Thank you, Shannon. Good morning everybody.

We're glad you are able to join us to discuss our outlook for 2015 and for our fourth quarter2014 financial updates. Frank Cesario, our CFO as joined me again today.

During this call, we'll be talking about the outlook for our four major growth initiatives, as well as updating you our existing business and of course 2014 results. We finished 2014 with better results in 2013, which I am happy about, but I want to focus on where we're positioned as we enter this year 2015.

I see our progress moving Nanophase from doing the behind the scenes blocking and tackling required to develop business at our growth areas to a place where we expect to see concrete commercial results, as and significant revenue from new sources beginning this year. Starting with the 2014 results that are high level as we discussed briefly in the press release, our Q4 2014 revenue came in slightly ahead of the same quarter in 2013, but each was the weakest quarter of its respective year.

Additionally our full year bottom-line improved by roughly double the increase in revenue over last year. Financial efficiency is a way our life here at Nanophase.

We continue to improve upon every area of our business, not just in business development. Even given those positive results, as many have heard me say before, I don't like to get caught up in incremental quarterly changes.

Our business doesn't run quarter-to-quarter and our business development cycle is measured months-to-years. We focus on year-over-year progress both in financial results and in planned execution.

Our top goals will lead us first to build the sustainable, then an exciting business over the typically drawn out times the market company as experienced in advanced materials applications. As we discussed last quarter, I also believe the path from sustainable to exciting will be much shorter than the journey from struggling to sustainable as then.

I can see the path directly in front of us to significant revenue growth, which I believe offers the potential of increasing equity value for Nanophase. That's when the exciting part will come in.

After Frank provides a short overview of our financial results, I'll talk about our key business development initiatives for 2015 and 2016. These are focused on four main areas, personal care technologies, surface finishing technologies and energy technologies, including energy storage and solar control.

With that, I'll hand it over to Frank.

Thanks Jess. Good morning.

This is Frank Cesario. Before I begin today's overview of the financial results for the fourth quarter and full year 2014, please remember that all financial results are stated in approximate terms.

Revenue for the fourth quarter of 2014 was slightly ahead of the comparable 2013 quarter, for both periods around the same numbers. Revenue $1.8 million, gross margin 16%; net loss for the quarter is $0.9 million or $0.03 per share.

The full year results ended December 31, 2014 saw revenue of $9.9 million versus $9.6 million for 2013. Gross margins increased 28% in 2014 versus 27% in 2013.

Net loss for the year during 2014 was $1.7 million or $0.06 per share versus $2.5 million, $0.09 per share for 2013. As just stated, our bottom-line improved by more than double our revenue growth.

We ended the year with $1.9 million in cash. Our company remained debt free.

Many of you are aware that we have $1 million cash covenant related to an exclusive supplier relationship with our largest customer. We disclosed more detail on our SEC filings.

It is our intention not to raise permanent capital, being said to implement a temporary borrowing vehicle should we needed to maintain compliance. This could certainly change in the future, but it is the way that our company is approaching 2015.

We anticipate putting something in place by the end of March, in order to deal with any working capital fluctuations. Jess?

Thanks Frank. Well the financial results show a nice improvement.

I'd like to key in now at our main business development initiatives. These areas are our top focus as we continue to build Nanophase to achieve the highest sustainable value possible.

Again these are personal care, surfacing finishing and energy technologies which include energy storage or battery and solar control. We expect revenue from these areas to make a meaningful difference beginning this year 2015.

In personal care, which is composed largely of our active ingredients for inorganic sunscreens, we saw another record year in terms of zinc oxide volume during 2014. We also believe there are positive indications that within a range of normal fluctuations, this is a sustainable to growing business for Nanophase.

We believe our expansion here is a reflection of a growing consumer preference for full spectrum inorganic sunscreens, specifically zinc oxide and titanium dioxide which are also referred to as physical sun blockers in the industry versus traditional organic sunscreens like avobenzone. Dermatologists have long preferred zinc oxide as a full spectrum UV blocker and movement in consumer preferences as helped in this area.

