UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM l0-QSB/A

AMENDMENT NO. 2

(Mark One)

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

    EXCHANGE ACT OF 1934

**                            For the quarterly period ended June 30, 2005**
( ) 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 IdentificationNumber)

             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 July 31, 2005, 194,344,788 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, 2005  and December 31,    2004 
4Condensed Consolidated    Statements of Operations for the Three  and Six    Months Ended June 30, 2005 and 2004 
6Condensed Consolidated    Statements of Cash Flows for the  Six Months Ended    June 30, 2005 and 2004 
7Notes to Condensed    Consolidated Financial Statements 
8Item 2. Management's    Discussion and Analysis or Plan of           Operation 
14Item 3. Controls and    Procedures
24PART II- OTHER INFORMATIONItem 1. Legal Proceedings
24Item 2. Changes in    Securities and Use of Proceeds 
25Item 3 Defaults upon Senior    Securities
27Item 6. Exhibits and    Reports on Form 8-K 
28Certifications
30
3

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 30, 2005 AND DECEMBER 31, 2004

(UNAUDITED)

 

ASSETS
 
June 30,
December    31, 
2005
2004CURRENT ASSETS   Cash 
$ -
$ 5,180Accounts receivable, less    allowance for  doubtful accounts, 2005,    $5,700; 2004, $5,700
152,035
188,805Marketable securities,    available for sale
112,004
26,180Inventories
583,488
571,704Prepaid expenses
120,135
142,509Total Current Assets
967,662
934,378   PROPERTY AND EQUIPMENT   Land 
215,000
215,000Building and improvements
1,167,315
1,167,315Design and construction in    progress,   manufacturing facility
136,921
121,171Equipment and furniture 
2,077,587
2,071,998Vehicles 
133,028
133,028Equipment    under capital lease-equipment and furniture1,008,4321,008,432Equipment    under capital lease-vehicles87,67287,672 
4,825,955
4,804,616Less: Accumulated    depreciation and amortization
1,794,154
1,670,668 
3,031,801
3,133,948OTHER ASSETS   Intangibles, net of    amortization 
79,911
8,435Deferred loan fees, net of    amortization
46,280
48,654Deposits
22,525
22,525 
148,716
79,614 
$4,148,179
$4,147,940
4

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
June 30,
December    31, 
2005
2004CURRENT LIABILITIES   Bank overdraft
$ 30,208
$ -Accounts payable 
590,709
558,566Account receivable and    inventory factoring
144,310
51,229Accrued management salaries    
528,799
389,127Accrued expenses 
322,083
398,731Insurance contracts payable    
34,327
15,048Interest payable on    stockholder advances
14,421
6,307Interest payable 
262,659
204,909Current maturities of    long-term debt 
179,222
522,845Current maturities of    capital lease obligations 
768,723
807,746Current maturities of    advances from an officer/stockholder
246,525
161,525Current maturities of    capital lease due stockholder
5,600
5,420Current maturities of    convertible notes and accrued interest
2,760,504
1,020,946Other 
30,679
21,429Total Current Liabilities 
5,918,769
4,163,828   LONG-TERM LIABILITIES  Long-term debt, less    current maturities 
549,735
97,022Convertible promissory    notes, less current maturities 
- 
1,517,000Accrued interest,    convertible notes, less current maturities
-
925,216Capital lease obligation,    shareholder, less current 
maturities
6,326
9,144Total Long-Term Liabilities    
556,061
2,548,382 
6,474,830
6,712,210   STOCKHOLDERS' EQUITY    (DEFICIT)  Preferred stock, par value    $0.001 per share;    authorized 999,500    shares, issued and outstanding    2005, 0 shares;    2004, 0 shares 
-
-Common stock, par value    $0.001 per share;    authorized    250,000,000 shares, issued and outstanding,    194,339,788 at June    30, 2005; 164,863,938 at     December 31, 2004
194,340
164,864Additional paid-in capital 
21,475,837
19,438,213Accumulated deficit 
(24,677,953)
(22,944,959)Common stock to be issued 
663,242
786,426Accumulated other    comprehensive income (loss) 
(19,642)
(9,568)Common stock options    outstanding, net 
37,525
754 
(2,326,651)
(2,564,270) 
$4,148,179
$4,147,940
See Notes to Condensed Consolidated Financial Statements

