U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒~~Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934~~

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, ~~2017~~2018

oror

☐~~Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934~~

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period From to .

Commission file number 000-25727

IKONICS CORPORATION

(Exact name of registrant as specified in its charter)

Minnesota		41-0730027
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification no.)

4832 Grand Avenue Duluth, Minnesota		55807
(Address of principal executive offices)		(Zip code)

(218) 628-2217

Registrant’s telephone number

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes ☒ No ☐

Indicate by check mark whether the registrant is a ~~shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒~~

~~Indicate by check mark whether the registrant is a~~ large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ~~(Do not check if a smaller reporting company)~~ ☐		Smaller reporting company ☒
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: Common Stock, $.10 par value per share - ~~1,992,053~~1,983,553 shares outstanding as of November ~~4, 2017.~~1, 2018.

PART I - FINANCIAL INFORMATION

ITEM 1. Condensed Financial Statements

IKONICS CORPORATION

CONDENSED BALANCE SHEETS


	September 30,		December 31,		September 30,			December 31,
	2017		2016		2018			2017
		(unaudited)			(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,001,244	$	1,048,713	$	1,559,725		$	929,700
Short-term investments		1,915,000		3,246,000		2,695,000			2,895,000
Trade receivables, less allowance of $52,000 in 2017 and $54,000 in 2016		1,644,232		2,336,501
Trade receivables, less allowance of $58,000 in 2018 and $53,000 in 2017						1,975,741			2,190,260
Inventories		2,546,309		1,986,172		2,270,890			2,086,065
Prepaid expenses and other assets		104,209		361,905		210,570			168,242
Income taxes receivable		327,733		66,181		10,208			2,116
Total current assets		8,538,727		9,045,472		8,722,134			8,271,383
PROPERTY, PLANT, AND EQUIPMENT, at cost:
Land and building		9,202,715		9,189,743		9,507,589			9,207,790
Machinery and equipment		4,980,101		4,884,814		5,110,666			4,968,595
Office equipment		1,600,760		1,566,856		1,583,524			1,573,191
Vehicles		245,679		272,144		245,679			245,679
		16,029,255		15,913,557		16,447,458			15,995,255
Less accumulated depreciation		(7,561,542)		(7,001,162)		(8,232,338	)		(7,693,594	)
		8,467,713		8,912,395
INTANGIBLE ASSETS, less accumulated amortization of $168,511 in 2017 and $149,072 in 2016		351,108		338,127
	$	17,357,548	$	18,295,994
Total property, plant, and equipment, at cost						8,215,120			8,301,661
INTANGIBLE ASSETS, less accumulated amortization of $143,643 as of September 30, 2018 and $174,991 as of December 31, 2017						368,823			351,186
Total assets					$	17,306,077		$	16,924,230
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt, net	$	129,995	$	127,303	$	128,247		$	130,899
Accounts payable		800,698		730,386		711,016			321,860
Accrued compensation		235,340		388,600		244,333			360,554
Other accrued liabilities		116,094		67,088		253,282			62,468
Total current liabilities		1,282,127		1,313,377		1,336,878			875,781
LONG-TERM LIABILITIES
Long-term debt, less current portion, net		2,979,614		3,077,457		2,854,529			2,946,518
Deferred income taxes		446,000		446,000		156,839			144,000
Total long-term liabilities		3,425,614		3,523,457		3,011,368			3,090,518
Total liabilities		4,707,741		4,836,834		4,348,246			3,966,299
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Preferred stock, par value $.10 per share; authorized 250,000 shares; none issued		—		—		—			—
Common stock, par value $.10 per share; authorized 4,750,000 shares; issued and outstanding 1,992,053 shares in 2017 and 2,018,753 shares in 2016		199,205		201,875
Additional paid-in-capital		2,714,861		2,732,006
Common stock, par value $.10 per share; authorized 4,750,000 shares; issued and outstanding 1,983,553 shares as of September 30, 2018 and December 31, 2017						198,355			198,355
Additional paid-in capital						2,719,444			2,709,390
Retained earnings		9,735,741		10,525,279		10,040,032			10,050,186
Total stockholders’ equity		12,649,807		13,459,160		12,957,831			12,957,931
	$	17,357,548	$	18,295,994
Total liabilities and stockholders' equity					$	17,306,077		$	16,924,230

~~IKONICS CORPORATION~~

~~CONDENSED STATEMENTS OF OPERATIONS (Unaudited)~~

Three Months Ended

Nine Months Ended


September 30,

September 30,


2017

2016

2017

2016

NET SALES

$
3,984,100

$
4,607,501

$
12,298,453

$
12,817,289

COST OF GOODS SOLD

2,660,149

2,940,027

8,441,010

8,330,930

GROSS PROFIT

1,323,951

1,667,474

3,857,443

4,486,359

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

1,305,455

1,357,605

4,209,705

4,121,891

RESEARCH AND DEVELOPMENT EXPENSES

168,686

150,176

519,160

475,165

INCOME (LOSS) FROM OPERATIONS

(150,190)

159,693

(871,422)

(110,697)

INTEREST EXPENSE

(20,832)

(21,721)

(62,475)

(36,720)

OTHER

6,309

4,519

17,364

6,681

INCOME (LOSS) BEFORE INCOME TAXES

(164,713)

142,491

(916,533)

(140,736)

INCOME TAX EXPENSE (BENEFIT)

(53,760)

60,225

(321,617)

(69,415)

NET INCOME (LOSS)

$
(110,953)

$
82,266

$
(594,916)

$
(71,321)

INCOME (LOSS) PER COMMON SHARE:

Basic

$
(0.06)

$
0.04

$
(0.30)

$
(0.04)

Diluted

$
(0.06)

$
0.04

$
(0.30)

$
(0.04)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

Basic

2,005,096

2,018,753

2,014,055

2,018,614

Diluted

2,005,096

2,018,842

2,014,055

2,018,614

~~See notes to condensed financial statements.~~

IKONICS CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)


	Nine Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2018			2017

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(594,916)	$	(71,321)	$	(10,154	)	$	(594,916	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Adjustments to reconcile net loss to net cash provided by
Depreciation		634,648		552,885		587,836			634,648
Amortization		28,724		24,094		27,463			28,724
Stock based compensation		17,527		18,384		10,054			17,527
Net gain on sale and disposal of property, plant and equipment		(32,635)		(5,750)		—			(32,635	)
Deferred income taxes						12,839			—
Changes in working capital components:
Trade receivables		692,269		10,962		214,519			692,269
Inventories		(560,137)		40,672		(184,825	)		(560,137	)
Prepaid expenses and other assets		257,696		(92,873)		(42,328	)		257,696
Income tax receivable		(261,614)		31,234		(8,092	)		(261,614	)
Accounts payable		70,312		326,996		389,156			70,312
Accrued expenses		(104,254)		(31,098)		74,593			(104,254	)
Net cash provided by operating activities		147,620		804,185		1,071,061			147,620

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, equipment and construction in progress		(189,966)		(1,966,150)
Purchases of property, plant, and equipment						(501,295	)		(189,966	)
Proceeds from sale of property and equipment		32,635		21,000		—			32,635
Purchases of intangibles		(32,420)		(25,842)
Purchases of intangible assets						(36,289	)		(32,420	)
Purchases of short-term investments		(1,915,000)		(3,399,000)		(4,145,000	)		(1,915,000	)
Proceeds on sale of short-term investments		3,246,000		—		4,345,000			3,246,000
Net cash provided by (used in) investing activities		1,141,249		(5,369,992)		(337,584	)		1,141,249

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt		—		3,415,000
Payment of debt issuance costs		—		(139,418)
Payments on long-term debt		(104,436)		(44,974)		(103,452	)		(104,436	)
Repurchase of common stock		(233,787)		—		—			(233,787	)
Proceeds from exercise of stock options		1,885		3,765		—			1,885
Net cash (used in) provided by financing activities		(336,338)		3,234,373
Net cash used in financing activities						(103,452	)		(336,338	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		952,531		(1,331,434)
NET INCREASE IN CASH AND CASH EQUIVALENTS						630,025			952,531

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		1,048,713		2,248,466		929,700			1,048,713

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	2,001,244	$	917,032	$	1,559,725		$	2,001,244

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Construction in progress included in accounts payable	$	—	$	8,778
Cash paid for interest	$	53,574	$	25,252	$	58,084		$	53,574
Cash received for income taxes, net	$	60,003	$	100,649
Cash paid for income taxes, net					$	7,652		$	60,003

Revenue

The Company’s ~~$1.9~~significant accounting policies are detailed in “Note 1: Summary of Significant Accounting Policies” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Topic 606. Revenue from Contracts with Customers (Topic 606), and in August 2015, FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date, which deferred the effective date of ASU 2014-09 by one year. Topic 606 supersedes the revenue recognition requirements previously set forth in the Accounting Standards Codification (ASC) Topic 605, Revenue Recognition, and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.

