company, W&W, and several
W&W employees, alleging libel and slander resulting from consulting work W&W had
done for Seahawk. The suit sought unspecified damages to be proven at trial, plus punitive
or exemplary damages. W&W's liability insurance carrier defended against the suit, and
in March 1997, the suit was dismissed. The individual has filed an appeal of the
dismissal.</p>

<p align="center">22</p>

<p align="center"> </p>

<hr>

<p>In February 1997, this individual served a second suit that includes the Company,
W&W, and a key employee as codefendants, along with several unrelated parties. The
suit alleges breach of contract and other causes of action and seeks in excess of $5
million plus punitive damages. The Company's liability insurance carrier has agreed to
assume the defense of this action with a reservation of rights, including the right to
disclaim insurance coverage. Management believes the allegations are without merit and is
vigorously defending against the suit. In May 1998 agreement was reached with the
plaintiff that if the appeal of the first suit fails, the second suit will be dropped. Due
to a civil court backlog, the appeal hearing has been delayed for at least 25 months from
July 31, 1998. As of the date of this report, a hearing date has not been set. </p>

<p> </p>

<p>ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF ITS SECURITY HOLDERS.</p>

<p>------- --------------------------------------------------------</p>

<p>The Company held its annual meeting on November 18, 1999. At that time, the
shareholders elected the present directors as a group. Following is a summary of the
voting:</p>

<p>Directors as a Group:</p>

<p>John W. Whitney</p>

<p>Paul H. Durckel</p>

<p>Alan C. Lewin</p>

<p>                
Votes: For             
43,221,701</p>

<p>                       
Against            825,000</p>

<p>                       
Abstain             17,548</p>

<p> </p>

<p align="center">23</p>

<p align="center"> </p>

<hr>

<p>PART II</p>

<p>ITEM 5. <u>MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS</u></p>

<p>(a). Market Information. The securities of the Company are traded on the
over-the-counter market, and quoted in the National Quotation Bureau, Inc.'s "pink
sheets" and on the NASD Electronic Bulletin Board.</p>

<p>The following table sets forth the high and low bid prices for the Company's common
stock for each quarter for 1998, 1999, and the first quarter of 2000, through February 29,
2000.</p>

<p> </p>

<p>                                          
  
<u>High Bid</u>      <u>Low Bid</u></p>

<p>          3/31/98
                            
$0.29          $0.20</p>

<p>          6/30/98
                            
$0.25          $0.13</p>

<p>          9/30/98
                            
$0.23          $0.14</p>

<p>          12/31/98
                           
$0.27          $0.19</p>

<p>          3/31/99
                            
$0.94          $0.17 </p>

<p>          6/30/99
                            
$0.72          $0.42 </p>

<p>          9/30/99
                            
$0.68          $0.36 </p>

<p>          12/31/99
                           
$0.81          $0.46 </p>

<p>          2/29/00
                            
$2.00          $0.64</p>

<p>These quotations reflect inter-dealer prices without retail markup, markdown, or
commissions, and may not represent actual transactions.</p>

<p>(b) On December 31, 1999 the number of record holders of the Common Shares was
approximately 950 and the number of beneficial holders was approximately 3,000.</p>

<p>(c) <u>Dividends.</u></p>

<p>The Company has paid no dividends. </p>

<p> </p>

<p><u>Recent Sales of Unregistered Securities:</u></p>

<p>Following is a summary of sales of unregistered securities for the fourth quarter of
1999. These securities were issued as restricted common shares which are subject to Rule
144 of the Securities and Exchange Commission. Generally, Rule 144 requires shareholders
to hold the shares for a minimum of one year before sale. In addition, officers, directors
and more than 10% shareholders are further restricted in their ability to sell such
shares. There have been no underwriters of these securities and no underwriting
commissions or discounts have been paid.</p>

<p>                                          
      
Shares              Value</p>

<p><u>Transaction Description</u>
                         
<u>Issued</u>             <u>Received</u></p>

<p>Exercise of warrants and options
               
1,675,000          $ 410,000</p>

<p>Private placement for cash
                        
36,000              9,000</p>

<p>Labor services of management, directors </p>

<p>and consultants
                                  
  52,381             21,986</p>

<p>Interest on accrued management salaries
               607
               246</p>

<p>                                          
     
  ---------            -------</p>

<p>                                          
     
  <u>1,763,988</u>          <u>$ 441,232</u></p>

<p align="center">24</p>

<p align="center"> </p>

<hr>

<p>The above transactions qualified for exemption from registration under Sections 3(b) or
4(2) of the Securities Act of 1933. Private placements for cash were non-public
transactions. The Company believes that all such investors are either accredited or,
either alone or with their purchaser representative, have such knowledge and experience in
financial and business matters that they are capable of evaluating the merits and risks of
the prospective investment. </p>

<p>ITEM 6. <u>MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION</u></p>

<p>I. Results of Operations</p>

<p>The Company reported a 1999 consolidated net loss of $1,901,479 or $0.0290 per share
compared to a 1998 loss of $1,024,863 or $0.0223 per share. The primary causes for the
increased loss are increased operating costs associated with the delay in obtaining the
building permits needed for construction for the new manufacturing facility, expanded
corporate marketing, expansion of sales and marketing departments for photobyproduct
services and fertilizer sales, and the addition of management personnel in the finance
function. The purpose of the substantial change in cost structure is to convert the
photobyproduct fertilizer segment from a small scale semi-works operation to full
commercial scale operation. Management focus has been on raising the capital required to
complete the move to the new facility and on making both the investing public and
potential customers aware of the Company and its products and services.</p>

<p>Consolidated sales increased approximately $139,200, or 18.0%, in 1999 compared to
1998. Consolidated cost of sales and operating expenses increased approximately
$1,064,900, or 61%, in 1999 compared to 1998. Other income (expense) improved from a net
expense of $40,500 in 1998 to income of $8,600 in 1999. The primary reason for the
improvement of other income is that since the construction of the plant improvements was
in progress during the year, approximately $88,600 in interest expense was capitalized as
part of the equipment cost. This cost will be depreciated over the lives of the equipment.
To provide a more complete understanding of the factors contributing to the changes in
sales, operating expenses and the resultant operating loss, the discussion presented below
is separated into the Company's two operating segments.</p>

<p align="center">25</p>

<p align="center"> </p>

<hr>

<p>PHOTOBYPRODUCT FERTILIZER</p>

<p align="center">-----------------------------------------------------------------------------</p>

<p>                                          
      
<u>Year Ended December 31,</u></p>

<p>                                          
         
<u>1999</u>          <u>1998</u></p>

<p>Sales revenue
                                  
$   299,304    $ 343,872 </p>

<p>Operating income (loss)
                        
(1,630,026)     (783,201) </p>

<p align="center">-----------------------------------------------------------------------------</p>

<p>Revenues for the photobyproduct fertilizer segment totaled $299,304 in 1999, compared
to $343,872 in 1998, a decrease of 13%. Fertilizer sales were $61,026 and $53,750 for 1999
and 1998, respectively, an increase of 14%. During the current year, the majority of the
sales have been to Western Farm Services, Inc. (WFS). Progress of the marketing effort
with WFS is discussed on page 17 of this report. Volume for photobyproduct recycling
services in 1999 increased 7.5% from 1998, while photobyproduct recycling revenue
decreased nominally. Silver sales were $112,725 and $163,799 for 1999 and 1998,
respectively. The 31% sales decrease reflects a combination of a 37% decrease in sales
volume and a 6% decrease in the average silver price in 1999, compared to 1998. The
decline in silver sales volume is due to a combination of a decline in film volume and
silver production timing differences between years. Total silver ounces brought into the
system from liquid photobyproducts and silver flake purchases increased nominally in 1999,
compared to 1998.</p>

<p>Combined cost of sales and operating expenses for the segment amounted to $1,929,330 in
1999, compared to $1,127,073 in 1998,a 71% increase. Cost of sales increased approximately
$66,800, which includes increases of $34,200 in payroll costs related to additional
production personnel and higher hourly rates caused by the tight labor market, $10,500 in
increased rent due to additional warehouse space and increased rental rates on existing
facilities, and increased costs related to establishing a separate office facility at the
new manufacturing plant. Operating costs increased by $735,400. R&D costs decreased
$41,000 due to a shift in management effort from developing commercial products
appropriate for marketing to implementing the WFS sales agreement. Sales and marketing
increased $559,600, reflecting the allocable share of increased corporate marketing,
expansion of sales departments for photobyproduct services and fertilizer sales and the
costs associated with implementing the WFS fertilizer sales and manufacturing agreement.
The increase in general and administrative costs of $208,200 includes an increase of
$113,700 in payroll costs related to establishing a full time finance position and a
greater allocation of administrative personnel costs to this segment, which reflects the
shift in emphasis away from the mining technical services segment. The increase in G&A
also includes approximately $40,800 in costs related to establishing a computer network,
detailing business processes in order to manage operations when full production is
reached, and planning for implementation of Enterprise Resource Planning (ERP) software. </p>

<p>These changes in revenues and operating expenses resulted in a segment operating loss
of $1,630,026 in 1999, compared to $783,201 in 1998.</p>

<p align="center">26</p>

<p align="center"> </p>

<hr>

<p>MINING TECHNICAL SERVICES</p>

<p align="center">-------------------------------------------------------------------------------
</p>

<p>                                          
               
<u>Year Ended December 31,</u></p>

<p>                                          
                  
<u>1999</u>           <u>1998</u></p>

<p>Sales revenue
                                          
 
$ 606,580      $ 422,848 </p>

<p>Operating income (Loss)
                                  
(280,009)       (201,136)</p>

<p align="center">-----------------------------------------------------------------------------</p>

<p>Mining technical services revenue totaled $606,580 for 1999, compared to $422,848 for
1998, an increase of 43%. Included in these revenue figures are pass-through expenses of
$366,421 and $221,856 for 1999 and 1998, respectively. Excluding these amounts, revenues
amounted to $240,159 and $200,992 for 1999 and 1998, respectively, an increase of 19%. The
increase is due to the addition of a new major client during 1999. The Company’s
plans to expand the technical services segment are more fully discussed on page 21 of this
report.</p>

<p>Combined cost of sales and operating expenses totaled $886,589 , compared to $623,984
for 1998, an increase of 42%. Included in these operating expense figures are pass-through
expenses of $366,421 and $221,856 for 1999 and 1998, respectively. Excluding these
amounts, combined cost of sales and operating expenses amounted to $520,168 and $402,128
for 1999 and 1998, respectively, an increase of 29%. The increased costs are attributable
primarily to increased corporate and technical services marketing efforts. </p>

<p>The above changes in revenues and operating expenses resulted in a segment operating
loss of $280,009 for 1999, compared to an operating loss of $201,136 for 1998. </p>

<p>SUMMARY</p>

<p>On a consolidated basis, the various changes in revenues and operating expenses
resulted in a 1999 operating loss of $1,910,035, compared to an operating loss of $984,337
for 1998. </p>

<p>II. Changes in Financial Condition; Capitalization</p>

<p>Cash amounted to $142,287 as of December 31, 1999, compared to $348,829 as of December
31, 1998. Net cash used by operations was $1,604,814 in 1999, compared to $689,177 in
1998. Operating resources utilized to finance the 1999 loss of $1,901,479 include
approximately $231,100 in expenses paid with the Company's common stock and a net increase
in accounts payable and accrued expenses of approximately $142,000. These sources of cash
were partially utilized by an increase in accounts receivable of $110,200 due primarily to
increased mining technical services revenue during the fourth quarter of 1999, compared to
the fourth quarter of 1998. Cash amounting to approximately $1,123,500 was invested in
property and equipment in 1999, including $582,900 in design and construction of
improvements to the new manufacturing plant and $300,000 for acquisition of the plant.
$837,500 was raised in the final tranche of the 1998 Private Placement, at a cost of
$28,400. Financing sources of cash in 1999 also included $1,488,000 in warrant and option
exercises, $277,900 in equipment financing, and $100,000 in convertible promissory notes.</p>

<p align="center">27</p>

<p align="center"> </p>

<hr>

<p>Total assets increased from $1,062,529 at December 31, 1998 to $3,677,342 at December
31, 1999. Current assets increased $51,600, net property and equipment increased
$2,338,000, and other assets increased $224,900. The increase in property and equipment is
due to the acquisition of the new manufacturing plant, the acquisition of the
manufacturing and processing equipment needed to reach a commercial scale of operations,
and the construction costs for setting the equipment up and plumbing it together. Other
assets increased primarily due to accepting available for sale marketable securities as
payment for services on a mining technical services contract. The stock had a market value
of $165,700 at December 31, 1999, with a cost of $72,900. </p>

<p>Total liabilities increased from $632,947 at December 31, 1998 to $1,668,897 at
December 31, 1999, an increase of approximately $1,036,000. Of this amount, current
liabilities increased $222,600 and long-term liabilities increased $813,300. The increase
in liabilities reflects the financing of the manufacturing and processing equipment for
the new plant.</p>

<p>The result of the above financing was to change stockholders’ equity from $429,582
at December 31, 1998 to $2,008,445 at December 31, 1999.</p>

<p>III. Working Capital/Liquidity</p>

<p>As discussed in Note 13 to the Consolidated Financial Statements on page 63 of this
report, the Company has implemented a plan to improve its working capital and liquidity
through private placements of common shares, conversion of debt to common shares, and
payment of consulting and labor services with common shares. Following is a summary of the
steps taken to improve the Company's working capital and liquidity during the year ended
December 31, 1999:</p>

<p>1. A total of $2,457,400 was received from the sale of common stock through private
placements and warrant exercises.</p>

<p>2. Various expenses including salaries, interest, director fees, and legal and outside
services, totaling $231,100, were paid with common stock.</p>

<p>3. A total of $377,900 was received in equipment financing and convertible promissory
notes.</p>