In addition to existing demand, which is primarily based in the U.S., regulatory changes in the EUR in the pipeline which should present opportunities for growth and do applications there. We expect this market to continue to be a strong one for Nanophase.

I would like to cover personal care technologies first, mainly because, it currently contribute the most to our bottom-line among our top areas of focus. This is clearly the most mature of our current business development initiatives than, wellbeing a strong P&L driver for Nanophase.

Personal care is now what relying and what we are relying at to put us over the top. In terms of the surest near term growth that would be in the surface finishing market.

This area is very different from any other market that Nanophase is currently developing in terms of how we approach it and the customer and market profile is involved. This is a market that include many medium size companies that may each ultimately by low six figure amounts of our [indiscernible].

To reach these customers, we have to do more technical support and we have to develop greater applications data to support the selling process than we do in our other markets. This is why we invested in our policy in mid last year Our buyer is typically an engineer and the actual end-user of our products, reporting us the higher level of customer intimacy.

This dynamic makes us the performance driven sale, which maxes our technology focus culture very well. We now have the proper metrology and proper application level production equipment to allow us to pursue this business aggressively and with credibility.

In the first quarter of 2014, we exhibited at Optatec in Frankfurt, Germany. Then we presented a good deal of home ground data at the American Precision Optical Manufacturers Association also referred to as APOMA.

The technical conference in the fall, which is very well attended by potential customers and industry opinion makers. On top of that, we just got back from exhibiting at Photonics West in San Francisco last week.

Photonics West is the premier North American trade show for the optics and photonics industry broadly and Nanophase had the opportunity to solidify our name in the industry and meet with several current and many prospective customers during the show. We're making our presence felt in this industry and we're being well received.

This is the market where we have the greatest near-term upside and where we can have the greatest direct impact and accelerate in commercial adoption and building sales. Our 2014 surface finishing revenue approached double the 2013 volume in the mid-six figure range.

For 2015, we expect our surface finishing volume to more than double from 2014 levels with upside potential beyond that. Of the four key areas, we're focusing our business development efforts on; we think this market to have the great impact on 2015 growth, probably beginning early in the second quarter.

Our two new energy technologies have a time to market which puts them in a near to mid-term commercialization group, a little further out than our surface finishing or policing activities. We're moving forward both in the energy storage application, referring to battery and in the solar control area, which refers to several applications involved with improving energy conservation.

For the battery work, during 2014 we saw multiple large battery manufacturers duplicate their results we used to validate our value proposition. With entities actually manufacturing their batteries on a small production basis, with our materials being incorporated to test our value proposition further.

Although we originally expected it to materialize in late 2014, we now look for the commercialization phase to begin with more than one customer during 2015 to be followed by more significant revenue volume in 2016. As I mentioned last time, we further relying in the battery application that we are in solar control, but based on test results the market feedback in both areas, we see opportunity for very large profitable volume across our energy portfolio.

Specifically, we've engaged some of the largest players in the industry along with some smaller players and believe we offer a significant value proposition with both applications in their respective markets. I planned to spend more time talking about both of these energy initiatives as we get further into the year.

We talk about making progress, which is both true and critical to the end results and you know that I try to be cautious and avoid the hype. Without abandoning my long standing approach, I will share my belief that our growth initiatives will yield meaningful new business revenue during 2015 and validate the strategy upon which the company is based.

I look forward to talking with you further as a story on full. Before, we go to the Q&A, I'd like to speak to some of the marketing outreach we've been doing.

I hope that all of you have now had the opportunity to see our newly updated website, which is that nanophase.com. Probably a greatest interest too many of you, we're ramping up our industry marketing pieces, which I released on a targeted basis unlike in investor press releases which we sent to a much broader audience.

