Nanophase Technologies (NANX) 10-Q 2024 Q3 Quarterly report

UNITED STATES 

 SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

 THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended: September 30, 2024 

 or 

 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) of
the Securities Exchange Act of 1934

For the transition period from to _______ to _______ 

Commission File Number: 000-22333

Nanophase Technologies Corporation

 (Exact name of registrant as specified in its charter)

Delaware	36-3687863
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

1319 Marquette Drive, Romeoville, Illinois 60446 

 (Address of principal executive offices, and zip code) 

Registrant’s telephone number, including area code: (630) 771-6708

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “accelerated filer”, “large accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☑
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of November 12, 2024, there were 69,994,979 shares outstanding of common stock, par value $.01, of the registrant.

NANOPHASE TECHNOLOGIES CORPORATION

QUARTER ENDED SEPTEMBER 30, 2024

INDEX

			Page
PART I – FINANCIAL INFORMATION
	Item 1.	Financial Statements	3
		Consolidated Balance Sheets (Unaudited Consolidated Condensed) as of September 30, 2024, and December 31, 2023	3
		Consolidated Statements of Operations (Unaudited Consolidated Condensed) for the three and nine months ended September 30, 2024, and 2023	4
		Consolidated Statements of Shareholders’ Equity (Unaudited Consolidated Condensed) for the three and nine months ended September 30, 2024, and 2023	5
		Consolidated Statements of Cash Flows (Unaudited Consolidated Condensed) for the nine months ended September 30, 2024, and 2023	6
		Notes to Unaudited Consolidated Condensed Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15
	Item 4.	Controls and Procedures	15
PART II – OTHER INFORMATION			16
	Item 1.	Legal Proceedings	16
	Item 1A.	Risk Factors	16
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
	Item 3.	Defaults Upon Senior Securities	16
	Item 4.	Mine Safety Disclosures	16
	Item 5.	Other Information	16
	Item 6.	Exhibits	17
SIGNATURES			18

2 

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements

NANOPHASE TECHNOLOGIES CORPORATION

CONSOLIDATED BALANCE SHEETS

 (Unaudited Consolidated Condensed) 

	(in thousands except share and per share data)
ASSETS	September 30, 2024			December 31, 2023
Current assets:
Cash	$	2,925		$	1,722
Trade accounts receivable, less allowance for credit losses of $446 for September 30, 2024, and $225 for December 31, 2023		8,732			3,467
Inventories, net		15,043			10,031
Prepaid expenses and other current assets		3,061			1,082
Total current assets		29,761			16,302
Equipment and leasehold improvements, net		10,230			8,668
Operating leases, right of use		8,054			7,907
Other assets, net		2			4
Total assets	$	48,047		$	32,881
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Lines of credit – accounts receivable, related party	$	—		$	2,810
Current portion of line of credit – inventory, related party		5,200			5,000
Current portion of long-term debt, related party		1,000			3,000
Current portion of operating lease obligations		1,091			1,297
Accounts payable		6,562			6,260
Deferred revenue		6,228			2,353
Accrued expenses		3,207			869
Total current liabilities		23,288			21,589
Long-term portion of operating lease obligations		9,346			9,152
Asset retirement obligations		244			238
Total long-term liabilities		9,590			9,390
Shareholders’ equity:
Preferred stock, $.01 par value, 24,088 shares authorized on September 30, 2024, and December 31, 2023. No shares issued and outstanding as of September 30, 2024, and December 31, 2023.		—			—
Common stock, $.01 par value, 95,000,000 and 60,000,000 shares authorized; 69,949,646 and 49,627,254 shares issued and outstanding on September 30, 2024 and December 31, 2023, respectively.		699			496
Additional paid-in capital		114,339			106,069
Accumulated deficit		(99,869	)		(104,663	)
Total shareholders’ equity		15,169			1,902
Total liabilities and shareholders’ equity	$	48,047		$	32,881

See Notes to Consolidated Condensed Financial Statements

3 

NANOPHASE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS 

(Unaudited Consolidated Condensed)

(in thousands except share and per share data)

	Three months ended September 30,					Nine months ended September 30,
	2024		2023			2024		2023
Revenue:
Product revenue	$	16,785	$	7,746		$	39,479	$	28,925
Other revenue		81		212			301		361
Total revenue		16,866		7,958			39,780		29,286
Operating expense:
Cost of revenue		10,764		6,428			26,358		21,932
Gross profit		6,102		1,530			13,422		7,354
Research and development expense		970		1,057			2,746		3,052
Selling, general and administrative expense		1,934		1,695			5,321		5,951
Income (loss) from operations		3,198		(1,222	)		5,355		(1,649	)
Interest expense		153		214			562		613
Income (loss) before provision for income taxes		3,045		(1,436	)		4,793		(2,262	)
Provision for income taxes		—		—			—		—
Net income (loss)	$	3,045	$	(1,436	)	$	4,793	$	(2,262	)
Net income (loss) per basic share	$	0.04	$	(0.03	)	$	0.08	$	(0.05	)
Weighted average number of basic common shares outstanding		69,873,394		49,598,581			59,778,119		49,532,395
Net income (loss) per diluted share	$	0.04	$	(0.03	)	$	0.08	$	(0.05	)
Weighted average number of diluted common shares outstanding		71,935,394		49,598,581			61,725,119		49,532,395

See Notes to Consolidated Condensed Financial Statements

4 

NANOPHASE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited Consolidated Condensed)

