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U.S. SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Quarterly Period Ended March 31, 2011
 or
 o
    
    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
  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)
 
 
  þ o
  o o
  o þ
   Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)




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##### 



IKONICS Corporation
  PAGE NO.PART I. FINANCIAL INFORMATIONItem 1. Financial Statements:
    
    
    3Condensed Balance Sheets as of March 31, 2011 (unaudited)
and December 31, 2010
    
    
    3Condensed Statements of Income for the Three Months Ended
March 31, 2011 and 2010 (unaudited)
    
    
    4Condensed Statements of Cash Flows for the Three Months Ended
March 31, 2011 and 2010 (unaudited)
    
    
    5Notes to Condensed Financial Statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    17Item 4. Controls and Procedures
    
    
    17PART II. OTHER INFORMATION
    
    
    18SIGNATURES
    
    
    19EX-31.1EX-31.2EX-32




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FINANCIAL INFORMATION
 
 ITEM 1. Condensed Financial Statements
 IKONICS CORPORATION  
 CONDENSED BALANCE SHEETS
 March 31
    
    
    December 312011
    
    
    2010(unaudited)ASSETSCURRENT ASSETS:Cash
    
    $
    752,262
    
    
    $
    1,291,383Short-term investments
    
    
    2,222,538
    
    
    
    2,217,990Trade receivables, less allowance of $60,000 in 2011 and
2010
    
    
    1,948,761
    
    
    
    1,883,428Inventories
    
    
    2,767,940
    
    
    
    2,198,064Prepaid expenses and other assets
    
    
    131,874
    
    
    
    63,965Income taxes receivable
    
    
    4,574
    
    
    
    Deferred income taxes
    
    
    157,000
    
    
    
    157,000Total current assets
    
    
    7,984,949
    
    
    
    7,811,830PROPERTY, PLANT, AND EQUIPMENT, at cost:Land and building
    
    
    5,891,696
    
    
    
    5,888,445Machinery and equipment
    
    
    2,472,354
    
    
    
    2,455,238Office equipment
    
    
    688,476
    
    
    
    642,100Vehicles
    
    
    234,650
    
    
    
    234,6509,287,176
    
    
    
    9,220,433Less accumulated depreciation
    
    
    4,305,988
    
    
    
    4,207,5004,981,188
    
    
    
    5,012,933INTANGIBLE ASSETS, less accumulated amortization of $389,597 in
2011 and $376,983 in 2010
    
    
    328,093
    
    
    
    317,168$
    13,294,230
    
    
    $
    13,141,931LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    522,499
    
    
    $
    441,830Accrued compensation
    
    
    241,824
    
    
    
    282,196Other accrued expenses
    
    
    73,255
    
    
    
    45,868Income taxes payable
    
    
    
    
    
    
    8,090Total current liabilities
    
    
    837,578
    
    
    
    777,984DEFERRED INCOME TAXES
    
    
    171,000
    
    
    
    171,000Total liabilities
    
    
    1,008,578
    
    
    
    948,984STOCKHOLDERS EQUITY:Preferred stock, par value $.10 per share; authorized 250,000 shares; issued
noneCommon stock, par value $.10 per share; authorized 4,750,000 shares;
issued and outstanding 1,981,357 shares in 2011 and 1,973,357 shares
in 2010
    
    
    198,136
    
    
    
    197,336Additional paid-in capital
    
    
    2,317,739
    
    
    
    2,263,176Retained earnings
    
    
    9,769,777
    
    
    
    9,732,435Total stockholders equity
    
    
    12,285,652
    
    
    
    12,192,947$
    13,294,230
    
    
    $
    13,141,931
  3




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IKONICS CORPORATION

CONDENSED STATEMENTS OF INCOME (Unaudited)
 Three MonthsEnded March 312011
    
    
    2010NET SALES
    
    $
    3,653,099
    
    
    $
    3,684,577COST OF GOODS SOLD
    
    
    2,186,256
    
    
    
    2,200,782GROSS PROFIT
    
    
    1,466,843
    
    
    
    1,483,795SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    1,343,641
    
    
    
    1,200,389RESEARCH AND DEVELOPMENT EXPENSES
    
    
    99,911
    
    
    
    160,704INCOME FROM OPERATIONS
    
    
    23,291
    
    
    
    122,702INTEREST INCOME
    
    
    4,562
    
    
    
