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 September 30, 1998
( ) 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 Employer Identification Number)
incorporation or organization)
6490 S. McCarran Blvd., Bldg C-23, Reno, Nevada 89509
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(Address of principal executive offices)
Issuer's telephone number, including area code: (702)689-7696
-------------
NO CHANGE
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Former name, former address and former fiscal, if changes since last report.
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (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 ( ).
<PAGE>
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
As of October 31, 1998, 49,669,857 shares of common stock were
outstanding.
Transitional Small Business Disclosure Format (Check one): Yes ( ) No (X)
2
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ITRONICS INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - September 30, 1998
and December 31, 1997 4
Condensed Consolidated Statements of Operations for the
Three and Nine Months Ended September 30, 1998 and 1997 6
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1998 and 1997 8
Notes to Condensed Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis or Plan of
Operation 10
PART II- OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 16
Item 6. Exhibits and Reports on Form 8-K 16
3
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
ITRONICS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
ASSETS
Sept 30, 1998 Dec 31, 1997
------------- ------------
CURRENT ASSETS
Cash $ 95,953 $ 29,213
Accounts receivable 95,200 52,272
Notes receivable, subscription of stock 50,746 37,337
Inventories 34,849 47,973
Prepaid expenses 34,665 22,462
--------- ---------
Total Current Assets 311,413 189,257
--------- ---------
PROPERTY AND EQUIPMENT
Plant lease/option acquisition costs 44,883 3,546
Leasehold improvements 14,212 14,212
Equipment and furniture 350,227 327,635
Vehicles 34,263 32,858
Equipment under capital lease 32,012 32,012
--------- ---------
475,597 410,263
Less: Accumulated depreciation and amortization 271,961 247,073
--------- ---------
203,636 163,190
--------- ---------
OTHER ASSETS
Intangibles 8,658 7,121
Note receivable, subscription of stock 52,606 82,663
Deposits 7,612 2,823
Acquisition of minority interest 9,250 -
--------- ---------
78,126 92,607
--------- ---------
$ 593,175 $ 445,054
========= =========
See Notes to Condensed Consolidated Financial Statements
4
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ITRONICS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS'(DEFICIT)
Sept 30, 1998 Dec 31, 1997
------------- ------------
CURRENT LIABILITIES
Accounts payable $ 176,509 $ 92,654
Accrued management salaries 106,606 82,997
Accrued expenses 135,619 67,515
Contracts payable 9,713 15,394
Current maturities of long-term debt - 5,000
Current maturities of advances from
stockholders 127,660 60,085
Capital lease obligations due stockholders 25,881 24,419
Interest payable 29,272 17,314
Other 6,326 6,326
--------- ---------
Total Current Liabilities 617,586 371,704
--------- ---------
LONG-TERM LIABILITIES
Advances from stockholders, less current
maturities 56,660 70,946
Accrued salary due officer/stockholder 45,000 140,000
Capital lease obligations due stockholders,
less current maturities - 2,803
Deferred gain, less current maturities 16,990 19,627
--------- ---------
Total Long-Term Liabilities 118,650 233,376
--------- ---------
736,236 605,080
--------- ---------
STOCKHOLDERS' (DEFICIT)
Preferred stock (-0- shares outstanding) - -
Common stock (46,932,357 shares outstanding at
September 30, 1998 and 43,050,532 outstanding
at December 31, 1997) 46,866 43,051
Additional paid-in capital 3,508,621 3,039,981
Accumulated deficit (4,037,908) (3,350,421)
Common stock to be issued 339,360 107,363
--------- ---------
( 143,061) ( 160,026)
--------- ---------
$ 593,175 $ 445,054
========= =========
See Notes to Condensed Consolidated Financial Statements
5
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ITRONICS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
Three Months Ended Sept 30, Nine Months Ended Sept 30,
--------------------------- --------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
REVENUES
Mining technical services $ 147,052 $ 205,341 $ 297,029 $ 381,456
Photobyproduct recycling 35,411 36,801 96,222 91,273
Silver 30,622 31,100 130,293 80,163
Fertilizer 17,003 3,927 45,054 6,417
-------- -------- -------- --------
Total Revenues 230,088 277,169 568,598 559,309
COST OF SALES 265,883 260,284 668,635 565,806