Description	Preferred Shares		Preferred Stock		Common Shares		Common Stock		Additional Paid in Capital		Accumulated Deficit			Total Equity
Balance on December 31, 2022		—	$	—		49,320,680	$	493	$	105,226	$	(100,070	)	$	5,649
Issuance of shares and stock option exercises		—		—		199,891		2		99		—			101
Stock-based compensation		—		—		—		—		209		—			209
Cumulative effect of accounting changes related to expected credit losses		—		—		—		—		—		(203	)		(203	)
Net loss for the three months ended March 31, 2023		—		—		—		—		—		(1,159	)		(1,159	)
Balance on March 31, 2023		—	$	—		49,520,571	$	495	$	105,534	$	(101,432	)	$	4,597
Issuance of shares and stock option exercises		—		—		68,633		1		33		—			34
Stock-based compensation		—		—		—		—		195		—			195
Net income for the three months ended June 30, 2023		—		—		—		—		—		333			333
Balance on June 30, 2023		—	$	—		49,589,204	$	496	$	105,762	$	(101,099	)	$	5,159
Issuance of shares and stock option exercises		—		—		38,050		—		19		—			19
Stock-based compensation		—		—		—		—		189		—			189
Net loss for the three months ended September 30, 2023		—		—		—		—		—		(1,436	)		(1,436	)
Balance on September 30, 2023		—	$	—		49,627,254	$	496	$	105,970	$	(102,535	)	$	3,931
Balance on December 31, 2023		—	$	—		49,627,254	$	496	$	106,069	$	(104,663	)	$	1,902
Issuance of shares and stock option exercises		—		—		5,233,730		52		1,944		—			1,996
Stock-based compensation		—		—		—		—		160		—			160
Net income for the three months ended March 31, 2024		—		—		—		—		—		893			893
Balance on March 31, 2024		—	$	—		54,860,984	$	548	$	108,173	$	(103,770	)	$	4,951
Issuance of shares and stock option exercises		—		—		15,000,000		150		5,810		—			5,960
Stock-based compensation		—		—		—		—		157		—			157
Net income for the three months ended June 30, 2024		—		—		—		—		—		856			856
Balance on June 30, 2024		—	$	—		69,860,984	$	698	$	114,140	$	(102,914	)	$	11,924
Issuance of shares and stock option exercises		—		—		88,662		1		39		—			40
Stock-based compensation		—		—		—		—		160		—			160
Net income for the three months ended September 30, 2024		—		—		—		—		—		3,045			3,045
Balance on September 30, 2024		—	$	—		69,949,646	$	699	$	114,339	$	(99,869	)	$	15,169

See Notes to Consolidated Condensed Financial Statements.

5 

NANOPHASE TECHNOLOGIES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS 

 (Unaudited Consolidated Condensed)

	Nine months ended September 30,
	2024			2023
	(in thousands)
Operating activities:
Net income (loss)	$	4,793		$	(2,262	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		700			524
Share-based compensation		477			593
Changes in assets and liabilities related to operations:
Trade accounts receivable		(5,265	)		1,333
Inventories, net		(5,012	)		(1,284	)
Prepaid expenses and other assets		(1,979	)		(174	)
Accounts payable		7			(422	)
Accrued expenses		2,345			113
Deferred revenue		3,875			476
Change in right-of-use asset and lease liability, net		(159	)		1,747
Net cash (used in) provided by operating activities		(218	)		644
Investing activities:
Acquisition of equipment and leasehold improvements		(1,965	)		(852	)
Net cash used in investing activities		(1,965	)		(852	)
Financing activities:
Proceeds from line of credit – accounts receivable, related party		14,875			22,304
Payments to line of credit – accounts receivable, related party		(17,685	)		(24,248	)
Proceeds from line of credit – inventory, related party		200			1,000
Proceeds from term loan, related party		—			1,338
Payments to term loan, related party		(2,000	)		(1,338	)
Proceeds from issuance of mezzanine preferred stock		6,000			—
Proceeds from issuance of stock and exercise of stock options		1,996			154
Net cash provided by (used in) financing activities		3,386			(790	)
Increase (decrease) in cash		1,203			(998	)
Cash at beginning of period		1,722			2,186
Cash at end of period	$	2,925		$	1,188
Supplemental cash flow information:
Interest paid	$	516		$	553
Supplemental non-cash investing and financing activities:
Accounts payable incurred for the purchase of equipment and leasehold improvements	$	295		$	329
Right-of-use assets obtained in exchange for lease liabilities	$	1,019		$	36

See Notes to Consolidated Condensed Financial Statements.

6 

NANOPHASE TECHNOLOGIES CORPORATION

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 (Unaudited Consolidated Condensed)

(in thousands, except share and per share data or as otherwise noted herein)

(1) Basis of Presentation

The accompanying unaudited consolidated condensed interim financial statements of Nanophase Technologies Corporation (“Nanophase”, “Company”, “we”, “our”, or “us”) reflect all adjustments (consisting of normal recurring adjustments) which, in the opinion of management, are necessary for a fair statement of our financial position and operating results for the interim periods presented. All statements include the results from both Nanophase and our wholly-owned subsidiary, Solésence, LLC (“Solésence,” or our “Solésence® subsidiary”). Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

These financial statements should be read in conjunction with our audited financial statements and notes thereto for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the Securities and Exchange Commission.

Long-term debt, related parties of $1,000 and long-term line of credit – inventory, related party of $5,000 at December 31, 2023 were reclassified to current in the current consolidated balance sheet for comparability purposes.

(2) Description of Business

Nanophase Technologies Corporation (“Nanophase,” “Company,” “we,” “our,” or “us”) is a science-driven company which, along with its wholly owned subsidiary, Solésence, LLC (our “Solésence beauty science subsidiary”), is focused in various beauty- and life-science markets.  Using consumer health as our end-goal and science and innovation to guide the path, skin health and medical diagnostics combined currently make up the majority of our business and drive our forward growth strategy.  We offer engineered materials, formulation development and commercial manufacturing through an integrated family of technologies. Our expertise in materials engineering allows us to effectively coat and disperse particles on a nano and “non-nano” scale for use in a variety of skin health markets, including for use in sunscreens as active ingredients and as fully developed prestige skin care and cosmetics products, marketed and sold through our Solésence beauty science subsidiary.  In terms of our life sciences focus, we have seen demand decrease for our medical diagnostics ingredients. Additionally, we continue to sell products in legacy markets, including architectural coatings, industrial coating applications, abrasion-resistant additives, plastics additives, and surface finishing technologies (polishing) applications, all of which, along with medical diagnostics, fall into the advanced materials product category.

