noodls browser compatibility check

The security settings of your browser are blocking the execution of scripts.

To use noodls, javascript support must be enabled. Please change your browser's security settings to enable javascript.

If you have changed your browser's security settings, you can click here.

related announcements

News

The Office of the Governor of the[...]

October 31, 2025 Governor Morrisey Announces Additional $2.5 Million[...]
Jack Reed

SASC Leaders Request Defense Department Orders and Information on[...]
University of the Incarnate Word

UIW Athletes Help Maintain Solar House

Company News

SCI Engineered Materials Inc.

10/31/2025 | Press release | Distributed by Public on 10/31/2025 06:01

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025

☐	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: 0-31641

SCI ENGINEERED MATERIALS, INC.

(Exact name of registrant as specified in its charter)


Ohio	31-1210318
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

2839 Charter Street, Columbus, Ohio 43228

(Address of principal executive offices) (Zip Code)

(614) 486-0261

(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
Common stock, without par value	SCIA	OTCQB

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. Yes ☒No ☐

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). Yes ☒No ☐

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 ☐	Non-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 ☐No ☒

4,578,979 shares of Common Stock, without par value, were outstanding at October 30, 2025.

Table of Contents

FORM 10-Q

SCI ENGINEERED MATERIALS, INC.

Table of Contents


		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Balance Sheets as of September 30, 2025 (unaudited) and December 31, 2024	3

	Condensed Statements of Income for the Three and Nine months ended September 30, 2025 and 2024 (unaudited)	5

	Condensed Statements of Shareholders' Equity for the Three and Nine months ended September 30, 2025 and 2024 (unaudited)	6

	Condensed Statements of Cash Flows for the Nine months ended September 30, 2025 and 2024 (unaudited)	7

	Notes to the Condensed Financial Statements (unaudited)	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	N/A

Item 4.	Controls and Procedures	18

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	N/A

Item 1A.	Risk Factors	N/A

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	N/A

Item 3.	Defaults Upon Senior Securities	N/A

Item 4.	Mine Safety Disclosures	N/A

Item 5.	Other Information	N/A

Item 6.	Exhibits	20

Signatures		21

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SCI ENGINEERED MATERIALS, INC.

CONDENSED BALANCE SHEETS

ASSETS


	September 30,		December 31,
	2025		2024
	(UNAUDITED)
Current Assets
Cash and cash equivalents	$	9,478,260	$	6,753,403
Investments - marketable securities, short term		-		509,478
Accounts receivable
Trade, less allowance for doubtful accounts of $15,000		898,910		704,808
Tax - Employee Retention Credit		-		40,539
Other		45,880		29,941
Inventories, net		3,031,834		1,432,914
Prepaid purchase orders		38,418		83,932
Prepaid expenses		118,854		154,902
Total current assets		13,612,156		9,709,917

Property and Equipment, at cost
Machinery and equipment		9,275,228		8,755,422
Furniture and fixtures		181,446		178,307
Leasehold improvements		745,907		744,297
Construction in progress		84,031		226,002
		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

The accompanying notes are an integral part of these unaudited condensed financial statements.

Table of Contents

SCI ENGINEERED MATERIALS, INC.

CONDENSED BALANCE SHEETS

LIABILITIES AND SHAREHOLDERS' EQUITY


	September 30,		December 31,
	2025		2024
	(UNAUDITED)
Current Liabilities
Operating lease obligations, current portion	$	203,012	$	174,863
Accounts payable		400,641		419,209
Customer deposits		4,032,224		337,873
Accrued compensation		391,041		401,830
Accrued expenses and other		140,514		130,430
Total current liabilities		5,167,432		1,464,205

Deferred tax liability		261,154		121,649
Operating lease obligations, net of current portion		905,521		1,061,709
Total liabilities		6,334,107		2,647,563

Shareholders' Equity
Common stock, no par value, authorized 15,000,000 shares; 4,578,979 and 4,568,127 shares issued and outstanding, respectively		10,753,529		10,706,323
Additional paid-in capital		2,233,384		2,233,384
Retained earnings (accumulated deficit)		1,130,150		(54,305)
Total shareholders' equity		14,117,063		12,885,402

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	20,451,170	$	15,532,965

The accompanying notes are an integral part of these unaudited condensed financial statements.

