TeraWulf (WULF) 10-Q 10 May 17 2017 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2017	May 01, 2017
Document and Entity Information
Entity Registrant Name	IKONICS CORP
Entity Central Index Key	1,083,301
Document Type	10-Q
Document Period End Date	Mar. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		2,019,003
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q1

CONDENSED BALANCE SHEETS

CONDENSED BALANCE SHEETS - USD ($)	Mar. 31, 2017	Dec. 31, 2016
CURRENT ASSETS:
Cash and cash equivalents	$ 608,340	$ 1,048,713
Short-term investments	3,338,000	3,246,000
Trade receivables, less allowance of $60,000 in 2017 and $54,000 in 2016	1,930,959	2,336,501
Inventories	2,232,534	1,986,172
Prepaid expenses and other assets	391,835	361,905
Income taxes receivable	280,540	66,181
Total current assets	8,782,208	9,045,472
PROPERTY, PLANT, AND EQUIPMENT, at cost:
Land and building	9,201,846	9,189,743
Machinery and equipment	4,909,952	4,884,814
Office equipment	1,590,032	1,566,856
Vehicles	272,144	272,144
Gross property, plant, and equipment, at cost	15,973,974	15,913,557
Less accumulated depreciation	(7,213,464)	(7,001,162)
Net property, plant, and equipment, at cost	8,760,510	8,912,395
INTANGIBLE ASSETS, less accumulated amortization of $155,552 in 2017 and $149,072 in 2016	339,329	338,127
Total assets	17,882,047	18,295,994
CURRENT LIABILITIES:
Current portion of long-term debt, net	128,182	127,303
Accounts payable	842,140	730,386
Accrued compensation	242,469	388,600
Other accrued liabilities	92,743	67,088
Total current liabilities	1,305,534	1,313,377
LONG-TERM LIABILITIES
Long-term debt, less current portion, net	3,044,789	3,077,457
Deferred income taxes	446,000	446,000
Total long-term liabilities	3,490,789	3,523,457
Total liabilities	4,796,323	4,836,834
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 2,018,753 shares in 2017 and 2016	201,875	201,875
Additional paid-in capital	2,737,467	2,732,006
Retained earnings	10,146,382	10,525,279
Total stockholders' equity	13,085,724	13,459,160
Total liabilities and stockholders' equity	$ 17,882,047	$ 18,295,994

CONDENSED BALANCE SHEETS (Paren

CONDENSED BALANCE SHEETS (Parenthetical) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
CONDENSED BALANCE SHEETS
Trade receivables, allowance	$ 60,000	$ 54,000
INTANGIBLE ASSETS, accumulated amortization	$ 155,552	$ 149,072
Preferred stock, par value (in dollars per share)	$ 0.10	$ 0.10
Preferred stock, shares authorized	250,000	250,000
Preferred stock, shares issued	0	0
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, shares authorized	4,750,000	4,750,000
Common stock, shares issued	2,018,753	2,018,753
Common stock, shares outstanding	2,018,753	2,018,753

CONDENSED STATEMENTS OF OPERATI

CONDENSED STATEMENTS OF OPERATIONS - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
CONDENSED STATEMENTS OF OPERATIONS
NET SALES	$ 3,628,992	$ 4,013,210
COST OF GOODS SOLD	2,538,764	2,716,536
GROSS PROFIT	1,090,228	1,296,674
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES	1,510,614	1,439,116
RESEARCH AND DEVELOPMENT EXPENSES	165,770	177,864
LOSS FROM OPERATIONS	(586,156)	(320,306)
INTEREST EXPENSE	(20,817)
OTHER	5,153	114
LOSS BEFORE INCOME TAXES	(601,820)	(320,192)
INCOME TAX BENEFIT	(222,923)	(127,380)
NET LOSS	$ (378,897)	$ (192,812)
LOSS PER COMMON SHARE:
Basic (in dollars per share)	$ (0.19)	$ (0.10)
Diluted (in dollars per share)	$ (0.19)	$ (0.10)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic (in shares)	2,018,753	2,018,335
Diluted (in shares)	2,018,753	2,018,335

