SCI Engineered Materials, Inc 10-Q for FY2023 Q1
SCI Engineered Materials, Inc. (SCIA)
About this 10-Q
SCI Engineered Materials, Inc filed this 10-Q on May 1, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).
Headline figures
Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $5.8M
- up 8.8% from $5.33M a year earlier
- Net income
- $538.02K
- up 40.0% from net income of $384.4K a year earlier
- Diluted EPS
- $0.12
- up 50.0% 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:
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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
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Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022 | 3 | |
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Statements of Income for the Three Months Ended March 31, 2023 and 2022 (unaudited) | 5 | |
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Statements of Shareholders’ Equity for the Three Months Ended March 31, 2023 and 2022 (unaudited) | 6 | |
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Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022 (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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19 | ||
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20 | ||
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2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SCI ENGINEERED MATERIALS, INC.
BALANCE SHEETS
ASSETS
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| March 31, |
| December 31, | ||
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| 2023 |
| 2022 | ||
| | (UNAUDITED) | | | | |
Current Assets | | | | | | |
Cash | | $ | | | $ | |
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 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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Other Assets | | | | | | |
Investments, net - marketable securities, long term | | | | | | |
Right of use asset, net | | | | | | |
Deferred tax asset | | | | | | |
Other assets | |
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Total other assets | | | | | | |
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TOTAL ASSETS | | $ | | | $ | |
The accompanying notes are an integral part of these financial statements.
3
SCI ENGINEERED MATERIALS, INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS’ EQUITY
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| March 31, |
| December 31, | ||
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| 2023 |
| 2022 | ||
| | (UNAUDITED) | | | | |
Current Liabilities | | | | | | |
Finance lease obligations, current portion | | $ | | | $ | |
Operating lease obligations, current portion | |
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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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Finance lease obligations, net of current portion | | | | | | |
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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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 financial statements.
4
SCI ENGINEERED MATERIALS, INC.
STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(UNAUDITED)
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| 2022 | ||
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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) expense, 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 financial statements.
5
SCI ENGINEERED MATERIALS, INC.
STATEMENTS OF SHAREHOLDERS’ EQUITY
THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(UNAUDITED)
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| Additional |
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| | | Common | | Paid-In | | Accumulated | | | | |||
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| Deficit |
| Total | ||||
Balance 12/31/2022 | | | $ | | | $ | | | $ | ( | | $ | |
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Adoption of ASU 2016-13 (Note 3) | | |
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Stock based compensation expense (Note 5) | | |
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Common stock issued (Note 5) | | |
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Net income | | |
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Balance 3/31/2023 | | | $ | | | $ | | | $ | ( | | $ | |
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Balance 12/31/2021 | | | $ | | | $ | | | $ | ( | | $ | |
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Stock based compensation expense (Note 5) | | |
| — | |
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Common stock issued (Note 5) | | |
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Net income | | |
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Balance 3/31/2022 | | | $ | | | $ | | | $ | ( | | $ | |
The accompanying notes are an integral part of these financial statements.
6
SCI ENGINEERED MATERIALS, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(UNAUDITED)
|
| THREE MONTHS ENDED MARCH 31, | | ||||
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| 2023 |
| 2022 | | ||
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | |
Net income | | $ | | | $ | | |
Adjustments to reconcile net income to net cash | |
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provided by 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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Gain on disposal of equipment | |
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Deferred tax asset | | | | | | | |
Inventory reserve | |
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Changes in operating assets and liabilities: | |
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Accounts receivable | |
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Inventories | |
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Prepaid expenses | | | ( | | | | |
Other assets | |
| — | |
| ( | |
Accounts payable | |
| ( | |
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Operating lease assets and liabilities, net | | | ( | | | ( | |
Accrued expenses and customer deposits | |
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Net cash provided by operating activities | |
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CASH FLOWS FROM INVESTING ACTIVITIES | |
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Proceeds on sale of equipment | | | | | | | |
Purchases of property and equipment | |
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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 and notes payable | |
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Net cash used in financing activities | |
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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 | | $ | | | $ | | |
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SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES | |
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Increase in asset retirement obligation | |
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The accompanying notes are an integral part of these financial statements.
7
Note 1. Business Organization and Purpose
SCI Engineered Materials, Inc. (“SCI,” 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 financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim 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 financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2022. Interim results are not necessarily indicative of results for the full year.
Use of Estimates - The preparation of 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 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 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 fully completed.