Table of Contents

SCI ENGINEERED MATERIALS, INC.

CONDENSED STATEMENTS OF INCOME

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 (Note 7)

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

The accompanying notes are an integral part of these unaudited condensed financial statements.

Table of Contents

SCI ENGINEERED MATERIALS, INC.

CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(UNAUDITED)


			Additional
	Common		Paid-In		Retained Earnings
	Stock		Capital		(Accumulated Deficit)		Total
Balance 12/31/2024	$	10,706,323	$	2,233,384	$	(54,305)	$	12,885,402

Common stock issued (Note 5)		47,206		-		-		47,206

Net income		-		-		1,184,455		1,184,455

Balance 9/30/2025	$	10,753,529	$	2,233,384	$	1,130,150	$	14,117,063

Balance 12/31/2023	$	10,662,343	$	2,233,384	$	(1,915,694)	$	10,980,033

Common stock issued (Note 5)		43,980		-		-		43,980

Net income		-		-		1,432,408		1,432,408

Balance 9/30/2024	$	10,706,323	$	2,233,384	$	(483,286)	$	12,456,421



Balance 6/30/2025	$	10,753,529	$	2,233,384	$	619,871	$	13,606,784

Net income		-		-		510,279		510,279

Balance 9/30/2025	$	10,753,529	$	2,233,384	$	1,130,150	$	14,117,063


Balance 6/30/2024	$	10,706,323	$	2,233,384	$	(843,864)	$	12,095,843

Net income		-		-		360,578		360,578

Balance 9/30/2024	$	10,706,323	$	2,233,384	$	(483,286)	$	12,456,421

The accompanying notes are an integral part of these unaudited condensed financial statements.

Table of Contents

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	$	1,184,455	$	1,432,408
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and accretion		325,488		363,245
Amortization of patents		3,700		3,700
Stock based compensation		47,206		43,980
Loss on disposal of equipment		497		-
Deferred taxes		139,505		15,088
Inventory reserve		(135)		1,530
Changes in operating assets and liabilities:
Accounts receivable		(169,502)		(105,033)
Inventories		(1,598,785)		2,862,659
Prepaid purchase orders		45,514		633,122
Prepaid expenses		36,048		111,870
Other assets		-		(7,038)
Accounts payable		(18,568)		155,305
Operating lease assets and liabilities, net		-		(9,084)
Customer deposits		3,694,351		(3,135,784)
Accrued liabilities		(5,879)		44,161
Net cash provided by operating activities		3,683,895		2,410,129

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities		(2,297,563)		(1,000,000)
Proceeds from maturities of marketable securities		1,759,478		1,000,000
Purchases of property and equipment		(420,953)		(378,928)
Net cash used in investing activities		(959,038)		(378,928)

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on finance lease obligations		-		(49,149)

NET INCREASE IN CASH		2,724,857		1,982,052

CASH - Beginning of year		6,753,403		5,673,994

CASH - End of period	$	9,478,260	$	7,656,046

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest	$	-	$	706
Income taxes		194,229		325,733

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES
Increase in asset retirement obligation	$	5,175	$	5,175

The accompanying notes are an integral part of these unaudited condensed financial statements.

Table of Contents

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 one segment as a global supplier and manufacturer of advanced materials for Physical Vapor Deposition ("PVD") thin film applications. The Company is focused on markets within the photonics industry and substantially all revenues are generated from customers with multi-national operations. The Company develops innovative customized solutions enabling commercial success through collaboration with end users and Original Equipment Manufacturers.

