U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Quarterly Period Ended March 31, 2003
or
[ ] 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
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IKONICS CORPORATION
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(Exact name of small business issuer as specified in its charter)
Minnesota 41-0730027
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
4832 Grand Avenue
Duluth, Minnesota 55807
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(Address of principal executive offices) (Zip code)
(218) 628-2217
-------------------------
Issuer's telephone number
Not Applicable
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(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 [X] No [ ]
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practical date: Common Stock, $.10
par value -- 1,248,127 shares outstanding as of April 29, 2003.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
IKONICS CORPORATION
QUARTERLY REPORT ON FORM 10-QSB
PART I. FINANCIAL INFORMATION PAGE NO.
--------------------- --------
Item 1. Financial Statements:
Balance Sheets
as of March 31, 2003 (unaudited) and December 31, 2002 3
Statements of Operations
for the Three Months Ended March 31, 2003
and 2002 (unaudited) 4
Statements of Cash Flows
for the Three Months Ended March 31, 2003 and 2002 (unaudited) 5
Notes to Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
Item 3. Controls and Procedures 12
PART II. OTHER INFORMATION 13
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SIGNATURES 14
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CERTIFICATIONS 15
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2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IKONICS CORPORATION
BALANCE SHEETS
________________________________________________________________________________
MARCH 31 DECEMBER 31
2003 2002
ASSETS (UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents $ 374,860 $ 384,107
Marketable securities 250,731 246,094
Trade receivables, less allowance for doubtful accounts of
$120,000 and $100,000 respectively 2,205,835 1,933,769
Inventories 1,868,008 1,771,905
Prepaid expenses and other assets 106,723 89,937
Income tax refund receivable 17,585 122,469
Deferred taxes 82,000 82,000
------------ -----------
Total current assets 4,905,742 4,630,281
PROPERTY, PLANT, AND EQUIPMENT, at cost:
Land, building and leasehold improvements 1,363,625 1,355,588
Machinery and equipment 2,246,238 2,231,478
Office equipment 1,164,353 1,144,564
Vehicles 167,102 167,102
------------ -----------
4,941,318 4,898,732
Less accumulated depreciation 3,776,950 3,694,105
------------ -----------
1,164,368 1,204,627
PATENTS, net of amortization of $44,053 and $41,800 respectively 100,341 90,917
NONCOMPETE AGREEMENT, net of amortization of $18,333 and $16,666
respectively 81,667 83,334
LICENSE AGREEMENTS, net of amortization of $4,531 and $2,500
respectively 95,469 97,500
OTHER ASSETS 187,500 187,500
DEFERRED TAXES 118,000 118,000
------------ -----------
$ 6,653,087 $ 6,412,159
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 500,654 $ 317,229
Accrued compensation 233,392 204,624
Other accrued expenses 22,298 23,643
------------ -----------
Total current liabilities 756,344 545,496
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.10 per share; authorized 250,000
shares; issued none
Common stock, par value $.10 per share; authorized 4,750,000 shares;
issued and outstanding 1,248,127 shares in 2003 and 2002 124,813 124,813
Additional paid-in capital 1,269,489 1,269,489
Retained earnings 4,513,573 4,483,895
Accumulated other comprehensive income (loss) (11,132) (11,534)
------------ -----------
Total stockholders' equity 5,896,743 5,866,663
------------ -----------
$ 6,653,087 $ 6,412,159
============ ===========
See notes to financial statements.