<p>The result of these steps was to change from a working capital balance of $115,949 at
December 31, 1998, to a deficit working capital balance of $55,065, a decrease of
approximately of $171,000. The current asset component of working capital increased from
approximately $620,600 at December 31, 1998 to $672,200 at December 31, 1999. The primary
changes in the components of current assets were a decrease in cash of $206,500, an
increase in accounts receivable of $107,700, an increase in account receivable from
equipment financing of $133,700, a decrease of $52,700 in notes receivable from
shareholders, and an increase of $47,700 in prepaid expenses. The current liability
component of working capital increased from $504,700 at December 31, 1998 to $727,300 at
December 31, 1999. Significant increases in the components of current liabilities include
$230,200 in accounts payable and $157,400 in current maturities of capital lease
obligations. Significant decreases in the components of current liabilities include
$80,000 in accrued management salaries and other expenses and $85,100 in the current
portion of advances due stockholders. The increase in accounts payable includes payables
on the building construction project of $114,700 and an increase of $73,200 in payables
relating to pass-through costs billed but unpaid by technical services clients as of
December 31, 1999.</p>

<p align="center">28</p>

<hr>

<p align="center"> </p>

<p>Subsequent to December 31, 1999 the Company began a convertible debt Private Placement
to raise $2.5 million in working capital. A total of $2,631,000 was received from the
Placement.</p>

<p>For details of other steps to improve the Company's working capital and liquidity taken
subsequent to December 31, 1999, see the discussion in Notes 13 and 15 to the Consolidated
Financial Statements on pages 63 and 66 of this report.</p>

<p>IV. Year 2000 Assessment</p>

<p>The Company has encountered no problems related to the Year 2000 computer issue. </p>

<p> 

<ol START="5" TYPE="I">
  <li>Forward-Looking Statements</li>
</ol>

<dir>
  <dir>
    <p align="left">The statements in this Form 10-KSB that are not historical facts or</p>
  </dir>
</dir>

<p>statements of current status are forward-looking statements (as defined in the Private
Securities Litigation Reform Act of 1995) that involve risks and uncertainties. Actual
results may differ materially.</p>

<p> </p>

<p>ITEM 7. <u>FINANCIAL STATEMENTS</u></p>

<p>The response to this Item is submitted under Item 13.</p>

<p> </p>

<p>ITEM 8. <u>CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON</u></p>

<p><u>ACCOUNTING AND FINANCIAL DISCLOSURE.</u></p>

<p>No change was made in the Company's auditors from the prior year.</p>

<p>To the Company's and its management's knowledge, there is no accounting or financial
disclosure dispute involving any present or former accountant.</p>

<p align="center">29</p>

<p align="center"> </p>

<hr>

<p>PART III</p>

<p>ITEM 9. <u>DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL</u></p>

<p><u>PERSONS: Compliance with Section 16(a) of the Exchange Act</u></p>

<p>I. <u>Summary Information.</u></p>

<p>The following are the directors and executive officers of the Company:</p>

<p>                       
Age as of</p>

<p><u>Name</u>
                   
<u>12/31/99</u>          <u>Position</u>
            <u>Position Held Since</u></p>

<p>Dr. John W. Whitney        53
         President/Treasurer
        May 1988</p>

<p>                                     
Director</p>

<p>Paul H. Durckel            82
         Director
                  
September 1995</p>

<p>Alan C. Lewin
              53
         Director
                  
September 1997</p>

<p>Gregory S. Skinner         45
         Secretary
                 
December 1990</p>

<p>Duane H. Rasmussen         69
         Vice President;
            November 1997</p>

<p>                                     
Vice President and         May 1994</p>

<p>                                     
General Manager-IMI</p>

<p>1) For directors, the term of office is until the next annual meeting of shareholders.
For officers, the term of office is until the next annual meeting of the Board of
Directors, presently scheduled to be held immediately following the annual meeting of the
shareholders.</p>

<p> </p>

<p>II. <u>Narrative Information Concerning the Directors and Executive</u></p>

<p><u>Officers of the Company.</u></p>

<p><u>John W. Whitney:</u></p>

<p>In addition to being the President and a Director of the Company, 1988 to present, Dr.
Whitney is the President and a Director of each of the operating subsidiaries, Itronics
Metallurgical, Inc. and Whitney & Whitney, Inc. Dr. Whitney also serves as the General
Manager of American Hydromet, a joint venture.</p>

<p>He received his Ph.D. in Mineral Economics from Pennsylvania State University in 1976,
his M.S. in Mineralogy from the University of Nebraska in 1971, and his B.S. in Geology
from the University of Nebraska in 1970. Dr. Whitney has served as President of Whitney
& Whitney, Inc. since its formation in 1977.</p>

<p>Prior to his serving as W&W full-time president, Dr. Whitney worked as a consultant
for the Office of Technology Assessment, U.S. Congress, doing analysis of various 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, and the Washington
office of the U.S. Bureau of Mines, consulting firms, law firms and mining companies on a
variety of mineral planning issues (1976-1977), as a consultant for BKW Associates, Inc.
evaluating mining investment opportunities in Mexico and the Philippines (1973-1975), and
as a geologist-mineralogist for Humble Oil & Refining Company and GeoTerrex Ltd.
(1971-1972).</p>

<p align="center">30</p>

<p align="center"> </p>

<hr>

<p>Dr. Whitney is an internationally recognized consultant in the field of Metal and
Material Resource Economics. Dr. Whitney has presented seminars for various clients on
Mining Economics, and has taught a three-credit graduate course on International 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 the seal of the American
Society for Metals. Dr. Whitney has made numerous presentations and written a number of
publications on various technical subjects within his broad area of expertise. Dr. Whitney
is coinventor of the American Hydromet process technology and holds four patents.</p>

<p> </p>

<p><u>Paul H. Durckel:</u></p>

<p>Mr. Durckel has served as a director of the Company since September 1995. He received a
pre-legal degree from Stanford University in 1940. He has served various companies
involved in fertilizer manufacturing and sales for approximately 30 years. He is presently
an Independent Real Estate Salesman for Prudential Nevada Realty, the successor company to
Myers Realty, Inc. He served Myers Realty, Inc. in varying capacities, including
Broker-Salesman, Consultant, Manager, Vice President of Operations, and Director, since
1987. His experience in the fertilizer industry includes Vice President and General
Manager and Vice President- Operations for American Plant Food Corp., Executive Assistant
to the Chairman for Best Fertilizers Co., Vice President and General Manager for Best
Fertilizer of Texas, and Vice President and General Manager for Farm Services Co.</p>

<p> </p>

<p><u>Alan C. Lewin:</u></p>

<p>Mr. Lewin has served as a Director since September 1997. He had previously served as a
Director from September 1995 through June 1996.He received a B.A. in Psychology from San
Diego State University in 1967. He has extensive operations management experience,
primarily in the x-ray film processing chemical industry. His positions include Founder,
President and Chief Executive Officer of Guardian X-Ray Equipment Service, Inc. from 1976
to 1992, General Manager of Douglas Roesch Communications, Inc. from 1992 to 1994,
Technical Sales Representative of Commerce Chemical Company from 1994 to 1996, Vice
President of Commodity Resource & Environmental, Inc. from August 1996 to July 1997,
and General Manager for a Merry X-Ray branch operation in Los Angeles, California since
November 1997. </p>

<p><u>Gregory S. Skinner, Esq.:</u></p>

<p>Mr. Skinner has served as secretary and general counsel of the Company and its
subsidiaries since December 1990. He obtained his B.A. degree in Economics from the
University of California at Berkeley in 1976. He obtained his J.D. degree from Hastings
College of the Law, University of California at San Francisco in 1979. He is licensed to
practice law in the states of California and Nevada. He is a shareholder in the Law
Offices of Skinner, Sutton & Watson, a Professional Corporation, which has offices
located in Reno and Incline Village, Nevada. Prior to becoming Secretary of Itronics Inc.,
Mr. Skinner has provided legal services and advice to Whitney & Whitney, Inc. since
1980.</p>

<p align="center">31</p>

<p align="center"> </p>

<hr>

<p> </p>

<p><u>Duane H. Rasmussen:</u></p>

<p>Mr. Rasmussen has served as Vice President and General Manager of IMI since May 1994.
He became Vice President of the Company in November 1997. He initially joined the Company
in 1991 as Assistant Manager and Business Consultant for W&W. He received his B.S.
degree in Chemical Engineering from the University of Wisconsin in 1953 and his M.B.A. in
Industrial Management in 1955 from the same University. He served as President of Screen
Printing Systems, Inc. from 1987 to 1990 and from 1995 to October 1998. Other business
experience includes approximately 20 years with Jacobs Engineering Group, Inc. in varying
capacities, including Project Manager, Regional Sales Manager, Regional Vice President,
and Group Vice President.</p>

<p>ITEM 10. <u>EXECUTIVE COMPENSATION.</u></p>

<p>Summary of Cash and Certain Other Compensation</p>

<p>The following table sets forth information as to the compensation of the Chief
Executive Officer and the four most highly compensated officers whose compensation for the
year ended December 31, 1999 exceeded $100,000:</p>

<p>                                          
                                    
Long Term </p>

<p>                                          
                 
Annual             <u>Compensation </u></p>

<p>Name and
                                          
      
<u>Compensation</u>           Securities</p>

<p>Principal
                             
Calendar
                               
Underlying</p>

<p><u>Position</u>
                                
<u>Year</u>           <u>Salary</u>
      <u>Bonus</u>      <u>Options (#)</u></p>

<p>Dr. John W. Whitney:
                    
1999          $129,534
      $-0-       1,000,000</p>

<p>President, Treasurer
                    
1998          $111,709
      $-0-
            -0-</p>

<p>and Director
                            
1997          $ 97,000
      $-0-
            -0-</p>

<p> </p>

<p>1) As of December 31, 1997, Dr. Whitney had accumulated deferred salary totaling
$141,750. Of this amount, $32,000 was accrued in 1997, $49,750 was accrued in 1996, and
$60,000 was accrued in prior years. Dr. Whitney was granted options to convert up to
$250,000 in unpaid salary at $0.10 per share, for a total of 2,500,000 shares of common
stock. Dr. Whitney was also granted options for 1,200,000 shares of common stock at $0.10
for his personal guarantee of certain obligations of the Company and its subsidiaries. The
options were to expire in February 1997, but were extended to six months after all the
Company and subsidiaries’ debts owed to, or guaranteed by, Dr. Whitney were paid in
full. In May 1996, Dr. Whitney received warrants for 100,000 shares. The warrants were
exercisable for five years at $0.10 per share. The warrants were issued in conjunction
with Dr. Whitney’s acquisition of 100,000 shares for cash. The combined total of
options and warrants for Dr. Whitney was for 3,800,000 shares of common stock. Of these
options and warrants, Dr. Whitney exercised 500,000 shares in December 1996, 2,092,380 in
1997, and the remaining 1,207,620 in January 1998. In September 1998 Dr. Whitney converted
an additional $50,000 of unpaid salary by acquiring five units of the Company’s 1998
Private Placement, Tranche One. On December 30, 1999 Dr. Whitney exercised his right to
purchase 37,500 shares at $0.40 per share and has remaining warrants to purchase 162,500
at $0.40 per share, expiring September 30, 2000. Effective January 1, 1999, Dr. Whitney
was granted an option for 1,000,000 common shares at $0.25 per share. The option is
exercisable at any time until one year after Dr. Whitney leaves the employment of the
Company.</p>

<p align="center">32</p>

<p align="center"> </p>

<hr>

<p>2) The salary amounts listed above include $4,534, $1,709, and $1,000 for 1999, 1998,
and 1997, respectively, that represent compensation paid in common stock for service as a
director of the Company. The compensation plan for all directors was 2,500 shares per
quarter for 1999. </p>

<p>Option Grants in Last Fiscal Year:</p>

<p>                                  
Number of          % of Total </p>

<p>                                  
Securities          Options to </p>

<p>                                  
Underlying           Employees
    Exercise </p>

<p>                                  
Options              in Fiscal
     or Base    Expiration</p>

<p><u>Name</u>
                              
<u>Granted</u>
               
<u>Year</u>       <u>Price </u>      
<u>Date </u></p>

<p>Dr. John W. Whitney
              
1,000,000
               93%
        $0.25     1 year after</p>

<p>                                          
                                    
    end of</p>

<p>                                          
                                    
    employment</p>

<p>Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option</p>

<p>Values</p>

<p>Options Exercised:</p>

<p>                          
Shares Acquired on</p>

<p><u>Name </u>                        
<u>Exercise (#)</u>           <u>Value
Realized(1)</u></p>

<p>Dr. John W. Whitney
             37,500
                    
$-0-

<ol>
  <li>The warrants exercised were at $0.40 per share. If value realized was based on the
    average of the closing bid and ask prices on the exercise date, the value realized would
    have been $11,813. However, the common stock received is restricted under Rule 144 and
    thus are not tradable within one year of exercise. In addition, as a greater than 10%
    shareholder of the Company, Dr. Whitney is further restricted by SEC regulations as to the
    sale of the Company’s securities. The actual value realized, if and when the
    securities are sold, may be more or less than the value listed above. Consequently, the
    value realized is reported at $-0-. </li>
</ol>

<p>Options Unexercised:</p>

<p>                         
Number of Securities
              Value of
Unexercised</p>

<p>                         
Underlying Unexercised           
In-the-Money Options</p>

<p>                         
<u>Options at 12/31/99  </u>            
<u>At 12/31/99           </u></p>

<p><u>Name      </u>               
<u>Exercisable</u> <u>Unexercise.</u>           
<u>Exercisable</u> <u>Unexer.</u></p>

<p>Dr. John W. Whitney        1,162,500
       -
                 
$ -0- (1)  $ -0-</p>

<p>(1) If value realized was based on the average of the closing bid and ask prices on
December 31, 1999, the value realized would have been $510,375. The securities under
option, common stock of the Company, are restricted under Rule 144 and thus are not
tradable within one year of exercise. In addition, as a greater than 10% shareholder of
the Company, Dr. Whitney is further restricted by SEC regulations as to the sale of the
Company’s securities. The actual value realized, if and when the securities are sold,
may be more or less than the value listed above. Consequently, the value of the
unexercised options is reported at $-0-.</p>

