Nanotechnology Now - Press Release: "Nanophase Announces Third Quarter Revenue"

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Abstract:
Nine Month 2007 Revenues Increase 41% Year-Over-Year

Nanophase Announces Third Quarter Revenue

ROMEOVILLE, IL | Posted on October 19th, 2007

Nanophase Technologies , a technology leader in nanomaterials and advanced nanoengineered products, announced the Company's eleventh consecutive quarter of year-over-year revenue growth.

For the quarter ended September 30, 2007, revenue rose to $2.6 million compared to $2.4 million in third quarter 2006, a 5% revenue increase year-over-year. Gross margin on sales for the third quarter 2007 was 21%, decreasing on a year-over-year basis due to unfavorable product mix. Nanophase reported a third quarter 2007 net loss of $0.96 million, or $0.05 per share (fully diluted), compared with a net loss for the third quarter of 2006 of $0.92 million, or $0.05 per share (fully diluted).

For the first nine months of 2007, total revenues rose to $9.6 million compared to $6.8 million in the first nine months of 2006, an increase of $2.8 million, or 41% year-over-year. Gross margin for the first nine months of 2007 reached 29% of revenue versus 23% in the same period of 2006; in total dollars, gross margin increased 73% year-over-year. Nanophase reported a net loss for the nine months of 2007 of $2.4 million, or $0.12 per share (fully diluted), compared with a net loss for the same period of 2006 of $3.6 million, or $0.20 per share (fully diluted).

"Third quarter 2007 revenue was disappointing compared with our outlook entering the quarter due to an unexpected revenue reduction in architectural coatings," stated Joseph Cross, Nanophase's president and CEO. "Based on customer information, we believe that the architectural coatings order rate was markedly impacted by a reduction in new housing starts and reduced consumer spending in the do-it-yourself (DIY) market. Tracking available data, this view seems to coincide with recent public information from home builders, DIY retailers and some architectural coatings companies. Given the uncertainty in demand level for the DIY architectural products over the near term, we have taken a conservative approach and corresponding actions to reduce our operating costs accordingly."

Cross noted that the Company's continuous operational improvement efforts advanced during the third quarter. Nanophase successfully completed a third party audit and was recertified to ISO14001, the international environmental standard, and passed a new milestone in employee safety with over 800,000 hours worked without a lost time accident. "Over the last several years, we have continuously worked to improve reactor output in our PVS process and this last quarter hit yet another new achievement level. Since approximately 1999, we have increased PVS reactor output an aggregate of ~1900% while improving product consistency and quality under the Company's Lean Six Sigma process."

"Despite the near-term slowdown in current architectural coating products, we are optimistic about growth in our present markets and those where we have initiated penetration. Sunscreen and daily care continue to grow in 2007 over 2006 levels. The new focus on full spectrum UVA products, such as in the proposed FDA monograph and similar legislation in the EU, offer improved potential for adoption going forward. We are working on an increasing number of new opportunities in industrial and architectural coatings markets and remain positive for material long-term growth. We have also achieved substantial progress in manufacturing nanomaterials for CMP and other polishing markets this past quarter and believe that these improvements are encouraging indicators of future opportunity."

Nanophase has scheduled its quarterly conference call for October 18 at 4:00 PM CDT, 5:00 PM EDT, which will be hosted by Joseph Cross, president and CEO, and Jess Jankowski, CFO. The call may be accessed through the Company's website, http://www.nanophase.com , and clicking on the link under Investor Relations and Calendar of Events. If you are unable to attend, a replay will be available through October 25, 2007 by dialing 706-645-9291 and entering code 20976692, or by logging onto the Company's website and following the above directions.

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About Nanophase Technologies
Nanophase Technologies Corporation (NANX), http://www.nanophase.com , is a leader in nanomaterials technologies and provides nanoengineered solutions for multiple industrial product applications. Using a platform of patented and proprietary integrated nanomaterial technologies, the Company creates products with unique performance attributes from two ISO 9001:2000 and ISO 14001 facilities. Nanophase delivers commercial quantity and quality nanoparticles, coated nanoparticles, and nanoparticle dispersions in a variety of media. The Company owns or licenses 18 United States and 49 foreign patents and patent applications. Information about Nanophase may be found in the Company's public filings or on its website.

Based on the financial data accompanying this release, results are stated in approximate terms with earning per share fully diluted. 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 risk and uncertainties include 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 nanocrystalline materials; 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; and other risks described in the Company's Form 10Q filed August 8, 2007 and other filings with the Securities and Exchange Commission. 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.


