UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM l0-QSB/A

Amendment No. 1

(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, 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 other jurisdiction of            (IRS EmployerIdentification 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 October 31, 2005, 197,057,628 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 – September 30, 2005and December 31, 2004 
4Condensed Consolidated    Statements of Operations for the Threeand NIne Months    Ended September 30, 2005 and 2004 
6Condensed Consolidated    Statements of Cash Flows for theNine Months Ended September    30, 2005 and 2004 
7Notes to Condensed    Consolidated Financial Statements 
9Item 2. Management's    Discussion and Analysis or Plan ofOperation 
16Item 3. Controls and    Procedures
27PART II- OTHER INFORMATIONItem 1. Legal Proceedings
28Item 2. Changes in    Securities and Use of Proceeds 
28Item 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, 2005 AND DECEMBER 31, 2004

(UNAUDITED)

 

ASSETS
 
September    30,
December    31, 
2005
2004CURRENT ASSETS   Cash 
$702,014
$ 5,180Accounts receivable, less    allowance for  doubtful accounts, 2005,    $5,700; 2004, $5,700
102,187
188,805Marketable securities,    available for sale
109,735
26,180Inventories
567,834
571,704Prepaid expenses
168,429
142,509Total Current Assets
1,650,199
934,378   PROPERTY AND EQUIPMENT   Land 
215,000
215,000Building and improvements
1,167,315
1,167,315Design and construction in    progress,     manufacturing    facility
178,921
121,171Equipment and furniture 
2,087,140
2,071,998Vehicles 
194,733
133,028Equipment under capital    lease-equipment and furniture 
1,008,432
1,008,432Equipment under capital    lease-vehicles
21,741
87,672 
4,873,282
4,804,616Less: Accumulated    depreciation and amortization
1,851,671
1,670,668 
3,021,611
3,133,948OTHER ASSETS   Intangibles, net of    amortization 
77,051
8,435Deferred loan fees, net of    amortization
318,881
48,654Deposits
17,212
22,525 
413,144
79,614 
$5,084,954
$4,147,940
4

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
September    30,
December    31, 
2005
2004CURRENT LIABILITIES   Accounts payable 
$ 429,041
$ 558,566Account receivable and    inventory factoring
94,777
51,229Accrued management salaries    
570,771
389,127Accrued expenses 
191,968
398,731Insurance contracts payable    
27,309
15,048Interest payable to    officer/stockholders
12,917
6,307Interest payable 
252,454
204,909Current maturities of    long-term debt 
57,779
522,845Current maturities of    capital lease obligations 
665,697
807,746Current maturities of    advances from an officer/stockholder
161,525
161,525Current maturities of    capital lease due stockholder
5,600
5,420Current maturities of    convertible notes and accrued interest
2,839,502
1,020,946Other 
31,621
21,429Total Current Liabilities 
5,340,961
4,163,828   LONG-TERM LIABILITIES  Long-term debt, less    current maturities 
541,045
97,022Callable secured    convertible notes, net of unamortized    discount of    $2,135,418
114,582
-Convertible promissory    notes, less current maturities 
-
1,517,000Accrued interest,    convertible notes, less current maturities
-
925,216Capital lease obligation,    shareholder, less current 
  maturities
4,965
9,144Total Long-Term Liabilities    
660,592
2,548,382 
6,001,553
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,    196,907,628 at    September 30, 2005; 164,863,938 at     December 31, 2004
196,908
164,864Additional paid-in capital 
23,895,053
19,438,213Accumulated deficit 
(25,609,971)
(22,944,959)Common stock to be issued 
579,530
786,426Accumulated other    comprehensive income (loss) 
(21,911)
(9,568)Common stock options    outstanding, net 
43,792
754 
(916,599)
(2,564,270) 
$5,084,954
$4,147,940
 

See Notes to Condensed Consolidated Financial Statements

5

ITRONICS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

(UNAUDITED)