On January 1, 2018, the Company adopted Topic 606 for all customer contracts using the modified retrospective method. The adoption of Topic 606 did not result in a change to revenue previously recognized under prior revenue recognition rules. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company does not expect the adoption of the new revenue standard to have a material impact to its operating results on an ongoing basis. A majority of the Company’s sales revenue continues to be recognized when products are shipped from its manufacturing facility. However, depending on the individual terms of the agreement with the customer, some sales revenue may be recognized when the goods arrive at the customer’s location, the point at which control transfers.

Changes to the Company’s significant accounting policies as a result of adopting Topic 606 are discussed below:

Revenue recognition. Revenue is measured based on consideration specified in the contract with a customer, adjusted for any applicable estimates of variable consideration and other factors affecting the transaction price, including noncash consideration, consideration paid or payable to customers and significant financing components. While most of the Company’s revenue is contracted with customers through one-time purchase orders and short-term contracts, the Company does have long-term arrangements with certain customers.

Table of Contents

IKONICS CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

Revenue from all customers is recognized when a performance obligation is satisfied by transferring control of a distinct good or service to a customer.

Individually promised goods and services in a contract are considered a distinct performance obligation and accounted for separately if the customer can benefit from the individual good or service on its own or with other resources that are readily available to the customer and the good or service is separately identifiable from other promises in the arrangement. When an arrangement includes multiple performance obligations, the consideration is allocated between the performance obligations in proportion to their estimated standalone selling price. Costs related to products delivered are recognized in the period incurred, unless criteria for capitalization of costs are met. Costs of revenues consist primarily of direct labor, manufacturing overhead, materials and components. The Company does not incur significant upfront costs to obtain a contract. If costs to obtain a contract were to become material, the costs would be recorded as an asset and amortized to expense in a manner consistent with the related recognition of revenue.

The Company excludes government assessed and imposed taxes on revenue generating transactions that are invoiced to customers from revenue. The Company includes freight billed to customers in revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of goods sold.

The timing of revenue recognition, billings and cash collections results in accounts receivable on the balance sheet.

Performance obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation in proportion to its standalone selling price and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s various performance obligations and the timing or method of revenue recognition are discussed below.

The Company sells its products to both distributors and end-users. Each unit of product delivered under a customer order represents a distinct and separate performance obligation as the customer can benefit from each unit on its own or with other resources that are readily available to the customer and each unit of product is separately identifiable from other products in the arrangement.

The transaction price for the Company’s products is the invoiced amount. The Company does not have variable consideration in the form of refunds, credits, rebates, price concessions, pricing incentives or other items impacting transaction price. The purchase order pricing in arrangements with customers is deemed to approximate standalone selling price; therefore, the Company does not need to allocate proceeds on a relative standalone selling price allocation between performance obligations. The Company applies the practical expedient in paragraph 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less. There are no material obligations that extend beyond one year.

Revenue is recognized when transfer of control occurs as defined by the terms in the customer agreement. The Company immediately recognizes incidental items that are immaterial in the context of the contract. The Company has applied the practical expedient in paragraph 606-10-25-16A and does not assess if immaterial items are promised goods or services. The Company has also applied the practical expedient in paragraph 606-10-32-18 regarding the adjustment of the promised amount of consideration for the effects of a significant financing component when the customer pays for that good or service within one year or less, as the Company does not have any significant financing components in its customer arrangements as payment is received at or shortly after the point of sale, generally 30 to 90 days.

Table of Contents

IKONICS CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

The Company estimates returns based on an analysis of historical experience if the right to return products is granted to its customers. The Company does not record a return asset as non-conforming products are generally not returned. The Company’s return policy does not vary by geography. The customer has no rotation or price protection rights.

Trade receivables. Trade receivables include amounts invoiced and currently due from customers. The amounts due are stated at their net estimated realizable value. The Company records an allowance for doubtful accounts to provide for the estimated amount of receivables that will not be collected. The allowance is based on a review of all outstanding amounts on an on-going basis. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considers a customer’s financial condition, credit history, and current economic conditions. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. Accounts are considered past due if payment is not received according to agreed-upon terms.

Sales commissions. Sales commissions paid to sales representatives are eligible for capitalization as they are incremental costs that would not have been incurred without entering into a specific sales arrangement and are recoverable through the expected margin on the transaction. The Company has elected to apply the practical expedient provided by ASC 340-40-25-4 and recognize the incremental costs of obtaining contracts as an expense when incurred, as the amortization period of the assets that would have otherwise been recognized is one year or less. The Company records these costs in selling, general, and administrative expense.

Product warranties. The Company offers warranties on various products and services. These warranties are assurance type warranties that are not sold on a standalone basis; therefore, they are not considered distinct performance obligations. The Company estimates the costs that may be incurred under its warranties and records a liability in the amount of such costs at the time the revenue is recognized for the product sale.

International revenue. The Company markets its products to numerous countries in North America, Europe, Latin America, Asia and other parts of the world. Foreign sales were approximately 29% of total sales during the first nine months of 2018 compared to 33% of sales for the first nine months of 2017.

If the Company was in a net income position for the three and nine months ended September 30, 2018, 5,000 options outstanding with a weighted average exercise price of $8.76 would have been included as part of the weighted average common and common equivalent shares outstanding as the options would have been dilutive while 13,000 options outstanding with a weighted average exercise price of $14.94 would have remained excluded as the options were anti-dilutive.

If the Company was in a net income position for the three months ended September 30, 2017, all 18,168 options outstanding with a weighted average exercise price of $13.81 would have remained excluded ~~as the options were anti-dilutive~~. ~~For the three months ended September 30, 2016, options to purchase 11,418 shares of common stock with a weighted average price of $15.99 were outstanding but were excluded~~ from the computation of common share equivalents ~~because they~~as the options were anti-dilutive.

If the Company was in a net income position for the first nine months of 2017, 2,250 options outstanding with a weighted average exercise price of $8.91 would have been included as part of the weighted average common and common equivalent shares outstanding as the options would have been dilutive while 15,918 options outstanding with a weighted average exercise price of $14.51 would have remained excluded as the options were ~~anti-dilutive~~. anti-dilutive.

If the Company was in a net income position for the first nine months of 2016, 4,750 options with a weighted average exercise price of $10.58 would have been included as part of the weighted average common and common equivalent shares outstanding as the options would have been dilutive, while 11,418 options with a weighted average exercise price of $15.99 would have remained excluded as the options were anti-dilutive.NOTES TO CONDENSED FINANCIAL STATEMENTS

There were ~~2,250~~2,750 and ~~4,500~~2,250 options granted during each of the nine months ended September 30, 2018 and 2017, ~~and 2016, respectively.~~ respectively while 2,918 options expired during the nine months ended September 30, 2018.

Stock option activity during the nine months ended September 30, ~~2017~~2018 was as follows:

The aggregate intrinsic value of all options outstanding and for those exercisable at September 30, ~~2017~~2018 was approximately ~~$1,000~~$3,800 and ~~$0,~~$500, respectively.