    3,519INCOME BEFORE INCOME TAXES
    
    
    27,853
    
    
    
    126,221INCOME TAX BENEFIT
    
    
    9,489
    
    
    
    22,120NET INCOME
    
    $
    37,342
    
    
    $
    148,341EARNINGS PER COMMON SHARE:Basic
    
    $
    0.02
    
    
    $
    0.08Diluted
    
    $
    0.02
    
    
    $
    0.08WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:Basic
    
    
    1,976,523
    
    
    
    1,967,057Diluted
    
    
    1,981,114
    
    
    
    1,969,433
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IKONICS CORPORATION


CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
 Three MonthsEnded March 312011
    
    
    2010CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    37,342
    
    
    $
    148,341Adjustments to reconcile net income to net cash provided by (used in)
operating activities:Depreciation
    
    
    98,488
    
    
    
    101,147Amortization
    
    
    12,614
    
    
    
    13,813Stock based compensation
    
    
    6,126
    
    
    
    6,846Changes in working capital components:Trade receivables
    
    
    (65,333
    )
    
    
    (32,755
    )Inventories
    
    
    (569,876
    )
    
    
    74,100Prepaid expenses and other assets
    
    
    (67,909
    )
    
    
    (54,576
    )Income taxes receivable
    
    
    (4,574
    )
    
    
    Accounts payable
    
    
    80,669
    
    
    
    93,136Accrued liabilities
    
    
    (12,985
    )
    
    
    (122,075
    )Income taxes payable
    
    
    (14,562
    )
    
    
    (43,535
    )Net cash provided by (used in) operating activities
    
    
    (500,000
    )
    
    
    184,442CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property, plant and equipment
    
    
    (66,743
    )
    
    
    (68,408
    )Proceeds from sale of vehicles
    
    
    
    
    
    
    8,434Purchase of intangibles
    
    
    (23,539
    )
    
    
    (9,880
    )Purchase of short-term investments
    
    
    (813,224
    )
    
    
    (203,402
    )Proceeds from maturity of short-term investments
    
    
    808,676
    
    
    
    200,000Net cash used in investing activities
    
    
    (94,830
    )
    
    
    (73,256
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from exercise of stock options
    
    
    55,709
    
    
    
    NET INCREASE (DECREASE) IN CASH
    
    
    (539,121
    )
    
    
    111,186CASH AT BEGINNING OF PERIOD
    
    
    1,291,383
    
    
    
    1,304,586CASH AT END OF PERIOD
    
    $
    752,262
    
    
    $
    1,415,772SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes, net of refunds received of $74,156 in 2010
    
    $
    9,647
    
    
    $
    56,415
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IKONICS CORPORATION
 
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 1.
    
    Basis of PresentationThe balance sheet of IKONICS Corporation (the Company) as of March 31, 2011, and the
related statements of income and cash flows for the three months ended March 31, 2011 and
2010 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, 2011, 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, 2010.The results of operations for interim periods are not necessarily indicative of results that
will be realized for the full fiscal year.
 2.
    
    Short Term InvestmentsThe Companys $2,223,000 of short-term investments is comprised of fully insured
certificates of deposit with maturities ranging from six to twelve months and interest rates
ranging from 0.3% to 1.7%.
 3.
    
    InventoriesThe major components of inventory are as follows:
 Mar 31, 2011
    
    
    Dec 31, 2010Raw materials
    
    $
    1,886,335
    
    
    $
    1,403,875Work-in-progress
    
    
    340,526
    
    
    
    294,006Finished goods
    
    
    1,560,767
    
    
    
    1,493,226Reduction to LIFO cost
    
    
    (1,019,688
    )
    
    
    (993,043
    )Total Inventory
    
    $
    2,767,940
    
    
    $
    2,198,064
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IKONICS CORPORATION   NOTES TO CONDENSED FINANCIAL STATEMENTS
 4.
    