-------- -------- -------- --------
Gross Profit (Loss) (35,795) 16,885 (100,037) ( 6,497)
-------- -------- -------- --------
OPERATING EXPENSES
Depreciation and amort. 7,938 5,681 23,214 16,643
Research and development 19,715 14,700 61,352 40,541
Sales and marketing 67,056 22,757 180,814 59,828
Plant start-up costs 14,367 - 19,156 -
General and administration 96,671 68,092 272,099 180,784
-------- -------- -------- --------
205,747 111,230 556,635 297,796
-------- -------- -------- --------
Operating Income (Loss) (241,542) (94,345) (656,672) (304,293)
-------- -------- -------- --------
OTHER INCOME (EXPENSE)
Forgiveness of debt - 12,824 - 12,824
Interest expense (13,476) (20,465) (35,502) (54,102)
Other, net 1,364 1,115 4,686 1,709
-------- -------- -------- --------
Total Other Income
(Expense) (12,112) ( 6,526) (30,816) (39,569)
-------- -------- -------- --------
Income (Loss) before provision
for income taxes (253,654) (100,871) (687,488) (343,862)
Provision for income taxes - - - -
-------- -------- -------- --------
Net income (loss) before cumu-
lative effect of a change in
accounting principle (253,654) (100,871) (687,488) (343,862)
Cumulative effect on prior
years (to December 31, 1996)
of changing the accrual of
audit and annual meeting
costs - - - ( 31,500)
-------- -------- -------- --------
Net Income (Loss) $(253,654) $(100,871) $(687,488) $(375,362)
======== ======== ======== ========
6
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ITRONICS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
Three Months Ended Sept 30, Nine Months Ended Sept 30,
--------------------------- --------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
Weighted average number of
shares outstanding (1,000's) 45,078 32,476 44,278 31,000
======== ======== ======== ========
Earnings (loss) per share
before cumulative effect of
a change in accounting
principle $(0.0056) $(0.0033) $(0.0155) $(0.0119)
Cumulative effect on prior
years (to December 31, 1996)
of changing the accrual of
audit and annual meeting
costs (0.0000) (0.0000) (0.0000) (0.0010)
-------- -------- -------- --------
Earnings (loss) per share $(0.0056) $(0.0033) $(0.0155) $(0.0129)
======== ======== ======== ========
See Notes to Condensed Consolidated Financial Statements
7
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ITRONICS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
Nine Months Ended Sept 30,
1998 1997
---------- ----------
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES
Net income (loss) $(687,488) $(375,362)
Adjustments to reconcile net income (loss)
to cash used by operations
Depreciation and amortization 23,214 16,643
Forgiveness of debt - (12,824)
Expenses paid with stock/notes 104,474 58,606
(Increase) decrease:
Trade receivables (42,928) (27,907)
Interest receivable-stock subscription ( 912) -
Inventories 13,124 ( 4,840)
Prepaid expenses 6,590 8,827
Deposits ( 4,789) -
Increase (decrease):
Accounts payable 83,854 ( 8,214)
Accrued expenses 171,794 82,518
Accrued interest 11,958 15,424
-------- --------
Net Cash Used by Operating Activities (321,109) (247,129)
-------- --------
CASH FLOWS FROM (FOR) INVESTING ACTIVITIES
Acquisition of property and equipment
and intangibles (65,334) (14,262)
-------- --------
CASH FLOWS FROM (FOR) FINANCING ACTIVITIES
Proceeds from sale of common stock 406,235 283,029
Proceeds from debt, stockholders 68,527 96,500
Payments on debt (21,579) (83,932)
-------- --------
Net Cash Provided by Financing Activities 453,183 295,597
-------- --------
Net Increase (Decrease) in Cash 66,740 34,206
Cash, beginning of period 29,213 1,091
-------- --------
Cash, end of period $ 95,953 $ 35,297
======== ========
See Notes to Condensed Consolidated Financial Statements
8
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ITRONICS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
1. The unaudited condensed consolidated financial statements printed
herein have been prepared in accordance with the instructions to Form 10-QSB
and do not include all of the information and disclosures required by
generally accepted accounting principles. Therefore, these financial
statements should be read in conjunction with the consolidated financial
statements and related footnotes included in the Company's Form 1O-KSB for
the year ended December 31, 1997. These financial statements reflect all
adjustments that are, in the opinion of management, necessary to fairly
state the results for the interim periods reported.
2. The results of operations for the three and nine months ended
September 30, 1998 are not necessarily indicative of the results to be
expected for the full year.
