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**U.S. SECURITIES AND EXCHANGE COMMISSION****WASHINGTON, D.C. 20549**
**FORM 10-QSB**
(Mark One)   þ **Quarterly Report Pursuant toSection 13 or 15(d) of the Securities Exchange Act of 1934** For the Quarterly Period Ended March 31, 2005 oro **Transition Report Pursuant toSection 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 small business issuer as specified in its charter)   Minnesota 41-0730027   (State or other jurisdiction of (I.R.S. employerincorporation or organization) identification no.)   4832 Grand Avenue  Duluth, Minnesota 55807   (Address of principal executive offices) (Zip code)(218) 628-2217Issuer’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 or15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorterperiod that the registrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes þ       No o
     State the number of shares outstanding of each of the issuer’s classes of commonequity, as of the latest practical date: Common Stock, $.10 par value — 1,947,645 sharesoutstanding as of April 18, 2005.
     Transitional Small Business Disclosure Format (check one): Yes o       No þ  
 

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**IKONICS Corporation**
QUARTERLY REPORT ON FORM 10-QSB       PAGE NO. PART I. FINANCIAL INFORMATION         Item 1. Financial Statements:         Balance Sheets as of March 31, 2005 (unaudited) and December 31, 2004  3      Statements of Operations for the Three Months Ended March 31, 2005 and 2004 (unaudited)  4      Statements of Cash Flows for the Three Months Ended March 31, 2005 and 2004 (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      SIGNATURES  14  Rule 13a-14(a)/15d-14(a) Certifications of CEO Rule 13a-14(a)/15d-14(a) Certifications of CFO Section 1350 Certifications
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PART I — FINANCIAL INFORMATION
**ITEM 1. Financial Statements**
**IKONICS CORPORATION****BALANCE SHEETS**           **March 31**  **December 31**   **2005**  **2004**   **(unaudited)**     **ASSETS**                 CURRENT ASSETS:        Cash and cash equivalents $2,670,062  $2,737,460 Marketable securities  84,195   124,358 Trade receivables, less allowance for doubtful accounts of$75,000 in 2005 and 2004  1,714,003   1,642,904 Inventories (Note 2)  2,172,967   2,201,282 Prepaid expenses and other assets  139,066   57,345 Income taxes receivable  22,305   0 Deferred income taxes  143,000   143,000        Total current assets  6,945,598   6,906,349                 PROPERTY, PLANT, AND EQUIPMENT, at cost:        Land and building  1,493,792   1,466,898 Machinery and equipment  2,465,587   2,442,295 Office equipment  1,226,591   1,239,811 Vehicles  175,406   175,406           5,361,376   5,324,410 Less accumulated depreciation  4,370,303   4,295,580           991,073   1,028,830          INTANGIBLE ASSETS, less accumulated amortization of $116,109 in2005 and $109,728 in 2004  291,437   292,349          DEFERRED INCOME TAXES  65,000   65,000          INVESTMENTS IN NON-MARKETABLE EQUITY SECURITIES  197,460   197,460                   $8,490,568  $8,489,988                 **LIABILITIES AND STOCKHOLDERS’ EQUITY**                 CURRENT LIABILITIES:        Accounts payable $567,330  $536,391 Accrued compensation  114,459   263,510 Other accrued expenses  290,072   245,702 Income taxes payable  0   30,169        Total current liabilities  971,861   1,075,772                 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 1,947,245 in 2005 and 1,930,545 in 2004  194,725   193,055 Additional paid-in capital  1,554,449   1,477,815 Retained earnings  5,769,317   5,745,662 Accumulated other comprehensive income (loss)  216   (2,316)       Total stockholders’ equity  7,518,707   7,414,216          $8,490,568  $8,489,988        
See notes to financial statements.
