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Nanophase Reports Record 2020 Financial Results as Solésence Beauty Science and Life Science Materials Lead Growth

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Nanophase Technologies Corporation (OTCQB: NANX) reported a remarkable 35% growth in 2020, achieving a net income of $1 million, or $0.03 per share, compared to a net loss of $3 million in 2019. Notable revenue increases were observed in Solésence products, which rose 263% to $6.7 million, and advanced materials, up 77% to $4.9 million, driven largely by medical diagnostics. The company anticipates continued market acceptance, with $12 million in purchase orders entering 2021. Despite a 30% decline in personal care ingredient sales, overall demand for their innovative products has increased significantly.

Positive
  • 35% overall revenue growth in 2020.
  • Record net income of $1 million for the year.
  • Solésence revenue increased by 263% year-over-year.
  • Advanced materials revenue rose 77%, driven by medical diagnostics.
Negative
  • 30% decline in personal care ingredients revenue from 2019.

Announces 35+% Overall Growth and $1M Profit

ROMEOVILLE, Ill., March 11, 2021 (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 fourth quarter and fiscal year ended December 31, 2020. 

Jess Jankowski, President and CEO, commented: “We are growing, and we believe this growth will be sustainable through 2021. We entered 2021 with purchase orders in excess of $12M, a clear indication of growing market acceptance of our Solésence beauty science products and the potential repeatability of our volumes in the life science area, specifically medical diagnostics. We have reached the point where our immediate focus has shifted from building new sales to further streamlining our production to accommodate more growth, a significant positive milestone.”

Jankowski continued, “Our growth strategy, with our long-term investment in Solésence beauty science as its driving force, is transforming our business in terms of both scale and profitability. Our Solésence beauty science product sales have more than tripled between 2019 and 2020. The growth rate far exceeds that of the industry, in part because we are well positioned to participate, and potentially help define the rapidly growing clean beauty segment. Since the inception of Solésence, we have launched well over 100 different SKUs with our clients, or as we call them our brand partners, with the vast majority of them still actively marketed. The rate of new product launches — one of the drivers for our growth in this business segment — has more than doubled each of the past three years, and it appears that number could continue to grow at a rate in the high double digits in the future.”

“High demand for our medical diagnostics materials has created what we believe will become the third major component of our business strategy in life science,” Jankowski further elaborated. “True to our fundamentals, our novel materials technology enables enhanced performance. We believe our materials are able to improve the accuracy and sensitivity of testing protocols in some medical diagnostics applications— something that has been increasingly in the spotlight lately during the global COVID-19 pandemic. Because of this success, we have increased our business and technology development efforts in this segment to define a path for even greater sustainable growth for these and other materials.

Our other major business segment, personal care ingredients, has experienced a 30% downturn year over year, which is in line with our expectations related to behaviors and spending driven by the COVID-19 pandemic, and should ease in 2021.”

Fourth Quarter and Full Year 2020 Financial Highlights

  • Revenue for the fourth quarter was $4.9 million, vs. $2.4 million for the same period in 2019. Revenue for the full year was $17.1 million vs. $12.5 million for the same period in 2019.

    For the full year of 2020
    :
    • Solésence revenue was $6.7 million, up 263% from $1.9 million in 2019.
    • Advanced Materials revenue was $4.9 million, up 77% from $2.7 million in 2019.
      • This was driven by growth in medical diagnostics materials, accounting for $3.4 million, or 69% of the total segment.
    • Personal Care Ingredients revenue was $5.5 million, down 30% from $7.9 million in 2019.
  • Net income for the quarter was $0.2 million in 2020, or $0.01 per share, compared to a net loss of $1million, or $0.03 per share, for 2019.   Net income for the full year 2020 was $1 million, or $0.03 per share, compared to a net loss of $3 million, or $0.08 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 million in cash.

“As volume has increased, our gross profit has more than doubled, helping us to achieve full-year GAAP profitability for the first time in our history. We are generating cash from operations that — while more than absorbed by working capital requirements demanded by our growth — is indicative of a much healthier company,” added Jankowski.

