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Edited Transcript of NANX earnings conference call or presentation 16-May-19 3:00pm GMT

Q1 2019 Nanophase Technologies Corp Earnings Call

Romeoville Jun 24, 2019 (Thomson StreetEvents) -- Edited Transcript of Nanophase Technologies Corp earnings conference call or presentation Thursday, May 16, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jess A. Jankowski

Nanophase Technologies Corporation - President, CEO & Director

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Conference Call Participants

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* James Lieberman

Revere Securities LLC, Research Division - Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Nanophase First Quarter 2019 Financial Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

The words expect, anticipate, plan, forecast and similar expressions are intended to identify forward-looking statements. Statements contained in this news release that are not historical facts are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect the company's current beliefs and a number of important factors that could cause actual results for future periods to differ materially from those expressed in this news release. These important factors include, without limitation: a decision of the customer to cancel a purchase order or supply agreement; demand for and acceptance of the company's nanocrystalline materials; changes in development and distribution relationships; the impact of competitive products and technologies; possible redistribution -- disruption in commercial activities occasioned by terrorist activity and armed conflict; and other risks indicated in the company's filings with the Securities and Exchange Commission. Nanophase takes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties.

I would now turn the call over to our President and Chief Executive Officer, Mr. Jess Jankowski. Please begin.

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Jess A. Jankowski, Nanophase Technologies Corporation - President, CEO & Director [2]

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Thank you, Norma. Good morning, everybody. I appreciate everyone being here and those choosing to listen later online. I'm happy that you could join us to discuss our first quarter 2019 financial results, our current state of the business and strategic updates. I'll be on this call solo today. We currently have an interim finance leader in place as we keep focusing on building our Solesence business and ensuring that operations are as efficient as they can be.

Unless identified otherwise, all numbers will be stated in approximate terms. Our Q1 2019 revenue was up by 30% over the same quarter in 2018. Year-over-year, we saw sales within our personal care ingredients product category go down by $300,000 and our advanced materials product category was up by $300,000. The major difference was within our Solesence product category where sales were $900,000 this quarter versus $60,000 in last year's first quarter and $1.4 million for all of 2018. So in Q1 of 2019, we're already at 66% of full year 2018 volume and we expect to record a multiple of 2018 Solesence revenue this year.

As you may have seen in the release, Solesence had another product launch through a leading natural skin and body care brand in the first quarter of Q1 (sic) [2019]. This resulted in low 6-figure revenue and -- along with follow-on orders from existing Solesence customers helped us to achieve solid revenue for Q1. The newly launched product has been lauded as one of the best in class in a recent competition, and we've received the first reorder for this product. We believe this to be a demonstration of strong consumer acceptance, which we continue to see with our Solesence products. In total, by the end of the second quarter, we expect to have Solesence develop and manufacture products being marketed by over a dozen different brands. I'm happy with our progress and I expect us to not only continue to grow but also to enter the stage where we can capture more margin from each product as we become more familiar with the product development and scale up processes.

Looking at the bottom line. We did a good job in managing our operating expenses year-over-year, but we struggled in Q4 last year and in Q1 on some of the execution issues that plague many companies like ours, companies that are growing aggressively in a newer product area, and ultimately these drove down our initial gross margins. We believe this to be a temporary situation and it has become a top area of focus for management going forward. Although we had a better bottom line in Q1 of 2019 than in Q1 of 2018, the last 2 reporting quarters have reflected a degree of growing pains that have been costly and their impact has been amplified by the drop in demand from our largest personal care ingredients customer between 2018 and 2019.

As we discussed during the March call, our internal expectation is for a $3 million reduction in personal care ingredients revenue year-over-year. Naturally, this puts a lot of pressure on cash as we work to build the Solesence business for 2019 and 2020. This is due to a combination -- the reduction in personal care ingredients is due to a combination of customer-specific events, none of which we believe are indicative of market weakness. More on that in a few minutes.

