Solesence, Inc. Common Stock (SLSN) Q3 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen and welcome to the Nanophase Third Quarter 2013 Financial Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) The words expect, anticipate, 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 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 disruption in commercial activities accessioned by terrorist activities and armed conflict 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. And I would now like to introduce your host for today’s conference, Mr. Jess Jankowski. Sir, please may begin.

Thank you. Good morning everybody. We are glad you are able to join us for our third quarter 2013 financial conference call. Frank Cesario, our CFO has joined me again today. During this call, we will be talking a bit about our newer initiatives as well as updating you on our existing business. At a high level, quarterly revenue this year has ranged from $2.2 million to $3 million, an improvement over quarterly revenue last year, which range from $2.1 million to $2.8 million. Our net result has likewise improved as it has consistently over the past few years. After Frank provides a short overview of our financial results, I will go into a little more detail about our position as we keep rolling in 2013. Frank?

Thanks Jess. Good morning. This is Frank Cesario. Before I begin today’s overview of our financial results for the third quarter and first nine months of 2013, please remember that all financial results are stated in approximate terms. Revenue for the third quarter was $2.2 million versus revenue of $2.1 million for the comparable 2012 quarter. For the first nine months, revenue was $7.8 million this year, up from $7.3 million last year. Gross margins were 24% for the quarter and 29% for the first nine months versus 25% and 27% for the comparable quarter and nine months of 2012. The net loss for the quarter was $0.6 million or $0.02 per share and $1.6 million or $0.06 per share for the nine months ended September 30, 2013 compared to net losses of $0.7 million and $1.8 million or $0.02 per share and $0.08 per share respectively in the comparable 2012 periods. We ended the quarter with $3.3 million in cash position. Our company remains debt free. Jess?

Thanks Frank. While I am happy we have seen some growth, particularly in our personal care business, everyone who has been listening knows that our goals don’t stop at 10% growth in quarterly revenue. The overall development of the business, however, does represented other steps towards our goals. That said our full year 2013 numbers will probably be in the $10 million range plus or minus at 2%. We, at Nanophase, fully understand there are real challenges ahead of us and our goal and vision is to firmly set on accruing high value to our shareholders and stakeholders. Those are my expectations which are shared throughout our organization. While we have yet to exhibit significant growth, we continue to set ourselves up to succeed in the longer tem. That’s why I am here and that’s why the team is here. At this point, we have seen our largest customer growing as well as the expected elimination of some legacy business we have talked about in the past. We have had mixed results from our other businesses, which are largely stable. All of this forms the background from which to grow into our new initiatives. We expect to be able to establish a stronger new business trajectory going into next year with new business coming on in addition to growth in the business that we have developed so far. We continue to focus on a few project areas, any of which will drive significant growth if we succeed. Our personal care business, which is composed largely of our active ingredients for inorganic sunscreens, continues to perform well. The sunscreen industry as a whole was down in 2013, but our business has increased. We believe that our growth is a reflection of consumer preference for inorganic sunscreens. There will be something zinc oxide and titanium dioxide, we are a Zinc Oxide producer, which are also referred to as physical sun blockers in the industry versus traditional organic sunscreens like (indiscernible). Kevin and I returned yesterday from the top anti-aging conference in the U.S. And it was clear that in addition to many health-conscious consumers dermatologists prefer zinc oxide a physical sun blocker to the organics that are in the market. The variability in downstream demand makes it hard for us to understand the impact of this change in consumer preference on next year’s volume. But the things broadly look good for this business going forward. Again our personal care sales may still fluctuate particularly during any short period of time, but overall we see a friendly market for our solutions. We are also working to build upon on our existing surface finishing or polishing businesses, but I don’t have much to add to today’s discussion in that regard. We have engaged this market space in ways we never have before and see many opportunities, a number of which are represented by companies that are in process of evaluating our product suite in this area. We should be able to share more latter in Q1 or in Q2. In terms of some of the new business development that we ultimately expect to contribute significant growth to Nanophase, we continue to make progress in our two energy applications. Recall that one of these was energy storage applications specifically in batteries and the other is an energy control application. We share both our battery, our energy storage and energy control solutions with targeted industry consumers or customers over the summer. We got our initial feedback and believe we offer value to both of these industries. Regarding energy storage, we are seeing continued positive test results as well expanded contact with potential customers. As we mentioned last time, we believe we will able to provide a more economical and more efficient materials than what is currently broadly used commercially today in some place of customer batteries. We aren’t relying on a new industry being developed. We aren’t forcing existing players to change their processes, but expect to provide them with both an immediate replacement solution and a mechanism to make changes to reduce future costs in related areas based on their own product management plans. We believe this to be a powerful value proposition. We think solutions should deliver cost savings and performance gains today with a roadmap towards additional savings down the line. We expect this application to continue to develop over the next 6 to 12 months with some revenue potential for 2014, with a more significant commercial ramp beginning in 2015. As much as we like them to embrace a new solution immediately there are additional steps that we still need to take and believe we will be successful in doing so. The energy control application is further away from commercialization, but also represents a solution for an existing markets that we believe provide significant performance benefits versus our competition at an attractive price point. The commercial rollout here will look different than with the battery application, but again we have targeted an existing market in a more straight forward replacement of existing materials. While further away the ultimate revenue potential may be as high or higher than anything in our current business development portfolio, so we are running full speed after this application as well. In both the energy storage and energy control, we may have some additional market feedback yet this year with more in 2014. But one way or another we expect to get solid commercial feedback quickly and are prepared to transfer both solutions to revenue as soon as possible. We have been discussing a difference in our approach in terms of how we are developing new business and I want to reiterate that through a tighter focus on fewer and more critical opportunities, we will maximize both our leverage and our ROI in this work. The growth I expect in our new application areas will be an addition to expecting growth in our existing business included – including in our traditional personal care applications and potentially in several polishing applications. We are looking both to lock in incremental or better improvement in our existing markets, while targeting more dramatic results in some newer markets. We believe that this balanced approach which encourages speed to market and a better hit rate is the right one for our company. With that I will finish up, although most of our investors listen to the webcast or review the transcript after the live call, we like to invite those participating in today’s call to ask any questions you may have or to share your comments. Nova, would you please begin the Q&A session.