<p align="center">33</p>

<p align="center"> </p>

<hr>

<p>ITEM 11. <u>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</u></p>

<p>a) <u>Security Ownership of Certain Beneficial Owners.</u></p>

<p>The following table sets forth certain data with respect to those persons known to the
Company, as of February 29, 2000, to be the beneficial owners of more than 5% of the
outstanding shares of common stock of the Company:</p>

<p>                              
Amount and Nature of Beneficial Ownership</p>

<p>                                          
       
Common Shares</p>

<p>Name and
                                          
 
Which May Be
              
Percent</p>

<p>Address of             
Common Shares             
Acquired Within
                 
of</p>

<p><u>Beneficial Owner </u>      <u>Presently Held </u>          
<u>   60 days      </u>     <u>Total</u>
      <u>Class</u></p>

<p>John W. Whitney</p>

<p>P.O. Box 10725</p>

<p>Reno, NV 89510         13,959,100(3)
              
1,162,500       15,121,600    20.42</p>

<p>(1)(2)</p>

<p>Richard J. Cavell</p>

<p>1013 No. Marshall Dr.</p>

<p>Camano Island, WA       5,165,752(4)
                  
-            5,165,752
     7.09</p>

<p>(1) Director</p>

<p>(2) Officer</p>

<p>(3) Includes 97,636 shares owned by or to be issued to John B. Whitney, Dr. John W.
Whitney's minor son, and 72,768 shares owned by Maureen E. Whitney, Dr. Whitney's wife.
Warrants, expiring September 30, 2000, for 167,500 shares of common stock are at $0.40 per
share. Options for 1,000,000 shares are at $0.25 per share.</p>

<p>(4) Includes 21,375 shares owned by Bonnie Cavell, Richard Cavell's wife.</p>

<p> </p>

<p>b) <u>Security Ownership of Management.</u></p>

<p>The following table sets forth as of February 29, 2000, certain information, with
respect to director and executive officer ownership of common stock in the Company:</p>

<p align="center">34</p>

<p align="center"> </p>

<hr>

<p>                              
<u>Amount and Nature of Beneficial Ownership</u></p>

<p>                                          
 
Common Shares
                         
Percent</p>

<p>Name and
                                    
Which May Be
                            
of</p>

<p>Address of
              
Common Shares      Acquired Within
                        
Class</p>

<p><u>Beneficial Owner</u>        <u>Presently Held</u>
      <u>  60 days(1)   </u>        
<u>Total </u>        <u>  
(2)    </u></p>

<p>Dr. John W. Whitney</p>

<p>P.O. Box 10725</p>

<p>Reno, NV 89510           
13,959,100(5)         1,162,500
           15,121,600
        20.42</p>

<p>(3)(4)</p>

<p>Paul H. Durckel</p>

<p>1511 Hwy. 395</p>

<p>Gardnerville, NV. 89410     211,000
                
-
               
211,000          0.29</p>

<p>(3)</p>

<p> </p>

<p>Alan C. Lewin </p>

<p>P.O. Box 10725</p>

<p>Reno, Nv 89510             
180,000
              
50,000              230,000
         0.32</p>

<p>(3)</p>

<p>All directors and</p>

<p>executive officers as</p>

<p>a group (5 persons)     16,534,597
            1,252,500
          17,787,097
        23.99</p>

<p>  </p>

<p>(1) Of the above options and warrants, 50,000 are at $0.10 per share, 202,500 are at
$0.40 per share and 1,000,000 are at $0.25 per share. </p>

<p>(2) The percent of class is based on the sum of 72,880,210 shares outstanding or to be
issued as of February 29, 2000 plus, for each individual, the number of common shares as
to which the named individual has the right to acquire beneficial ownership within 60 days
of February 29, 2000.</p>

<p>(3) Director</p>

<p>(4) Officer</p>

<p>(5) Includes 97,636 shares owned by or to be issued to John B. Whitney, Dr. John W.
Whitney's minor son, and 72,768 shares owned by Maureen B. Whitney, Dr. Whitney's wife. </p>

<p>c) <u>Changes in Control</u></p>

<p>The Company is not aware of any arrangement which at some later date results in changes
in control of the Company.</p>

<p align="center">35</p>

<p align="center"> </p>

<hr>

<p>ITEM 12. <u>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.</u></p>

<p>During the Company's two most recent fiscal years, including those of its subsidiaries
and affiliates, the Company engaged in no transactions or series of transactions with any
director, officer, security holder or family thereof in which the amount involved exceeded
$60,000 except as follows:</p>

<p>1. As of December 31, 1997, Dr. Whitney had accumulated deferred salary totaling
$141,750. The entire balance was converted into the Company’s common stock in 1998.</p>

<p>2. In 1994, options totaling 2,675,000 shares for Dr. Whitney and 200,000 shares for
Dr. Cavell, which were to expire in 1995, were extended to dates ranging from February 5,
1996 to May 15, 1997. The option price of $0.10 per share remained unchanged. In 1995, an
additional option for 1,025,000 shares was granted to Dr. Whitney and his existing options
were extended to dates ranging from February 5, 1997 to May 15, 1997. In 1996, the above
options were extended to six months after all debts owed to, or guaranteed by, Drs.
Whitney and Cavell by Itronics Inc. and its subsidiaries and partnerships are paid in
full. Of the above options, Dr Whitney exercised 500,000 shares in 1996, 1,992,380 in
1997, and 1,207,620 in 1998. Dr Cavell exercised all 200,000 of his options in 1998.</p>

<p>3. After approval from the Company's Board of Directors, in March 1999 the Company's
subsidiary, W&W, agreed to provide technical services to Golden Phoenix Minerals, Inc.
(Golden), a junior mine exploration and development company whose common shares trade on
the OTC Bulletin Board. Services are billed monthly and W&W receives a combination of
Golden common stock, SEC Rule 144 restricted common stock, and cash. Separately, Dr.
Whitney personally agreed to acquire up to 10,000,000 common shares of Golden at $0.10 per
share, making him beneficial owner of more than ten percent of Golden. Any unexercised
options under this arrangement can be assigned to W&W. Dr.'s Whitney and Cavell are
principals in a group that controls the mining claims underlying one of Golden's two
principal exploration and development properties. At December 31, 1999 W&W owned
200,000 unrestricted Golden shares, 536,267 restricted Golden shares and will receive
67,957 restricted shares billed for December, 1999 services. The initial one year period
before resale begins April, 1999, and continues monthly thereafter. Total amount billed
for 1999 was $95,546, of which $17,428 will be received in cash. A total of $23,793 is
included in accounts receivable at December 31, 1999. At December 31, 1999, the average
bid/asked price for Golden common was $0.225, resulting in a value of shares held and to
be received on that date of $180,950.</p>

<p align="center">36</p>

<p align="center"> </p>

<hr>

<p>ITEM 13. <u>FINANCIAL STATEMENTS, EXHIBITS AND REPORTS ON FORM 8-K.</u></p>

<p> </p>

<p>I. <u>List of Financial Statements and Exhibits</u></p>

<p>1. <u>List of Financial Statements:</u></p>

<p>(a) Consolidated Balance Sheets as of December 31, 1999 and 1998.</p>

<p>(b) Consolidated Statements of Operations for the Years ended December 31, 1999 and
1998. </p>

<p>(c) Consolidated Statements of Stockholders' Equity for the Years ended December 31,
1999 and      1998.</p>

<p>(d) Consolidated Statements of Cash Flows for the Years ended December 31, l999 and
1998.</p>

<p>(e) Notes to Consolidated Financial Statements.</p>

<p>2. <u>List of Exhibits:</u></p>

<p>         21
               
List of significant subsidiaries.</p>

<p>II. <u>Reports on Form 8-K. </u></p>

<p>           None</p>

<p align="center">37</p>

<p align="center"> </p>

<hr>

<p align="center">INDEX TO FINANCIAL STATEMENTS</p>

<p align="center">AND SUPPLEMENTAL DATA</p>

<p align="center">DECEMBER 31, 1999</p>

<p>                                          
                               
<u>PAGE</u></p>

<p>INDEPENDENT AUDITOR'S REPORT ON THE FlNANCIAL STATEMENTS
                  
39</p>

<p>FINANCIAL STATEMENTS</p>

<p>Consolidated Balance Sheets
                                          
     
40</p>

<p>Consolidated Statements of Operations
                                     
42</p>

<p>Consolidated Statements of Stockholders' Equity
                           
43</p>

<p>Consolidated Statements of Cash Flows
                                     
44</p>

<p>Notes to Consolidated Financial Statements
                                
46</p>

<p> </p>

<p>EXHIBITS:</p>

<p>           21 Significant
subsidiaries
                                    
68</p>

<p>STATEMENTS AND SCHEDULES</p>

<p>Schedules not included are omitted for the reason that they are not applicable or not
required.</p>

<p align="center">38</p>

<p align="center"> </p>

<hr>

<p align="center">KAFOURY, ARMSTRONG & CO.</p>

<p align="center">A PROFESSIONAL CORPORATION</p>

<p align="center">CERTIFIED PUBLIC ACCOUNTANTS</p>

<p>To the Board of Directors and Stockholders of Itronics Inc.</p>

<p> </p>

<p>We have audited the accompanying consolidated balance sheets of Itronics Inc. (a Texas
corporation) and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations and comprehensive income, stockholders' equity
(deficit), and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audits.</p>

<p>We conducted our audits in accordance with generally accepted auditing standards. Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.</p>

<p>In our opinion, the consolidated financial statements referred to in the first
paragraph present fairly, in all material respects, the consolidated financial position of
Itronics Inc. and subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the years then ended in conformity with generally
accepted accounting principles.</p>

<p>The accompanying consolidated financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements, the
Company and its subsidiaries have reported recurring losses from operations, including a
net loss of $1,901,479 during the year ended December 31, 1999. The ability to continue as
a going concern is contingent primarily upon (a) future profitable operations, and (b) the
ability to generate sufficient cash from operations and additional operating capital
raised from other sources to meet obligations as they become due. This condition raises
substantial doubt about the ability to continue as a going concern. Management's plans
regarding this matter are described in Note 13. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.</p>

<p> </p>

<p> </p>

<p> </p>

<p> </p>

<p align="left">/S/ KAFOURY, ARMSTRONG & CO.</p>

<p>Reno, Nevada</p>

<p>March 3, 2000</p>

<p align="center">39</p>

<p align="center"> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p align="center">CONSOLIDATED BALANCE SHEETS</p>

<p align="center">DECEMBER 31, 1999 AND 1998</p>

<p> </p>

<p align="center">ASSETS</p>

<p> </p>

<p>CURRENT ASSETS
                                        
<u>  1999  </u>        <u>1998 </u></p>

<p>Cash
                                          
       
$ 142,287     $ 348,829 </p>

<p>Accounts receivable, less allowance for</p>

<p>doubtful accounts, 1999, $3,900;</p>

<p>1998, $1,406
                                          
 
225,089        117,397 </p>

<p>Account receivable, lease equipment financing
           133,669
          - </p>

<p>Notes receivable, shareholders
                          
13,591        66,325</p>

<p>Inventories
                                          
   
54,981        41,107</p>

<p>Prepaid expenses
                                        
94,669        46,945</p>

<p>Current portion of deferred loan fees
                    
7,923           -</p>

<p>                                          
           
  ---------     ---------</p>

<p>Total Current Assets
                                  
  672,209       620,603 </p>

<p>                                          
           
  ---------     ---------</p>

<p>PROPERTY AND EQUIPMENT</p>

<p>Land
                                          
         
215,000            -</p>

<p>Building and improvements
                              
787,526            -</p>

<p>Design and construction in progress, </p>

<p>manufacturing facility
                                 
681,225        98,358 </p>

<p>Leasehold improvements
                                  
14,212        14,212 </p>

<p>Equipment and furniture
                                
433,316       394,746 </p>

<p>Vehicles
                                          
      
69,155        68,273 </p>

<p>Equipment under capital lease
                          
803,555        35,189 </p>

<p>                                          
           
  ---------     ---------</p>

<p>                                          
           
  3,003,989       610,778 </p>

<p>Less: Accumulated depreciation and</p>

<p>amortization
                                          
  336,326        281,433 </p>

<p>                                          
           
  ---------      ---------</p>

<p>                                          
           
  2,667,663        329,345 </p>

<p>                                          
           
  ---------      ---------</p>

<p>OTHER ASSETS</p>

<p>Patents, trademarks, and other, less accumulated </p>

<p>amortization 1999, $22,163; 1998, $12,857
              
12,283          8,339 </p>

<p>Stock placement and organization costs, less </p>

<p>accumulated amortization 1999, $40,826; </p>

<p>1998, $26,360
                                          
58,936         45,040</p>

<p>Marketable securities, available for sale
              165,660
           -</p>

<p>Investment in non-public company
                       
30,000             - </p>

<p>Note receivable, shareholder
                              
-           42,340</p>

<p>Deferred loan fees, less current portion
               
31,694            - </p>

<p>Investment in American Gold & Silver Ltd.
               
