UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM l0-QSB

(Mark One)

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

EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

( ) 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 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)

 

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

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

 

As of July 31, 2007, 402,219,231 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 – June 30, 2007and December 31, 2006    (Unaudited) 
4Condensed Consolidated    Statements of Operations for the Three and Six Months    Ended June 30, 2007 and 2006 (Unaudited) 
6Condensed Consolidated    Statements of Stockholders’ Equity (Deficit)For the Six Months Ended    June 30, 2007 and the Year EndedDecember 31, 2006    (Unaudited)
7Condensed Consolidated    Statements of Cash Flows for theSix Months Ended June 30,    2007 and 2006 (Unaudited) 
8Notes to Condensed    Consolidated Financial Statements (Unaudited) 
10Item 2. Management's    Discussion and Analysis or Plan of Operation
20Item 3. Controls and    Procedures
32PART II- OTHER INFORMATIONItem 1. Legal Proceedings
32Item 2. Changes in    Securities and Use of Proceeds 
33Item 3 Defaults upon Senior    Securities
34Item 6. Exhibits 
35Certifications
37
3

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 30, 2007 AND DECEMBER 31, 2006

(UNAUDITED)

ASSETS
 
June 30,
December    31, 
2007
2006CURRENT ASSETS   Cash 
$ 260,282
$ -Accounts receivable, less    allowance for  doubtful accounts, 2007,    $4,600; 2006, $4,600
79,414
36,493Marketable securities,    available for sale
42,969
-Inventories
804,083
548,399Prepaid expenses
307,116
316,872Total Current Assets
1,493,864
901,764   PROPERTY AND EQUIPMENT   Land 
215,000
215,000Building and improvements
1,312,409
1,167,315Design and construction in    progress,   manufacturing facility
66,248
234,347Equipment and furniture 
2,877,052
2,543,682Vehicles 
222,298
200,557Equipment under capital    lease-equipment and furniture
  466,571
692,438Equipment under capital    lease-vehicles
-
21,741 
5,159,578
5,075,080Less: Accumulated    depreciation and amortization
2,236,163
2,131,542Total Property and    Equipment 
2,923,415
2,943,538   OTHER ASSETS   Intangibles 
76,500
76,500Deferred loan fees, less    accumulated amortization 2007,  $445,302; 2006, $328,120 
350,589
335,629Deposits
8,108
8,108Total Other Assets 
435,197
420,237 
$4,852,476
$4,265,539
 

4

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
June 30,
December    31, 
2007
2006CURRENT LIABILITIES   Bank overdraft
$ -
$ 13,834Accounts payable 
502,765
521,188 Accrued management salaries    
667,274
799,948Accrued expenses 
201,318
206,830Insurance contracts payable    
39,713
12,597Interest payable to    officer/stockholders 
90,131
87,211Interest payable, long-term    debt and lease obligations 
208,365
202,366Current maturities of    long-term debt 
46,836
45,065Current maturities of    capital lease obligations 
350,850
389,032Advances from stockholder
161,525
161,525Current maturities of    capital lease due stockholder
-
3,333Current maturities of    convertible notes and accrued interest
3,500,119
3,304,027Convertible debt    derivatives
5,598,128
4,876,175Warrant and option    liability
1,169,824
380,083Other 
113,904
38,166Total Current Liabilities 
12,650,752
11,041,380   LONG-TERM LIABILITIES  Long-term debt, less    current maturities 
487,552
504,131Capital lease obligations,    less current maturities
127,845
149,533Total Long-Term Liabilities    
615,397
653,664Commitments and    Contingencies 
-
-Total Liabilities 
13,266,149
11,695,044   STOCKHOLDERS' 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,     381,241,231 at June    30, 2007; 337,581,957 at December 31,    2006 
381,241
337,582Additional paid-in capital 
23,761,099
23,305,788Accumulated deficit 
(33,365,426)
(31,661,456)Common stock to be issued 
799,860
583,868Accumulated other    comprehensive income 
3,115
-Common stock options    outstanding, net 
6,438
4,713Total Stockholders’    Equity (Deficit) 
(8,413,673)
(7,429,505) 
$4,852,476
$ 4,265,539
The accompanying notes are an integral part of these financialstatements.

5

 

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006

(UNAUDITED)
 
Three Months Ended June 30,
Six Months Ended June 30, 
2007
2006
2007
2006REVENUES    GOLD’n GRO    fertilizer 
$847,390
$ 766,563
$1,378,624
$1,098,374Mining    technical services 
1,675
1,460
6,628
21,911Total Revenues 
849,065
768,023
1,385,252
1,120,285     COST OF    REVENUES (exclusive of     depreciation    and amortization    shown    separately below)    GOLD’n GRO    fertilizer 
722,869
621,356
1,234,740
964,574Mining    technical services 
7,667
6,856
15,730
22,665Total Cost of    Revenues
730,536
628,212
1,250,470
987,239Gross Profit    (Loss)(exclusive     of depreciation    and amortization    shown    separately below
118,529
139,811
134,782
133,046     OPERATING    EXPENSES    Depreciation    and amortization 
52,392
57,114
104,621
113,628Research and    development 
91,572
68,619
188,854
140,995Sales and    marketing 
283,703
175,055
560,914
361,080Delivery and    warehousing
66,220
52,555
91,136
70,112General and    administrative 
239,744
236,402
474,396
455,562Total Operating    Expenses 
733,631
589,745
1,419,921
1,141,377Operating    (Loss) 
(615,102)
(449,934)
(1,285,139)
(1,008,331)     OTHER INCOME    (EXPENSE)    Interest    expense 
(317,550)
(305,844)
(602,558)
(587,143)Gain (loss) on    derivative instruments
(311,142)
986,137
(168,753)
1,492,406Gain (loss) on    sale of investments
7,718
43,497
352,009
97,728Other
471
91
471
91Total Other    Income (Expense) 
(620,503)
723,881
(418,831)
1,003,082     Income (Loss)    before provision 
for income tax
(1,235,605)
273,947
(1,703,970)
(5,249)Provision for    income tax 
-
-
-
-Net    Income(Loss) 
(1,235,605)
273,947
(1,703,970)
(5,249)     Other    comprehensive income (loss)    Unrealized    gains (losses) on 
  securities 
868
(47,783)
3,115
39,889     Comprehensive    Income (Loss) 
$(1,234,737)
$ 226,164
$(1,700,855)
$ 34,640     Weighted    average number of shares     Outstanding    (1,000’s)
374,749
213,590
366,715
206,315Earnings (Loss)    per share, basic     and diluted
$(0.003)
$0.001
$(0.005)
$ -
See Notes to Condensed Consolidated Financial Statements

6

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND THE YEAR ENDED DECEMBER 31,2006 

(UNAUDITED)
 
COMMON STOCK  
COMMON
ACCUMULATED
COMMON 
NUMBER    OF 
ADDITIONAL 
STOCK TO
OTHER
STOCK  
SHARES  
PAID-IN
ACCUMULATED
BE
COMPREHENSIVE
OPTIONS,  
(1,000’s)
AMOUNT
CAPITAL
DEFICIT
ISSUED
INCOME
NET
TOTALBalance, Dec. 31, 2005 
197,148
$197,148
$21,646,307
$(27,851,571)
$573,993
$(39,889)
$ 413
$(5,473,599)Issue of common stock:         For cash
100
100
7,400
-
-
-
-
7,500For services
24,350
24,350
412,703
-
(3,725)
-
-
433,328For debt conversion
108,723
108,723
1,114,839
-
13,600
-
-
1,237,162For asset acquisition
7,261
7,261
124,539
-