 We target markets, primarily related to skin health products and ingredients, as well as diagnostic life sciences ingredients where we believe our materials and products offer practical and competitive minerals-based solutions. We traditionally work closely with current customers in these target markets to identify their material and performance requirements. We market our materials to various end-use applications manufacturers, and our Solésence® products to cosmetics and skin care brands.

 Recently developed technologies have made certain new products possible and opened potential new markets. During 2015 we were granted a patent on a new type of particle surface treatment (coating) — now called Active Stress Defense ™ Technology — which became the cornerstone of our new product development in personal care, with first revenue recognized during 2016. Active Stress Defense™ now refers to a suite of three proprietary technologies — Original Active Stress Defense™, Kleair™, and Bloom™ — all three of which either utilize a unique and proprietary, mineral-based technology or work synergistically with one of our unique and proprietary, mineral-based technologies to improve performance and/or aesthetics. Our ongoing innovation efforts include new IP in areas that advance environmental protection, align with market needs, and complement our existing technologies. Through the creation of our Solésence beauty science subsidiary, we utilize our technology suite to manufacture and sell fully developed solutions to targeted customers in the skin care industry, typically in prestige skin care and cosmetics markets, in addition to the ingredients we have traditionally sold in the personal care area.

 Although our primary strategic focus has been the North American market, we currently sell materials to customers overseas and have been working to expand our reach within foreign markets. Our common stock trades on the OTCQB marketplace under the symbol NANX.

 While product sales comprise the majority of our revenue, we also recognize revenue from other sources from time to time. These activities are not expected to drive the long-term growth of the business. For this reason, we classify such revenue as “other revenue” in our Consolidated Statements of Operations, as it does not represent revenue directly from the sale of our products.

 Under SEC Release 33-10513; 34-83550, Amendments to Smaller Reporting Company Definition, the Company qualifies as a smaller reporting company and accordingly, it has scaled some of its disclosures of financial and non-financial information in this quarterly report. The Company will continue to determine whether to provide additional scaled disclosures of financial or non-financial information in future quarterly reports, annual reports and/or proxy statements if it remains a smaller reporting company under SEC rules. 

 (3) Revenues and Other Income

Revenues are recognized when control of the promised goods is transferred to customers, in an amount that reflects the consideration we expect to receive in exchange for those goods. When our ingredients and finished products are shipped with control being transferred at the shipping point (which we do almost universally) we recognize the related revenue at the time of shipping. In the rare instances when we use FOB destination, we would not recognize revenue until the customer receives the product.

7 

 We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within selling, general and administrative expenses. Customers’ deposits, deferred revenue and other receipts are deferred and recognized when the revenue is realized and earned. Cash payments to customers are classified as reductions of revenue in our statements of operations.

 Contract balances at September 30, 2024, December 31, 2023, and December 31, 2022 are as follows:

	Contract Assets		Contract Liabilities
Balance, December 31, 2022	$	4,734	$	2,188
Balance, December 31, 2023		3,467		2,353
Balance, September 30, 2024		8,732		6,228

Contract assets consist of trade accounts receivable.

Revenue recognized in the reporting period that was included in the contract liability balance at the beginning of the period was $1,279 and $414, for the three months ended September 30, 2024 and 2023, respectively, and $2,882 and $2,438 for the nine months ended September 30, 2024 and 2023, respectively.

Other revenue may include revenue from technology license fees and paid development projects. Technology license fees and paid development projects are recognized over time when the obligations under the agreed upon contractual arrangements are performed on our part.  Other revenue recognized over time was $81 and $212, for the three months ended September 30, 2024 and 2023, respectively, and $301 and $361 for the nine months ended September 30, 2024 and 2023, respectively.

(4) Earnings Per Share

Included in the computation of diluted earnings per share for the three and nine months ended September 30, 2024 was a total of 2,062,000 and 1,947,000 in potential common stock, respectively. Options to purchase approximately 853,000 and 728,000 shares of common stock that were outstanding as of September 30, 2023 were not included in the computation of diluted earnings per share for the three and nine-months ended September 30, 2023, respectively. The inclusion of these shares for the three and nine months ended September 30, 2023 would have resulted in an anti-dilutive effect and were thus omitted from disclosure.

Earnings applicable to common stock and common stock shares used in the calculation of basic and diluted earnings per share are as follows: 

	Three months ended September 30,					Nine months ended September 30,
	2024		2023			2024		2023
Numerator: (in Thousands)
Net income (loss)	$	3,045	$	(1,436	)	$	4,793	$	(2,262	)
Denominator:
Weighted average number of basic shares outstanding		69,873,394		49,598,581			59,778,119		49,532,395
Weighted average additional shares assuming conversion of in-the-money stock options to common shares		2,062,000		—			1,947,000		—
Weighted average number of diluted common shares outstanding		71,935,394		49,598,581			61,725,119		49,532,395
Basic earnings per common share:
Net income (loss) per share – basic	$	0.04	$	(0.03	)	$	0.08	$	(0.05	)
Diluted earnings per common share:
Net income (loss) per share – diluted	$	0.04	$	(0.03	)	$	0.08	$	(0.05	)

(5) Financial Instruments

We follow ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment.

8 

 Our financial instruments include cash, any cash equivalents, accounts receivable, accounts payable and accrued expenses, along with any short-term and long-term borrowings as described in Note 6. The carrying values of cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses are reasonable estimates of their fair value due to the short-term nature of these accounts. The fair value of short-term and long-term debt approximates carrying value based on comparison of terms to similar debt offering in the marketplace.

There were no financial instruments adjusted to fair value on September 30, 2024 and December 31, 2023.