The upshot of the decrease in volume and related decrease in margin along with our recent results, is that it created a need for operating cash in order to continue executing on our Solesence strategy and to have some breathing room to focus on improving our margins. Cash management has become more of an issue for us than ever as we try to manage our growth within our contractual and resource constraints. In that regard, we've been busy shoring up the balance sheet.

As reported in our recent 10-Q, to address these issues, we completed an equity transaction earlier this week selling 4.1 million shares of unregistered stock for $1.7 million. This reflected a price of $0.40 per share, which we viewed as an efficient transaction in terms of total cost and dilutive impact. While the buyer has demand registration rights, they are not generally exercisable until after 4 years. This transaction was also completed quickly helping us to remain focused on our Solesence growth strategy, while we're coping with the volume reduction from our other line of business.

Additionally, as you may have read in the 8-K we filed on April 24, or as described in greater detail our subsequent 10-Q, we renegotiated our agreement with our largest customer. We expect this to allow us to have more access to our own balance sheet by reducing the cash requirements within our contract. Since the 2000s, we have been managing to the tech transfer provision embedded within the previous version of our agreement with BASF. For a number of years, we've been required to maintain a minimum balance of $1 million in cash at the end of each reporting quarter to avoid triggering a transfer of our technology.

Given inventory requirements and AR, among other things, this cash requirement placed the burden on the company, which was difficult to transcend. We often skimped on inventory to avoid risking our quarter end cash balance, which, in example, led to a situation where we made less material in Q1 of 2018 than was prudent from a purely operational sense in an effort to reserve enough cash to meet this aggressive covenant. The new amendment allows for up to $500,000 of the $1 million requirement to be composed of a combination of raw material and finished goods inventory. Along with our existing quarter end line of credit, which was also renegotiated favorably, this change has enabled us to carry more inventory to meet customer demand while maintaining a higher free cash balance and at less commercial risk to the organization. Given our expectation of continued growth, particularly within the Solesence product category, working capital is a bigger issue now than it has been in the past.

Now, I'd like to get back to our key markets. Earlier, when I mentioned the reduction in personal care ingredients volume this year, I said it was more discretely related to our customer, not weakness in the markets for our products. To better explain, I'd like to spend a few minutes discussing the demand in the markets we address with our minerals-based skin and sun care ingredients. I'll also discuss the strengths we see relative to our position both as an ingredients supplier and through our Solesence finished products in the market.

The outlook for minerals-based sunscreens continues to improve. I think that the underlying market dynamics continue to validate our broader strategy of focusing on the sun and skin care markets and within that the Solesence-specific strategy of delivering safe and effective prestige cosmetics to enhance people's lives.

First, there's been a world-wide shortage of zinc oxide and titanium dioxide most noticeably to us beginning in early 2018. Industry sources have been predicting a 300% increase in demand for zinc oxide for a mineral product over the next 5 years. We don't know what share we can expect from that growth, but it certainly supports our strategy.

You may also recall that over the past few years, some of the most common chemical sunscreens have also been banned due to their environmental impacts. They are not considered safe for use near coral reefs. This has been a positive for us in the market. After the study came out talking about the 300% increase in the market, came the recent Food and Drug Administration's announcement of the first new proposal in decades that was issued on sunscreen ingredient safety.

There are 16 active ingredients currently listed on what the FDA calls the monograph. This is the list of ingredients currently allowed to be used in human sunscreens in the United States. The FDA has concluded that 2 of these ingredients are unsafe for humans and that there is not enough data to determine if 12 more of these ingredients are safe for human use. Combined, those 14 active ingredients represent all of the ingredients currently allowed in the monograph that we refer to as chemicals-based sunscreens. They are our most significant market competition and we make up 14 out of the 16 of the ingredients in the monograph. Zinc oxide and titanium dioxide, the 2 remaining options in the current monograph, are the only 2 that the FDA has deemed to be safe for human use. This should be another big positive for us and it should drive further market growth.