~~6.Segment Information~~
7.
Segment Information

The Company’s reportable segments are strategic business units that offer different products and have varied customer bases. There are five reportable segments: Domestic, Export, IKONICS Imaging, Digital Texturing (DTX) and Advanced Material Solutions (AMS). Domestic sells screen printing film, emulsions, and inkjet receptive film to distributors located in the United States and Canada. IKONICS Imaging sells photo resistant film, art supplies, glass, metal medium and related abrasive etching equipment to end user customers located in the United States and Canada. AMS provides sound deadening and weight reduction technology to the aerospace industry along with products and services for etched composites, ceramics, glass and silicon wafers. DTX includes products and customers related to patented and proprietary inkjet technology used for mold texturing and prototyping. Export sells primarily the same products as Domestic and the IKONICS Imaging products not related to AMS or DTX. The accounting policies applied to determine the segment information are the same as those described in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

Management evaluates the performance of each segment based on the components of divisional ~~income.~~income (loss). Assets and liabilities are not allocated to segments, except for trade receivables which are allocated based on the previous segmentation. Financial information with respect to the reportable segments follows:

For the three months ended September 30, 2018:

	IKONICS
					IKONICS
	Domestic		Export		Imaging		DTX		AMS			Unalloc.			Total
Net sales	$	1,893,513	$	1,320,594	$	810,240	$	158,862	$	468,149		$	—		$	4,651,358
Cost of goods sold		1,151,121		1,055,901		466,763		30,279		420,475			—			3,124,539
Gross profit		742,392		264,693		343,477		128,583		47,674			—			1,526,819
Selling, general and administrative*		346,137		127,647		256,094		42,922		91,876			504,169			1,368,845
Research and development*		-		-		-		-		-			179,915			179,915
Income (loss) from operations	$	396,255	$	137,046	$	87,383	$	85,661	$	(44,202	)	$	(684,084	)	$	(21,941	)

Table of Contents

IKONICS CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

For the three months ended September 30, 2017:


	IKONICS														IKONICS
						IKONICS													IKONICS
	Domestic		Export		Imaging		DTX		AMS		Unalloc.		Total		Domestic		Export		Imaging		DTX		AMS			Unalloc.			Total
Net sales	$	1,790,331	$	1,083,594	$	731,289	$	121,255	$	257,631	$	—	$	3,984,100	$	1,790,331	$	1,083,594	$	731,289	$	121,255	$	257,631		$	—		$	3,984,100
Cost of goods sold		1,026,311		819,728		417,882		59,293		336,935		—		2,660,149		1,026,311		819,728		417,882		59,293		336,935			—			2,660,149
Gross profit (loss)		764,020		263,866		313,407		61,962		(79,304)		—		1,323,951		764,020		263,866		313,407		61,962		(79,304	)		—			1,323,951
Selling, general and administrative*		315,941		131,100		287,087		44,805		91,442		435,080		1,305,455		315,941		131,100		287,087		44,805		91,442			435,080			1,305,455
Research and development*		—		—		—		—		—		168,686		168,686		-		-		-		-		-			168,686			168,686
Income (loss) from operations	$	448,079	$	132,766	$	26,320	$	17,157	$	(170,746)	$	(603,766)	$	(150,190)	$	448,079	$	132,766	$	26,320	$	17,157	$	(170,746	)	$	(603,766	)	$	(150,190	)


	IKONICS														IKONICS
						IKONICS													IKONICS
	Domestic		Export		Imaging		DTX		AMS		Unalloc.		Total		Domestic		Export		Imaging		DTX		AMS			Unalloc.			Total
Net sales	$	1,981,212	$	1,273,923	$	879,712	$	195,890	$	276,764	$	—	$	4,607,501	$	5,229,971	$	3,686,815	$	2,736,544	$	341,850	$	1,361,833		$	—		$	13,357,013
Cost of goods sold		1,115,507		956,953		413,385		49,924		404,258		—		2,940,027		3,137,858		2,904,558		1,467,420		89,283		1,206,341			—			8,805,460
Gross profit (loss)		865,705		316,970		466,327		145,966		(127,494)		—		1,667,474
Gross profit																2,092,113		782,257		1,269,124		252,567		155,492			—			4,551,553
Selling, general and administrative*		330,578		169,858		260,810		35,595		94,993		465,771		1,357,605		965,754		388,205		772,299		110,370		274,136			1,516,027			4,026,791
Research and development*		—		—		—		—		—		150,176		150,176		-		-		-		-		-			490,463			490,463
Income (loss) from operations	$	535,127	$	147,112	$	205,517	$	110,371	$	(222,487)	$	(615,947)	$	159,693	$	1,126,359	$	394,052	$	496,825	$	142,197	$	(118,644	)	$	(2,006,490	)	$	34,299

For the nine months ended September 30, 2017:


	IKONICS														IKONICS
						IKONICS													IKONICS
	Domestic		Export		Imaging		DTX		AMS		Unalloc.		Total		Domestic		Export		Imaging		DTX		AMS			Unalloc.			Total
Net sales	$	4,910,856	$	3,510,691	$	2,664,330	$	707,730	$	504,846	$	—	$	12,298,453	$	4,910,856	$	3,510,691	$	2,664,330	$	707,730	$	504,846		$	—		$	12,298,453
Cost of goods sold		2,887,111		2,755,371		1,394,675		453,712		950,141		—		8,441,010		2,887,111		2,755,371		1,394,675		453,712		950,141			—			8,441,010
Gross profit (loss)		2,023,745		755,320		1,269,655		254,018		(445,295)		—		3,857,443		2,023,745		755,320		1,269,655		254,018		(445,295	)		—			3,857,443
Selling, general and administrative*		1,001,434		516,958		824,692		130,301		292,562		1,443,758		4,209,705		1,001,434		516,958		824,692		130,301		292,562			1,443,758			4,209,705
Research and development*		—		—		—		—		—		519,160		519,160		-		-		-		-		-			519,160			519,160
Income (loss) from operations	$	1,022,311	$	238,362	$	444,963	$	123,717	$	(737,857)	$	(1,962,918)	$	(871,422)	$	1,022,311	$	238,362	$	444,963	$	123,717	$	(737,857	)	$	(1,962,918	)	$	(871,422	)

IKONICS

IKONICS


Domestic

Export

Imaging

DTX

AMS

Unalloc.

Total

Net sales

$
5,278,456

$
3,470,693

$
2,997,006

$
306,246

$
764,888

$
—

$
12,817,289

Cost of goods sold

3,067,112

2,654,611

1,378,287

120,410

1,110,510

—

8,330,930

Gross profit (loss)

2,211,344

816,082

1,618,719

185,836

(345,622)

—

4,486,359

Selling, general and administrative*

1,034,975

472,510

759,863

109,968

322,182

1,422,393

4,121,891

Research and development*

—

—

—

—

—

475,165

475,165

Income (loss) from operations

$
1,176,369

$
343,572

$
858,856

$
75,868

$
(667,804)

$
(1,897,558)

$
(110,697)

Trade receivables by segment as of September 30, ~~2017~~2018 and December 31, ~~2016~~2017 were as follows:

IKONICS CORPORATION

The information presented below in Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements. These forward-looking statements include statements relating to our future plans and objectives and results. Such statements are subject to risks and uncertainties, including those discussed elsewhere in this report and under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2017, as updated in our subsequent reports filed with the SEC, which could cause actual results to differ materially from those projected. Because actual results may differ, readers are cautioned not to place undue reliance on these forward-looking statements.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following management’s discussion and analysis focuses on those factors that had a material effect on the Company’s financial results of operations during the third quarter of ~~2017~~2018 and first nine months of ~~2017,~~2018, as well as the same periods of ~~2016.~~2017. It should be read in connection with the Company’s condensed unaudited financial statements and notes thereto included in this Form 10-Q.

Critical Accounting Estimates

The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America. Therefore, the Company is required to make certain estimates, judgments and assumptions that the Company believes are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. The accounting estimates, which IKONICS believes are the most critical to aid in fully understanding and evaluating its reported financial results, include the following:

Trade Receivables. The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by review of the current credit information. The Company continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses based upon historical experience and any specific customer collection issues that have been identified. While such credit losses have historically been within expectations and the provisions established, the Company cannot guarantee that it will continue to experience the same collection history that has occurred in the past. The general payment terms are net 30-45 days for domestic customers and net 30-90 days for foreign customers. A small percentage of the trade receivables balance is denominated in a foreign currency with no concentration in any given country. At the end of each reporting period, the Company analyzes the receivable balance for customers paying in a foreign currency. These balances are adjusted to each quarter or year-end spot rate in accordance with ~~the~~ ~~Financial Accounting Standards Board (“FASB”)~~ FASB ASC 830, Foreign Currency Matters. The Company also maintains a provision for any customer related returns based upon historical experience of actual returns and any specifically identified product issues, refunds or credits.

