UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM l0-QSB

 

(Mark One)

(X) QUARTERLY REPORT UNDER SECTlON 13 OR 15(d) OF THE SECURITIES 

EXCHANGE ACT OF 1934

**                        Forthe quarterly period ended September 30, 2003**
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from______ to_____ 

 

Commission File Number 33-18582

 
**ITRONICS INC.**
(Exact name of small business issuer as specified in its charter)

 

                        TEXAS                                  75-2198369
            (State or otherjurisdiction of        (IRS Employer IdentificationNumber)

            incorporation ororganization) 

 

6490 S. McCarran Blvd., Bldg C-23, Reno, Nevada 89509

(Address of principal executive offices)

 

 

Issuer's telephone number, including area code: (775)689-7696
NO CHANGE

Former name, former address and former fiscal, if changes since lastreport.

 

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

 

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of commonequity, as of the latest practicable date:

As of October 31, 2003, 117,589,773 shares of common stock were outstanding.

Transitional Small Business Disclosure Format (Check one): Yes ( ) No (X)

 

2

 

ITRONICS INC. AND SUBSIDIARIES

TABLE OF CONTENTS

 

 
PART I - FINANCIAL    INFORMATION
PAGEItem 1. Financial    StatementsCondensed Consolidated    Balance Sheets – September 30, 2003  and December 31,    2002 
4Condensed Consolidated    Statements of Operations and       Comprehensive Income for the Three and Nine Months Ended 
  September 30,    2003 and 2002 
6Condensed Consolidated    Statements of Cash Flows for the  Nine Months Ended    September 30, 2003 and 2002 
7Notes to Condensed    Consolidated Financial Statements 
8Item 2. Management's    Discussion and Analysis or Plan ofOperation 
13Item 3. Controls and    Procedures
24PART II- OTHER INFORMATIONItem 1. Legal Proceedings
24Item 2. Changes in    Securities and Use of Proceeds 
25Item 3 Defaults upon Senior    Securities
26Item 6. Exhibits and    Reports on Form 8-K 
27Certifications
29
 

3

 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2003 AND DECEMBER 31, 2002

(UNAUDITED)

 

ASSETS
 
SEPTEMBER    30,
DECEMBER    31, 
2003
2002CURRENT ASSETS   Cash 
$ 84,631
$ 57,201Accounts receivable, less    allowance for  doubtful accounts, 2003,    $5,700; 2002, $5,700
180,993
88,239Marketable securities,    available for sale
463,673
483,983Inventories
431,009
337,153Prepaid expenses
73,836
44,331Current portion of deferred    loan fees
45,327
46,225Total Current Assets
1,279,469
1,057,132   PROPERTY AND EQUIPMENT   Land 
215,000
215,000Building and improvements
1,167,315
1,167,315Design and construction in    progress,     manufacturing    facility
86,884
86,884Equipment and furniture 
1,820,620
1,797,926Vehicles 
133,028
133,028Equipment under capital    lease 
1,098,893
1,077,152 
4,521,740
4,477,305Less: Accumulated    depreciation and amortization
1,306,901
1,085,175 
3,214,839
3,392,130OTHER ASSETS   Intangibles, net of    amortization 
8,638
9,115Marketable securities,    available for sale 
60,000
220,096Deferred loan fees, less    current portion, net of    amortization 
58,167
91,946Investment in American Gold    & Silver Ltd. 
49,750
9,250Deposits
31,970
35,131 
208,525
365,538 
$4,702,833
$4,814,800
 

4

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
SEPTEMBER    30,
DECEMBER    31, 
2003
2002CURRENT LIABILITIES   Accounts payable 
$ 560,190
$ 610,772Accrued management salaries    
326,873
341,278Accrued expenses 
248,511
300,204Insurance contracts payable    
26,664
15,962Interest payable 
220,860
168,473Current maturities of    long-term debt 
547,611
556,301Current maturities of    capital lease obligations 
1,103,721
1,162,723Current maturities of    lease/advances from stockholders
284,156
284,687Current maturities of    convertible notes and accrued interest
917,403
3,374,838Other 
22,428
18,131Total Current Liabilities 
4,258,417
6,833,369   LONG-TERM LIABILITIES  Long-term debt, less    current maturities 
125,254
146,610Convertible promissory    notes, less current maturities 
3,043,600
2,086,129Accrued interest,    convertible notes, less current maturities
972,951
294,262Capital lease obligations,    less current maturities
8,803
31,214Capital lease obligation,    shareholder, less current 
  maturities
14,891
-Accrued salary due    stockholder
2,454
7,854Deferred gain, less current    maturities
- 
3,221Total Long-Term Liabilities    
4,167,953
2,569,290 
8,426,370
9,402,659   STOCKHOLDERS' EQUITY    (DEFICIT)  Preferred stock, par value    $0.001 per share;    authorized 999,500    shares, issued and outstanding    2003, 0 shares;    2002, 0 shares 
-
-Common stock, par value    $0.001 per share;    authorized    250,000,000 shares, issued and outstanding,    116,639,878 at    September 30, 2003; 88,690,170 at     December 31, 2002
116,640
88,690Additional paid-in capital 
14,648,408
11,748,423Accumulated deficit 
(19,331,967)
(17,352,796)Common stock to be issued 
583,254
576,998Accumulated other    comprehensive income (loss) 
257,196
241,653Common stock options    outstanding, net 
2,932
109,173 
(3,723,537)
(4,587,859) 
$4,702,833
$ 4,814,800
 