The purpose of these will be to establish Nanophase in the markets we serve, where we'd like to serve by reaching out the various customer constituencies. Our current focus is upon expanding our presence in surface finishing.

If you navigate to the above to us dropdown then to news and events, you will see we'll be up doing this part of our business. As we mentioned in our press release, you can also find a quarterly summary of these things under the investor relations drop down choosing, investor news then 2014 Q4 recap.

Additionally, we've expanded our presence on LinkedIn, Facebook and Twitter for those of you inclined to learn more about Nanophase via those sources. While you are on our site or investigating these other sources, you're sure to see that Nanophase recently celebrated our 25th anniversary.

Anniversaries are not always very meaningful on the investment context, but in the hi-tech business of developing and producing nano materials for cutting hedge applications. 25 years speaks volumes, our technology and our commercial activities have developed to a point where we are saying power.

I don't keep the statistics, but imagine 100s of nano driven companies have failed over this period. Most never bother to develop a viable commercial proposition.

Nanophase as real applications, real customers and we saw 100s of tons of nano materials every year. Although most of our investors listen to the webcast or review the transcript after the live call, we'd like to invite those participating in today's call to ask any questions you may have or to share your comments.

Shannon, would you please begin the Q&A session.

Hi.

Hi James, how are you?

Hello Jess, thank you very much for your presentation, I was my interest was really peaked by the comments you made about the increasing volume of interest in the surface finishing area. Can you broaden that a little bit, give a little bit more detail, I know you said that there are a lot of mid-level or midstream type companies or midsize companies that are interested in this, but can you give a broad idea of what the opportunities are here?

Sure. This definitely represents over a period of time, a seven figure up to be in seven figure or greater market for Nanophase.

We think as we started out some will remember for years we had an exclusive relationship with Roman house and then Dove, and while we're in there, we really didn't explore the other polishing area as much, because we didn't want to defuse our efforts or crisscross them and what they were trying to do. We during that time had developed the few small optics polishing customers that we're achieving very strong results and we recognized once we were non-exclusive with all that, not only that they're achieving results, but we aren't really doing much to support that market, and they were persistent customers.

So, we kind of dug in Jim, we started bringing in some consultants first and then a seller which have experienced in the market and we realize that this is an underserved area and we have a lot of chemistry expertise and what we brought to the table relative to ingredients supply for semiconductor wafer polishing. We developed into a full blown product, so unlike much of what Nanophase sells, say in the sunscreen business, where we're providing an active ingredient for somebody else to incorporate in a product.

In the surface finishing business particularly in optics, we are selling a complete flurry that to drop in. We found that those customers are very well and to be collaborative, we found that we have the technical strength to support those markets well.

And we saw a lot of opportunity there for us. We about doubled our business last year and to the mid-six figure range to expect to better than double that this year, possibly greater, additionally the type of the market is pretty good in this market.

I mean the downside, from my perspective what would be great is if every customer was gigantic and came to market quickly. Typically what happens is the smaller, more nimble or entrepreneurial the company is, the quicker they get to market, but lower volume of material each purchases at the time.

So when you look at our forward looking, when you look at surface finishing versus the two energy areas, we're typically dealing with much larger companies in the energy space that have to have a development cycle to a lot of product testing. On the surface finishing side, we're frequently there in the plant helping them to corporate the flurry into their process and the sales cycle is much faster, anecdotally we've had a sale level is made in a small new application, while we were at the show last week, somebody said, “hey could we try with this.”

We got on the phone, we got sampled out the door, by the end of the show, they ordered a material and there won't be a big customer, but those are the kind of that's faster than both, but I would say three to six month timeframe is more common in this market, certainly less than a year which is very different from lot of the markets were ended also made me much more comfortable in making investments in metrology equipment, we have production equipment here small scale, but actual production in that lab equipment that we are doing our testing developing data on and if it's of interest to you or any of the other folks listening, some of that's available on the website and on LinkedIn we're putting out some technical papers and information and it's pretty interesting. So, we're happy with the market and I look at that as, that's not the business that's going to make us the $100 million company.