3
IKONICS CORPORATION
STATEMENTS OF OPERATIONS (UNAUDITED)
______________________________________________________________________________
THREE MONTHS
ENDED MARCH 31
-----------------------------
2003 2002
SALES $2,830,649 $ 2,782,372
COSTS AND EXPENSES:
Cost of goods sold 1,625,860 1,623,687
Selling, general, and administrative 1,003,695 950,561
Research and development 168,324 179,322
---------- -----------
2,797,879 2,753,570
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INCOME FROM OPERATIONS 32,770 28,802
INTEREST INCOME 12,888 8,349
---------- -----------
INCOME BEFORE INCOME TAXES 45,658 37,151
FEDERAL AND STATE INCOME
TAX EXPENSE 15,980 14,104
---------- -----------
NET INCOME $ 29,678 $ 23,047
========== ===========
EARNINGS PER SHARE:
Basic $ 0.02 $ 0.02
========== ===========
Diluted $ 0.02 $ 0.02
========== ===========
WEIGHTED AVERAGE COMMON SHARES
ASSUMED OUTSTANDING:
Basic 1,248,127 1,263,916
========== ==========
Diluted 1,254,045 1,263,916
========== ==========
See notes to financial statements.
4
IKONICS CORPORATION
STATEMENTS OF CASH FLOWS (UNAUDITED)
_______________________________________________________________________________
THREE MONTHS
ENDED MARCH 31
------------------------------
2003 2002
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 29,678 $ 23,047
Adjustments to reconcile net income to net
cash provided by/(used in) operating
activities:
Depreciation 82,845 118,925
Amortization 5,951 3,920
Gain on sale of property and equipment -- (19,632)
Provision for doubtful accounts 20,000 23,499
Changes in working capital components:
Decrease (increase) in:
Trade receivables (292,066) (407,978)
Inventories (96,103) 25,833
Prepaid expenses and other assets (16,786) (18,082)
Income taxes refund receivable 104,884 13,658
(Decrease) increase in:
Accounts payable 183,425 (13,873)
Accrued expenses 27,423 49,090
------------ -------------
Net cash provided by/(used in)
operating activities 49,251 (201,593)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property and equipment (42,586) (79,105)
Purchase of intangibles (11,677) --
Purchases of marketable securities (4,235) (2,950)
------------- --------------
Net cash (used in) (58,498) (82,055)
investing activities
CASH FLOWS FRON FINANCING
ACTIVITIES:
Re-purchase of company stock -- (72,492)
------------- --------------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (9,247) (356,140)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 384,107 543,679
------------ -------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 374,860 $ 187,539
============ =============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Income taxes paid $ 1,096 $ 446
============ =============
See notes to financial statements.
5
IKONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Notes to Financial Statements
The balance sheet of IKONICS Corporation (the "Company") as of March
31, 2003, and the related statements of operations for the three months
ended March 31, 2003 and 2002, and cash flows for the three months
ended March 31, 2003 and 2002, 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,
2003, 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-KSB for the year ended December 31,
2002.
The results of operations for interim periods are not necessarily
indicative of results that will be realized for the full fiscal year.
2. Inventory
The major components of inventory at March 31, 2003 and December 31,
2002 are as follows:
Mar 31, 2003 Dec 31, 2002
------------ ------------
Raw materials $ 936,014 $ 735,006
Work-in-progress 268,506 257,813
Finished goods 895,244 1,003,342
Reduction to LIFO cost (231,756) (224,256)
----------- -----------
Total Inventory $ 1,868,008 $ 1,771,905
=========== ===========
3. Stockholders' Equity
Three Months Ended
Mar 31, 2003
------------------
Total Stockholders' Equity-December 31, 2002 $ 5,866,663
Net income $ 29,678
Unrealized gain on available-
for-sale investments 402
---------
Comprehensive income 30,080
------------
Total Stockholders' Equity-March 31, 2003 $ 5,896,743
============
6
4. Earnings Per Common Share (EPS)
Basic EPS is calculated using net income divided by the weighted
average of common shares outstanding during the quarter. Diluted EPS is
similar to basic EPS except that the weighted average of common shares
outstanding is increased to include the number of additional common
shares that would have been outstanding if the dilutive potential
common shares, such as options, had been issued.