    Earnings Per Common Share (EPS)Basic EPS is calculated using net income divided by the weighted average of common shares
outstanding. Diluted EPS is similar 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.
 Shares used in the calculation of diluted EPS are summarized below:
 Three Months EndedMar 31, 2011
    
    
    Mar 31, 2010Weighted average common shares outstanding
    
    
    1,976,523
    
    
    
    1,967,057Dilutive effect of stock options
    
    
    4,591
    
    
    
    2,376Weighted average common and common equivalent shares outstanding
    
    
    1,981,114
    
    
    
    1,969,433
 Options to purchase 7,250 shares of common stock with a weighted average price of $8.22 were
outstanding during the quarter ended March 31, 2011, but were excluded from the computation
of common share equivalents because they were anti-dilutive. For the quarter ended March
31, 2010, options to purchase 17,500 shares of common stock with a weighted average price of
$7.65 were outstanding, but were excluded from the computation of common share equivalents
because they were anti-dilutive.
 5.
    
    Stock-based Compensation
 The Company has a stock incentive plan for the issuance of up to 442,750 shares of common
stock. 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 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. A total of
125,573 shares of common stock are reserved for additional grants of options under the plan
at March 31, 2011.
 The Company charged compensation cost of approximately $6,100 and $6,800 against income for
the three months ended March 31, 2011 and 2010, respectively. As of March 31, 2011 there
was approximately $30,000 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 increased the
APIC pool, which is the amount that represents the pool of excess tax benefits available to
absorb tax shortages. There were no excess tax benefits recognized during the three month
period ending March 31, 2011 and 2010, respectively. The Companys APIC pool totaled
approximately $111,000 at March 31, 2011 and December 31, 2010, respectively.
 Proceeds from the exercise of stock options were $56,000 for the three months ended March
31, 2011. There were no options exercised during the three months ended March 31, 2010.
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IKONICS CORPORATION   NOTES TO CONDENSED FINANCIAL STATEMENTS
 Stock option activity during the three months ended March 31, 2011 was as follows:
 WeightedAverageExerciseShares
    
    
    PriceOutstanding at beginning of period
    
    
    40,500
    
    
    $
    6.38Granted
    
    
    
    
    
    
    Exercised
    
    
    (8,000
    )
    
    
    6.96Expired and forfeited
    
    
    
    
    
    
    Outstanding at March 31, 2011
    
    
    32,500
    
    
    
    6.24Exercisable at March 31, 2011
    
    
    11,583
    
    
    
    6.94
 The aggregate intrinsic value of all options outstanding and for those exercisable at March
31, 2011 was approximately $53,000 and $13,000, respectively.
  The Companys reportable segments are strategic business units that offer different products
and have varied customer bases. In previous years there were three reportable segments:
Domestic, Export, and IKONICS Imaging. 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. The
IKONICS Imagining segment also included products and customers for etched composites,
ceramics, glass and silicon wafers along with sound deadening technology to the aerospace
industry, which beginning in 2011 the Company now defines as Micromachining. In addition
IKONICS Imaging included products and customers related to proprietary inkjet technology
used for mold texturing and referred to by the Company as Digital Texturing (DTX). Export
sells primarily the same products as Domestic and the IKONICS Imaging products not related
to Micromachining or DTX. Beginning in 2011, the Company no longer includes Micromaching
and DTX financial information under the IKONICS Imaging segment. The financial information
for Micromaching and DTX are combined into a new segment called Other. As the Company is
unable to provide comparable 2010 financial information for the newly defined segments, the
Company will disclose in 2011 both the new basis and old basis of segment reporting. The
accounting policies applied to determine the segment information are the same as those
described in the summary of significant accounting policies included in the Companys Annual
Report on Form 10-K for the year ended December 31, 2010.
 Management evaluates the performance of each segment based on the components of divisional
income, and does not allocate assets and liabilities to segments except for accounts
receivables which is allocated based on the old segmentation. Financial information with
respect to the reportable segments follows:
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IKONICS CORPORATION   NOTES TO CONDENSED FINANCIAL STATEMENTS
 For the three months ended March 31, 2011 (old segment method):
 IKONICSDomestic
    
    
    Export
    
    
    Imaging
    
    
    Unalloc.
    