“As we entered 2020, we were charged with turning around a business that for many years had showed promise but had yet to fulfill it,” offered Kevin Cureton, Chief Operating Officer. “The investments we made in previous years to grow our top line provided the foundation for transforming our company through changing both the influence we have on our business development processes and the scale of the clients we work with. We now have five brand partners that will purchase several million dollars of the products and services we provide them as well as another half dozen brand partners with the potential to exceed over one million dollars in purchases. On top of this foundation, we layered important operational changes to further professionalize the management of all aspects of our company. These changes led to greater visibility of costs and improved leverage from our operating expenses, and they also empowered our talented employees to execute more effectively. While it is clear that there is more to do in building our team, improving our margins, and expanding our business portfolio, the results from 2020 should be seen as harbinger of the exciting future we see in both our life science and beauty science business sectors.”

Jankowski added, “Lastly, we are reminded daily of what an honor it is to contribute to our national public health through the materials we make for use in medical diagnostics and remain well aware of the sacrifices being made by 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.



NANOPHASE TECHNOLOGIES CORPORATION
      
CONSOLIDATED BALANCE SHEETS
      
   As of
   December 31, December 31,
    2020   2019 
ASSETS(Unaudited)  
      
Current assets:   
 Cash$956,751  $1,193,994 
 Trade accounts receivable, less allowance for doubtful accounts of $9,000   
  for both December 31, 2020 and 2019 2,932,427   970,472 
 Inventories, net 4,339,850   2,553,620 
 Prepaid expenses and other current assets 605,908   266,587 
  Total current assets 8,834,936   4,984,673 
      
 Equipment and leasehold improvements, net 2,868,025   2,255,158 
 Operating leases, Right of Use 1,826,869   2,118,883 
 Other assets, net 10,275   12,528 
   $13,540,105  $9,371,242 
      
LIABILITIES AND STOCKHOLDERS' EQUITY   
Current liabilities:   
 Line of credit, bank$500,000  $500,000 
 Line of credit, related party 2,154,832   223,871 
 Current portion of long-term debt, related party 500,000   500,000 
 Current portion of capital lease obligations 177,227   218,345 
 Current portion of operating lease obligations 430,881   356,949 
 Accounts payable 2,126,093   1,748,021 
 Current portion of deferred revenue 410,672   482,349 
 Accrued expenses 483,801   379,314 
  Total current liabilities 6,783,506   4,408,849 
      
 Long-term portion of capital lease obligations 110,432   287,660 
 Long-term portion of operating lease obligations 1,650,990   2,034,592 
 Long-term convertible loan, related party 1,097,214   829,721 
 PPP Loan (SBA) 951,600   - 
 Long-term portion of deferred revenue -   92,750 
 Asset retirement obligation 214,256   206,221 
  Total long-term liabilities 4,024,492   3,450,944 
      
Contingent liabilities   
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;   
  38,221,292 and 38,136,792 shares issued and outstanding on December 31, 2020   
  and December 31, 2019, respectively 382,213   381,368 
 Additional paid-in capital 102,116,916   101,886,411 
 Accumulated deficit (99,767,022)  (100,756,330)
  Total stockholders' equity 2,732,107   1,511,449 
   $13,540,105  $9,371,242 
      



NANOPHASE TECHNOLOGIES CORPORATION 
              
CONSOLIDATED STATEMENTS OF INCOME 
              
(Unaudited) 
              
      Three months ended Years ended 
      December 31, December 31, 
       2020   2019   2020   2019  
Revenue:           
 Product revenue, net  $4,492,867  $2,055,067  $16,422,363  $11,852,011  
 Other revenue   368,476   335,706   701,244   656,764  
  Net revenue   4,861,343   2,390,773   17,123,607   12,508,775  
              
Operating expense:          
 Cost of revenue   3,300,575   2,053,674   11,132,700   9,893,117  
  Gross profit   1,560,768   337,099   5,990,907   2,615,658  
              
 Research and development expense   438,039   420,280   1,571,159   1,869,926  
 Selling, general and administrative expense   800,876   831,251   2,934,462   3,541,964  
Income/(Loss) from operations   321,853   (914,432)  1,485,286   (2,796,232) 
Interest income   -   -   -   -  
Interest expense   (127,648)  (69,594)  (495,978)  (209,876) 
Other, net    -   -   -   -  
Income/(Loss) before provision for income taxes   194,205   (984,026)  989,308   (3,006,108) 
Provision for income taxes   -   -   -   -  
Net income/(loss)  $194,205  $(984,026) $989,308  $(3,006,108) 
              
