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 September 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 otherjurisdiction of       (IRS Employer Identification Number)

            incorporation ororganization) 

 

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 October 31, 2008, 2,049,588,005 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 – September 30, 2008 (Unaudited) and December    31, 2007
4Condensed Consolidated    Statements of Operations for the Three And Nine Months    Ended September 30, 2008 and 2007 (Unaudited) 
6Condensed Consolidated    Statements of Stockholders’ Equity (Deficit)For the Nine Months Ended    September 30, 2008 and the Year EndedDecember 31, 2007    (Unaudited)
7Condensed Consolidated    Statements of Cash Flows for theNine Months Ended September    30, 2008 and 2007 (Unaudited) 
8Notes to Condensed    Consolidated Financial Statements (Unaudited) 
10Item 2. Management's    Discussion and Analysis or Plan of Operation
25Item 4T. Controls and    Procedures
41PART II- OTHER INFORMATIONItem 1. Legal Proceedings
41Item 2. Unregistered Sales    of Equity Securities and Use of Proceeds 
42Item 3 Defaults upon Senior    Securities
46Item 6. Exhibits 
47Certifications
49
3

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2008 AND DECEMBER 31, 2007

ASSETS
 
Sept. 30,
December    31, 
2008
2007 
(Unaudited) CURRENT ASSETS   Cash 
$ -
$92,987Accounts receivable, less    allowance for  doubtful accounts, 2008,    $4,600; 2007, $4,600
52,638
17,561Inventories
1,064,976
889,996Prepaid expenses
117,778
94,952Total Current Assets
1,235,392
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 
2,881,463
2,879,938Vehicles 
222,298
222,298Equipment under capital    lease-equipment and furniture
466,571
466,571 
5,214,206
5,193,326Less: Accumulated    depreciation and amortization
2,481,811
2,341,004Total Property and    Equipment 
2,732,395
2,852,322   OTHER ASSETS   Intangibles 
76,500
76,500Deferred loan fees, less    accumulated amortization 2008,    $457,716; 2007,    $521,727 
241,840
323,042Deposits
7,181
8,508Total Other Assets 
325,521
408,050 
$4,293,308
$4,355,868
The accompanying notes are an integral part of these financialstatements

4

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
Sept. 30,
December    31, 
2008
2007 
(Unaudited) CURRENT LIABILITIES   Bank overdraft
$ 24,685
$ -Accounts payable 
816,868
672,163Accrued management salaries    
563,916
779,873Accrued expenses 
344,138
272,267Insurance contracts payable    
30,094
13,761Interest payable to    officer/stockholders 
312,525
157,181Interest payable, long-term    debt and lease obligations 
240,960
225,533Current maturities of    long-term debt 
496,985
436,523Current maturities of    capital lease obligations 
384,673
463,996Advances from stockholder
112,025
143,025Current maturities of    Series 2000 convertible notes     and accrued interest
3,333,574
3,497,838Series 2000 convertible    debt derivatives
153,462
-Callable secured    convertible debt derivatives
15,572,704
13,003,762Warrant and option    liability
520,852
231,224Other 
121,609
40,498Total Current Liabilities 
23,029,070
19,937,644   LONG-TERM LIABILITIES  Long-term debt, less    current maturities 
-
82,197Series 2000 convertible    notes and accrued interest, net of     current maturities    and net of $153,462 fair value of the     conversion feature    at September 30, 2008 and $-0-     at December 31, 2007    
329,099
-Total Long-Term Liabilities    
329,099
82,197Commitments and    Contingencies (see Note 4) 
-
-Total Liabilities 
23,358,169
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,   1,827,988,760 at    September 30, 2008 and 999,996,999 at     December 31, 2007
182,799
999,997Additional paid-in capital 
26,360,185
24,692,645Accumulated deficit 
(46,907,255)
(42,143,980)Common stock to be    issued 
1,299,410
787,365Total Stockholders’    Equity (Deficit) 
(19,064,861)
(15,663,973) 
$4,293,308
$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 NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(UNAUDITED)
 
Three Months Ended Sept 30,
Nine Months Ended Sept 30, 
2008
2007
2008
2007REVENUES    GOLD’n GRO    fertilizer 
$ 472,124
$ 533,624
$    2,301,903
1,901,436Mining    technical services 
21,784
8,329
108,999
14,957Total Revenues 
493,908
541,953
2,410,902
1,916,393     COST OF    REVENUES (exclusive of          depreciation and amortization      shown    separately below)    GOLD’n GRO    fertilizer 
478,761
516,291
1,918,472
1,751,031Mining    technical services 
19,753
10,238
71,671
25,968Total Cost of    Revenues
498,514
526,529
1,990,143
1,776,999Gross Profit    (Loss)(exclusive       of    depreciation and amortization      shown    separately below)  
(4,606)
15,424
420,759
139,394     OPERATING    EXPENSES    Depreciation    and amortization 
46,944
52,392
140,807
157,013Research and    development 
68,975
92,053
215,816
280,907Sales and    marketing 
145,048
423,962
491,641
984,876Delivery and    warehousing
25,937
20,606
144,742
111,742Stock and    option compensation
345,690
11,436
333,216
13,161General and    administrative 
236,973
290,245
704,040
762,916Total Operating    Expenses 
869,567
890,694
2,030,262
2,310,615Operating    (Loss) 
(874,173)
(875,270)
(1,609,503)
(2,171,221)     OTHER INCOME    (EXPENSE)    Interest    expense 
(503,836)
(339,488)
(1,133,163)
(931,234)Gain (loss) on    derivative instruments
(4,624,198)
1,762,907
(2,107,986)
1,594,154Gain (loss) on    sale of investments
-
(3,983)
-
348,026Other
44,938
159
87,377
630Total Other    Income (Expense) 
(5,083,096)
1,419,595
(3,153,772)
1,011,576     Income (Loss)    before provision 
for income tax
(5,957,269)
544,325
(4,763,275)
(1,159,645)Provision for    income tax 
-
-
-
-Net    Income(Loss) 
(5,957,269)
544,325
(4,763,275)
(1,159,645)Other    comprehensive income (loss)    Unrealized    gains (losses) on 
securities 
-
(3,115)
-
-     Comprehensive    Income (Loss) 
$ (5,957,269)
$ 541,210
$(4,763,275)
$(1,159,645)     Weighted    average number of shares     Outstanding    (1,000’s) - Basic
1,560,397
466,067
1,211,448
407,278                           Diluted
1,560,397
2,753,976
1,211,448
407,278Earnings    (Loss) per share: Basic 
$(0.004)
$0.001
$(0.004)
$(0.003)                              Diluted
$(0.004)
$0.0002
$(0.004)
$(0.003)
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, 2008 AND THE YEAR ENDED DECEMBER31, 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)