CONDENSED STATEMENTS OF CASH FL

CONDENSED STATEMENTS OF CASH FLOWS - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (378,897)	$ (192,812)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	212,302	162,751
Amortization	9,574	6,047
Stock based compensation	5,461	5,248
Net loss on sale and disposal of property, plant and equipment		8,001
Changes in working capital components:
Trade receivables	405,542	(56,062)
Inventories	(246,362)	(134,229)
Prepaid expenses and other assets	(29,930)	(96,474)
Income tax receivable	(214,359)	(139,119)
Accounts payable	111,754	170,805
Accrued expenses	(120,476)	110,076
Net cash used in operating activities	(245,391)	(155,768)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, equipment and construction in progress	(60,417)	(1,017,857)
Proceeds from sale of equipment		1,000
Purchases of intangibles	(7,682)	(14,242)
Purchases of short-term investments	(1,225,000)
Proceeds on sale of short-term investments	1,133,000
Net cash used in investing activities	(160,099)	(1,031,099)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt	(34,883)
Proceeds from exercise of stock options		3,765
Net cash provided by (used in) financing activities	(34,883)	3,765
NET DECREASE IN CASH AND CASH EQUIVALENTS	(440,373)	(1,183,102)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	1,048,713	2,248,466
CASH AND CASH EQUIVALENTS AT END OF PERIOD	608,340	1,065,364
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Construction in progress included in accounts payable		96,166
Cash paid for interest	17,786
Cash received (paid) for income taxes, net	$ 8,564	$ (11,740)

Basis of Presentation

Basis of Presentation	3 Months Ended
	Mar. 31, 2017
Basis of Presentation
Basis of Presentation	1. The condensed balance sheet of IKONICS Corporation (the “Company”) as of March 31, 2017, and the related condensed statements of operations for the three months ended March 31, 2017 and 2016, and cash flows for the three months ended March 31, 2017 and 2016, have been prepared without being audited. In the opinion of management, these statements reflect all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of IKONICS Corporation as of March 31, 2017, and the results of operations and cash flows for all periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted. Therefore, these statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The results of operations for interim periods are not necessarily indicative of results that will be realized for the full fiscal year.

Short-Term Investments

Short-Term Investments	3 Months Ended
	Mar. 31, 2017
Short-Term Investments
Short-Term Investments	2. The Company’s $3.3 million of short-term investments at March 31, 2017 is comprised of 14 fully insured certificates of deposit with original maturities ranging from nine to twelve months and interest rates ranging from 0.60% to 0.95%

Inventories

Inventories	3 Months Ended
	Mar. 31, 2017
Inventories
Inventories	3. The major components of inventories are as follows: Mar 31, 2017 Dec 31, 2016 Raw materials $ 1,555,975 $ 1,438,471 Work-in-progress 374,598 355,208 Finished goods 1,442,853 1,319,856 Reduction to LIFO cost (1,140,892) (1,127,363) Total Inventories $ $ 1,986,172

Earnings Per Common Share (EPS)

Earnings Per Common Share (EPS)	3 Months Ended
	Mar. 31, 2017
Earnings Per Common Share (EPS)
Earnings Per Common Share (EPS)	4. Basic EPS is calculated using net loss divided by the weighted average of common shares outstanding. Diluted EPS is calculated similarly to Basic EPS except that the weighted average number of common shares outstanding is increased to include the number of additional common shares that would have been outstanding if the potential dilutive common shares, such as those shares subject to options, had been issued. The options disclosed in Note 5 have been excluded from the computation because of their antidilutive effect. Shares used in the calculation of diluted EPS are summarized below: Three Months Ended Mar 31, 2017 Mar 31, 2016 Weighted average common shares outstanding 2,018,753 2,018,335 Dilutive effect of stock options — — Weighted average common and common equivalent shares outstanding 2,018,753 2,018,335