Our technologies and our expertise developed over the years and everyday are allowing us to make enabling materials and products. Products that feel better on the skin, are easier to use and help to reduce the whitening effect that has been viewed as the main detriment of minerals-based products over the years.

Further, the Active Stress Defense Technology marketed to brands through Solesence also allows us to formulate with non-nano materials and achieve the same performance. This presents another marketing advantage as non-nano is important to many consumers of cosmetics. Other consumer benefits that we have proven are: comprehensive environmental protection, including protection against pollution; broad-spectrum UV protection, protecting the skin from damage that can be caused by both UVA and UVB light; and stopping the formation of free radicals, which contribute to premature aging, such as wrinkle formation and skin discoloration. These claims for Solesence products help the brands to provide evidence of anti-aging benefits, which continue to be one of the biggest drivers of demand from consumers.

We often refer to our Solesence clients as brands. That's because these clients will be marketing these products with their brand names on them, using their distribution channels enabled by our Solesence technology, our formulating expertise, marketing support and our regulatory and production backbone. We're marketing Solesence products to luxury and prestige brands, and we're having good success, not just in terms of effectiveness but in terms of feel and appearance.

Within the footnotes of our latest 10-Q, you'll see that we're now breaking out our revenue in 3 product categories. These are personal care ingredients, Solesence and advanced materials. I've explained these in greater depth during our previous call and will devote more time in the future to doing the same, but I don't choose to do so today just not to -- I know many of you have been on the last several calls and I try to keep it as fresh as I can. And now you'll also be able to track all of our progress more easily in our public filings, thanks to this.

Although most of our investors listen to the webcast or review the transcript after the live call, I'd like to invite those participating in today's call to ask any questions you may have or to share your comments. Norma, would you please begin the Q&A session?

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from Wayne Woo, a private investor.

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Unidentified Participant [2]

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Yes, I'd like to express all congratulations and all appreciation for -- as our company has struggled, for your determination and sticking through and keep pounding away at it. I'm very pleased with the people you have at work, Jess, and I hope, as Solesence's stock continues to grow, these calls will get something you really look forward, but I think in the last 3 months you've really shined and I really appreciate it.

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Jess A. Jankowski, Nanophase Technologies Corporation - President, CEO & Director [3]

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Thank you, Wayne. I appreciate you.

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Operator [4]

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And our next question comes from James Lieberman of Revere Securities.

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James Lieberman, Revere Securities LLC, Research Division - Analyst [5]

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So, yes, it's Revere Securities. But -- congratulations. Am I sort of delusional or is this really the beginning of something dramatic? Because you have now multiple customers. This looks like a really -- almost like an explosion of opportunities coming your way. Is this all happening right before our eyes right now? Is there something I'm missing or is it really all -- is this really happening?

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Jess A. Jankowski, Nanophase Technologies Corporation - President, CEO & Director [6]

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It's happening, and we have -- I mean we're very happy with the amount of traction we've gotten with new products and new brands in the market. I think the continued success is going to have a lot to do with reorders, as we go. This is a different market than Nanophase has been in and certainly Solesence, this is the only market Solesence has been in, but a lot of our history has been in these markets that takes forever to get into the market. You know, it's a four-year lead time sometimes and then you're kind of set and maybe you don't get a lot of growth.

In this case, you get into the markets more quickly and it's dependent on consumer acceptance. I think we're in a great spot. I think we'll see more reorders going into later in the second and then the third quarter, which is going to shore up our results for this year and the ones that are starting this year that are smaller, presuming consumer acceptance, will be larger next year. So yes, it is exciting, it's just a -- it's a lot to keep track of and we're scrambling and as I mentioned, I'm -- we're having some growing pains but we're working through them.