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 99% of total revenue during the nine months ended September 30, 2025 and 2024. The top two customers represented 83% and 88% of total revenue for the nine months ended September 30, 2025 and 2024, respectively. The Company sells multiple products to its top two customers. International shipments were 1% of total revenue for the nine months ended September 30, 2025 and 2024.

Table of Contents

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
Accounts receivable	$	704,808	$	12,398,652	$	(12,204,550)	$	898,910

Nine months ended September 30, 2024
Accounts receivable	$	854,501	$	17,819,042	$	(17,727,321)	$	946,222

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:



		Balance at beginning of period		Billings		Recognized revenue		Balance at end of period
Nine months ended September 30, 2025
Contract Liabilities: Customer deposits	$	337,873	$	11,508,166	$	(7,813,815)	$	4,032,224

Nine months ended September 30, 2024
Contract Liabilities: Customer deposits	$	4,871,035	$	9,501,877	$	(12,637,661)	$	1,735,251

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 $40,539 appears as a tax receivable on the balance sheet December 31, 2024. The Company received the full ERC balance, plus interest of $6,650 in April of 2025.

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.

Table of Contents

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 $5,447,376 and $3,192,705 at September 30, 2025 and December 31, 2024, respectively. This is valued at original cost plus interest and is included in Cash and cash equivalents on the balance sheet.

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 13 to 38 months. The amortized cost, allowance for credit losses, fair value, and the related unrecognized gains and losses of these investments, were as follows:


			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Losses		Gains		Fair Value
September 30, 2025
Corporate bonds	$	3,297,563	$	(4,253)	$	-	$	3,293,310
U.S. government treasuries		-		-		-		-
Total investments	$	3,297,563	$	(4,253)	$	-	$	3,293,310

Allowance for credit losses		(1,000)
Total investments, net	$	3,296,563

December 31, 2024
Corporate bonds	$	2,250,000	$	(6,097)	$	-	$	2,243,903
U.S. government treasuries		509,478		-		7,662		517,140
Total investments	$	2,759,478	$	(6,097)	$	7,662	$	2,761,043

Allowance for credit losses		(1,000)
Total investments, net	$	2,758,478

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 $1,000 at September 30, 2025 and December 31, 2024, respectively. 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.

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 10,852 and 8,709 aggregate shares of common stock of the Company during the nine months ended September 30, 2025, and 2024, respectively. These shares had an aggregate value of $47,206 and $43,980 and were recorded as non-cash stock compensation expense in the condensed financial statements for the nine months ended September 30, 2025 and 2024, respectively.

Table of Contents

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


		Weighted
		Average
	Stock	Exercise
	Options	Price
Outstanding at January 1, 2024	41,304	$	1.05
Exercised	(35,359)	$	1.02
Outstanding at December 31, 2024	5,945	$	1.25
Outstanding at September 30, 2025	5,945	$	1.25
Options exercisable at December 31, 2024	5,945	$	1.25
Options exercisable at September 30, 2025	5,945	$	1.25

Exercise price for options was $1.25 at September 30, 2025, with a contractual life of 2.6 years.

Note 6. Inventories

Inventories consisted of the following:


	September 30,		December 31,
	2025		2024
Raw materials	$	212,853	$	291,890
Work-in-process		2,507,378		895,373
Finished goods		318,484		252,667
		3,038,715		1,439,930
Inventory reserve		(6,881)		(7,016)
	$	3,031,834	$	1,432,914

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:


	Three months ended September 30,				Nine months ended September 30,
	2025		2024		2025		2024
Net income	$	510,279	$	360,578	$	1,184,455	$	1,432,408

Weighted average common shares outstanding - basic		4,578,979		4,564,259		4,573,970		4,546,269

Effect of dilution - stock options		4,163		4,604		4,256		4,551
Weighted average shares outstanding - diluted		4,583,142		4,568,863		4,578,226		4,550,820

Table of Contents

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 $1 million during the third quarter of 2025. This line of credit has a maturity date of August 29, 2026 and bears interest equal to the rate of interest per annum established by Fifth Third Bank as its Prime Rate. No amounts were drawn on this line of credit as of September 30, 2025.