Stock-Based Compensation

Stock-Based Compensation	3 Months Ended
	Mar. 31, 2017
Stock-Based Compensation
Stock-Based Compensation	5. The Company maintains a stock incentive plan which authorizes the issuance of up to 442,750 shares of common stock. Of those shares, 16,168 were subject to outstanding options and 104,239 were reserved for future grants at March 31, 2017. The plan provides for granting eligible participants stock options or other stock awards, as described by the plan, at option prices ranging from 85% to 110% of fair market value at the date of grant. Options granted expire up to seven years after the date of grant. Such options generally become exercisable over a one- to three-year period. The Company charged compensation cost of approximately $5,000 against income for the three months ended March 31, 2017 and 2016. As of March 31, 2017, there was approximately $27,000 of unrecognized compensation cost related to unvested share-based compensation awards granted. That cost is expected to be recognized over the next three years. The Company receives a tax deduction for certain stock option exercises during the period in which the options are exercised, generally for the excess of the market price at the time the stock options are exercised over the exercise price of the options, which increases additional paid in capital and reduces income taxes payable. Proceeds from the exercise of 500 stock options were approximately $4,000 for the three months ended March 31, 2016. No stock options were exercised during the three months ended March 31, 2017, and there were no options granted for the three months ended March 31, 2017 or 2016. Stock option activity during the three months ended March 31, 2017 was as follows: Weighted Average Exercise Shares Price Outstanding at January 1, 2017 16,168 $ 14.40 Outstanding at March 31, 2017 16,168 $ 14.40 Exercisable at March 31, 2017 8,084 $ 15.49 The aggregate intrinsic value of all options outstanding and exercisable at March 31, 2017 was approximately $1,000.

Segment Information

Segment Information	3 Months Ended
	Mar. 31, 2017
Segment Information
Segment Information	6. 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. Management evaluates the performance of each segment based on the components of divisional income. 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 March 31, 2017: IKONICS IKONICS Domestic Export Imaging DTX AMS Unalloc. Total Net sales $ 1,303,569 $ 1,055,005 $ 989,986 $ 115,231 $ 165,201 $ — $ 3,628,992 Cost of goods sold 826,741 839,364 523,580 35,482 313,597 — 2,538,764 Gross profit (loss) 476,828 215,641 466,406 79,749 (148,396) — 1,090,228 Selling, general and administrative* 351,422 196,117 283,859 34,635 96,795 547,786 1,510,614 Research and development* — — — — — 165,770 165,770 Income (loss) from operations $ 125,406 $ 19,524 $ 182,547 $ 45,114 $ (245,191) $ (713,556) $ (586,156) For the three months ended March 31, 2016: IKONICS IKONICS Domestic Export Imaging DTX AMS Unalloc. Total Net sales $ 1,353,728 $ 1,243,185 $ 1,117,698 $ 76,880 $ 221,719 $ — $ 4,013,210 Cost of goods sold 846,399 962,489 539,782 35,424 332,442 — 2,716,536 Gross profit (loss) 507,329 280,696 577,916 41,456 (110,723) — 1,296,674 Selling, general and administrative* 359,397 143,031 251,371 34,743 103,903 546,671 1,439,116 Research and development* — — — — — 177,864 177,864 Income (loss) from operations $ 147,932 $ 137,665 $ 326,545 $ 6,713 $ (214,626) $ (724,535) $ (320,306) * Trade receivables by segment as of March 31, 2017 and December 31, 2016 were as follows: Mar 31, 2017 Dec 31, 2016 Domestic $ $ 1,206,866 Export 551,803 IKONICS Imaging 363,602 DTX 52,935 AMS 177,374 Unallocated (16,079) Total $ $ 2,336,501

Income Taxes

Income Taxes	3 Months Ended
	Mar. 31, 2017
Income Taxes
Income Taxes	7. The Company reports a liability for unrecognized tax benefits taken or expected to be taken when they are uncertain. As of March 31, 2017 and 2016, there was no liability for unrecognized tax benefits. The Company is subject to taxation in the United States and various states. The material jurisdictions that are subject to examination by tax authorities primarily include Minnesota and the United States, in each case for tax years 2014, 2015, and 2016.

Inventories (Tables)

Inventories (Tables)	3 Months Ended
	Mar. 31, 2017
Inventories
Schedule of major components of inventories	Mar 31, 2017 Dec 31, 2016 Raw materials $ 1,555,975 $ 1,438,471 Work-in-progress 374,598 355,208 Finished goods 1,442,853 1,319,856 Reduction to LIFO cost (1,140,892) (1,127,363) Total Inventories $ $ 1,986,172

Earnings Per Common Share (EP14

Earnings Per Common Share (EPS) (Tables)	3 Months Ended
	Mar. 31, 2017
Earnings Per Common Share (EPS)
Summary of shares used in the calculation of diluted EPS	Three Months Ended Mar 31, 2017 Mar 31, 2016 Weighted average common shares outstanding 2,018,753 2,018,335 Dilutive effect of stock options — — Weighted average common and common equivalent shares outstanding 2,018,753 2,018,335

