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

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