But that is the business that certainly we have a lot of levers to pull on, we could move quickly and we have a history of strong technology in the area.

That's very helpful. So when you said drop in, do you - did I understand that to be that, the many - that the applications, the products you have can be used without much tweaking or there was very individual company have a slightly different application that requires a slightly different turn of the technology?

Largely, we have several products now and we're developing more. There are probably say four or five products in our space in the market that are already out there that satisfy the bulk of the market.

We don't have to tweak a product to work in every system. We do however frequently for instance; we've helped some folks get to a level of surface finish or quality that they cannot achieve which works on the market.

And once we do that for say customer A, assuming it's, we qualify them and they are large enough, now we've got a new product that goes out to other customers. We also have something that is historically has been a struggle, we've achieved the ability to get a higher rate, removable rate, polishing rate lot of our applications in surface finishing that is available in the market, which with nanos is tough and speaks to the ability we've developed to understand and work with the chemistry.

So, we don't have to build the new specific solution for each customer. We can't however, though offer them a broader suite of products and we have a deep enough level of understanding particularly on the chemistry side to work with them when it makes sense to us.

And as you all know and lot of our shareholders know, if we are talking at Nanophase we're talking about a $100,000, $200,000 customer. They're leverage is pretty good with us.

That's in my mind that's worth spending, time under plant floor and some hours in the lab we get it done, because it's just - at this point its material and the margins are good.

Thank you very much. I'll step back in the queue and in case other people are asking, I just have another couple of questions.

But I can wait on them if it's more appropriate.

Okay.

Hi Bill.

Thank you, Jess. Frank, good morning, hello everybody.

How are you?

Jess, fine. Thanks for everything and we got, I wanted to talk about the battery and the solar control if you could please?

We were talking several times now about it being lower cost and having better performance. So that is still being validate in all the test that these - the end-users are coming up with?

It is, it is, there are always challenges and there are always sometimes we talk about everybody talks about critical to quality or just noticeable differences, things like that. So always those things that take a bit of time to get into the production cycle, but we are seeing in testing that we are equivalent or better than what, in the battery business we are equivalent or better than what they are using now and at a lower cost.

We're also seeing in the solar control side that our performance is exceeding what's out there, but we are still working through some things there. And as, part of it Bill is that, to contrast polishing, when we work on a polishing application we have all the equipment here we need, we have all the metrology here we need and all the knowledge and house to execute and build applications data, though we went to the APOMA conference in Arizona in the fall and we showed them data that is directly translatable to what happens under plat floor.

When you get in to the energy applications that requires a lot more equipment to develop application specific data that we're a little bit reliant on the customer to do some of that work, because we're not ready to make that kind of an investment. So the feedback has been solid, but you always have to go between, there is always a negotiating process and there is always internal dynamics that make things move a little slower.

In addition to just the whole big companies think, there isn't a, my history here is well I mean the story and I would say that I've never dealt with the company that it was say north of a billion, may be even $500 million it doesn't have a very long cycle, twists and turns in it that are logical. We had a board meeting yesterday, one of our quarterly board meetings and one of our Directors made the comment like, I can't imagine that people wouldn't, the value proposition seems so strong and ought be just, no brand.

Well it might be to the product manager or to the person directly responsible to the launch, but there are just somebody people involved, one of the reasons that we're betting on the polishing business, we're being the biggest growth driver in 2015 and the energy once coming on later in the year. And then really seeing more volume in the following year, we've - the value proposition is critical we've established it.

We've had it reaffirmed which is always, great and that's one of the best things you could do and the fact that our customers are affirming that we have a good value proposition as a great thing, I mean that's a major hurdle. But there are still plenty of other twists and turns.

So, I know what I know and I know what I can move forward with a lot of our own effort and some of the things we're just working through systems that we don't have much control over.