Inventories. Inventories are valued at the lower of cost or market value using the last in, first out (LIFO) method. The Company monitors its inventory for obsolescence and records reductions from cost when required.

Income Taxes. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Deferred tax assets and liabilities are presented as long-term on a net basis. The Company follows the accounting standard on accounting for uncertainty in income taxes, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, the Company may recognize the tax

benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. The guidance on accounting for uncertainty in income taxes also addresses derecognition, classification, interest and penalties on income taxes, and accounting in interim periods.

Table of Contents

Revenue. In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Topic 606. Revenue ~~Recognition.~~ from Contracts with Customers (Topic 606), and in August 2015, FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date, which deferred the effective date of ASU 2014-09 by one year. Topic 606 supersedes the revenue recognition requirements previously set forth in the Accounting Standards Codification (ASC) Topic 605, Revenue Recognition, and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.

On January 1, 2018, the Company adopted Topic 606 for all customer contracts using the modified retrospective method. The adoption of Topic 606 did not result in a change to revenue previously recognized under prior revenue recognition rules. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The Company ~~recognizes~~does not expect the adoption of the new revenue standard to have a material impact to its operating results on an ongoing basis. A majority of the Company’s sales revenue continues to be recognized when products are shipped from its manufacturing facility. However, depending on the individual terms of ~~products when title passes, which can occur at~~ the ~~time of shipment or~~agreement with the customer, some sales revenue may be recognized when the goods arrive at the customer’s location, the point at which control transfers.

Changes to the Company’s significant accounting policies as a result of adopting Topic 606 are discussed below:

Revenue recognition. Revenue is measured based on consideration specified in the contract with a customer, ~~location depending~~adjusted for any applicable estimates of variable consideration and other factors affecting the transaction price, including noncash consideration, consideration paid or payable to customers and significant financing components. While most of the Company’s revenue is contracted with customers through one-time purchase orders and short-term contracts, the Company does have long-term arrangements with certain customers. Revenue from all customers is recognized when a performance obligation is satisfied by transferring control of a distinct good or service to a customer.

The Company excludes governmental assessed and imposed taxes on revenue transactions that are invoiced to customers from revenue. The Company includes freight billed to customers in revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of goods sold.

The timing of revenue recognition, billings and cash collections results in accounts receivable on the ~~agreement with~~balance sheet.

Table of Contents

Performance obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation in proportion to its standalone selling price and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s various performance obligations and the timing or method of revenue recognition are discussed below.

The Company sells its products to both distributors and end-users. ~~Sales~~Each unit of product delivered under a customer order represents a distinct and separate performance obligation as the customer can benefit from each unit on its own or with other resources that are readily available to ~~distributors~~the customer and ~~end-users~~each unit of product is separately identifiable from other products in the arrangement.

The transaction price for the Company’s products is the invoiced amount. The Company does not have variable consideration in the form of refunds, credits, rebates, price concessions, pricing incentives or other items impacting transaction price. The purchase order pricing in arrangements with customers is deemed to approximate standalone selling price; therefore, the Company does not need to allocate proceeds on a relative standalone selling price allocation between performance obligations. The Company applies the practical expedient in paragraph 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less. There are ~~recorded based upon the criteria governed~~no material obligations that extend beyond one year.

Revenue is recognized when transfer of control occurs as defined by the ~~sales, delivery, and payment~~ terms ~~stated on~~in the ~~invoices from~~customer agreement. The Company immediately recognizes incidental items that are immaterial in the context of the contract. The Company has also applied the practical expedient in paragraph 606-10-32-18 regarding the adjustment of the promised amount of consideration for the effects of a significant financing component when the customer pays for that good or service within one year or less, as the Company does not have any significant financing components in its customer arrangements as payment is received at or shortly after the point of sale, generally 30 to ~~the purchaser. In addition to transfer of title / risk of loss, all revenue is recorded in accordance with the criteria outlined within Staff Accounting Bulletin No. 104 and FASB ASC 605,~~ ~~Revenue Recognition~~:90 days.

~~(a)~~

~~persuasive evidence of an arrangement (principally in the form of customer sales orders and the Company’s sales invoices);~~

~~(b)~~

delivery and performance (evidenced by proof of delivery, e.g. the shipment of film and substrates with bill of lading used for proof of delivery for FOB shipping point terms, and the carrier booking confirmation report used for FOB destination terms). Once the finished product is shipped and physically delivered under the terms of the invoice and sales order, the Company has no additional performance or service obligations to complete;

~~(c)~~

a fixed and determinable sales price (the Company’s pricing is established and is not based on variable terms, as evidenced in either the Company’s invoices or the limited number of distribution agreements; the Company rarely grants extended payment terms and has no history of concessions); and

~~(d)~~

~~a reasonable likelihood of payment (the Company’s terms are standard, and the Company does not have a substantial history of customer defaults or non-payment).~~

~~Sales~~The Company estimates returns based on an analysis of historical experience if the right to return products is granted to its customers. The Company does not record a return asset as non-conforming products are ~~reported on a net basis by deducting credits, estimated normal returns and discounts.~~generally not returned. The Company’s return policy does not vary by geography. The customer has no rotation or price protection ~~rights~~rights.

Trade receivables. Trade receivables include amounts invoiced and currently due from customers. The amounts due are stated at their net estimated realizable value. The Company records an allowance for doubtful accounts to provide for the ~~Company~~estimated amount of receivables that will not be collected. The allowance is based on a review of all outstanding amounts on an on-going basis. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considers a customer’s financial condition, credit history, and current economic conditions. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. Accounts are considered past due if payment is not ~~under a warranty obligation. Freight billed~~received according to ~~customers is included in sales. Shipping costs are included in cost of goods sold.~~agreed-upon terms.

Sales commissions. Sales commissions paid to sales representatives are eligible for capitalization as they are incremental costs that would not have been incurred without entering into a specific sales arrangement and are recoverable through the expected margin on the transaction. The Company has elected to apply the practical expedient provided by ASC 340-40-25-4 and recognize the incremental costs of obtaining contracts as an expense when incurred, as the amortization period of the assets that would have otherwise been recognized is one year or less. The Company records these costs in selling, general, and administrative expense.

Product warranties. The Company offers warranties on various products and services. These warranties are assurance type warranties that are not sold on a standalone basis; therefore, they are not considered distinct performance obligations. The Company estimates the costs that may be incurred under its warranties and records a liability in the amount of such costs at the time the revenue is recognized for the product sale.

International revenue. The Company markets its products to numerous countries in North America, Europe, Latin America, Asia and other parts of the world. Foreign sales were approximately 29% of total sales during the first nine months of 2018 compared to 33% of sales for the first nine months of 2017.

Table of Contents

Results of Operations

Quarter Ended September 30, ~~2017~~2018 Compared to Quarter Ended September 30, ~~2016~~2017

Sales. Sales ~~decreased 13.5%~~increased 16.7% during the third quarter of 2018 to record third quarter sales of $4.7 million, compared to $4.0 million during the same period in 2017. Third quarter sales were favorably impacted by AMS sales which grew by $211,000, or 81.7% from $258,000 during the third quarter of 2017 to ~~$4.0 million, compared~~$468,000 in the third quarter of 2018. Most of this increase is related to ~~$4.6 million during~~increased sales to AMS’s largest customer who is expected to maintain similar sales levels for the ~~same period in 2016. Third quarter sales were unfavorably impacted by $191,000, or 9.6%, Domestic sales decrease as soft market conditions resulted in lower sales across all product lines.~~remainder of 2018. Export sales also realized a ~~14.9%~~21.9% sales ~~decrease~~increase in the third quarter as sales ~~fell~~increased from ~~$1.3 million in 2016 to~~ $1.1 million in 2017 to $1.3 million in 2018, mainly due ~~mainly~~ to ~~the timing of~~higher sales into ~~Asia.~~Asia which is partially timing related. IKONICS Imaging sales ~~decreased~~increased from ~~$880,000 in the third quarter of 2016 to~~ $731,000 in 2017. The $148,000, or 16.9%, decrease in sales is related to lower sales of high margin film products compared to the prior year. Part of the IKONICS Imaging sales shortfall is timing related and we anticipate that it will be recovered in the fourth quarter of 2017. DTX film sales were also down for the third quarter of 2017 compared to the same period in 2016 as sales decreased by $75,000, or 38.1%. During the third quarter of 2017, AMS sales were down $19,000, or 6.9%, versus the same period last year.