9,250          9,250 </p>

<p>Deposits
                                          
     
29,647          7,612 </p>

<p>                                          
          
---------       --------- </p>

<p>                                          
            
337,470         112,581 </p>

<p>                                          
          
---------       ---------</p>

<p>                                          
         
$3,677,342      $1,062,529</p>

<p>                                          
          
=========       =========</p>

<p align="center">40</p>

<p align="center"> </p>

<hr>

<p align="center">LIABILITIES AND STOCKHOLDERS' EQUITY </p>

<p>                                          
            
<u>1999 </u>        <u>1998  </u></p>

<p>CURRENT LIABILITIES </p>

<p>Accounts payable
                                    
$ 382,882     $ 152,682 </p>

<p>Accrued management salaries
                            
15,513        80,914 </p>

<p>Accrued expenses
                                       
88,491       103,136 </p>

<p>Insurance contracts payable
                            
16,127        19,279 </p>

<p>Interest payable
                                       
12,490        15,084 </p>

<p>Current maturities of long-term debt
                    
4,740         4,251</p>

<p>Current maturities of capital lease obligations
        158,115
          700 </p>

<p>Current maturities of advances from </p>

<p>stockholders
                                          
 
28,179       113,318 </p>

<p>Current maturities of capital lease obligations</p>

<p>due stockholders
                                        
7,606         8,964 </p>

<p>Other
                                          
        
13,131         6,326 </p>

<p>                                          
          
---------      ---------</p>

<p>Total Current Liabilities
                             727,274
       504,654 </p>

<p>                                          
          
---------      ---------</p>

<p>LONG-TERM LIABILITIES</p>

<p>Long-term debt, less current maturities
               
17,054         21,769 </p>

<p>Convertible promissory notes
                         
100,000            -</p>

<p>Capital lease obligations, less current </p>

<p>maturities
                                          
 
760,906         3,017 </p>

<p>Advances from stockholders, less current</p>

<p>maturities
                                          
     
-          43,154 </p>

<p>Capital lease obligations due stockholder,</p>

<p>less current maturities
                                  
-           7,042 </p>

<p>Accrued salary due stockholder
                        
29,454        37,200 </p>

<p>Deferred gain, less current maturities
                
34,209        16,111 </p>

<p>                                          
          
---------     ---------</p>

<p>Total Long-Term Liabilities
                           941,623
      128,293</p>

<p>Contingency
                                          
    
-             - </p>

<p>                                          
         
---------     ---------</p>

<p>                                          
         
1,668,897       632,947 </p>

<p>                                          
         
---------     ---------</p>

<p>STOCKHOLDERS' EQUITY </p>

<p>Preferred stock, par value $0.001 per share;</p>

<p>authorized 999,500 shares, issued and outstand-</p>

<p>ing 1999, 0 shares; 1998, 0 shares
                        
-            -</p>

<p>Common stock, par value $0.001 per share;</p>

<p>authorized 250,000,000 shares, issued and</p>

<p>outstanding 1999, 70,828,231; 1998, 56,059,727
          70,828
      56,060 </p>

<p>Additional paid-in capital
                          
8,013,746    4,625,194 </p>

<p>Accumulated deficit
                                
(6,276,762) (4,375,283) </p>

<p>Common stock to be issued
                             
104,061      123,611</p>

<p>Accumulated other comprehensive income
                 
92,799          - </p>

<p>Common stock options outstanding, net
                   
3,773          - </p>

<p>                                          
           
---------    --------- </p>

<p>                                          
           
2,008,445      429,582 </p>

<p>                                          
           
---------    ---------</p>

<p>                                          
          
$3,677,342   $1,062,529 </p>

<p>                                          
           
=========    =========</p>

<p align="center">The accompanying notes are an integral part of these financial
statements.</p>

<p align="center">41</p>

<p align="center"> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p ALIGN="CENTER">CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME</p>

<p align="center">FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998</p>

<p align="left">                                        
                
<u>  1999  </u>      <u>  1998  </u></p>

<p>REVENUES</p>

<p>Fertilizer
                                          
   
$ 61,026       $  53,750</p>

<p>Photobyproduct recycling
                                
125,553         126,323 </p>

<p>Silver
                                          
        
112,725         163,799 </p>

<p>Mining technical services
                               
606,580         422,848</p>

<p>                                          
          
  -----------       ---------</p>

<p>Total Revenues
                                          
905,884         766,720 </p>

<p>COST OF SALES
                                         
1,156,483         923,115 </p>

<p>                                          
          
  -----------       ---------</p>

<p>Gross Profit (Loss)
                                    
(250,599)       (156,395) </p>

<p>                                          
          
  -----------       ---------</p>

<p>OPERATING EXPENSES</p>

<p>Depreciation and amortization
                            
66,656          39,941 </p>

<p>Research and development
                                 
49,120          90,104 </p>

<p>Sales and marketing
                                     
922,926         278,817 </p>

<p>Plant start-up costs
                                     
27,878          42,620 </p>

<p>General and administrative
                              
592,856         376,460 </p>

<p>                                          
          
  -----------       ---------</p>

<p>                                          
            
  1,659,436         827,942 </p>

<p>                                          
          
  -----------       ---------</p>

<p>Operating (Loss)
                                     
(1,910,035)       (984,337) </p>

<p>                                          
           
-----------        ---------</p>

<p>OTHER INCOME (EXPENSE)</p>

<p>Interest expense
                                         
(8,877)          (46,511) </p>

<p>Interest income
                                          
17,433             5,985 </p>

<p>                                          
          
-----------         ---------</p>

<p>Total Other Income (Expense)
                              
8,556           (40,526) </p>

<p>                                          
          
-----------         ---------</p>

<p>(Loss) before provision for income tax
               
(1,901,479)       (1,024,863)</p>

<p>Provision for income tax
                                    
-
               
- </p>

<p>                                          
          
-----------         ---------</p>

<p>Net Income(Loss)
                                     
(1,901,479)       (1,024,863)</p>

<p>Other comprehensive income (loss)</p>

<p>Unrealized gains (losses) on securities
                  
92,799               -</p>

<p>                                          
          
-----------         ---------</p>

<p>Comprehensive Income (Loss)
                        
$ (1,808,680)     $ (1,024,863)</p>

<p>                                          
          
===========          =========</p>

<p>Weighted average number of shares outstanding
         65,585,785
        45,993,944 </p>

<p>                                          
           
==========         ========== </p>

<p>Earnings (Loss) per share
                            
$ (0.0290)        $ (0.0223) </p>

<p>                                          
          
==========          ==========</p>

<p> </p>

<p ALIGN="CENTER"> </p>

<p ALIGN="CENTER">The accompanying notes are an integral part of these financial
statements.</p>

<p ALIGN="CENTER">42</p>

<p ALIGN="CENTER"> </p>

<hr>

<p> </p>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p ALIGN="CENTER">CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY </p>

<p ALIGN="CENTER">FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998</p>

<p> </p>

<p> </p>

<p>                             
</p>

<p>                       
<u>COMMON STOCK</u>   ADDITIONAL </p>

<p>                     
NUMBER OF          PAID-IN  
ACCUMULATED   COMMON STOCK </p>

<p>                     
<u>SHARES</u>   <u>  AMOUNT</u>   <u>CAPITAL</u>    
<u>DEFICIT</u>    <u>TO BE ISSUED</u>  <u>OTHER </u>   <u>TOTAL</u></p>

<p>Balance, 12/31/97  43,050,532 $ 43,051 $3,039,980 $(3,350,420)  $107,363
    $ -    $(160,026)</p>

<p>Sale/issue of common </p>

<p>  stock
              13,009,195
   13,009  1,585,214        -
       16,248      -
     1,614,471</p>

<p>Net (loss) for the </p>

<p>year ended 12/31/98         -
        -
         -    (1,024,863)
       -        -
   (1,024,863)         ----------
-------- ---------- -----------  -------- -------- -----------</p>

<p>Balance, 12/31/98  56,059,727   56,060  4,625,194
(4,375,283)   123,611      -
       429,582</p>

<p>Sale/issue of common </p>

<p>stock
             14,768,504
   14,768  3,388,552        -
    (19,550)     -     
3,383,770</p>

<p>Net (loss) for the </p>

<p>year ended 12/31/99        -
       -
          -   (1,901,479)
    -        -   
(1,901,479)</p>

<p>Other comprehensive income for </p>

<p>the year ended 12/31/99     -       
-           -
          -     
-     92,799       92,799</p>

<p>Common stock options </p>

<p>outstanding
               
-        -
          -
          -     -
      3,773       3,773</p>

<p>                    ----------
-------- ---------- ----------- --------  --------  ----------</p>

<p>Balance, 12/31/99  70,828,231 $ 70,828 $8,013,746 $(6,276,762)$104,061  
$ 96,572  $2,008,445</p>

<p>                   
========== ======== ========== =========== ========  ========  ==========</p>

<p ALIGN="CENTER">The accompanying notes are an integral part of these financial
statements.</p>

<p ALIGN="CENTER"> </p>

<p ALIGN="CENTER">43</p>

<p ALIGN="CENTER"> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC, AND SUBSIDIARIES</p>

<p align="center">CONSOLIDATED STATEMENTS OF CASH FLOWS</p>

<p align="center">FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 </p>

<dir>
  <dir>
    <dir>
      <dir>
        <dir>
          <dir>
            <dir>
              <dir>
                <dir>
                  <dir>
                    <dir>
                      <dir>
                        <dir>
                        <dir>
                        <dir>
                        <dir>
                        <p> </p>
                        </dir>
                        </dir>
                        </dir>
                        </dir>
                      </dir>
                    </dir>
                  </dir>
                </dir>
              </dir>
            </dir>
          </dir>
        </dir>
      </dir>
    </dir>
  </dir>
</dir>

<p>                                          
           
<u>  1999  </u>      <u>  1998  </u></p>

<p>Cash flows from operating activities </p>

<p>Net income (loss)
                                  
$(1,901,479)   $(1,024,863) </p>

<p>Adjustments to reconcile net loss to cash</p>

<p>used by operating activities:</p>

<p>   Depreciation and amortization
                       
66,656          39,941 </p>

<p>   Bad debts
                                          
  
2,494             - </p>

<p>   Stock option compensation
                            
3,773             -</p>

<p>   Expenses paid with issuance of common stock: </p>

<p>     Interest expense
                                   
4,383          18,143 </p>

<p>     Legal and consulting expenses
                    
111,926          57,850 </p>

<p>     Directors fees
                                    
13,601           5,127 </p>

<p>     Operating expenses
                                
10,000           9,500 </p>

<p>     Salaries
                                          
91,181         119,591 </p>

<p>   (Increase) decrease in:</p>

<p>     Accounts receivable
                             
(110,186)       (65,125)</p>

<p>     Interest receivable, stock subscription
               621
        (1,003) </p>

<p>     Inventories
                                      
(13,874)         6,866 </p>

<p>     Prepaid expenses
                                  
(3,907)        (4,586)</p>

<p>     Deposits
                                         
(22,035)        (4,789) </p>

<p>   Increase (decrease) in:</p>

<p>     Accounts payable
                                 
230,199         70,028 </p>

<p>     Accrued expenses and contracts payable
            (87,444)
       86,373 </p>

<p>     Interest payable
                                    
(723)        (2,230) </p>

<p>                                          
          
  ---------      ---------</p>

<p>Net cash used by operating activities
              
(1,604,814)      (689,177) </p>

<p>                                          
          
  ---------      ---------</p>

<p>Cash flows from investing activities:</p>

<p>   Acquisition of property and equipment
            (1,123,472)
     (169,401)</p>

<p>   Acquisition of marketable securities
               
(72,861)           - </p>

<p>   Acquisition of intangibles and investments
          (37,695)
      (52,855) </p>

<p>                                          
          
  ---------      ---------</p>

<p>Net cash used by investing activities
              
(1,234,028)      (222,256) </p>

<p>                                          
          
  ---------      ---------</p>

<p>Cash flows from financing activities:</p>

<p>   Proceeds from sale of stock
                      
2,457,378      1,202,263 </p>

<p>   Proceeds from long-term debt, stockholders
              -
          69,327 </p>

<p>   Proceeds from long-term debt, unrelated
             377,852
           -</p>

<p>   Payments on long-term debt, stockholders
           (126,693)
      (35,102) </p>

<p>   Payments on long-term debt, unrelated parties
       (76,237)      
  (5,439) </p>

<p>                                          
          
  ---------      ---------</p>

<p>Net cash provided by financing activities
            2,632,300
     1,231,049 </p>

<p>                                          
          
  ---------      ---------</p>

<p>Net increase (decrease) in cash
                      
(206,542)       319,616 </p>

<p>Cash, beginning of year
                               
348,829         29,213 </p>

<p>                                          
          
  ---------      ---------</p>

<p>Cash, end of year
                                   
$ 142,287      $ 348,829 </p>

<p>                                          
          
  =========      =========</p>

<p ALIGN="CENTER">The accompanying notes are an integral part of these financial
statements.</p>
<b>

<p ALIGN="CENTER"></b>44<b></p>
</b>

<p ALIGN="CENTER"> </p>

<hr>

<p align="center">ITRONICS INC. AND SUBSIDIARIES</p>

<p align="center">CONSOLIDATED STATEMENTS OF CASH FLOWS</p>

<p align="center">FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998</p>

<p align="center">(continued)</p>

<p> </p>

<p>                                          
            
<u>  1999  </u>    <u>  1998  </u></p>

<p>Supplemental Disclosures of Cash Flow Information:</p>

<p>Cash paid during the period for interest
              $ 98,242
    $ 30,598 </p>

<p>Schedule of non-cash financing transactions:</p>

<p>  Settlement of debt/accruals for</p>

<p>  issuance of common stock:</p>

<p>   Accounts payable
                                       
-         10,000 </p>

<p>   Accrued liabilities
                                  
3,500      151,750 </p>

<p>   Notes payable
                                       
10,000       20,000 </p>

<p>   Accrued interest payable
                             
1,871          - </p>

<p>Notes receivable received in subscription of</p>

<p>common stock
                                          
   
-         42,000 </p>

<p>Equipment financed with long-term debt
                    
-         26,459 </p>

<p>Equipment financed with capital leases
                
601,210        3,717</p>

<p>Deferred loan fees on capital leases
                   
39,617          -</p>

<p>Acquisition of assets by issuance of</p>

<p>common stock:</p>

<p>   Building and improvements
                          
700,000          - </p>

<p>   Equipment
                                          
  
4,900          938 </p>

<p>   Investments in stock
                                
25,667          -</p>

<p> </p>

<p ALIGN="CENTER">The accompanying notes are an integral part of these financial
statements.</p>

<p ALIGN="CENTER">45</p>

<p ALIGN="CENTER"> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p align="center">DECEMBER 31, 1999 AND 1998</p>

<p>NOTE 1 - Summary of Significant Accounting Policies:</p>

<p>Company's Activities:</p>

<p>The Company, a Texas corporation, was incorporated on October 29, 1987. The Company was
to seek out and obtain through an acquisition and/or merger transactions, assets which
could benefit its shareholders. In May of 1988, the Company acquired Whitney &
Whitney, Inc. and its related entities through the issuance of its common stock. This
acquisition was accounted for using the pooling of interests method. The Company, through
its subsidiaries, is involved in mining technical services, developing and implementing
silver recovery and photobyproduct recycling techniques, and research and development of
manufacturing fertilizer from photobyproducts. The process of converting to a commercial
level of operations for the photobyproduct recycling and fertilizer manufacturing segment
was commenced during 1998.</p>

<p>Financial Statement Estimates and Assumptions:</p>

<p>The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.</p>

<p>Principles of Consolidation:</p>

<p>The consolidated financial statements include the accounts of Itronics Inc. and its
subsidiaries owned and/or controlled by the Company as follows:</p>

<p>                                          
                 
1999         1998</p>

<p>                                          
              
<u>PERCENTAGE</u>    <u>PERCENTAGE</u></p>

<p>Whitney & Whitney, Inc.
                                   