(6) Notes and Lines of Credit

 Notes and lines of credit consist of the following:

		As of September 30, 2024				As of December 31, 2023
	Rate at September 30, 2024	Total Borrowing Capacity		Outstanding Borrowed Balance		Total Borrowing Capacity		Outstanding Borrowed Balance
Libertyville Bank & Trust(1)	9.00%	$	30	$	—	$	30	$	—
Libertyville Bank & Trust(2)	9.00%		500		—		500		—
Beachcorp, LLC(3)	8.75%		8,000		—		3,298		2,810
Beachcorp, LLC(4)	8.75%		5,200		5,200		5,200		5,000
Strandler, LLC(5)	8.75%		1,000		1,000		1,000		1,000
Strandler, LLC(6)	9.25%		—		—		2,000		2,000

1) Since July 2014, we have maintained a bank-issued letter of credit for up to $30 in borrowings, with interest at the prime rate plus 1%, to support our obligations under our Romeoville, Illinois facility lease agreement. No borrowings have been incurred under this promissory note. It is our intention to renew this note annually. Because there were no amounts outstanding on the note at any time during 2024 or 2023, we have recorded no related liability on our balance sheet.

2) On December 21, 2021, the existing credit agreement with Libertyville was converted for use to support our obligations under our newly leased manufacturing and warehouse space in Bolingbrook, Illinois. Interest on drawn balances will be at the prime rate plus 1%. This credit agreement has a maturity of December 22, 2024. We expect to renew this agreement annually, as the lease requires. This credit agreement is secured by all the unencumbered assets of the Company and has superior collateral rights to those credit facilities with Beachcorp, LLC and Strandler, LLC.

3) On January 28, 2022, the Company entered into an Amended and Restated Business Loan Agreement (the “A&R Loan Agreement”), which amends and restates the Master Agreement between the Company and Beachcorp, LLC, and a new promissory note in order to evidence the A/R Revolver facility, including an amendment to expand the limit on the A/R Revolver Facility from $6,000 to $8,000, reduce the interest rate to the prime rate plus 0.75%, and extend the maturity of the A/R Revolver Facility to March 31, 2024. On March 1, 2024, the company entered into a Second Amendment to the Amended and Restated Business Loan Agreement extending the maturity of the A/R Revolver Facility to October 1, 2025.

4) On January 28, 2022, the Company entered into the A&R Loan Agreement and a new revolving loan agreement (“Inventory Facility”) with Beachcorp, LLC, and a new promissory note in order to evidence the Inventory Facility. The maximum borrowing amount under the Inventory Facility was $4,000, with a borrowing base consisting of up to 50% of the value of qualified inventory of the Company. The interest rate for the Inventory Revolver is at the prime rate plus 0.75%, and it matured on March 31, 2024. On November 13, 2023, the Company entered into a Replacement Promissory Note with Beachcorp, LLC replacing the Inventory Facility promissory note executed on January 28, 2022. The maximum borrowing amount under the replacement Inventory Facility was increased to $5,200, with a borrowing base consisting of up to 55% of the value of qualified inventory of the Company. The interest rate for the replacement Inventory Revolver remains at the prime rate plus 0.75%. On March 1, 2024, the company entered into a Second Amendment to the Business Loan Agreement extending the maturity of the Inventory Revolver Facility to October 1, 2025.

5) On January 28, 2022, the Company entered into an additional Business Loan Agreement (the “New Term Loan Agreement”) with Strandler, LLC, which effectively transferred or assigned the Term Loan to Strandler, LLC from Beachcorp, LLC. Interest on the New Term Loan is at the prime rate plus 0.75%. Strandler, LLC is also an affiliate of Bradford T. Whitmore. On March 1, 2024, the company entered into a Second Amendment to the Business Loan Agreement extending the maturity of the Term Maturity Note to October 1, 2025.

6) On November 13, 2023, the Company entered into a new Promissory Note (the “Bridge Note”) with Strandler, LLC. The maximum borrowing amount under the Bridge Note was $2,000. The interest rate for the Bridge Note was at the prime rate plus 0.75%, and it was to mature on May 13, 2024. The Bridge Note was repaid in February 2024.

9 

The Company classifies the line of credit – accounts receivable as current because we are required to pay back the borrowings as cash is received from our customers. The company’s remaining debt is presented within the consolidated balance sheet as of September 30, 2024, and December 31, 2023, in accordance with the maturity dates in the financing agreements.

Beachcorp, LLC and Strandler, LLC are affiliates of Mr. Bradford T. Whitmore, who beneficially owns a majority of the Company’s common stock and is the brother of Ms. R. Janet Whitmore, a director of the Company and the chair of the Company’s board of directors. The A/R Revolver Facility, the Inventory Facility and the New Term Loan are all secured by all the unencumbered assets of the Company and subordinated to the Company’s credit facility with Libertyville Bank & Trust. The Company’s loan agreements with Strandler, LLC and Beachcorp, LLC currently are set to expire on October 1, 2025, which could become an operating risk if we are not able to refinance or extend the maturity dates. Related party interest summary:

Related party interest expense consists of the following:

	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Interest expense, related parties	$	152	$	199	$	546	$	560
Accrued interest expense, related parties		46		57		46		57

Outstanding notes and lines of credit balances associated with related parties are as follows:

	September 30, 2024		December 31, 2023
Beachcorp, LLC	$	5,200	$	7,810
Strandler, LLC		1,000		3,000

7) Leases

On September 1, 2024 the Company extended the term of its Romeoville lease for an additional 37 months beginning on January 1, 2025. The total monthly payments for 2025 will be $34, escalating to $36 and $37 for the year 2026 and 2027, respectively, with one payment of $39 for the final month of the extension on January 1, 2028. All other terms remain unchanged.

Nanophase Technologies subleases portions of its leased facilities that are used to support operations for the lessees. Total lease payment received for the three and nine months ended September 30, 2024 was $125 and $399, respectively. Total lease payment received for the three and nine months ended September 30, 2023 was $196 and $599, respectively. The arrangement is not with a related party.