~~Gross Profit. Gross profit was $1.3 million, or 33.2% of sales,~~ in the third quarter of 2017 ~~compared~~ to ~~$1.7 million, or 36.2%~~$810,000 in the third quarter of 2018, a 10.8% increase. IKONICS Imaging sales for the third quarter of 2018 benefitted from both improved film and equipment sales. DTX sales were favorably impacted by a $78,000 film shipment which occurs approximately every other year as DTX 2018 third quarter sales of $159,000 were $38,000, or 31.0%, higher than the same period in ~~2016. The gross profit as a percentage of~~2017. Domestic sales ~~decreased due to lower sales levels across all divisions. Additionally, a less favorable sales mix negatively impacted the 2017~~grew from $1.8 million in third quarter ~~margin due~~of 2017 to $1.9 million in the ~~decrease in sales~~third quarter of ~~IKONICS Imaging and DTX high margin film products.~~

2018, a 5.8% increase.

~~Selling, General and Administrative Expenses~~Gross Profit. ~~Selling, general and administrative expenses were $1.3~~Gross profit was $1.5 million, or 32.8% of sales, in the third quarter of ~~2017~~2018 compared to ~~$1.4~~$1.3 million, or ~~29.5%~~33.2% of sales, for the same period in ~~2016.~~2017. The 2018 third quarter gross margin was negatively impacted by an increase in lower margin Export sales into Asia along with 2018 third quarter production cost increases. The 2018 third quarter margin decrease was partially offset by increased AMS sales volumes as the AMS gross margin improved from a negative 30.8% in third quarter of 2017 to a positive 10.2% in the third quarter of 2018. A large portion of the AMS cost structure is fixed, causing sales volumes to have a significant impact on its gross margin. The 2018 third quarter DTX gross margin also improved over the same period last year due an increase in higher margin film shipments.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $1.4 million, or 29.4% of sales, in the third quarter of 2018 compared to $1.3 million, or 32.8% of sales, for the same period in 2017. The third quarter 2018 increase in selling, general and administrative expense is primarily related to higher health insurance expenses, partially offset by lower promotional and travel ~~and Export personnel~~ expenses.

Research and Development Expenses. Research and development expenses during the third quarter of ~~2017~~2018 were $180,000, or 3.9% of sales, versus $169,000, or 4.2% ~~of sales, versus $150,000, or 3.3%~~ of sales, for the same period in ~~2016.~~2017. The ~~higher 2017~~increase in 2018 third quarter costs ~~were~~is due to ~~patent related legal expenses along with increased production trial~~higher health insurance expenses.

Interest Expense. Interest expense for the third quarter of ~~2017~~2018 was ~~$21,000~~$23,000 compared to interest expense of ~~$22,000~~$21,000 during the third quarter of ~~2016.~~2017. The interest expense is related to a $3.4 million financing agreement the Company entered into during 2016 to finance the construction of a 27,300-square foot building and related equipment for use in the Company’s manufacture of sound deadening technology used in the aerospace industry and products consisting of etched composites, ceramics, glass and silicon wafers.

Income Taxes. For the third quarter of ~~2017,~~2018, the Company realized an income tax benefit of $7,000, or an effective rate of 21.4% which reflects the new federal rate of 21% enacted December 22, 2017 through the Tax Cut and Jobs Act, compared to the income tax benefit of $54,000, or an effective rate of 32.6%, ~~compared to income tax expense of $60,000 or an effective rate of 42.3%~~ for the same period in ~~2016.~~2017. The decrease in the quarterly effective tax rate for ~~2017~~2018 over ~~2016~~2017 is primarily due to the ~~impact of non-deductible items and pre-tax profit for the quarter in 2016 and its related impact on the forecasted annual~~lower federal tax rate. ~~In 2017, the unfavorable non-deductible items decreased the effective tax rate due to estimated pre-tax losses.~~ The income tax ~~benefit and~~ provision for the ~~2017~~2018 and ~~2016~~2017 periods differ from expected tax benefit due to unfavorable non-deductible items offset by the generation of research and development tax credits.

Table of Contents

Nine Months Ended September 30, ~~2017~~2018 Compared to the Nine Months Ended September 30, ~~2016~~2017

Sales. Sales ~~decreased 4.0%~~increased 8.6% during the first nine months of 2018 to $13.4 million compared to $12.3 million during the same period in 2017. AMS sales for the first nine months of 2018 increased by $857,000, or 169.8%, compared to the same period last year, as the Company realized increased sales from its largest customer. The customer maintained expected activity level for the entire 2018 period while AMS sales during the first nine months of 2017 ~~to $12.3 million, compared to $12.8 million during the same period in 2016. A more competitive market for artwork film sales along with overall soft market conditions resulted in~~were unfavorably affected by a temporary decrease in orders from its largest customer. Domestic sales also increased from ~~$5.3~~$4.9 million in the first nine months of ~~2016~~2017 to ~~$4.9~~$5.2 million in 2017. Compared to the first nine months of 2016, IKONICS Imaging sales decreased by $333,000 to $2.7 million in 2017. Part of the 2017 IKONICS Imaging sales decrease is timing related. Additionally, IKONICS Imaging sales in the first nine months of ~~2016 were favorably impacted~~2018, a $319,000, or 6.5%, sales increase due to improved emulsion and film sales, while Export sales for the first nine month of 2018 increased by ~~a large initial order from a new customer. AMS~~$176,000, or 5.0%, due to higher sales ~~decreased by $260,000,~~to both the Middle East and Latin America. Equipment sales increases resulted in IKONICS Imaging sales growing $72,000, or ~~34.0%, for~~2.7% in the first nine months of ~~2017 versus~~2018 compared to the same period in ~~2016 due to the temporary decrease in orders from AMS’s largest customer during the second quarter of~~ 2017. Beginning in the third quarter of 2017, the customer resumed its normal order pattern which is expected to continue for the remainder of 2017. Partially offsetting these sales decreases was a $401,000, or 131.1% increase in DTX due to the sale of two DTX printers and improved consumable sales. Export sales also realized a 1.2% sales increaseSales for the first nine months of 2018 were unfavorably impacted by a $366,000, or 51.7%, DTX sales decrease as 2017 asDTX sales ~~increased by $40,000.~~benefitted from $320,000 in sales of two DTX printers. There were no printer sales during the first nine months of 2018, and the Company does not anticipate any new DTX printer sales until 2019.

Gross Profit. Gross profit was ~~$3.9~~$4.6 million, or ~~31.4%~~34.1% of sales, in the first nine months of ~~2017~~2018 compared to ~~$4.5~~$3.9 million, or ~~35.0%~~31.4% of sales, for the same period in ~~2016.~~2017. AMS increased sales volumes benefitted the 2018 gross margin, as the AMS gross margin improved from a negative 88.2% in first nine months of 2017 to a positive 11.4% in 2018. A large portion of the AMS cost structure is fixed, causing sales volumes to have a significant impact on its gross margin. The 2018 DTX gross ~~profit as a percentage of sales decreased due~~margin improved to ~~lower sale volumes and a less favorable sales mix. Low margin Export sales comprised 28.5% of total 2017 sales compared to 27.1% of total sales~~73.9% from 35.9% in the first nine months of ~~2016 while higher margin IKONICS Imaging sales comprised 21.7% of total sales during~~2017, as the ~~first nine months of~~ 2017 ~~versus 23.4% of total sales for the same period in 2016. The~~ gross margin ~~percentage for the first nine months of 2017~~ was ~~also unfavorably impacted~~negatively affected by the sale of two low margin ~~DTX~~ printers. The IKONICS Imaging, Domestic, and Export gross margins were negatively affected by higher production costs for the first nine months of 2018 compared to the same period last year.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were ~~$4.2~~$4.0 million, or ~~34.2%~~30.1% of sales, in the first nine months of ~~2017~~2018 compared to ~~$4.1~~$4.2 million, or ~~32.2%~~34.2% of sales, for the same period in ~~2016.~~2017. The ~~increase~~2018 decrease in selling, general and administrative expense is related to the Company’s cost reduction initiative. The Company realized lower travel, promotional, consulting and salary expenses ~~reflects promotional and trade show expenses for both Export and IKONICS Imaging in addition to~~which were partially offset by higher ~~international sales consulting~~health insurance expenses.

