Nanophase Reports First Quarter 2011 Revenue Increase of 39 Percent

Nanophase Technologies Corporation, a technology leader in nanomaterials and advanced nanoengineered products, has announced its financial results for the quarter, ended March 31, 2011.

First Quarter 2011 Highlights

• Revenue increased by 39 percent over the first quarter of 2010.

• Gross margin, as a percentage of revenue, increased 37 percent over the comparable quarter of 2010.

• Net loss for the quarter improved 52 percent over the comparable quarter of 2010.

• The introduction of NanoArc® dispersions for UV-cured scratch-resistant coatings at the European Coatings Show, the largest in the coatings industry, generated booth traffic and significant interest.

Nanophase CEO Jess Jankowski commented, “We entered 2011 with a strong first quarter, a continuation of our 2010 growth trend - and one we expect will continue through 2011 and beyond. With an improved worldwide economy, we, along with our customers and potential customers, are beginning to see an increased demand within the specialty chemicals sector. This was evidenced during this year’s European Coatings show in Nuremburg, Germany, attended by over 20,000 companies from 45 countries and 800 plus exhibitors in the coatings, adhesives, sealants, production equipment and services market. This show provided a wealth of prospective customers.”

Jankowski continued, “We expect a ramp-up in sales of our NanoArc® exterior coating additives in the second half of 2011 as pilot programs evolve into customer orders. The recent launch of our NanoArc® scratch-resistant coatings should generate new customers and sales this year as the pilot/testing cycles are significantly shorter.

“Our goal is to launch additional products that would generate revenue in 2011. We believe our strategy to phase-in products throughout the year will assist in better leveling our revenue flow going forward. All in all, this should be a sound year for revenue growth and market expansion,” added Jankowski.

While the company’s balance sheet remains strong, the skyrocketing cost of rare-earth materials used in the manufacture of the company’s polishing application products has affected the company’s working capital levels. A year ago, inventory of approximately $1 million was maintained at any given time. Today, that same inventory is valued closer to $2 million. While these costs typically pass through to customers, this market dynamic is significant and must be managed carefully.

Shareholders and members of the financial community are invited to participate in tomorrow’s first quarter financial results conference call. During the call, Mr. Jankowski will be discussing the company’s goals and milestones for 2011.