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James Lieberman, Revere Securities LLC, Research Division - Analyst [7]

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So talking about growing pains. I understand the requirement of managing cash flow when you're building revenues and growing this -- finally starting to get some real growth in place and that's another challenge as -- of course, it is a better challenge than trying to see the growth coming at all. But do you also see -- one wonders whether there's a moving target. You know, it used to be like when you got to like $3 million a quarter, were just about break-even and around $4 million were just about break-even. Are we talking more like $5 million now to be like a positive cash flow per quarter? Or was it -- is that really not even easy to measure because it's all a question of how you manage inventories and receivables?

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Jess A. Jankowski, Nanophase Technologies Corporation - President, CEO & Director [8]

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Well, it's -- yes I mean, certainly if you -- cash flow from operations is different than total cash flow, and you're right: inventories and receivables have a lot to do with it -- the cycle and these can be longer.

I'll say that our business -- we've got 3 parts of our business, but the main parts are the personal care ingredients, which is largely the BASF business and the Solesence business. The advanced materials business has been relatively flat. The toughest part for us relative to managing that break-even is until the Solesence business gets big enough to kind of equate with where the BASF business is, BASF has such an outsized impact on what we -- what happens to us. As the volume goes up in that business, the margin per unit goes down although little dollar margin goes up and so it's kind of a -- it has been a moving target.

I will say and what I think is the reason we're having this success with Solesence is that if you compare the resources we're putting into product development through R&D and our advanced engineering and really our marketing, it's much higher now than it's been in the past. So at one level one could argue that has pushed up the break-even point a little bit. On the other hand, we have a lot more control and we're seeing the influence of what we're doing on the market. So I think, all in all, it's a good thing. I'll probably have a better answer for your question after we get through the Q2 and maybe into Q3 because we've had the growing pains we've gone through and the issues with the results and also having to respond quickly to that big reduction in expected volume have created some anomalous things that I don't think are going to keep going on. I'd like they have a few -- another quarter or 2 of steadier operations to make that call.

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James Lieberman, Revere Securities LLC, Research Division - Analyst [9]

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And from a standpoint of an investor and a consumer, whereas I've really enjoyed this product, this Sunforgettable product, are there other product names you're allowed to pass along to us at this stage?

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Jess A. Jankowski, Nanophase Technologies Corporation - President, CEO & Director [10]

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I'm not, but I will say that if you -- one of the things you can do is to follow our -- follow us on Instagram and Twitter. And some of the customers that we are using are more free with talking about themselves and who they are and attaching themselves to us than I am allowed to be, relative to our agreements with them. Over time, our goal is like the Sunforgettable products that our name will appear somewhere on those labels, ideally our logo as well, and that will be a freeing experience. For now, you've got to kind of search for some of these but they're bigger brands in the prestige world, and with the breakout that we're now doing in the Ks and Qs you'll really be able to see much more clearly what those customers are contributing and as they grow and they become more than a certain percent of our quarterly revenue, we'll have to, whether we name them or not, break them out separately, which will also be helpful.

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James Lieberman, Revere Securities LLC, Research Division - Analyst [11]

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Okay, and then the other question I -- to get a little more clarity, you say that by the end of the second quarter, you'll have over a dozen different brands marketing your products. Is that -- brands means distinct companies, or the different brands -- several brands within one company?

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Jess A. Jankowski, Nanophase Technologies Corporation - President, CEO & Director [12]

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For the most part, those are distinct companies that have a -- the Sunforgettable is the name of a product. The brand is really Colorescience. And there are -- we have more. Some are small, some are larger, some are nascent that we hope are going to grow. Some are relatively larger companies with smaller product lines. It's hard to know where it's going to go and I think the wildcard for a lot of this is the growing consumer demand for minerals-based products in light of the changes both regulatory that are coming and then the changes we've had but just the natural focus and the green focus. Our materials are just by design -- or not by design, I suppose, by gut design are greener when you get out there, and I think that's going to be a continuing -- we're seeing while the millennials don't use as much prestige cosmetics say, the 20-somethings, there is a big push in that direction to make them natural, either food-based or mineral-based, and we have a nice advantage in that space.

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Operator [13]

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(Operator Instructions) And our next question comes from [Rand Kay] of RKA.