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**IKONICS CORPORATION****STATEMENTS OF OPERATIONS (Unaudited)**           **Three Months**   **Ended March 31**   **2005**  **2004** NET SALES $3,328,527  $3,382,798          COSTS AND EXPENSES:        Cost of goods sold  1,930,644   1,888,080 Selling, general and administrative  1,238,154   1,127,591 Research and development  154,903   150,520           3,323,701   3,166,191                 INCOME FROM OPERATIONS  4,826   216,607          INTEREST INCOME  9,940   3,018                 INCOME BEFORE INCOME TAXES  14,766   219,625          INCOME TAX EXPENSE (BENEFIT)  (8,889)  58,967                 NET INCOME $23,655  $160,658                 EARNINGS PER COMMON SHARE:        Basic $0.01  $0.09                 Diluted $0.01  $0.08        WEIGHTED AVERAGE COMMON SHARESOUTSTANDING:        Basic  1,930,783   1,878,140                 Diluted  1,984,051   1,932,554        
See notes to financial statements.
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**IKONICS CORPORATION****STATEMENTS OF CASH FLOWS (Unaudited)**           **Three Months**   **Ended March 31**   **2005**  **2004** CASH FLOWS FROM OPERATINGACTIVITIES:        Net income $23,655  $160,658 Adjustments to reconcile net income to netcash provided by (used in) operating activities:        Depreciation  74,723   88,425 Amortization  6,381   7,107 Tax benefit from stock option exercise  2,941   0 Changes in working capital components:        Trade receivables  (71,099)  (10,231)Inventories  28,315   (37,795)Prepaid expenses and other assets  (81,721)  (60,701)Income taxes receivable  (22,305)  0 Accounts payable  30,939   162,458 Accrued liabilities  (104,681)  34,417 Income taxes payable  (30,169)  (90,822)       Net cash provided by (used in)operating activities  (143,021)  253,516                 CASH FLOWS FROM INVESTINGACTIVITIES:        Purchase of property and equipment  (36,966)  (66,049)Purchase of intangibles  (5,469)  (1,440)Proceeds on sales of marketable securities  42,695   74,346        Net cash provided by (used in)investing activities  260   6,857                 CASH FLOWS FROM FINANCINGACTIVITIES:        Proceeds from exercise of stock options  75,363   75,445                 NET INCREASE (DECREASE) IN CASHAND CASH EQUIVALENTS  (67,398)  335,818          CASH AND CASH EQUIVALENTS ATBEGINNING OF PERIOD  2,737,460   1,507,794                 CASH AND CASH EQUIVALENTS ATEND OF PERIOD $2,670,062  $1,843,612                 SUPPLEMENTAL DISCLOSURES OFCASH FLOW INFORMATION:        Income taxes paid $40,643  $149,588        
See notes to financial statements.
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**IKONICS CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
(Unaudited)
1.  Notes to Financial Statements    The balance sheet of IKONICS Corporation (the “Company”) as of March 31, 2005, and therelated statements of operations for the three months ended March 31, 2005 and 2004, andcash flows for the three months ended March 31, 2005 and 2004, have been prepared withoutbeing audited.    In the opinion of management, these statements reflect all adjustments (consisting of onlynormal recurring adjustments) necessary to present fairly the financial position of IKONICSCorporation as of March 31, 2005, and the results of operations and cash flows for allperiods presented.    Certain information and footnote disclosures normally included in financial statementsprepared in accordance with accounting principles generally accepted in the United States ofAmerica, have been condensed or omitted. Therefore, these statements should be read inconjunction with the financial statements and notes thereto included in the Company’s AnnualReport on Form 10-KSB for the year ended December 31, 2004.    The results of operations for interim periods are not necessarily indicative of results thatwill be realized for the full fiscal year. 2.  Inventory    The major components of inventory at March 31, 2005 and December 31, 2004 are as follows:           Mar 31, 2005  Dec 31, 2004 Raw materials $1,306,373  $1,260,457 Work-in-progress  238,986   268,419 Finished goods  993,154   1,019,952 Reduction to LIFO cost  (365,546)  (347,546)        Total Inventory $2,172,967  $2,201,282        
3.  Stockholders’ Equity               Three Months Ended       Mar 31, 2005 Total Stockholders’ Equity-December 31, 2004     $7,414,216 Net income $          23,655     Unrealized gain on available-for-sale investments  2,532     Comprehensive income      26,187 Issuance of 16,700 shares of common stockupon exercise of options      78,304         Total Stockholders’ Equity-March 31, 2005     $7,518,707         
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4.  Earnings Per Common Share (EPS)    Basic EPS is calculated using net income divided by the weighted average of common sharesoutstanding during the quarter. Diluted EPS is similar to Basic except that the weightedaverage 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 asthose shares subject to stock options, had been issued.    Shares used in the calculation of diluted EPS are summarized below:           Three Months Ended   Mar 31, 2005  Mar 31, 2004 Weighted average common shares outstanding  1,930,783   1,878,140 Dilutive effect of stock options  53,268   54,414        Weighted average common and common equivalent shares outstanding  1,984,051   1,932,554        
