UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM l0-Q

(Mark One)

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

EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008

( ) 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 registrant as specified in its charter)

 

                    TEXAS                                 75-2198369
       (State or other jurisdiction of         (IRS Employer Identification Number)

       incorporation or organization) 

 

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

(Address of principal executive offices)

 

Registrant's telephone number, including area code: (775)689-7696
 

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

Indicate by checkmark whether the registrant is a large accelerated, an acceleratedfiler, a non-accelerated filer, or a smaller reporting company. See the definitions of"large accelerated filer", accelerated filer" and smaller reportingcompany" in Rule 12b-2 of the Exchange Act. 

Large accelerated filer ( )                                 Accelerated filer ( )

Non-accelerated filer ( ) (Do not check if a                Smaller reporting company (X)

Smaller reporting company)

Indicate by checkmark whether the registrant is a shell company ( as defined in Rule12b-2 of the Exchange Act). Yes ( ) No (X)

As of April 30, 2008, 999,996,999 shares of common stock wereoutstanding.

 

2

ITRONICS INC. AND SUBSIDIARIES

TABLE OF CONTENTS

 
PART I - FINANCIAL    INFORMATION
PAGEItem 1. Financial    StatementsCondensed Consolidated    Balance Sheets – March 31, 2008 (Unaudited)and December 31, 2007 
4Condensed Consolidated    Statements of Operations for the Three Months Ended    March 31, 2008 and 2007 (Unaudited) 
6Condensed Consolidated    Statements of Stockholders’ Equity (Deficit)For the Three Months Ended    March 31, 2008 and the Year EndedDecember 31, 2007    (Unaudited)
7Condensed Consolidated    Statements of Cash Flows for theThree Months Ended March    31, 2008 and 2007 (Unaudited) 
8Notes to Condensed    Consolidated Financial Statements (Unaudited) 
10Item 2. Management's    Discussion and Analysis or Plan of Operation
24Item 4T. Controls and    Procedures
35PART II- OTHER INFORMATIONItem 1. Legal Proceedings
36Item 2. Unregistered Sales    of Equity Securities and Use of Proceeds 
37Item 3 Defaults upon Senior    Securities
38Item 4 Submission of    Matters to a Vote of Security Holders
39Item 6. Exhibits 
39Certifications
43
 

3

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH 31, 2008 AND DECEMBER 31, 2007

ASSETS
 
March 31,
December    31, 
2008
2007 
(Unaudited) CURRENT ASSETS   Cash 
$ 241,667
$92,987Accounts receivable, less    allowance for  doubtful accounts, 2008,    $4,600; 2007, $4,600
162,983
17,561Inventories
836,278
889,996Prepaid expenses
60,671
94,952Total Current Assets
1,301,599
1,095,496   PROPERTY AND EQUIPMENT   Land 
215,000
215,000Building and improvements
1,312,409
1,312,409Design and construction in    progress,   manufacturing facility
105,609
97,110Equipment and furniture 
2,881,247
2,879,938Vehicles 
222,298
222,298Equipment under capital    lease-equipment and furniture
466,571
466,571 
5,203,134
5,193,326Less: Accumulated    depreciation and amortization
2,387,923
2,341,004Total Property and    Equipment 
2,815,211
2,852,322   OTHER ASSETS   Intangibles 
76,500
76,500Deferred loan fees, less    accumulated amortization 2008,    $358,486; 2007,    $521,727 
315,070
323,042Deposits
8,508
8,508Total Other Assets 
400,078
408,050 
$4,516,888
$4,355,868
The accompanying notes are an integral part of these financialstatements

4

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

March 31,
December 31,
2008
2007
(Unaudited)CURRENT    LIABILITIES Accounts    payable 
$ 771,207
$ 672,163Accrued    management salaries 
862,034
779,873Accrued    expenses 
255,601
272,267Insurance    contracts payable 
27,222
13,761Interest    payable to officer/stockholders 
208,084
157,181Interest    payable, long-term debt and lease obligations 
224,406
225,533Current    maturities of long-term debt 
429,305
436,523Current    maturities of capital lease obligations 
426,755
463,996Advances from    stockholder
188,025
143,025Current    maturities of convertible notes and accrued interest
3,603,793
3,497,838Convertible    debt derivatives
16,514,068
13,003,762Warrant and    option liability
760,493
231,224Other 
170,746
40,498Total Current    Liabilities 
24,441,739
19,937,644LONG-TERM    LIABILITIESLong-term debt,    less current maturities 
80,379
82,197Capital lease    obligations, less current maturities
-
-Total Long-Term    Liabilities 
80,379
82,197Commitments and    Contingencies (see Note 4) 
-
-Total    Liabilities 
24,522,118
20,019,841STOCKHOLDERS'    EQUITY (DEFICIT)Preferred    stock, par value $0.001 per share;     authorized 999,500 shares; issued and outstanding  2007, 0    shares; 2006, 0 shares 
-
-Common stock,    par value $0.001 per share;     authorized 1,000,000,000 shares; issued and outstanding,      999,996,999 at March 31, 2008 and December 31, 2007 
999,997
999,997Additional    paid-in capital 
24,705,967
24,692,645Accumulated    deficit 
(46,502,758)
(42,143,980)Common stock to    be issued 
791,564
787,365Total    Stockholders’ Equity (Deficit) 
(20,005,230)
(15,663,973)
$4,516,888
$4,355,868
 

The accompanying notes are an integral part of these financialstatements.

