Nanophase Reports Second Quarter 2009 Financial Results

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Home > News Center > Nanophase Reports Second Quarter 2009 Financial Results

August 04, 2009

Romeoville, IL, - August 4, 2009 - Nanophase Technologies Corporation (Nasdaq: NANX), a technology leader in nanomaterials and advanced nanoengineered products, reported today financial results for its second quarter ending June 30, 2009.

Second Quarter

Revenue for second quarter 2009 was $1.6 million, compared to $2.9 million for the same period in 2008. The net loss for the quarter was $1.2 million, or $0.06 per share, compared to a net loss of $0.8 million, or $0.04 per share, for the second quarter of 2008.

Jess Jankowski, President and CEO of Nanophase, noted, “Although results were below prior year, they were in-line with expectations. The results reinforce our view that we must successfully transition Nanophase to a market-driven business model that has a diverse base of customers and revenue streams, while concurrently managing our costs to help off-set the decline in revenue.”

Looking Ahead

“The last several months have shown some solid business development and destocking of excess inventory has started to reverse, both with some of our own customers and industry wide. We believe this shift is and will be a positive one for Nanophase,” said Jankowski.

“Over the past year we have aligned around several market segments, allowing us to better leverage our activities. The quality and quantity of these opportunities continues to improve, as does our eventual ability to convert these opportunities into revenue for Nanophase. This is a direct result of us focusing on fewer markets and building a stronger understanding of the performance benefits of our products in each of those markets.

“While transition costs obscured the benefits in our first half 2009 results, we have reduced our annual expense rate by $2 million, despite increasing the number of business opportunities we have been actively pursuing. This realignment along a lean structure should become even more apparent as we continue through 2009, and is already reflected in a meaningful reduction in sales, general & administrative expenses compared with 2008.” He noted SG&A in second quarter 2009 was $1.05 million, down 31% from second quarter 2008, while first half 2009 SG&A was $2.05 million compared with $3.10 million in first half 2008. “We are spending money prudently, and expect to generate future savings due to the philosophy accompanying these changes.”

Jankowski concluded: “Our research and development efforts are well aligned with the market-driven, direct-to-the-customer model. In addition to continuing to serve the needs of our existing partners, we are intent on building applications expertise in carefully selected market segments. We are tailoring our product offerings towards customers’ identified unmet needs where there is a strong value proposition. We continue to develop ready-to-go products that should serve the customers’ needs more directly. We expect the prospects for success will be improved relative to our previous model. We believe we are doing the right things to build the business.”

Shareholders and members of the investing community are encouraged to participate in today’s conference call, where Jankowski will be discussing the company’s second quarter performance and 2009 prospects.

2nd Quarter Conference Call

Nanophase has scheduled its quarterly conference call for August 4, 2009, at 4:00 p.m. CDT (5:00 p.m. EDT), which will be hosted by Jess Jankowski, president and CEO. To participate in the call you may dial 800-344-8034, or 785-830-1990 and reference the conference identification of 7NANOPHASE. The call may also be accessed through the company’s website, www.nanophase.com, by clicking on the link under NewsCenter and Calendar of Events. If you are unable to attend, a replay will be available through August 11, 2009, by dialing 800-723-0544, or 402-220-2656, or by logging onto the company’s website and following the above directions.

Use of Non-GAAP Financial Information

Nanophase believes that the presentation of results excluding certain items, including severance charges and 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 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 generally accepted accounting principles.

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.

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 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 factors described in the Company’s Form 10-K filed March 25, 2009. 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			2009	2008


Current assets:
	Cash and cash equivalents		$ 649,546	$ 723,069
	Investments		3,664,418	6,908,888
	Trade accounts receivable, less allowance for doubtful accounts
		of $9,000 on June 30, 2009 and December 31, 2008	916,389	1,092,125
	Other receivable		-	7,749
	Inventories, net		1,095,395	1,154,207
	Prepaid expenses and other current assets		436,346	482,452
		Total current assets	6,762,094	10,368,490

	Investments		5,340,000	5,340,000
	Equipment and leasehold improvements, net		6,073,015	6,651,842
	Other assets, net		39,872	39,765
			$ 18,214,981	$ 22,400,097

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Current portion of capital lease obligations		8,089	22,211
	Current portion of deferred other revenue		10,608	74,243
	Current portion of long term debt, less current maturities and debt discount		530,702	1,570,346
	Accounts payable		424,248	356,853
	Accrued expenses		1,445,641	1,493,262
	Accrued severance		375,172	541,014
		Total current liabilities	2,794,460	4,057,929

