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

**                               For the quarterly period ended September 30, 2004**
( ) 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
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 November 8, 2004, 159,136,889 shares ofcommon 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, 2004  and December 31,    2003 
4Condensed Consolidated    Statements of Operations and Comprehensive    Income for the Three and Nine Months Ended 
  September 30, 2004 and 2003 
6Condensed Consolidated    Statements of Cash Flows for the  Nine Months Ended    September 30, 2004 and 2003 
7Notes to Condensed    Consolidated Financial Statements 
8Item 2. Management's    Discussion and Analysis or Plan ofOperation 
13Item 3. Controls and    Procedures
28PART II- OTHER INFORMATIONItem 1. Legal Proceedings
29Item 2. Changes in    Securities and Use of Proceeds 
29Item 3 Defaults upon Senior    Securities
30Item 6. Exhibits and    Reports on Form 8-K 
31Certifications
33
3

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2004 AND DECEMBER 31, 2003

(UNAUDITED)

 

ASSETS
 
Sept. 30,
December    31, 
2004
2003CURRENT ASSETS   Cash 
$ -
$ 34,499Accounts receivable, less    allowance for    doubtful accounts,    2004, $5,700; 2003, $5,700
129,977
96,384Marketable securities,    available for sale
66,845
413,240Inventories
522,501
425,525Prepaid expenses
69,742
53,073Current portion of deferred    loan fees
36,234
40,773Total Current Assets
825,299
1,063,494   PROPERTY AND EQUIPMENT   Land 
215,000
215,000Building and improvements
1,167,315
1,167,315Design and construction in    progress,     manufacturing    facility
101,171
102,203Equipment and furniture 
2,069,587
1,861,917Vehicles 
133,028
133,028Equipment under capital    lease 
1,078,265
1,076,687 
4,764,366
4,556,150Less: Accumulated    depreciation and amortization
1,595,464
1,383,307 
3,168,902
3,172,843OTHER ASSETS   Intangibles, net of    amortization 
8,447
8,483Marketable securities,    available for sale 
-
120,000Deferred loan fees, less    current portion, net of    amortization 
23,040
49,113Deposits
26,575
26,575 
58,062
204,171 
$4,052,263
$4,440,508
4

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
Sept. 30,
December    31, 
2004
2003CURRENT LIABILITIES   Bank overdraft
$ 30,811
$ -Accounts payable 
560,030
517,989Accrued management salaries    
322,896
218,185Accrued expenses 
340,449
213,295Insurance contracts payable    
61,144
9,458Interest payable 
202,833
217,604Current maturities of    long-term debt 
530,597
537,031Current maturities of    capital lease obligations 
968,510
994,456Current maturities of    advances from an officer/stockholder
181,525
248,168Current maturities of    capital lease due stockholder
5,237
4,869Current maturities of    convertible notes and accrued interest
1,750,189
1,686,286Other 
19,679
27,056Total Current Liabilities 
4,973,900
4,674,397   LONG-TERM LIABILITIES  Long-term debt, less    current maturities 
97,613
123,059Convertible promissory    notes, less current maturities 
1,537,000
2,376,100Accrued interest,    convertible notes, less current maturities
873,770
879,126Capital lease obligations,    less current maturities
- 
75,391Capital lease obligation,    shareholder, less current 
  maturities
10,192
14,117Total Long-Term Liabilities    
2,518,575
3,467,793 
7,492,475
8,142,190   STOCKHOLDERS' EQUITY    (DEFICIT)  Preferred stock, par value    $0.001 per share;    authorized 999,500    shares, issued and outstanding    2004, 0 shares;    2003, 0 shares 
-
-Common stock, par value    $0.001 per share;    authorized    250,000,000 shares, issued and outstanding,    148,573,715 at    September 30, 2004; 122,373,953 at     December 31, 2003
148,574
122,374Additional paid-in capital 
18,166,018
15,234,212Accumulated deficit 
(22,388,332)
(20,105,087)Common stock to be issued 
602,247
672,255Accumulated other    comprehensive income (loss) 
30,527
374,346Common stock options    outstanding, net 
754
218 
(3,440,212)
(3,701,682) 
$ 4,052,263
$ 4,440,508
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, 2004 AND 2003