Three Months Ended Sept. 30,
Nine Months Ended Sept. 30,
2005
2004
2005
2004REVENUESPhotochemical    fertilizer 
$ 231,166
$ 251,888
$1,015,007
1,152,395Mining    technical services 
12,230
37,846
95,690
170,349Total Revenues 
243,396
289,734
1,110,697
1,322,744COST OF    REVENUES (exclusive of      depreciation and amortization  shown    separately below)Photochemical    fertilizer 
279,011
291,322
1,084,298
1,185,096Mining    technical services 
15,698
51,199
108,177
186,596Total Cost of    Revenues
294,709
342,521
1,192,475
1,371,692Gross Profit    (Loss)(exclusive   of    depreciation and amortization  shown    separately below
(51,313)
(52,787)
(81,778)
(48,948)OPERATING    EXPENSESDepreciation    and amortization 
81,834
82,119
212,718
239,568Research and    development 
64,313
45,338
197,969
94,249Sales and    marketing 
214,325
215,549
739,596
698,956Delivery and    warehousing
9,366
10,807
62,357
62,688General and    administrative 
204,381
210,405
689,950
672,605Total Operating    Expenses 
574,219
564,218
1,902,590
1,768,066Operating    (Loss) 
(625,532)
(617,005)
(1,984,368)
(1,817,014)OTHER INCOME    (EXPENSE)Interest    expense 
(215,511)
(191,379)
(581,285)
(602,474)Interest-amortization    of note 
discount
(114,582)
-
(114,582)
-Gain (loss) on    sale of 
investments
-
38,418
(10,116)
136,220Other
23,607
10
25,339
23Total Other    Income (Expense) 
(306,486)
(152,951)
(680,644)
(466,231)Income (Loss)    before provision 
for income tax
(932,018)
(769,956)
(2,665,012)
(2,283,245)Provision for    income tax 
-
-
-
-Net    Income(Loss) 
(932,018)
(769,956)
(2,665,012)
(2,283,245)Other    comprehensive income (loss)Unrealized    gains (losses) on 
securities 
(2,269)
(53,966)
(12,343)
(343,819)Comprehensive    Income (Loss) 
$(934,287)
$(823,922)
$(2,677,355)
$(2,627,064)Weighted    average number of shares Outstanding    (1,000’s)
195,625
144,755
187,671
136,715Earnings (Loss)    per share, basic and diluted
$(0.005)
$(0.005)
$(0.014)
$(0.017)
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, 2005 AND 2004

(UNAUDITED)
 
Nine Months Ended Sept. 30, 
2005
2004Cash flows from operating    activities   Net income (loss) 
$(2,665,012)
$(2,283,245)Adjustments to reconcile    net loss to 
cash used by operating activities:    Depreciation and    amortization 
212,718
239,568  Interest on    convertible notes
286,537
383,572  Amortization of note    discount
114,582
-  Marketable    securities received for services
(116,193)
(33,318)  (Gain) Loss on    investments
10,116
(136,220)  Addition of silver    in solution inventory by 
  offsetting photochemical processing fees
(28,598)
(82,549)  Stock option    compensation 
43,379
536  (Gains)on debt    forgiveness
(24,832)
-  Other
2,200
-  Expenses paid with    issuance of common stock 
480,322
478,045  (Increase) decrease    in:      Trade    accounts receivable 
86,618
(33,593)       Inventories 
32,468
(14,427)    Prepaid    expenses and deposits 
(25,021)
(3,207)    Increase    (decrease) in:      Accounts    payable 
(117,678)
52,706    Accrued    management salaries
181,644
104,711    Accrued    expenses and contracts payable 
(184,310)
174,700    Accrued    interest
67,360
35,339Net cash used by operating    activities 
(1,643,700)
(1,117,382)   Cash flows from investing    activities:    Acquisition of    property and equipment 
(57,142)
(16,506)  Acquisition of    intangibles
(195,490)
-  Proceeds from sale    of investments
10,177
320,390  Proceeds from sale    of equipment
500
-Net cash provided (used) by    investing activities 
(241,955)