Payments received by the Company for these subleases are comprised of two components, which include base rent and Common Area Maintenance (CAM) charges. While the base rent is fixed, the CAM charges are indexed directly to the Master Lease and are expected to be adjusted periodically as actual costs are incurred. However, the executed sublease agreements specifically itemize these costs with a provision that informs the sublessee that the CAM charges will be adjusted (up or down) based on actual amounts once this information becomes known. As such, the nature of the charges is more closely representative of a fixed payment (an “in-substance fixed” charge) with the adjustments occurring simply to “true up” the listed CAM charges once actual charges from the head lessor become known. As sublessor, Nanophase Technologies has elected the practical expedient to not separate lease and nonlease components in disclosing future undiscounted cashflows and treats the combined components as a single lease component.

Both subleases are now month to month. There are no future undiscounted lease payments that are guaranteed.

(8) Inventories

Inventories consist of the following: 

	September 30, 2024		December 31, 2023
Raw materials	$	12,034	$	7,847
Finished goods		3,009		2,184
Total inventories, net	$	15,043	$	10,031

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The Company had reserves for excess and obsolete inventory of $2,302 and $677 as of September 30, 2024 and December 31, 2023, respectively.

(9) Capital Stock

On March 1, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”), between the Company and Strandler, LLC (“Strandler”).

 Pursuant to the Purchase Agreement, the Company issued to Strandler 15,000 shares of the Company’s Series X Preferred Stock (the “Series X Preferred Stock”) at a purchase price per share of $400, for total consideration of $6,000,000, in a transaction exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof. The terms of the Series X Preferred Stock are set forth in the Company’s Certificate of Designations to its Certificate of Incorporation, filed with the Secretary of State of the State of Delaware on March 4, 2024 (the “Certificate of Designations”).

 Under the Purchase Agreement, the Company granted Strandler customary registration rights with respect to shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), it may receive in connection with any conversion of Series X Preferred Stock into Common Stock, as described below. For so long as any amount of Preferred Stock was outstanding, the Purchase Agreement also (i) prevented the Company from paying any dividend on any shares of the Company’s capital stock (other than dividends consisting solely of Common Stock or rights to purchase Common Stock), (ii) prevented the Company from repurchasing any Common Stock, and (iii) subject to certain permitted exceptions, restricted the Company’s ability to permit any lien or other encumbrance on Company assets.

 At any time and from time to time, in whole or in part, following the Company properly filing an amendment (the “Certificate Amendment”) to its Certificate of Incorporation to increase the number of authorized shares of its Common Stock from 60,000,000 to 95,000,000, each share of Series X Preferred Stock was convertible, at the option of the holder, into 1,000 shares of Common Stock at no additional cost. If the Company had not properly filed, upon shareholder approval, the Certificate Amendment on or before August 1, 2024, then each share of Series X Preferred Stock would have been redeemable at the holder’s option, in whole or in part, without penalty or premium, at a redemption price equal to $420 per share (each, a “Redemption”). If the Company failed to fully pay any Redemption within five days of receiving notice, all unpaid amounts would bear interest at a rate of 10% per annum. In addition, in the event of a Change in Control (as defined in the Certificate of Designations) of the Company, each share of the Series X Preferred Stock would have been redeemable at the option of the holder, without penalty or premium, at a redemption price equal to $420 per share. Upon any conversion of Preferred Stock into Common Stock by Strandler, Strandler is required to hold the Common Stock received in the conversion for a period of 12 months.

 Holders of Series X Preferred Stock (i) are not entitled to receive dividends, subject to customary anti-dilution protections, (ii) have no voting rights, and (iii) receive a liquidation preference of $400 per share. The Series X Preferred Stock ranks senior in right of payment to all securities designated as junior securities, including Common Stock.

 ASC 815-15-25-17D provides guidance for assessing host contracts in the form of preferred shares, in which 25-17D(b) states that an investor’s ability to “convert a preferred share into a fixed number of common shares generally is viewed as an equity-like characteristic”. Because conversion of the Series X Preferred Shares is at the discretion of the Holder, conversion is in a fixed number of shares, dividends are not typically paid and cash settlement would only occur in the unlikely event of change in control, the host contract has the characteristics of, and is classified as, an equity instrument, and the embedded derivatives and host contract are considered clearly and closely related. As such, the embedded derivative does not require bifurcation and the Series X Preferred Shares shall be reported as mezzanine equity on the balance sheet.

 Issuance costs associated with issuance of the Series X Preferred Stock were immaterial.

 On June 18, 2024, the Company held a special meeting of stockholders where the Certificate Amendment was approved. The Certificate Amendment was filed with the State of Delaware on June 19, 2024. On June 20, 2024, Strandler converted its 15,000 shares of Series X Preferred Stock to 15,000,000 shares of Common Stock.

(10) Significant Customers and Contingencies

The portion of total revenue from our significant customers are as follows for the periods ending September 30, 2024, and 2023:

		Three months ended September 30,						Nine months ended September 30,
Customer #	Product Category	2024			2023			2024			2023
1	Solésence®	34		%	21		%	34		%	11		%
2	Personal Care Ingredients		17	%		30	%		14	%		31	%
3	Solésence®		5	%		18	%		5	%		13	%
4	Solésence®		6	%		2	%		9	%		10	%
	Total		62	%		71	%		62	%		65	%

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Accounts receivable balances for these customers were approximately:

		September 30,		December 31,
Customer #	Product Category	2024		2023
1	Solésence®	$	3,976	$	1,288
2	Personal Care Ingredients		1,034		—
3	Solésence®		342		864
4	Solésence®		1,084		—
	Total	$	6,436	$	2,152

We currently have exclusive supply agreements with BASF Corporation (“BASF”), that have contingencies outlined which could potentially result in the sale of production equipment from the Company to the customer intended to provide capacity sufficient to meet the customer’s production needs. This outcome may occur if we fail to meet certain performance requirements. In the event of an equipment sale, upon incurring a triggering event, the equipment would be sold to the customer at either 115% of the equipment’s net book value or the greater of 30% of the original book value of such equipment, and any associated upgrades to it, or 115% of the equipment’s net book value, depending on the equipment and related products.