All revenue was from the photonics industry during the three months ended March 31, 2023 and 2022. The top two customers represented approximately
8
Note 2. Summary of Significant Accounting Policies (continued)
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
In June 2016, the FASB issued ASU No. 2016-13 “Credit Losses - Measurement of Credit Losses on Financial Instruments.” ASU No. 2016-13 significantly changes how entities measure credit losses for most financial assets, including accounts receivable and held-to-maturity marketable securities, by replacing today’s “incurred loss” approach with an “expected loss” model under which allowances will be recognized based on expected rather than incurred losses. ASU No. 2016-13 became effective for us in the first quarter of 2023. The adoption of ASU No. 2016-13 resulted in a cumulative effect of $
Note 4. Investments
As of March 31, 2023 and December 31, 2022, the Company held investments in corporate and U.S. government bonds that are required to be measured for disclosure purposes at fair value on a recurring basis. The bonds 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 March 31, 2023, 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 | | Gains | | Losses | | Fair Value | ||||
March 31, 2023 |
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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, 2022 | |
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Corporate bonds | | $ | | | $ | — | | $ | ( | | $ | |
U.S. government treasuries | |
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Total investments | | $ | | | $ | | | $ | ( | | $ | |
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 expected credit losses are adjusted each period as necessary for changes in expected lifetime credit losses. The credit loss calculations for held-to-maturity securities are based upon historical default and recovery rates of bonds rated with the same rating as the current portfolio. An adjustment factor is applied to these credit loss calculations based upon management’s assessment of the expected impact from current economic conditions on our investments. The Company monitors the credit quality of debt securities classified as held-to-maturity through the use of their respective credit ratings and update them on a quarterly basis with the latest assessment completed on March 31, 2023. Our allowance for credit losses was $
9
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. Noncash stock-based compensation expense was $
Unrecognized compensation expense was $
Employees received compensation of
The non-employee Board members received compensation of
The cumulative status of options granted and outstanding at March 31, 2023, and December 31, 2022, 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, 2022 |
| | | $ | |
Outstanding at December 31, 2022 |
| | | $ | |
Outstanding at March 31, 2023 |
| | | $ | |
Options exercisable at December 31, 2022 |
| | | $ | |
Options exercisable at March 31, 2023 |
| | | $ | |
Exercise prices for options ranged from $
Note 6. Inventories
Inventories consisted of the following:
| | March 31, | | December 31, | ||
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| 2023 |
| 2022 | ||
Raw materials | | $ | | | $ | |
Work-in-process | |
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Finished goods | |
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Inventory reserve | |
| ( | |
| ( |
| | $ | | | $ | |
10
Note 7. Earnings Per Share
Basic income per share is calculated as income applicable to common shareholders divided by the weighted average of common shares outstanding. Diluted earnings per share is calculated as diluted income applicable to common shareholders 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 and convertible preferred stock using the if-converted method. Diluted earnings per share exclude all diluted potential shares if their effect is anti-dilutive. All 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:
| | Three months ended March 31, | | ||||
|
| 2023 |
| 2022 | | ||
Net income | | $ | | | $ | | |
| | | | | | | |
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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Note 8. Note Payable
The Company renewed its line of credit with Fifth Third Bank for $
Note 9. Income Taxes
The provision for income taxes for the three months ended March 31, 2023 and 2022 is based on our projected annual effective tax rate for fiscal year 2023, adjusted for permanent differences and specific items that are required to be recognized in the period in which they are incurred.
Following is the income tax expense for the three months ended March 31:
| | Three months ended March 31, | ||||
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| 2023 |
| 2022 | ||
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. The Company had net operating loss carryforwards available for federal and state tax purposes of approximately $
As of December 31, 2022, management determined that there was sufficient positive evidence to conclude that it is more likely than not that deferred taxes of $
11
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 include monthly payments ranging from $
The following is a maturity analysis, by year, of the annual undiscounted cash outflows of the operating lease liabilities as of March 31, 2023:
| | | 2023 | | |
2023 | | $ | | | |
2024 | |
| | | |
Total minimum lease payments | | | | | |
Less debt discount | | | | | |
Total operating lease obligations | | $ | | | |
| | | 2023 | | | 2022 | |
Operating cash outflows from operating lease - year-to-date | | $ | | | $ | | |
Weighted average remaining lease term – operating lease | |
| years |
| years | ||
Weighted average discount rate – operating lease | |
| | % |
| | % |
Note 11. Finance Leases
The Company leases certain equipment under finance leases. Future minimum lease payments, by year, with the present value of such payments, as of March 31, 2023, are shown in the following table.
