Jess Jankowski - President and CEO Frank Cesario - CFO

James Liberman - Wells Fargo Advisors Rand Kay - RKA

Good day, ladies and gentlemen, and welcome to the Nanophase Second Quarter 2017 Financial Conference Call. [Operation Instructions] As a reminder, this conference call is being recorded. The words expect, anticipates, plans, forecasts 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 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 customers to cancel a purchased order or a 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 disruption in the commercial activities occasioned with -- by terrorist activity and armed conflicts, and other risks indicated in the company's filings with the Securities and Exchange Commission. Nanophase undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties. I would now like to turn the conference over to Mr. Jess Jankowski, President and CEO.

Thanks for your intro, Bryan, and good morning, everyone. To those of you on the live call, thank you, and thank you also to the greater group who prefer to listen after the fact online. Today, we'll discuss our second quarter and 6-month 2017 results, along with some business updates. I'm Jess Jankowski, and I'm joined today by our CFO, Frank Cesario. Coming off of our historic best-ever annual bottom line results in 2016, I'm happy to say that we have now achieved record 6-month numbers, including positive earnings. Our base business is expanding, one of our new personal care intermediates opportunities has been growing, and we remain focused on growth in our 2 main strategic areas: personal care and solar control. Let's have an overview of our current results first, then I'll expand some more on where we are on our strategic path and our outlook for the balance of 2017. Frank, let me hand it over to you.

Thanks, Jess. Good morning. This is Frank Cesario. Before I begin today's overview of our financial results for the second quarter of 2017, please remember that all financial results are stated in approximate terms. Revenue for the second quarter of 2017 was $3.6 million versus $3.7 million in 2016. Net profit for the quarter was $22,000 or 0 per share for the second quarter of 2017 versus net profit of $0.5 million or $0.01 per share during 2016. For the 6 months ended June 30, 2017, revenue was $7.1 million versus $5.9 million during 2016. The net profit for the first 6 months of 2017 was $0.1 million versus a loss of $0.1 million during 2016. Both round to 0 per share. Hi, it's Frank coming back at you. Sorry, everyone. We don't know what happened but we are back together. So just to finish, 2017 was the first time we ever posted a profit during consecutive quarters and for the first 6 months of the year. Investments in launching our line of fully formulated skin care products interfered with our ability to drop the revenue increase to the bottom line. We believe these investments will be significant to our company in a positive way as we move forward. We ended the second quarter 2017 with $1.1 million cash position, and nothing drawn on our working capital credit line. Again, Jess?