Research and Development Expenses. Research and development expenses during the first nine months of ~~2017~~2018 were $490,000, or 3.7% of sales, versus $519,000, or 4.2% ~~of sales, versus $475,000, or 3.7%~~ of sales, for the same period in ~~2016.~~2017. The ~~increase~~decrease in ~~expenses for the first nine months of 2017 was~~2018 costs is due to ~~patent related legal expenses along with increased~~lower production trial expenses. The Company incurred additional production trial expenses in 2017 related to the development of its new SubTHAT! film product.

Interest Expense. Interest expense for the first nine months of ~~2017~~2018 was ~~$62,000~~$67,000 compared to interest expense of ~~$37,000~~$62,000 during the first nine months of ~~2016.~~2017. The interest expense is related to a $3.4 million financing agreement the Company entered into during 2016 to finance the construction of a 27,300-square foot building as well as related equipment for use in the Company’s manufacture of sound deadening technology used in the aerospace industry and products consisting of etched composites, ceramics, glass and silicon wafers.

Income Taxes. For the first nine months of ~~2017,~~2018, the Company realized income tax expense of $12,000, or an effective rate of 552.3% which reflects the new federal corporate rate of 21% versus the income tax benefit of $322,000 or an effective rate of 35.1%, ~~compared~~for the first nine months of 2017. The Company’s increased effective rate for 2018 relates to the higher year-to-date pre-tax income generated and the related impact of discrete events and non-deductible permanent items. The 2017 year-to-date third quarter tax benefit ~~of $69,000 or an effective rate of 49.3%, for the same period in 2016. The decrease in the effective tax rate for 2017 over 2016 is primarily~~was due to ~~higher pre-tax loss for~~ the ~~current year and the impact of non-deductible items.~~year-to-date net loss. The income tax ~~benefit~~provision for the ~~2017~~2018 and ~~2016~~2017 periods differ from the expected ~~tax~~ benefit due to ~~unfavorable non-deductible items, offset by the generation of~~credits for research and development ~~tax credits.~~and other non-deductible items

Table of Contents

Liquidity and Capital Resources

Outside of the building expansion, for which $3.4 million in financing was obtained during 2016, the Company has financed its operations principally with funds generated from operations. These funds have been sufficient to cover the Company’s normal operating expenditures, annual capital requirements, and research and development expenditures.

Cash and cash equivalents were ~~$2.0~~$1.6 million and ~~$1.0 million~~$930,000 at September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively. Operating activities provided ~~$148,000~~$1.1 million in cash during the first nine months of ~~2017~~2018 compared to ~~$804,000~~$148,000 of cash provided by operating activities during the same period in ~~2016.~~2017. Cash provided by operating activities is primarily the result of a net income or loss adjusted for non-cash depreciation, amortization, ~~gain on sale and disposal of property,~~ and certain changes in working capital components discussed in the following paragraph.

During the first nine months of 2018, the timing of collections resulted in a $215,000 decrease in trade receivables. The Company believes that the quality of its receivables is high and that strong internal controls are in place to maintain proper collections. Inventories increased by $185,000 due to higher raw material and finished goods levels as the Company is increasing inventory levels to meet expected fourth quarter sales demand. Prepaid expenses and other assets increased by $42,000, reflecting prepayments on annual software license agreements. Accounts payable increased by $389,000 due to the timing of vendor payments for recent large raw materials purchases. Accrued expenses increased by $75,000, reflecting an increase in the accrual for health insurance costs while income taxes receivable increased by $8,000 due to the timing of estimated tax payments compared to the calculated 2018 tax liability.

During the first nine months of 2017, the timing of collections resulted in a $692,000 decrease in trade receivables. The Company believes that the quality of its receivables is high and that strong internal controls are in place to maintain proper collections. Inventories increased by $560,000 due to higher raw material and finished goods ~~levels as the Company is increasing inventory levels for fourth quarter sales.~~levels. Prepaid expenses and other assets decreased $258,000. The prepaid expense balance at December 31, 2016 included prepayments related to two DTX printers which ~~have since been sold.~~were sold in 2017. Accounts payable increased $70,000 due to the timing of vendor payments mainly related to raw material purchases. Accrued expenses decreased $104,000, reflecting the timing of compensation payments while income taxes receivable increased $262,000 due to the timing of estimated tax payments compared to the calculated 2017 tax liability.

During the first nine months of ~~2016,~~2018, cash used in investing activities was $338,000. Eighteen certificates of deposits totaling $4.3 million matured during the ~~timing~~first nine months of ~~collections resulted in an $11,000 decrease in trade receivables.~~2018. The Company ~~believes~~purchased seventeen certificates of deposits totaling $4.1 million. The Company’s purchases of property and equipment of $501,000 were mainly for building upgrades and improvements to production and process capabilities. Also, during the first nine months of 2018, the Company incurred $36,000 in patent application costs that the ~~quality~~Company records as an asset and amortizes upon successful completion of its receivables is high and that strong internal controls are in place to maintain proper collections. Inventories decreased by $41,000 due to lower raw material and finished goods levels. Prepaid expenses and other assets increased $93,000, reflecting insurance premiums and annual software license fees paid in advance. Accounts payable increased $327,000 due to the timing of vendor payments mainly related to raw material purchases. Accrued expenses decreased $31,000, reflecting the timing of compensation payments while income taxes receivable decreased $31,000 due to the timing of estimated tax payments compared to the calculated 2016 tax liability.application process.

During the first nine months of 2017, cash provided by investing activities was $1.1 million. The Company obtained proceeds from 14 certificates of deposits totaling $3.2 million and purchased eight certificates of deposits totaling $1.9 million. The Company’s purchases of property and equipment of $190,000 were mainly for improvements to production and process capabilities and two vehicles. Also, during the first nine months of 2017, the Company incurred $32,000 in patent application costs that the Company has recorded as an asset and will amortize upon successful completion of the application process. In addition the Company sold three vehicles for $33,000.

During the first nine months of 2016, cash used in investing activities was $5.4 million. The Company purchased 15 certificates of deposits totaling $3,399,000. The Company’s cash purchases of property and equipment were $1,966,000. Total building expansion expenditures for 2016 were $1,393,000. Expenditures on the new ERP system in the first nine months of 2016 were $209,000, of which $9,000 was included as part of construction payable and not as cash used in investing activities. The remaining capital expenditures were mainly for upgrades to improve AMS production and process capabilities. Also during the first nine months of 2016, the Company incurred $26,000 in patent application costs that the Company records as an asset and amortizes upon successful completion of the application process. In addition, the Company sold equipment for $21,000.

Related to the Company’s loan, the Company made principal payments of $103,000 and $104,000 during the first nine months of ~~2017.~~ 2018 and 2017, respectively.

During the first nine months of 2017, the Company received $2,000 from financing activities from the issuance of 250 shares of common stock due to the exercise of stock options while the Company repurchased 26,950 shares of its own stock during the first nine months of 2017 for $234,000.

During the first nine months of 2016, the Company received $3.2 million from financing activities. The Company secured a loan of $3.4 million to finance the expansion of its AMS facility. The Company paid $139,000 in debt issuance costs to obtain the loan initially and has made principal payments of $45,000. During the first nine months of 2016, the Company received $4,000 from the issuance of 500 shares of common stock from the exercise of stock options.

As part of the $3.4 million loan obtained in 2016, the Company is required to maintain a debt service coverage ratio calculated as of the last day of each calendar quarter on a rolling four-quarter basis. As of September 30, 2017, the Company’s was in compliance with the required debt service coverage ratio.

A bank line of credit exists providing for borrowings of up to $2,050,000 and expires on September 30, 2019. The line of credit is collateralized by the Company’s assets and bears interest at 1.8 percentage points over the ~~30‑day~~30-day LIBOR rate. The Company did not utilize this line of credit during the first nine months of ~~2017~~2018 or ~~2016~~2017, and there were no borrowings outstanding as of September 30, ~~2017~~2018 and December 31, ~~2016.~~2017. There are no financial covenants related to the line of credit.