 If a triggering event were to occur and BASF elected to proceed with the equipment sale mentioned above, we would lose significant revenue. Replacement of necessary equipment that could be purchased and removed by the customer pursuant to this triggering event could take in excess of twelve months. Any additional capital outlays required to rebuild capacity would probably be greater than the proceeds from the purchase of the assets as dictated by our agreement with the customer. Similar consequences would occur if we were determined to have materially breached certain other provisions of the supply agreement with BASF.

We recently amended our Zinc Oxide Supply Agreement with BASF regarding using our commercially reasonable efforts to develop a modified zinc oxide product for BASF’s exclusive purchase. The amendment also includes provisions (a) amending the exclusivity section of the Agreement to provide that (i) BASF has the exclusive right to use zinc oxide materials that we develop, make, or sell to BASF as an ingredient for uses in the field of use designated in the Agreement, and (ii) we can supply and sell both certain finished products containing zinc oxide for use in the field of use to customers anywhere in the world and certain zinc oxide dispersions that we developed or develop for a particular customer, and (b) amending the provisions of the Agreement concerning order forecasting and procedures, operational planning, inventory and capacity requirements, and periodic facility shutdown arrangements, to more effectively serve each party’s business needs with respect to all product that BASF purchases from us under the Agreement. 

 (11) Business Segmentation and Geographical Distribution

Revenue from international sources approximated $735 and $1,490 for the three and nine months ended September 30, 2024, respectively, compared to $731 and $2,918 for the three and nine months ended September 30, 2023, respectively. All of this revenue was product revenue.  

Our operations comprise a single business segment and all of our long-lived assets are located within the United States. We categorize our revenue stream into three main product categories, Personal Care Ingredients, Advanced Materials and Solésence. The revenues, by category, for the three and nine months ended September 30, 2024 and 2023 are as follows:

	Three months ended September 30,				Nine months ended September 30,
Product Category	2024		2023		2024		2023
Solésence	$	13,600	$	5,016	$	32,904	$	17,839
Personal Care Ingredients		2,845		2,364		5,966		8,944
Advanced Materials		421		578		910		2,503
Total Sales	$	16,866	$	7,958	$	39,780	$	29,286

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Nanophase is a health-oriented, science-driven company, which, along with its wholly owned subsidiary, Solésence, LLC (our “Solésence beauty science subsidiary”), is focused on various beauty- and life-science markets. Our primary skin health products are fully developed prestige skin care formulations with mineral-based UV protection, marketed and sold through our Solésence beauty science subsidiary, enabled by our proprietary Active Pharmaceutical Ingredients (“APIs”) which are also marketed as APIs for sale to manufacturers of other types of skin health products, including sunscreens and daily care products.  In terms of the balance of our life sciences focus, we have seen current conditions decrease demand for our medical diagnostics ingredients, which are used in testing for various viruses.  Additionally, we continue to sell products in legacy markets including architectural coatings, industrial coating applications, abrasion-resistant additives, plastics additives, and surface finishing technologies (polishing) applications— all of which, along with medical diagnostics, currently fall into the advanced materials product category.

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 Leveraging a platform of integrated patented and proprietary technologies, we create products with unique performance to enhance end-consumers’ health and well-being. We offer soup-to-nuts production, from engineered materials, formulation development, and finished product development, to commercial manufacturing and packaging capabilities. Our expertise in materials engineering allows us to effectively coat and disperse materials on a nano and “non-nano” scale for use in a variety of markets in skin health, including for use in sunscreens as APIs and as fully developed prestige skin care products, marketed and sold through our Solésence beauty science subsidiary. We believe that we have developed technological advantages with respect to our APIs sold for use as ingredients, while our Solésence beauty science technologies lead to enhanced efficacy and aesthetics in our finished products, which have received broad acceptance in the marketplace. Due to the enhanced efficacy and aesthetic qualities offered by our proprietary technology platform, Solésence finished products satisfy growing consumer demands around “clean” and inclusive beauty. Solésence beauty science also benefits from the Company’s vertical integration with each product’s key active ingredient that delivers its point-of-difference. This vertical integration helps us to improve efficiency and avoid potential major supply chain challenges while also addressing ongoing sustainability efforts. 

 Polymerase Chain Reaction (“PCR”) testing for various viruses, most notably SARS-CoV-2 (“COVID-19”), has become an important use of our technology in the life science space. However, we have seen current conditions decrease demand for our medical diagnostics ingredients, which are used in testing for various viruses. We believe that our deep expertise in materials science has created advantages that enable performance in certain tests that may not be achievable through other materials. Outside of life science, we continue to sell advanced materials for use in legacy applications, all of which, along with medical diagnostics, currently fall into the advanced materials product category.  

 Given our technological position, in addition to the historical market acceptance of our APIs for use in skin health products and sunscreens, rapidly growing sales for our suite of Solésence® finished products, and the expanded use of our diagnostic materials in aiding the fight to curb the spread of COVID-19 and other viruses, in 2021 we announced that we reoriented our Company strategy. Regardless of the demand decrease for our medical diagnostic ingredients, we continue to see unprecedented demand in beauty science for our APIs and finished products. The markets for both have shown an appetite for what we are producing, and management believes that this growth is happening now due to a confluence of our technology, market conditions that favor what we produce, and our expanded expertise in these areas.

 Nanophase, primarily through Solésence, now partners with brands to develop, manufacture, and market products and ingredients that enhance lives through healthy skin. We are focusing our combined business-, ingredient-, and product-development capabilities on products with unique performance in this area. While we will continue to produce and sell materials to our other advanced materials customers, it is not our strategic focus. We may develop additional technologies or find unique applications outside of our core markets in the future, but to maximize the use of our resources today, we plan on expanding efforts in areas where we have proven we can deliver innovation and growth.

