2010 3rd Quarter Report

TO OUR STOCKHOLDERS:

I am very pleased to report record sales for the quarter ended September 30, 2010 of $4,141,000, a 6% increase over the third quarter of 2009. Earnings were $287,000, or $0.15 per share, compared to a 2009 third quarter loss of $709,000 caused by the write off the Company’s $919,000 investment in Imaging Technology International (iTi). The first nine months of 2010 produced record sales of $12,074,000, a 7% increase over the same period of 2009, and near record earnings per share of $0.39.

We have rebounded from the poorest quarterly earnings in our Company’s history and a sluggish world economy to set a new sales record and near record earnings for this current nine month period. Not only have we recovered financially from the failure of iTi, but we have established stronger new sources for the digital printers that iTi was supplying to our Digital Texturing (DTX) program. DTX is now a growing product line, and we have been awarded a European patent on the process and have applied for a U.S. patent.

The sales growth for both the quarter and nine month periods were primarily driven by increased export sales and our new business initiatives, primarily DTX.

We have successfully completed a research project for DARPA (Defense Advanced Research Projects Agency) using our proprietary technology to machine exotic metal composites; we are investigating the commercial opportunities. We are also seeing increasing awareness of and interest in our new technologies from the electronics display and sound deadening segments.

Over the past two years we have experienced both increased capital and operating costs associated with the start up of our new business initiatives. These include increased expenditures for patent applications, as we add to our intellectual property portfolio; an additional chemist hired to advance our DTX program; increased depreciation related our new facility which houses our new business initiatives as well as shipping for the Company. However, sales are growing, profits are at near record levels, and we have a cash and short term investments position at the end the quarter of $2,670,000 with no long term debt. I believe these trends will continue through 2011.

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, 2010 and 2009

                                                           

                                                                  Three Months Ended                     Nine Months Ended

                                                                09/30/10            09/30/09            09/30/10            09/30/09

Net sales                                               $4,141,092         $3,920,663        $ 12,073,724       $11,270,376

 

Cost of goods sold                                   2,474,188          2,337,757         7,093,266             6,825,654

 

Gross profit                                              1,666,904          1,582,906          4,980,458             4,444,722

 

Operating expenses                                  1,249,997          1,266,276          3,938,063             3,906,972

 

Income from operations                                 416,907             316,630          1,042,395               537,750

 

Gain on sale of investment                                    –                        –                           –               29,762

 

Loss on investment                                             –                  (918,951)                   –               (918,951)

 

Interest income                                                6,267                 3,070              13,672                   5,190

 

Income (loss) before income taxes                 423,174             (599,251)         1,056,067             (346,249)

 

Income tax expense                                    135,831              110,134             277,111               163,253

 

Net income (loss)                                                $   287,343        $  (709,385)       $   778,956        $   (509,502)

 

Earnings (loss) per common share-diluted   $         0.15       $        (0.36)      $          0.39      $         ( 0.26)

 

Average shares outstanding-diluted                         1,975,882          1,967,057          1,972,351            1,975,911

 

 

Condensed Balance Sheets

As of September 30, 2010 and December 31, 2009

 

                                                                                   9/30/10          12/31/09        

                                                                               (unaudited)

Assets 

Current assets                                                    $  7,452,140       $  6,417,488

Property, plant and equipment, net                            5,077,144          5,234,244

Intangible assets, net                                                 311,829             345,540

  $12,841,113       $11,997,272

Liabilities and Stockholders’ Equity                                                                                

Current liabilities                                                 $    831,383       $     809,186

Deferred income taxes                                                162,000             162,000

Long term debt                                                                   –                           –

Stockholders’ equity                                             11,847,730         11,026,086

$12,841,113       $11,997,272

 

 

CONDENSED STATEMENTS OF CASH FLOW (Unaudited)

For the Nine Months Ended September 30, 2010 and 2009

 

                                                                                                         9/30/010            9/30/09                     

Net cash provided by operating activities                            $  715,416         $   857,258

 

Net cash used in investing activities                                       (1,580,950)            (657,289)

 

Net cash provided by (used in) financing activities                     20,110            (123,844)

 

Net increase (decrease) in cash                                          (845,424)               76,125

 

Cash at beginning of period                                               1,304,586             901,738

 

Cash at end of period                                                      $   459,162        $   977,863

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