9
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operations
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I. Results of Operations
The Company reported a net loss of $253,654 or $0.0056 per share for
the quarter ended September 30, 1998, compared to a net loss of $100,871 or
$0.0033 per share for the comparable 1997 period. For the first nine months
of 1998, the net loss was $687,488 or $0.0155 per share, compared to a net
loss of $375,362 or $0.0129 per share for the comparable 1997 period. The
results for the quarter reflect the ongoing fundamental shift in Company
focus from being a technical services Company, with an R&D project, to being
primarily a photochemical recycler and fertilizer manufacturer. The process
of converting the R&D project to a commercial operation with significant
sales growth requires increasing the Company's cost structure prior to
achieving such sales growth. These necessary increases resulted in
consolidated operating costs for the quarter of $205,700, compared to
$111,200 for the prior year quarter. During the current quarter, management's
focus has been on completing the Private Placement to provide the funds
necessary to move the existing pilot scale plant into the commercial scale
facility that is presently under lease/option. During the current quarter,
$268,100 was received from the Private Placement and subsequent to September
30, 1998, an additional $708,300 was received. Sufficient funds are now in
hand to proceed with the move to the new facility.
To provide a more complete understanding of the factors contributing
to the changes in sales, operating expenses and the resultant operating loss,
the discussion presented below is separated into the Company's two operating
segments.
MINING TECHNICAL SERVICES
This segment, known as Whitney & Whitney, Inc., provides mining and
materials management, geology, engineering and economics consulting, and
publishes specialized mineral economics and materials financial reports.
It employs technical specialists with expertise in the areas of mining,
geology, mining engineering, mineral economics, materials processing and
technology development. Technical services have been provided to many of the
leading U.S. and foreign mining companies, several public utilities with
mineral interests, to various state agencies, the U.S. and foreign
governments, and the United Nations and the World Bank.
- -----------------------------------------------------------------------------
Three Months Ended Sept 30, Nine Months Ended Sept 30,
---------------------------- --------------------------
1998 1997 1998 1997
---------- ---------- ---------- ---------
Sales revenue $147,052 $205,341 $ 297,029 $381,456
Operating income (loss) $(40,168) $ 488 $(121,084) $(25,776)
- -----------------------------------------------------------------------------
10
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Mining technical services revenue was approximately $147,100 for the
quarter ended September 30, 1998, compared to $205,300 for the comparable
quarter of 1997, a 28.4% decrease. The revenue decrease is due to the third
quarter 1997 completion of one major technical services project that has not
been replaced, management focus on the photobyproduct fertilizer segment and
the depressed price of gold, which has resulted in reduced gold mining
industry need for the type of services the Company offers. Cost of sales were
reduced by $30,400, due primarily to decreases in payroll costs. These
factors resulted in a segment gross profit of $14,600 for the current
quarter, compared to $42,500 for the third quarter of 1997. Segment
operating expenses increased $12,700, including $6,400 in marketing costs
and $6,200 in general and administration.
The combination of these factors resulted in a 1998 third quarter
segment operating loss of $40,200, compared to operating income of $500 for
the comparable 1997 quarter.
For the first nine months of 1998, segment revenue totaled $297,000,
compared to $381,500 for the first nine months of 1997, a decline of 22.1%.
Operating loss for the period was $121,100, compared to an operating loss of
$25,800 for the comparable 1997 period, an increased loss of $95,300. The
primary factor contributing to the sales decline was decreased consulting
activity due to management concentration of effort on the photobyproduct
fertilizer segment.
PHOTOBYPRODUCT FERTILIZER
This segment, known as Itronics Metallurgical, Inc., operates a semi-
works photobyproduct recycling pilot plant, which includes related silver
recovery. As part of the recycling process, the Company is manufacturing and
selling liquid fertilizer products on a limited basis. Revenues are generated
from photobyproduct management services, silver sales, and fertilizer sales.
- -----------------------------------------------------------------------------
Three Months Ended Sept 30, Nine Months Ended Sept 30,
--------------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
Sales revenue $ 83,036 $ 71,828 $ 271,569 $ 177,853
Operating income (loss) $(201,374) $(94,833) $(535,588) $(278,517)
- -----------------------------------------------------------------------------
Total segment sales for the third quarter of 1998 were approximately
$83,000, an increase of 15.6% from the third quarter of 1997. Photobyproduct
recycling revenue for the quarter decreased nominally from the third quarter
of 1997, on a 3.5% decrease in volume. Silver sales decreased nominally from
the third quarter of 1997. Silver ounces sold decreased 9.6% for the quarter.
