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

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