UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM l0-Q

(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, 2008

( ) 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 registrant as specified in its charter)

 

                   TEXAS                                         75-2198369
       (State or other jurisdiction of               (IRSEmployer Identification Number)

         incorporation or organization) 

 

6490 S. McCarran Blvd., Bldg C-23, Reno, Nevada 89509

(Address of principal executive offices)

 

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

Indicate by checkmark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12months (or for such shorter period that the registrant was required to file such reports),and (2) has been subject to such filing requirements during the past 90 days. Yes (x) No ()

Indicate by checkmark whether the registrant is a large accelerated, an acceleratedfiler, a non-accelerated filer, or a smaller reporting company. See the definitions of"large accelerated filer", accelerated filer" and smaller reportingcompany" in Rule 12b-2 of the Exchange Act. 

Large accelerated filer ( )                         Accelerated filer ( )

Non-accelerated filer ( ) (Do not check if a         Smaller reporting company (X)

Smaller reporting company)

Indicate by checkmark whether the registrant is a shell company ( as defined in Rule12b-2 of the Exchange Act). Yes ( ) No (X)

As of August 12, 2008, 1,722,340,113 shares of common stock were outstanding.

 

2

 

ITRONICS INC. AND SUBSIDIARIES

TABLE OF CONTENTS

 
PART I - FINANCIAL    INFORMATION
PAGEItem 1. Financial    StatementsCondensed Consolidated    Balance Sheets – June 30, 2008 (Unaudited)and December 31, 2007 
4Condensed Consolidated    Statements of Operations for the Three And Six Months    Ended June 30, 2008 and 2007 (Unaudited) 
6Condensed Consolidated    Statements of Stockholders’ Equity (Deficit)For the Six Months Ended    June 30, 2008 and the Year EndedDecember 31, 2007    (Unaudited)
7Condensed Consolidated    Statements of Cash Flows for theSix Months Ended June 30,    2008 and 2007 (Unaudited) 
8Notes to Condensed    Consolidated Financial Statements (Unaudited) 
10Item 2. Management's    Discussion and Analysis or Plan of Operation
24Item 4T. Controls and    Procedures
38PART II- OTHER INFORMATIONItem 1. Legal Proceedings
39Item 2. Unregistered Sales    of Equity Securities and Use of Proceeds 
40Item 3 Defaults upon Senior    Securities
41Item 6. Exhibits 
41Certifications
43
 

3

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 30, 2008 AND DECEMBER 31, 2007

ASSETS
 
June 30,
December    31, 
2008
2007 
(Unaudited) CURRENT ASSETS   Cash 
$ 18,576
$92,987Accounts receivable, less    allowance for  doubtful accounts, 2008,    $4,600; 2007, $4,600
165,420
17,561Inventories
1,042,256
889,996Prepaid expenses
106,150
94,952Total Current Assets
1,332,402
1,095,496   PROPERTY AND EQUIPMENT   Land 
215,000
215,000Building and improvements
1,312,409
1,312,409Design and construction in    progress,   manufacturing facility
116,465
97,110Equipment and furniture 
2,881,247
2,879,938Vehicles 
222,298
222,298Equipment under capital    lease-equipment and furniture
466,571
466,571 
5,213,990
5,193,326Less: Accumulated    depreciation and amortization
2,434,867
2,341,004Total Property and    Equipment 
2,779,123
2,852,322   OTHER ASSETS   Intangibles 
76,500
76,500Deferred loan fees, less    accumulated amortization 2008,  $407,406; 2007, $521,727 
266,149
323,042Deposits
8,508
8,508Total Other Assets 
351,157
408,050 
$4,462,682
$4,355,868
 

The accompanying notes are an integral part of these financialstatements

 