Thanks, again, Frank. It's definitely been a solid year so far. I'm more confident than I've ever been in our strategy, our products and, most importantly, our people. The first 6 months has been great for Nanophase. The 2 quarters evened out, with Q2 being slightly lower due to some advantageous timing in Q1. We're on track for a good year in terms of revenue growth, although our expectations are that the second half of 2017 will see lower revenue levels than we've seen in the first half. Regardless, we still expect to see solid growth year-over-year in revenue. We're currently running ahead of plan and will have better updates for you by the time we get through Q3. We are investing in the next wave of growth right now. You may have read our June press release and 8-K announcing the new relationship between Nanophase and Eminess Technologies. This was done in keeping with our strategy to streamline the business and to focus our product and business development resources on personal care and solar control. Our investments in the surface finishing markets have resulted in expanded business and good margins for Nanophase, but I don't view this as our best option for rapid growth. That's where our deal with Eminess Technologies fills the gap. By reducing the sales, marketing and technical support load, it allows Nanophase to retain product margins, while offering potential upside. Most importantly, through some organizational streamlining, it will allow us to focus more attention and development resources on personal care and solar control. Eminess is a world-class company with deep roots in surface finishing. They support a full line of products in addition to polishing slurries, including pads, conditioners and other related materials. They develop and manufacture many of their own products and distribute those of others. The collaboration with Nanophase will add new products to their line and enhance their value proposition in the marketplace as a result. In a nutshell, we're licensing dispersion technology to Eminess to allow them to bake some of our particle slurries for the optics polishing markets. They will also become the face of sales and technical support for all of our existing polishing customers. Nanophase will continue to manufacture many of the nanomaterials and slurries for this business while stepping back from related sales support and development activities. And of critical importance to our culture and me, every day, Eminess will offer customers a continuation of excellent service which is a hallmark of Nanophase. Additionally, Eminess will leverage their existing relationships in other polishing markets as well as their much larger sales and support teams across the board. Ultimately, we believe that this should lead to new opportunities to expand the market footprint of both companies. Moving on, our results, thus far, in 2017 have been driven by consistent demand for zinc oxide in our personal care ingredients markets and growth related to our coatings business via European customers, who appear to be enjoying a stronger local economy. As our financial results continue to show, our attention to balancing the management of cash and expenses against the investment in the development of our suite of fully formulated skincare or beauty science products is bearing fruit. We're currently focusing more of our work on formulating and developing clinical data to support our marketing efforts. We have objective technical evidence, mostly via in-vitro and ex-vivo testing, that our products offer benefits that are high in demand by skincare cosmetic consumers. These benefits include good broad band UV absorption, a minerals-based solution and reduction of free radicals formed through photo instability, among other benefits. Now these are technical advantages that ingredients buyers and formulators find interesting, but they don't build a consumer story. To put these advantages in sexier terms, we now need to design and complete in-vivo clinical studies on consumer panels, showing advantages like wrinkle masking, environmental protection and UV protection. These all add up to be able -- to us being able to show antiaging benefits, which are the biggest driver on the consumer demand side. By rounding out our marketing support package with a consumer claims set, we'll offer our white label product customers a much easier-to-communicate consumer value proposition. We often refer to our white label customers as brands. They will be marketing these products with their names on them using their distribution channels enabled by our Solésence Technology, formulating expertise and regulatory and production backbone. Between the product benefits we add, many falling into the growing category referred to as beauty science and the growing demand for minerals-based UV absorbers in cosmetics, we're well-aligned to take advantage of market trends that are becoming more prevalent. Unlike almost all of our historic products, skincare products, particularly white label products, cannot be sold on a technical basis. Many of our past ingredients customers have been more engineering or science-focused, whereas our typical white label customers are focused on consumer claims with an end-use product marketing orientation. Developing a consumer claims set for our products is something that we started doing last year in concert with the establishment of our Solésence subsidiary. Our goal has been to have a few white label products scaling up by the end of this year for launches in 2018. If we reach our goal, the volume for 2017 will be relatively small, with more significant volumes expected for 2018. With respect to our solar control business, we have customers engaged in testing with some in the process of determining whether they will begin scale up this year or not. Given the natures of the -- nature of the products in this area, there is less to report on today. To a degree, this is a function of a small universe of potential customers coupled with longer-duration testing cycles. We should know more later in the year as to whether or not we see a 6-figure revenue in this area for 2017. Our expectation remains that solar control should be a significant revenue driver over the next several years. In terms of our revenue and earnings expectations for the business more broadly, we expected 2016 revenue bottom line to exceed 2015's and they did. We now have similar expectations for 2017 while we are consciously limiting our bottom line growth only in the near term by continuing to invest in developing our 2 key business areas as we go. Currently, between the 2, the bulk of this investment is going into developing our fully formulated product line for personal care. Regarding the second half of any of our calendar years, we may always have to contend with the seasonality factor in our business. While I expect the second half of 2017's results to be less than the first half, I do expect them to be better than 2016's second half. The extent to which we will see year-over-year growth from 2016 to 2017 will become clearer as we get well into Q3 then Q4, but we are ahead of plan. In order to build the most -- in order to most effectively build the enterprise value of Nanophase, and I'm going to come back to it again and again, revenue growth, cash generation and new business growth remain our top priorities. Although the largest group 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. Brian, would you please begin the Q&A session?

[Operation Instructions] And our first question comes from the line of James Liberman from Wells Fargo Advisors.

It's great to see the progress you're making. I wonder from a marketing standpoint, do you have to come up against a lot of the counteradvertising, which is to say that a lot of sunscreen and sun -- and moisturizing products, say, not non-nano or not nano-based zinc oxide and titanium oxide because of problems that have shown up from other lesser-quality nano products? Do you try to overcome -- how do you try to overcome that resistance?