   Options to purchase 177,692 and 231,579 shares of common stock were outstanding atMarch 31, 2005 and 2004, respectively. 5.  Employee Stock Plan    The Company has a stock-based compensation plan. The Company accounts for this plan underthe recognition and measurement principles of APB Opinion No. 25, *Accounting for StockIssued to Employees,*and related interpretations. Accordingly, no stock-based employeecompensation cost has been recognized, as all options granted under this plan had anexercise price equal to the market value of the underlying common stock on the date ofgrant. The following table illustrates the effect on net income and earnings per share hadcompensation cost for the stock-based compensation plan been determined based on the grantdate fair values of awards (the method described in FASB Statement No. 123, *Accounting forStock-Based Compensation*):           Three Months Ended   Mar 31, 2005  Mar 31, 2004 Net income:        As reported $23,655  $160,658 Deduct total stock-based employee compensationexpense determined under fair value based methodfor all awards  3,914   8,865        Pro forma $19,741  $151,793                 Basic earnings per share:        As reported $0.01  $0.09 Pro forma $0.01  $0.08          Diluted earnings per share:        As reported $0.01  $0.08 Pro forma $0.01  $0.08 
6.  Intangible Assets    Intangible assets consist primarily of patents, licenses and covenants not to competearising from business combinations. Intangible assets are amortized on a straight-linebasis over their estimated useful lives or terms of their agreements. Estimatedamortization expense for each of the next five years is $25,000annually. In connection with license agreements, the Company has agreed to pay royaltiesranging from 3% to 5% on the future sales of products subject to the agreements.
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IKONICS CORPORATION
     *The information presented below in Management’s Discussion and Analysis of Financial Conditionand Results of Operations contains forward-looking statements within the meaning of the safe harborprovisions of Section 21E of the Securities Exchange Act of 1934, as amended. Such statements aresubject to risks and uncertainties, including those discussed under “Factors that May Affect FutureResults” below, that could cause actual results to differ materially from those projected. Becauseactual results may differ, readers are cautioned not to place undue reliance on theseforward-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 amaterial effect on the Company’s financial results of operations during the first quarter of 2005and the same period of 2004. It should be read in connection with the Company’s unauditedfinancial 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 summarizedbelow, are forward-looking statements within the meaning of the safe harbor provisions of Section21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties, andactual results may differ. Factors that could cause actual results to differ include thoseidentified below.
 •  *The Company’s belief that the quality of its receivables is high and that stronginternal controls are in place to maintain proper collections—*This belief may beimpacted by domestic economic conditions, by economic, political, regulatory or socialconditions in foreign markets, or by the failure of the Company to properly implementor maintain strong internal controls.  •  *The belief that the Company’s current financial resources, cash generated fromoperations and the Company’s capacity for debt and/or equity financing will besufficient to fund current and anticipated business operations and capitalexpenditures. The belief that the Company’s low debt levels and available line ofcredit make it unlikely that a decrease in product demand would impair the Company’sability to fund operations—*Changes in anticipated operating results, creditavailability, equity market conditions or the Company’s debt levels may further enhanceor 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 expendituresand that capital expenditures will be funded with cash generated from operatingactivities—*This expectation may be affected by changes in the Company’s anticipatedcapital expenditure requirements resulting from unforeseen required maintenance orrepairs. The funding of planned or unforeseen expenditures may also be affected bychanges in anticipated operating results resulting from decreased sales or increasedoperating expenses or by other unexpected events affecting the Company’s financialposition.  •  *The Company’s belief that its vulnerability to foreign currency fluctuations andgeneral economic conditions in foreign countries is not significant—*This belief may beimpacted by economic, political and social conditions in foreign markets, changes inregulatory and competitive conditions, a change in the amount or geographic focus ofthe Company’s international sales, or changes in purchase or sales terms.  •  *The Company’s plans to continue to invest in research and development efforts,expedite internal product development and invest in technological alliances, as well asthe expected focus and results of such investments—*These plans and expectations may beimpacted by
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    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 orother changes in competitive or market conditions.  •  *The Company’s efforts to grow its international business—*These efforts may beimpacted by economic, political and social conditions in current and anticipatedforeign markets, regulatory conditions in such markets, unanticipated changes inexpenses or sales, changes in competitive conditions or other barriers to entry orexpansion.  •  *The Company’s belief as to future activities that may be undertaken to expand theCompany’s business—*Actual activities undertaken may be impacted by general marketconditions, competitive conditions in the Company’s industry, unanticipated changes inthe Company’s financial position or the inability to identify attractive acquisitiontargets or other business opportunities.