(Operator Instructions) And our first question comes from the line of (Rand Kay) from RKA. Your line is open.

Good morning gentleman.

Hey, Rand.

The new technology sound extremely promising. My question is, is that how much will they impact the bottom line from your trajectory on your breakeven point? And two, are there any customer participation – financial participation in any of these new markets skinning again kind of thing that might control costs? Thank you.

Could you elaborate on a second in terms of controlling cost?

Well, are any of the potential customers that you are exploring right now helping with the development of the costs or is this something where you basically said look guys, if we can show you this and we can perform we abide from us, but you are not going to have to put we are not asking for any development costs?

It’s three, you asked two questions and I would have three comments. The first comment at an overarching level, we are not expecting significant revenue in these applications in 2014. So it has to do with the fact that we are working in an area – in both areas that are two to three years to market. We may get some revenue for sampling, for testing. So in that regard, I don’t expect 2014, I expect commercial progress. It maybe potentially some sort of an announcement of the liaison and that kind of thing next year, but I don’t expect revenue to speak off than at significant level. Relative to the breakeven question, I would say that both of these applications are relatively high profit margin applications that should be better relative to our typical businesses. I mean, we are looking at businesses specifically that allow for higher margins, that specifically allow for leveraging technologies better and going after things that other companies just can’t do. So in that regard, that’s true. Relative to a specific relationship and a cost sharing with any of these companies that is neither in the plan nor is it excluded from the plan in the sense that we are open relative to dealing with people. Typically, if that were going to happen, it would involve exclusivity and a bunch of other things and we are just not close enough down that path. We are trying to cap the wider net initially although what it makes about these markets is they are relatively concentrated. So we don’t have to talk to 100 customers to cover the whole market. We have to talk to half a dozen customers to cover the bulk of the market. And as you know or maybe or many of our shareholders know, we try to remain North American centric at least initially in these markets due to the fact that our reach is limited due to our size. So that isn’t something that we rollout. It’s certainly not something we are approaching the markets with. What we are doing is and this is something that we have always done it to a certain extent, but we are doing it to a much greater extent now is we are developing more data internally, more market knowledge internally and going into talk to these folks with a lot more information in the front end and then trying to get as much iterative work done as we can. So that, it maybe that we get to that point, but we have to have a strong enough value proposition that also makes us, links us to a lot of the other people they are talking to. In other words, I don’t want to go in and hand somebody XYZ battery company, a research project. I want to look just like there are other suppliers but with a much better material that they can’t get anywhere else. So that takes some time to develop and that’s my comment about there are further things we need to complete. We have done quite a bit of testing. We are sharing results. We are in the process of reaching out to these customers, but we also have more to do in that regard. Frank wants to make a comment as well.