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Unidentified Analyst [14]

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In hindsight, over the last 2 quarters, what are the models that you guys are looking to scrub or evaluate going forward to make them more practical or robust? Are they financial models? Are they operational models? Are they make-buy models? What seems to be the area where you are putting most of your elbow grease and reevaluating the way you have done business and the way you want to go forward doing business?

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Jess A. Jankowski, Nanophase Technologies Corporation - President, CEO & Director [15]

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Wow. Okay. That's a good question. Pretty broad. I -- there are several. I think there are -- our key focus right now has been on the make-buy side. We manufacture the active ingredients for everything. Well, we have a few products we don't, but almost everything we make and certainly at the dispersion level we do. What we historically have done was done all of the packaging outside in some of the -- there are a few treatments that we do to our products that we don't have the infrastructure to do.

We are working on bringing as much of that in as we can in a cost-effective way because the combination of -- for us $1 million of revenue or if it doubles, triples, if we end up with a $10 million Solesence business in a few years, that's not big volume to the people that do a lot of the other pieces in this contract manufacturing selling to brand world where you'd have to have 100,000, 1 million pieces of everything to make it worth their while. So the treatment we get and the costing we get hasn't been as competitive as we'd hoped. So we are -- that is a high area focus.

We also -- getting into -- looking at our inventories, the bulk of our inventory growth has been related directly to Solesence and the ingredients required to make those products as well as the bulk formulas required to put into the consumer packages. And I think the -- one of the things that we are very focused on is, first of all, are we carrying more than we have to carry and tying back all of our SKUs to that inventory, but also we don't have the buying power necessarily in some of these markets yet to have distributors stock materials for us and do some of the things that they will do at larger volumes.

So those are operational issues that are pretty critical, and we are also spending a high degree of effort trying to make sure that we have our workforce cross-trained and valuable. We do -- we basically have -- our business is very congruent strategically. If you compare the personal care ingredients business with Solesence even with the business we're selling into medical diagnostics, those are all -- they align well. There is a lot of regulation. There is a lot of backbone the company has to have to support those so they fit. Operationally, the consumer product business, which has -- the company historically has sold things in totes or big boxes or super sacs or drums and now we're selling pallets of fancy boxes with 15 milliliters of lotion in them that can't be damaged, can't be moved, can't -- working through those issues is something that has been a challenge and it's not going away but it is -- we are mitigating it -- you know how it is, the more you do it the better you get at it. And the best part is the positive results we're continuing to get in the marketplace and the market continues to be strong.

So I'd say our top focus getting back to your original 3 points is the -- is making sure that operationally, we can execute more efficiently and bring as much of it under our control as we can get. And some of that has to do with our size. We're not the -- people jump when L'Oréal wants something or a large contract manufacturer for L'Oréal wants something, not so much for us. And secondly, we do have to manage our working capital and manage our margins to a point where what we're doing is profitable and what we are putting new investment toward isn't being hindered because of some of the old things that we're working on. So we've -- and we've been -- you've seen that -- over the years that we've been migrating toward things we know better. We have a stronger position and I think we'll keep doing that into this year and looking forward to more growth and more efficient growth next year.

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Unidentified Analyst [16]

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On a follow-up to that question, do you feel now that you have the either in-house expertise or the -- or are you using consultants for this kind of ramp-up, or not kind of ramp-up, for this ramp-up? Is there somebody that is on staff who has been there/done that and had a peek around the corner or are consultants at this point driving that process?

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Jess A. Jankowski, Nanophase Technologies Corporation - President, CEO & Director [17]

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For the most part, we don't really have consultants driving. I mean we here and there have consultants as a set of hands or a specific advisor. Kevin Cureton, our Chief Commercial Officer, has experience of managing a division that was doing the same thing. He was at AMCOL HBS, which was doing something very similar to what we're doing. While obviously, he wouldn't be as hands-on, he has helped us with just -- guiding us down certain paths.