Okay, thanks. And the better performance, this you're speaking of the battery will last longer, is that still what you're projecting?

Well it's, potentially well either last longer or would allow the manufacturer to include less of an expensive material and as to get the same performance. It really depends on the outlook without getting into any insight baseball there is, every manufacturer as a different profile and a different series products.

Some go on performance, some go on cost, some go on a balance, some will launch something as a higher performance item and then eventually move that performance benefit into their broader product line. So really depends, but we have a material that replaces the more expensive material.

That does the same - completes the same function as that material as well or better than it does at a lower cost. And in some cases depending misses again.

It's kind of strange depending on the structure every - surprisingly although all batteries pretty much look the same expect for the label, the guts of them are different and depending on the chemistry, we can extend the life or increase the power over similar life. So there is a bunch of features that are interrelated and it really depends on where the customer wants to take it.

Okay. Well, you mentioned - you said, you mentioned earlier and said in prior calls that the solar control was behind.

But you are talking about both ramping up later this year and going more materially next year. And could you clarify what you mean by being behind?

I mean behind the –

The batteries?

It's just a slower process. That's - part of it is how long the product is designed to last.

See you got an issue where in the case of a battery although it has to be in an uncharged state in the rack of Walmart for three years, once it's in the unit at powering whether that's a flash light or clock or a camera, it's not designed to last that long. Whereas when you are talking about solar control which is typically going to go on some sort of glass that's exposed to the elements, it has to last for a period of time.

So the testing cycle is longer. Also there are fewer larger players in that market than batteries.

So whereas, we might ultimately have 100 customers in polishing, we might ultimately have four or five customers in the battery business. We would probably only have a few in the solar control area just based on the way that you are marketing still.

Okay. And this is also a lower cost component and performance for the solar control?

In this case, yes. It's a lower cost component and a higher performing component for the solar control.

There are application issues that were - we are still working through relative to - as most of you know, you can get results in a lab then you have to get them in the application we have got them in the lab and to a certain extent in the application not universally in every application and that's a question of just working through it with the customers.

Okay.

And I'm optimistic.

Thank you for telling me that. And you mentioned commercialization rollout, would this be on a limited basis just to stop with the batteries, you just kind of –

I think both would be on a limited basis this year. The issue is, it will be scale up and what we don't really know will be the first couple of slugs of material to fill a pipeline are they going to be a product line, a small product line, a new product line, difficult to determine.

The first thing we have to do is get through the purchasing cycle with these customers and agree that we are going to supply a minimum amount of material at a certain price over a period of time and talk about logistics. And then I think what I anticipate and this is just me thinking I haven't heard this from the customers.

But, I directly what I anticipate is that we will have a ramp, some volume will grow. Based on things they have sold us in terms of their initial demand.

And then after that I feel it had a lot to do with how well the material performance in the commercial package with consumers and if it continues to perform and they are able to trade on their benefit whether it's a cost benefit or a performance benefit, volume should expand. Then I would assume over a period of time, which will be a longer period of time, price will go down and volume will go up.

But, my visibility is a little bit limited at this point. Other than knowing we are working our way through the cycle and I'm expecting progress on a commercial basis this year.

Okay. Well, I like that you are not letting this be an exclusive; you are spreading it out with many firms.

And that's comforting to see.

Well, it's always a relative decision.

Yes.

It depends what exclusivity means to somebody. At this point, we are keeping our options open frankly as a company.

Okay.

We started this in a brand new space and so we wanted to be completely above board and tell you that we didn't know who is going to end up being exclusive with one customer or not. Having worked through it, now having progressed with multiple entities and how far we have gotten, we just don't see that as being possible frankly.

I mean we never say never to anything especially if it's a brand new space for us. But, we have been a material supplier, advance material supplier and additive supplier in a lot of different areas.

This is another one of those. And we know we are very good at doing - we have got a long history at it.

And it's starting to become that sort of proposition which frankly is quite comforting.