100.00        100.00</p>

<p>Itronics Metallurgical, Inc.
                              
100.00        100.00</p>

<p>Itronics California, Inc.
                                 
100.00           -</p>

<p>Nevada Hydrometallurgical Project (A Partnership)
           92.50
        92.50</p>

<p>American Hydromet (A Joint Venture)
                        
81.63         81.63</p>

<p>American Gold & Silver (A Limited Partnership)
              43.84
        43.84</p>

<p> </p>

<p>Whitney & Whitney, Inc. is the general partner for American Gold & Silver. As
such, the Company has control over American Gold & Silver and has included it in its
consolidation.</p>

<p>American Gold & Silver and Nevada Hydrometallurgical Project possess no material
tangible assets or liabilities.</p>

<p align="center">46</p>

<p align="center"> </p>

<hr>

<p> </p>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p align="center">DECEMBER 31, 1999 AND 1998</p>

<p align="center"> </p>

<p>No amount for minority interests is reflected in the consolidated balance sheets as the
equity of minority interests in the net losses exceed the carrying value of the minority
interests.</p>

<p>No amount for minority interests is reflected in the consolidated statement of
operations since losses applicable to the minority interest in each subsidiary exceed the
minority interest in the equity capital of each subsidiary. As a result, losses applicable
to the minority interest are charged against the majority interest. When future earnings
materialize, the majority interest will be credited to the extent of such losses
previously absorbed.</p>

<p>All significant intercompany accounts and transactions have been eliminated in the
consolidation.</p>

<p>Revenue Accounting for Contracts:</p>

<p>When the mining technical services segment of the Company is responsible for the
procurement of materials and equipment, property, or subcontracts in its consulting
business, it includes such amounts in both revenues and cost of sales. The amount of such
pass-through costs included in both mining consulting revenues and cost of sales for the
year ended December 31, 1999 and 1998 were $366,421 and $221,854, respectively.</p>

<p>Accounts Receivable Allowance Account:</p>

<p>The photobyproduct fertilizer segment of the Company uses the allowance method to
account for uncollectible accounts receivable.</p>

<p>The Company considers accounts receivable for the mining technical services segment to
be fully collectible; accordingly, no allowance for doubtful accounts is required.</p>

<p>Inventories:</p>

<p>Inventory is determined utilizing the lower of cost or market value determined on the
average cost valuation method and consists primarily of unprocessed silver bearing
photobyproducts, fertilizer raw materials and saleable fertilizer.</p>

<p>Cost of silver inventory is either the actual cost, or 80% of the fair market value of
the silver content of the photobyproducts as determined by laboratory assays (See Note
14).</p>

<p>Property and Equipment:</p>

<p>Property and equipment are stated at cost. Depreciation is computed by accelerated and
straight-line methods over five to forty years.</p>

<p align="center">47</p>

<p align="center"> </p>

<hr>

<p> </p>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p align="center">DECEMBER 31, 1999 AND 1998</p>

<p> </p>

<p>Repairs and maintenance are charged to operations as incurred.</p>

<p> </p>

<p>Amortization:</p>

<p>Intangible assets are amortized by the straight-line method over the following lives:</p>

<p>                                          
                    
<u>YEARS</u></p>

<p>          Patents
                                          
    
17</p>

<p>          Stock placement and organization
costs
                
5</p>

<p>          Non-compete agreement
                                
10</p>

<p>Research and Development:</p>

<p>The Company's fertilizer production process was in the research and development stage.
Accordingly, wages, benefits, rent, and other costs associated with the research are
expensed as research and development expenses when incurred. Nominal sales, and the
related cost of sales, are included in revenues and cost of sales, respectively.</p>

<p>Income Taxes:</p>

<p>The Company has accounted for income taxes to conform to the requirements of Statements
of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Under the
provisions of SFAS 109, an entity recognizes deferred tax assets and liabilities for
future tax consequences of events that have already been recognized in the Company's
financial statements or tax returns. The measurement of deferred tax assets and
liabilities is based on provisions of the enacted tax law; the effects of future changes
in tax laws or rates are not anticipated. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.</p>

<p>Loss per Common Share:</p>

<p>Loss per common share is calculated based on the consolidated net loss for the period
divided by the weighted average number of common shares outstanding during 1999 and 1998.
Common stock equivalents are not included, as their effect would be antidilutive.</p>

<p>Loss per common share for the period is $0.0290 and $0.0223 for 1999 and 1998,
respectively. Loss per common share assuming all shares issued for the settlement of
services and liabilities during 1999 and 1998 were outstanding as of the beginning of each
year (or issuance/accrual date, if later) is $0.0288 and $0.0213, respectively.</p>

<p align="center">48</p>

<p align="center"> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p align="center">DECEMBER 31, 1999 AND 1998</p>

<p> </p>

<p>Common Stock:</p>

<p>The Company’s common shares have, subject to the provisions of any series of
Preferred Stock, certain rights, including one vote per share, on a non-cumulative basis,
and a ratable portion of any dividends that may be declared by the Board of Directors. The
Company may from time to time issue common shares that are restricted under Rule 144 of
the Securities and Exchange Commission. Such restrictions require the shareholder to hold
the shares for a minimum of one year before sale. In addition, officers, directors and
more than 10% shareholders are further restricted in their ability to sell such shares.</p>

<p>NOTE 2 - Reclassification:</p>

<p>The prior year's financial statements have been reclassified, where necessary, to
conform with the current year presentation.</p>

<p>NOTE 3 - Long-Term Debt:</p>

<p>Long-term debt at December 31, 1999 and 1998 is comprised of the following (all debt
payments are applied to outstanding interest owed at date of payment prior to being
applied to the principal balance). The carrying amount approximates fair value. The fair
value of long-term debt is based on current rates at which the Company could borrow funds
with similar remaining maturities.</p>

<p>                                          
                        
<u>DECEMBER 31,</u></p>

<p>                                          
                    
<u>  1999  </u>     <u>  1998  </u></p>

<p><u>Notes due to unrelated outside parties:</u></p>

<p>Note payable secured by a vehicle. The note is</p>

<p>payable at $575 per month, including interest</p>

<p>at 11.0% per annum, for 60 months beginning </p>

<p>December 30, 1998.
                                          
   
$21,794      $26,020 </p>

<p>Less current portion due within one year
                        
(4,740)      (4,251) </p>

<p>                                          
                     
-------      -------</p>

<p>Total long-term liabilities due to unrelated parties
            $17,054
     $21,769 </p>

<p>                                          
                    
  =======      =======</p>

<p ALIGN="CENTER">49</p>

<p ALIGN="CENTER"> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p align="center">DECEMBER 31, 1999 AND 1998 </p>

<p> </p>

<p>                                          
                        
<u>DECEMBER 31,</u></p>

<p>                                          
                      
<u>1999 </u>    <u>1998 </u></p>

<p><u>Convertible Promissory Notes:</u></p>

<p>Note payable due November 18, 2002, including</p>

<p>interest at 12% per annum. The note and accrued </p>

<p>interest are convertible into the Company's</p>

<p>restricted common stock at $0.50 per share </p>

<p>at any time through November 18, 2002.
                         
$ 20,000     $ - </p>

<p>Thirty day notes subsequently converted to </p>

<p>convertible notes due January 2003, including</p>

<p>interest at 9% per annum. The notes and accrued </p>

<p>interest are convertible into the Company's</p>

<p>restricted common stock at $0.65 per share </p>

<p>at any time through January 2003.
                               
80,000         -</p>

<p>                                          
                    
--------     -------</p>

<p>Total long-term convertible promissory notes
                  
$100,000       $ -</p>

<p>                                          
                     
========    =======</p>

<p><u>Loans from Stockholders/Related Transactions:</u> </p>

<p>Unwritten, unsecured 14% interest bearing advance </p>

<p>payable to officer/stockholder, due on demand. </p>

<p>Monthly installments are estimated at $1,000,</p>

<p>but are contingent upon the Company's future</p>

<p>cash flows.
                                          
         
$ -         $44,255 </p>

<p>Unsecured note payable to a stockholder dated </p>

<p>March 1, 1996, with a fixed interest rate of 12%</p>

<p>per annum. Payments are interest only at $500 per</p>

<p>month through March 1997 and $1,500 in principal</p>

<p>and interest per month to March 2000, at which </p>

<p>time the unpaid balance will be due and payable. </p>

<p>On November 10, 1998 the note was amended to </p>

<p>increase monthly payments to $2,500, with the </p>

<p>balance due on September 1, 2000.
                             
21,287        46,983 </p>

<p>Unsecured note payable to a stockholder in the</p>

<p>amount of $10,000, dated December 28, 1994.</p>

<p>Monthly payments of $220, including interest at </p>

<p>11.5%, began January 1998 and are to continue to </p>

<p>December 2000, at which time the unpaid balance </p>

<p>will be due and payable.
                                       
6,892         8,456 </p>

<p align="center">50</p>

<p align="center"> </p>

<hr>

<p> </p>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p align="center">DECEMBER 31, 1999 AND 1998 </p>

<p> </p>

<p>                                          
                        
<u>DECEMBER 31,</u></p>

<p>                                          
                       
<u>1999 </u>   <u>1998 </u></p>

<p>Four unsecured notes payable to an unaffiliated</p>

<p>company owned by an officer/ stockholder</p>

<p>totaling $22,440, dated in July 1995 and 1996.</p>

<p>The notes are payable in monthly installments</p>

<p>of $534, contingent on the Company’s cash flow, </p>

<p>including variable interest at 6% over prime </p>

<p>(15% as of December 31, 1998).
                                    
$ -       $ 14,278 </p>

<p>Unwritten, unsecured advance payable to an </p>

<p>officer/stockholder. Variable interest (10.5%</p>

<p>to 19.8% as of December 31, 1998) is payable</p>

<p>monthly. The advance is due on demand.
                              
-         10,500 </p>

<p>Unsecured note payable owed to a family member </p>

<p>of an officer/stockholder dated March 1997.</p>

<p>Interest accrues at 10% per annum. The balance</p>

<p>of principal and interest is payable in March </p>

<p>2002. An option has been granted to convert the </p>

<p>note and accrued interest into the Company’s </p>

<p>common stock. The note and accrued interest </p>

<p>were converted into common stock on December 30, </p>

<p>1999.
                                          
                       
-       10,000 </p>

<p>Unsecured note payable due an officer/stock-</p>

<p>holder, dated December 1997. Payments are interest </p>

<p>only at prime plus 6%(15% at December 31, 1998)</p>

<p>through 1998, monthly payments of $476 through 1999,</p>

<p>with the balance due on December 31, 1999.
                            
-       22,000 </p>

<p>                                          
                       
--------    --------</p>

<p>                                          
                         
28,179     156,472</p>

<p>Less current portion due within one year
                           (28,179)
   (113,318) </p>

<p>                                          
                       
--------    --------</p>

<p>Total long-term liabilities due to stockholders
                  
$    -     $ 43,154 </p>

<p>                                          
                       
========    ========</p>

<p>Long-term debt matures as follows:</p>

<p>                                          
                  
CONVERTIBLE</p>

<p>                       
<u>YEAR</u>
               <u>UNRELATED
PARTIES</u> <u>   NOTES    STOCKHOLDERS</u></p>

<p>                       
2000
                   
$ 4,740        $  -
         $28,179 </p>

<p>                       
2001
                     
5,289            -
             -</p>

<p>                       
2002
                     
5,901         20,000
           -</p>

<p>                       
2003
                     
5,864         80,000
           -</p>

<p>                                          
      
------        -------
        ------</p>

<p>                                          
    
$ 21,794       $100,000     
   $28,179</p>

<p>                                          
      
======        =======
        ======</p>

<p align="center">51</p>

<p align="center"> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p align="center">DECEMBER 31, 1999 AND 1998</p>

<p>NOTE 4 - Major Customers:</p>

<p>Fertilizer sales for the years ended December 31, 1999 and 1998 include $44,768 and
$40,810, respectively, from one major customer. The customer is one of the largest
fertilizer distribution companies in the country.</p>

<p>Silver sales for the years ended December 31, 1999 and 1998 include $73,709 and
$116,430, respectively, from one major customer. The customer is one of the largest silver
refiners in the country.</p>

<p>Technical services revenue (including pass through funds described in Note 1) for the
year ended December 31, 1999 includes $488,383 and $110,129, respectively, from two major
customers which represents 80.5% and 18.2%, respectively, of technical services revenues.
Technical services revenue (including pass through funds described in Note 1) for the year
ended December 31, 1998 includes $391,807 and $123,858 from one major customer which
represents 92.7% of technical services revenues. Receivables from these major customers as
of December 31, 1999 and 1998 amount to $185,609 and $79,883, which represents 97.6% and
89.2%, respectively, of consulting accounts receivable.</p>

<p>The Company's major technical services customers operate within the mining industry,
both nationally and internationally. Due to the nature of the Company's operations, the
major sources of sales revenues may change from year to year.</p>

