SCI Engineered Materials, Inc 10-Q for FY2025 Q3
SCI Engineered Materials, Inc. (SCIA)
About this 10-Q
SCI Engineered Materials, Inc filed this 10-Q on October 31, 2025, covering the quarter ended September 30, 2025 (FY2025 Q3).
Headline figures
Quarter ended September 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $5.29M
- up 36.2% from $3.88M a year earlier
- Net income
- $510.28K
- up 41.5% from net income of $360.58K a year earlier
- Diluted EPS
- $0.11
- up 37.5% from $0.08 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
(Address of principal executive offices) (Zip Code)
(
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| | | | |
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ | Smaller reporting company | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
FORM 10-Q
SCI ENGINEERED MATERIALS, INC.
Table of Contents
| Page No. | |
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Condensed Balance Sheets as of September 30, 2025 (unaudited) and December 31, 2024 | 3 | |
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5 | ||
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6 | ||
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Condensed Statements of Cash Flows for the Nine months ended September 30, 2025 and 2024 (unaudited) | 7 | |
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8 | ||
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 | |
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Item 3. | Quantitative and Qualitative Disclosures About Market Risk | N/A |
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18 | ||
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PART II. OTHER INFORMATION | ||
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Item 1. | Legal Proceedings | N/A |
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Item 1A. | Risk Factors | N/A |
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | N/A |
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Item 3. | Defaults Upon Senior Securities | N/A |
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Item 4. | Mine Safety Disclosures | N/A |
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Item 5. | Other Information | N/A |
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20 | ||
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21 | ||
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2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SCI ENGINEERED MATERIALS, INC.
CONDENSED BALANCE SHEETS
ASSETS
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| September 30, |
| December 31, | ||
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| 2025 |
| 2024 | ||
| | (UNAUDITED) | | | | |
Current Assets | | | | | | |
Cash and cash equivalents | | $ | | | $ | |
Investments - marketable securities, short term | | | — | | | |
Accounts receivable | | | | | | |
Trade, less allowance for doubtful accounts of $ | |
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Tax - Employee Retention Credit | | | — | | | |
Other | |
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Inventories, net | |
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Prepaid purchase orders | | | | | | |
Prepaid expenses | |
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Total current assets | |
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Property and Equipment, at cost | |
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Machinery and equipment | |
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Furniture and fixtures | |
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Leasehold improvements | |
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Construction in progress | |
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Less accumulated depreciation and amortization | |
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Property and equipment, net | |
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Other Assets | | | | | | |
Investments, net - marketable securities, long term | | | | | | |
Right of use asset, net | | | | | | |
Other assets | |
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Total other assets | | | | | | |
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TOTAL ASSETS | | $ | | | $ | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
SCI ENGINEERED MATERIALS, INC.
CONDENSED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
| September 30, |
| December 31, | ||
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| 2025 |
| 2024 | ||
| | (UNAUDITED) | | | | |
Current Liabilities | | | | | | |
Operating lease obligations, current portion | | $ | | | $ | |
Accounts payable | |
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Customer deposits | |
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Accrued compensation | |
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Accrued expenses and other | |
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Total current liabilities | |
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Deferred tax liability | | | | | | |
Operating lease obligations, net of current portion | | | | | | |
Total liabilities | |
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Shareholders' Equity | |
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Common stock, | |
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Additional paid-in capital | |
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Retained earnings (accumulated deficit) | |
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| ( |
Total shareholders' equity | |
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | $ | | | $ | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
SCI ENGINEERED MATERIALS, INC.
CONDENSED STATEMENTS OF INCOME
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(UNAUDITED)
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| Three Months Ended September 30, | | Nine Months Ended September 30, | | ||||||||
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| 2024 |
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| 2024 | | ||||
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Gross profit | |
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General and administrative expense | |
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Research and development expense | |
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Marketing and sales expense | |
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Income from operations | |
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Interest income, net | |
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Income before provision for income taxes | |
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Income tax expense | |
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NET INCOME | | $ | | | $ | | | $ | | | $ | | |
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Earnings per share - basic and diluted (Note 7) | |
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Income per common share | |
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Basic | | $ | | | $ | | | $ | | | $ | | |
Diluted | | $ | | | $ | | | $ | | | $ | | |
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Weighted average shares outstanding | |
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Basic | |
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Diluted | |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
5
SCI ENGINEERED MATERIALS, INC.
CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(UNAUDITED)
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| Additional |
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| | Common | | Paid-In | | Retained Earnings | | | | |||
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| Stock |
| Capital |
| (Accumulated Deficit) |
| Total | ||||
Balance 12/31/2024 | | $ | | | $ | | | $ | ( | | $ | |
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Common stock issued (Note 5) | |
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| — | |
| — | |
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Net income | |
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| — | |
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Balance 9/30/2025 | | $ | | | $ | | | $ | | | $ | |
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Balance 12/31/2023 | | $ | | | $ | | | $ | ( | | $ | |
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Common stock issued (Note 5) | |
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Net income | |
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Balance 9/30/2024 | | $ | | | $ | | | $ | ( | | $ | |
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Balance 6/30/2025 | | $ | | | $ | | | $ | | | $ | |
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Net income | |
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Balance 9/30/2025 | | $ | | | $ | | | $ | | | $ | |
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Balance 6/30/2024 | | $ | | | $ | | | $ | ( | | $ | |
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Net income | |
| — | |
| — | |
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Balance 9/30/2024 | | $ | | | $ | | | $ | ( | | $ | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
6
SCI ENGINEERED MATERIALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(UNAUDITED)
|
| Nine Months Ended September 30, | | ||||
|
| 2025 |
| 2024 | | ||
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | |
Net income | | $ | | | $ | | |
Adjustments to reconcile net income to net cash | |
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provided by (used in) operating activities: | |
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Depreciation and accretion | |
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Amortization of patents | |
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Stock based compensation | |
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Loss on disposal of equipment | |
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Deferred taxes | | | | | | | |
Inventory reserve | |
| ( | |
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Changes in operating assets and liabilities: | |
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Accounts receivable | |
| ( | |
| ( | |
Inventories | |
| ( | |
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Prepaid purchase orders | | | | | | | |
Prepaid expenses | | | | | | | |
Other assets | |
| — | |
| ( | |
Accounts payable | |
| ( | |
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Operating lease assets and liabilities, net | | | — | | | ( | |
Customer deposits | | | | | | ( | |
Accrued liabilities | |
| ( | |
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Net cash provided by operating activities | |
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CASH FLOWS FROM INVESTING ACTIVITIES | |
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Purchases of marketable securities | | | ( | | | ( | |
Proceeds from maturities of marketable securities | | | | | | | |
Purchases of property and equipment | |
| ( | |
| ( | |
Net cash used in investing activities | |
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CASH FLOWS FROM FINANCING ACTIVITIES | |
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Principal payments on finance lease obligations | |
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NET INCREASE IN CASH | | | | | | | |
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CASH - Beginning of year | |
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CASH - End of period | | $ | | | $ | | |
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | |
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Cash paid during the year for: | |
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Interest | | $ | — | | $ | | |
Income taxes | |
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SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES | |
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Increase in asset retirement obligation | | $ | | | $ | | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
7
SCI ENGINEERED MATERIALS, INC
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Business Organization and Purpose
SCI Engineered Materials, Inc. (“SCI,” “we” or the “Company”), an Ohio corporation, was incorporated in 1987. The Company operates in
Note 2. Summary of Significant Accounting Policies
Basis of Presentation - The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim condensed financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for fair presentation of the results of operations for the periods presented have been included. The condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2024. Interim results are not necessarily indicative of results for the full year.
Use of Estimates - The preparation of condensed financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition - The Company enters into contracts with its customers that generally represent purchase orders specifying general terms and conditions, order quantities and per unit product prices. The Company has determined that each unit of product purchased represents a separate performance obligation. The Company satisfies its performance obligations and recognizes revenue at a point in time when control of a unit of product is transferred to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products. For the majority of product sales, transfer of control occurs when the products are shipped from the Company’s manufacturing facility to the customer. The cost of delivering products to the Company’s customers is recorded as a component of the cost of products sold. Those costs may include the amounts paid to a third party to deliver the products. Any freight costs billed to and paid by a customer are included in revenue.
The Company considers collectability of amounts due under a contract to be probable upon inception of a sale based on an evaluation of the creditworthiness of each customer. The Company sells its products typically under agreements with payment terms of 30-60 days. The Company does not normally include extended payment terms or significant financing components in contracts with customers. The majority of the Company’s contracts have an obligation to transfer products within one year. Thus, the Company elects to use the practical expedient where incremental cost of obtaining a contract, such as commissions, is expensed when incurred because the amortization period for those costs is one year or less. The Company treats shipping and handling activities that occur after control of the product transfers as fulfillment activities and therefore does not account for shipping and handling costs as a separate performance obligation. Customer deposits are funds received in advance from customers and are recognized as revenue when the Company has transferred control of product to the customer. Product revenues are recognized upon shipment of goods as the customer has assumed the significant risks and rewards of ownership and the Company is entitled to payment at this point. Service revenues are recognized upon completion as the customer cannot realize the benefit of the service until it is fully completed.
Revenue from the photonics industry exceeded
8
SCI ENGINEERED MATERIALS, INC
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 2. Summary of Significant Accounting Policies (continued)
Contract assets – The following table presents changes in the Company’s contract assets during the nine months ended September 30, 2025 and 2024:
| | | Balance at beginning of period | | Billings | | | Payments received | | | Balance at end of period | |
Nine months ended September 30, 2025 |
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Accounts receivable | | $ | | | $ | | | $ | ( | | $ | |
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Nine months ended September 30, 2024 |
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Accounts receivable | | $ | | | $ | | | $ | ( | | $ | |
Customer deposits – Amounts that have been invoiced are recognized in accounts receivable, customer deposits or revenue, depending on whether the revenue recognition criteria have been met. Customer deposits represent amounts billed for which revenue has not yet been recognized. Customer deposits typically relate to uncompleted purchase orders which have been partially paid for by customers prior to performance of those services or transfer of control of the product. The following table presents changes in contract liabilities during the nine months ended September 30, 2025 and 2024:
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| | | Balance at beginning of period | | | Billings | | | Recognized revenue | | | Balance at end of period |
Nine months ended September 30, 2025 |
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Contract Liabilities: Customer deposits | | $ | | | $ | | | $ | ( | | $ | |
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Nine months ended September 30, 2024 |
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Contract Liabilities: Customer deposits | | $ | | | $ | | | $ | ( | | $ | |
Employee Retention Credit (ERC) - The Company qualified for federal government assistance through Employee Retention Credit provisions of the Consolidated Appropriations Act of 2021 during 2021 and 2020. The purpose of the Employee Retention Credit was to encourage employers to keep employees on the payroll, even if they were not working during the covered period because of the coronavirus outbreak. These funds were recorded in the Statements of Income as an offset to payroll costs in their respective expense lines and as a tax receivable on the balance sheets. A balance of $
Note 3. Recent Accounting Pronouncements
The Company has reviewed the accounting pronouncements issued by the Financial Accounting Standards Board during the three months ended September 30, 2025. Applicable pronouncements are adopted by the Company in accordance with the accounting guidance and definition. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s condensed financial statements.