So Rand, I also got from your questions that you are focused on our cost in developing these markets and then potential impact in our bottom line and breakeven. So just as a reference point, we have been going hard after both of these markets throughout 2013 as we saw from our nine-month financials. It’s very consistent with our rate, because we have focused our company around our high potential opportunities. So my answer to you is it will not be negatively impactful to our cash flow or financial results. You are seeing that results already, because we have been going very hard after this space.

Hey, thank you gentlemen.

Welcome.

Thank you. Our next question comes from the line of James Liberman of Wells Fargo Advisors. Your line is open.

Thank you.

Hi, Jim.

Hi Jim.

Hey good to hear your progress. I wonder and I understand that there are changes in the old polishing business, but are you seeing any progress in repositioning that technology either in the polishing area or the coatings area, some of your legacy businesses that have other opportunities that you are exploring?

Sure. It’s a great question. Polishing is a multi-faceted area and the part of the business that changed in radical way for us was the reduction of the Roman houses, that’s over a period of time. And year-over-year, while our revenues appear relatively flat, we have lost $1 million with the business practically in the Roman house area, because that is CMP, chemical mechanical planarization or polishing for semiconductor wafers. The technology is there. And some of the technologies we have developed also apply bunch of other polishing areas, including optic. Now, we have been in the optics business around the trends for a number of years, actually probably close to 10 years now. And it just wasn’t an area of focus we were limited from looking at it due to the dull relationship. We also didn’t have the internal knowledge to go after it. I think there are some things that are directly relatable to the work we have done historically to new areas in polishing, both in optics and other areas going forward. Further on your question, some of the work that we have done relative to the architectural coatings which has been disappointing relative to the trajectory we have had there, has actually been helpful in some of those other areas, because if you really think about what Nanophase does. We are a company that’s all about physics. We are all about the how the particle reacts to the chemicals, that’s put in and how the particles react to the things that they are applied toward. In the case of polishing, how does it change the surface? In the case of coating, how does it protect the surface, etcetera? And we are finding more and more that there is not that much difference even though the markets are amazingly different, there is not that much difference in the technology and the know-how we built specifically around dispersion and how those particles react in different media whether we are talking about polishing or abrasion resistant coatings, a lot of other areas and dispersions is key. It may be even be at a point, where we are starting to see interest in those kinds of things in personal care. I mean, I think broadly, we are a company that historically has been when you are a platform technology as it’s a tough place to be, because there are too many things to look at. And what we need to do or we continue to do and I am pushing hard is to focus more narrowly on more profitable businesses, ideally businesses that have a higher degree of concentration, so there are fewer people to reach in the marketplace that you could develop these relationships and gain understanding and I think we are. In some of those businesses that we haven’t focused on and we are starting to focus on more in polishing space, for instance, we have been outperforming existing large companies for years at a small level and we just haven’t been – if you only look at so many things at one time. I think right now, going forward, the focus on the energy applications is our new business for the future development. In addition, we always have some irons in the fire for business beyond that, but that looking forward, that was going to be some growth 2015 maybe down to 2014. Then you look at the polishing business, there are some thorough opportunities there. We maybe able to put some more points on the board next year certainly going forward and then the existing business, personal care business is strong. Personal care business has been growing. I am always tempering that with the fact that we don’t understand all the downstream situations. As things change quickly, this year we have a bad year for weather for sunscreens, yet ours did well as it appears to the consumers like the concept of a physical blocker. You don’t always know where that’s going to go? In the rest of coatings business, it’s perking along. We have got existing customers. We are seeing some growth there. It’s not fabulous growth that we realized that we have fewer levers to pull there to build that business, which is why we are continuing to support it in terms of – sure, we’ll sell it and we answer questions that we have, but relative to development and where we get the most paying for our buck, it’s on those more forward-looking areas and making a long answer even longer. Your point about are you leveraging your technologies in other areas, we certainly are. I mean we wouldn’t be here in these opportunities without the work we have done over the past years. Ideally, it’s always based on high faith to wish you shortcut something by 50%. I don’t know that you could. I do know that one of the things I find most exciting about the business going forward is the deeper we get into these markets, where we provide a stronger value proposition and we rely more specifically in our particle and how it reacts in various chemistries, the stronger our business proposition becomes, because what we haven’t seen. We have seen over the years that we can’t always grow as quickly as we want. In some of the markets we don’t grow the way we would like to. What we haven’t seen our particles in the converse coming out supplanting the things we can do with ours. We need to buy things that we really have a big advantage in zinc oxide and personal care is one of those. I believe we have some particles in the energy space that may prove to be those, but that’s where our expertise lies and we are still different in that regard. Our materials still looks different and performs differently than others and it’s a matter of finding the right markets to exploit.

