Nanophase Reports Record Third Quarter 2020 Financial Results as Solésence Expands Beauty Footprint

Announces 20+% Growth and Record Profitability

ROMEOVILLE, Ill., Nov. 03, 2020 (GLOBE NEWSWIRE) — Nanophase Technologies Corporation (OTCQB: NANX), a leader in minerals-based and scientifically-driven health care innovations across various beauty and life science categories, protecting skin from environmental aggressors and aiding in medical diagnostics, today reported financial results for the three- and nine-month periods ended September 30, 2020.

Jess Jankowski, President and CEO, commented: “the third quarter continued our strong progress in profitably growing Nanophase. Our medical diagnostics materials for Covid-19-related applications continue to receive broad use during the global pandemic, while our fully formulated Solésence products have seen triple digit growth despite the challenges of 2020. Although our third major business segment, personal care ingredients, has experienced a sales downturn that we believe is related to the pandemic, our growth in total has been exceptional.”

Third Quarter and YTD 2020 Financial Highlights

  • Revenue for the third quarter was $3.9 million, vs. $3.1 million for the same period in 2019. Revenue for the nine-month period was $12.3 million vs. $10.1 million for the same period in 2019. 

For the nine-month period of 2020:

    • Solésence revenue was $4.4 million, up 164% from $1.7 million in 2019
    • Advanced Materials revenue was $3.7 million, up 85% from $2.0 million in 2019
    • Personal Care Ingredients revenue was $4.2 million, down 35% from $6.5 million in 2019
  • Net income for the quarter was $0.4 million in 2020, or $0.01 per share, compared to a net loss of $0.9 million, or $0.02 per share, for 2019.   Net income for the nine-month period was $0.8 million in 2020, or $0.02 per share, compared to a net loss of $2.0 million, or $0.06 per share, for 2019.
  • We note that the PPP funding we received in the second quarter of 2020 is recorded on the balance sheet as a liability and has not had any impact on our income statement to date.
  • The Company finished the quarter with approximately $1.1 million in cash and cash equivalents.

Jankowski continued, “Our gross profit and bottom line have improved nicely since the first quarter. This is a function of growing product volume, improvements in operational efficiency, and prudent cost-cutting. We expect these gains combined with a slight improvement in the personal care ingredients segment to result in the fourth quarter exceeding last year’s results.”

”The growth in our Solésence business is a validation of our beauty products strategy,” offered Kevin Cureton, Chief Operating Officer. “As expected, our two largest Solésence clients have each exceeded $1 million in revenue, while we have launched products with over a dozen different beauty and personal care brands, demonstrating the broadening of our customer base.”

Jankowski added, “We are also honored to contribute to our national public health through the materials we make for use in medical diagnostics, and we are keenly aware of the suffering of our fellow citizens under current conditions. We remain committed to protecting our employees, their families, and our communities, as we work to provide essential products for the health and safety of those we serve.”

Use of Non-GAAP Financial Information

Nanophase believes that the presentation of results excluding certain items, such as non-cash equity compensation charges, provides meaningful supplemental information to both management and investors, facilitating the evaluation of performance across reporting periods. The Company uses these non-GAAP measures for internal planning and reporting purposes. These non-GAAP measures are not in accordance with, or an alternative for, Generally Accepted Accounting Principles (“GAAP”) and may be different from non-GAAP measures used by other companies. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income or net income per share prepared in accordance with GAAP.

About Nanophase Technologies
Nanophase Technologies Corporation (NANX), www.nanophase.com, is a leading innovator in minerals-based and scientifically-driven health care solutions across beauty and life science categories, as well as other legacy advanced materials applications. Leveraging a platform of integrated patented and proprietary technologies, the Company creates products with unique performance, enhancing consumers health and well-being. We deliver commercial quantity and quality engineered materials both as ingredients and as part of fully formulated products in a variety of formats.

