SCCI Sci Engineered Materials Inc

Management Discussion

• For the three months ended September 30, 2019, we had total revenue of $3,255,201. This was an increase of $602,566, or 22.7%, compared to the three months ended September 30, 2018. For the nine months ended September 30, 2019, we had total revenue of $10,012,187 compared to $7,043,244 for the same period in 2018. This was an increase of $2,968,943 or 42.2%, compared to the nine months ended September 30, 2018. Volume and pricing were higher in our photonics market and volume was lower in our thin film solar market during 2019.
• Gross profit was $458,520 for the three months ended September 30, 2019 compared to $665,884 for the same three months in 2018. This was a decrease of $207,364, or 31.1%. Gross profit as a percentage of revenue (gross margin) was 14.1% for the third quarter of 2019 compared to 25.1% for the same period in 2018. Gross profit was $1,849,491 for the nine months ended September 30, 2019 compared to $1,917,425 for the first nine months of 2018. This was a decrease of $67,934 or 3.5%. Gross margin was 18.5% for the first nine months of 2019 compared to 27.2% for the same period in 2018. The decrease in gross profit was primarily due to product mix including lower volume in our thin film solar market previously mentioned. A certain raw material related to the increased volume in our photonics market had an increase in pricing which contributed to a lower gross margin which impacted overall gross margin.
• General and administrative expense for the three months ended September 30, 2019 and 2018, was $247,984 and $310,464, respectively, a decrease of 20.1%. This decrease was primarily related to lower compensation of approximately $67,000, principally due to the retirement in June of 2019 of our former President and CEO.