The Company believes that current financial resources, its line of credit, cash generated from operations and secured through debt financing, and ~~short term~~short-term investments, along with the Company’s capacity for additional debt and/or equity financing will be sufficient to fund current and anticipated business operations. The Company also believes that it is unlikely that a temporary decrease in demand for the Company’s products would impair the Company’s ability to fund operations given its excess cash and available line of credit.

Table of Contents

Capital Expenditures

Through the first nine months of ~~2017,~~2018, the Company incurred ~~$190,000~~$501,000 of capital expenditures mainly for upgrades to the heating system at the Company’s main Duluth, Minnesota location, and for improvements to production and process ~~capabilities and the purchase of two vehicles.~~

capabilities. The Company expects additional capital expenditures in ~~2017~~2018 of approximately ~~$75,000 mainly~~$115,000 including an additional $25,000 related to the heating system upgrade. The remaining 2018 capital expenditures are expected to be primarily for ~~process~~production and ~~production~~safety improvements. Currently, the Company expects to fund its capital expenditures with existing cash and cash generated from operating activities.

International Activity

The Company markets its products to numerous countries in North America, Europe, Latin America, Asia and other parts of the world. Foreign sales were approximately ~~33.7%~~29.3% of total sales during the first nine months of ~~2017~~2018 compared to ~~29.7%~~32.8% of ~~total~~ sales for the ~~same period in 2016.~~first nine months of 2017. Foreign sales ~~increased~~ in 2017 ~~due to~~were favorably impacted by the sale of two DTX printers totaling $320,000 into ~~Europe along with improved consumable~~Europe. There were no DTX printer sales ~~to Latin America. Fluctuations~~in 2018 and none are anticipated in the fourth quarter of 2018. The fluctuations of certain foreign currencies have not significantly impacted the Company’s operations, as the Company’s foreign sales are not concentrated in any one region of the world, although a strong U.S. dollar does make the Company’s products less competitive internationally. The Company believes its vulnerability due to uncertainties ~~due to~~in foreign currency fluctuations and general economic conditions in foreign countries is not significant.

The Company’s foreign transactions are primarily negotiated, invoiced and paid in U.S. dollars, ~~although~~while a portion is transacted in Euros. ~~IKONICS~~The Company has not implemented an economic hedging strategy to reduce the risk of foreign currency translation or transaction exposures, as management does not believe this to be a significant risk based on the scope and geographic diversity of the Company’s foreign operations as of September 30, ~~2017.~~2018. Furthermore, the impact of foreign exchange on the Company’s balance sheet and operating results was not material in either ~~2017~~2018 or ~~2016.~~2017.

Future Outlook

IKONICS has spent an average of approximately 4.0% of annual sales in research and development and has made capital expenditures related to new products and programs. The Company plans to maintain its efforts in these areas to expedite internal product development as well as to form technological alliances with outside entities to commercialize new product opportunities.

The Company continues to make progress on its AMS business ~~initiative. Although AMS experienced a short-term drop in~~initiative as demonstrated by its sales ~~during~~for the first ~~six~~nine months of 2017 due to temporary inventory overstocking by a major customer, these sales have returned to expected levels in the third quarter of 2017, and the Company anticipates continued growth over the long term.2018. The Company has ~~two~~three long-term sales agreements in place for its technology with major aerospace ~~companies and is negotiating a third.~~companies. In anticipation of this growing business, the Company increased its AMS capacity with a 27,300 square foot expansion at its Morgan Park site in 2016.

The Company is also continuing to pursue DTX-related business ~~initiatives and~~initiatives. Despite lower sales for the first nine months of 2018, the Company expects ~~increased~~increasing consumable sales as a result of the sale of two DTX printers in ~~the second quarter of~~ 2017. However, additional DTX printer sales are not expected until 2019. In addition to making efforts towards growing the inkjet technology business, the Company offers a range of products for creating texture surfaces and has introduced a fluid for use in prototyping. The Company is currently working on production improvements to enhance its customer offerings. The Company has been awarded European, Japanese, and United States patents on its DTX technologies. The Company has also modified its DTX technology to facilitate entry into the market for prototyping.

Table of Contents

Both the Domestic and IKONICS Imaging units remain profitable in mature markets. Although these business units require aggressive strategies to grow market share, both are developing new products and business relationships that we believe will contribute to growth. In October 2017, the Company introduced SubTHAT!™, a patent-pending product for the dye-sublimation market. Response to SubTHAT!™ has been ~~very~~ encouraging, ~~and~~however the Company ~~received~~fulfilled a $258,000 ~~purchase~~SubTHAT!™ initial stocking order ~~for SubTHAT!™~~ in the fourth quarter of 2017 and does not expect to receive an order of that magnitude in 2018. In addition to its traditional emphasis on domestic markets, the Company will continue efforts to grow its business internationally by attempting to develop new markets and expanding market share where it has already established a presence. However, the strong U.S. dollar has made this challenging.

Other future activities undertaken to expand the Company’s business may include acquisitions, building improvements, equipment additions, new product development and marketing opportunities.

Recent Accounting Pronouncements

~~In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers.~~ ~~ASU 2014-09 supersedes the revenue recognition requirements in~~ ~~Revenue Recognition (Topic 605~~), and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, ~~Revenue from Contracts with Customers: Deferral of the Effective Date,~~ which defers the adoption of ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The standard permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The standard also requires expanded disclosures relating to the nature, amount, timing,

and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. While the Company is still in the process of evaluating the effect of adoption on its financial statements and is currently assessing its contracts with customers, the Company anticipates that it will expand its financial statement disclosures in order to comply with the new standard. The Company has established a timeline and process to evaluate the impact, transition and disclosure requirements of the ASU and believes the timeline is sufficient to allow the Company to effectively implement the new standard in the first quarter of 2018. The Company has not yet concluded on a transition method upon adoption, but plans to select a transition method in the fourth quarter of 2017.

During February 2016, the FASB issued ASU No. 2016-02, Leases. ASU No. 2016-02 was issued to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset (as defined). ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with earlier application permitted. Upon adoption, the lessee will apply the new standard retrospectively to all periods presented or retrospectively using a cumulative effect adjustment in the year of adoption. The Company is currently ~~assessing~~evaluating the ~~effect that~~impact of this standard and does not expect the adoption of ASU No. 2016-02 ~~will~~to have a material impact on its financial statements.

~~In March 2016, the FASB issued ASU No. 2016-09,~~ ~~Compensation—Stock Compensation~~ (Topic 718). This standard makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for interim and annual reporting periods beginning after December 15, 2016, although early adoption is permitted. The Company adopted ASU No. 2016-09 in 2017 with minimal impact on the financial statements.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable

ITEM 4. Controls and Procedures

As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of the Company’s disclosure control and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on this evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

There was no change in the Company’s internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and Rule 15d-15(d) of the Exchange Act that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Table of Contents

PART II.OTHER INFORMATION

ITEM 1.

~~ITEM 1.~~ Legal Proceedings

None

ITEM 1A.

~~ITEM 1A.~~ Risk Factors

Not applicable

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

~~ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds~~

~~The Company repurchased shares as indicated in the table below during the third quarter of 2017(1)~~: Not applicable

(c) Total Number of

(a) Total

(b) Average

Shares Purchased as

(d) Maximum Number

Number

Price

Part of Publicly

of Shares that May


of Shares

Paid per

Announced

Yet Be Purchased Under


Purchased

Share

Plans or Programs

The Plans or Programs
July 1, 2017 through July 31, 2017

—

$
—

—

—
Aug. 1, 2017 through Aug. 31, 2017

25,000

$
8.75

25,000

75,000
Sep. 1, 2017 through Sep. 30, 2017

—

$
—

—

—

25,000

25,000

~~(1)~~

In prior years, the Company’s board of directors had authorized the repurchase of 250,000 shares of common stock. A total of 219,589 shares were repurchased under this program including 1,950 shares repurchased during the second quarter of 2017. As of August 2 2017 the plan allowed for an additional 30,411 shares to be repurchased. On August 3, 2017, the Company’s board of directors approved a new repurchase authorization for 100,000 shares of the Company’s common stock, which replaces all prior authorizations. Shares repurchased under this new authorization may be made through open market and privately negotiated transactions from time to time. The new share repurchase authorization does not have an expiration date.