**Critical Accounting Policies**
     The Company prepares its financial statements in conformity with accounting principlesgenerally accepted in the United States of America. Therefore, the Company is required to makecertain estimates, judgments and assumptions that the Company believes are reasonable based uponthe information available. These estimates and assumptions affect the reported amounts of assetsand liabilities at the date of the financial statements and the reported amounts of revenues andexpenses during the periods presented. The accounting policies, which IKONICS believes are themost critical to aid in fully understanding and evaluating its reported financial results, includethe following:
     *Accounts Receivable.*The Company performs ongoing credit evaluations of its customers andadjusts credit limits based upon payment history and the customer’s current credit worthiness, asdetermined by review of the current credit information. The Company monitors collections andpayments from its customers and maintains a provision for estimated credit losses based uponhistorical experience and any specific customer collection issues that have been identified. Whilesuch credit losses have historically been within expectations and the provisions established, theCompany cannot guarantee that it will continue to experience the same collection history that hasoccurred in the past. The Company’s general payment terms are net 30-45 days for domesticcustomers and net 60-90 days for foreign customers.
     *Inventory.*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 recordsreductions in cost when required.
     *Deferred Tax Assets.*At March 31, 2005, the Company had approximately $208,000 of netdeferred tax assets. The net deferred tax assets result primarily due to timing differences inintangible assets and property and equipment. The Company has recorded a $46,000 valuationallowance to reserve for items that will more likely than not be realized. The Company hasdetermined that it is more likely than not that the remaining net deferred tax assets reflected onthe balance sheet will be realized and that an additional valuation allowance for such assets isnot currently required.
     *Revenue Recognition.*The Company recognizes revenue on products when title passes, which isusually upon shipment. Freight billed to customers is included in sales. Shipping costs areincluded in cost of goods sold.
**Results of Operations**
***Quarter Ended March 31, 2005 Compared to Quarter Ended March 31, 2004***
     *Sales.*Compared to the same period in 2004, the Company’s sales dropped 1.6% during the firstquarter of 2005. Sales during the first quarter of 2005 were $3,329,000 versus sales of$3,383,000 during the first quarter of 2004. Weaker international sales were partially offset bystronger domestic sales. The weaker international sales were partially due to timing of shipmentsand slower activity in Asian markets. The domestic sales growth was related to new sales generatedby IKON SignEtch.
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     *Cost of Goods Sold*. Cost of goods sold during the first quarter of 2005 was $1,931,000, or58.0% of sales, compared to $1,888,000, or 55.8% of sales, during the same period in 2004*.*Theincrease in the cost of sales in the first quarter of 2005 as a percentage of sales reflects a lessfavorable product mix in addition to rising raw material costs.
     *Selling, General and Administrative Expenses*. Selling, general and administrative expensesincreased to $1,238,000, or 37.2% of sales, in the first quarter of 2005, from $1,128,000, or 33.3%of sales, for the same period in 2004. The first three months of 2005 reflected higheradministrative expenses related to compliance with the Sarbanes-Oxley Act. The Company has alsoincurred an additional $110,000 in sales and marketing expenses related to the two product lines,IKON SignEtch and IKONImage.
     *Research and Development Expenses*. Research and development expenses during the first quarterof 2005 were $155,000, or 4.7% of sales, versus $151,000, or 4.4% of sales, for the same period in2003. The increase is due to higher trial production costs and additional research and developmentstaff.