9
SCI ENGINEERED MATERIALS, INC
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 4. Investments
Money market funds, where quoted prices are available in an active market, are classified within level 1 of the valuation hierarchy. The Company invested in a money market fund which had a fair value of $
As of September 30, 2025 and December 31, 2024, the Company held investments in corporate bonds rated BBB+ or higher, and U.S. government securities that are required to be measured for disclosure purposes at fair value on a recurring basis. The bonds and government securities are considered held-to-maturity and are recorded at amortized cost on the balance sheet. These investments are considered level 2 as detailed in the table below. The Company considers investments which will mature in the next twelve months and interest receivable on the long-term bonds as current assets. The remaining investments are considered non-current assets including the investment in marketable securities which the Company intends to hold longer than twelve months. The fair value of these investments was estimated using recently executed transactions and market price quotations. At September 30, 2025, the length of time until maturity of the bonds currently owned ranged from
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| Gross |
| Gross |
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| | Amortized | | Unrealized | | Unrealized | | | | |||
| | Cost | | Losses | | Gains | | Fair Value | ||||
September 30, 2025 |
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Corporate bonds | | $ | | | $ | ( | | $ | — | | $ | |
U.S. government treasuries | |
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| — |
Total investments | | $ | | | $ | ( | | $ | — | | $ | |
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Allowance for credit losses | |
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Total investments, net | | $ | | |
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December 31, 2024 | |
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Corporate bonds | | $ | | | $ | ( | | $ | — | | $ | |
U.S. government treasuries | |
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Total investments | | $ | | | $ | ( | | $ | | | $ | |
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Allowance for credit losses | |
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Total investments, net | | $ | | |
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The Company uses an “expected credit loss” measurement objective for the recognition of credit losses for held-to-maturity securities at the time the financial asset is originated or acquired. The Company monitors the credit quality of debt securities classified as held-to-maturity using their respective credit ratings and updates them on a quarterly basis with the latest assessment completed on September 30, 2025. Our allowance for credit losses was $
Note 5. Common Stock and Stock Options
Stock based compensation cost for all stock awards is based on the grant date fair value and recognized over the required service (vesting) period. Employees received compensation of
10
SCI ENGINEERED MATERIALS, INC
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 5. Common Stock and Stock Options (continued)
The cumulative status of options granted and outstanding at September 30, 2025 and December 31, 2024, as well as any options which became exercisable in connection with the Company’s stock option plans is summarized as follows:
Employee Stock Options
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| Weighted | |
| | | | Average | |
| | Stock | | Exercise | |
| | Options | | Price | |
Outstanding at January 1, 2024 |
| | | $ | |
Exercised | | ( | | $ | |
Outstanding at December 31, 2024 |
| | | $ | |
Outstanding at September 30, 2025 |
| | | $ | |
Options exercisable at December 31, 2024 |
| | | $ | |
Options exercisable at September 30, 2025 |
| | | $ | |
Exercise price for options was $
Note 6. Inventories
Inventories consisted of the following:
| | September 30, | | December 31, | ||
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| 2025 |
| 2024 | ||
Raw materials | | $ | | | $ | |
Work-in-process | |
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Finished goods | |
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Inventory reserve | |
| ( | |
| ( |
| | $ | | | $ | |
Note 7. Earnings Per Share
Basic income per share is calculated as net income divided by the weighted average of common shares outstanding. Diluted earnings per share is calculated as net income divided by the diluted weighted average number of common shares. Diluted weighted average number of common shares gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method. Diluted earnings per share exclude all diluted potential shares if their effect is anti-dilutive. Any common stock options listed in Note 5 that were out-of-the-money or anti-dilutive were excluded from diluted earnings per share. The following is provided to reconcile the earnings per share calculations:
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| Three months ended September 30, | | Nine months ended September 30, | | ||||||||
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| 2025 |
| 2024 |
| 2025 |
| 2024 | | ||||
Net income | | $ | | | $ | | | $ | | | $ | | |
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Weighted average common shares outstanding - basic | |
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Effect of dilution - stock options | |
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Weighted average shares outstanding - diluted | |
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11
SCI ENGINEERED MATERIALS, INC
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 8. Line of Credit
The Company renewed its line of credit with Fifth Third Bank for $
Note 9. Income Taxes
The provision for income taxes for the three and nine months ended September 30, 2025 and 2024 is based on our projected annual effective tax rate, adjusted for permanent differences and specific items that are required to be recognized in the period in which they are incurred. The effective tax rate was
The following table presents the income tax expense:
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| Three months ended September 30, | | Nine months ended September 30, | ||||||||
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| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Federal | | $ | | | $ | | | $ | | | $ | |
State and local | |
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| | $ | | | $ | | | $ | | | $ | |
Deferred tax assets and liabilities result from temporary differences in the recognition of income and expense for tax and financial reporting purposes. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred taxes. Accordingly, management determined that
12
SCI ENGINEERED MATERIALS, INC
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 10. Operating Lease
The Company entered into an operating lease with a third party on March 18, 2014 for its headquarters in Columbus, Ohio. The terms of the lease included monthly payments ranging from $
The Company extended the lease period for an additional
The following is a maturity analysis, by year, of the annual undiscounted cash outflows of the operating lease liabilities as of September 30, 2025:
| | | | | |
2025 | | $ | | | |
2026 | |
| | | |
2027 | | | | | |
2028 | | | | | |
2029 | |
| | | |
Total minimum lease payments | | | | | |
Less debt discount | | | | | |
Total operating lease obligations | | $ | | | |
| | 2025 | | 2024 | | ||
Right of use asset obtained in exchange for lease liability | | $ | — | | $ | | |
Operating cash outflows from operating leases - year-to-date | | $ | | | $ | | |
Weighted average remaining lease term – operating leases | |
| years |
| years | ||
Weighted average discount rate – operating leases | |
| | % |
| | % |
13
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the Condensed Financial Statements and Notes contained herein and with those in our Form 10-K for the year ended December 31, 2024.