Thank you very much for your answer. And I am excited to know that you are still out there pushing the applications and the particular benefits of your technology? Thank you.

We remain enthusiastic. I think the most difficult thing is that we are in a market – we are in a place with a really long time to market. So the fastest applications we get if we meet a customer and start working with them today, it might be 12 months to 18 months before we see revenue. So part of what we are seeing now is something is hitting that we worked nine years ago, part of why I am saying 2015 is the revenue for some of these energy applications is. We get it hard in 2013. We are on track. Things are going in this direction, but it gets out. My job here in addition to dealing with our investors is making sure that everybody remains as enthusiastic as I am because we really – this is one of those tough things to do. We are keeping motivated and moving on path that’s take a long time. Yet looking at what we have, we are in a solid position. So with that I would ask if there are any more questions. Nova?

(Operator Instructions) We have a follow up question from the line of (Rand Kay) of RKA. Your line is open.

Gentlemen, thank you. Jess, you brought up something that I think is kind of the (indiscernible) my concern from the last question. You mentioned that the architecture market was a bit of disappointment. I am wondering what lessons garnered from that product launch, would help you differentiate or assess future interests in things like the battery. I mean obviously the concern could be, hey we have got a great product. We have done everything that we should, we would do, but the battery people for whatever reason (indiscernible) to you decide that they are no longer interested, how are things a little bit different than what happened with the architecture market?

That’s a great question. It’s a great question in many regards, because that – the experience in those markets really has informed our approach and I would say that if you looking back on those markets there is a couple of things that are involved. Those industries are not tech forward first of all. So you are already at a little bit of a disadvantage because you are coming out with a very high-tech solution dealing with people in some cases I won’t disclose them, we have confidentiality, but there are architectural coatings companies that literally have the same formula when (indiscernible) was President. And you are trying to explain to them that they can have a better product and they are saying, hey we have another change this. And the people that are there frequently very good time to have a degree of inertia both internally, personally and internally, because they are just not, they are not tech forward. The other thing about their business is architectural coatings is a giant piece of the pie in terms of, there are 100 markets in there. There is abrasion resistance, there is floor coatings there is wall coatings, there is interior coatings, decorative coatings. And at the end of the day at one point we are in testing with 80% of the companies by market share and external things, but we also if you run the risk of having hundreds of small customers, none of them can bring enough to bear in terms of generating enough profit to help you move the business forward. And at some point, you have to decide what you are going to do? Now, we have simplified life around here to a certain extent by not doing development on opportunities that are smaller, but for those that have been around for a while as we wander to the seeming wilderness to trying to build that market, it’s hard to turndown business and it takes a certain discipline. We also are doing a much better job in my view of understanding the market. We have been retaining more outside help that have experience in those markets at a very high level in the new markets we are in. So not only are we listening to what the customer says we are contacting their suppliers talking to them. We are contacting the people that used to be the customer five years ago and bouncing our value propositions off them. We are paying for that of course, but we are doing it within our budgetary means. And I would say that the entire approach is stronger. We are going to still get surprised. I tend to know that at a technical company, where we have got enthusiastic people, you always run the risk that nobody gets it at the customer side or that you are not hearing a piece of truth that’s important to know like what we do in this product line we are going to kill him three years, so nobody is going to develop anything new. We are trying to dig as many sources as we possibly can. The addition of Kevin Cureton last year at the end of the year has been very strong in this regard, because unlike our past leadership who were confident, his entire career has almost been doing this kind of business development, where you are digging, you are digging, you are digging, you are building information and you are going forward. And so in addition to the learnings we have had looking at these markets, then it shouldn’t be, I hope it’s not a surprise to any of our shareholders that I am disappointed in the way the architectural coatings market has unfolded, because my expectations were much higher and it’s been a tough one. However, I think we have learned a lot from them and I don’t think we have any budding markets internally. Lastly, Rand by focusing tighter, putting more resources on fewer customers in fewer areas. The absolute worst case is going to be that we will come to resolution more quickly even if it’s not the resolution we want. Now, I am not a big fan of raising the failure and moving on to the next one. I am a big fan of not dedicating thunder resources to something and getting bled over a number of years. Then I think the more we learn the better we are. Our technical team has never been as strong as it is today. Our marketing and sales team has never been as strong as it is today. And I think our value proposition is very strong right now and it’s just a matter – the economy is not helping, but certainly it’s not just the economy it’s our approach to this business. The way we are doing it, have been doing it, I think it’s going to bear fruit and I think it’s going to be different and I think we learned some of that. I don’t believe you ever learned all those lessons, but I think we have learned some of them and we understand our customers even better.