Fertilizer sales for the quarter were $17,000, compared to $3,900 for the
1997 third quarter. Cost of sales for the quarter increased $35,900 from the
third quarter of 1997. The increase is comprised primarily of $3,500 in
direct costs related to increased sales and $21,800 in increased payroll
11
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costs due to additional personnel needed to increase plant production and to
higher pay rates caused by the tight labor market and the Company's desire to
maintain a stable, high quality work force. It should be noted that the
present production facility is a pilot scale plant which results in a
disproportionate need for personnel for production increases. It is
anticipated that once the new facility is fully operational, commercial scale
efficiencies will occur, allowing substantial increases in production with
minor increases in the number of personnel required. These factors resulted
in a gross loss of $50,400 for the third quarter of 1998, compared to a gross
loss of $25,700 for the third quarter of 1997.
Segment operating expenses increased $81,800 over the third quarter
of 1997, due to increases in R&D costs of $5,000, sales and marketing of
$37,900, plant start-up costs of $14,400, and general and administration of
$22,400. The increase in R&D relates to development of fertilizer nutrition
programs tailored specifically for golf courses and for the needs of
professional lawn maintenance companies. The increase in sales and
marketing reflects the establishment of a photochemical recycling and
distillation machine sales department in late 1997, the establishment of a
fertilizer sales department in the second quarter of 1998, implementation of
the WFS contract, and intensified corporate marketing to inform the investing
public about the Company and its products and services. Plant start-up costs
reflects one time costs of moving to the new plant, rent and plant operating
costs prior to the plant being operational, and costs of closing the old
plant. The increase in general and administration relates primarily to a full
time financial management position for the quarter, and to costs related to
the Private Placement funding effort.
These factors resulted in a 1998 third quarter segment operating loss
of $201,400, compared to a loss of $94,800 for the third quarter of 1997.
For the first nine months of 1998, segment sales totaled $271,600,
compared to $177,900 for the first nine months of 1997, an increase of 52.7%.
Operating loss for the first nine months of 1998 was approximately $535,600,
compared to $278,500 for the first nine months of 1997. The primary factor
contributing to the larger loss was increased operating costs related to
converting the segment from an R&D stage to a commercial stage.
SUMMARY
On a consolidated basis, the operating loss for the third quarter of
1998 was $241,500, compared to an operating loss of $94,300 for the third
quarter of 1997. Consolidated operating loss for the first nine months of
1998 was $656,700, compared to an operating loss of $304,300 for the first
nine months of 1997.
II. Changes in Financial Condition; Capitalization
Cash amounted to $95,953 as of September 30, 1998, compared to
$35,297 as of September 30, 1997. Net cash used for operating activities was
approximately $321,100 for the first nine months of 1998. In addition,
$65,300 was invested in property and equipment. These uses of cash were
financed by stockholders, including $406,200 in proceeds from the private
placement of common shares and $68,500 in advances from stockholders.
Total assets increased during the nine months ended September 30,
1998 by approximately $148,100 to $593,200. Current assets increased
12
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approximately $122,200 due primarily to increases in cash of $66,700 and
accounts receivable of $42,900. Total property and equipment, before
accumulated depreciation and amortization, increased $65,300. Of this amount,
$41,300 was for costs related to acquisition of the Stead facility lease/
option, obtaining the special use permit for the facility, and engineering of
building improvements to be constructed prior to moving into the facility.
Current liabilities increased by $245,900 and total liabilities increased by
$131,200. Increases in liabilities, including $83,900 in accounts payable,
$109,400 in accrued management salaries, $79,500 in payroll burdens, and
$68,500 in advances from stockholders, were partially offset by loan
payments to stockholders and an unrelated party totaling $21,600, and by
accrued management salaries totaling $180,800 being converted into the
Company's restricted common stock.
On March 31, 1998 the Company began a Private Placement Offering to
raise $2,000,000 in equity capital. The Offering is being made in four
$500,000 tranches, with the stock price of each tranche dependent on market
conditions. The first tranche was closed on October 30, 1998. The second
tranche was closed on November 9, 1998. Management is now updating the 1998
Private Placement Memorandum for the third and fourth tranches.
III. Working Capital/Liquidity
During the nine months ended September 30, 1998, the working capital
deficit increased by approximately $123,700 to a deficiency of $306,200.
