Nanotechnology Now - Press Release: Nanophase Announces Second Quarter and First Half Revenue

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Abstract:
Nanophase Technologies (Nasdaq: NANX), a leader in nanomaterials and advanced nanoengineered products, announced that for the quarter ending June 30, 2008, the Company achieved total revenue of $2.94 million, compared to $4.1 million in the second quarter of 2007, and grew gross margin as a percentage of revenue to 38%. Nanophase reported a net loss of $788,000, or $0.04/share, for the quarter compared to $241,000, or $0.01/share, in the second quarter of 2007.

Nanophase Announces Second Quarter and First Half Revenue

ROMEOVILLE, IL | Posted on July 22nd, 2008

"In an increasingly challenging economic and cost environment and considering the inventory stocking that occurred in the second quarter of 2007, Nanophase delivered a relatively solid quarter," stated Joseph Cross, Nanophase's president and CEO. "The quarter was as forecast, essentially flat to the first quarter. We knew that the second quarter of 2007 benefitted from architectural coating orders for retail rollout and inventory-building with our market partner, BYK Chemie, amounting to $1.2 million more revenue in that quarter than the current second quarter."

For the first half of 2008, Nanophase revenues were $6.0 million, compared with $7 million in the first half of 2007. Gross margin was 36%, a 4% increase over the same period in 2007. The net loss was $1.7 million, or $0.08/share, compared to $1.5 million, or $0.08/share, in the first half of 2007.

Cross noted, "Gross margin growth, along with cost control management, has reduced the Company's cash used for operations to an average of $350,000 per quarter, a reduction of 57% from the same period in 2007. Exiting the first half, Nanophase has $15.8 million in cash and investments and, we believe, is adequately funded for the future."

Markets and Outlook

Cross noted that the Company continues to make sound progress adding new opportunities and moving those through the stage gate sales process toward revenue producing applications. In the second quarter the Company added three new customers for glass polishing, electrostatic discharge protection, and animal hygiene. Nanophase is pursuing opportunities in chemical mechanical polishing for semiconductors, energy, architectural coatings, natural rubber latex products, SPF clothing, industrial coatings, and several other markets.

"We have added sales personnel, realigned R&D and internal resources with our business development opportunities and are seeing increased success in new product development as evidenced by the three new customers we have noted," stated Cross. "We believe that we are taking the proper actions to identify new markets and capture new sales and we remain optimistic going forward."

"Relative to the second half of the year, we have recently become aware of over-inventory conditions at both BASF and BYK Chemie that will likely effect their order requirements. While we expect this to be a one to two quarter situation until the inventory is reduced, it will impact our previous revenue expectations for the second half of 2008. It also seems apparent that economic conditions may restrict existing business growth and new business volumes. We now believe that third and fourth quarter will be relatively flat compared with our second quarter. As such, it now appears that total 2008 revenue will be down about 10-15% year-over-year."

Nanophase has scheduled its quarterly conference call for July 22 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, www.nanophase.com, by clicking on the link under Investor Relations and Calendar of Events. If you are unable to attend, a replay will be available through July 29, 2008 by dialing 706-645-9291 and entering code 55557439, or by logging onto the Company's website and following the above directions.

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About Nanophase Technologies
Nanophase Technologies Corporation (NANX), 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.

All numbers in this release are approximate; refer to the financials accompanying the release for details. Earnings per share are stated as 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 10K filed March 14, 2008, 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)


                                                      June 30,    December 31,
                   ASSETS                               2008          2007


    Current assets:
      Cash and cash equivalents                       $908,493       $563,075
      Investments                                    8,881,386     16,145,844
      Trade accounts receivable, less
       allowance for doubtful accounts
       of $13,000 on June 30, 2008 and
       December 31, 2007                             1,289,652      1,403,206
      Inventories, net                               1,571,760      1,085,364
      Prepaid expenses and other current assets        427,601        298,464
        Total current assets                        13,078,892     19,495,953

      Investments                                    6,000,000              -
      Equipment and leasehold improvements, net      7,085,963      7,409,666
      Other assets, net                                627,685        781,266
                                                   $26,792,540    $27,686,885

         LIABILITIES AND STOCKHOLDERS’ EQUITY
    Current liabilities:
      Current portion of deferred other revenue        127,273        127,273
      Current portion of capital lease obligations      40,300         43,110
      Accounts payable                                 617,709        238,295
      Accrued expenses                               1,640,446      1,584,656
        Total current liabilities                    2,425,728      1,993,334