Results of Operations

Total revenue increased to $16,866 for the three months ended September 30, 2024, compared to $7,958 for the same period in 2023. Total revenue increased to $39,780 for the nine months ended September 30, 2024, compared to $29,286 for the same period in 2023. Much of our revenue was from our largest customers for the three- and nine-month periods ended September 2024, and 2023, respectively. This reflects sales to our largest customers for our finished skin health products marketed through our Solésence subsidiary and sales of APIs to our largest customer in skin care and sunscreen applications.  This is the revenue breakdown, as a percentage of total revenue, from the customers referenced above during the three- and nine- months periods ended September 2024, and 2023 respectively:

		Three months ended September 30,						Nine months ended September 30,
Customer #	Product Category	2024			2023			2024			2023
1	Solésence®	34		%	21		%	34		%	11		%
2	Personal Care Ingredients		17	%		30	%		14	%		31	%
3	Solésence®		5	%		18	%		5	%		13	%
4	Solésence®		6	%		2	%		9	%		10	%
	Total		62	%		71	%		62	%		65	%

Product revenue, the primary component of our total revenue, increased to $16,785 for the three months ended September 30, 2024, compared to $7,746 during the same period of 2023, and increased to $39,479 for the nine months ended September 30, 2024, compared to $28,925 during the same period of 2023. The three-month and nine-month increase in product revenue were due to higher sales in our Solésence® and Personal Care Ingredients product categories offset by lower sales in our Advanced Materials product category.

Other revenue decreased to $81 and $301 for the three- and nine-month periods ended September 30, 2024, respectively, compared to $212 and $361 for the same periods in 2023, respectively. Other revenue is typically comprised primarily of developmental or licensing fees. 

Cost of revenue generally includes costs associated with commercial production and customer development arrangements.  Cost of revenue increased to $10,764 for the three months ended September 30, 2024, compared to $6,428 for the same period in 2023, and increased to $26,358 for the nine months ended September 30, 2024, compared to $21,932 for the same period in 2023.  The increase for the three months in the cost of revenue was primarily driven by increased volume, manufacturing operating inefficiencies, and facilities improvements. The increase for the nine months in cost of revenue was primarily driven by increased volume, price inflation on materials, manufacturing operating inefficiencies and facilities improvements. While we typically pass-through costs to our customers, we sometimes cannot pass through 100% of pricing increases on raw materials, and even with pass throughs, our gross margin percentage is negatively impacted by higher material costs.

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Capacity is a key area of focus to increase throughput first, followed quickly by increased cost efficiency once we can achieve greater scale. Our planning has had us adding to our current fixed manufacturing cost structure through 2024 to accommodate additional growth, and to build a better base for further growth beyond that level. The extent to which margins grow, as a percentage of total revenue, will be dependent upon revenue mix, revenue volume, our ability to cut costs and pass commodity market-driven raw materials increases on to customers, and the speed and efficiency with which we are able to scale up production for our Solésence products. We expect that, as product revenue volume increases, our fixed manufacturing costs will be more efficiently absorbed, which should lead to increased margins as we grow. Our most critical operational issue today is reducing controllable variable product manufacturing costs.

Research and development expense, which includes all expenses relating to the technology and advanced engineering groups, primarily consists of costs associated with the development or acquisition of new finished product formulations for skin care, new product applications for our skin care ingredients, advancement of our medical diagnostics ingredient knowledge, and the cost of enhancing our manufacturing processes. As an example, we are currently focusing the bulk of our resources on developing new product formulations, and related new technologies, as we expand marketing and sales efforts relating to our Solésence products. This work has led to several new products and additional potential new products. Our efforts in research and development, cosmetic formulating, process engineering and advanced engineering groups are focused in three major areas: 1) application development for our products; 2) creating or obtaining additional core materials technologies and/or materials that have the capability to serve multiple skin health-related markets; and 3) continuing to improve our core technologies to improve manufacturing operations and reduce costs.

Research and development expense decreased to $970 for the three months ended September 30, 2024, compared to $1,057 for the same period in 2023. For the nine months ended September 30, 2024 research and development expense decreased to $2,746 compared to $3,052 for the same period in 2023. The decrease is due in large part to decreased legal costs related to research and development, and salaries in 2024 compared to 2023.

Selling, general and administrative expense increased to $1,934 for the three months ended September 30, 2024, compared to $1,695 for the same period in 2023. The increase is due to an increase in the allowance for credit loss and increased employee-related costs in 2024 to when compared to 2023. For the nine months ended September 30, 2024, selling, general and administrative expense decreased to $5,321, compared to $5,951 for the same period in 2023.  The decrease is due to lower legal costs in 2024 when compared to 2023.

Inflation

We believe inflation has had an incremental impact on our costs of operations and financial position to date. However, supplier price increases and wage and benefit inflation, both of which represent a significant component of our costs of operations, could have a material effect on our operations and financial position in 2024 if we are unable to pass through any applicable increases under our present contracts or through to our markets in general. We have begun to increase pricing where possible and continue to adjust our pricing to the extent supported by the markets we are in, and under any contract limitations we may have. 

Liquidity and Capital Resources

Cash, cash proceeds and use of cash for the nine months ended September 30, 2024, 2023, and year ended December 31, 2023 were:

	Nine months ended  September 30, 2024			Nine months ended  September 30, 2023			Year ended December 31, 2023
Total cash	$	2,925		$	1,188		$	1,722
Cash (used in) provided by operating activities		(218	)		644			(2,006	)
Net cash used in investing activities		(1,965	)		(852	)		(1,051	)
Net cash provided by (used in) financing activities		3,386			(790	)		2,593

The net cash used in operating activities during the nine months ended September 30, 2024 was primarily due to increased accounts receivable and inventory offset by net income and increased customer deposits. Net cash used in investing activities was attributable to expenditures on capital equipment for all periods presented above. The net cash provided by financing activities was attributable to the issuance of additional common stock.

