Climate Change Data

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Loss of a major customer in the Micro-Machining Aerospace business.
• High costs related to product development in Micro-Machining Aerospace business.
• Slow development of DTX business due to technical issues.
• Competition in highly competitive industries with rapid technological and market developments.
• Risks related to sales to government subcontractors, including potential delays or cancellations of planned sales and additional regulatory compliance costs and obligations.
• Increases in prices and declines in the availability of raw materials.
• Dependence on two manufacturers to make and sell DTX printers.
• Inability to attract and retain qualified personnel.

Mitigation Strategies

• Transitioning to more profitable production parts in Micro-Machining Aerospace business.
• Adding technical staff and bringing in a veteran of the aerospace industry to lead the Micro-Machining Aerospace business.
• Making a major effort in the 3D printing and prototyping arena with DTX technology.
• Expanding Micro-Machining capacity and patent applications.
• Continuing to make progress on its DTX business initiatives, including working with customers on training, production optimization, and product improvements.
• Modifying DTX technology to enter the market for prototyping and 3D printing.
• Maintaining efforts in research and development and forming technological alliances with outside experts to commercialize new product opportunities.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• New technologies (DTX and AMS) might not achieve market acceptance.
• Adverse changes to global economic conditions, particularly in aerospace and automotive industries.
• Risks related to sales to government subcontractors (potential delays or cancellations).
• Significant competition.
• Failure to comply with environmental laws and regulations.
• Inability to enforce or protect intellectual property rights.
• Risks related to sales through distributors and other third parties.
• Inability to attract and retain qualified personnel.
• Increases in prices and declines in the availability of raw materials.
• Lack of an active trading market for the company's shares.
• Dependence on single or limited source suppliers.
• Dependence on one manufacturer for DTX printers.
• Fluctuations in the price of common stock.
• Quarterly and annual fluctuations in operating results.

Mitigation Strategies

• Investing significant resources in research and development for DTX and AMS.
• Expanding AMS capacity and patent applications.
• Working with DTX customers on training, production optimization, and product improvements.
• Modifying DTX technology to enter the prototyping and 3D printing market.
• Aggressive strategies to grow market share in Domestic Chromaline Screen Print Product and IKONICS Imaging units.
• Efforts to grow business internationally.
• Maintaining efforts in research and development and forming technological alliances.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Strong U.S. dollar adversely affected export sales.
• Change of glass supplier impacted IKONICS Imaging sales.

Mitigation Strategies

• Developing new businesses and new markets based on core technologies.
• Expanding AMS facility to meet anticipated demand.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Large unforeseen increase in health care expenses in the fourth quarter of 2016, resulting in a loss of $0.03 per diluted share.

Mitigation Strategies

• IKONICS utilizes a self-funded medical insurance plan and mitigates part of the risk under this self-funded plan by purchasing both specific and aggregate stop-loss insurance coverage.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Temporary slowdown of orders from largest aerospace customer due to a manufacturing problem.
• More competitive market for artwork film sales along with overall soft market conditions resulted in a decrease in Domestic sales.
• IKONICS Imaging sales decreased by $231,000 to $4.0 million in 2017 as sales were negatively affected by some customers moving to competing technologies.
• AMS sales decreased by $296,000, or 28.4%, in 2017 versus 2016 due to the temporary decrease in orders from AMS’s largest customer during the second quarter of 2017.
• Strong U.S. dollar has made international growth challenging.

Mitigation Strategies

• Cost-reduction initiative.
• Entry into the dye-sublimation market with a patent-pending product.
• Efforts to diversify business to become less dependent on screen-print chemistry and decorative sandblasting and to enter larger and more dynamic markets (aerospace, automotive, electronics).
• AMS capacity increased with a 27,300 square foot expansion.
• Pursuing DTX-related business initiatives.
• Working on production improvements to enhance customer offerings.
• Developing new products and business relationships in Domestic and IKONICS Imaging units.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Record cold weather limiting shipment of freezable products.
• Delays in international orders due to cold weather.

Supply Chain Management

Climate-Related Risks & Opportunities

Sustainable Products & Innovation

• IKONART stencil system
• Patented imaging system (with AKK GmbH)
• Water transfer film

Environmental Metrics

ESG Focus Areas

• Safety
• Sustainability

Social Achievements

• Implemented safety protocols at the outset of the COVID-19 pandemic, limiting the impact of COVID-19 on both employees and operations.

Climate Goals & Targets

Environmental Challenges

• COVID-19 pandemic negatively affected operations, supply chain, and workforce, causing business disruptions.
• Slow aerospace and aviation industry recovery negatively impacted the AMS division.
• $2.7 million outstanding loan payable.
• Decreased demand for products and services due to COVID-19.
• Lower sales and production volume impacting gross profit margins.
• Competition in highly competitive industries with rapid technological and market developments.

Mitigation Strategies

• Implemented cost control and cash management measures.
• Received and had forgiven a Paycheck Protection Program (PPP) loan under the CARES Act.
• Implemented cost reduction efforts including reducing workforce by approximately 30%, temporary reductions in board and officer compensation, temporary suspension of 401(k) contributions, and elimination of non-essential expenditures.
• Built cash through prudent financial management in 2020.
• Strong working capital position mitigated the adverse effect of the loan recall.

Supply Chain Management

Climate-Related Risks & Opportunities