Shares used in the calculation of diluted EPS are summarized below:
Three Months Ended
Mar 31, 2003 Mar 31, 2002
-----------------------------
Weighted average common shares outstanding 1,248,127 1,263,916
Dilutive effect of stock options 5,918 0
------------ ------------
Weighted average common and common equivalent shares outstanding 1,254,045 1,263,916
============ ============
Options to purchase 150,029 and 142,920 shares of common stock were
outstanding during the quarter ended March 31, 2003 and 2002,
respectively. The options to purchase were excluded from the
computation of common stock equivalents because they were anti-dilutive
for the quarter ended March 31, 2002.
5. Employee Stock Plans
The Company has a stock-based compensation plan. The Company accounts
for those plans under the recognition and measurement principles of APB
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. Accordingly, no stock-based employee compensation cost
has been recognized, as all options granted under those plans had an
exercise price equal to the market value of the underlying common stock
on the date of grant. The following table illustrates the effect on net
income and earnings per share had compensation cost for all of the
stock-based compensation plans been determined based on the grant date
fair values of awards (the method described in FASB Statement No. 123,
Accounting for Stock-Based Compensation):
Three Months Ended
Mar 31, Mar 31,
2003 2002
------------ ------------
Net income:
As reported $ 29,678 $ 23,047
Deduct total stock-based employee compensation 14,379 20,527
expense determined under fair value based method -------- ---------
for all awards, net of tax
Pro forma $ 15,299 $ 2,520
========= =========
Basic earnings per share:
As reported $ 0.02 $ 0.02
Pro forma $ 0.01 $ 0.00
Diluted earnings per share:
As reported $ 0.02 $ 0.02
Pro forma $ 0.01 $ 0.00
7
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. Such statements are subject to
risks and uncertainties, including those discussed under "Factors that May
Affect Future Results" below, that 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.
Certain forward-looking statements are indicated by italics.
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 first quarter of 2003 and the same period of 2002. It
should be read in connection with the Company's unaudited financial statements
and notes thereto included in this Form 10-QSB.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Certain statements made in this Quarterly Report on Form 10-QSB,
including those summarized below, are forward-looking statements within the
meaning of the safe harbor provisions of Section 21E of the Securities Exchange
Act of 1934, as amended, that involve risks and uncertainties, and actual
results may differ. Factors that could cause actual results to differ include
those identified below.
o The Company's belief that the quality of its receivables is high
and that strong internal controls are in place to maintain proper
collections--This belief may be impacted by domestic economic
conditions, by economic, political, regulatory or social
conditions in foreign markets, or by the failure of the Company
to properly implement or maintain internal controls.
o The belief that the Company's current financial resources, cash
generated from operations and the Company's capacity for debt
and/or equity financing will be sufficient to fund current and
anticipated business operations and capital expenditures. The
belief that the Company's low debt levels and available line of
credit make it unlikely that a decrease in product demand would
impair the Company's ability to fund operations--Changes in
anticipated operating results, credit availability, equity market
conditions or the Company's debt levels may further enhance or
inhibit the Company's ability to maintain or raise appropriate
levels of cash.
o The Company's expectation that capital expenditures during the
remainder of 2003 will be funded with cash generated from
operating activities--This expectation may be affected by changes
in the Company's anticipated capital expenditure requirements
resulting from unforeseen required maintenance or repairs. The
funding of planned or unforeseen expenditures may also be
affected by changes in anticipated operating results resulting
from decreased sales or increased operating expenses.
o The Company's belief that its vulnerability to foreign currency
fluctuations and general economic conditions in foreign countries
is not significant--This belief may be impacted by economic,
political and social conditions in foreign markets and changes in
regulatory and competitive conditions or a change in the amount
or geographic focus of the Company's international sales.