4

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
June 30,
December    31, 
2008
2007 
(Unaudited) CURRENT LIABILITIES   Accounts payable 
$ 841,763
$ 672,163Accrued management salaries    
929,166
779,873Accrued expenses 
375,288
272,267Insurance contracts payable    
36,831
13,761Interest payable to    officer/stockholders 
262,481
157,181Interest payable, long-term    debt and lease obligations 
239,590
225,533Current maturities of    long-term debt 
424,301
436,523Current maturities of    capital lease obligations 
423,885
463,996Advances from stockholder
188,025
143,025Current maturities of    convertible notes and accrued interest
3,709,964
3,497,838Convertible debt    derivatives
10,643,814
13,003,762Warrant and option    liability
246,126
231,224Other 
131,027
40,498Total Current Liabilities 
18,452,261
19,937,644   LONG-TERM LIABILITIES  Long-term debt, less    current maturities 
80,379
82,197Capital lease obligations,    less current maturities
-
-Total Long-Term Liabilities    
80,379
82,197   Commitments and    Contingencies (see Note 4) 
-
-Total Liabilities 
18,532,640
20,019,841   STOCKHOLDERS' EQUITY    (DEFICIT)  Preferred stock, par value    $0.001 per share;    authorized 999,500    shares; issued and outstanding    2008, 0 shares;    2007, 0 shares 
-
-Common stock, par value    $0.0001 per share;       authorized 20,000,000,000 shares; issued and outstanding,   1,209,103,913 at    June 30, 2008 and 999,996,999 at December     31, 2007
120,913
999,997Additional paid-in capital 
25,919,145
24,692,645Accumulated deficit 
(40,949,986)
(42,143,980)Common stock to be    issued 
839,970
787,365Total Stockholders’    Equity (Deficit) 
(14,069,958)
(15,663,973) 
$4,462,682
$4,355,868
 

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, 2008 AND 2007

(UNAUDITED)
 
Three Months Ended June 30,
Six Months Ended June 30, 
2008
2007
2008
2007REVENUES    GOLD’n GRO    fertilizer 
$1,232,490
$839,910
$1,829,779
$1,367,812Mining    technical services 
31,373
1,675
87,215
6,628Total Revenues 
1,263,863
841,585
1,916,994
1,374,440     COST OF    REVENUES (exclusive of          depreciation and amortization      shown    separately below)    GOLD’n GRO    fertilizer 
922,544
722,869
1,439,711
1,234,740Mining    technical services 
21,668
7,667
51,918
15,730Total Cost of    Revenues
944,212
730,536
1,491,629
1,250,470Gross Profit    (Loss)(exclusive       of    depreciation and amortization      shown    separately below
319,651
111,049
425,365
123,970     OPERATING    EXPENSES    Depreciation    and amortization 
46,944
52,392
93,863
104,621Research and    development 
68,512
91,572
146,841
188,854Sales and    marketing 
153,737
283,703
346,593
560,914Delivery and    warehousing
87,236
66,220
118,805
91,136General and    administrative 
255,181
239,744
454,593
474,396Total Operating    Expenses 
611,610
733,631
1,160,695
1,419,921Operating    (Loss) 
(291,959)
(622,582)
(735,330)
(1,295,951)OTHER INCOME    (EXPENSE)    Interest    expense 
(324,550)
(310,070)
(629,327)
(591,746)Gain (loss) on    derivative instruments
6,169,281
(311,142)
2,516,212
(168,753)Gain (loss) on    sale of investments
-
7,718
-
352,009Other
-
471
42,439
471Total Other    Income (Expense) 
5,844,731
(613,023)
1,929,324
(408,019)     Income (Loss)    before provision 
for income tax
5,552,772
(1,235,605)
1,193,994
(1,703,970)Provision for    income tax 
-
-
-
-Net    Income(Loss) 
5,552,772
(1,235,605)
1,193,994
(1,703,970)     Other    comprehensive income (loss)    Unrealized    gains (losses) on 
securities 
-
868
-
3,115Comprehensive    Income (Loss) 
$5,552,772
$(1,234,737)
$1,193,994
$(1,700,855)     Weighted    average number of shares     Outstanding    (1,000’s)
1,071,615
374,749
1,045,106
366,715Earnings    (Loss) per share: Basic 
$0.005
$(0.003)
$0.001
$(0.005)Diluted
$0.001
N/A
$0.0002
N/A
The accompanying notes are an integral part of these financialstatements.

6

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE SIX MONTHS ENDED JUNE 30, 2008 AND THE YEAR ENDED DECEMBER 31,2007 

(UNAUDITED)
 
COMMON STOCK  
COMMON  
NUMBER    OF 
ADDITIONAL 
STOCK TO
STOCK  
SHARES  
PAID-IN
ACCUMULATED
BE
OPTIONS,  
(1,000’s)
AMOUNT
CAPITAL
DEFICIT
ISSUED
NET
TOTALBalance, 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 cash       For services
99,274
99,274
588,713
-
217,097
-
905,084For debt conversion
555,410
555,410
698,057
-
(13,600)
-
1,239,867For asset acquisition
7,731
7,731
100,087
-
-
-
107,818Net (loss) for the year        ended Dec. 31, 2007 
-
-
-
(10,482,524)
-
-
(10,482,524)Common stock options       outstanding
-
-
-
-
-
(4,713)
(4,713)Balance, Dec. 31, 2007 
999,997
999,997
24,692,645
(42,143,980)
787,365-