Net income/(loss) per share-basic  $0.01  $(0.03) $0.03  $(0.08) 
              
Weighted average number of basic shares outstanding  38,136,792   38,136,792   38,158,586   36,596,372  
              
Net income (loss) per share-diluted  $0.01  $(0.03) $0.03  $(0.08) 
              
Weighted average number of diluted shares outstanding  38,218,542   38,136,792   38,539,586   36,596,372  
              
              
              
NANOPHASE TECHNOLOGIES CORPORATION 
              
CONSOLIDATED STATEMENTS OF INCOME - EXPANDED SCHEDULE 
              
(Unaudited) 
              
      Three months ended Yeard ended 
      December 31, December 31, 
       2020   2019   2020   2019  
Revenue:           
 Product revenue, net  $4,492,867  $2,055,067  $16,422,363  $11,852,011  
 Other revenue   368,476   335,706   701,244   656,764  
  Net revenue   4,861,343   2,390,773   17,123,607   12,508,775  
              
Operating expense:          
 Cost of revenue detail:          
 Depreciation   77,872   65,082   295,450   246,576  
 Non-Cash equity compensation   (5,691)  12,684   32,395   46,293  
 Other costs of revenue   3,228,394   1,975,908   10,804,855   9,600,248  
  Cost of revenue   3,300,575   2,053,674   11,132,700   9,893,117  
   Gross profit   1,560,768   337,099   5,990,907   2,615,658  
              
 Research and development expense detail:          
 Depreciation   10,067   11,022   41,822   47,721  
 Non-Cash equity compensation   15,809   15,804   58,606   58,000  
 Other research and development expense   412,163   393,454   1,470,731   1,764,205  
  Research and development expense   438,039   420,280   1,571,159   1,869,926  
              
 Selling, general and administrative expense detail:         
 Depreciation and amortization   5,543   2,473   20,568   18,421  
 Non-Cash equity compensation   37,562   34,408   103,581   137,822  
 Other selling, general and administrative expense  757,771   794,370   2,810,313   3,385,721  
  Selling, general and administrative expense  800,876   831,251   2,934,462   3,541,964  
Income/(Loss) from operations   321,853   (914,432)  1,485,286   (2,796,232) 
Interest income   -   -   -   -  
Interest expense   (127,648)  (69,594)  (495,978)  (209,876) 
Other, net    -   -   -   -  
Income/(Loss) before provision for income taxes   194,205   (984,026)  989,308   (3,006,108) 
Provision for income taxes   -   -   -   -  
Net income/(loss)  $194,205  $(984,026) $989,308  $(3,006,108) 
              
Non-GAAP Disclosure (see note regarding Non-GAAP disclosures):       
 Addback Interest, net   127,648   69,594   495,978   209,876  
 Addback Depreciation/Amortization   93,482   78,577   357,840   312,718  
 Addback Non-Cash Equity Compensation   47,680   62,896   194,582   242,115  
 Addback Other, net   -   -   -   -  
              
 Adjusted EBITDA  $463,015  $(772,959) $2,037,708  $(2,241,399) 
              

COMPANY CONTACT
Investor Relations
630-771-6700


FAQ

What were Nanophase Technologies' financial results for 2020?

Nanophase Technologies reported $17.1 million in revenue for 2020, with a net income of $1 million.

How did Solésence product sales perform in 2020?

Solésence sales increased by 263% in 2020, reaching $6.7 million.

What is the outlook for Nanophase Technologies in 2021?

The company expects sustained growth with over $12 million in purchase orders as it enters 2021.

What segments contributed to Nanophase Technologies' growth?

The main segments contributing to growth were Solésence beauty products and medical diagnostics materials.

What impact did COVID-19 have on Nanophase Technologies' personal care ingredients?

The personal care ingredients segment experienced a 30% revenue decline, reflecting changes in consumer behavior due to COVID-19.

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