1.	Basis of Presentation

The condensed balance sheet of IKONICS Corporation (the “Company”) as of

June 30, 2020,

and the related condensed statements of operations for the

three

and

six

months ended

June 30, 2020

and

2019,

the condensed statements of stockholders' equity for the

three

and

six

months ended

June 30, 2020

and

2019,

and condensed cash flows for the

six

months ended

June 30,

2020

and

2019,

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

June 30, 2020,

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

-K for the year ended

December 31, 2019.

The results of operations for interim periods are

not

necessarily indicative of results that will be realized for the full fiscal year.

The Company relies on cash flow generated from operations and available borrowings under its bank line of credit to fund its working capital and other operating and investing needs. The Company's ability to borrow under the bank line of credit is based on its continued compliance with its debt service coverage ratio covenant, as defined.

The full extent of the effect of the COVID-

pandemic on the Company's customers, supply chain and business cannot be reasonably assessed at this time although the Company expects its full year

2020

results of operations to be adversely affected. The Company has developed a plan to mitigate the impact of COVID-

which includes the implementation of a series of specific and identified cost reductions, in addition to actions already taken, including further reducing its direct and indirect operating costs. The impact of COVID-

on the Company's operating results will depend on future developments, which are highly uncertain and cannot be predicted, including governmental and business reactions to the pandemic.

Based on the Company's current cash position, and expected future cash flows, the Company believes it will have sufficient cash to funds its operations beyond

twelve

months from the date of the issuance of the accompanying unaudited condensed consolidated financial statements.

The Company has evaluated subsequent events occurring after the date of the financial statements for events requiring recording or disclosure in the financial statements. As a result of the novel strain of COVID-

pandemic effect on the Company's business as well as the businesses of its customers and suppliers, a significant decline in the Company's business has occurred and that decline is expected to continue. Although the Company continues to operate, the Company has experienced a significant decrease in sales activity, and the future financial impact and duration cannot be reasonably estimated at this time.