2011 3rd Quarter Report

To Our Stockholders:

We reported record third quarter sales in 2011 of $4,361,000, a 5% increase over the third quarter of 2010. However, earnings were down 25% to $215,000, or $0.11 per share, compared to $0.15 per share for the corresponding 2010 quarter.

Escalating petrochemical costs are a major contributor to our declining profit margins. Recently, we have seen prices double for some of our raw materials. Although we are raising our prices, it is not always possible to immediately pass the increases on to customers.

For the past few years our strategy has been to diversify into industrial markets where our unique technologies give us cost and quality advantages over competing technologies. This transition has added to costs, and has taken more time than I had planned. However, we are making substantial progress with these new businesses.

Our Micro-Machining technology is now being used to make components for both Boeing and Airbus commercial aircraft, and we recently have acquired enhanced production capability to machine various composite parts along with wafers and other components for the electronics industry. This business is the most rapidly growing part of IKONICS with sales up 90% year to date over last year.

Although we have made significant technical advances in our patented DTX technology, this business has not grown as fast as Micro-Machining because the program is in part dependent on third-party equipment manufacturers. For a number of reasons, including ever evolving printer technology and a reluctance to commit resources to a new specialized market, these third-party manufacturers have been slow to produce DTX printers. Although printers are being manufactured, we are reevaluating this aspect of our supply chain so it is more responsive to the needs of IKONICS and our customers.

For the Board of Directors,

William C. Ulland Chairman, President & CE

 

IKONICS Corporation

CONDENSED STATEMENTS OF OPERATIONS

For the Three Months and Nine Months Ended September 30, 2011 and 2010

                                                           

                                                                  Three Months Ended                     Nine Months Ended

                                                                9/30/11              9/30/10              9/30/11              9/30/10

Net sales                                               $4,361,312         $4,141,092        $ 12,601,843       $ 12,073,724

 

Cost of goods sold                                   2,681,509          2,474,188         7,601,207             7,093,266

 

Gross profit                                              1,679,803          1,666,904          5,000,636             4,980,458

 

Operating expenses                                  1,383,557          1,249,997          4,232,292             3,938,063

 

Income from operations                                 296,246             416,907             768,344             1,042,395

 

Interest income                                                4,028                 6,267              13,371                 13,672

 

Income before income taxes                          300,274             423,174              781,715           1,056,067

 

Income tax expense                                      85,597             135,831              220,150               277,111

 

Net income                                             $  214,677         $   287,343        $   561,565        $     778,956

 

Earnings per common share-diluted                        $         0.11       $         0.15       $          0.28      $           0.39

 

Average shares outstanding-diluted                         1,987,945          1,975,882          1,985,263           1,972,351

 

 

Condensed Balance Sheets

As of September 30, 2011 and December 31, 2010

 

                                                                                        9/30/11          12/31/10        

                                                                                      (unaudited)

Assets 

Current assets                                                    $   8,352,285      $  7,811,830

Property, plant and equipment, net                        5,406,333         5,012,933

Intangible assets, net                                                  334,541            317,168

 $14,093,159       $13,141,931

Liabilities and Stockholders’ Equity                                                                                

Current liabilities                                                 $  1,086,047       $     777,984

Deferred income taxes                                                171,000              171,000

Long term debt                                                                   –                           –

Stockholders’ equity                                             12,836,112         12,192,947

$14,093,159       $13,141,931

 

 

CONDENSED STATEMENTS OF CASH FLOW

For the Nine Months Ended September 30, 2011 and 2010

 

                                                                                                               9/30/11             9/30/10                     

Net cash provided by operating activities                            $   465,752        $   715,416

 

Net cash used in investing activities                                       (334,980)        (1,580,950)

 

Net cash provided by financing activities                                  67,631                20,110

 

Net increase (decrease) in cash                                           198,403              (845,424)

 

Cash at beginning of period                                               1,291,383            1,304,586

 

Cash at end of period                                                      $1,489,786         $     459,162

 

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