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 March 31, 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 otherjurisdiction 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 April 30, 2007, 374,467,231 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 – March 31, 2007and December 31, 2006    (Unaudited) 
4Condensed Consolidated    Statements of Operations for the Three Months Ended    March 31, 2007 and 2006 (Unaudited) 
6Condensed Consolidated    Statements of Stockholders’ Equity (Deficit)For the Three Months Ended    March 31, 2007 and the Year EndedDecember 31, 2006    (Unaudited)
7Condensed Consolidated    Statements of Cash Flows for theThree Months Ended March    31, 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
31PART II- OTHER INFORMATIONItem 1. Legal Proceedings
31Item 2. Changes in    Securities and Use of Proceeds 
32Item 3 Defaults upon Senior    Securities
33Item 6. Exhibits 
33Certifications
35
3

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH 31, 2007 AND DECEMBER 31, 2006

(UNAUDITED)

ASSETS

March 31,
December 31,
2007
2006CURRENT ASSETS Cash 
$ 406,790
$ -Accounts    receivable, less allowance fordoubtful    accounts, 2007, $4,600; 2006, $4,600
119,708
36,493Marketable    securities, available for sale
140,600
-Inventories
638,491
548,399Prepaid    expenses
292,060
316,872Total Current    Assets
1,597,649
901,764PROPERTY AND    EQUIPMENT Land 
215,000
215,000Building and    improvements
1,312,409
1,167,315Design and    construction in progress, manufacturing    facility
60,703
234,347Equipment    and furniture 
2,872,645
2,543,682Vehicles    
200,557
200,557Equipment    under capital lease-equipment and furniture
466,571
692,438Equipment    under capital lease-vehicles
21,741
21,741
5,149,626
5,075,080Less:    Accumulated depreciation and amortization
2,183,771
2,131,542Total Property    and Equipment 
2,965,855
2,943,538OTHER ASSETS Intangibles 
76,500
76,500Deferred loan    fees, less accumulated amortization 2007,$373,442; 2006,    $328,120 
360,307
335,629Deposits
8,108
8,108Total Other    Assets 
444,915
420,237
$5,008,419
$4,265,539
 

4

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

March 31,
December 31,
2007
2006CURRENT    LIABILITIES Bank overdraft
$ -
$ 13,834Accounts    payable 
450,087
521,188 Accrued    management salaries 
862,173
799,948Accrued    expenses 
201,699
206,830Insurance    contracts payable 
29,236
12,597Interest    payable to officer/stockholders 
123,732
87,211Interest    payable, long-term debt and lease obligations 
203,733
202,366Current    maturities of long-term debt 
45,987
45,065Current    maturities of capital lease obligations 
353,071
389,032Advances from    stockholder
161,525
161,525Current    maturities of capital lease due stockholder
1,741
3,333Current    maturities of convertible notes and accrued interest
3,399,966
3,304,027Convertible    debt derivatives
4,608,256
4,876,175Warrant and    option liability
1,464,150
380,083Other 
101,891
38,166Total Current    Liabilities 
12,007,247
11,041,380LONG-TERM    LIABILITIESLong-term debt,    less current maturities 
495,096
504,131Capital lease    obligations, less current maturities
139,797
149,533Total Long-Term    Liabilities 
634,893
653,664Commitments and    Contingencies 
-
-Total    Liabilities 
12,642,140
11,695,044STOCKHOLDERS'    EQUITY (DEFICIT)Preferred    stock, par value $0.001 per share;authorized    999,500 shares; issued and outstanding2007, 0 shares;    2006, 0 shares 
-
-Common stock,    par value $0.001 per share;authorized    1,000,000,000 shares; issued and outstanding, 368,705,921 at    March 31, 2007; 337,581,957 at December 31,2006 
368,706
337,582Additional    paid-in capital 
23,550,792
23,305,788Accumulated    deficit 
(32,129,821)
(31,661,456)Common stock to    be issued 
568,654
583,868Accumulated    other comprehensive income 
2,247
-Common stock    options outstanding, net 
5,701
4,713Total    Stockholders’ Equity (Deficit) 
(7,633,721)
(7,429,505)
$ 5,008,419
$ 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 MONTHS ENDED MARCH 31, 2007 AND 2006

(UNAUDITED)
 
Three Months Ended March 31,REVENUES
2007
2006Photochemical fertilizer 
$ 531,234
$331,811 Mining technical services 
4,953
20,451Total Revenues 
536,187
352,262   COST OF REVENUES (exclusive    of depreciation and   amortization shown    separately below)  Photochemical fertilizer
511,871
343,218Mining technical services
8,063
15,809Total Cost of Revenues
519,934
359,027   Gross Profit (Loss)    (exclusive of   depreciation and    amortization shown  separately below)
16,253
(6,765)   OPERATING EXPENSES  Depreciation and    amortization 
52,229
56,514Research and development 
97,282
72,376Sales and marketing 
277,211
186,025Delivery and warehousing 
24,916
17,557General and administrative 
234,652
219,160Total Operating Expenses 
686,290
551,632Operating Loss 
(670,037)
(558,397)   OTHER INCOME (EXPENSE)  Interest 
(285,008)
(281,299)Gain on derivative    instruments
142,389
506,269Gain on sale of investments
344,291
54,231Total Other Income    (Expense) 
201,672
279,201(Loss) before provision for    income tax 
(468,365)
(279,196)Provision for income tax 
-
-Net Loss 
(468,365)
(279,196)Other comprehensive income   Unrealized gains (losses)    on securities 
2,247
87,672Comprehensive Loss 
$(466,118)
$(191,524)   Weighted average number of    shares outstanding,   basic and diluted 
358,591
198,959Loss per share, basic and    diluted 
$(0.001)
$(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, 2007 AND THE YEAR ENDED DECEMBER31, 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
-
-
-
-
7,500  For services
24,350
24,350
412,703
-
(3,725)
-
-
433,328  For debt conversion
108,723
108,723
1,114,839
-
13,600
-
-
1,237,162  For asset    acquisition
7,261
7,261
124,539
-
-
-
-
131,800Net (loss) for the year           ended Dec. 31, 2006 
-
-
-
(3,809,885)
-
-
-
(3,809,885)Other comprehensive           income for the year          ended Dec. 31, 2006 
-
-
-
-
-
39,889
-
39,889Common stock options          outstanding
-
-
-
-
-
-
4,300
4,300Balance, 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 services
6,614
6,614
100,371
-
(1,614)
-
-
105,371  For debt conversion
21,155
21,155
101,252
-
(13,600)
-
-
108,807  For asset    acquisition
3,355
3,355
43,381
- 
-
-
46,736