8
o The Company's plans to continue to invest in research and
development efforts, expedite internal product development and
invest in technological alliances, as well as the expected focus
and results of such investments--These plans and expectations may
be impacted by general market conditions, unanticipated changes
in expenses or sales, delays in the development of new products,
technological advances, the ability to find suitable and willing
technology partners or other changes in competitive or market
conditions.
o The Company's efforts to grow its international business--These
efforts may be impacted by economic, political and social
conditions in current and anticipated foreign markets, regulatory
conditions in such markets, unanticipated changes in expenses or
sales, changes in competitive conditions or other barriers to
entry or expansion.
o The Company's belief as to future activities that may be
undertaken to expand the Company's business--Actual activities
undertaken may be impacted by general market conditions,
competitive conditions in the Company's industry, unanticipated
changes in the Company's financial position or the inability to
identify attractive acquisition targets or other business
opportunities.
CRITICAL ACCOUNTING POLICIES
The Company prepares the 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 policies,
which IKONICS believes are the most critical to aid in fully understanding and
evaluating its reported financial results, include the following:
Accounts Receivable. Trade receivables are carried at original invoice
amount less an estimate made for doubtful receivables based on a review of all
outstanding amounts on a monthly basis. Management determines the allowance for
doubtful accounts by regularly evaluating individual customer receivables and
considering 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.
A trade receivable is considered to be past due if any portion of the
receivable balance is outstanding for more than 90 days. Interest is charged on
domestic trade receivables that are outstanding for more than 30 days and is
recognized as it is charged. After the receivable becomes past due, it is on
nonaccrual status and accrual of interest is suspended. While 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 60-90 days for foreign customers. The
concentration of credit risk is not significant except for a receivable from one
of the Company's larger customers, which accounted for 14.2% of total
receivables as of March 31, 2003.
Inventory. Inventories are valued at the lower rate of cost or market
value. The Company monitors its inventory for obsolescence and records
reductions in cost when required.
Deferred Tax Assets. At March 31, 2003, the Company had approximately
$200,000 of net deferred tax assets. The deferred tax assets result primarily
due to timing differences in intangible assets and property and equipment. The
Company has recorded a $20,000 valuation allowance to reserve for items that
will more likely than not be realized. The Company has determined that it is
more likely than not that the remaining deferred tax assets will be realized and
that an additional valuation allowance for such assets is not currently
required.
Revenue Recognition. The Company recognizes revenue on products when
title passes, which is usually upon shipment. Freight billed to customers is
included in sales. Shipping costs are included in cost of goods sold.
9
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 2003 COMPARED TO QUARTER ENDED MARCH 31, 2002
Sales. The Company experienced moderate sales growth during the first
quarter of 2003 of $2.83 million, which was 1.8% higher than the $2.78 million
in sales during the same period in 2002. Sales were stronger domestically, but
were offset by lower international sales primarily due to a container shipment
to China in the first quarter of 2002. This year's corresponding container
shipment is currently scheduled to occur in the second quarter of 2003.
Cost of Goods Sold. Cost of goods sold during the first quarter of 2003
was $1.63 million, or 57.4% of sales, compared to $1.62 million, or 58.4% of
sales, during the same period in 2002. The reduction in the cost of sales in the
first quarter of 2003 as a percentage of sales reflects an improved product mix
across all geographic areas.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $1,004,000, or 35.5% of sales, in the first
quarter of 2003, from $951,000, or 34.2% of sales, for the same period in 2002.
The first three months of 2003 reflected higher sales and marketing expenses
including costs to set up a training facility in Singapore, trade show costs and
advertising. The Company also realized a gain of $19,632 in the first quarter of
2002 from the sale of four company vehicles.
Research and Development Expenses. Research and development expenses
during the first quarter of 2003 were $168,000, or 6.0% of sales, versus
$179,000, or 6.4% of sales, for the same period in 2002. The reduction was due
to lower costs for production trials and legal fees.
Interest Income. Interest income for the first quarter of 2003 was
$13,000 compared to $8,000 for the same period in 2002. Interest is earned
primarily from government obligation revenue bonds of various municipalities and
school districts in the State of Minnesota. On March 1, 2003, the Company began
assessing a 1% per month finance charge on delinquent customer accounts over 30
days.