Except for the historical information contained herein, the matters discussed in this Quarterly Report on Form 10-Q include certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Those statements include, but may not be limited to, all statements regarding our intent, belief, and expectations, such as statements concerning our future profitability and operating and growth strategy. Words such as “believe,” “anticipate,” “expect,” “will,” “may,” “should,” “intend,” “plan,” “estimate,” “predict,” “potential,” “continue,” “likely” and similar expressions are intended to identify forward-looking statements. Investors are cautioned that all forward-looking statements contained in this Quarterly Report on Form 10-Q and in other statements we make involve risks and uncertainties including, without limitation, the factors set forth under the caption “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2024, and other factors detailed from time to time in our other filings with the Securities and Exchange Commission. One or more of these factors have affected, and in the future could affect our business and financial condition and could cause actual results to differ materially from plans and projections. Although we believe the assumptions underlying the forward-looking statements contained herein are reasonable, there can be no assurance that any of the forward-looking statements included in this Quarterly Report on Form 10-Q will prove to be accurate. Considering the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved.
Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statements are made or reflect the occurrence of unanticipated events, unless necessary to prevent such statements from becoming misleading. New factors emerge from time to time, and it is not possible for us to predict all factors, nor can we assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Executive Summary
For the three months ended September 30, 2025, we had total revenue of $5,289,116 compared to $3,883,237 for the three months ended September 30, 2024. The increase in revenue for the three months ended September 30, 2025 versus September 30, 2024 was primarily due to higher volume and product mix. The Company had total revenue of $12,398,652 for the nine months ended September 30, 2025, compared to $17,819,042 for the nine months ended September 30, 2024. The combination of product mix, lower raw material costs, and lower volume contributed to the decrease in total revenue for the nine months ended September 30, 2025.
Gross profit was $1,331,145 for the three months ended September 30, 2025, compared to $1,089,293 for the same three months in 2024. Gross profit as a percentage of revenue (gross margin) was 25.2% and 28.1% for the three months ended September 30, 2025 and 2024, respectively. Higher revenue contributed to the increase in gross profit while higher raw material costs and product mix were the primary reasons for the decreased gross margin for the three months ending September 30, 2025 compared to the same three months in 2024. Gross profit was $3,562,116 for the nine months ended September 30, 2025 compared to $3,883,348 for the same nine months in 2024, and gross margin was 28.7% and 21.8% for the nine months ended September 30, 2025 and 2024, respectively. While lower raw material costs and volume were key factors in the decrease in gross profit, gross margin benefited from lower raw materials costs and product mix. We constantly monitor the costs of our raw materials as they continue to fluctuate.
Operating expenses were $790,976 and $730,182 for the three months ended September 30, 2025 and September 30, 2024, respectively and $2,363,601 and $2,320,771 for the nine months ended September 30, 2025 and 2024, respectively.
The Company continues to invest in developing innovative applications and its Technical Committee establishes a defined path to commercialization. For example, electrically conductive Indium Tin Oxide with a density of 99% and rotatable targets up to three meters in length that offer multiple benefits were recently introduced in several of our markets. Our Boron Carbide Armor and Enriched Boron Carbide products are particularly valued in the defense and aerospace markets since they are manufactured
14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
domestically. New initiatives are also being pursued that utilize our vacuum hot presses, cold isostatic press, and kilns for increased production and development projects, including specialty diffusion bonding processes.
Income from operations was $540,169 and $359,111 for the three months ended September 30, 2025, and 2024, respectively, and $1,198,515 and $1,562,577 for the nine months ended September 30, 2025 and 2024, respectively.
Several issues are currently impacting national and global market conditions. First, continued political uncertainties, including international tariffs, are particularly affecting multinational customers. Second, inflation continues to impact labor, raw material costs and transportation expenses. We seek to pass these increases on to customers but are unable to predict how future or sustained inflationary pressure may impact our results. Third, supply chain disruptions are adversely impacting customers’ businesses in certain markets. Thus far, we have not experienced material adverse effects regarding sourcing of raw materials or product shipments; however, timely deliveries and sourcing of certain materials is of increased concern and may be influenced by the changes in international tariffs and reactions to such changes. We are actively maintaining contact with our suppliers and customers, identifying additional suppliers, and adapting to our customers’ specific circumstances and forecasts.
RESULTS OF OPERATIONS
Three and nine months ended September 30, 2025 (unaudited) compared to three and nine months ended September 30, 2024 (unaudited):
Revenue
For the three months ended September 30, 2025, we had total revenue of $5,289,116 compared to $3,883,237 for the three months ended September 30, 2024. The increase in revenue for the three months ended September 30, 2025 versus September 30, 2024 was primarily due to higher volume and product mix. The Company had total revenue of $12,398,652 for the nine months ended September 30, 2025, compared to $17,819,042 for the nine months ended September 30, 2024. The combination of product mix, lower raw material costs, and lower volume contributed to the decrease in total revenue for the nine months ended September 30, 2025.