	Long-term portion of capital lease obligations		5,081	9,219
			5,081	9,219

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; 21,204,162
		and 21,188,912 shares issued and outstanding on June 30, 2009 and
		December 31, 2008, respectively	212,042	211,889
	Additional paid-in capital		92,027,075	91,597,529
	Accumulated deficit		(76,823,677)	(73,476,469)
		Total stockholders' equity	15,415,440	18,332,949
			$ 18,214,981	$ 22,400,097



NANOPHASE TECHNOLOGIES CORPORATION STATEMENTS OF OPERATIONS

(Unaudited)

				Three months ended		Six months ended
				June 30,		June 30,
					As Adjusted		As Adjusted
				2009	2008	2009	2008
Revenue:
	Product revenue, net			$ 1,500,733	$ 2,811,626	$ 2,797,546	$ 5,754,347
	Other revenue			109,930	132,780	218,275	244,167
		Total revenue		1,610,663	2,944,406	3,015,821	5,998,514

Operating expense:
	Cost of revenue			1,430,363	1,836,276	2,745,287	3,836,484
		Gross Profit		180,300	1,108,130	270,534	2,162,030

	Research and development expense			381,075	416,239	785,119	854,934
	Selling, general and administrative expense			1,051,343	1,529,643	2,051,510	3,104,387
	Severance charges			-	-	794,069
Loss from operations				(1,252,118)	(837,752)	(3,360,164)	(1,797,291)
Interest income				24,291	80,788	58,294	248,010
Interest expense				(12,379)	(33,142)	(33,286)	(71,559)
Other, net				1,652	(2,074)	(12,052)	157
Loss before provision for income taxes				(1,238,554)	(792,180)	(3,347,208)	(1,620,683)
Provision for income taxes				-	-	-	-
Net loss				$ (1,238,554)	$ (792,180)	$ (3,347,208)	$ (1,620,683)


Net loss per share- basic and diluted				$ (0.06)	$ (0.04)	$ (0.16)	$ (0.08)

Weighted average number of common
	shares outstanding			21,204,162	21,130,697	21,200,791	21,118,652




NANOPHASE TECHNOLOGIES CORPORATION

STATEMENTS OF OPERATIONS - EXPANDED SCHEDULE

(Unaudited)

				Three months ended		Six months ended
				June 30,		June 30,
					As Adjusted		As Adjusted
				2009	2008	2009	2008
Revenue:
	Product revenue, net			$ 1,500,733	$ 2,811,626	$ 2,797,546	$ 5,754,347
	Other revenue			109,930	132,780	218,275	244,167
		Total revenue		1,610,663	2,944,406	3,015,821	5,998,514

Operating expense:
	Cost of revenue detail:
	Depreciation			226,692	240,575	486,068	478,620
	Non-Cash equity compensation			18,073	20,165	26,416	36,936
	Other costs of revenue			1,185,598	1,575,536	2,232,803	3,320,928
		Cost of revenue		1,430,363	1,836,276	2,745,287	3,836,484
			Gross profit	180,300	1,108,130	270,534	2,162,030

	Research and development expense detail:
	Depreciation			57,227	59,318	114,270	117,775
	Non-Cash equity compensation			25,748	38,281	48,022	69,313
	Other research and development expense			298,100	318,640	622,827	667,846
		Research and development expense		381,075	416,239	785,119	854,934

	Selling, general and administrative expense detail:
	Depreciation and amortization			19,385	15,154	39,727	29,705
	Non-Cash equity compensation			81,664	173,682	156,433	326,342
	Trademark abandonment charge			-	-	-	37,214
	Other selling, general and administrative expense			950,294	1,340,807	1,855,350	2,711,126
		Selling, general and administrative expense		1,051,343	1,529,643	2,051,510	3,104,387
		Severance charges		-	-	794,069	-
Loss from operations				(1,252,118)	(837,752)	(3,360,164)	(1,797,291)
Interest income				24,291	80,788	58,294	248,010
Interest expense				(12,379)	(33,142)	(33,286)	(71,559)
Other, net				1,652	(2,074)	(12,052)	157
Loss before provision for income taxes				(1,238,554)	(792,180)	(3,347,208)	(1,620,683)
Provision for income taxes				-	-	-	-
Net loss				$ (1,238,554)	$ (792,180)	$ (3,347,208)	$ (1,620,683)

Non-GAAP Disclosure (see note regarding Non-GAAP disclosures):
	Addback Interest, net			(11,912)	(47,646)	(25,008)	(176,451)
	Addback Depreciation/Amortization			303,304	315,047	640,065	626,100
	Addback Severance Charge			-	-	794,069	-
	Addback Non-Cash Equity Compensation			125,485	232,128	230,871	432,591

	Adjusted EBITDA			$ (821,677)	$ (292,651)	$ (1,707,211)	$ (738,443)