5

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004

(UNAUDITED)
 
Three Months Ended June 30,
Six Months Ended June 30, 
2005
2004
2005
2004REVENUES    Photochemical fertilizer 
$ 523,667
$ 573,511
$ 783,841
$ 900,507Mining technical services 
33,661
52,659
83,460
132,503Total Revenues 
557,328
626,170
867,301
1,033,010     COST OF REVENUES (exclusive    of     depreciation and    amortization    shown separately below)    Photochemical fertilizer 
502,949
531,139
805,287
893,774Mining technical services 
43,709
57,459
92,479
135,397Total Cost of Revenues
546,658
588,598
897,766
1,029,171Gross    Profit (Loss) (exclusive of
 
 
 
 depreciation    and amortization    shown    separately below)10,67037,572(30,465)3,839     OPERATING EXPENSES    Depreciation and    amortization 
65,442
79,338
130,884
157,449Research and development 
52,920
27,808
133,656
48,911Sales and marketing 
244,434
269,122
525,271
483,407Delivery and warehousing
34,908
34,275
52,991
51,881General and administrative 
225,934
249,425
485,569
462,200Total Operating Expenses 
623,638
659,968
1,328,371
1,203,848Operating (Loss) 
(612,968)
(622,396)
(1,358,836)
(1,200,009)     OTHER INCOME (EXPENSE)    Interest expense 
(201,722)
(202,325)
(365,774)
(411,095)Gain (loss) on sale of 
investments
(6,431)
22,044
(10,116)
97,802Other
1,732
5
1,732
13Total Other Income    (Expense) 
(206,421)
(180,276)
(374,158)
(313,280)Income (Loss) before    provision 
for income tax
(819,389)
(802,672)
(1,732,994)
(1,513,289)Provision for income tax 
-
-
-
-Net Income(Loss) 
(819,389)
(802,672)
(1,732,994)
(1,513,289)Other comprehensive income    (loss)    Unrealized gains (losses)    on 
securities 
(1,192)
(105,099)
(10,074)
(289,853)Comprehensive Income (Loss)    
$(820,581)
$ (907,771)
$(1,743,068)
$(1,803,142)     Weighted average number of    shares     Outstanding (1,000’s)
192,661
137,761
183,628
132,651Earnings (Loss) per share,    basic     and diluted
$(0.004)
$(0.006)
$(0.009)
$(0.011)
See Notes to Condensed Consolidated Financial Statements

6

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004

(UNAUDITED)
 
Six Months Ended June 30, 
2005
2004Cash flows from operating    activities   Net income (loss) 
$(1,732,994)
$(1,513,289)Adjustments to reconcile    net loss to 
cash used by operating activities:    Depreciation and    amortization 
130,884
157,449  Interest on    convertible notes
180,038
261,411  Marketable    securities received for services
(116,193)
(15,256)  (Gain) Loss on    investments
10,116
(97,802)  Addition of silver    in solution inventory by 
   offsetting photochemical processing fees
(11,144)
(51,212)  Stock option    compensation 
37,112
123  Other
(1,725)
-  Expenses paid with    issuance of common stock 
429,453
310,925  (Increase) decrease    in:      Trade    accounts receivable 
36,770
(71,142)       Inventories 
(640)
(53,159)    Prepaid    expenses and deposits 
(15,295)
1,805  Increase (decrease)    in:      Accounts    payable 
43,990
77,479    Accrued    management salaries
139,672
52,431    Accrued    expenses and contracts payable 
(48,119)
58,077    Accrued    interest
65,864
16,358    Net cash    used by operating activities 
(852,211)
(865,802)   Cash flows from investing    activities:    Acquisition of    property and equipment 
(5,589)
(8,922)  Acquisition of    intangibles
(5,000)
-  Proceeds from sale    of investments
10,177
223,139    Net cash    provided (used) by investing activities 
(412)
214,217   Cash flows from financing    activities:    Proceeds from sale    of stock 
570,000
712,000  Proceeds from debt,    stockholder
90,000
-  Proceeds from short    term debt, unrelated
125,000
-  Proceeds from    receivable/inventory factoring, net
93,081
38,641  Payments on debt 
(60,846)
(112,080)    Net cash    provided by financing activities 
817,235
638,561    Net    increase (decrease) in cash 
(35,388)
(13,024)