Gross profit
Gross profit was $1,331,145 for the three months ended September 30, 2025, compared to $1,089,293 for the same three months in 2024. Gross profit as a percentage of revenue (gross margin) was 25.2% and 28.1% for the three months ended September 30, 2025 and 2024, respectively. Higher revenue contributed to the increase in gross profit while higher raw material costs and product mix were the primary reasons for the decreased gross margin for the three months ending September 30, 2025 compared to the same three months in 2024. Gross profit was $3,562,116 for the nine months ended September 30, 2025 compared to $3,883,348 for the same nine months in 2024, and gross margin was 28.7% and 21.8% for the nine months ended September 30, 2025 and 2024, respectively. While lower raw material costs and volume were key factors in the decrease in gross profit, gross margin benefited from lower raw materials costs and product mix. We constantly monitor the costs of our raw materials as they continue to fluctuate.
General and administrative expense
General and administrative expense for the three months ended September 30, 2025, and 2024, was $523,408 and $476,572, respectively, an increase of 9.8%. The increase was primarily due to increased staff and compensation of $48,941, and higher rent expense of $7,719 which was partially offset by lower professional fees and Information Technology consulting services of $8,048 versus the third quarter of 2024. General and administrative expense for the nine months ended September 30, 2025, and 2024, was $1,620,770 and $1,426,406, respectively, an increase of 13.6%. The increase is attributed to increased staff and compensation of $106,230, increased professional fees and information technology consulting services of $54,492, and higher rent expense of $24,094 versus the first nine months of 2024.
15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Research and development expense
Research and development expense for the three months ended September 30, 2025, was $111,250 compared to $130,014 for the same period in 2024, a decrease of 14.4%. This decrease was due to fewer research materials and supplies of $13,817 and lower compensation of $8,008. Research and development expense for the nine months ended September 30, 2025 was $320,891 compared to $489,879 for the same period in 2024, a decrease of 34.5% This decrease was due to fewer research materials and supplies being used, which amounted to $145,830, and lower compensation of $27,579. Specialty materials are being researched for use in niche markets which include custom applications and additive manufacturing. Our development efforts utilize a disciplined innovation approach focused on accelerating time to market for these products which involve ongoing research and development expense.
Marketing and sales expense
Marketing and sales expense was $156,318 and $123,596 for the three months ended September 30, 2025, and 2024, respectively, an increase of 26.5%. The increase was due to increased staff and compensation of $14,509, increased travel expenses of $10,139, and increased consulting fees of $6,600 during the three months ended September 30, 2025, compared to the same period in 2024. Marketing and sales expense was $421,940 and $404,486 for the nine months ended September 30, 2025 and 2024, respectively, an increase of 4.3%. The increase is attributed to higher compensation of $11,020 and increased consulting fees of $6,600 during the nine months ended September 30, 2025, compared to the same period in 2024.
Stock compensation expense
There were no stock-based compensation costs for the three months ended September 30, 2025 and 2024. Stock-based compensation costs were $47,206 and $43,980 for the nine months ended September 30, 2025 and 2024, respectively. Compensation expense for all stock-based awards is based on the grant date fair value and recognized over the required service (vesting) period.
Interest
Net interest income was $119,959, and $107,391 for the three months ended September 30, 2025, and 2024, respectively, and $333,769 and $290,908 for the nine months ended September 30, 2025 and 2024, respectively. The increase was primarily due to higher cash and cash equivalents plus approximately $3.3 million invested in marketable securities.
Income taxes
Income tax expense was $149,849, and $105,924 for the three months ended September 30, 2025, and 2024, respectively, and $347,829 and $421,077 for the nine months ended September 30, 2025 and 2024, respectively. The effective tax rate was 22.7% for the three and nine months ended September 30, 2025, and 2024. The deferred tax liability was $261,154 at September 30, 2025 and $121,649 at December 31, 2024.
Net income
Net income for the three months ended September 30, 2025 and 2024, was $510,279 and $360,578, respectively, and $1,184,455 and $1,432,408 for the nine months ended September 30, 2025 and 2024, respectively. Higher gross profit primarily contributed to the increase in net income for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. Lower gross profit, slightly offset by higher interest income, contributed to the decrease in net income for the nine months ended September 30, 2025 compared to the same nine months of 2024.
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Liquidity and Capital Resources
Cash and cash equivalents
As of September 30, 2025, cash and cash equivalents were $9,478,260 compared to $6,753,403 at December 31, 2024. Customer deposits of nearly $2,000,000 were received late in the third quarter of 2025 which will be used to purchase inventory and manufacture product to be shipped in future months. Additionally, the Company had investments of $3,296,563 and $2,758,478 in marketable securities at September 30, 2025, and December 31, 2024.
Working capital
At September 30, 2025, working capital was $8,444,724, compared to $8,245,712 at December 31, 2024, an increase of $199,012, or 2.4%. Cash and cash equivalents increased $2,724,857, inventories increased $1,598,920, customer deposits increased $3,694,351 and accounts receivable increased $169,502. Also, a short-term investment of $509,478 matured and was reinvested into a long-term corporate bond. In addition, accounts payable decreased $18,568 and accrued liabilities decreased $5,880.
Cash from operations
Net cash provided by operating activities was $3,683,895 and $2,410,129 for the nine months ended September 30, 2025, and September 30, 2024, respectively. In addition to the net income generated in each period, these amounts included depreciation and amortization of $329,188 and $366,945, and noncash stock-based compensation costs of $47,206 and $43,980 for the nine months ended September 30, 2025, and 2024, respectively. The increase in customer deposits and inventory compared to December 31, 2024, were primarily related to orders received late in the third quarter of 2025. Customers continue to adapt to external economic and market issues, while monitoring their inventory very closely with continued emphasis on intra-quarter shipments while also attempting to minimize their inventory at quarter end.