2023 | | $ | | |
2024 | |
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Total minimum lease payments | |
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Less amount representing interest | |
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Present value of minimum lease payments | |
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Less current portion | |
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Finance lease obligations, net of current portion | | $ | | |
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Weighted average remaining lease term – finance leases | | | years | |
Weighted average discount rate – finance leases | | | % |
The equipment under finance lease at March 31, 2023, and December 31, 2022, is included in the accompanying balance sheets as follows:
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| March 31, 2023 |
| Dec. 31, 2022 | | ||
Machinery and equipment | | $ | | | $ | | |
Less accumulated depreciation and amortization | |
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Net book value | | $ | | | $ | | |
12
Note 11. Finance Leases (continued)
These assets are amortized over a period of
The finance leases are structured such that ownership of the leased asset reverts to the Company at the end of the lease term. Accordingly, leased assets are depreciated using the Company’s normal depreciation methods and lives. Ownership of certain assets was transferred to the Company in accordance with the terms of the leases and these assets have been excluded from the leased asset disclosure above.
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 Financial Statements and Notes contained herein and with those in our Form 10-K for the year ended December 31, 2022.
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, 2022, 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. In light of 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 March 31, 2023, we had total revenue of $5,797,147 compared to $5,326,432 for the three months ended March 31, 2022. Higher volume was the key factor that contributed to the increase, despite lower raw material costs compared to the same period last year.
Gross profit was $1,324,597 for the three months ended March 31, 2023 compared to $994,101 for the same three months in 2022. The increase was due to higher revenue and favorable product mix.
Operating expenses were $677,344, and $542,407 for the three months ended March 31, 2023 and 2022, respectively.
Income from operations was $647,253 and $451,694 for the three months ended March 31, 2023 and 2022, respectively.
Consistent with our growth strategy, we have identified niche markets that can benefit from our expertise in custom powder solutions, such as near-infrared doped phosphors and short-wave infrared applications. These applications enable extended life of phosphors for specific nighttime identification needs of defense personnel and first responders.
New initiatives are also being pursued that utilize our vacuum hot presses, cold isostatic press, and kilns for increased production and development projects, including diffusion bonding. We recently manufactured and sold conductive metal oxides for direct current sputtering of Tungsten Oxide and Molybdenum Oxide materials. We continue to invest in developing new products for all our markets including specialty bonding processes for Aerospace customers. Those products involve research and development expense to accelerate time to market.
14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Several issues continue to affect national and global market conditions. First, inflation remains at historically high levels, impacting labor, raw material costs and transportation expenses. We have generally been able to pass on these increases to customers but are unable to predict how future or sustained inflationary pressure may impact our results. Second, supply chain disruptions are adversely impacting customers in certain markets. Thus far, we have not experienced material adverse effects regarding product shipments; however, timely deliveries and sourcing of certain materials is of increased concern. Third, published articles and corporate announcements continue to address the global semiconductor chip shortage, which is anticipated to continue in 2023. This shortage is affecting some of our customers which could impact the Company’s revenue, volume, and profitability. Fourth, there are increased political uncertainties affecting global markets. Although we currently have no customers or vendors in Russia or Ukraine, we continue to monitor the situation as some raw material comes from Russia for the PVD industry. We continue to actively monitor these developments, including ongoing contact with our suppliers and customers, including identifying additional suppliers and adapting to our customers’ specific circumstances and forecasts.
RESULTS OF OPERATIONS
Three months ended March 31, 2023 (unaudited) compared to three months ended March 31, 2022 (unaudited):
Revenue
For the three months ended March 31, 2023, we had revenue of $5,797,147. This was an increase of $470,715, compared to the three months ended March 31, 2022. Higher volume was the key factor that contributed to the increase, despite lower raw material costs compared to the same period last year.
Gross profit
Gross profit was $1,324,597 for the three months ended March 31, 2023, compared to $994,101 for the same three months in 2022, an increase of $330,496. The increase was due to higher revenue and favorable product mix. Gross profit as a percentage of revenue (gross margin) was 22.8% for the first quarter of 2023 compared to 18.7% for the first quarter of 2022. The improved gross margin in 2023 was due to product mix and lower raw material costs.
General and administrative expense
General and administrative expense for the three months ended March 31, 2023 and 2022, was $432,413, and $373,188, respectively, an increase of 15.9%. This increase was attributed to higher compensation of $42,119, an increase in business liability insurance (due to higher revenue) of $12,938, and professional fees, primarily related to SEC compliance costs for legal, accounting and stockholder relations fees, of $7,328.