Well, several ways. In our -- both in our ingredients business and in our white label products business, we have developed something that is a non-nano zinc oxide. It's still small and are -- but it's definitely not nano. And our ability to disperse it and formulate with it gives us roughly the same degree of clarity and workability as we have with those smaller particles. TiO2 is a little bit of a different story. At this point, there aren't -- I don't know if there any, but there's certainly aren't many non-nano materials. That concern has been around for a number of years. Really, we started -- we developed a non-nano material that's got to be 4 years ago in response to what the industry was expecting to be a pretty big marketing push back, and we really haven't seen it. Although on the marketing side relative to the down-line purchasers of our materials, everybody would prefer to not have to deal with it one way or another. And I look at it as a necessary -- it's more of a marketing risk than it certainly is a safety risk of any kind. But as the market gets educated, we're still seeing increasing demand for both nano and non-nano materials. And there still is plenty of proof that the nano -- the zinc nano particles are certainly as safe or safer or certainly less migratory into your system than the organic chemicals typically used in sunscreens.

And I know that over the years, you had mentioned that not all nanomaterials are alike and that you're able to somehow [indiscernible] use particles so that they don't get absorbed by the skin whereas other companies don't have that ability to control the size of the molecules, is that correct?

Well, we pride ourselves on being able to create our materials with a very tight-sized distribution. So what happens frequently is that other producers will make material that may have an average size similar to what ours is. But on the tails, on either end, they have less control over it. So they -- the real risk is if materials get very, very, very small, like 10 nanometers, 8 nanometers and lower, you've got issues. And that really were not detectable in that range.

And are you able to comment any further on the solar energy component of your growth strategy?

Well, it's not really solar energy. I mean, it's an energy saving -- it's absorption of infrared and other things. What -- I mean, what it amounts to, at the end of the day, we are very strong in engineering particles and getting them to do things that many can't and getting them into films. And still producing clarity while having the efficacy is something that Nanophase is good at, whether that's infrared absorption, UV absorption. There are other features as well I'd rather not discuss, but getting them in is something that we have a strength toward. Now that being said, as I mentioned, the universe of customers is smaller. We've got people in process working these. These things generally are [longer-lived] because you've got something that might be on -- either on or more likely inside in the layers of a windshield, say, on a car or potentially on the outside or inside the layers of a film that have to last a number of years. Now the testing doesn't take as many years as the warranty, but it takes a lot longer than personal care products testing. The other piece of it is, with the number of customers in one versus the other, meaning, personal care, specifically, white label versus the solar control business, we are, in fact, much more focused just because we have limited resources on handling a higher flow as we get the Solésence materials launched and out into the market on a commercial basis.

And how do you -- how does one integrate that? How do you envision integrating this product? Is this done on a separate aftermarket? The glass is already there and there's an application process. Or are you integrating it in the actual manufacturing with the glass manufacturers?

Typically, it would be more so for film manufacturers, incorporated -- either incorporated in the film itself or incorporated in the coating on the film. And similar to, as you know, windshield glass, high-rise safety glass, they're laminates. Some of them have 16 different layers. Films are made similarly. So the benefits there in terms of integration would be either allowing fewer layers of coating or more effective, more robust coatings or materials to be incorporated actually into the films. So the incorporation, I would picture, at this point, most of the market that we've been addressing is aftermarket, but there are other opportunities that are certainly down the road for us. And it's just a question of limited resources focusing on the places we have the greatest leverage and also waiting for some customer-driven commercial results that will help -- you know how it is. Every customer you get makes the next one easier to get, and that's something we're working toward, Jim.

I have one more question if it's all right. Back to the moisturizer area. Do you see this, because you're going into the moisturizer business, you probably have already mentioned this and I missed it. But is it being a much larger business than the traditional sunscreen and it's like a year-round business? So someone putting on, say, moisturizer in the morning would have a natural sort of coating and protection and so it's sold very differently than the sunscreen business?