<p>NOTE 5 - Income Taxes:</p>

<p>Although the Company has incurred net losses for 1999 and 1998, the majority of the
loss from the photobyproduct fertilizer segment is attributed to American Hydromet, which
is a joint venture. Net income (loss) before taxes, after application of the above, amount
to $(283,795) and $(201,342) for 1999 and 1998, respectively. The following is a
reconciliation of the federal statutory tax and tax rate to the Company's provision for
taxes and its effective tax rate. </p>

<p>                                          
     
<u>    1999     </u>           
<u>    1998      </u></p>

<p>                                          
         
      PERCENT
               
   PERCENT</p>

<p>                                          
            
OF PRE-TAX
               OF
PRE-TAX</p>

<p>                                          
   
<u>AMOUNT</u>      <u>INCOME</u>       
<u>AMOUNT</u>      <u>INCOME</u></p>

<p> </p>

<p>Federal tax at statutory rate
                
$ -          - %
          $ -
         - %</p>

<p>Temporary differences, primarily bad debt </p>

<p>and compensation related expenses
               -
          - %
            -
         - % </p>

<p>Non-deductible expenses
                        
-           - %
            -
         - %</p>

<p>Utilization of NOL
                             
-           - %
            -
         - %</p>

<p>                                          
 
-------      -------       -------
    -------</p>

<p>Total Income Tax Expense
                  
$ -            0.0%
          $ -
        0.0%</p>

<p>                                          
 
=======      =======       =======
    =======</p>

<p align="center">52</p>

<p align="center"> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p align="center">DECEMBER 31, 1999 AND 1998</p>

<p> </p>

<p>The Company's consolidated net operating loss available for carry-forward to offset
future taxable income and tax liabilities for income tax reporting purposes expire as
follows:</p>

<p>         <u>Year Ending December 31</u>:
                    
<u>Net 0perating Loss</u></p>

<p>                
2001
                                    
$ 33,828</p>

<p>                
2002
                                      
26,089</p>

<p>                
2003
                                      
14,737</p>

<p>                
2005
                                      
65,113</p>

<p>                
2006
                                     
430,403</p>

<p>                
2007
                                     
188,146 </p>

<p>                
2008
                                     
113,253</p>

<p>                
2012
                                     
322,525 </p>

<p>                
2018
                                     
377,944</p>

<p>                
2019
                                     
541,581</p>

<p>                                          
              
  ---------</p>

<p>                                          
             
  $2,113,619

<dir>
  <dir>
    <dir>
      <dir>
        <ul>
          <p>                               
            =========</p>
        </ul>
      </dir>
    </dir>
  </dir>
</dir>

<p>The Company's total deferred tax assets, and deferred tax asset valuation allowances at
December 31, 1999 and 1998 are as follows:</p>

<p>                                          
              
<u>  1999  </u>     <u>   1998   </u></p>

<p>Total deferred tax assets
                              
$ 754,058     $ 572,240 </p>

<p>Less valuation allowance
                                
(754,058)     (572,240) </p>

<p>                                          
              
--------       --------</p>

<p>       Net deferred tax asset
                          
$      -       $    
-</p>

<p>                                          
              
========       ========</p>

<p>NOTE 6 - Stock Option and Purchase Plans:</p>

<p>Pursuant to various Board of Director authorizations, the Company  adopted a debt
restructuring plan which included the private placement of its Common Shares and/or
warrants to acquire Common Shares at a minimum of $0.l0 per share. The warrants issued
under this plan are exercisable at varying dates through November 2, 2002.</p>

<p>On March 31, 1998 the Company began a private placement offering to raise $2 million in
equity funds. Included in the offering is one two year warrant for each two common shares
acquired. A total of 5,000,000 warrants were issued in Tranche 1 and 2 of the offering,
with an exercise price of $0.25 and $0.40 per share for years one and two of the exercise
period, respectively. The warrants are exercisable at varying dates through January 2001.
A bonus warrant was granted for each common share acquired in Tranche 2 of the Offering.
The bonus warrants are exercisable in four six month intervals at prices of $0.15, $0.20,
$0.30, and $0.40 per share, respectively. A total of 3,720,000 bonus warrants were issued,
with varying exercise dates through November 12, 2000.</p>

<p align="center">53</p>

<p align="center"> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p ALIGN="CENTER">DECEMBER 31, 1999 AND 1998</p>

<p ALIGN="CENTER"> </p>

<p>In February 1999 the Company began the final tranche of the 1998 Private Placement. A
total of 1,172,063 two year warrants were issued in connection with the final tranche,
with an exercise price of $0.75 and $1.00 for years one and two of the exercise period,
respectively. The warrants are exercisable at varying dates through August 2001.</p>

<p>In addition to the above private placement warrants, the Company has granted options to
acquire Common Shares to certain officers, directors, employees, consultants, and
creditors of the Company. The options are exercisable at varying dates through January
2003, except for the 1,000,000 options granted to an officer/stockholder, which expire one
year after the end of his employment. The number of outstanding options was 1,330,641 and
218,710 shares at December 31, 1999 and 1998, respectively.</p>

<p>Following is a summary of all the above described warrants and options granted for the
years ended December 31, 1999 and 1998.</p>

<p>                                          
                     
<u>NUMBER OF SHARES</u></p>

<p>                                          
                  
<u>  1999  </u>      <u>  1998  </u></p>

<p>   Under option, beginning of year
                         
12,415,762     5,317,590</p>

<p>   Granted
                                          
        
2,771,574     8,580,792 </p>

<p>   Exercised
                                          
     
(8,198,320)   (1,482,620) </p>

<p>   Expired
                                          
              
-             - </p>

<p>                                          
                 
----------    ----------</p>

<p>   Under option, end of year
                               
6,989,016    12,415,762 </p>

<p>                                          
                 
----------    ----------</p>

<p>   Average price for all options granted and exercised
        $0.26
        $0.l9</p>

<p>                                          
                 
----------    ----------</p>

<p><u>Compensatory Stock Options</u>:</p>

<p>Included in the above options and warrants are compensatory options to acquire
1,253,000 restricted common shares. These options were granted to various employees and a
consultant at varying dates during 1999. All the options are exercisable at any time
during the option period for $0.25 per share. 1,000,000 of the options were granted to an
officer and expire one year after the termination of his employment. All the other options
expire three years after the grant date. The Company applies APB Opinion 25 in accounting
for these stock options. Total compensation, based on the fair market values of the stock
on the grant dates is $59,307. This amount is being amortized over the three year lives of
the options, which resulted in compensation expense in 1999 of $3,773 and deferred
compensation as of December 31, 1999 of $55,534. </p>

<p>If the Company were to apply the provisions of FASB Statement No. 123 to these options,
using the fair value method, compensation expense would have been $171,818. Net loss and
loss per share would have been impacted as follows:</p>

<p align="center">54</p>

<p align="center"> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p ALIGN="CENTER">DECEMBER 31, 1999 AND 1998</p>

<p ALIGN="CENTER"> </p>

<p>                                          
                 
<u>  1999  </u>     <u>  1998 </u></p>

<p>Net Income (Loss):</p>

<p>     As reported
                                        
$(1,901,479)   $(1,024,863)</p>

<p>                                          
               
==========     ==========</p>

<p>     Pro forma
                                          
$(2,073,297)   $(1,024,863)</p>

<p>                                          
               
==========     ==========</p>

<p>Earnings (Loss) per share:</p>

<p>     As reported
                                         
$ (0.0290)    $ (0.0223)</p>

<p>                                          
               
==========     ==========</p>

<p>     Pro forma
                                          
 
$ (0.0316)    $ (0.0223)</p>

<p>                                          
               
==========     ==========</p>

<p>The pro forma amounts were estimated using the Black-Scholes option pricing model with
the following assumptions for 1999:</p>

<p>              
Dividend yield
                          
0%</p>

<p>              
Risk-free interest rate
               6.25%</p>

<p>              
Expected life
                      
3 years</p>

<p>              
Expected volatility
                 
78.43%</p>

<p> </p>

<p>NOTE 7 - Common Stock to be Issued:</p>

<p>The following summarizes stock transactions commencing prior to December 31, with stock
issued or to be issued subsequent to that date:</p>

<p>                                          
                    
  <u>1999 </u>          <u>1998 </u></p>

<p>   Payment of consulting and operating fees
                  
$ 18,565      $ 15,020 </p>

<p>   Payment of director fees
                                     
4,590          1,377 </p>

<p>   Payment of salaries
                                         
48,211        103,318 </p>

<p>   Payment of interest
                                          
  
237          3,896 </p>

<p>   Payment of notes payable and interest
                       
13,058            - </p>

<p>   Purchase of equipment
                                        
4,400            - </p>

<p>   Exercise of warrants
                                        
15,000            - </p>

<p>                                          
                    
-------        -------</p>

<p>                                          
                   
$104,061       $123,611 </p>

<p>                                          
                    
=======        =======</p>

<p>NOTE 8 - Accrued Expenses:</p>

<p>The following is the composition of accrued expenses as of December 31:</p>

<p>                                          
                    
   <u>1999 </u>        <u>  1998  </u></p>

<p>   Accrued vacation
                                          
$30,256        $ 19,709 </p>

<p>   Federal and State payroll taxes
                            
15,128          47,236 </p>

<p align="center">55</p>

<p align="center"> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p align="center">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p align="center">DECEMBER 31, 1999 AND 1998</p>

<p> </p>

<p>                                          
                  
      <u>1999 </u>          <u>1998
</u>

<dir>
  <dir>
    <p>Sales tax
                                              
  
    1,107           1,191 </p>
  </dir>
</dir>

<p>          Audit & annual meeting costs
                        
42,000          35,000</p>

<p>                                          
                   
  -------         -------</p>

<p>                                          
                  
  $ 88,491        $103,136 </p>

<p>                                          
                   
  =======         =======</p>

<p>NOTE 9 - Related Party Transactions:</p>

<p>Several promissory notes are held by stockholders at December 31, 1999 and 1998 (see
Note 3 for terms).</p>

<p>Interest expense includes $16,945 and $42,088 for December 31, 1999 and 1998,
respectively, relating to the Company's notes payable and salary in arrears due to
stockholders. Accrued interest payable includes $5,445 and $14,973 for the notes and
leases payable to stockholders as of December 31, 1999 and 1998, respectively.</p>

<p>An officer/stockholder of Whitney & Whitney, Inc. was owed $36,654 for salary in
arrears as of December 31, 1999. The individual retired on December 31, 1998 and will
receive payment of the back salary over several years. The individual has agreed not to
make demand for $29,454 of the arrearages prior to January 1, 2001.</p>

<p>An officer/stockholder of the Company was owed $11,750 and $141,750 for salary in
arrears as of December 31, 1998 and 1997, respectively. The officer/stockholder made an
agreement with the Company not to make demand on these arrearages prior to March 1, 1999
(to a maximum of $140,000). The $141,750 due at December 31, 1997 was converted into the
Company’s common stock during 1998. The $11,750 due at December 31, 1998 was paid in
1999. </p>

<p>$36,654 and $110,204 of the accrued management salaries as of December 31, 1999 and
1998, respectively, is for salary in arrears due to several officer/stockholders and
employee/stockholders. Interest amounting to $3,196 was paid in 1999 and 2000 by issuance
of 11,372 shares of common stock. Interest amounting to $18,143 for 1998 was paid in 1998
and 1999 by issuance of 124,073 shares of common stock.</p>

<p>Consulting and labor services amounting to $250,424 and $349,088 for 1999 and 1998,
respectively, were paid by issuance of 589,022 and 2,738,418 shares, respectively, of
common stock. The shares were or are to be issued at varying dates in 1998, 1999 and 2000.</p>

<p>After approval from the Company's Board of Directors, in March 1999 the Company's
subsidiary, WWI, agreed to provide technical services to Golden Phoenix Minerals, Inc.
(Golden), a junior mine exploration and development company whose common shares trade on
the OTC Bulletin Board. Services are billed monthly and WWI receives a combination of
Golden common stock, SEC Rule 144 restricted common stock, and cash. Separately, Dr.
Whitney personally agreed to acquire up to 10,000,000 common shares of Golden at $0.10 per
share, making him beneficial owner of more than ten percent of Golden. Any unexercised
options under this arrangement can be assigned to</p>

<p align="center">56</p>

<p align="center"> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p ALIGN="CENTER">DECEMBER 31, 1999 AND 1998</p>

<p> </p>

<p>WWI. Dr.'s Whitney and Cavell are principals in a group that controls the mining claims
underlying one of Golden's two principal exploration and development properties. At
December 31, 1999 WWI owned 200,000 unrestricted Golden shares, 536,267 restricted Golden
shares and will receive 67,957 restricted shares billed for December, 1999 services. The
initial one year period for resale begins April, 2000, and continues monthly thereafter.
Total amount billed for 1999 was $95,546, of which $17,428 will be received in cash. A
total of $23,793 is included in accounts receivable at December 31, 1999. At December 31,
1999, the average bid/asked price for Golden common was $0.225, resulting in a value of
shares held and to be received on that date of $180,950.</p>

<p>For related party transactions subsequent to December 31, 1999, see Note 15.</p>

<p>NOTE 10 - Lease Commitments and Rent Expense:</p>

<p><u>0perating Leases</u></p>

<p>The Company leases its office facility under a noncancellable agreement which expired
June 30, 1999. A one year extension to June 30, 2000 was obtained in 1999. Monthly
payments are $4,727.</p>

<p>A wholly owned subsidiary of the Company (Itronics Metallurgical, Inc. - IMI) leases
plant facilities on a month-to-month basis and, therefore, no long-term binding
contractual obligation exists with regards to minimum lease payments. The monthly rent
payment is $3,120. The subsidiary also leased storage space for the period of October 1,
1998 through September 30, 1999 for $614 per month.</p>

<p>On January 15, 1998 IMI entered into a lease agreement, with option to purchase, for a
35,000 square foot manufacturing facility in Reno/Stead, Nevada. Occupancy of
approximately 16,000 square feet occurred on June 1, 1998, with rental payments of $4,789
per month beginning on that date. Occupancy of the remainder of the facility occurred on
October 15, 1998. The monthly rental amount increased by $2,500 beginning on that date.
The additional rent was paid by issuance of the Company’s restricted common stock. On
March 31, 1999 the Company exercised its option to purchase the building for $1,000,000.</p>