We also are -- we have a strong formulating group who has a lot of experience. We brought experience in from the market and we also raised some experience up internally and we brought some consultants in, to help us with that, and I think that area is strong.

Our chemical engineering group is strong. We are in terms of scaling up some of these processes and for the first time, I would say, the company is working on processes and equipment that is much more standard. The issues we have are issues that are addressable. There is a known way to deal with them. Whereas with the equipment that we built the business on originally, much of that was fabricated from scratch and there was nobody to call. If you had an operating issue, it was your people.

Now we've got -- we have more available resources. That said, all those resources cost money and so from an internal perspective, if I go up 1,000 feet and lately I haven't been operating as high up as I'd like to because of the situation, but you look at it, this company has struggled since inception with finding a business that the market supports that we can sell. And on the business development side, I think we're in really nice shape, which means to me then the issues are okay, if I had more money or more internal experience, this would go faster. We'd get the scale up done, we'd have the equipment soup to nuts running 90 days after we ordered it and now sometimes it takes a while and we buy used equipment, et cetera. Those things are knowable, though, and I think that any of the issues that the company has to struggle with over the next several years, as we're following this strategy, are things that are more commonly addressable and knowable.

Now it's a question of, can we turn this into an exciting company where we can grow quickly enough and profitably enough to make it an exciting investment for all of our outside investors as well as all of our stakeholders internally? And we've got a great team that thinks we are going to just hit it out of the park one of these days, and I can't disagree, but as Wayne [Ryuen] said earlier, it has been a slog and we thought we were a little closer to turning the corner at the end of last year than we ended up being. And some of that had to do with the outside forces that we had to contend with that weren't something we planned on.

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Unidentified Analyst [18]

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Well, if there was one wish that I would love to see is you now have an opportunity to hire a really -- I hope a very dynamic CFO that can really present you with solid modeling opportunities for financial consequences going forward. So I look forward to the choice you guys make but the -- if you can find somebody who's been there, done that, I know it's going to be expensive but that would be -- I think that would be a tremendous boost to your team.

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Jess A. Jankowski, Nanophase Technologies Corporation - President, CEO & Director [19]

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I agree. I agree. That's been something that we need to buck up on. That's good input.

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Operator [20]

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And our next question comes from Ronald Prater, a private investor.

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Unidentified Participant [21]

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Jess, why did BSF -- BASF cut their orders and do you expect them to return?

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Jess A. Jankowski, Nanophase Technologies Corporation - President, CEO & Director [22]

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I do. Effectively and -- effectively last year, so there was a massive increase in demand world-wide for zinc in the beginning of the year. And they picked up a lot of that demand. Some of it was spot buying. We're estimating that potentially almost half of that shortfall this year could have been related -- half of that $3 million that we took out of our forecasting could have been related to spot buying last year. There were some customer changes and there was also a -- an inventory build that wasn't clear to us, and we didn't determine the extent of all of that till probably the end of January, February.

So we're looking at this year's volume without betraying any confidences, at being at roughly half of our peak production that we ramped up to last year in order to satisfy this growing demand. The market is growing rapidly and is going to start to grow even more rapidly in a couple of years. That study, that was a client study I believe. That study was before any of the FDA information came out and they're talking about this 300% growth. BASF is a big player in that market. They're also a big player in the organic chemical sunscreen market and one good thing about that, although it's not great from that perspective for them, is that they are one of the few that has a -- somebody like us already producing high-quality minerals-based sunscreens.

So I don't think that's going to be a permanent situation at all. It may actually go up as we get further into the year. It's just -- we are so razor-thin on operating free cash and everything else that we are operating as if that's what it is, and we're going to work with it. But again the market is good. There are a really good partner. They're a good company. They've got a nice position in the market. And I think this is a temporary situation, painful situation for us but a temporary situation.

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Unidentified Participant [23]

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Did you add significant new capital equipment in the quarter?