Cash from investing activities
Cash of $420,953 and $378,928 was used in investing activities for the acquisition of production equipment during the nine months ended September 30, 2025 and 2024, respectively. Reinvestments of $538,085 in marketable securities during the first nine months of 2025 were attributable to increased free cash flow.
Cash from financing activities
The Company used $49,149 of cash in financing activities for principal payments to third parties for finance lease obligations during the nine months ended September 30, 2024.
Debt outstanding
Total debt outstanding was $0 at September 30, 2025 and December 31, 2024.
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements including special purpose entities.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make judgments, assumptions and estimates that affect the amounts reported in the condensed financial statements and accompanying notes. Note 2 to the condensed financial statements in our Annual Report on Form 10-K for the year ended December 31, 2024, describes the significant accounting policies and methods used in the preparation of the condensed financial statements. Estimates are used for, but not limited to, accounting for the allowance for doubtful accounts and current
17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
expected credit losses, inventory allowances, property and equipment depreciable lives, patents and licenses useful lives, revenue recognition, income tax expense, deferred tax assets and liabilities, realization of deferred tax assets, stock-based compensation and assessing changes in which impairment of certain long-lived assets may occur. Actual results could differ from these estimates. The following critical accounting policies are impacted significantly by judgments, assumptions and estimates used in the preparation of the Financial Statements. The allowance for doubtful accounts is based on our assessment of the collectability of specific customer accounts and the aging of accounts receivable. If there is a deterioration of a major customer’s creditworthiness or actual defaults are higher than our historical experience, our estimates of the recoverability of amounts due us could be adversely affected. Inventory purchases and commitments are based upon future demand forecasts. If there is a sudden and significant decrease in demand for our products or there is a higher risk of inventory obsolescence because of rapidly changing technology and customer requirements, we may be required to increase our inventory allowances, and our gross margin could be adversely affected. The tax valuation allowance is based on our consideration of new evidence, both positive and negative, that could affect our view of the future realization of deferred tax assets. If we were to determine not to be able to realize all or part of the deferred tax asset in the future, an adjustment to the deferred tax asset would be necessary which would reduce our net income for that period. Depreciable and useful lives estimated for property and equipment, licenses and patents are based on initial expectations of the period of time these assets and intangibles will benefit us. Changes in circumstances related to a change in our business, changes in technology or other factors could result in these assets becoming impaired, which could adversely affect the value of these assets.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and implemented, can only provide reasonable assurance of achieving the desired control objectives. Management is required to apply its judgment in evaluating the cost-benefit relationship of controls and procedures. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, to allow timely discussions regarding required disclosure.
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective. Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) of the Exchange Act as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the SEC under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.
Inherent Limitations over Internal Controls
Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on our financial statements.
Management is responsible for the consistency, integrity, and presentation of information. We fulfill our responsibility by maintaining systems of internal control designed to provide reasonable assurance that assets are safeguarded, and transactions are executed in accordance with established procedures. The concept of reasonable assurance is based upon recognition that the cost of the controls should not exceed the benefit derived. We believe our systems of internal control provide this reasonable assurance.
18
Item 4. Controls and Procedures (continued)
The Board of Directors exercises its oversight role with respect to our systems of internal control primarily through its Audit Committee, which is comprised of independent directors. The Committee oversees our financial reporting, quarterly reviews, and audits to assess whether their quality, integrity, and objectivity are sufficient to protect shareholders’ investments.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal controls over financial reporting for the nine months ended September 30, 2025, that materially affected or were reasonably likely to materially affect our disclosure controls and procedures. Additionally, there were no changes in our internal controls that could materially affect our disclosure controls and procedures after the date of their evaluation.
19
PART II. OTHER INFORMATION
Item 6. Exhibits
3(a) |
| |
| ||
3(b) | ||
| ||
3(c) | ||
| ||
4(a) | ||
| | |
14(a) | SCI Engineered Materials Code of Ethics for the Chief Executive Officer and Chief Financial Officer (Incorporated by reference to the Company’s Current Report via the Company’s website at www.sciengineeredmaterials.com). | |
| ||
31.1 | * | Rule 13a-14(a) Certification of Principal Executive Officer. |
| ||
31.2 | * | Rule 13a-14(a) Certification of Principal Financial Officer. |
| ||
32.1 | * | |
| | |
32.2 | * | |
| ||
99.1 | * | |
| ||
101 | * | The Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2025, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Balance Sheets at September 30, 2025 and December 31, 2024, (ii) Condensed Statements of Income for the three and nine months ended September 30, 2025 and 2024, (iii) Condensed Statement of Changes in Equity for the three and nine months ended September 30, 2025 and 2024, (iv) Condensed Statements of Cash Flows for the nine months ended September 30, 2025 and 2024, and (v) Notes to the Condensed Financial Statements. |
| | |
104 | * | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* Filed herewith
20
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| SCI ENGINEERED MATERIALS, INC. |
| | |
Date: October 31, 2025 | | /s/ Jeremiah R. Young |
| | Jeremiah R. Young, President, and Chief Executive Officer |
| | (Principal Executive Officer) |
| | |
| | /s/ Gerald S. Blaskie |
| | Gerald S. Blaskie, Vice President, and Chief Financial Officer |
| | (Principal Financial Officer and Principal Accounting Officer) |
21
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jeremiah R. Young, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of SCI Engineered Materials, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, which involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: October 31, 2025 | /s/ Jeremiah R. Young |
| Jeremiah R. Young |
| President and Chief Executive Officer |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Gerald S. Blaskie, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of SCI Engineered Materials, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, which involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: October 31, 2025 | /s/ Gerald S. Blaskie |
| Gerald S. Blaskie |
| Vice President and Chief Financial Officer |
| (Principal Financial Officer and Principal Accounting |
| Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of SCI Engineered Materials, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeremiah R. Young, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
| /s/ Jeremiah R. Young |
| Jeremiah R. Young |
| President and Chief Executive Officer of |
| SCI Engineered Materials, Inc. |
| (Principal Executive Officer) |
| October 31, 2025 |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of SCI Engineered Materials, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gerald S. Blaskie, Vice President, and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
| /s/ Gerald S. Blaskie |
| Gerald S. Blaskie |
| Vice President and Chief Financial Officer of |
| SCI Engineered Materials, Inc. (Principal Financial |
| Officer and Principal Accounting Officer) |
| October 31, 2025 |
Exhibit 99.1
Contact: Robert Lentz
(614) 439-6006
SCI Engineered Materials, Inc. Reports
2025 Third Quarter and Year-to-Date Results
COLUMBUS, Ohio (October 31, 2025) SCI Engineered Materials, Inc. (“SCI” or “Company”) (OTCQB: SCIA), today reported financial results for the three months and nine months ended September 30, 2025.