Well, I clearly understand technology, new technology development, but I like the way you have sharpened your focus and feedback mechanisms to better comprehend the sways of the market and take corrective action ahead of time. So I appreciate that. Thanks.

Thank you.

And our final question comes from the line of Bill Chapman of Morgan Stanley. Your line is open.

Yes, Frank. Good morning everybody.

Hi Bill.

Hi Bill.

Hello. Have we had any additional patent filings recently on the anything on the energy or any other areas you haven’t disclosed to us yet on new products?

Right. I guarantee you we would disclose when we get something to disclose, no, we haven’t.

Okay.

I know that there has been some frustration about the, I don’t know, if everybody understands the way these patent filings work. We filed a patient on one of the energy applications and we filed it in secret. There are two ways to file a patent, you file it openly, let everybody know what you are doing, you could file it secretly. And a company like ours with limited resources if you file it openly, all of a sudden, you have agitated giant companies that maybe learning, they are just nothing around their customers they are in these areas, you would prefer not to do that. If you file them secretly and I am not using the right terminology confidentially, you can’t talk about it. And so if we were to explain what within the patent, specifically, we would basically force the hand at the patent office to overturn the confidentiality. So one of those things that we are always wrestling with, I talk to a lot of investors who say hey, tell me more about the patent and obviously if I tell you more about the patent, first of all, I have to tell everybody more about the patent, not just you. Second of all, once I do that, you are on the risk of losing your confidentiality, which we think is strength relative to our business. Also patent starts the be-all and end-all relative to our business. We operate a lot with trade secrets, our proprietary knowledge that we don’t believe anybody else has and we don’t really think they could develop in any short period of time. And that’s a big part of the advantage we bring in some of these businesses. If you look at – if you were the type, the patents for all type and you went back and looked at all of the technology that’s been exposed publicly in the last 70 years. Some of the things we are doing don’t look any different than what are sitting an expired patent. However, those companies and those people have never been able to accomplish what we have accomplished, some of what we have is not patentable by definition, but it’s unique. And you may not be able to approve to the PPO patent examiner that is unique enough for patents, but you know what’s unique in the sense that we are competitive in some of these markets and we are outperforming other materials. So that’s the answer to that question relative to the patents.

Okay, thank you. Well, last quarter we talked about new materials you have come up with for new markets that are behind the curve unless you haven’t disclosed yet. And do you foresee possibly approaching some new niche markets or some of your nanomaterials next year?

We do. I think the – one of the things as we are devoting a lot of energy, energy for energy applications. And so we have – our sales team and our technology team is largely tied up in the two energy areas as well as supporting the personal care business and expanding our optics play (indiscernible) polishing play of which optics is one area. And so in terms of new business and new business niches, some of these will have adjacencies that make a lot of sense. There will be people and we are working with people that are telling us much and those are the types that we don’t invest a lot of R&D time, but we do support them with products. I think there will be new materials and new products coming out. I think most of them are going to be around the same spaces I am talking about and have talked about in the call, just because with limited resources we have got fewer than 50 people here. I have done some math yesterday, we have got to talk tomorrow on our customer meeting, 30% of our company has esthetical background, which is really interesting and it’s what we do, those 30% of those people are pretty much tied up in supporting these areas. So it’s I think from the outside, sometimes it’s difficult to understand that it’s a cool new idea and we can’t seem to just answer a question or send a sample or do a little bit of work, but typically a little bit of work is anywhere from a few hundred to a few thousand hours of development time. And so we have to try to focus tightly and we have been doing that. I think this year we have been doing that remarkably well. And we are also focused on our bottom line results, which continue to improve and expect them to improve next year as well.

Okay, good. Just one last question, I didn’t get a clear on the battery testing, you mentioned you are doing testing, certain specs the battery companies want, are they testing also to validate what your test results are?

They will be.

Okay.

