The Columbus-based advanced materials maker more than doubled sales year over year while continuing efforts to recoup funds lost to a February bank fraud incident.

May 4, 2026

SCI Engineered Materials, Inc., a Columbus, Ohio-based manufacturer of advanced materials used in thin-film coating applications, reported record quarterly revenue for the three months ended March 31, 2026, even as the company absorbed a sizable charge tied to an imposter scam disclosed earlier this year. The smaller reporting company, which trades under the ticker SCIA on the OTCQB marketplace, attributed top-line growth to higher raw material pricing, a different product mix, and increased volume.

First-quarter revenue reached roughly $8.16 million, more than double the approximately $3.50 million booked in the same period of 2025. Sales of products introduced during the second half of last year, along with shipments to new customers, were the primary contributors to the year-over-year jump. Despite the surge in sales, gross margin compressed to 24.9% from 30.6% a year earlier, with management attributing the squeeze to elevated raw material costs and a less favorable product mix. Even so, gross profit nearly doubled in dollar terms, climbing to about $2.04 million from roughly $1.07 million.

Net income for the quarter rose to $462,262, up from $309,717 a year earlier, while income from operations climbed to $488,924 from $302,539, achieved despite a $562,026 fraud-related charge that flowed through operating expenses.

A Costly First-Quarter Surprise

On February 10, 2026, the company disclosed it had been victimized by an imposter scheme carried out alongside bank fraud, with funds totaling $898,325 wrongfully diverted. As of April 30, 2026, $336,299 had been recovered, leaving a net loss of $562,026 that the company recorded as fraud expense in the first quarter. Management said recovery efforts remain ongoing and emphasized that day-to-day operations were not disrupted by the incident.

Total operating expenses for the quarter rose sharply to $1,546,196 from $770,275 a year earlier. Beyond the fraud charge, the company saw:

• General and administrative costs of $642,043 versus $547,821, driven primarily by timing-related stock-based compensation.
• Marketing and sales expenses up 66% to $199,517 as the company added staff.
• Research and development spending up 39.4% to $142,610 on higher compensation and research material outlays.

Product Innovation and Market Strategy

SCI operates as a single business segment from its Columbus headquarters, serving as a global supplier and manufacturer of advanced materials for Physical Vapor Deposition thin-film applications. Recent product introductions include electrically conductive Indium Tin Oxide reaching 99% density and rotatable sputtering targets measured up to three meters in length. Enriched Boron Carbide, manufactured domestically, has drawn particular interest from defense and aerospace customers. The company is also developing applications using its vacuum hot presses, cold isostatic press, and kilns, with specialty diffusion bonding among the new initiatives.

During the second half of 2025, SCI identified an additional niche market that could benefit from its custom powder offerings, including spherical powders aimed at additive manufacturing. Research spending is being channeled toward custom and additive-manufacturing applications under a disciplined innovation approach intended to shorten the time required to commercialize new products.

Macro Headwinds Acknowledged

Management flagged several external pressures shaping the operating environment. Geopolitical uncertainty in the Middle East and the evolving tariff landscape continue to weigh on multinational customers’ planning. Inflation remains a factor across labor, raw materials, and transportation, with the company seeking to pass higher costs along where possible while acknowledging that future inflationary pressure is difficult to forecast. Supply chain disruptions are affecting some end markets, although SCI said it has not yet experienced material problems sourcing raw materials or shipping goods. Customer behavior reflects this caution, with buyers closely managing inventory and timing shipments to keep quarter-end balances lean.

Balance Sheet and Cash Flow

Liquidity strengthened during the period. Cash and cash equivalents grew to $8,540,160 at the end of March from $7,939,000 at the close of 2025, while marketable securities held essentially flat at roughly $3.37 million. Working capital expanded 2.3% to $8,585,299. Inventories rose by about $2.19 million and customer deposits climbed by $2.73 million, both linked primarily to orders received late in the quarter.

Operating activities generated $1,178,205 of cash, up from $933,353 a year earlier, supported by net income, depreciation and accretion totaling $125,189, and stock-based compensation of $87,129. Investing activities consumed $326,982 to acquire production equipment, compared with $83,336 a year earlier. The company allocated $267,500 to treasury stock purchases during the quarter and made no third-party finance lease payments.

Net interest income rose modestly to $109,086 from $98,130, reflecting larger cash balances and roughly $3.3 million invested in marketable securities. Income tax expense of $135,748 outpaced the prior year’s $90,952, while the effective tax rate held steady at 22.7%. Deferred tax liabilities rose to $515,154 from $389,572 at year-end 2025, and management determined that no valuation allowance was necessary as of March 31, 2026.

Other Disclosures

SCI continues to lease its Columbus headquarters under an operating lease entered in November 2024, with monthly payments ranging from $24,700 to $28,900 and a maturity in November 2029. Total minimum lease payments outstanding came to $1,208,230, with a remaining weighted-average lease term of 3.7 years and a discount rate of 8.5%. Lease costs in the quarter were approximately $77,190, plus about $19,000 of variable lease costs.

The company reported 4,450,003 common shares outstanding as of April 30, 2026 and noted that no off-balance-sheet arrangements existed at quarter-end. Management concluded that disclosure controls and procedures were effective and reported no material changes to internal controls over financial reporting during the period.