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 September 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 otherjurisdiction of     (IRS Employer Identification Number)

             incorporationor 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 November 11, 2007, 802,466,402 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, 2007and December 31, 2006    (Unaudited) 
4Condensed Consolidated    Statements of Operations for the Three and Nine Months    Ended September 30, 2007 and 2006 (Unaudited) 
6Condensed Consolidated    Statements of Stockholders’ Equity (Deficit)For the Nine Months Ended    September 30, 2007 and the Year EndedDecember 31, 2006    (Unaudited)
7Condensed Consolidated    Statements of Cash Flows for theNine Months Ended September    30, 2007 and 2006 (Unaudited) 
8Notes to Condensed    Consolidated Financial Statements (Unaudited) 
10Item 2. Management's    Discussion and Analysis or Plan of Operation
21Item 3. Controls and    Procedures
33PART II- OTHER INFORMATIONItem 1. Legal Proceedings
34Item 2. Changes in    Securities and Use of Proceeds 
34Item 3 Defaults upon Senior    Securities
37Item 6. Exhibits 
37Certifications
39
3

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2007 AND DECEMBER 31, 2006

(UNAUDITED)

ASSETS
 
Sept. 30,
December    31, 
2007
2006CURRENT ASSETS   Cash 
$ 20,304
$ -Accounts receivable, less    allowance for  doubtful accounts, 2007,    $4,600; 2006, $4,600
161,212
36,493Inventories
737,914
548,399Prepaid expenses
250,222
316,872Total Current Assets
1,169,652
901,764   PROPERTY AND EQUIPMENT   Land 
215,000
215,000Building and improvements
1,312,409
1,167,315Design and construction in    progress,   manufacturing facility
76,330
234,347Equipment and furniture 
2,878,567
2,543,682Vehicles 
222,298
200,557Equipment under capital    lease-equipment and furniture
466,571
692,438Equipment under capital    lease-vehicles
-
21,741 
5,171,175
5,075,080Less: Accumulated    depreciation and amortization
2,288,555
2,131,542Total Property and    Equipment 
2,882,620
2,943,538   OTHER ASSETS   Intangibles 
76,500
76,500Deferred loan fees, less    accumulated amortization 2007,  $521,727; 2006, $328,120 
314,164
335,629Deposits
8,108
8,108Total Other Assets 
398,772
420,237 
$4,451,044
$4,265,539
4

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
Sept. 30,
December    31, 
2007
2006CURRENT LIABILITIES   Bank overdraft
$ -
$ 13,834Accounts payable 
563,699
521,188 Accrued management salaries    
732,294
799,948Accrued expenses 
268,965
206,830Insurance contracts payable    
39,545
12,597Interest payable to    officer/stockholders 
108,419
87,211Interest payable, long-term    debt and lease obligations 
219,522
202,366Current maturities of    long-term debt 
52,705
45,065Current maturities of    capital lease obligations 
349,556
389,032Advances from stockholder
143,025
161,525Current maturities of    capital lease due stockholder
-
3,333Current maturities of    convertible notes and accrued interest
3,600,271
3,304,027Convertible debt    derivatives
4,549,282
4,876,175Warrant and option    liability
282,487
380,083Other 
36,610
38,166Total Current Liabilities 
10,946,380
11,041,380   LONG-TERM LIABILITIES  Long-term debt, less    current maturities 
475,444
504,131Capital lease obligations,    less current maturities
118,433
149,533Total Long-Term Liabilities    
593,877
653,664   Commitments and    Contingencies (see Note 4) 
-
-Total Liabilities 
11,540,257
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,     546,596,891 at    September 30, 2007; 337,581,957 at     December 31, 2006 
546,597
337,582Additional paid-in capital 
24,379,246
23,305,788Accumulated deficit 
(32,821,101)
(31,661,456)Common stock to be issued 
806,045
583,868Common stock options    outstanding, net 
-
4,713Total Stockholders’    Equity (Deficit) 
(7,089,213)
(7,429,505) 
$4,451,044
$ 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 NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

(UNAUDITED)
 
Three Months Ended Sept 30,
Nine Months Ended Sept 30, 
2007
2006
2007
2006REVENUES    GOLD’n GRO    fertilizer 
$535,352
$ 294,849
$1,913,976
$1,393,223Mining    technical services 
8,329
3,300
14,957
25,211Total Revenues 
543,681
298,149
1,928,933
1,418,434COST OF    REVENUES (exclusive of          depreciation and amortization      shown    separately below)    GOLD’n GRO    fertilizer 
516,291
303,080
1,751,031
1,267,654Mining    technical services 
10,238
6,951
25,968
29,616Total Cost of    Revenues
526,529
310,031
1,776,999
1,297,270Gross Profit    (Loss)(exclusive       of    depreciation and amortization      shown    separately below
17,152
(11,882)
151,934
121,164     OPERATING    EXPENSES    Depreciation    and amortization 
52,392
57,414
157,013
171,042Research and    development 
92,053
80,106
280,907
221,101Sales and    marketing 
423,962
182,118
984,876
543,198Delivery and    warehousing
20,606
19,186
111,742
89,298General and    administrative 
301,681
232,843
776,077
688,405Total Operating    Expenses 
890,694
571,667
2,310,615
1,713,044Operating    (Loss) 
(873,542)
(583,549)
(2,158,681)
(1,591,880)     OTHER INCOME    (EXPENSE)    Interest    expense 
(341,216)
(297,204)
(943,774)
(884,347)Gain (loss) on    derivative instruments
1,762,907
(2,222,810)
1,594,154
(730,404)Gain (loss) on    sale of investments
(3,983)
-
348,026
97,728Other
159
-
630
91Total Other    Income (Expense) 
1,417,867
(2,520,014)
999,036
(1,516,932)     Income (Loss)    before provision 
for income tax
544,325
(3,103,563)
(1,159,645)
(3,108,812)Provision for    income tax 
-
-
-
-Net    Income(Loss) 
544,325
(3,103,563)
(1,159,645)
(3,108,812)     Other    comprehensive income (loss)    Unrealized    gains(losses) on 
securities 
(3,115)
-
-
39,889Comprehensive    Income (Loss) 
$541,210
$(3,103,563)
$(1,159,645)
$(3,068,923)     Weighted    average number of shares     Outstanding    (1,000’s)- Basic
466,067
253,718
407,278
226,831                          Diluted
2,753,976
253,718
407,278
226,831     Earnings (Loss)    per share, basic 
$0.001
$(0.012)
$(0.003)
$(0.014)Earnings (Loss)    per share, diluted
$0.0002
$(0.012)
$(0.003)
$(0.014)
The accompanying notes are an integral part of these financialstatements.

6

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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