See Notes to Condensed Consolidated Financial Statements

5

 

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

(UNAUDITED)
 
Three Months Ended Sept 30,
Nine Months Ended Sept 30, 
2003
2002
2003
2002REVENUES    Fertilizer 
$ 51,676
$ 82,224
$ 422,525
$381,164Photochemical recycling 
142,142
139,450
241,259
259,867Silver 
11,286
42,343
32,271
111,149Mining technical services 
103,088
127,451
290,568
282,236Total Revenues 
308,192
391,468
986,623
1,034,416COST OF SALES 
365,866
465,625
1,063,362
1,234,155Gross Profit (Loss) 
(57,674)
(74,157)
(76,739)
(199,739)     OPERATING EXPENSES    Depreciation and    amortization 
83,577
97,790
249,131
281,947Research and development 
14,741
23,697
45,627
57,756Sales and marketing 
193,103
204,172
578,362
806,306Delivery and warehousing
8,079
8,152
33,758
31,166General and administrative 
267,909
239,005
639,630
764,095Total Operating Expenses 
567,409
572,816
1,546,508
1,941,270Operating (Loss) 
(625,083)
(646,973)
(1,623,247)
(2,141,009)     OTHER INCOME (EXPENSE)    Interest expense 
(244,047)
(224,116)
(715,153)
(638,368)Interest income 
7
-
7
3Gain on sale of investments
197,485
32,487
352,366
100,257Other
-
-
6,856
-Total Other Income    (Expense) 
(46,555)
(191,629)
(355,924)
(538,108)     Income (Loss) before    provision 
  for income tax
(671,638)
(838,602)
(1,979,171)
(2,679,117)Provision for income tax 
-
-
-
-     Net Income(Loss) 
(671,638)
(838,602)
(1,979,171)
(2,679,117)     Other comprehensive income    (loss)      Unrealized gains    (losses) on 
    securities 
46,736
(195,018)
15,543
592,833     Comprehensive Income (Loss)    
$(624,902)
$(1,033,620)
$(1,963,628)
$(2,086,284)     Weighted average number of    shares       Outstanding    (1,000’s)
107,481
85,151
98,960
83,410Earnings (Loss) per share 
$(0.0062)
$(0.0098)
$(0.0200)
$(0.0321)
See Notes to Condensed Consolidated Financial Statements

6

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

(UNAUDITED)
 
Nine Months Ended Sept 30, 
2003
2002Cash flows from operating    activities   Net income (loss) 
$(1,979,171)
$(2,679,117)Adjustments to reconcile    net loss to 
 cash used by operating activities:    Depreciation and    amortization 
249,131
281,947  Interest on    convertible notes
469,052
384,900  Marketable    securities received for services
(2,573)
(197,089)  (Gain) Loss on    investments
(352,366)
(100,257)  Stock option    compensation (credit) 
(106,241)
36,242  (Gain) on debt    restructuring
(29,370)
-  Bad debts
15
4,823  Expenses paid with    issuance of common stock 
559,188
666,817  (Increase) decrease    in:      Trade    accounts receivable 
(92,769)
47,946    Other    receivables
-
(3,985)        Inventories 
(93,856)
(17,770)    Prepaid    expenses and deposits 
(37,629)
6,950  Increase (decrease)    in:      Accounts    payable 
58,703
154,928    Accrued    management salaries
110,695
243,229    Accrued    expenses and contracts payable 
(32,166)
(80,308)    Accrued    interest
75,261
51,333Net cash used by operating    activities 
(1,204,096)
(1,199,411)   Cash flows from investing    activities:    Acquisition of    property and equipment 
(22,694)
(236,733)  Acquisition of    marketable securities
(9,000)
-  Proceeds from sale    of investments
559,887
222,523Net cash provided (used) by    investing activities 
528,193
(14,210)   Cash flows from financing    activities:    Proceeds from sale    of stock 
782,095
247,518  Proceeds from debt,    stockholders
-