Research and development expense
Research and development expense for the three months ended March 31, 2023, was $135,360 compared to $87,031 for the same period in 2022, an increase of 55.5%. This increase was attributed to higher compensation of $19,121, outside consulting of $16,789 and materials and supplies of $12,614. 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 applications and involve ongoing research and development expense.
15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Marketing and sales expense
Marketing and sales expense was $109,571 and $82,188 for the three months ended March 31, 2023, and 2022, respectively. This was an increase of 33.3%. Compensation expense and travel expense increased $17,525 and $9,225 during the three months ended March 31, 2023, and 2022, respectively. We exhibited at a major international photonics trade show for the first time during the first quarter of 2023.
Stock compensation expense
Included in total expenses were noncash stock-based compensation costs of $45,090 and $23,299 for the three months ended March 31, 2023 and 2022, respectively. Compensation expense for all stock-based awards is based on the grant date fair value and recognized over the required service (vesting) period. Unrecognized non-cash stock-based compensation expense was $394 as of March 31, 2023 and will be recognized through April of 2023.
Interest
Interest income was $48,977, for the three months ended March 31, 2023. Interest expense was $6,493 for the three months ended March 31, 2022. The improvement was due to our approximately $2.0 million investment in marketable securities and the overall increase in interest rates. Interest expense has decreased as we continue to reduce our debt outstanding.
Income taxes
Income tax expense was $158,210, and $60,800 for the three months ended March 31, 2023, and 2022, respectively. At December 31, 2022, the deferred tax asset was $151,164. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. Accordingly, management determined that no valuation allowance was necessary, and the deferred tax asset was $34,231 at March 31, 2023.
Net income
Net income for the three months ended March 31, 2023, and 2022, was $538,020, and $384,401, respectively. The increase was primarily the result of higher revenue, gross profit and interest income partially offset by higher operating and income tax expenses.
Liquidity and Capital Resources
Cash
As of March 31, 2023, cash on hand was $4,495,169 compared to $3,947,966 at December 31, 2022 due to net cash provided by operating activities in conjunction with investment in our manufacturing footprint and acquisition of production equipment.
Working capital
At March 31, 2023, working capital was $5,843,578 compared to $5,211,625 at December 31, 2022, an increase of $631,953 or 12.1%. Cash increased $547,203, inventories increased $441,214, prepaid expenses increased $200,093 and customer deposits increased $823,495 while accounts payable decreased $198,002.
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Cash from operations
Net cash provided by operating activities during the three months ended March 31, 2023, was $719,764 and $603,992 for the three months ended March 31, 2022. In addition to the net income generated, this included depreciation and amortization of $115,591 and $102,350, and noncash stock-based compensation costs of $45,090 and $23,299 for the three months ended March 31, 2023, and 2022, respectively. The increases in inventories, prepaid expenses, and customer deposits compared to December 31, 2022, were related to the increase in orders received during the first quarter. Customer orders remain strong, and customers continue to monitor inventory closely with continued emphasis on intra-quarter shipments.
Cash from investing activities
Cash of $147,721 was used in investing activities during the three months ended March 31, 2023, which included the initial stages of the enclosure of our ceramic machining area in addition to the acquisition of production equipment. Cash of $74,676 was used in investing activities during the three months ended March 31, 2022, for the purchase of production equipment.
Cash from financing activities
Cash of $24,840 and $23,783 was used in financing activities for principal payments to third parties for finance lease obligations during the three months ended March 31, 2023, and 2022, respectively.
Debt outstanding
Total debt outstanding, related to finance lease obligations, was $121,676 at March 31, 2023, compared to $146,516 at December 31, 2022, a decrease of 17.0%. As previously mentioned, cash of $24,840 was used for principal payments for finance lease obligations during 2023.
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements including special purpose entities.
Critical Accounting Policies
The preparation of 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 Financial Statements and accompanying notes. Note 2 to the Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2022, describes the significant accounting policies and methods used in the preparation of the Financial Statements. Estimates are used for, but not limited to, accounting for the allowance for doubtful accounts and current 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 the 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 we would not 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, change in technology or other factors could result in these assets becoming impaired, which could adversely affect the value of these assets.
17
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 possible 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 the 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.
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 three months ended March 31, 2023, 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 subsequent to the date of their evaluation.
