2006 3rd Quarter Report

To Our Shareholders:

We experienced record third quarter sales of $3,674,000, a 6% increase over the third quarter of 2005. Earnings were basically flat at $285,000, or $0.14 cents per share, 1% below the $287,000 earned in the third quarter of 2005. Year to date sales are up 6% and earnings are up 25% to $0.36 per share over the first three quarters of 2005.

The flat earnings growth for the quarter reflects heavy new product development and launch expenses in addition to expenses related to the IKONICS’ biennial screen print trade show.

Our new product initiatives continue to show considerable promise, while requiring significant R&D and product launch expenses. We have received much interest from an article published in Machine Design Magazine about our industrial etching technology, and our industrial ink jet technology has received positive reviews from potential customers. I believe these and other new products are changing the face of IKONICS, as we venture into new markets with exciting new technologies.

Importantly, our traditional lines of business are growing and remain profitable. Our cash flow is excellent, and we have a cash balance of nearly $4,000,000 dollars for acquisitions and strategic investments such as in Imaging Technology International where we made an additional investment during the third quarter.

For the Board of Directors,
William C. Ulland Chairman, President & CEO

 

IKONICS Corporation

 

CONDENSED STATEMENTS OF OPERATIONS (unaudited)

For the Three Months and Nine Months Ended September 30, 2006 and 2005

 

                                                                  Three Months Ended                      Nine Months Ended           

                                                                9/30/06              9/30/05              9/30/06              9/30/05

Net Sales                                               $ 3,673,830        $ 3,462,253        $ 11,145,304      $10,532,775

 

Costs and expenses net of interest income   3,262,067         3,045,639          10,086,829          9,702,465

 

Income before income taxes                          411,763             416,614             1,058,475            830,310

 

Income tax expense                                     126,810             129,150                 327,751           243,929

 

Net income                                             $   284,953        $   287,464        $       730,724    $     586,381

 

Earnings per common share-diluted                        $         0.14       $         0.14       $             0.36   $           0.30

 

Average shares outstanding-diluted                         2,043,981          1,986,033              2,029,732       1,980,151

 

 

 

 

CONDENSED BALANCE SHEETS

As of September 30, 2006 and December 31, 2005

 

                                                                       9/30/06             12/31/05        

Assets                                                  (unaudited)

Current assets                                        $  8,464,823       $7,728,358

Property, plant and equipment, net                   862,987           951,565

Investment in non-marketable

equity securities                                         865,160           450,790

Intangible assets                                           283,868           279,086

Deferred taxes                                                 61,000             61,000

$10,537,838       $9,470,799

Liabilities and Stockholders’ Equity                                                                                

Current liabilities                                     $  1,073,382       $   992,294
Long term debt                                                     –                         –

Stockholders’ equity                                    9,464,456         8,478,505

$10,537,838       $ 9,470,799

 

 

 

 

CONDENSED STATEMENTS OF CASH FLOW (unaudited)

For Nine Months Ended September 30, 2006 and 2005

 

   9/30/06               9/30/05                     

Net cash provided by operating activities                            $    797,419       $   606,004

 

Net cash used in investing activities                                         ($446,247)          (334,476)

 

Net cash provided by financing activities                                $223,047              55,094

 

Net increase in cash and cash equivalents                             $574,219            326,622

 

Cash and cash equivalents at beginning of period                   3,412,072         2,737,460

 

Cash and cash equivalents at end of period                           $ 3,986,291        $3,064,082

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