(UNAUDITED)
 
Three Months Ended Sept. 30,
Nine Months Ended Sept. 30, 
2004
2003
2004
2003REVENUES    Fertilizer 
$152,230
$ 51,676
$ 858,619
$ 422,525Photochemical recycling 
82,373
142,142
212,016
241,259Silver 
17,285
11,286
81,760
32,271Mining technical services 
37,846
103,088
170,349
290,568Total Revenues 
289,734
308,192
1,322,744
986,623COST OF SALES 
342,521
365,866
1,371,692
1,063,362Gross Profit (Loss) 
(52,787)
(57,674)
(48,948)
(76,739)     OPERATING EXPENSES    Depreciation and    amortization 
82,119
83,577
239,568
249,131Research and development 
45,338
14,741
94,249
45,627Sales and marketing 
215,549
193,103
698,956
578,362Delivery and warehousing
10,807
8,079
62,688
33,758General and administrative 
210,405
267,909
672,605
639,630Total Operating Expenses 
564,218
567,409
1,768,066
1,546,508Operating (Loss) 
(617,005)
(625,083)
(1,817,014)
(1,623,247)     OTHER INCOME (EXPENSE)    Interest expense 
(191,379)
(244,047)
(602,474)
(715,153)Gain on sale of investments
38,418
197,485
136,220
352,366Other
10
7
23
6,863Total Other Income    (Expense) 
(152,951)
(46,555)
(466,231)
(355,924)     Income (Loss) before    provision 
  for income tax
(769,956)
(671,638)
(2,283,245)
(1,979,171)Provision for income tax 
-
-
-
-Net Income(Loss) 
(769,956)
(671,638)
(2,283,245)
(1,979,171)Other comprehensive income    (loss)    Unrealized gains (losses)    on 
  securities 
(53,966)
46,736
(343,819)
15,543Comprehensive Income (Loss)    
$(823,922)
$(624,902)
$(2,627,064)
$(1,963,628)     Weighted average number of    shares       Outstanding    (1,000’s)
144,755
107,481
136,715
98,960Earnings (Loss) per share,    basic       and diluted
$(0.005)
$(0.006)
$(0.017)
$(0.020)
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, 2004 AND 2003

(UNAUDITED)
 
Nine Months Ended Sept. 30, 
2004
2003Cash flows from operating    activities   Net income (loss) 
$(2,283,245)
$(1,979,171)Adjustments to reconcile    net loss to 
cash used by operating activities:    Depreciation and    amortization 
239,568
249,131  Interest on    convertible notes
383,572
469,052  Marketable    securities received for services
(33,318)
(2,573)  (Gain) Loss on    investments
(136,220)
(352,366)  Stock option    compensation (credit) 
536
(106,241)  (Gain) on debt    restructuring
-
(29,370)  Bad debts
-
15  Expenses paid with    issuance of common stock 
478,045
559,188  (Increase) decrease    in:      Trade    accounts receivable 
(33,593)
(92,769)       Inventories 
(96,976)
(93,856)    Prepaid    expenses and deposits 
(3,207)
(37,629)  Increase (decrease)    in:      Accounts    payable 
52,706
58,703    Accrued    management salaries
104,711
116,095    Accrued    expenses and contracts payable 
174,700
(37,566)    Accrued    interest
35,339
75,261Net cash used by operating    activities 
(1,117,382)
(1,204,096)   Cash flows from investing    activities:    Acquisition of    property and equipment 
(16,506)
(22,694)  Acquisition of    marketable securities
-
(9,000)  Proceeds from sale    of investments
320,390
559,887Net cash provided (used) by    investing activities 
303,884
528,193   Cash flows from financing    activities:    Proceeds from sale    of stock 
881,008
782,095  Proceeds from    account receivable factoring, net
6,191
30,920  Payments on    long-term debt 
(139,011)
(109,682)Net cash provided by    financing activities 
748,188
703,333Net increase (decrease) in    cash 
(65,310)
27,430Cash, beginning of period 
34,499