Income Taxes. Income taxes were $16,000, or an effective rate of 35%,
during the first quarter of 2003, versus income taxes of $14,000, or an
effective rate of 38%, for the first quarter of 2002. The difference in the
effective rate is due to permanent differences for allowable tax deductions,
including an extraterritorial income exclusion for foreign sales.
LIQUIDITY AND CAPITAL RESOURCES
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 $375,000 and $188,000 at March 31, 2003
and March 31, 2002, respectively. The Company generated $49,000 in cash from
operating activities during the three months ended March 31, 2003 and used
$202,000 in cash from operating activities during the same period in 2002. Cash
provided by operating activities is primarily the result of adjusting net income
for non-cash depreciation, amortization and certain changes in working capital
components.
During the first three months of 2003, trade receivables increased by
$292,000. The increase in receivables was driven by higher sales and a moderate
slowdown in domestic screen print customer payments due to economic conditions.
The Company believes that the quality of its receivables is high and that strong
internal controls are in place to maintain proper collections. Inventory levels
increased $96,000, reflecting increased stocks of AccuArt related products due
to strong market acceptance. Prepaid expenses increased $17,000, reflecting
prepaid insurance costs in the first quarter of 2003. Income tax refund
receivables decreased $105,000, reflecting the overpayment of corporate income
tax during 2002. Accounts payable increased $183,000, reflecting timing of
payments for inventory to suppliers. Accrued expenses increased $27,000,
reflecting primarily the timing of compensation payments.
10
During the first three months of 2002, trade receivables increased by
$408,000, reflecting international sales with longer payment terms and a general
slowing of payments from domestic screen print customers due to economic
conditions. Inventory levels decreased $26,000. Prepaid expenses increased
$18,000 due to higher insurance premiums. Income tax refund receivables
decreased $14,000. Accounts payable decreased $14,000 and accrued expenses
increased $49,000, reflecting the timing of compensation payments.
The Company used $58,000 and $82,000, in cash for investing activities
during the three months ended March 31, 2003 and March 31, 2002, respectively.
During the first three months of 2003, the Company purchased $43,000 in capital
equipment and software. It also incurred $12,000 in patent application costs
that the Company records as an asset and amortizes upon successful completion of
the application process. During the first three months of 2002, the Company
purchased $79,000 in capital equipment and business software.
During the first quarter of 2002, the Company repurchased 23,500 shares
of its outstanding Common Stock for $72,000.
A bank line of credit exists providing for borrowings of up to
$1,250,000. Outstanding debt under this line of credit is collateralized by
accounts receivable and inventory and bears interest at 2.25 percentage points
over the 30-day LIBOR rate. The Company did not utilize this line of credit
during the quarter ended March 31, 2003 and there was no debt outstanding under
this line as of March 31, 2003.
The Company believes that current financial resources, its line of
credit, cash generated from operations and the Company's capacity for debt
and/or equity financing will be sufficient to fund current and anticipated
business operations. The Company also believes that its low debt levels and
available line of credit make it unlikely that a decrease in demand for the
Company's products would impair the Company's ability to fund operations.
CAPITAL EXPENDITURES
Through March 31, 2003, the Company spent $42,586 on capital
expenditures in 2003. This spending included plant equipment upgrades to improve
efficiency and reduce operating costs, additions to the Company's business
software, improvements to the Company's trade show booths and construction costs
on the leased training facility in Singapore.
Plans for additional capital expenditures in 2003 of $150,000 include
ongoing manufacturing equipment upgrades and development equipment to modernize
the capabilities and processes of the Company's research and development
laboratory. The modernization is intended to improve measurement and quality
control processes. Total 2003 planned expenditures are expected to be less than
2002 capital expenditures and are expected to be funded with cash generated from
operating activities.