5

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(UNAUDITED)
 
Three Months Ended Mar. 31, 
2008
2007REVENUES  GOLD’n GRO    fertilizer 
$597,289
$527,902Mining    technical services 
55,842
4,953Total Revenues 
653,131
532,855COST OF    REVENUES (exclusive of   depreciation    and amortization  shown    separately below)  GOLD’n GRO    fertilizer 
517,167
511,871Mining    technical services 
30,250
8,063Total Cost of    Revenues
547,417
519,934Gross Profit    (Loss)(exclusive   of depreciation    and amortization  shown    separately below
105,714
12,921   OPERATING    EXPENSES  Depreciation    and amortization 
46,919
52,229Research and    development 
78,329
97,282Sales and    marketing 
192,856
277,211Delivery and    warehousing
31,569
24,916General and    administrative 
199,412
234,652Total Operating    Expenses 
549,085
686,290Operating    (Loss) 
(443,371)
(673,369)   OTHER INCOME    (EXPENSE)  Interest    expense 
(304,777)
(281,676)Gain (loss) on    derivative instruments
(3,653,069)
142,389Gain on sale of    investments
-
344,291Debt    forgiveness
42,439
-Total Other    Income (Expense) 
(3,915,407)
205,004   Income (Loss)    before provision 
for income tax
(4,358,778)
(468,365)Provision for    income tax 
-
-Net    Income(Loss) 
(4,358,778)
(468,365)Other    comprehensive income (loss)       Unrealized gains(losses) on 
   securities 
-
2,247Comprehensive    Income (Loss) 
$(4,358,778)
$(466,118)   Weighted    average number of shares   Outstanding    (1,000’s)- Basic and diluted
999,997
358,591Earnings (Loss)    per share, basic and diluted 
$(0.004)
$(0.001)   
The accompanying notes are an integral part of these financialstatements.

6

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND THE YEAR ENDED DECEMBER31, 2007 

(UNAUDITED)
 
COMMON STOCK  
COMMON  
NUMBER    OF 
ADDITIONAL 
STOCK TO
STOCK  
SHARES  
PAID-IN
ACCUMULATED
BE
OPTIONS,  
(1,000’s)
AMOUNT
CAPITAL
DEFICIT
ISSUED
NET
TOTALBalance, Dec. 31, 2006 
337,582
$337,582
$23,305,788
$(31,661,456)
$ 583,868
$4,713
$(7,429,505)Issue of common stock:        For cash       For services
99,274
99,274
588,713
-
217,097
-
905,084For debt conversion
555,410
555,410
698,057
-
(13,600)
-
1,239,867For asset acquisition
7,731
7,731
100,087
-
-
-
107,818Net (loss) for the year        ended Dec. 31, 2007 
-
-
-
(10,482,524)
-
-
(10,482,524)Common stock options       outstanding
-
-
-
-
-
(4,713)
(4,713)Balance, Dec. 31, 2007 
999,997
999,997
24,692,645
(42,143,980)
787,365-
(15,663,973)Issue of common stock        For services
-
-
13,322
-
4,199
-
17,521Net (loss) for the 
three    months ended 

Mar. 31, 2008 
-
-
-
(4,358,778)
-
-
(4,358,778)        Balance, Mar. 31, 2008 
999,997
$ 999,997
$24,705,967
$(46,502,758)
$ 791,564
$ -
$(20,005,230)
The accompanying notes are an integral part of these financialstatements.

7

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(UNAUDITED)
 
Three Months Ended Mar. 31, 
2008
2007Cash flows from operating    activities   Net loss 
$(4,358,778)
$(468,365)Adjustments to reconcile    net loss to 
cash used by operating activities:    Depreciation and    amortization 
92,691
97,551  Interest on    convertible notes
182,206
163,283  (Gain) loss on    change in fair value of derivative      instruments
3,653,069
(142,389)  (Gain) on sale of    investments
-
(344,291)  Addition of silver    in solution inventory by      offsetting    photochemical processing fees
(61,269) 
(66,354)   Stock and option    compensation 
(16,141)
988  (Gain) on debt    forgiveness
(42,439)
-  Expenses paid with    issuance of common stock:     Consulting expenses 
14,444
84,367  Director fees 
3,000
7,388  Salaries 
54,117
72,737  (Increase) decrease    in:      Trade    accounts receivable 
(145,422)
(83,215)       Inventories