ITEM 3.

~~ITEM 3.~~ Defaults upon Senior Securities

Not applicable

ITEM 4.

~~ITEM 4.~~ Mine Safety Disclosures

Not applicable

ITEM 5.

~~ITEM 5.~~ Other Information

None

~~Table of Contents~~

ITEM 6.

~~ITEM 6.~~ Exhibits

The following exhibits are filed as part of this Quarterly Report on Form 10-Q for the quarterly period ended September 30, ~~2017:~~2018:


Exhibit		Description
3.1		Restated Articles of Incorporation of Company, as amended (Incorporated by reference to the like numbered Exhibit to the Company’s Registration Statement on Form 10-SB filed with the Commission on April 7, 1999 (File No. 000-25727).
3.2		Amended and Restated By-Laws of the Company, as ~~amended~~amended. (Incorporated by reference to ~~the like numbered~~ Exhibit 3.1 to the Company’s Current Report on Form 8-K filed ~~with the Commission~~ on ~~February 22, 2007~~April 30, 2018 (File No. ~~000-25727)~~000-25757).)
31.1		Rule 13a-14(a)/15d-14(a) Certifications of CEO
31.2		Rule 13a-14(a)/15d-14(a) Certifications of CFO
32		Section 1350 Certifications
101		Interactive Data Files Pursuant to Rule 405 of Regulation S-T

Copies of Exhibits will be furnished upon request and payment of the Company’s reasonable expenses in furnishing the Exhibits.

Table of Contents

IKONICS CORPORATION

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	IKONICS CORPORATION


DATE: November ~~14, 2017~~13, 2018	By:	/s/ Jon Gerlach
		Jon Gerlach,
		Chief Financial Officer, and
		Vice President of Finance

			PAGE NO.
PART I.	FINANCIAL INFORMATION

Item 1.		Condensed Financial ~~Statements~~Statements::

		Condensed Balance Sheets as of September 30, ~~2017~~2018 (unaudited) and December 31, ~~2016~~2017	1

		Condensed Statements of Operations for the Three Months and Nine Months Ended September 30, ~~2017~~2018 and ~~2016~~2017 (unaudited)	2

		Condensed Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2018 and ~~2016~~2017 (unaudited)	3

		Notes to Condensed Financial Statements (unaudited)	4

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	9 12

Item 3.		Quantitative and Qualitative Disclosures about Market Risk	15 19

Item 4.		Controls and Procedures	15 19

PART II.	OTHER INFORMATION		16 20

	SIGNATURES		21


	Sep 30, 2017		Dec 31, 2016		Sep 30, 2018			Dec 31, 2017

Raw materials	$	1,731,599	$	1,438,471	$	1,644,515		$	1,428,924
Work-in-progress		406,683		355,208		375,122			423,186
Finished goods		1,570,450		1,319,856		1,490,116			1,416,547
Reduction to LIFO cost		(1,162,423)		(1,127,363)		(1,238,863	)		(1,182,592	)

Total Inventories	$	2,546,309	$	1,986,172	$	2,270,890		$	2,086,065


	2017	2016	2018	2017
Dividend yield	0%	0%	0%	0%
Expected volatility	41.3%	42.4%	40.0%	41.3%
Expected life of option	Five Years	Five Years
Expected life of option (in years)			5	5
Risk-free interest rate	1.8%	1.3%	2.8%	1.8%
Fair value of each option on grant date	$ 3.43	$ 4.02	$ 3.38	$ 3.43



		Weighted
		Average
		Exercise
	Shares	Price
Outstanding at January 1, 2017	16,168	$	14.40
Granted	2,250		8.91
Exercised	(250)		7.54
Outstanding at September 30, 2017	18,168	$	13.81
Exercisable at September 30, 2017	10,499	$	15.41

				Weighted
				Average
				Exercise
	Shares			Price
Outstanding at January 1, 2018		18,168		$	13.81
Granted		2,750			8.63
Exercised		—			—
Expired and forfeited		(2,918	)		12.56
Outstanding at September 30, 2018		18,000			13.22
Exercisable at September 30, 2018		12,247		$	15.09

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017

NET SALES	$	4,651,358		$	3,984,100		$	13,357,013		$	12,298,453

COST OF GOODS SOLD		3,124,539			2,660,149			8,805,460			8,441,010

GROSS PROFIT		1,526,819			1,323,951			4,551,553			3,857,443

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		1,368,845			1,305,455			4,026,791			4,209,705

RESEARCH AND DEVELOPMENT EXPENSES		179,915			168,686			490,463			519,160

INCOME (LOSS) FROM OPERATIONS		(21,941	)		(150,190	)		34,299			(871,422	)

INTEREST EXPENSE		(23,298	)		(20,832	)		(67,040	)		(62,475	)

OTHER		13,760			6,309			34,986			17,364

INCOME (LOSS) BEFORE INCOME TAXES		(31,479	)		(164,713	)		2,245			(916,533	)

INCOME TAX EXPENSE (BENEFIT)		(6,727	)		(53,760	)		12,399			(321,617	)

NET LOSS	$	(24,752	)	$	(110,953	)	$	(10,154	)	$	(594,916	)

LOSS PER COMMON SHARE:
Basic	$	(0.01	)	$	(0.06	)	$	(0.01	)	$	(0.30	)
Diluted	$	(0.01	)	$	(0.06	)	$	(0.01	)	$	(0.30	)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic		1,983,553			2,005,096			1,983,553			2,014,055
Diluted		1,983,553			2,005,096			1,983,553			2,014,055


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016

NET SALES	$	3,984,100	$	4,607,501	$	12,298,453	$	12,817,289

COST OF GOODS SOLD		2,660,149		2,940,027		8,441,010		8,330,930

GROSS PROFIT		1,323,951		1,667,474		3,857,443		4,486,359

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		1,305,455		1,357,605		4,209,705		4,121,891

RESEARCH AND DEVELOPMENT EXPENSES		168,686		150,176		519,160		475,165

INCOME (LOSS) FROM OPERATIONS		(150,190)		159,693		(871,422)		(110,697)

INTEREST EXPENSE		(20,832)		(21,721)		(62,475)		(36,720)

OTHER		6,309		4,519		17,364		6,681

INCOME (LOSS) BEFORE INCOME TAXES		(164,713)		142,491		(916,533)		(140,736)

INCOME TAX EXPENSE (BENEFIT)		(53,760)		60,225		(321,617)		(69,415)

NET INCOME (LOSS)	$	(110,953)	$	82,266	$	(594,916)	$	(71,321)

INCOME (LOSS) PER COMMON SHARE:
Basic	$	(0.06)	$	0.04	$	(0.30)	$	(0.04)
Diluted	$	(0.06)	$	0.04	$	(0.30)	$	(0.04)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic		2,005,096		2,018,753		2,014,055		2,018,614
Diluted		2,005,096		2,018,842		2,014,055		2,018,614

				(c) Total Number of
	(a) Total	(b) Average		Shares Purchased as	(d) Maximum Number
	Number	Price		Part of Publicly	of Shares that May
	of Shares	Paid per		Announced	Yet Be Purchased Under
	Purchased	Share		Plans or Programs	The Plans or Programs
July 1, 2017 through July 31, 2017	—	$	—	—	—
Aug. 1, 2017 through Aug. 31, 2017	25,000	$	8.75	25,000	75,000
Sep. 1, 2017 through Sep. 30, 2017	—	$	—	—	—
	25,000			25,000


	Sep 30, 2017		Dec 31, 2016		Sep 30, 2018			Dec 31, 2017

Domestic	$	817,124	$	1,206,866	$	928,122		$	1,119,228
Export		374,744		551,803		460,788			558,872
IKONICS Imaging		223,990		363,602		243,912			238,813
DTX		88,151		52,935		7,162			64,278
AMS		190,113		177,374		356,295			238,848
Unallocated		(49,890)		(16,079)		(20,538	)		(29,779	)

Total	$	1,644,232	$	2,336,501	$	1,975,741		$	2,190,260