18
PART II. OTHER INFORMATION
Item 6. Exhibits
3(a) |
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3(b) | ||
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3(c) | ||
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4(a) | ||
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4(b) | ||
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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). | |
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31.1 | * | Rule 13a-14(a) Certification of Principal Executive Officer. |
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31.2 | * | Rule 13a-14(a) Certification of Principal Financial Officer. |
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32.1 | * | |
| | |
32.2 | * | |
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99.1 | * | |
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101 | The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Balance Sheets at March 31, 2023 and December 31, 2022, (ii) Statements of Income for the three months ended March 31, 2023 and 2022, (iii) Statement of Changes in Equity for the three months ended March 31, 2023 and 2022, (iv) Statements of Cash Flows for the three months ended March 31, 2023 and 2022, and (v) Notes to Financial Statements. | |
| | |
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* Filed herewith
19
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: May 1, 2023 | | /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) |
20
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: May 1, 2023 | /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: May 1, 2023 | /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 March 31, 2023 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) |
| May 1, 2023 |
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 March 31, 2023 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) |
| May 1, 2023 |
Exhibit 99.1
Contact: Robert Lentz
(614) 439-6006
SCI Engineered Materials, Inc. Reports
2023 First Quarter Results
COLUMBUS, Ohio (May 1, 2023) SCI Engineered Materials, Inc. (“SCI”) (SCIA: OTCQB), today reported financial results for the three months ended March 31, 2023. SCI is a global supplier and manufacturer of advanced materials for physical vapor deposition thin film applications who works closely with end users and OEMs to develop innovative, customized solutions.
Jeremy Young, President, and Chief Executive Officer, said, “We are encouraged by our solid start in 2023 and first quarter financial results. The increase in total revenue was due to strong volume throughout the quarter. We continue to benefit from recent customer additions, especially for a growing number of toll services utilizing SCI’s vacuum hot presses. Our marketing plans for 2023 include exhibiting at additional industry trade shows which have a specific market focus and increasing our sales team staff.”
Revenue
Total revenue for the first three months of 2023 increased 9% to $5,797,147 from $5,326,432 for the same period a year ago. Higher volume was the key factor that contributed to the year-over-year increase, despite lower raw material costs.
Order backlog was approximately $5.1 million on March 31, 2023, versus $4.1 million at 2022 year-end and $3.0 million on the same date last year.
Gross profit
Gross profit was $1,324,597 for the 2023 first quarter versus $994,101 the prior year. The increase was attributable to higher revenue and to a lesser extent favorable product mix.
Operating expenses
Operating expenses (general and administrative, research and development (R&D), and marketing and sales) were $677,344 for the three months ended March 31, 2023, compared to $542,407 the prior year. The largest increase was in general and administrative expenses, followed by research and development and marketing and sales expenses to support the Company’s growth. Higher research and development expenses included initiatives focused on custom specialty materials and additive manufacturing applications. During the first quarter of 2023 the Company exhibited for the first time at an international photonics trade show and launched targeted online corporate visibility and product campaigns.
Interest (income)/expense, net
Interest income was $48,977 for the 2023 first quarter compared to interest expense of $6,493 for the same period a year ago. Interest income in the first quarter of 2023 increased due to the approximately $2.0 million investment in marketable securities during the fourth quarter of 2022 and the overall increase in interest rates. Interest expense continues to decline as the Company reduces outstanding balances for equipment leases.
Income taxes
Income tax expense for the first three months of 2023 was $158,210 versus $60,800 for the same period a year ago. The effective tax rate for the first quarter of 2023 was 22.7% compared to the tax rate for calendar year 2022 of 21.7%.
1
Net income
Net income increased 40% to $538,020 from $384,401 for the same period last year. The increase was due to higher revenue, gross profit and interest income, partially offset by higher operating and income tax expenses.
Cash and investments
Cash on hand was $4,495,169 on March 31, 2023, compared to $3,947,966 on December 31, 2022, benefiting from net cash provided by operating activities during the first three months of 2023. There were also approximately $2.0 million of investments in marketable securities at the end of the 2023 first quarter and 2022 year-end.
Debt outstanding
Debt outstanding was $121,676 on March 31, 2023, compared to $146,516 on December 31, 2022. The Company made principal payments of $24,840 during the first three months of 2023 related to finance lease obligations.
About SCI Engineered Materials, Inc.
SCI Engineered Materials is a global supplier and manufacturer of advanced materials for PVD thin film applications who 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://www.twitter.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, 2022. One or more of these factors have 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.