That's an excellent question, and I always weigh whether how much I want to expound on these things during my prepared remarks just because some people know it, some people don't. Essentially, if you look at the ingredients business, a lot of that material is going into -- they used to call it beachwear, now they call it activewear sunscreens for people doing things outside. Some of it also has always gone in -- a good share of it into daily wear products as they are. In terms of cyclicality -- you asked 2 questions. In terms of volume, the volume on the cosmetics beauty science side in terms of dollar volume to Nanophase is higher. The accessible market is bigger because the items are more highly priced. And the idea and moving into the white label business is that we might sell a ton of material in an ingredients business and sell 5% of that for the same amount of revenue and margin potentially or maybe some relationship where it's much different. I can't -- I don't have enough detail to get into it and I don't want to get into it. But it's -- there's a lot more accessible revenue and cash margin for Nanophase in that business. In terms of cyclicality, as long as we are working in this hemisphere, for the most part, cosmetics companies, whether they are -- when you look at the -- you talked about moisturizers. Moisturizers, facial creams, neck creams, there's all these different products. Typical launch times for all that really are somewhere in the first quarter. That's just how that business works. It was funny. I mean, similarly, we've been in other businesses, including some of the architectural coatings businesses that have a bigger ramp in the first half of the year than the second. So I don't think the push into more cosmetic moisturizing-type facial care products is going to change the cyclicality all that much. There will be later -- smaller launches later in the year than you would see with the straight out activewear sunscreen, but I don't think the cyclicality is going to change a lot. The goal is that the second halfs and the first halfs keep growing and growing. And while we have cyclicality, we'll be able to balance it more easily.

Because you've significantly broadened your market potential, so even though it will be cyclical, it'll be at a much broader and bigger market?

Right. And that eventually as we grow and as we can get our hands around it, we will be looking. I mean, currently, our largest customer is certainly selling materials in Asia and other side of the world and all that, and that's a great market. It's just not -- us reaching it directly is tougher. And North America still is the biggest market that we're in.

Yes, the whole idea, Jim, is to build up our brand in this area and to get in the higher end on the chain. And we're starting to see that happen.

[Operation Instructions] Our next question comes from the line of Rand Kay from RKA.

Well, I like this information about strategic partner with Eminess Technologies. So I think that's a good utilization of resources and capital on your part, and I like the way that direction is going. What my question revolves on is a little bit about understanding markets and what you guys need to do to penetrate markets. My original -- well, not my original, but my question -- my first question has to do with, you guys mentioned that you have a lot of scientific data, which backs up your new generic or your new Solésence product. But now, as of last year, there needs to be a story crafted and formulated around the consumer side of it. Is this something that you guys were aware that was going to have to come? Or did this kind of come up in the course of product release as you were going and do volumes? I don’t know if I made that clear, I apologize.

Let me take that in 2 pieces. We were well aware that it was coming. It's a better way -- I mean, essentially, as a company, historically, Nanophase has been very technically focused. It's the nature of an advanced materials producer. And then using the experience we've had in the various markets and particularly the heavy experience we've had in personal care, we have in-house, Kevin has a lot of experience in that market. I have some experience in that market. We've brought in people -- we realized that if you're going to sell something that is a product to a consumer, you really have to put it -- you have to couch it in the terms. And the same is true for a lot of our customers. The -- I think the bent of a company like Nanophase, 10 years ago, is to sell everything on a technical basis because that's how we grew up. We came out of Oregon, we make the smallest best stuff ever and you've got all these reasons why it's great. And the reality is, what you have to do is explain why the customers will like it to the people you're selling it to. And that's true whether it's a consumer product or a technical sale. It's just easier to get your head around a consumer product because there are fewer steps the material has to go through before we get there. So we knew about that. We -- I mean, there's a cultural change involved that we've been working over the last few years within the company. In addition, I've talked about becoming more entrepreneurial. It's also becoming consistently more and more and more market-focused and customer-focused, and in the case of white label products, consumer-focused. Now you mentioned the term generic. I'd like to -- just for the benefit of everybody that's going to listen to the call, so when we refer to white label products, we are talking about products that incorporate -- we get something called the marketing brief from one of the brands and they have features that they want in their products. We include those. We enable that with our technology. We potentially add benefits that are unavailable, particularly in a lot of minerals-based sunscreens with our technology. So when you think of the term white label, what it really means is a differentiated product, not a generic product, something in the marketplace that either doesn't exist or exists in a certain strata. And we're selling that to a brand who's putting their label on it and running it, marketing it through their channels. So if you were to walk into Ulta or any of those kinds of stores that primarily sell cosmetic and beauty items, you wouldn't know it, but there would be a lot of products on all those shelves that may say brand A that are actually made by a company like Nanophase that's bringing the technology to that brand.