Forward-Looking Statements
This press release contains words such as “expects,”” shall,” “will,” “believes,” and similar expressions that are intended to identify forward-looking statements within the meaning of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Such statements in this announcement are made based on the Company’s current beliefs, known events and circumstances at the time of publication, and as such, are subject in the future to unforeseen risks and uncertainties that could cause the Company’s results of operations, performance and achievements to differ materially from current expectations expressed in, or implied by, these forward-looking statements. These risks and uncertainties include, without limitation, the following: a decision by a customer to cancel a purchase order or supply agreement in light of the Company’s dependence on a limited number of key customers; uncertain demand for, and acceptance of, the Company’s engineered materials, ingredients, and fully formulated products; the Company’s manufacturing capacity and product mix flexibility in light of customer demand; the Company’s limited marketing experience; changes in development and distribution relationships; the impact of competitive products and technologies; the Company’s dependence on patents and protection of proprietary information; the resolution of litigation in which the Company may become involved; the impact of any potential new government regulations that could be difficult to respond to or too costly to comply with while remaining financially viable; the ability of the Company to maintain an appropriate electronic trading venue; and other factors described in the Company’s Form 10-K filed March 30, 2020. In addition, the Company’s forward-looking statements could be affected by general industry and market conditions and growth rates. Except as required by federal securities laws, the Company undertakes no obligation to update or revise these forward-looking statements to reflect new events, uncertainties or other contingencies.

COMPANY CONTACT
Investor Relations
630-771-6700

NANOPHASE TECHNOLOGIES CORPORATION  
             
CONSOLIDATED BALANCE SHEETS  
(Unaudited Consolidated Condensed)  
             
             
      September 30,   December 31,  
ASSETS   2020       2019    
             
Current assets:        
  Cash and cash equivalents $ 1,133,850     $ 1,193,994    
  Trade accounts receivable, less allowance for doubtful accounts of $9,000 on September 30, 2020 and on December 31, 2019   2,451,324       970,472    
  Inventories, net   3,583,944       2,553,620    
  Prepaid expenses and other current assets   599,387       266,587    
    Total current assets   7,768,505       4,984,673    
             
  Equipment and leasehold improvements, net   2,649,619       2,255,158    
  Operating lease right-of-use assets   1,916,993       2,118,883    
  Other assets, net   10,840       12,528    
      $ 12,345,957     $ 9,371,242    
             
LIABILITIES AND STOCKHOLDERS’ EQUITY        
Current liabilities:        
  Line of credit, bank $ 500,000     $ 500,000    
  Line of credit, related party   1,541,113       223,871    
  Current portion of long-term debt, related party   500,000       500,000    
  Current portion of finance lease obligations   185,621       218,345    
  Current portion of operating lease obligations   411,421       356,949    
  Accounts payable   1,668,492       1,748,021    
  Current portion of deferred revenue   309,122       482,349    
  Accrued expenses   645,998       379,314    
    Total current liabilities   5,761,767       4,408,849    
             
  Long-term portion of finance lease obligations   148,369       287,660    
  Long-term portion of operating lease obligations   1,766,066       2,034,592    
  Long-term convertible loan, related party   1,030,340       829,721    
  PPP SBA Loan   951,600          
  Long-term portion of deferred revenue         92,750    
  Asset retirement obligations   212,247       206,221    
    Total long-term liabilities   4,108,622       3,450,944    
             
             
Stockholders’ equity:        
  Preferred stock, $.01 par value, 24,088 shares authorized and no shares issued and outstanding            
  Common stock, $.01 par value, 55,000,000 shares authorized; 38,215,069 and 38,136,792 shares issued and outstanding on September 30, 2020 and December 31, 2019, respectively   381,928       381,368    
  Additional paid-in capital   102,054,867       101,886,411    
  Accumulated deficit   (99,961,227 )     (100,756,330 )  
    Total stockholders’ equity   2,475,568       1,511,449    
      $ 12,345,957     $ 9,371,242    
             

NANOPHASE TECHNOLOGIES CORPORATION  
                           
CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited Consolidated Condensed)  
                           
            Three months ended   Nine months ended  
            September 30,   September 30,  
              2020     2019       2020     2019    
Revenue:                     
  Product revenue, net     $ 3,826,918   $ 3,043,036     $ 11,929,496   $ 9,796,944    
  Other revenue       60,538     26,350       332,768     321,058    
    Net revenue       3,887,456     3,069,386       12,262,264     10,118,002    
                           
