IKONICS Corporation

2017 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.

Issue link: http://ikonics.uberflip.com/i/955776

Contents of this Issue

Navigation

Page 16 of 46

15 Liquidity and Capital Resources Outside of the 2016 building expansion, for which $3.4 million in financing was obtained, 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 $930,000 and $1.0 million at December 31, 2017 and 2016, respectively. In addition to its cash, the Company held $2.9 million and $3.2 million of short-term investments as of December 31, 2017 and 2016, respectively. The Company generated $205,000 in cash from operating activities during 2017, compared to generating $917,000 of cash from operating activities in 2016. Cash provided by operating activities is primarily the result of the net loss adjusted for non-cash depreciation and amortization, deferred taxes, and certain changes in working capital components discussed in the following paragraph. During 2017, improved collections resulted in a $146,000 trade receivables decrease. Inventories increased by $100,000 related to an increase in finished goods inventories compared to 2016. Accounts payable decreased from 2016 to 2017 by $409,000 due to the timing of payments to and purchases from vendors, mainly related to raw materials. Prepaid expenses and other assets decreased $194,000 from 2016 to 2017. The decrease is mainly related to 2016 prepayments on equipment being manufactured that was sold in 2017. Compared to 2016, accrued expenses decreased $33,000 reflecting the timing of compensation payments. Income taxes receivables decreased $64,000 due to the timing of estimated 2017 tax payments compared to the calculated 2017 tax liability. During 2016, inventories decreased by $134,000 related to a decrease in raw material inventories compared to 2015. The timing of collections resulted in a $171,000 trade receivables increase in 2016 versus 2015. Accounts payable increased from 2015 to 2016 by $310,000 due to the timing of payments to and purchases from vendors. Prepaid expenses and other assets increased $276,000 from 2015 to 2016. The increase is mainly related to prepayments on equipment manufactured in 2016 that were completed and sold in 2017. Compared to 2015, accrued expenses increased $74,000 reflecting the timing of compensation payments and an increase in the accrual for medical expenses. Income taxes receivable decreased $37,000 due to the timing of estimated 2016 tax payments compared to the calculated 2016 tax liability. During 2017, cash provided by investing activities was $115,000. The Company purchased 16 certificates of deposits totaling $3.9 million. Eighteen certificates of deposits totaling $4.2 million matured during 2017. The Company's purchases of property and equipment of $230,000 in 2017 were mainly for improvements to production and process capabilities and two vehicles. Also, during 2017, the Company incurred $39,000 in patent application costs that the Company has recorded as an asset and will amortize upon successful completion of the application process. In addition, the Company sold three vehicles for $33,000. During 2016, cash used in investing activities was $5.3 million. The Company purchased 19 certificates of deposits totaling $4.4 million. Five certificates of deposits totaling $1.1 million matured during 2016. The Company's cash purchases of property and equipment were $2.1 million in 2016. Total building expansion expenditures for 2016 were $1,393,000. Expenditures on the new ERP system in 2016 were $281,000. The remaining capital expenditures were mainly for upgrades to improve AMS production and process capabilities. Also during 2016, the Company incurred $27,000 in patent application costs that the Company records as an asset and amortizes upon successful completion of the application process. In addition, the Company sold equipment for $21,000. Related to the Company's loan, the Company made principal payments of $140,000 in 2017. During 2017, the Company received $2,000 from financing activities from the issuance of 250 shares of common stock due to the exercise of stock options, while the Company repurchased 35,450 shares of its own stock for $300,000. During 2016, the Company received $3.2 million from financing activities. The Company secured a loan of $3.4 million in which the proceeds were used to finance the expansion of its AMS facility. Related to securing the loan, the Company paid $139,000 in debt issuance costs and made principal payments of $79,000. During 2016, the Company received $4,000 from the issuance of 500 shares of common stock pursuant to the exercise of stock options. On April 1, 2016, the Company entered into a financing agreement to borrow $3.4 million. The proceeds from the loan were used to finance the construction of a 27,300-square foot building, as well as related equipment for use in the Company's manufacture of sound deadening technology used in the aerospace industry and products consisting of

Articles in this issue

Archives of this issue

view archives of IKONICS Corporation - 2017 Annual Report