Right. Actually, I apologize. Generic was not the right word. I understand and I appreciate the explanation. I did mean white label. There seem -- I'm then curious about when you need to develop to use new marketing segments, okay, or at least offshoots of various stories like -- to the commercial side as opposed to the technical side, does that usually result because there's pushback on certain things technically about the product, for example? Are the [indiscernible] concerned about, is nano a problem? The other questioner came up with, is nano a problem and we need to figure out a commercial discussion that we can engage in to sell that problem? Or is it more that there just needs to be a line of commercial verbiage that has to be put out into the marketplace to explain the story?

No, nano is not a problem in the -- certainly in the technical sense. What we do is, we are managing ourselves based on what the market is demanding. So we go to the shows, we go to the customers, we go to the various symposia, we go to webinars, we're in touch with brands all the time. And we're looking at what they are interested in knowing and what benefits they're looking for to market their products. So it's not a question of pushback as much as it's a question of we are saying okay, we're trying to sell an item and what is required to effectively sell that item. And I think that as I mentioned earlier, in terms of changing company culture, one of those things is kind of enforcing or in viewing the organization with that view saying, I don't care if the XYZ factor under a microscope is perfect. I care that the result of that is that, in the case of the Solésence materials, we could talk about anti-aging benefits. Yes, to get there, you have to reduce free radicals and do a whole bunch of other things. But the average consumer and the average buyer isn't as concerned about the technical piece as they are about the market benefits. So we're just -- we're basically just doing it right.

Rand, this is -- I think this is a broader morphing of business in general. And by that, I mean, historically, we defined ourselves by what we do. And over time, we've developed capabilities that are much broader, all based on the solution to the customer. And that's really where we are today and how we present and what we present. So to address the first question there, the first portion that you brought up, when we walk into a potential customer's office, we have material they can touch and we have a story, and both of those have to resonate. And if they do, then the customer will tell us their specificity, what elements are important to them as part of their identity and how they serve their customers and we adapt to that. And that's how we really flex into the solutions-based selling which you're seeing the results start to flow through.

You made the comment -- a couple of people made the comment earlier. Just to be clear, our white label products, all of them at this point, are non-nano. Again, there are no...

Oh, I did not know that. That's interesting.

All of them are non-nano. However, there is no biological path for nanos as we manufacture them and the kind we manufacture to get into your system. And so there is no data that there's any problem. I mean, there's a path if you eat them or if you have a cut in your mouth. But there is no data anywhere that there are any problems. This is more of a fear. Prince Charles came out years ago and then the grey goo with Michael Crichton and all that. And really there are materials that are dangerous when they're large. And when they're dangerous when they're large, they frequently become more dangerous when they're small, things like cadmium or nickel. There are very safe materials such as the ones we manufacture that there haven't been any -- there's no data that shows any issues that called us. And the one study I can even think of that was ever used was jamming enough TiO2 into a rat's lungs so that the thing suffocated, which is really irrelevant relative to the discussion of nano or non-nano.

Yes. At the end of the day, Rand, we offer the market what the market wants and we offer good materials across the board.

Okay. Then shifting a little bit to the second side of the equation on the solar business. How should we think about what the timeline is on the solar business to adoption? There's times where a couple of years ago, we thought, it was just around the corner. And now today, we are in a stall. I can't -- we can't seem to get even updates as to what the status of the solar business is. And I'm just wondering what kinds of things are you facing that are either hindering adoption or delaying adoption? Or is adoption going pretty much as expected? I'm just wondering if you could provide a little more color in that area.