2
SCI ENGINEERED MATERIALS, INC.
BALANCE SHEETS
|
| March 31, |
| December 31, | ||
| | 2023 | | 2022 | ||
ASSETS |
| (UNAUDITED) | | | | |
Current Assets |
| |
|
| |
|
Cash | | $ | 4,495,169 | | $ | 3,947,966 |
Investments - marketable securities, short term | |
| 989,265 | |
| 989,265 |
Accounts receivable, less allowance for doubtful accounts | |
| 888,617 | |
| 895,839 |
Inventories | |
| 2,619,131 | |
| 2,177,917 |
Prepaid expenses | |
| 336,227 | |
| 136,134 |
Total current assets | |
| 9,328,409 | |
| 8,147,121 |
| | | | | | |
Property and Equipment, at cost | |
| 9,516,640 | |
| 9,363,206 |
Less accumulated depreciation | |
| (7,210,906) | |
| (7,101,573) |
Property and Equipment, net | |
| 2,305,734 | |
| 2,261,633 |
| | | | | | |
Investments, net - marketable securities, long term | |
| 995,000 | |
| 1,000,000 |
Right of use asset, net | | | 161,794 | | | 185,072 |
Deferred tax asset | | | 34,231 | | | 151,164 |
Other assets | | | 84,035 | | | 85,138 |
Total other assets | |
| 1,275,060 | |
| 1,421,374 |
| | | | | | |
TOTAL ASSETS | | $ | 12,909,203 | | $ | 11,830,128 |
| | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | |
|
| |
|
|
Current Liabilities | |
|
| |
|
|
Short term debt | | $ | 92,966 | | $ | 97,367 |
Operating lease, short term | |
| 107,932 | |
| 105,789 |
Accounts payable | |
| 316,510 | |
| 514,512 |
Customer deposits | |
| 2,649,090 | |
| 1,825,595 |
Accrued expenses | |
| 318,333 | |
| 392,233 |
Total current liabilities | |
| 3,484,831 | |
| 2,935,496 |
| |
| | |
| |
Long term debt | |
| 28,710 | |
| 49,149 |
Operating lease, long term | | | 71,903 | | | 99,834 |
Total liabilities | | | 3,585,444 | | | 3,084,479 |
| | | | | | |
Total Shareholders’ Equity | |
| 9,323,759 | |
| 8,745,649 |
| | | | | | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | $ | 12,909,203 | | $ | 11,830,128 |
3
SCI ENGINEERED MATERIALS, INC.
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(UNAUDITED)
|
| 2023 |
| 2022 | ||
Revenue | | $ | 5,797,147 | | $ | 5,326,432 |
Cost of revenue | |
| 4,472,550 | |
| 4,332,331 |
Gross profit | |
| 1,324,597 | |
| 994,101 |
General and administrative expense | |
| 432,413 | |
| 373,188 |
Research and development expense | |
| 135,360 | |
| 87,031 |
Marketing and sales expense | |
| 109,571 | |
| 82,188 |
Income from operations | |
| 647,253 | |
| 451,694 |
Interest (income) expense, net | |
| (48,977) | |
| 6,493 |
Income before provision for income taxes | |
| 696,230 | |
| 445,201 |
Income tax expense | |
| 158,210 | |
| 60,800 |
NET INCOME | | $ | 538,020 | | $ | 384,401 |
Earnings per share - basic and diluted | |
| | |
| |
Income per common share | |
| | |
| |
Basic | | $ | 0.12 | | $ | 0.09 |
Diluted | | $ | 0.12 | | $ | 0.08 |
Weighted average shares outstanding | |
| | |
| |
Basic | |
| 4,525,103 | |
| 4,510,276 |
Diluted | |
| 4,555,409 | |
| 4,538,165 |
4
SCI ENGINEERED MATERIALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(UNAUDITED)
|
| 2023 |
| 2022 | ||
CASH PROVIDED BY (USED IN): |
| |
|
| |
|
Operating activities | | $ | 719,764 | | $ | 603,992 |
Investing activities | |
| (147,721) | |
| (74,676) |
Financing activities | |
| (24,840) | |
| (23,783) |
NET INCREASE IN CASH | |
| 547,203 | |
| 505,533 |
| | | | | | |
CASH - Beginning of period | |
| 3,947,966 | |
| 4,140,942 |
| | | | | | |
CASH - End of period | | $ | 4,495,169 | | $ | 4,646,475 |
5