Management is continuing the Company's ongoing program of improving working
capital and liquidity through private placements of common shares,
conversion of debt to common shares, and payment of consulting and other labor
services with common shares. During the nine months ended September 30, 1998,
a total of $406,200 was received from the private placements of common
shares, $104,500 in various expenses were paid with common shares, and
$180,800 in accrued management salaries has been converted to common shares.
IV. New Developments
During the first quarter, IMI entered into a lease/option agreement
to acquire a 35,000 square foot manufacturing facility on three acres of land
in the Reno-Stead, Nevada area. On March 14, 1998 the Special Use Permit for
the facility became effective. Building occupancy is now dependent on
obtaining the necessary Environmental Control Permit, which requires
completion of engineering drawings for specified improvements, receipt of
necessary building permits, construction of a new floor and required spill
containment, and inspection/approval by the City of Reno Environmental
Control Department. The move to the new facility was scheduled for mid to
late June 1998, but delays in acquisition of necessary financing and the time
required to make site improvements have delayed the move. Sufficient funding
has now been obtained to proceed with moving to the new facility. A
contractor has been selected to construct the flooring and spill containment.
The building permit application process is under way and the contractor has
begun work. Receipt of the building permit is anticipated shortly and
construction will begin immediately thereafter. It is now anticipated that
the move will occur in December and the plant will be operational in January
1999.
The introduction of the Gold'n Gro fertilizer products to
Western Farm Services, Inc. is ongoing. Gold'n Gro fertilizer products are
now being used or tested by more than 60 golf courses and other commercial
customers.
13
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V. Year 2000 Assessment
The Company has begun its assessment of the potential effects of the
Year 2000 issue on the Company's operations. The assessment is in two parts.
First, an evaluation of the Company's computer systems and equipment with
embedded computer chips for Year 2000 compliance. The majority of the
Company's computers and software have been acquired within the last year.
Therefore, management anticipates only minor Year 2000 compliance problems
with its computer systems.
The second part of the assessment process involves the Year 2000
readiness of third parties. There are two primary issues related to the
evaluation of the potential impact on the Company.
First, interruption of the services provided by local public
utilities, namely power and telephone service, would have a material negative
impact on the Company's operations. Based on attendance at seminars and
public reports, management believes that the local utility service providers
are actively working on their Year 2000 compliance issues. At this time,
management believes that no interruption of service will occur.
Second, significant Year 2000 problems with the Company's major
customers and suppliers could have a material negative impact on the
Company's operations. At the present time, there are two major customers in
the photobyproduct fertilizer segment and one major customer in the Company's
mining technical services segment. The Year 2000 assessment process involves
discussing the issue with these customers and evaluating the impact their
operations could have on the Company's operations. All three customers are
substantially larger and financially stronger than the Company, so no
significant problems with these customers are anticipated at this time.
Based on current information, management does not anticipate the Year
2000 issue will have a material impact on the Company's operations.
VI. Forward-Looking Statements
The statements in this Form 10-QSB that are not historical facts or
statements of current status are forward-looking statements (as defined in
the Private Securities Litigation Reform Act of 1995) that involve risks and
uncertainties. Actual results may differ materially.
PART II- OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
The former president of Seahawk, Inc. (Seahawk) filed suit on June
30, 1995 in the Superior Court of California, County of Orange, against the
14
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Company, W&W, and several W&W employees. W&W's liability insurance carrier
defended against the suit, and in March 1997, the suit was dismissed on the
grounds that the claim had no legal basis. The individual has exercised his
right to appeal the dismissal. In February 1997, this individual served a
second suit that includes the Company, W&W, and a key employee as
codefendants, along with several unrelated parties. The suit seeks in excess
of $5 million plus punitive damages. The Company's liability insurance
carrier has agreed to assume the defense of this action with a reservation of
rights, including the right to disclaim insurance coverage. Management
believes the allegations are without merit and is vigorously defending
against the suit. In May 1998 agreement was reached with the plaintiff that
if the appeal of the first suit fails, the second suit will be dropped. Due
to a civil court backlog, the appeal hearing has been delayed for at least 25
months from July 31, 1998. As of the date of this report, a hearing date has
not been set.