                       NANOPHASE TECHNOLOGIES CORPORATION
                                 BALANCE SHEETS
                                   (Unaudited)

                                               September 30,      December 31,
                   ASSETS                          2007              2006

    Current assets:
      Cash and cash equivalents                   $563,582          $132,387
      Investments                               16,513,125         8,434,793
      Trade accounts receivable, less allowance
       for doubtful accounts of $13,000 and
       $22,000 on September 30, 2007 and
       December 31, 2006, respectively           1,481,018         1,459,391
      Inventories, net                           1,660,335           923,223
      Prepaid expenses and other current assets    442,722           534,407
        Total current assets                    20,660,782        11,484,201

      Equipment and leasehold improvements, net  7,601,479         7,608,326
      Other assets, net                            777,763           651,218
                                               $29,040,024       $19,743,745

        LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Current portion of deferred other revenue    127,273           127,273
      Current portion of capital lease obligations  42,150            32,972
      Accounts payable                             659,172           478,694
      Accrued expenses                           1,551,834         1,643,585
        Total current liabilities                2,380,429         2,282,524

      Long-term debt, less current maturities
       and unamortized debt discount             1,478,956         1,383,707
      Long-term portion of capital lease
       obligations                                  42,575            50,552
      Deferred other revenue, less current
       portion                                     106,061           201,515
                                                 1,627,592         1,635,774

    Contingent liabilities:                             --                --

    Stockholders' equity:
      Preferred stock, $.01 par value, 24,088
       shares authorized and no shares issued
       and outstanding                                  --                --
      Common stock, $.01 par value, 30,000,000
       shares authorized; 21,063,500 and
       18,995,581 shares issued and outstanding
       on September 30, 2007 and December 31,
       2006, respectively                          210,635           189,956
      Additional paid-in capital                89,995,439        78,380,962
      Accumulated deficit                      (65,174,071)      (62,745,471)
        Total stockholders' equity              25,032,003        15,825,447
                                               $29,040,024       $19,743,745


                      NANOPHASE TECHNOLOGIES CORPORATION
                             STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                Three months ended       Nine months ended
                                  September 30,            September 30,
                                2007        2006        2007         2006
    Revenue:
      Product revenue, net   $2,442,890  $2,329,738   $9,252,306   $6,546,100
      Other revenue             111,233      96,052      333,762      276,161
        Total revenue         2,554,123   2,425,790    9,586,068    6,822,261

    Operating expense:
      Cost of revenue         2,012,938   1,705,725    6,817,462    5,220,154
        Gross Profit            541,185     720,065    2,768,606    1,602,107

      Research and
       development expense      405,650     550,208    1,379,819    1,584,487
      Selling, general and
       administrative
       expense                1,296,510   1,143,530    4,067,727    3,772,388
    Loss from operations     (1,160,975)   (973,673)  (2,678,940)  (3,754,768)
    Interest income             232,605      90,563      421,434      248,045
    Interest expense            (34,968)    (32,275)    (102,188)     (93,889)
    Other, net                      191        (328)     (68,906)       2,655
    Loss before provision
     for income taxes          (963,147)   (915,713)  (2,428,600)  (3,597,957)
    Provision for income taxes       --          --           --           --
    Net loss                  $(963,147)  $(915,713) $(2,428,600) $(3,597,957)

    Net loss per share-
     basic and diluted           $(0.05)     $(0.05)      $(0.12)      $(0.20)

    Weighted average number
     of common shares
     outstanding             20,962,150  18,380,334   19,686,578   18,128,994



                        NANOPHASE TECHNOLOGIES CORPORATION
                   STATEMENTS OF OPERATIONS - EXPANDED SCHEDULE
                                   (Unaudited)

                                Three months ended        Nine months ended
                                  September 30,             September 30,
                                2007        2006         2007         2006
    Revenue:
      Product revenue, net   $2,442,890  $2,329,738   $9,252,306   $6,546,100
      Other revenue             111,233      96,052      333,762      276,161
        Total revenue         2,554,123   2,425,790    9,586,068    6,822,261

    Operating expense:
      Cost of revenue detail:
      Depreciation              281,518     227,391      839,650      690,825
      Non-Cash equity
       compensation               4,013       5,471       31,902       20,737
      Other costs of revenue  1,727,407   1,472,863    5,945,910    4,508,592
        Cost of revenue       2,012,938   1,705,725    6,817,462    5,220,154
           Gross profit         541,185     720,065    2,768,606    1,602,107

      Research and development
       expense detail:
      Depreciation               60,016      62,258      173,990      184,719
      Non-Cash equity
       compensation               5,316      21,502       67,282       87,521
      Other research and
       development expense      340,318     466,448    1,138,547    1,312,247
        Research and
         development expense    405,650     550,208    1,379,819    1,584,487

      Selling, general and
       administrative expense
       detail:
      Depreciation and
       amortization              21,145      18,467       59,971       45,822
      Non-Cash equity
       compensation              94,104      92,282      320,027      336,643
      Other selling, general
       and administrative
       expense                1,181,261   1,032,781    3,687,729    3,389,923
        Selling, general and
         administrative
         expense              1,296,510   1,143,530    4,067,727    3,772,388
    Loss from operations     (1,160,975)   (973,673)  (2,678,940)  (3,754,768)
    Interest income             232,605      90,563      421,434      248,045
    Interest expense            (34,968)    (32,275)    (102,188)     (93,889)
    Other, net                      191        (328)     (68,906)       2,655
    Loss before provision
     for income taxes          (963,147)   (915,713)  (2,428,600)  (3,597,957)
    Provision for income taxes       --          --           --           --
    Net loss                  $(963,147)  $(915,713) $(2,428,600) $(3,597,957)

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Contacts:
Nanophase Technologies Corporation
1319 Marquette Drive
Romeoville, IL 60446
Phone: +1-630-771-6700
Fax: +1-630-771-0825
Investor Relations +1-630-771-6708

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