     *Interest Income.*Interest income for the first quarter of 2005 was $10,000 compared to $4,000for the same period in 2004. The interest income increase is due to an increase in interest ratesand a larger investment balance. Interest is earned primarily from government obligation revenuebonds of various municipalities and school districts.
     *Income Taxes.*The income tax provision differs from the expected tax expense primarily due tothe benefits of the foreign sales exclusion, state income taxes and federal tax credits forresearch and development. During the first quarter of 2005, the Company performed a study of itsresearch and development activities resulting in tax credits totaling $15,000. The tax creditsresulted in a net income tax benefit during the period of $9,000. For the same period in 2004,income tax expense was $59,000, or an effective rate of 26.7%.
**Liquidity and Capital Resources**
     The Company has financed its operations principally with funds generated from operations andemployee stock option exercises. These funds have been sufficient to cover the Company’s normaloperating expenditures, annual capital requirements, and research and development expenditures.
     Cash and cash equivalents were $2,670,000 and $1,844,000 at March 31, 2005 and March 31, 2004,respectively. The Company used $143,000 in cash from operating activities during the three monthsended March 31, 2005, compared to generating $254,000 in cash from operating activities during thesame period in 2004. The decrease in cash generated from operating activities is primarily due tothe decrease in net income and changes in working capital components as discussed below. Cashprovided by operating activities is primarily the result of net income adjusted for non-cashdepreciation, amortization, and certain changes in working capital components.
     During the first three months of 2005, trade receivables increased by $71,000. The increasein receivables was driven by the timing of collections. The Company believes that the quality ofits receivables is high and that strong internal controls are in place to maintain propercollections. Inventory levels decreased $28,000 due to the timing of raw material shipments.Prepaid expenses increased $79,000, reflecting insurance costs prepaid in the first quarter of2005. Accounts payable increased $31,000, primarily as a result of the timing of payments tosuppliers for inventory. Accrued expenses decreased $105,000, primarily reflecting the timing ofcompensation payments. Income taxes payable decreased $30,000 due to payment of 2004 taxes duringthe first quarter of 2005 and lower first quarter 2005 income levels.
     For the first three months of 2005, the Company received $300 in net cash flows from investingactivities compared to $7,000 received from investing activities for the same period in 2004.During the first three months of 2005, the Company received $43,000 from the sale of marketablesecurities and purchased $37,000 of plant equipment and building upgrades to improve efficiency andreduce operating costs. The Company also incurred $5,000 in patent application costs that theCompany records as an asset and amortizes upon successful completion of the application process.During the first three months of 2004, the Company received $74,000 from the sale of marketablesecurities, purchased $66,000 in capital equipment, and incurred $1,000 in patent applicationcosts.
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     During the first three months of 2005, $78,000 in proceeds from financing activities wererealized from 16,700 shares of common stock issued upon the exercise of stock options compared to$75,000 received during the first three months of 2004 from 19,946 shares of common stock issuedupon the exercise of stock options
     A bank line of credit exists providing for borrowings of up to $1,250,000. Borrowings underthis line of credit are collateralized by accounts receivable and inventory and bear interest at2.25 percentage points over the 30-day LIBOR rate. The Company did not utilize this line of creditduring the quarter and there were no borrowings outstanding as of March 31, 2005. The line ofcredit was also not utilized during 2004 and there were no borrowings outstanding under this lineas of March 31, 2004.
     The Company believes that current financial resources, its line of credit, cash generated fromoperations and the Company’s capacity for debt and/or equity financing will be sufficient to fundcurrent and anticipated business operations. The Company also believes that its low debt levelsand available line of credit make it unlikely that a decrease in demand for the Company’s productswould impair the Company’s ability to fund operations.
**Capital Expenditures**
     Through March 31, 2005, the Company has spent $37,000 on capital expenditures during 2005.This spending primarily consists of plant equipment upgrades and building improvements to improveefficiency and reduce operating costs.
     The Company plans for additional capital expenditures during 2005 to include ongoingmanufacturing equipment upgrades, development equipment to modernize the capabilities and processesof the Company’s research and development laboratory to improve measurement and quality controlprocesses. Total 2005 planned capital expenditures are expected to be less compared to prior yearsand are expected to be funded with cash generated from operating activities.