      Long-term debt, less current maturities and
       unamortized debt discount                     1,540,703      1,512,507
      Long-term portion of capital lease
       obligations                                      13,170         31,430
      Deferred other revenue, less current portion      10,609         74,243
                                                     1,564,482      1,618,180

    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; 21,130,697 and
        21,088,068 shares issued and outstanding
        on June 30, 2008 and December 31, 2007,
        respectively                                   211,307        210,881
      Additional paid-in capital                    90,663,474     90,201,131
      Accumulated deficit                          (68,072,451)   (66,336,641)
        Total stockholders’ equity                  22,802,330     24,075,371
                                                   $26,792,540    $27,686,885



                        NANOPHASE TECHNOLOGIES CORPORATION

                             STATEMENTS OF OPERATIONS

                                   (Unaudited)

                               Three months ended        Six months ended
                                    June 30,                 June 30,
                                2008        2007        2008         2007
    Revenue:
      Product revenue, net   $2,811,626  $4,015,275   $5,754,347   $6,809,416
      Other revenue             132,780     110,233      244,167      222,529
        Total revenue         2,944,406   4,125,508    5,998,514    7,031,945

    Operating expense:
      Cost of revenue         1,836,276   2,611,249    3,836,484    4,804,524
        Gross Profit          1,108,130   1,514,259    2,162,030    2,227,421

      Research and
       development expense      416,239     450,005      854,934      974,169
      Selling, general and
       administrative
       expense                1,525,446   1,360,957    3,219,514    2,771,217
    Loss from operations       (833,555)   (296,703)  (1,912,418)  (1,517,965)
    Interest income              80,788      89,202      248,010      188,829
    Interest expense            (33,142)    (34,173)     (71,559)     (67,220)
    Other, net                   (2,074)        248          157      (69,097)
    Loss before provision
     for income taxes          (787,983)   (241,426)  (1,735,810)  (1,465,453)
    Provision for income
     taxes                          -           -            -            -
    Net loss                  $(787,983)  $(241,426) $(1,735,810) $(1,465,453)


    Net loss per share --
     basic and diluted           $(0.04)     $(0.01)      $(0.08)      $(0.08)

    Weighted average number
     of common shares
     outstanding             21,130,697  19,070,236   21,118,652   19,038,217



                        NANOPHASE TECHNOLOGIES CORPORATION

                   STATEMENTS OF OPERATIONS - EXPANDED SCHEDULE

                                   (Unaudited)

                               Three months ended        Six months ended
                                    June 30,                 June 30,
                                2008        2007        2008         2007
    Revenue:
      Product revenue, net   $2,811,626  $4,015,275   $5,754,347   $6,809,416
      Other revenue             132,780     110,233      244,167      222,529
        Total revenue         2,944,406   4,125,508    5,998,514    7,031,945

    Operating expense:
      Cost of revenue detail:
      Depreciation              240,575     278,052      478,620      558,133
      Non-Cash equity
       compensation              20,165      13,488       36,936       27,889
      Other costs of revenue  1,575,536   2,319,709    3,320,928    4,218,502
        Cost of revenue       1,836,276   2,611,249    3,836,484    4,804,524
           Gross profit       1,108,130   1,514,259    2,162,030    2,227,421

      Research and
       development expense
       detail:
      Depreciation               59,318      58,612      117,775      113,974
      Non-Cash equity
       compensation              38,281      16,736       69,313       61,966
      Other research and
       development expense      318,640     374,657      667,846      798,229
        Research and
         development expense    416,239     450,005      854,934      974,169

      Selling, general and
       administrative
       expense detail:
      Depreciation and
       amortization              24,509      19,727       48,603       38,824
      Non-Cash equity
       compensation             173,682      79,218      326,634      225,923
      Other selling, general
       and administrative
       expense                1,327,255   1,262,012    2,844,277    2,506,470
        Selling, general and
         administrative
         expense              1,525,446   1,360,957    3,219,514    2,771,217
    Loss from operations       (833,555)   (296,703)  (1,912,418)  (1,517,965)
    Interest income              80,788      89,202      248,010      188,829
    Interest expense            (33,142)    (34,173)     (71,559)     (67,220)
    Other, net                   (2,074)        248          157      (69,097)
    Loss before provision
     for income taxes          (787,983)   (241,426)  (1,735,810)  (1,465,453)
    Provision for income
     taxes                          -           -            -            -
    Net loss                  $(787,983)  $(241,426) $(1,735,810) $(1,465,453)

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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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