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 March 31, 2006**
( ) 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
              (Stateor 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
 

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, 2006, 210,671,731 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, 2006and December 31, 2005 
4Condensed Consolidated    Statements of Operations for the ThreeMonths Ended    March 31, 2006 and 2005 
6Condensed Consolidated    Statements of Stockholders’ Equity (Deficit)For the Three Months Ended    March 31, 2006 and the Year EndedDecember 31, 2005
7Condensed Consolidated    Statements of Cash Flows for theThree Months Ended March    31, 2006 and 2005 
8Notes to Condensed    Consolidated Financial Statements 
10Item 2. Management's    Discussion and Analysis or Plan ofOperation 
19Item 3. Controls and    Procedures
29PART II- OTHER INFORMATIONItem 1. Legal Proceedings
30Item 2. Changes in    Securities and Use of Proceeds 
30Item 3 Defaults upon Senior    Securities
32Item 4 Submission of    Matters to a Vote of Security Holders
32Item 6. Exhibits and    Reports on Form 8-K 
33Certifications
35
3

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2006 AND DECEMBER 31, 2005

(UNAUDITED)

 

ASSETS
 
March 31,
December    31, 
2006
2005      CURRENT ASSETS   Cash 
$ 171,667
$ 24,260Accounts receivable, less    allowance for  doubtful accounts, 2006,    $7,600; 2005, $7,600
151,263
21,164Marketable securities,    available for sale
89,331
91,758Inventories
689,575
592,098Prepaid expenses
90,756
94,447Total Current Assets
1,192,592
823,727   PROPERTY AND EQUIPMENT   Land 
215,000
215,000Building and improvements
1,167,315
1,167,315Design and construction in    progress,   manufacturing facility
154,989
153,896Equipment and furniture 
2,310,083
2,302,984Vehicles 
200,557
200,557Equipment under capital    lease-equipment and furniture 
847,105
851,952Equipment under capital    lease-vehicles
21,741
21,741 
4,916,790
4,913,445Less: Accumulated    depreciation and amortization
1,960,039
1,903,525 
2,956,751
3,009,920OTHER ASSETS   Intangibles, net of    amortization 
76,500
76,500Deferred loan fees, net of    amortization
405,543
311,362Deposits
8,108
8,108 
490,151
395,970 
$4,639,494
$4,229,617
 

4

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
March 31,
December    31, 
2006
2005CURRENT LIABILITIES   Accounts payable 
$ 453,165
$ 437,113Accrued management salaries    
638,194
599,900Accrued expenses 
174,133
239,130Insurance contracts payable    
33,693
13,738Interest payable to    officer/stockholders
13,062
13,276Interest payable 
193,327
197,708Current maturities of    long-term debt 
55,875
57,414Current maturities of    capital lease obligations 
687,168
730,403Current maturities of    advances from an officer/stockholder
161,525
161,525Current maturities of    capital lease due stockholder
5,970
5,858Current maturities of    convertible notes and accrued interest
3,003,286
2,918,559Convertible debt derivative
3,963,115
3,621,220Warrant and option    liability
159,272
134,212Other 
36,513
35,234Total Current Liabilities 
9,578,298
9,165,290   LONG-TERM LIABILITIES  Long-term debt, less    current maturities 
524,681
534,607Convertible promissory    notes and accrued interest,   less current maturities 
-
-Capital lease obligation,    shareholder, less current   maturities 
1,819
3,319Total Long-Term Liabilities    
526,500
537,926 
10,104,798
9,703,216   STOCKHOLDERS' EQUITY    (DEFICIT)  Preferred stock, par value    $0.001 per share;    authorized 999,500    shares, issued and outstanding    2006, 0 shares;    2005, 0 shares 
-
-Common stock, par value    $0.001 per share;    authorized    1,000,000,000 shares, issued and outstanding,    204,671,731 at March    31, 2006; 197,148,179 at     December 31, 2005
204,672
197,148Additional paid-in capital 
21,842,492
21,646,307Accumulated deficit 
(28,130,767)
(27,851,571)Common stock to be issued 
567,430
573,993Accumulated other    comprehensive income (loss) 
47,783
(39,889)Common stock options    outstanding, net 
3,086
413 
(5,465,304)
(5,473,599) 
$4,639,494
$ 4,229,617
See Notes to Condensed Consolidated Financial Statements

5

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 

FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005

(UNAUDITED)
 
Three Months Ended March 31, 
2006
2005   REVENUES  GOLD’n GRO fertilizer 
$ 331,811
260,174Mining technical services 
20,451
24,002Total Revenues 
352,262
284,176COST OF REVENUES (exclusive    of   depreciation and    amortization  shown separately below)  GOLD’n GRO fertilizer 
343,218
302,338Mining technical services 
15,809
22,973Total Cost of Revenues
359,027
325,311Gross Profit    (Loss)(exclusive   of depreciation and    amortization  shown separately below
(6,765)
(41,135)   OPERATING EXPENSES  Depreciation and    amortization 
56,514
61,755Research and development 
72,376
80,736Sales and marketing 
186,025
280,837Delivery and warehousing
17,557
18,083General and administrative 
219,160
259,635Total Operating Expenses 
551,632
701,046Operating (Loss) 
(558,397)
(742,181)   OTHER INCOME (EXPENSE)  Interest expense 
(281,299)
(167,739)Gain (loss) on derivative    instruments
506,269
-Gain (loss) on sale of    investments
54,231
(3,685)Total Other Income    (Expense) 
279,201
(171,424)Income (Loss) before    provision 
for income tax
(279,196)
(913,605)Provision for income tax 
-
-Net Income(Loss) 
(279,196)
(913,605)Other comprehensive income    (loss)  Unrealized gains (losses)    on 
securities 
87,672
(8,882)Comprehensive Income (Loss)    
$(191,524)
$(922,487)   Weighted average number of    shares   Outstanding (1,000’s)
198,959
174,495Earnings (Loss) per share,    basic   and diluted
$(0.001)
$(0.005)
See Notes to Condensed Consolidated Financial Statements

6

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND THE YEAR ENDED DECEMBER31, 2005 

(UNAUDITED)
 
COMMON STOCK   
ACCUMULATED
COMMON 
NUMBER    OF 
ADDITIONAL 
COMMON
OTHER
STOCK  
SHARES  
PAID-IN
ACCUMULATED
STOCK TO 
COMPREHENSIVE
OPTIONS,  
(1,000’s)
AMOUNT
CAPITAL
DEFICIT
BE    ISSUED
INCOME
NET
TOTALBalance, Dec. 31, 2004 
164,864
$164,864
$19,438,213
$(22,944,959)
$786,426
$ (9,568)
$754
$(2,564,270)Issue of common stock:         For cash
12,050
12,050
590,450
-
(32,500)
-
-
570,000For services
6,003
6,003
406,323
-
(9,933)
-
-
402,393For debt conversion
12,893
12,893
1,114,209
-
(170,000)
-
-
957,102For asset acquisition
1,338
1,338
97,112
-
-
-
-
98,450Net (loss) for the year         ended Dec. 31, 2005 
-
-
-
(4,906,612)
-
-
-
(4,906,612)Other comprehensive         income for the year        ended Dec. 31, 2005 
-
-
-
-
-
(30,321)
-
(30,321)Common stock options        outstanding
-
-
-
-
-
-
(341)
(341)Balance, 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
-
-
-
-
7,500For services
224
224
14,299
-
(6,563)
-
-
7,960For debt conversion
7,200
7,200
174,486
-
-