Stock-Based Compensation (Table

Stock-Based Compensation (Tables)	3 Months Ended
	Mar. 31, 2017
Stock-Based Compensation
Stock option activity	Weighted Average Exercise Shares Price Outstanding at January 1, 2017 16,168 $ 14.40 Outstanding at March 31, 2017 16,168 $ 14.40 Exercisable at March 31, 2017 8,084 $ 15.49

Segment Information (Tables)

Segment Information (Tables)	3 Months Ended
	Mar. 31, 2017
Segment Information
Schedule of financial information with respect to the reportable segments	For the three months ended March 31, 2017: IKONICS IKONICS Domestic Export Imaging DTX AMS Unalloc. Total Net sales $ 1,303,569 $ 1,055,005 $ 989,986 $ 115,231 $ 165,201 $ — $ 3,628,992 Cost of goods sold 826,741 839,364 523,580 35,482 313,597 — 2,538,764 Gross profit (loss) 476,828 215,641 466,406 79,749 (148,396) — 1,090,228 Selling, general and administrative* 351,422 196,117 283,859 34,635 96,795 547,786 1,510,614 Research and development* — — — — — 165,770 165,770 Income (loss) from operations $ 125,406 $ 19,524 $ 182,547 $ 45,114 $ (245,191) $ (713,556) $ (586,156) For the three months ended March 31, 2016: IKONICS IKONICS Domestic Export Imaging DTX AMS Unalloc. Total Net sales $ 1,353,728 $ 1,243,185 $ 1,117,698 $ 76,880 $ 221,719 $ — $ 4,013,210 Cost of goods sold 846,399 962,489 539,782 35,424 332,442 — 2,716,536 Gross profit (loss) 507,329 280,696 577,916 41,456 (110,723) — 1,296,674 Selling, general and administrative* 359,397 143,031 251,371 34,743 103,903 546,671 1,439,116 Research and development* — — — — — 177,864 177,864 Income (loss) from operations $ 147,932 $ 137,665 $ 326,545 $ 6,713 $ (214,626) $ (724,535) $ (320,306) *
Schedule of trade receivables by segment	Mar 31, 2017 Dec 31, 2016 Domestic $ $ 1,206,866 Export 551,803 IKONICS Imaging 363,602 DTX 52,935 AMS 177,374 Unallocated (16,079) Total $ $ 2,336,501

Short-Term Investments (Details

Short-Term Investments (Details)	3 Months Ended
	Mar. 31, 2017USD ($)item	Dec. 31, 2016USD ($)
Short-term investments
Short-term Investments. | $	$ 3,338,000	$ 3,246,000
Certificates of Deposit
Short-term investments
Number of fully insured certificates of deposit | item	14
Certificates of Deposit | Minimum
Short-term investments
Maturity period	9 months
Interest rate (as a percent)	0.60%
Certificates of Deposit | Maximum
Short-term investments
Maturity period	12 months
Interest rate (as a percent)	0.95%

Inventories (Details)

Inventories (Details) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Inventories
Raw materials	$ 1,555,975	$ 1,438,471
Work-in-progress	374,598	355,208
Finished goods	1,442,853	1,319,856
Reduction to LIFO cost	(1,140,892)	(1,127,363)
Total inventories	$ 2,232,534	$ 1,986,172

Earnings Per Common Share (EP19

Earnings Per Common Share (EPS) (Details) - $ / shares	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Shares used in calculation of diluted EPS
Weighted average common shares outstanding	2,018,753	2,018,335
Weighted average common and common equivalent shares outstanding	2,018,753	2,018,335
Stock Options.
Dilutive effect
Based on the Company's net income position, dilutive effect of stock options (in shares)	250	250
Based on the Company's net income position, dilutive effect of stock options, weighted average exercise price (in dollars per share)	$ 7.54	$ 7.54
Based on the Company's net income position, anti-dilutive securities (in shares)	15,918	11,418
Based on the Company's net income position, anti-dilutive securities, weighted average exercise price (in dollars per share)	$ 14.51	$ 15.99