Jeremy Young, President and Chief Executive Officer, commented “Our 2025 third quarter financial results reflect solid improvement over the same period last year. We are encouraged by the recent increase in orders across SCI’s growing customer base. Market response to products launched earlier this year has been positive as reflected in the strong order backlog at September 30, 2025.”
Mr. Young added, “We remain focused on implementing plans to accelerate future growth. During the most recent quarter we updated our long-term strategy and identified new market opportunities for SCI’s products and value-added services. They involve investments in manufacturing equipment which complement our existing production capabilities and development of targeted marketing initiatives which are underway.”
Revenue
The Company’s revenue was $12,398,652 for the first nine months of 2025 compared to $17,819,042 for the same period in 2024. The 30% decrease in 2025 year-to-date revenue versus a year ago was due to product mix, lower raw material costs, and lower volume.
Quarterly revenue for the three months ended September 30, 2025, increased 36% to $5,289,116 from $3,883,237 a year ago due to higher volume and product mix.
Order backlog was $5.8 million at September 30, 2025, versus $3.4 million on June 30, 2025, and $3.8 million on the same date last year.
Gross profit
Gross profit was $3,562,116 for first nine months of 2025 versus $3,883,348 in the same period last year, a decrease of 8%. Lower raw material costs and volume were the key factors in the year-over-year comparison.
The third quarter of 2025 gross profit increased 22% to $1,331,145 from $1,089,293 a year ago due to the increase in revenue compared to last year.
Operating expenses
Operating expenses increased approximately 2% to $2,363,601 for the first nine months of 2025 versus $2,320,771 last year. Lower research and development expenses primarily offset higher general, administrative, and marketing and sales expenses.
For the three months ended September 30, 2025, operating expenses increased 8% to $790,976 from $730,182 the prior year. Increased staff plus higher compensation and rent expense were key factors which contributed to the increase compared to the same period in 2024.
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Net interest income
Net interest income increased approximately 15% to $333,769 for the 2025 year-to-date period from $290,908 last year.
For the third quarter of 2025, net interest income increased approximately 12% to $119,959 from $107,391 for the same period a year ago. Both periods in 2025 benefited from higher cash and cash equivalents plus investments in marketable securities of approximately $3.3 million.
Income taxes
For the nine months ended September 30, 2025, income tax expense was $347,829 compared to $421,077 for the same period a year ago, a decrease of 17%.
The Company’s third quarter 2025 income tax expense increased 41% to $149,849 from $105,924 last year. The effective tax rate remained at 22.7% for the nine month and three-month periods ended September 30, 2025, and 2024. The deferred tax liability was $261,154 at September 30, 2025, compared to $121,649 at December 31, 2024.
Net income
Net income of $1,184,455 for the nine months ended September 30, 2025, was 17% below the $1,432,408 for the same period last year. Lower gross profit for the first nine months of 2025 was partially offset by higher interest income compared to a year ago.
Third quarter 2025 net income increased approximately 42% to $510,279, primarily led by higher gross profit, compared to $360,578 a year ago.
Net income per diluted share was $0.26 for the nine months ended September 30, 2025, compared to $0.31 last year. For the third quarter of 2025, net income increased to $0.11 from $0.08 in 2024.
Cash and cash equivalents and Investments in marketable securities
Cash and cash equivalents totaled $9,478,260 at September 30, 2025, an increase of 40% versus $6,753,403 at December 31, 2024. The Company received approximately $2 million in customer deposits late in the third quarter of this year which will be used to purchase inventory and manufacture products to be shipped in future months. Investments in marketable securities totaled $3,296,563 at September 30, 2025, versus $2,758,478 at 2024 year-end, an increase of approximately 20%.
Debt outstanding
The Company had no debt outstanding at September 30, 2025, or December 31, 2024.
About SCI Engineered Materials, Inc.
SCI Engineered Materials is a global supplier and manufacturer of advanced materials for PVD thin film applications and works closely with end users and OEMs to develop innovative, customized solutions. Additional information is available at www.sciengineeredmaterials.com or follow SCI Engineered Materials, Inc. at:
https://www.linkedin.com/company/sci-engineered-materials.-inc https://www.facebook.com/sciengineeredmaterials/
https://x.com/SciMaterials
This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Those statements include, but are not limited to, all statements regarding intent, beliefs, expectations, projections, customer guidance, forecasts, plans of the Company and its management. These forward-looking statements involve numerous risks and uncertainties, including without limitation, other risks and uncertainties detailed from time to time in the Company's Securities and Exchange Commission filings, including the Company's Annual Report on Form 10-K for the year ended December 31, 2024. One or more of these factors has affected and could affect the Company's projections in the future. Therefore, there can be no assurances that the forward-looking statements included in this press release will prove to be accurate. Due to the significant uncertainties in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company, or any other persons, that the objectives and plans of the Company will be achieved. All forward-looking statements made in this press release are based on information presently available to the management of the Company. The Company assumes no obligation to update any forward-looking statements.