**International Activity**
     The Company markets its products to approximately 83 countries in North America, Europe, LatinAmerica, Asia and other parts of the world. Foreign sales were approximately 30% of total salesduring the first quarter 2005 and 33% of total sales for the same period in 2004. Fluctuations ofcertain foreign currencies have not significantly impacted the Company’s operations because theCompany’s foreign sales are not concentrated in any one region of the world. The Company believesits vulnerability to uncertainties due to foreign currency fluctuations and general economicconditions in foreign countries is not significant.
     The Company’s foreign transactions are primarily negotiated, invoiced and paid in U.S. dollarswhile a portion is transacted in Euros. IKONICS has not implemented a hedging strategy to reducethe risk of foreign currency translation exposures, which management does not believe to besignificant based on the scope and geographic diversity of the Company’s foreign operations as ofMarch 31, 2005.
**Future Outlook**
     IKONICS has invested on average over 4% of its sales dollars for the past few years inresearch and development. The Company plans to maintain its efforts in this area and expediteinternal product development as well as form technological alliances with outside experts to ensurecommercialization of new product opportunities.
     In addition to its traditional emphasis on domestic markets, the Company will continue effortsto grow its business internationally by attempting to develop new markets and expanding marketshare 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 marketingopportunities.
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**Recent Accounting Pronouncements**
     In December 2004, the Financial Accounting Standards Board (FASB) issued Statement ofFinancial Accounting Standards No. 123 (revised 2004) “Share-Based Payment” (SFAS 123R). SFAS 123Rreplaces FASB Statement No. 123 “Accounting for Stock-Based Compensation”, and supersedes APBOpinion No. 25 “Accounting for Stock Issued to Employees.” The statement establishes standards foraccounting for share-based payment transactions. Share-based payment transactions are those inwhich an entity exchanges its equity instruments for goods or services, or in which an entityincurs liabilities in exchange for goods or services, that are based on the fair value of theentity’s equity instruments or that may be settled by the issuance of those equity instruments.SFAS 123R covers a wide range of share-based compensation arrangements including share options,restricted share plans, performance-based awards, share appreciation rights and employee sharepurchase plans. SFAS 123R requires a public entity to measure the cost of employee servicesreceived in exchange for an award of equity instruments based on the fair value of the award on thegrant date (with limited exceptions). That cost will be recognized in the entity’s financialstatements over the period during which the employee is required to provide services in exchangefor the award. The statement will be effective for the Company’s first quarter of 2006. SFAS 123Rallows two methods for determining the effects of the transition. The Company has not yetcompleted its study of the transition methods, made any decisions about how it will adopt SFAS123R, or determined what option-pricing model is most appropriate for future awards.
**ITEM 3. Controls and Procedures**
     As of the end of the period covered by this report, the Company conducted an evaluation, underthe supervision and with the participation of the principal executive officer and principalfinancial officer, of the Company’s disclosure control and procedures (as defined in Rules13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based onthis evaluation, the principal executive officer and principal financial officer concluded that theCompany disclosure controls and procedures are effective to ensure that information required to bedisclosed by the Company in reports that it files or submits under the Exchange Act is recorded,processed, summarized and reported within the time periods specified in SEC rules and forms.
     There was no change in the Company’s internal control over financial reporting identified inconnection with the evaluation required by Rule 13a-15(d) and Rule 15d-15(d) of the Exchange Actthat occurred during the period covered by this report that has materially affected, or isreasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II. OTHERINFORMATION
**ITEM 1. Legal Proceedings**
     None
**ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds**
     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**
     The following exhibits are filed as part of this Quarterly Report on Form 10-QSB for thequarterly period ended March 31, 2005:   Exhibit Description3.1 Restated Articles of Incorporation of Company, as amended.1   3.2 By-Laws of the Company, as amended.1   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
     Copies of Exhibits will be furnished upon request and payment of the Company’s reasonableexpenses in furnishing the Exhibits.
1 Incorporated by reference to the like numberedExhibit to the Company’s Registration Statement on Form 10-SB (File No.000-25727).
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IKONICS CORPORATION
**SIGNATURES**
     In accordance with the requirements of the Securities Exchange Act of 1934, the registrantcaused this report to be signed on its behalf by the undersigned, thereunto duly authorized.      IKONICS CORPORATION