IKONICS Corporation

2014 IKONICS Annual Report

Through processes based in photochemistry, abrasive etching, chemical etching and other technologies, IKONICS participates in a diverse spectrum of markets. From traditional and high-tech screen printing, to decorative and industrial etching.

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1 Letter to SharehoLderS The past year saw two of our new initiatives continue to gain momentum and position themselves for future growth. For the year, IKONICS Corporation experienced record sales of $18,500,000, a 6% percent increase over 2013. Earnings were down 5% from 2013 to $649,000, or $0.32 per diluted share. Fourth quarter sales for our two new businesses – DTX, which works primarily with the automotive industry, and Advanced Materials Solutions (AMS), which serves the aerospace and electronics industries, were strong compared to the same quarter in 2013, and I believe sales for these businesses will continue to grow. Our traditional Domestic screen print chemical business performed well for the year, helped by a partial return of manufacturing from China to the U.S. Our Export business was hurt by the same reshoring and the strength of the U.S. dollar, resulting in both declining sales and margins. I anticipate the strong dollar and weakening Asian markets to continue to impact our export sales in 2015. In 2014, our IKONICS Imaging business unit had a very large film stocking order resulting in a 21% increase in IKONICS Imaging sales for the year. Although this remains a profitable and robust business, I do not expect a similar large stocking order in 2015. AMS incurred increasing expenses in 2014 as we geared up to meet anticipated orders. Beginning in 2015, these orders have finally begun to arrive, and we now have three orders in house which I believe will be multiyear commitments. Additional orders are pending. These orders can always be canceled, but being chosen as a supplier at the beginning of a program often leads to being a supplier for the life of the program. Some of these programs have a life expectancy of more than 20 years. I believe in 2015 we will see accelerating growth in sales with profits beginning in 2016. Our AMS electronic wafer business also continues to grow. In the 4th quarter of 2014, our DTX business, which supplies texturing and prototyping technology primarily to the automotive industry, turned its first profit with a sales increase of 132% over the same quarter of 2013. Although there may be some bumps in that growth rate, we are seeing broader market acceptance of this technology and are both selling system consumables and printing transfer and prototype film in-house and selling them worldwide. I believe that our strategic plan to gain new markets through creative combinations of our core technology platforms of ultraviolet photochemistry, film coating and construction, technical abrasive etching, and industrial inkjet printing is beginning to pay off and will make IKONICS a unique and profitable technology company in the years ahead. WILLIAM C. ULLAND Chairman, President & CEO March 24, 2015

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