<p>On April 1, 1999 a wholly owned subsidiary of the Company, (Whitney & Whitney, Inc.
- WWI) entered into a sublease agreement with Golden to lease one half of its office space
to be utilized by the technical services group. The sub-lease period is from April 1, 1999
to July 31, 2000, with monthly payments of $2,511.</p>

<p>On May 3, 1999 the Company entered into a four year lease for a vehicle, with monthly
payments of $481.</p>

<p>Future minimum rental commitments at December 31, 1999, under these operating lease
agreements are due as follows:</p>

<p align="center">57</p>

<p align="center"> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p ALIGN="CENTER">DECEMBER 31, 1999 AND 1998</p>

<p> </p>

<p>                        
2000
                
$ 51,709</p>

<p>                        
2001
                   
5,770 </p>

<p>                        
2002
                   
5,770</p>

<p>                        
2003
                   
1,923</p>

<p>                                          
    
  -------</p>

<p>                                          
   
  $ 65,172</p>

<p>                                          
    
  =======</p>

<p>Total rental expense included in the statements of operations for the above leases for
the years ended December 31, 1999 and 1998 are $147,175 and $138,788, respectively.</p>

<p> </p>

<p><u>Capital Leases</u></p>

<p>On August 5, 1995 the Company entered into a lease agreement for new photobyproduct
equipment with a stockholder. The lease is in the amount of $10,000, and is payable at
$332 per month for 36 months. At the end of the lease there is an optional buyback clause
for either 10% of the value of the assets or two months additional payments. </p>

<p>On January 30, 1996 and March 20, 1996, the Company entered into lease agreements for
new photobyproduct equipment with two stockholders. The leases, in the amounts of $7,000
and $10,000, are payable at $233 and $355 per month, respectively, for 36 months. There
are optional buyback clauses at the end of the leases for either 10% of the value of the
assets or two to four months of additional payments. The March 1996 lease was completed
and the buyback clause was exercised. </p>

<p>On December 31, 1998, the August 5, 1995 and January 30, 1996 leases were extended,
with eighteen monthly lease payments at the existing rates and the remaining balance due
on July 25, 2000.</p>

<p>In December 1998 the Company entered into a lease agreement to acquire two computers.
The lease term is for three years, with monthly payments of $154. There is a $1 purchase
option at the end of the lease.</p>

<p>At varying dates in 1999 the Company's subsidiaries, WWI and IMI, entered into leases
to finance the equipment for the manufacturing facility in Reno/Stead, Nevada and for
computer equipment. The leases totaled $987,315. Of this amount $277,852 was received in
cash and $133,669 will be received in cash subsequent to December 31, 1999. $65,033 of the
cash received was in connection with two sale/leaseback transactions of computer and
office equipment. The lease periods range from three to five years, and the total monthly
lease payments are $24,192. With the exception of two leases, all have buyout options for
$1 at the end of the lease. Of the other two leases, one is for transportation equipment
with a buyout of $6,020, and the other is for a forklift with a buyout of $3,647.</p>

<p>All of the above described leases are secured by the equipment acquired under the
lease.</p>

<p align="center">58</p>

<p align="center"> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p ALIGN="CENTER">DECEMBER 31, 1999 AND 1998</p>

<p> </p>

<p>Future minimum lease commitments at December 31, 1999 are due as follows:

<dir>
  <dir>
    <dir>
      <dir>
        <dir>
          <p>       2000
                        $ 308,718</p>
          <p>       2001
                         
          292,154</p>
        </dir>
      </dir>
    </dir>
  </dir>
</dir>

<p>                               
2002
               
289,170</p>

<p>                               
2003
               
282,907</p>

<p>                               
2004
               
145,542</p>

<p>                                          
       
---------</p>

<p>                                          
      
$1,318,491</p>

<p>                                          
       
=========</p>

<p>NOTE 11 - Business Segments:</p>

<p>The Company and its subsidiaries operate primarily in two business segments as
identified in Note 1. The following defines business segment activities:</p>

<p>              
Photobyproduct Fertilizer:       Photobyproduct recycling,
Silver recovery,</p>

<p>                                          
     
Fertilizer production and Sales</p>

<p> </p>

<p>              
Mining Technical Services:       Mining industry services</p>

<p> </p>

<p>The photobyproduct fertilizer segment operates principally in the Northern Nevada and
Southern California areas and, to a lesser extent, the Northern California area. The
primary source of revenue for this segment is from the pick-up and processing of
photobyproducts and recovery of silver therefrom. The customer base is diverse and
includes organizations in the photo-processing, printing, x-ray and medical fields.
Fertilizer sales are concentrated in the same geographic markets and the customer base is
principally in commercial markets, including golf courses, turf farms, and professional
lawn maintenance organizations.</p>

<p>The mining technical services segment performs its services primarily out of the
Company's Reno, Nevada offices, but its source of clients is not limited to organizations
based locally. It has served both national and international clients in the past. As
discussed in Note 4, at present the segment is serving primarily two clients in the gold
mining industry, who have several operations in different areas of the United States. </p>

<p>The Company measures segment performance based on operating income or loss. At present
there are no intercompany revenues. Costs benefiting both segments are incurred by both
the Company and by Whitney & Whitney, Inc. Such costs are allocated to each segment
based on the estimated benefits to the segment. General and administrative costs incurred
by the Company that have no other rational basis for allocation are divided evenly between
the segments. Cost allocation percentages are reviewed annually and are adjusted based on
expected business conditions for the year.</p>

<p align="center">59</p>

<p> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p ALIGN="CENTER">DECEMBER 31, 1999 AND 1998</p>

<p>Operating income (loss) by business segment:</p>

<p>                                          
              
    <u>1999  </u>          <u>1998
</u></p>

<p>Photobyproduct Fertilizer:</p>

<p>   Revenues:</p>

<p>     Fertilizer sales (Note 13)
                         
$ 61,026        $ 53,750 </p>

<p>     Photobyproduct recycling
                            
125,553          126,323 </p>

<p>     Silver recovery (Note 14)
                           
112,725          163,799 </p>

<p>                                          
             
  ---------        ---------</p>

<p>                                          
               
  299,304          343,872 </p>

<p>                                          
             
  ---------        ---------</p>

<p>   Cost of sales and operating expenses
                
1,880,210        1,036,969 </p>

<p>   Research and development
                               
49,120           90,104 </p>

<p>                                          
             
  ---------        ---------</p>

<p>                                          
             
  1,929,330        1,127,073 </p>

<p>                                          
             
  ---------        ---------</p>

<p>          Operating (Loss)
                           
$(1,630,026)      $ (783,201) </p>

<p>                                          
             
  =========        =========</p>

<p>Mining Technical Services: </p>

<p>  Technical services revenues (Note 1)
                 
$ 606,580       $ 422,848 </p>

<p>  Cost of sales and operating expenses
                   
886,589          623,984 </p>

<p>                                          
              
  --------         --------</p>

<p>          Operating (Loss)
                            
$ (280,009)     $ (201,136) </p>

<p>                                          
              
  ========         ========</p>

<p>General and administrative expenses of $141,904 and $87,873 incurred by Itronics Inc.
were equally divided between the two segments for 1999 and 1998, respectively.</p>

<p>Reconciliation of segment revenues, cost of sales, and operating income (loss) to the
respective consolidated amounts:</p>

<p>                                          
              
    <u>1999 </u>           <u>1998 </u></p>

<p>   Revenues</p>

<p>          Photobyproduct Fertilizer
                    
$ 299,304        $ 343,872

<dir>
  <dir>
    <p>Mining Technical Services
                          
    606,580          422,848 </p>
  </dir>
</dir>

<p>                                          
             
  ---------          -------</p>

<p>             Consolidated
Revenues
                     
$ 905,884        $ 766,720 </p>

<p>                                          
             
  =========         ========</p>

<p>  Cost of Sales</p>

<p>          Photobyproduct Fertilizer
                   
$ 614,139         $ 547,326 </p>

<p>          Mining Technical Services (Note
1)              542,344
          375,789</p>

<p>                                          
            
  ---------           -------</p>

<p>            Consolidated Cost of
Sales
               
$1,156,483         $ 923,115 </p>

<p>                                          
            
  =========           =======</p>

<p align="center">60</p>

<p align="center"> </p>

<hr>

<dir>
  <p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>
</dir>

<p ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p ALIGN="CENTER">DECEMBER 31, 1999 AND 1998</p>

<p> </p>

<p>                                          
              
  <u>1999 </u>         
     <u>1998 </u></p>

<p>   Operating Income (Loss)</p>

<p>     Photobyproduct Fertilizer
                      
$(1,630,026)         $(783,201) </p>

<p>     Mining Technical Services
                         
(280,009)          (201,136) </p>

<p>                                          
           
-----------          ---------</p>

<p>       Consolidated Operating Income (Loss)
            (1,910,035)
        (984,337) </p>

<p>       Other Income (Expense)
                              
8,556          ( 40,526) </p>

<p>                                          
           
  ----------         ---------</p>

<p>       Consolidated Net Income (Loss) before</p>

<p>          taxes
                                      
$(1,901,479)      $(1,024,863) </p>

<p>                                          
            
  ==========        ==========</p>

<p>Other segment information:</p>

<p>   Capital expenditures by business segment:</p>

<p>     Photobyproduct Fertilizer
                       
$ 2,193,354        $ 169,217 </p>

<p>     Mining Technical Services
                           
199,857           31,298</p>

<p>                                          
             
  ---------         -------- </p>

<p>       Consolidated Capital Expenditures
              $ 2,393,211
       $ 200,515 </p>

<p>                                          
             
  =========          =======</p>

<p>   Depreciation and amortization expense by business segment:

<dir>
  <dir>
    <p>Photobyproduct Fertilizer</p>
  </dir>
</dir>

<p>            Depreciation
                               
$ 31,305         $ 25,820 </p>

<p>            Amortization
                                 
24,855             6,952 </p>

<p>                                          
               
  ------            ------</p>

<p>                                          
               
  56,160            32,772 </p>

<p>                                          
               
  ------            ------ </p>

<p>          Mining Technical Services</p>

<p>            Depreciation
                               
  $ 4,706            $ 5,094 </p>

<p>            Amortization
                                 
  5,790             
2,075 </p>

<p>                                          
              
   ------            
------</p>

<p>                                          
              
   10,496
             7,169 </p>

<p>                                          
              
   ------            
------ </p>

<p>      Consolidated Depreciation and Amortization
        $ 66,656
          $ 39,941 </p>

<p>                                          
              
   ======            
======</p>

<p>Identifiable assets by business segment (net of accumulated depreciation, accumulated
amortization, and allowance for doubtful accounts):</p>

<p align="center">61</p>

<p align="center"> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p ALIGN="CENTER">DECEMBER 31, 1999 AND 1998</p>

<p> </p>

<p>                                     
<u>         1999
         </u>        
<u>      
1998         </u></p>

<p>                                         
PHOTO-     MINING
            PHOTO-
    MINING </p>

<p>                                       
BYPRODUCT   TECHNICAL        BYPRODUCT 
TECHNICAL </p>

<p><u>ASSET DESCRIPTION</u>
                     
<u>FERTILIZER</u>   <u>SERVICES</u>        <u>FERTILIZER</u> 
<u>SERVICES </u></p>

<p>Current Assets </p>

<p>   Cash
                               
$ 14,507    $ 33,486       
   $ 17,637     $ 29,004</p>

<p>   Accounts receivable, net
              34,835
     190,254          
27,858       89,539 </p>

<p>   Account receivable, lease equipment </p>

<p>    financing
                          
130,500        3,169
            -
            - </p>

<p>   Inventories
                          
53,155        1,826
         39,281
        1,826</p>

<p>   Deferred loan fees, current
            5,864
       2,059
            -
            - </p>

<p>   Prepaid expenses
                     
22,879        3,028
         18,916
          802 </p>

<p>                                     
  ---------      -------     
  ---------       -------</p>

<p>                                       
  261,740      233,822  
       103,692       121,171</p>

<p>                               
        ---------     
-------       ---------      
-------</p>

<p>Property and Equipment, net</p>

<p>   Land
                                
215,000          -
              -
            -</p>

<p>   Building and improvements
            786,529
         -
              -
            -</p>

<p>   Construction in progress, </p>

<p>    manufacturing facility
              681,225
         -
          98,358
           - </p>

<p>   Leasehold improvements
                
6,485          -
           7,355    
        -</p>

<p>   Equipment
                           
140,486       37,616       
118,795         43,818 </p>

<p>   Vehicles
                             
25,540        3,654
        32,532      
   4,983 </p>

<p>   Equipment under capital lease        
577,607      193,521        
19,880          3,624 </p>

<p>                                     
---------       -------      ---------
       -------</p>

<p>                                     
2,432,872       234,791       
276,920         52,425 </p>

<p>                                     
---------       -------      ---------
       -------</p>

<p>Other Assets, net </p>

<p>   Patents, trademarks, and other        12,283
         -
            8,452
          -</p>

<p>   Marketable securities
                  
-       165,660
             -
            -</p>

<p>   Intercompany investments/loans
          -     2,732,356
             -
      3,105,064 </p>

<p>   Deposits
                             
9,694      19,953
           5,491
        2,121</p>

<p>   Deferred loan fees
                   23,457
      8,237
             -
            -</p>

<p>                                   
-----------  ----------     
   ----------   ----------</p>

<p>                                        
45,434   2,926,206         
   13,943    3,107,185 </p>

<p>                                     
---------   ---------      
   ---------   ----------</p>

<p>                                    
$2,740,046  $3,394,819       
   $394,555   $3,280,781</p>

<p>                                     
=========   =========      
   =========    =========</p>

<p align="center">62</p>

<p align="center"> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p ALIGN="CENTER">DECEMBER 31, 1999 AND 1998</p>