There has been some of that. It’s complicated part of it again is our limitation. So – and I have got to speak, I have got to paint a generic word picture, which is horrible I know on a phone call, but essentially say there is 10 attributes to a battery that are important, that a company would test. So actually, battery companies that they need to know these kind of things. Nanophase has immediate access to two of those things with a minimal amount of time and equipment. Then we have access on a paid basis to the other 8 or 10 things. Of those, some of them are sequential, some of them can be done in tandem, most of them take three to six months worth of testing, just because you’ve got an asset, unlike a building thank goodness, a battery doesn’t have to last 30 years, so our testing cycle is faster than the architectural coating is, the ultra-coating business. On the other hand, they do have to last certain amount of time on the shelves, a certain amount of time in your device whatever it is. And so you are talking about a three to six-month testing regime. And what we have been doing is cherry picking the key areas that we believe and getting feedback from the outside and what are the key areas that they want first at a limit test basis to develop a dataset. Then we are approaching a company with our dataset, they are going to retest those things. In some cases and some of our investors know that very well, there is a directly involved in the battery business, but this is a very crowded space. This is similar to better gas mileage in a car or cold fusion, I mean, people (indiscernible) what are the other energy cells where fuel cells whether it’s so much in here that there is a degree of increased utility that comes back from the customers and hey, I have tried that already. And what we have to do is have a reproducible professional dataset that says you may have tried it already with XYZ material, but it wasn’t our XYZ material. It is smaller, it has a different surface chemistry, it has a different data potential, it’s starting to get an inside baseball here, but it has a lot of different characteristics due to the way we manufacture it, which is unique. And so the hump to get over to walk in there is a little higher. You are talking to somebody who is tech forward, but they will look into this after 50 years saying hey, you didn’t invent a new element on the periodic table, explain to me why this is better. So we are spending more time. We have spent more time building the initial data. We are spending more time expanding that data. And they are going to necessarily have to retest it, which is really why I won’t expect to see 2014 revenue from this business. I am looking at it thinking if I was on the other side of it, I do the same thing. My people here came in with an idea, it’s a great idea, the seller is telling us, it’s going to work, no matter what, I am not going to put my brand on the line until we do some testing. The upside is they are very organized. All these companies are very tech forward and very capable. The downside is the test take three to six months, you got to get in their queue. The other upside as well, three to six months is relatively fast in the world we live in. And I think because our name is Nanophase Technologies and because we are a high-tech company, it’s often misunderstood that we are not playing in the materials space, the advanced materials, the advanced chemical space, which doesn’t necessarily, they have a long life. And the longer the life of any product you have, the longer the testing cycle is. So I know it’s a longwinded answer Bill, but I try to be as clear as I can.

Yes, no and it’s all that way to on the windows, I mean it’s the same situation, you want to make sure the materials don’t alter through time, some heat and etcetera, so same testing process, but probably longer than the batteries it appear to me?

Bill, the difference with that is that market we haven’t had success in the NanoUltra product. We don’t think that has the market acceptance to merit. You are right, it has to last for long time and that’s been frustrating, because you are just – you are waiting for results. But we are also not seeing, we are seeing a lot more enthusiasm. And again to my earlier point, this market is much more concentrated. That market literally 10,000 customers, 50,000 customers potentially some of whom when we started that we were going after the big players, we were getting some resistance, some of the small players by material once a year. And so you are getting this huge margin on $300 item and you are thinking we are not setup. This company is not setup to do that and well we missed the mark by that one at a little bit. But I do agree that the principle is the same.

Okay. On the margin – the margin advantages using your material, is it extremely attractive to a window company?

Well, we are talking on two different things, right. On the one hand is the new applications and on is the qualifying gates, is to make sure it has the complete value prop all the way around. So, comparing to what’s being used today, how easy it is, how beneficial cost wise to both players etcetera. When you are talking about going back to coatings applications, windows or otherwise, now you are getting to really using very different materials, it’s a very different sales proposition you talked about doing it differently. So comparing a few drops of soap in a bucket, a chemical additive and going to be a little different on one end of the spectrum, but we are really talking and focused on where we think we have a very direct value proposition with customers who are used to using similar materials in the similar fashion and being able to share the benefits both in performance and in in-cost.

Okay. Okay guys thank you very much.

Thank you too.

And sir, I am showing no further questions in the queue at this time. I would like to turn the program back to you for closing remarks.

Thank you, Nova. Hello everybody. We appreciate your continued support. We also appreciate the many new investors that have been getting involved with Nanophase as we clear commercial hurdles and work toward our ultimate goals of becoming an exciting company with significant growth and profitability. Lot of yo have been heard. Thanks for joining us. And we hope you enjoy the rest of your day.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day.