2007 3rd Quarter Report

To Our Shareholders:

I am pleased to report earnings of $354,000 or $0.17 per share, a 24% increase over the third quarter of 2006. Sales were 9% over the comparable quarter to $4,017,000. Both figures are third quarter records.

Sales growth was led by our screen print photochemical and ink jet receptive substrate products. Although these results were aided by the Imagemate® acquisition of December 2006, we also experienced growth in our traditional Chromaline® brand. We also began to see sales contributions from our new business ventures, and I expect those to increase in the fourth quarter as production is ramped up.

During the quarter we entered into an option agreement to buy a 15 acre brown field site from the City of Duluth. If we consummate the purchase, we will initially move shipping, warehousing and some manufacturing to a new 35,000 square foot facility to be built on the site, which is in an economic development zone carrying significant tax benefits. This move will give us space to grow our business as well as to eventually consolidate our activities in one location.

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, 2007 and 2006

                                                           

                                                                  Three Months Ended                      Nine Months Ended           

                                                                9/30/07              9/30/06              9/30/07              9/30/06

Net Sales                                               $4,016,923         $3,673,830         $11,899,367       $11,145,304

 

Costs and expenses                                  3,531,922          3,294,559          10,978,072         10,169,468

 

Income from operations                                 485,001             379,271               921,295             975,836

 

Gain on sale of investment                                                 –                        –                 55,159                     –

 

Interest income                                              40,616               32,492               110,247                82,639

 

Income before income taxes                          525,617             411,763            1,086,701           1,058,475

 

Federal and state Income tax expense            171,692             126,810               262,277              327,751

 

Net income                                             $   353,925        $   284,953        $     824,424      $      730,724

 

Earnings per common share-diluted                        $         0.17       $         0.14       $           0.40     $            0.36

 

Average shares outstanding-diluted                         2,074,569          2,043,981          2,061,400            2,029,732

 

 

Condensed Balance Sheets

As of September 30, 2007 and December 31, 2006

 

                                                       9/30/07             12/31/06        

Assets                                                  (unaudited)

Current assets                                        $  8,910,277       $  8,229,210

Property, plant and equipment, net                1,329,280             991,920

Investment in non-marketable

equity securities                                         855,201             988,910

Intangible assets                                           485,074             485,421

Deferred income taxes                                      48,000               48,000

 $11,627,832       $10,743,461

Liabilities and Stockholders’ Equity                                                                                

Current liabilities                                     $     945,897      $     879,362
Long term debt                                                     –                         –

Stockholders’ equity                                  10,681,935          9,864,099

 $ 11,627,832      $10,743,461

 

 

CONDENSED STATEMENTS OF CASH FLOW (unaudited)

For Nine Months Ended September 30, 2007 and 2006

 

   9/30/07               9/30/06                     

Net cash provided by operating activities                            $1,384,262         $   797,419

 

Net cash used in investing activities                                                (385,067)            (446,247)

 

Net cash provided by financing activities                                103,719               223,047

 

Net increase in cash and cash equivalents                          1,102,914             574,219

 

Cash and cash equivalents at beginning of period                  3,428,186          3,412,072

 

Cash and cash equivalents at end of period                                    $4,531,100         $3,986,291

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