Item 2. Changes in Securities and Use of Proceeds
- -------------------------------------------------
(c) Recent Sales of Unregistered Securities:
Following is a summary of sales of unregistered securities for the
three months ended September 30, 1998. All securities were issued as
restricted common shares which are subject to Rule 144 of the Securities and
Exchange Commission. Generally, Rule 144 requires shareholders to hold the
shares for a minimum of one year before sale. In addition, officers,
directors and more than 10% shareholders are further restricted in their
ability to sell such shares. There have been no underwriters of these
securities and no underwriting discounts have been paid.
Shares Value
Issued Received
-------- --------
Private placement for cash 1,920,000 $240,000
Price adjustment on Private Placement
shares issued in the previous quarter 120,000 -
Acquisition of newsletter publication
rights 10,815 2,000
--------- --------
2,050,815 $242,000
========= ========
The above transactions qualified for exemption from registration
under Sections 3(b) or 4(2) of the Securities Act of 1933. Private placements
for cash were non-public transactions. The Company believes that all such
investors are either accredited or, either alone or with their purchaser
representative, have such knowledge and experience in financial and business
matters that they are capable of evaluating the merits and risks of the
prospective investment.
15
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Item 3. Defaults Upon Senior Securities
- ---------------------------------------
(a) As of September 30, 1998, the Company and its subsidiaries were in
default on various promissory notes and secured leases with stockholders
totaling $84,376. Details of these notes are more fully described in Note 3
to the Consolidated Financial Statements included in the Company's Form 10-KSB
for the year ended December 31, 1997. No collection action has been taken by
the note and lease holders. Subsequent to September 30, 1998 one lease has
been brought current and a promissory note, in the amount of $49,000, has
been renegotiated. Management anticipates that all defaults will be cured by
year end.
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibit 11, "Computation of Loss Per Share", is presented on page
18 of this report.
Exhibit 27, "Financial Data Schedule", is presented on page 19
of this report.
(b) No reports on Form 8-K were filed by the Company during the
quarter ended September 30, 1998.
16
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ITRONICS INC.
DATED: November 14, 1998 By: JOHN W. WHITNEY
---------------- ---------------------------------
John W. Whitney
President, Treasurer and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated
DATED: November 14, 1998 By: JOHN W. WHITNEY
----------------- ---------------------------------
John W. Whitney
President, Treasurer and Director
(Principal Executive Officer)
DATED: November 14, 1998 By: MICHAEL C. HORSLEY
----------------- ---------------------------------
Michael C. Horsley
Controller
(Principal Accounting Officer)
17
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ITRONICS INC. AND SUBSIDIARIES
COMPUTATION OF LOSS PER SHARE
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
EXHIBIT 11
Three Months Ended Sept 30, Nine Months Ended Sept 30,
--------------------------- -------------------------
1998 1997 1998 1997
---------- ---------- --------- ----------
Common and common
equivalent shares used in
determining net loss per
share
Weighted average number of
common shares outstanding
during the period(1,000's) 45,078 32,476 44,278 31,000
Common equivalent shares - - - -
---------- ---------- ---------- ----------
45,078 32,476 44,278 31,000
========== ========== ========== ==========
Net income (loss) $(253,654) $(100,871) $(687,488) $(375,362)
Cumulative preferred dividends
for the period - ( 6,240) - (26,000)
---------- ---------- ---------- ----------
Net income (loss) less
cumulative preferred
dividends for the period $(253,654) $(107,111) $(687,488) $(401,362)
========== ========== ========== ==========
Earnings (Loss) per share $( 0.0056) $( 0.0033) $( 0.0155) $( 0.0129)
========== ========== ========== ==========
18
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
10-QSB FOR SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1998
<CASH> 95,953
<SECURITIES> 0
<RECEIVABLES> 96,606
<ALLOWANCES> 1,406
<INVENTORY> 34,849
<CURRENT-ASSETS> 311,413
<PP&E> 475,597
<DEPRECIATION> 271,961
<TOTAL-ASSETS> 593,175
<CURRENT-LIABILITIES> 617,586
<BONDS> 118,650
0
0
<COMMON> 46,866
<OTHER-SE> (189,927)
<TOTAL-LIABILITY-AND-EQUITY> 593,175
<SALES> 271,569
<TOTAL-REVENUES> 568,598
<CGS> 407,297
<TOTAL-COSTS> 668,635
<OTHER-EXPENSES> 84,566
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,502
<INCOME-PRETAX> (687,488)
<INCOME-TAX> 0
<INCOME-CONTINUING> (687,488)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (687,488)
<EPS-PRIMARY> (.016)
<EPS-DILUTED> (.016)
</TABLE>