To Frank's point, what I think is off the table is an upfront exclusivity that keeps us out of market initially. What - if that were to develop over time what would probably happen is, we would be in the market and somebody would want to license it or do something in that regard and ideally we have a much better view of the potential, which is where we would rather be anyway.

Okay. One question on the amount of money you are going to borrow - are you talking $0.5 million to $1 million, somewhere in that range?

Well, so to be clear, I wanted to get ahead of the whole cash issue. We entered this year like $1.9 million, we all know, we have $1 million covenant for the exclusive supply arrangement.

It is our intension. It is our plan not to raise any permanent capital at all as we go through the year.

And obviously, we don't have a lot of access there. But that's our plan.

Now, I wouldn't be doing my job, if I weren't ready for any working capital fluctuation, so it's my intent to put something in place, hundreds of thousands of dollars something small to deal with any time that we might be just under that $1 million or afraid we might be just under that $1 million mark. But, at this point, that's our intension.

Okay. Okay.

That's good to hear. One last question - do you foresee going to any investor conferences this year?

Probably not Bill. My view on that is that I made the comment that I'm pretty conservative about sharing information.

And for the most part, until we start seeing this commercial success particularly with new business development, I just don't think there is enough to talk about. I also if we are being frank here, we've got just under 50 employees, I'm part of the business development cycle here to extent so is Frank.

I mean the entire team is involved on the customer side and working that and I would at this point prefer to spend my time on those things. I do foresee times when Frank and I used together and individually are doing a quarterly sort of investment talk somewhere if either on line or going out and making some trips.

But, at this point, I think the given the way we manage resources and not trying to invest in advance, I'm not there yet.

Okay. Thank you for everything.

Sure.

Hi, Rand.

Hi, guys. How are you?

Fine. How are you doing?

Good, good. Some exciting news - I don't want to continue to harp on this.

But I am interested in understanding a little bit about the cash flow situation. I understand that the new polishing lamp has yielded great results.

Are any capital expenditures that you guys are planning for the future, for any of the business segments, do you plan to fund those out of reserves or do you plan to fund those out of cash flow? And how do you think that will affect breakeven?

So this is Frank. I will take the first shot at that.

Our capital needs are typically few hundred thousand dollars a year that's our normal spend for capital assets. This year, I would not expect substantial deviation from that.

What we have done in the past now we continue to do is do some sort of financing arrangement on relatively large equipment say we would pay it back over three years or something like that just to smooth out the spending cycle. And I would envision that again for this year, now at some point in the future would we talk about potentially larger amounts of capital to support much, much higher business levels.

Great.

And then at that point we could do either frankly funded out of current earnings or funded out of a financing vehicle. I'm biased in favor of doing something over a period of time to match the benefit and the cost of that capital expense.

But, it is our intention to be able to do either.

Pretty answer Frank, completely agree.

Then let me ask the $100,000 question, does that mean we are looking at breakeven EBITDA at - in the coming year?

I will take that one too.

I figured you would Frank.

We don't formally give guidance and you know.

I know. I know.

But, I think it's clear from the remarks based on our cash lock-in and year and our sharing of what our plan is for obtaining cash that I'd be lying if I said - I didn't plan on being pretty good on cash flow this year because we see the new business has come up as the year goes on. So I do see, our cash flow strengthening.

I do see the one quarter positive cash flow we had last year we flirted with it the adjacent quarter. I see us doing better than that this year.

So I would be lying if I said that I did not expect our cash flow to improve and you see positive cash flow from this company.

Thank you very much gentlemen. Very, very exciting news.

Jim Liberman have another question. If he had mentioned or if he - I think he is probably good.

Okay. Well, thank you, Shannon.

In terms of the direction of the company, the quality of our pipeline and the potential and commercial value of our technology, I don't think there has ever been a better time to be a Nanophase investor. I'm glad that all of you are here.

And I'm looking forward to achieving and enjoying great returns together. Thanks again for joining us today.