 Our actual future capital requirements in 2024 and beyond will depend on many factors, including customer acceptance of our current and potential finished Solésence products, APIs sold as ingredients in to the skin health markets, medical diagnostics ingredients, and other engineered materials, applications, and products, continued progress in research and development activities and product testing programs, the magnitude of these activities and programs, and the costs necessary to increase and expand our manufacturing capabilities and to market and sell these products and ingredients. Other important issues that will drive future capital requirements will be the development of new markets and new customers as well as the potential for significant unplanned growth with existing customers. Depending on the success of certain projects, and conditions within the markets supplying labor and materials for capital equipment, we expect that capital spending relating to currently known capital needs for 2024 will be between $1 million and $2 million, to be funded by profit from operations, our existing loans and lines of credit, and possible new debt financing. If those projects are delayed or ultimately prove unsuccessful, or if we fail to be able to support the additional cost of funding them in the near term, we expect our capital expenditures may fall below the lower end of the range. Similarly, substantial success in business development projects may cause the actual 2024 capital investment to exceed the top of this range.

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Additional Consideration

We had federal net operating loss carryforwards for tax purposes of approximately $50 million, and tax effected section 179 carryforwards of approximately $0.2 million at December 31, 2023. Because the Company may experience “ownership changes” within the meaning of the U.S. Internal Revenue Code (“IRC”) in connection with any future equity offerings, future utilization of this carryforward may be subject to certain limitations as defined by the IRC. If not utilized, $44 million of this loss carryforward will expire between 2024 and 2037. Given changes to the IRC, net operating loss carryforwards generated after January 1, 2018 do not expire, therefore, $5.6 million in net operating losses generated since January 1, 2018 do not expire. We had Illinois net loss deduction carryforwards for tax purposes of approximately $21.3 million on December 31, 2023. Due to the provisions of Illinois Public Act 102-0669 signed November 16, 2021, Illinois net loss deductions expire between 2029 and 2042.

Off-Balance Sheet Arrangements

We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purposes of raising capital, incurring debt or operating our business. We do not have any off-balance sheet arrangements or relationships with entities that are not consolidated into our financial statements that are reasonably likely to materially affect our liquidity or the availability of capital resources.

Safe Harbor Provision

We want to provide investors with more meaningful and useful information. As a result, this Quarterly Report on Form 10-Q (the “Form 10-Q”) contains and incorporates by reference certain “forward-looking statements”, as defined in Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements reflect our current expectations of the future results of our operations, performance, and achievements. Forward-looking statements are covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We have tried, wherever possible, to identify these statements by using words such as “anticipates”, “believes”, “estimates”, “expects”, “plans”, “intends” and similar expressions. These statements reflect management’s current beliefs and are based on information now available to it. Accordingly, these statements are subject to certain risks, uncertainties and contingencies that could cause our actual results, performance, or achievements in 2024 and beyond to differ materially from those expressed in, or implied by, such statements. These risks, uncertainties and factors include, without limitation: our ability to be consistently profitable despite the losses we have incurred since our incorporation; a decision by a customer to cancel a purchase order or supply agreement in light of our dependence on a limited number of key customers; the terms of our supply agreements with BASF which could trigger a requirement to sell equipment to that customer; our potential inability to obtain working capital when needed on acceptable terms or at all; our ability to obtain materials at costs we can pass through to our customers, including Rare Earth elements, specifically cerium oxide, as well as high purity zinc; uncertain demand for, and acceptance of, our Solésence products, and our advanced materials; our manufacturing capacity and product mix flexibility in light of customer demand; our limited marketing experience, including with our suite of Solésence products; changes in development and distribution relationships; the impact of competitive products and technologies; our dependence on patents and protection of proprietary information; our ability to maintain an appropriate electronic trading venue for our securities; the impact of any potential new governmental regulations, especially any new governmental regulations focusing on the processing, handling, storage or sale of nanomaterials, that could be difficult to respond to or costly to comply with; business interruptions due to unexpected events or public health crises, including viral pandemics such as COVID-19; and the resolution of litigation or other legal proceedings in which we may become involved. In addition, our forward-looking statements could be affected by general industry and market conditions and growth rates. Readers of this Quarterly Report on Form 10-Q should not place undue reliance on any forward-looking statements. Except as required by federal securities laws, we undertake no obligation to update or revise these forward-looking statements to reflect new events or uncertainties.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for a smaller reporting company.

Item 4. Controls and Procedures

Disclosure controls

We are responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports filed by us under the Exchange Act is: (a) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and (b) accumulated and communicated to our management, including our principal executive and principal financial officers, to allow timely decisions regarding required disclosures. It should be noted that in designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and that our management necessarily was required to apply its judgment regarding the design of our disclosure controls and procedures. As of the end of the period covered by this report, we conducted an evaluation, under the supervision (and with the participation) of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective at reaching that level of reasonable assurance. 

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Internal control over financial reporting

The Company’s management, including the CEO (who is also currently acting as both the Company’s principal executive officer and the Company’s principal financial officer), confirm that there was no change in the Company’s internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.  Legal Proceedings

None

Item 1A. Risk Factors

Not required for a smaller reporting company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.     

Item 5. Other Information

None.  

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Item 6. Exhibits

Exhibit 31.1	Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act.
Exhibit 31.2	Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act.
Exhibit 32	Certification of the Chief Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350.
Exhibit 101	The following materials from Nanophase Technologies Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, formatted in XBRL (Extensible Business Reporting Language): (1) the Balance Sheets, (2) the Statements of Operations, (3) the Statements of Shareholders Equity, (4) the Statements of Cash Flows, and (5) the Notes to Unaudited Consolidated Condensed Financial Statements.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	NANOPHASE TECHNOLOGIES CORPORATION
Date: November 12, 2024	By:	/s/ JESS A. JANKOWSKI
		Jess A. Jankowski
		President and Chief Executive Officer
		(principal executive officer, and principal financial officer)

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