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 22.7% for the three and nine months ended September 30, 2025, and 2024. The difference between the effective tax rate and the marginal rate is primarily due to the effect of state and local taxes.

The following table presents the income tax expense:


	Three months ended September 30,				Nine months ended September 30,
	2025		2024		2025		2024
Federal	$	138,627	$	97,963	$	321,779	$	389,537
State and local		11,222		7,961		26,050		31,540
	$	149,849	$	105,924	$	347,829	$	421,077

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 no valuation allowance was necessary at September 30, 2025. The deferred tax liability was $261,154 at September 30, 2025 and $121,649 at December 31, 2024.

Table of Contents

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 $9,200 to $9,700 with a maturity date of November 30, 2024. During the third quarter of 2024, the Company modified its operating lease, which included changes to the lease terms and adjustments to the lease payments.

The Company extended the lease period for an additional five years with a new maturity date of November 30, 2029. The terms of the lease include monthly payments ranging from $24,700 to $28,900. The modifications did not result in a change in the classification of the lease, which continues to be classified as an operating lease. The lease liability was remeasured using the discount rate as of the effective date of the modification. The right of use asset was adjusted by the amount of the remeasurement of the lease liability. There are no restrictions or covenants associated with the lease. The lease costs were approximately $74,200 and $29,200 for the three months ended September 30, 2025 and 2024, respectively, and $222,700 and $87,600 during the nine months ended September 30, 2025 and 2024, respectively. Additionally, the variable lease costs were approximately $18,600 and $11,500 for the three months ended September 30, 2025 and 2024, respectively and $77,800 and $50,000 for the nine months ended September 30, 2025 and 2024, respectively.

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	$	75,212
2026		309,793
2027		322,184
2028		335,072
2029		318,374
Total minimum lease payments		1,360,635
Less debt discount		252,102
Total operating lease obligations	$	1,108,533


	2025			2024
Right of use asset obtained in exchange for lease liability	$	-		$	499,125
Operating cash outflows from operating leases - year-to-date	$	128,039		$	84,811
Weighted average remaining lease term - operating leases		4.2	years		5.2	years
Weighted average discount rate - operating leases		8.5	%		5.5	%

Table of Contents

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

Table of Contents

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

Gross profit

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.

Table of Contents

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.

Table of Contents

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

Table of Contents

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.

Table of Contents

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.

Table of Contents

PART II. OTHER INFORMATION

Item 6. Exhibits


3(a)		Certificate of Second Amended and Restated Articles of Incorporation of Superconductive Components, Inc. (Incorporated by reference to Exhibit 3(a) to the Company's initial Form 10-SB, filed on September 28, 2000)

3(b)		Restated Code of Regulations of Superconductive Components, Inc. (Incorporated by reference to Exhibit 3(b) to the Company's initial Form 10-SB, filed on September 28, 2000)

3(c)		Amendment to Articles of Incorporation recording the change of the corporate name to SCI Engineered Materials, Inc. (Incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-QSB filed November 7, 2007).

4(a)		SCI Engineered Materials, Inc. 2011 Stock Incentive Plan (Incorporated by reference to the Company's Definitive Proxy Statement for the 2011 Annual Meeting of Shareholders held on September 10, 2011, filed April 28, 2011).




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	*	Section 1350 Certification of Principal Executive Officer.

32.2	*	Section 1350 Certification of Principal Financial Officer.

99.1	*	Press Release dated October 31, 2025 entitled "SCI Engineered Materials, Inc., Reports 2025 Third Quarter and Year-to-Date Results."

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

Table of Contents

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)

SCI Engineered Materials Inc. published this content on October 31, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 31, 2025 at 12:01 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]

Back

View original format