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SCI ENGINEERED MATERIALS, INC.
CONDENSED BALANCE SHEETS
|
| September 30, |
| December 31, | ||
|
| 2025 |
| 2024 | ||
ASSETS | | (UNAUDITED) | | | | |
Current Assets | | | | | | |
Cash and cash equivalents | | $ | 9,478,260 | | $ | 6,753,403 |
Investments - marketable securities, short term | | | - | | | 509,478 |
Accounts receivable, less allowance for doubtful accounts | |
| 944,790 | |
| 775,288 |
Inventories | |
| 3,031,834 | |
| 1,432,914 |
Prepaid purchase orders and expenses | |
| 157,272 | |
| 238,834 |
Total current assets | |
| 13,612,156 | |
| 9,709,917 |
| | | | | | |
Property and Equipment, at cost | |
| 10,286,612 | |
| 9,904,028 |
Less accumulated depreciation and amortization | |
| (7,915,388) | |
| (7,632,946) |
Property and equipment, net | |
| 2,371,224 | |
| 2,271,082 |
| | | | | | |
Other Assets | | | | | | |
Investments, net - marketable securities, long term | | | 3,296,563 | | | 2,249,000 |
Right of use asset, net | | | 1,108,533 | | | 1,236,572 |
Other assets | |
| 62,694 | |
| 66,394 |
Total other assets | | | 4,467,790 | | | 3,551,966 |
TOTAL ASSETS | | $ | 20,451,170 | | $ | 15,532,965 |
| | | | | | |
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | |
Current Liabilities | | | | | | |
Operating lease, short term | | $ | 203,012 | | $ | 174,863 |
Accounts payable | |
| 400,641 | |
| 419,209 |
Customer deposits | |
| 4,032,224 | |
| 337,873 |
Accrued expenses | |
| 531,555 | |
| 532,260 |
Total current liabilities | |
| 5,167,432 | |
| 1,464,205 |
| | | | | | |
Deferred tax liability | | | 261,154 | | | 121,649 |
Operating lease, long term | | | 905,521 | | | 1,061,709 |
Total liabilities | |
| 6,334,107 | |
| 2,647,563 |
| | | | | | |
Total shareholders' equity | |
| 14,117,063 | |
| 12,885,402 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | $ | 20,451,170 | | $ | 15,532,965 |
3
SCI ENGINEERED MATERIALS, INC.
CONDENSED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(UNAUDITED)
|
| THREE MONTHS ENDED SEPTEMBER 30, | | NINE MONTHS ENDED SEPTEMBER 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | | | | | | | | | | | |
Revenue | | $ | 5,289,116 | | $ | 3,883,237 | | $ | 12,398,652 | | $ | 17,819,042 |
Cost of revenue | |
| 3,957,971 | |
| 2,793,944 | |
| 8,836,536 | |
| 13,935,694 |
Gross profit | |
| 1,331,145 | |
| 1,089,293 | |
| 3,562,116 | |
| 3,883,348 |
General and administrative expense | |
| 523,408 | |
| 476,572 | |
| 1,620,770 | |
| 1,426,406 |
Research and development expense | |
| 111,250 | |
| 130,014 | |
| 320,891 | |
| 489,879 |
Marketing and sales expense | |
| 156,318 | |
| 123,596 | |
| 421,940 | |
| 404,486 |
Income from operations | |
| 540,169 | |
| 359,111 | |
| 1,198,515 | |
| 1,562,577 |
Interest income, net | |
| 119,959 | |
| 107,391 | |
| 333,769 | |
| 290,908 |
Income before provision for income taxes | |
| 660,128 | |
| 466,502 | |
| 1,532,284 | |
| 1,853,485 |
Income tax expense | |
| 149,849 | |
| 105,924 | |
| 347,829 | |
| 421,077 |
NET INCOME | | $ | 510,279 | | $ | 360,578 | | $ | 1,184,455 | | $ | 1,432,408 |
Earnings per share - basic and diluted | |
|
| |
|
| |
|
| |
|
|
Income per common share | |
|
| |
|
| |
|
| |
|
|
Basic | | $ | 0.11 | | $ | 0.08 | | $ | 0.26 | | $ | 0.32 |
Diluted | | $ | 0.11 | | $ | 0.08 | | $ | 0.26 | | $ | 0.31 |
Weighted average shares outstanding | |
| | |
| | |
| | |
| |
Basic | |
| 4,578,979 | |
| 4,564,259 | |
| 4,573,970 | |
| 4,546,269 |
Diluted | |
| 4,583,142 | |
| 4,568,863 | |
| 4,578,226 | |
| 4,550,820 |
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SCI ENGINEERED MATERIALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2025 AND 2024
(UNAUDITED)
|
| 2025 |
| 2024 | ||
CASH PROVIDED BY (USED IN): | | | | | | |
Operating activities | | $ | 3,683,895 | | | 2,410,129 |
Investing activities | |
| (959,038) | | | (378,928) |
Financing activities | |
| — | | | (49,149) |
NET INCREASE IN CASH | | | 2,724,857 | | | 1,982,052 |
| | | | | | |
CASH - Beginning of period | |
| 6,753,403 | |
| 5,673,994 |
| | | | | | |
CASH - End of period | | $ | 9,478,260 | | $ | 7,656,046 |
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