Operating expense:                    
  Cost of revenue       2,203,105     2,506,720       7,832,125     7,839,443    
    Gross profit       1,684,351     562,666       4,430,139     2,278,559    
                           
  Research and development expense       402,216     487,798       1,133,120     1,449,646    
  Selling, general and administrative expense     729,779     889,659       2,133,586     2,710,710    
Income/(Loss) from operations       552,356     (814,791 )     1,163,433     (1,881,797 )  
Interest income                        
Interest expense       122,137     47,139       368,330     140,282    
Other, net                         
Income/(Loss) before provision for income taxes     430,219     (861,930 )     795,103     (2,022,079 )  
Provision for income taxes                        
Net income/(loss)     $ 430,219   $ (861,930 )   $ 795,103   $ (2,022,079 )  
                           
                           
Net income/(loss) per basic shares     $ 0.01   $ (0.02 )   $ 0.02   $ (0.06 )  
Weighted average number of basic common shares outstanding       38,141,741     38,136,792       38,138,453     36,077,257    
Net income/(loss) per diluted share     $ 0.01   $ (0.02 )   $ 0.02   $ (0.06 )  
Weighted average number of diluted common shares outstanding       38,432,741     38,136,792       38,228,453     36,077,257    
                           
   
   
NANOPHASE TECHNOLOGIES CORPORATION  
                           
CONSOLIDATED STATEMENTS OF OPERATIONS – EXPANDED SCHEDULE  
(Unaudited Consolidated Condensed)  
                           
            Three months ended   Nine months ended  
            September 30,   September 30,  
              2020     2019       2020     2019    
Revenue:                     
  Product revenue, net     $ 3,826,918   $ 3,043,036     $ 11,929,496   $ 9,796,944    
  Other revenue       60,538     26,350       332,768     321,058    
    Net revenue       3,887,456     3,069,386       12,262,264     10,118,002    
                           
Operating expense:                    
  Cost of revenue detail:                    
  Depreciation       73,572     61,612       217,578     181,494    
  Non-Cash equity compensation       19,426     13,297       38,086     33,609    
  Other costs of revenue       2,110,107     2,431,811       7,576,461     7,624,340    
    Cost of revenue       2,203,105     2,506,720       7,832,125     7,839,443    
      Gross profit       1,684,351     562,666       4,430,139     2,278,559    
                           
  Research and development expense detail:                  
  Depreciation       10,579     12,250       31,755     36,699    
  Non-Cash equity compensation       13,930     15,804       42,797     42,196    
  Other research and development expense       377,707     459,744       1,058,568     1,370,751    
    Research and development expense       402,216     487,798       1,133,120     1,449,646    
                           
  Selling, general and administrative expense detail:                
  Depreciation and amortization       4,871     5,159       15,025     15,948    
  Non-Cash equity compensation       14,998     34,746       66,019     103,414    
  Other selling, general and administrative expense   709,910     849,754       2,052,542     2,591,348    
    Selling, general and administrative expense   729,779     889,659       2,133,586     2,710,710    
Income/(Loss) from operations       552,356     (814,791 )     1,163,433     (1,881,797 )  
Interest income                        
Interest expense       122,137     47,139       368,330     140,282    
Other, net                       
Income/(Loss) before provision for income taxes     430,219     (861,930 )     795,103     (2,022,079 )  
Provision for income taxes                        
Net income/(loss)     $ 430,219   $ (861,930 )   $ 795,103   $ (2,022,079 )  
                           
Non-GAAP Disclosure (see note regarding Non-GAAP disclosures):              
  Addback Interest, net       122,137     47,139       368,330     140,282    
  Addback Depreciation/Amortization       89,022     79,021       264,358     234,141    
  Addback Non-Cash Equity Compensation       48,354     63,847       146,902     179,219    
                           
  Adjusted EBITDA     $ 689,732   $ (671,923 )   $ 1,574,693   $ (1,468,437 )  
                           

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