<p> </p>

<p>Reconciliation of segment assets to consolidated assets:</p>

<p>                                          
           
<u>  1999  </u>          <u> 
1998  </u></p>

<p>Total Assets:</p>

<p>  Photobyproduct Fertilizer
                        
$ 2,740,046        $ 394,555</p>

<p>  Mining Technical Services
                          
3,394,819         3,280,781 </p>

<p>                                          
           
---------         ---------</p>

<p>     Total Segment Assets
                            
6,134,865        3,675,336 </p>

<p>  Itronics Inc. assets
                               
9,528,737        6,746,058 </p>

<p>  Less: intercompany elimination
                   
(11,986,260)      (9,358,865) </p>

<p>                                          
           
----------        ---------</p>

<p>     Consolidated Assets
                            
$3,677,342       $1,062,529 </p>

<p>                                          
           
  =========       =========</p>

<p>NOTE 12 - Contingencies:</p>

<p>In June 1995 the former President of a former mining client filed suit against the
Company, Whitney & Whitney, Inc. (W&W) and several key employees, alleging libel
and slander related to the issuance of W&W's final report on the project. The
Company's liability insurance carrier is presently defending W&W and its key employees
in this case. Management believes the allegations to be without merit, and is vigorously
defending against the suit, and has served a counter-suit against the individual. In March
1997 the June 1995 suit was dismissed by the Court. The individual has subsequently filed
an appeal of the dismissal.</p>

<p>In February 1997, this same individual filed a second suit that includes the Company,
W&W and a key employee as co-defendants, along with several unrelated parties. The
suit alleges breach of contract and other causes of action and seeks in excess of $5
million plus punitive damages. The Company's liability insurance carrier has agreed to
assume the defense of this action with a reservation of rights, including the right to
disclaim insurance coverage. Management believes the allegations are without merit and is
vigorously defending against the suit. In May 1998 agreement was reached with the
plaintiff that if the appeal of the first suit fails, the second suit will be dropped. Due
to a civil court backlog, the appeal hearing has been delayed for at least 25 months from
July 31, 1998. As of the date of this report, a hearing date has not been set.</p>

<p>In management's judgment, no accrual of a loss contingency is required in the financial
statements.</p>

<p>NOTE 13 - Going Concern:</p>

<p>The Company's consolidated financial statements have been presented on the basis that
it is a going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company and its subsidiaries have
reported recurring losses from operations, including a net loss of $1,901,479 during the
year ended December 31, 1999. This factor indicates the Company and its subsidiaries'</p>

<p align="center">63</p>

<p align="center"> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p ALIGN="CENTER">DECEMBER 31, 1999 AND 1998</p>

<p> </p>

<p>ability to continue in existence is dependent upon their ability to obtain additional
long-term debt and/or equity financing and achieve profitable operations. The consolidated
financial statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification of liabilities
that might be necessary should the Company and its subsidiaries be unable to continue in
existence.</p>

<p>Prior to acquiring Whitney & Whitney, Inc. in 1988, the Company registered
1,777,000 common shares for public offering. Each common share included one Class A and
one Class B warrant. Due to security law changes immediately subsequent to the offering,
the offering did not raise sufficient equity capital to complete the Company's business
plan. In order to solve the Company's liquidity problems, management has been implementing
a plan of increasing equity through private placements of preferred and common shares,
conversion of debt to common shares, and payment of consulting and other labor services
with common shares.</p>

<p>In addition to continuing the above described efforts, development of the technology
necessary to manufacture fertilizer from photobyproducts has been completed. Management is
now organizing the resources needed to market the products. In March 1998 the
Company’s subsidiary, Itronics Metallurgical, Inc., signed a definitive manufacturing
and distribution agreement with Western Farm Services, Inc. (WFS). The agreement gives WFS
the exclusive license and right to manufacture and market the Gold’n Gro line of
fertilizer products in the states of Arizona, California, Hawaii, Idaho, Oregon and
Washington. The agreement is for five years, with five year renewal options.</p>

<p>During 1998 the Company began a Private Placement Memorandum to raise $2 million in
equity funds. A total of $1,078,750 was received from the Private Placement in 1998. In
addition, $37,500 was received subsequent to December 31, 1998, $70,000 in accrued
management salaries and an account payable due to an officer/stockholder were converted
into common stock in the Private Placement, and promissory notes with balances of $25,000
at December 31, 1998 were accepted in subscription of the Private Placement.</p>

<p>In February 1999 the Company opened the Final Tranche of the 1998 Private Placement to
raise $780,000 in equity funds. A total of $837,500 was received under the Final Tranche
in 1999. In addition, $1,487,924 was received in 1999 from the exercise of warrants from
the 1998 and earlier private placements. </p>

<p>In January 2000 the Company began a Private Placement of 9% Convertible Promissory
Notes to raise $2.5 million. A total of $2,631,000 was received. In addition, a total of
$340,179 has been received from the exercise of warrants through March 3, 2000. </p>

<p align="center">64</p>

<p align="center"> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p ALIGN="CENTER">DECEMBER 31, 1999 AND 1998</p>

<p> </p>

<p>NOTE 14 - Off-Balance Sheet Risks and Concentration of Credit Risk:</p>

<p>The Company occasionally maintains bank deposits in excess of federally insured limits.
Statement of Financial Accounting Standards No. 105 identifies this as a concentration of
credit risk requiring disclosure, regardless of the degree of risk. The Company’s
risk is managed by maintaining its accounts in one of the top five largest banks in the
country.</p>

<p>As of December 31, 1999, a significant portion of the Company's accounts receivable is
concentrated with one mining industry client. This concentration of credit risk is
somewhat mitigated due to the fact that the Company has been providing services for this
client for more than ten years and the client has always paid the billings on a timely
basis.</p>

<p>Increase or decrease in photobyproduct recycling service and silver extraction revenues
has a direct relationship with federal, state, and local regulations and enforcement of
said regulations. Increase or decrease in fertilizer revenues will be related to crop
cycles, seasonal variations, and weather patterns.</p>

<p>The ability to recognize a net profit from silver recovery sales is based on the fair
market value of silver (London five day average) at the time the photobyproducts are
obtained versus the fair market value of silver when recovered silver is sold. Most
customers are given an 80% silver credit against recycling services based on the content
of silver in the photobyproducts. If the fair market value of silver declines, the
possibility exists that the 80% credit, plus operating costs associated with the silver
extraction, could exceed the revenues generated at the time the silver is sold.</p>

<p>Management's plan to reduce the market risk of silver is to increase the volume of
photobyproducts and the resultant silver recovery, and then to implement a hedging program
in which silver will be sold forward, thereby matching the price to be received to the
price paid to the Company's customers.</p>

<p>As a handler of photobyproduct materials, the Company is subject to various federal,
state, and local environmental, safety, and hazardous waste regulations. The Company
believes that its policies and procedures for handling hazardous wastes are in compliance
with the applicable laws and regulations and are consistent with industry standards. Costs
for these compliance activities are expensed as incurred. As the Company's photobyproduct
fertilizer business expands, the various laws and regulations that are applicable to the
Company's activities will change. During 1996, the Company received concurrence from the
State of Nevada environmental officials that the Company's photobyproduct fertilizer
process meets the existing requirements for exemption from all environmental regulations,
except toxic metal content standards, and with the exception that certain presently
conducted lab analyses of the photobyproducts will continue to be required. Certain of the
Company's large scale customers presently meet the exemption requirements. Once all the
photobyproducts are utilized in</p>

<p align="center">65</p>

<p align="center"> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p ALIGN="CENTER">DECEMBER 31, 1999 AND 1998</p>

<p> </p>

<p>the fertilizer or other commercial products, all the Company's customers will be
exempt. As a result, the Company's cost of compliance could decrease.</p>

<p>NOTE 15 - Subsequent Events:</p>

<p>Subsequent to December 31, 1999, new capital leases in the amount of $205,980 (original
principal amount) were incurred to finance equipment acquisitions for the Reno/Stead
manufacturing facility. Of this amount, $174,064 was received in cash.</p>

<p>The following summarizes common stock activity from January 1, 2000 through March 3,
2000:</p>

<p>                                    
<u>        ISSUED       </u>     
<u>    TO BE ISSUED    </u></p>

<p>                                    
<u>  SHARES  </u>  <u>AMOUNT  </u>      <u> 
SHARES    AMOUNT   </u></p>

<p>   Warrant exercise
                 
1,122,625    $185,594        504,562
   $169,586 </p>

<p>   Promissory note conversion
          130,580     
13,058             -
          - </p>

<p>   Labor & consulting services
         255,517    357,075
         80,000     29,436 </p>

<p>   Director fees
                        
7,500       4,590
            -
          -</p>

<p>   Interest
                               
505         237
            -
          -</p>

<p>   Purchase of equipment
                
7,190       4,400
            -
          -</p>

<p>   Operating expenses
                   
2,000       1,000
            -
          - </p>

<p>                                    
---------    --------      ---------  
  --------</p>

<p>                                    
1,525,917    $565,954        584,562
   $199,022</p>

<p>                                    
=========    ========      =========  
  ========</p>

<p>In addition, a total of $18,120 in labor and consulting services has been incurred and
will be paid in stock.</p>

<p>In January 2000 the Company began a Private Placement of 9% Convertible Notes to raise
$2.5 million. A total of $2,631,000 was received. The notes are due in three years with
dates ranging from January 2003 through March 2003. The notes and accrued interest are
convertible, at any time during the three year period, into the Company's restricted
Common Stock, at prices ranging from $0.65 to $1.18 per share, depending on the date of
purchase. The Company may call the notes prior to the due date and, in that event, the
note holder has thirty days to decide whether to convert the note to stock.</p>

<p>NOTE 16 – Earnings (Loss) Per Share:</p>

<p>Following is a reconciliation of the numerators, Net Income (Loss), and the
denominators, weighted average number of shares outstanding, in the computation of
earnings (loss) per share (EPS) for the years ended December 31, 1999 and 1998.</p>

<p align="center">66</p>

<p align="center"> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</p>

<p ALIGN="CENTER">DECEMBER 31, 1999 AND 1998</p>

<p> </p>

<p>                                          
        
  <u>  1999  </u>         <u>  1998
</u></p>

<p>   Net Income (Loss)
                            
$(1,901,479)     $(1,024,863) </p>

<p>   Less: Preferred stock dividends
                      
-                -</p>

<p>                                          
        
---------        ---------</p>

<p>   Basic EPS income (loss) available to</p>

<p>    common stockholders
                         
$(1,901,479)     $(1,024,863) </p>

<p>                                          
     
============       ==========</p>

<p>  Weighted average number of shares</p>

<p>   outstanding
                                  
65,585,785       45,993,944 </p>

<p>  Common equivalent shares
                             
-                - </p>

<p>                                          
      
----------        ----------</p>

<p>                                          
      
65,585,785        45,993,944 </p>

<p>                                          
      
==========        ==========</p>

<p>  Per share amount
                               
$(0.0290)         $(0.0223) </p>

<p>                                          
       
=========         ========= </p>

<p>Warrants, options, and shares to be issued, totaling 7,341,308 and 13,411,850 shares as
of December 31, 1999 and 1998, respectively, could potentially dilute future EPS. No
diluted EPS is presented as the effect of including these shares is antidilutive.</p>

<p align="center">67</p>

<p align="center"> </p>

<hr>

<p ALIGN="CENTER">ITRONICS INC. AND SUBSIDIARIES</p>

<p ALIGN="CENTER">SIGNIFICANT SUBSIDIARIES</p>

<p ALIGN="CENTER">EXHIBIT 21</p>

<p ALIGN="CENTER"> </p>

<p ALIGN="CENTER"> </p>

<p>                                          
   
STATE OF         NAMES UNDER WHICH</p>

<p>NAME
                                      
<u>INCORPORATION</u>         <u>THEY DO BUSINESS </u></p>

<p>Whitney & Whitney, Inc.
                       
Nevada
                
Same</p>

<p>Itronics Metallurgical, Inc
                   
Nevada
                
Same</p>

<p>Itronics California, Inc.
                     
California              Same</p>

<p>Nevada Hydrometallurgical Project</p>

<p>(A Partnership)
                               
Nevada
                
Same</p>

<p>American Hydromet (A Joint Venture)
            Nevada
                
Same</p>

<p align="center">68</p>

<p align="center"> </p>

<hr>

<p ALIGN="CENTER">SIGNATURES</p>

<p>Pursuant to the requirements of Section 13 or 15(d) of the Securities</p>

<p>Exchange Act of 1934, the Registrant has duly caused this report to be signed</p>

<p>on its behalf by the undersigned, thereunto duly authorized.</p>

<p>                                          
          
<u>ITRONICS INC.</u></p>

<p>Date: <u>March 29, 2000</u>
                                
By: <u>/S/ JOHN W. WHITNEY </u></p>

<p>                                          
              
John W. Whitney</p>

<p>                                          
              
President, Treasurer and Director</p>

<p>                                          
              
(Principal Executive Officer)</p>

<p> </p>

<p>Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has
been signed below by the following persons on behalf of the Company and in the capacities
and on the dates indicated.</p>

<p>Date: <u>March 29, 2000</u>
                                 
By: <u>/S/ JOHN W. WHITNEY</u></p>

<p>                                          
               
John W. Whitney</p>

<p>                                          
               
President, Treasurer and Director</p>

<p>                                          
               
(Principal Executive and Financial </p>

<p>                                          
                 
Officer)</p>

<p> </p>

<p>Date: <u>March 29, 2000</u>
                                 
By: <u>/S/ MICHAEL C. HORSLEY </u></p>

<p>                                          
               
Michael C. Horsley</p>

<p>                                          
               
Controller</p>

<p>                                          
               
(Principal Accounting Officer)</p>

<p> </p>

<p>Date: <u>March 29, 2000</u>
                                 
By: <u>/S/ PAUL H. DURCKEL</u> </p>

<p>                                          
               
Paul H. Durckel</p>

<p>                                          
               
Director</p>

<p> </p>

<p>Date: <u>March 29, 2000</u>
                                 
By: <u>/S/ ALAN C. LEWIN</u></p>

<p>                                          
               
Alan C. Lewin</p>

<p>                                          
               
Director</p>

<p align="center">69</p>
</font>

<p align="center"> </p>

<hr>
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