INTERNATIONAL ACTIVITY
The Company markets its products to over 60 countries in North America,
Europe, Latin America, Asia and other parts of the world. Foreign sales were
approximately 31% of total sales for the three months ended March 31, 2003 and
34% of total sales for the three months ended March 31, 2002. Foreign sales in
2002 reflected higher sales to India and China. Fluctuations of certain foreign
currencies have not significantly impacted the Company's operations because the
Company's foreign sales are not concentrated in any one region of the world. The
Company believes its vulnerability to uncertainties due to foreign currency
fluctuations and general economic conditions in foreign countries is not
significant.
Substantially all of the Company's foreign transactions are negotiated,
invoiced and paid in U.S. dollars. A portion of the Company's foreign sales are
invoiced and paid in Euros. IKONICS has not implemented a hedging strategy to
reduce the risk of foreign currency translation exposures, which management does
not believe to be significant based on the scope and geographic diversity of the
Company's foreign operations as of March 31, 2003.
11
FUTURE OUTLOOK
IKONICS has invested over 6% of its sales dollars for the past several
years in research and development. The Company plans to maintain its efforts in
this area and expedite internal product development as well as form
technological alliances with outside experts to ensure commercialization of new
product opportunities.
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.
Other future activities undertaken to expand the Company's business may
include acquisitions, building expansion and additions, equipment additions, new
product development and pursuit of marketing opportunities.
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. The Company's
Chief Executive Officer and its Chief Financial Officer, after evaluating the
effectiveness of the Company's disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14(c) and 15d-14(c)) on a date within 90 days before the
filing date of this quarterly report, have concluded that, as of such date, the
Company's disclosure controls and procedures were adequate and effective to
ensure that material information relating to the Company would be made known to
them by others within the Company.
(b) Changes in internal controls. There were no significant changes in
the Company's internal controls or in other factors that could significantly
affect the Company's internal controls subsequent to the date of their
evaluation, nor were there any significant deficiencies or material weaknesses
in the Company's internal controls. As a result, no corrective actions were
required or undertaken.
12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following exhibits are filed as part of this Quarterly Report on
Form 10-QSB for the quarterly period ended March 31, 2003:
Exhibit Description
------- -----------
3.1 Restated Articles of Incorporation of Company, as amended.(1)
3.2 By-Laws of the Company, as amended.(1)
11 Computation of Net Earnings per Common Share
99 Certification under Section 906 of the Sarbanes-Oxley Act.
Copies of Exhibits will be furnished upon request and payment of the
Company's reasonable expenses in furnishing the Exhibits.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the registrant during the
quarterly period ended March 31, 2003.
---------------------
(1) Incorporated by reference to the like numbered Exhibit to the Company's
Registration Statement on Form 10-SB (File No. 000-25727).
13
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: April 30, 2003 By: /s/ Jeffery A. Laabs
-----------------------------
Jeffery A. Laabs,
Chief Financial Officer, Treasurer
and Secretary (Duly authorized
officer and Principal Financial
Officer)
14
CERTIFICATIONS PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, William C. Ulland, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of IKONICS
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: April 30, 2003
/s/ William C. Ulland
------------------------------
William C. Ulland
Chairman, Chief Executive Officer
and President
15
CERTIFICATIONS PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Jeffery A. Laabs, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of IKONICS
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: April 30, 2003
/s/ Jeffery A. Laabs
----------------------------------
Jeffery A. Laabs
Chief Financial Officer, Treasurer
and Secretary
16
INDEX TO EXHIBITS
Exhibit Description Page
------- ----------- ----
3.1 Restated Articles of Incorporation of Company, as amended...................... Incorporated by Reference
3.2 By-Laws of the Company, as amended............................................. Incorporated by Reference
11 Computation of Net Earnings per Common Share................................... Filed Electronically
99 Certification Under Section 906 of the Sarbanes-Oxley Act...................... Filed Electronically
17