Well, in some cases, I mean, there are a series of different things that create issues that make this less quick to market than the Solésence materials, the white label materials. Now to say that you've got internal and external. Internally, we are keenly focused on getting the white label materials to market, the Solésence products developed. It takes a lot of resources for a small company and we're managing expenses. So to the extent that the solar control market changes and has variables, which it does, we are not able to react as quickly as we are on the personal care market. So you've got the piece of it where we've got to be able to continue to iterate in any market we're in, it's the nature of the business. And right now, we're really focused heavily on personal care. That's one piece. There's a lot of competition in the solar control market and the film markets. There's a lot of companies out there fighting for it. There are fewer customers. So from our end, we've been in touch with a good swathe of the market running from very small to very large customers. Some of them are testing materials working through. We certainly haven't gone everywhere. I mean, there's a fair amount of business in India and Korea and a lot of other places that present opportunities that are solid. It's just, in the near term, we have other things to focus on. And really, it comes down to resources. I -- the last thing I want to do, I've been preaching focus for years now and we are focused on these 2 areas. And as the opportunities heat up in the one area and become more immediate, I don't want to diffuse that energy until we get that done. So there's multiple pieces for it. Relative to timeline, it's still a relatively quick adoption cycle once it gets put in. But it's also a quick replacement cycle. And I was is trying to -- I was searching for that earlier. When we talk about continual improvement and continual product development, a couple of years ago, we had some volume in window films that went away and the customer didn't go away and the efficacy of our materials didn't go away. Something else came on that was a little bit different, a little bit better, whatever it was, cheaper, and you have to be able to continually iterate. I envision a time in the near future where we will be able to compete in that market more aggressively. That said, we are in that market right now. We have multiple customers working with our materials. We are looking at ways we could change that, ways that we could update that market, ways that we could do better things. We have things that might come on this year or next that we have less control over just because of the nature of the business, but they are moving forward. So I don't think the timeline has changed as much as our focus is heavier on one than the other, and that necessarily slows it down. In addition, the market experience within this company for personal care broadly is very high. The way we understand the market, the customers, the suppliers, all the different features is very high. In the other markets, we have good experience, but we've learned it in the markets which has been historically how Nanophase functions, which, in one of the ways, I am most confident about where we're at today and about our strategy as we've got a market that's been great for us. We've got a fantastic customer in BASF for all these years, and that business continues to grow because the market demands it. We've got a lot of experience. So that's a -- to me, that's a no-brainer to expand, especially with the patent, the Solésence patent -- patents, plural, are going to continue to grow as a suite of products. We've got that and we're managing the solar control on top of that.

Well, I greatly appreciate the explanation. And I think the reason why I voiced a bit of concern is, we seem to have developed a very, very good product for the battery business. But at the end of the day, it turns out that even though we did our part, the markets -- yes, you did it, but it doesn't make sense to us. What my concern is, is the obsolescence factor of the product in the potential solar business and how hamstrung are we to lack of market knowledge, lack of expertise or lack of funds to just develop and execute? And I'm still trying to get a handle on, is the solar business just waiting to explode? Or is it a potential business but it really depends on how the market goes, whether we'll participate? So I think you have added a bit of what the variables are, so I can -- we -- the investor can make a more intelligent decision about, okay, what's the likelihood of solar, okay? And...

Here's where I would wrap it up on solar versus battery, and I appreciate you're bringing it up. The materials that we invented that would provide a cost savings for battery manufacturers and some value for performance, it was relatively small, but we saw high cost materials that we could replace. And the math said, what we would say would be sufficient to be worth the change. That was shortly before commodities decreased in price broadly, and that math got more difficult. So 1-day batteries may come back, and I think that's a commodity play more than anything else. We're going to find that out. Here, on solar, as Jess was saying, there are -- it's an established business. There are established competitors. And our customers say, wow, you can do this? The next thing we want to do is, x, can you do that? And so we're finding those give and takes and we have to be very careful with which ones that we pursue and how deeply. So over here, we think this is going to be a big part of our company. We think it's going to be a big deal. It is a different animal, and it has a lot of feast or famine built into it because there are relatively few entities that are driving this market.