    
    TotalNet sales
    
    $
    1,331,049
    
    
    $
    1,196,213
    
    
    $
    1,125,837
    
    
    $
    
    
    
    $
    3,653,099Cost of goods sold
    
    
    746,008
    
    
    
    881,726
    
    
    
    558,522
    
    
    
    
    
    
    
    2,186,256Gross profit
    
    
    585,041
    
    
    
    314,487
    
    
    
    567,315
    
    
    
    
    
    
    
    1,466,843Selling, general and
administrative*
    
    
    276,505
    
    
    
    132,474
    
    
    
    495,730
    
    
    
    438,932
    
    
    
    1,343,641Research and
development*
    
    
    
    
    
    
        
    
    
    
    
    
    
    
    99,911
    
    
    
    99,911Income from operations
    
    $
    308,536
    
    
    $
    182,013
    
    
    $
    71,585
    
    
    $
    (538,843
    )
    
    $
    23,291
 For the three months ended March 31, 2010 (old segment method):
 Domestic
    
    
    Export
    
    
IKONICS Imaging
    
    
    Unalloc.
    
    
    TotalNet sales
    
    $
    1,500,171
    
    
    $
    1,156,790
    
    
    $
    1,027,616
    
    
    $
    
    
    
    $
    3,684,577Cost of goods sold
    
    
    798,205
    
    
    
    801,008
    
    
    
    601,569
    
    
    
    
    
    
    
    2,200,782Gross profit
    
    
    701,966
    
    
    
    355,782
    
    
    
    426,047
    
    
    
    
    
    
    
    1,483,795Selling, general and
administrative*
    
    
    230,855
    
    
    
    158,659
    
    
    
    284,661
    
    
    
    526,214
    
    
    
    1,200,389Research and
development*
    
    
    
    
    
    
        
    
    
    
    
    
    
    
    160,704
    
    
    
    160,704Income from operations
    
    $
    471,111
    
    
    $
    197,123
    
    
    $
    141,386
    
    
    $
    (686,918
    )
    
    $
    122,702
 For the three months ended March 31, 2011 (new segment method):
 IKONICSDomestic
    
    
    Export
    
    
    Imagining
    
    
    Other
    
    
    Unalloc.
    
    
    TotalNet sales
    
    $
    1,331,049
    
    
    $
    1,196,213
    
    
    $
    890,919
    
    
    $
    234,918
    
    
    $
    
    
    
    $
    3,653,099Cost of goods sold
    
    
    746,008
    
    
    
    881,726
    
    
    
    456,267
    
    
    
    102,255
    
    
    
    
    
    
    
    2,186,256Gross profit
    
    
    585,041
    
    
    
    314,487
    
    
    
    434,652
    
    
    
    132,663
    
    
    
    
    
    
    
    1,466,843Selling general and
adminstrative*
    
    
    276,505
    
    
    
    132,474
    
    
    
    297,240
    
    
    
    198,490
    
    
    
    438,932
    
    
    
    1,343,641Research and
development*
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99,911
    
    
    
    99,911Income from operations
    
    $
    308,536
    
    
    $
    182,013
    
    
    $
    137,412
    
    
    $
    (65,827
    )
    
    $
    (538,843
    )
    
    $
    23,291
 
 *
    
    The Company does not allocate all general and administrative expenses or any research
and development expenses to its operating segments for internal reporting. Accounts receivable related to the Other segment are included in IKONICS Imaging. Accounts
receivable by segment as of March 31, 2011 and December 31, 2010 were as follows:
 Mar 31, 2011
    
    
    Dec 31, 2010Domestic
    
    $
    832,639
    
    
    $
    874,535Export
    
    
    751,464
    
    
    
    725,007IKONICS Imaging
    
    
    378,625
    
    
    
    325,334Unallocated
    
    
    (13,967
    )
    
    
    (41,448
    )Total
    
    $
    1,948,761
    
    
    $
    1,883,428
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IKONICS CORPORATION   NOTES TO CONDENSED FINANCIAL STATEMENTS
 7.
    
    Income Taxes
 The Company reports a liability for unrecognized tax benefits taken or expected to be taken
when they are uncertain. During the first quarter of 2010, the statute of limitations for
the relevant taxing authority to examine and challenge the tax position for an open year
expired, resulting in decreases in income tax expense of $27,000 for the first quarter of
2010. As of March 31, 2011 and 2010, 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, for tax years 2007, 2008, 2009, and 2010.
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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
  Factors that May Affect Future Results
 
    
    The Companys expectation that its effective tax rate will return to 35% to 36% of
pretax income for the remainder of 2011 compared to the tax benefit recorded in the
first three months of 2011The effective tax rate for the final nine months of 2011
may be affected by changes in federal and state tax law, unanticipated changes in the
Companys financial position or the Companys operating activities and/or management
decisions could increase or decrease its effective tax rate.
 