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Jess A. Jankowski, Nanophase Technologies Corporation - President, CEO & Director [24]

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I think we added about $300,000 worth of equipment in Q1, and we have equipment on order or that has been delivered so far in April and May. Our goal is -- I don't know what the number is for the full year yet, but our goal is to get some more of the equipment that will allow us to, in terms of that make-buy decision, to make more of the things internally, give us greater efficiencies and allow us to cut down on the -- some of the growing pains and the cost -- the initial costs that you have when you're trying to ramp up -- because our volumes as you know, you've been around for a while -- you always want to scale up slowly; and my bent is to sell it first and then if we get a market and it's robust then start investing in equipment that has a payback. Even though if it's a quick payback, it's still -- you only get a payback if you continue to sell. I think Solesence is that product for us. It's -- or that line I should say. It's a growth engine and I don't see it going away anytime soon, and I see our ability to influence it being much greater and much more immediate than what we've had in the past.

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Unidentified Participant [25]

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Are you financing those with operating leases?

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Jess A. Jankowski, Nanophase Technologies Corporation - President, CEO & Director [26]

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We're not, for the most part. We had in the past. We have -- we had a term loan that we put on toward the end of the year, and we have a revolving loan and now we have the new equity. And so the terms of the loan package are that we don't add any more debt for the time being and that runs through first quarter of '20. But -- to me, this is all about growth and successful growth because everybody we talked to, everybody from our largest investor who is a great investor to every bank. We have a few quarters of some nice growth with some proof of more traction in the market, multiple larger customers, and I think this becomes a much easier undertaking for us.

I shouldn't say easy, more straight forward.

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Unidentified Participant [27]

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And how's Q2 looking? Any chance that you'll break-even cash-wise?

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Jess A. Jankowski, Nanophase Technologies Corporation - President, CEO & Director [28]

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I don't know. I think the -- if I had to guess, I would say no. I think the -- we're still in that mode where we're now beating up April to see -- we've put in some measures to pick up some efficiencies that we know we didn't have in Q1. We started doing that toward the end of Q1. April is closest to a full month. Definitely no more soon, but I'm not sure right now where it's at and there's that degree of variability that we are struggling with.

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Unidentified Participant [29]

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And you mentioned your largest shareholder has been very supportive. As a minority shareholder, I'd like you to pass along our thanks and gratitude to him for his support of the company. It's important to us all and I think he's done it in a fair way with regard to the interest of the minority shareholders. So as one I do appreciate that.

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Jess A. Jankowski, Nanophase Technologies Corporation - President, CEO & Director [30]

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I will pass that along. Thank you, Ron.

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Operator [31]

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And at this time, I have no further questions in the queue. I'd like to turn the call back over to Mr. Jess Jankowski for closing remarks.

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Jess A. Jankowski, Nanophase Technologies Corporation - President, CEO & Director [32]

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Thank you, Norma. Before I start my prepared closing remarks, I do want to say that we had a -- I've had several investors call and want me to contact them prior to the call and because the call was so late, typically I'm in a quiet period when we're preparing the financials before release once the quarter is closed, and with the financing that we just had, then it becomes a flat-out blackout. So apologize to anybody that I didn't get back to on schedule.

Now in terms of where we're at, I think given that we've found our growth engine in Solesence and clearly it's become the area of our business where we can exert the greatest degree of influence, I'm really looking forward to reviewing our progress in future calls as we discuss the ongoing strategy. In the meantime, I'd reiterate, in addition to following us on Instagram and Twitter, it is good to get on the Solesence website, which is constantly evolving and -- that's at www.solesence.com. And while we have our challenges, we're in the right markets with the right strategy at the right time. I expect 2019 to continue to be an excellent year for Solesence, and I'm looking forward to the opportunity to discuss the business with all of you again soon. Thanks again to all of you taking the time to listen and to support Nanophase and Solesence. Have a great day, everybody.

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Operator [33]

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Ladies and gentlemen, thank you for your participation in today's conference. You may now disconnect. Everyone, have a wonderful day.