But it sounds like you guys had a more or a better handle on what the variables are. And you're -- it sounds like you're making very educated decisions about the ones that you intend to go into.

Yes, we -- thank you. We are. We are. And you mentioned resource shortage. I think a conversation we have internally all the time isn't about -- I don't believe it's about shortage. I believe it's about prioritization. And at the end of the day, we're trying to balance the 2 things with cash flow positive, with everybody's equity value, enterprise value, do we spend more money on IP, do we do this, do we do that? And at the end of the day, no company, no matter how successful you are, can invest heavily in every single thing. And I think what we're doing is prudently understanding the risks of each, and then saying, okay, where's my highest percentage? Which is really, as we spun out or we collaborated with Eminess, that's a good business. Those guys have a nice business. We've known them for a long time. That's the kind of thing that they're going to be able to sell better than we are because we've de-prioritized it relative to limited resources and what we can do. I think we could grow that business. It wouldn't grow as quickly as the other ones, and I'm living in a very resource-limited world. And prioritization is key, which is -- we must have this conversation internally almost every day. A new piece of equipment versus a new hire versus should we ship more samples, should we do this. I mean, it's consistently -- I think that -- I think it's incumbent on us to always chase the nickels down the hallway. But being in a situation, Rand, has us being very creative and prioritizing as much as we can, including as we build these test data -- the consumer test data, we're not going to build every little bit of it that we could. We're going to build enough to go out and market the materials and then we'll see where that goes, but I am optimistic it's going to go well. And I have, on a hands-on basis and face-to-face, seen plenty of both potential customers and potential people looking at samples, comparing them. And internally, we do it all the time, these 2 things that are on the market. And our materials really are nice, and that's also a difference. You can't -- it's difficult to make your own whatever, make your own film, make your own waterproof paint. Make whatever it is internally and compare it to what's in the market, it's -- in this case, we're actually coming up with the end product and so we're doing a lot of that work, which has been very, very useful.

Very good. Last question, Jim. When you look into the tea leaves in the future and the strategic plan and marketing costs, et cetera, et cetera, products, what do you -- what would you consider your number one flagship opportunity for moving the stock into the dollar range and over? What do you think is going to be the -- what do you think The Street is most interested in seeing or hearing from you guys?

I think the Solésence products will definitely be that. And the beauty of that is, the -- as we have some successes there and we get commercialized products, everybody will be able to touch, see and feel it. And I think one of the issues with Nanophase broadly has been, we talk about products and then people always ask, well, where can I buy some? Well, you can't. Now in the case of the Solésence products -- I mean, you can get them on Solésence's website and we are not marketing to consumers, we're marketing to brands who are going to market to consumers. But we will, in all likelihood, be able to point at products that are out there on the street at Ulta or wherever that you could buy or your sisters could buy or whomever. And I think that will make a difference for the market. But I also think ultimately, positive cash flow and growth are what everybody wants to see and we're in a really nice spot. I mean, the minerals market is growing. The inorganic that we sell is popular. All-natural, continues to grow. And really, although there's no such thing as all-natural, we are more natural and certainly more efficacious in that regard than a lot of materials that are out there.

Rand, we expect that you're going to be able to go into a store and see the word Solésence on a package and be able to buy that package. And I mean, that's really the difference. We're actually building our own brand identity, and we think that's going to be a big deal.

Well, from a strictly selfish standpoint, that's exactly the kinds of things I was hoping to hear and did. So really appreciate it, guys. Thanks a lot.

You're welcome.

Thank you.

And I am currently showing no more further questions. I would now like to turn the call back to Mr. Jess Jankowski for any further remarks.

Thank you, Bryan. Thank you also to all of you who have taken the time to listen live and on the web. We appreciate your interest and support. So far so good for 2017, and we're just getting started. We're looking forward to our next opportunity to discuss this business with you, and I hope that everybody has a good rest of your day. Thank you very much.

Ladies and gentlemen, thank you for participating in this conference. This concludes today's program, and you may all disconnect. Everyone, have a great day.