    
    The Companys belief that the quality of its trade 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.
 
    
    The Companys expectation that it will obtain a new line of credit similar to its
current line of credit when the current line of credit expires on October 30,
2011This expectation may be impacted by factors such as changes in credit markets,
the interest rate environment, general economic conditions, the Companys financial
results and condition, and the Companys anticipated need for capital to fund business
operations and capital expenditures.
 
    
    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.
 
    
    The Companys expectations as to the level and use of planned capital expenditures
and that capital expenditures will be funded with cash on hand and 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, repairs, or capital asset additions. The funding of planned or unforeseen
expenditures may also be affected by changes in anticipated operating results resulting
from decreased sales, lack of acceptance of new products or increased operating
expenses or by other unexpected events affecting the Companys financial position.
 
    
    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, changes in regulatory and competitive
conditions, a change in
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the amount or geographic focus of the Companys international
sales, or changes in purchase or sales terms.
 
    
    The Companys expectation that research and development spending will grow and
return to historic levelsThese plans and expectations may be impacted by the
Companys ability to identify, hire and retain qualified personnel, unexpected changes
to resource requirements for other areas of the Companys business and the overall
performance of the Company.
 
    
    The Companys beliefs as to the future performance of its new technologies or
particular segmentsActual performance may be impacted by general market conditions or
conditions in particular industries in which the Companys products are used (including
the aerospace and automotive industries), changes to the competitive landscape in the
industries in which the Company competes (including pricing pressures from existing or
future competitors), lack of acceptance of new products or technologies or increases to
raw materials costs used to produce the Companys products.
 
    
    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.
 
    
    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 industries in which the Company sells
products, unanticipated changes in the Companys financial position, lack of acceptance
of new products or the inability to identify attractive acquisition targets or other
business opportunities.
 Critical Accounting Estimates
  Trade Receivables.
 Inventories.
 Income Taxes.
 12




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Revenue Recognition.
 (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)
 (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)
  Results of Operations
 Quarter Ended March 31, 2011 Compared to Quarter Ended March 31, 2010
 Net Sales.
 Gross Profit
 13




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Selling, General and Administrative Expenses
 Research and Development Expenses
 Interest Income.
 Income Taxes.
 Liquidity and Capital Resources
    14




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Capital Expenditures
  International Activity
   15




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Future Outlook
         16




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Recent Accounting Pronouncements
  Off Balance Sheet Arrangements
  
 ITEM 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
  
 ITEM 4.
    
    Controls and Procedures
   17




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OTHER INFORMATION
 ITEM 1.
    
    Legal Proceedings
  ITEM 1A.
    
    Risk Factors
  ITEM 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  ITEM 3.
    
    Defaults upon Senior Securities
  ITEM 4.
    
    [Removed and Reserved]
 ITEM 5.
    
    Other Information
  ITEM 6.
    
    Exhibits
  Exhibit
    
    Description3.1
    
    Restated Articles of Incorporation of Company, as amended.13.2
    
    By-Laws of the Company, as amended.231.1
    
    Rule 13a-14(a)/15d-14(a) Certifications of CEO31.2
    
    Rule 13a-14(a)/15d-14(a) Certifications of CFO32
    
    Section 1350 Certifications
  
 1
    
    Incorporated by reference to the like numbered
Exhibit to the Companys Registration Statement on Form 10-SB (File No.
000-25727).2
    
    Incorporated by reference to the like numbered Exhibit to the
Companys Current Report on Form 8-K filed with the Commission on February 22,
2007 (File No. 000-25727). 18




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SIGNATURES
  IKONICS CORPORATIONDATE: May 12, 2011
    By:
    /s/ Jon GerlachJon Gerlach,Chief Financial Officer, and

Vice President of Finance 19




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INDEX TO EXHIBITS
 Exhibit
    
    Description
    
    Page3.1
    
    Restated Articles of Incorporation of Company, as amended
    
    Incorporated by reference3.2
    
    By-Laws of the Company, as amended.
    
    Incorporated by reference31.1
    
    Rule 13a-14(a)/15d-14(a) Certifications of CEO.
    
    Filed Electronically31.2
    
    Rule 13a-14(a)/15d-14(a) Certifications of CFO.
    
    Filed Electronically32
    
    Section 1350 Certifications.
    
    Filed Electronically