Stock-Based Compensation - Plan

Stock-Based Compensation - Plan and Expense Information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Stock-Based Compensation
Common stock reserved for future grants (in shares)	104,239
Compensation cost recognized	$ 5,000	$ 5,000
Unrecognized compensation cost	$ 27,000
Period during which compensation cost is expected to be recognized	3 years
Proceeds from exercise of stock options		$ 3,765
Maximum
Stock-Based Compensation
Number of shares of common stock authorized for issuance	442,750
Stock Options.
Stock-Based Compensation
Outstanding options (in shares)	16,168		16,168
Exercise of stock options and related tax benefit (in shares)	0	500
Proceeds from exercise of stock options		$ 4,000
Granted (in shares)	0	0
Stock Options. | Minimum
Stock-Based Compensation
Price range of stock award (as a percent)	85.00%
Period over which options become exercisable	1 year
Stock Options. | Maximum
Stock-Based Compensation
Price range of stock award (as a percent)	110.00%
Expiration period of options granted	7 years
Period over which options become exercisable	3 years

Stock-Based Compensation - Assu

Stock-Based Compensation - Assumptions and Activity (Details) - Stock Options. - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Shares
Outstanding at beginning of period (in shares)	16,168
Granted (in shares)	0	0
Exercised (in shares)	0	(500)
Outstanding at end of period (in shares)	16,168
Exercisable at end of period (in shares)	8,084
Weighted Average Exercise Price
Outstanding at beginning of period (in dollars per shares)	$ 14.40
Outstanding at end of period (in dollars per share)	14.40
Exercisable at end of period (in dollars per share)	$ 15.49
Aggregate intrinsic value of all options outstanding	$ 1,000

Segment Information (Details)

Segment Information (Details)	3 Months Ended
	Mar. 31, 2017USD ($)segment	Mar. 31, 2016USD ($)	Dec. 31, 2016USD ($)
Segment Reporting Information
Number of reportable segments | segment	5
Financial information with respect to the reportable segments
Net sales	$ 3,628,992	$ 4,013,210
Cost of goods sold	2,538,764	2,716,536
GROSS PROFIT	1,090,228	1,296,674
Selling general and administrative	1,510,614	1,439,116
Research and development	165,770	177,864
Loss from operations	(586,156)	(320,306)
Trade receivables by segment
Trade receivables	1,930,959		$ 2,336,501
Unalloc.
Financial information with respect to the reportable segments
Selling general and administrative	547,786	546,671
Research and development	165,770	177,864
Loss from operations	(713,556)	(724,535)
Trade receivables by segment
Trade receivables	(39,236)		(16,079)
Domestic
Financial information with respect to the reportable segments
Net sales	1,303,569	1,353,728
Cost of goods sold	826,741	846,399
GROSS PROFIT	476,828	507,329
Selling general and administrative	351,422	359,397
Loss from operations	125,406	147,932
Trade receivables by segment
Trade receivables	877,154		1,206,866
Export
Financial information with respect to the reportable segments
Net sales	1,055,005	1,243,185
Cost of goods sold	839,364	962,489
GROSS PROFIT	215,641	280,696
Selling general and administrative	196,117	143,031
Loss from operations	19,524	137,665
Trade receivables by segment
Trade receivables	527,327		551,803
IKONICS Imaging
Financial information with respect to the reportable segments
Net sales	989,986	1,117,698
Cost of goods sold	523,580	539,782
GROSS PROFIT	466,406	577,916
Selling general and administrative	283,859	251,371
Loss from operations	182,547	326,545
Trade receivables by segment
Trade receivables	286,048		363,602
DTX
Financial information with respect to the reportable segments
Net sales	115,231	76,880
Cost of goods sold	35,482	35,424
GROSS PROFIT	79,749	41,456
Selling general and administrative	34,635	34,743
Loss from operations	45,114	6,713
Trade receivables by segment
Trade receivables	87,569		52,935
Micro-Machining
Financial information with respect to the reportable segments
Net sales	165,201	221,719
Cost of goods sold	313,597	332,442
GROSS PROFIT	(148,396)	(110,723)
Selling general and administrative	96,795	103,903
Loss from operations	(245,191)	$ (214,626)
Trade receivables by segment
Trade receivables	$ 192,097		$ 177,374

Income Taxes (Details)

Income Taxes (Details) - USD ($)	Mar. 31, 2017	Mar. 31, 2016
Deferred tax amounts included in balance sheet
Unrecognized tax benefits	$ 0	$ 0