2009 3rd Quarter Report
To Our Stockholders:
In the third quarter of 2009 we experienced a rebound in business, but suffered a write-off of our investment in Imaging Technology International (iTi) as they ceased operations due to an inability to refinance the current portion of their debt.
Sales for the third quarter of 2009 were $3,921,000, a 2.3% increase over the third quarter of 2008, and a 3.5% increase over the second quarter of 2009. Excluding the $919,000 write off of the investment in iTi, pre-tax earnings for the third quarter of 2009 were $320,000, up 48% over pre-tax earnings for the second quarter of 2009 and up 9.6% compared to the third quarter of 2008. Pre-tax loss for the third quarter of 2009 was $599,000 and the net loss for the quarter was $709,000, or $0.36 per share. This is IKONICS’ second consecutive quarter of sales growth, and it appears that the recession may be weakening. At the end of the 2009 third quarter, the company’s cash and short term investment position had increased to $1,578,000.
The write off and the loss of iTi as a supplier for our DTX printers is certainly an unwelcomed event. However, we are working on alternatives to iTi as our supplier of printers and believe we have two viable options. We hope to be in the market with these printers in the first half of 2010 and plan to have one of our iTi manufactured machines placed at a beta site before the end of this year.
I am pleased that our sales are improving and particularly gratified by the progress of our IKONICS Acoustics and Photo-Machining initiatives, both of which are showing good sales. We are also in the process of doubling our Photo-Machining manufacturing capacity.
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, 2009 and 2008
Three Months Ended Nine Months Ended
09/30/09 09/30/08 09/30/09 09/30/08
Net sales $3,920,663 $3,832,783 $ 11,270,376 $11,943,690
Cost of goods sold 2,337,757 2,178,597 6,825,654 6,798,858
Gross profit 1,582,906 1,654,186 4,444,722 5,144,832
Operating expenses 1,266,276 1,406,983 3,906,972 4,311,623
Income from operations 316,630 247,203 537,750 833,209
Gain on sale of investment – 24,550 29,762 24,550
Loss on investment (918,951) – (918,951) –
Interest income 3,070 19,890 5,190 87,262
Income (loss) before income taxes (599,251) 291,643 (346,249) 945,021
Income tax expense 110,134 53,810 163,253 243,113
Net income (loss) $ (709,385) $ 237,833 $ (509,502) $ 701,908
Earnings per common share-diluted $ (0.36) $ 0.11 $ (0.26) $ 0.34
Average shares outstanding-diluted 1,967,057 2,073,925 1,975,911 2,070,134
CONDENSED BALANCE SHEETS
As of September 30, 2009 and December 31, 2008
09/30/09 12/31/08
(Unaudited)
Assets
Current assets $ 5,920,080 $ 5,562,130
Property, plant and equipment, net 5,345,301 5,602,063
Investment in non-marketable
equity securities – 918,951
Intangible assets 357,619 403,285
$11,623,000 $12,486,429
Liabilities and Stockholders’ Equity
Current liabilities $ 627,682 $ 909,789
Deferred income taxes 178,000 143,000
Long term debt – –
Stockholders’ equity 10,817,318 11,433,640
$11,623,000 $12,486,429
CONDENSED STATEMENTS OF CASH FLOW (Unaudited)
For the Nine Months Ended September 30, 2009 and 2008
9/30/09 9/30/08
Net cash provided by operating activities $ 857,258 $1,009,363
Net cash provided by (used in) investing activities (657,289) 621,926
Net cash used in financing activities (123,844) (380,181)
Net increase in cash and cash equivalents 76,125 1,251,108
Cash and cash equivalents at beginning of period 901,738 1,230,020
Cash and cash equivalents at end of period $ 977,863 $2,481,128