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<SEC-DOCUMENT>0000950137-07-007863.txt : 20070522
<SEC-HEADER>0000950137-07-007863.hdr.sgml : 20070522
<ACCEPTANCE-DATETIME>20070522161809
ACCESSION NUMBER:		0000950137-07-007863
CONFORMED SUBMISSION TYPE:	S-3
PUBLIC DOCUMENT COUNT:		3
FILED AS OF DATE:		20070522
DATE AS OF CHANGE:		20070522

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			NANOPHASE TECHNOLOGIES CORPORATION
		CENTRAL INDEX KEY:			0000883107
		STANDARD INDUSTRIAL CLASSIFICATION:	MISCELLANEOUS PRIMARY METAL PRODUCTS [3390]
		IRS NUMBER:				363687863
		STATE OF INCORPORATION:			IL
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		S-3
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-143153
		FILM NUMBER:		07871352

	BUSINESS ADDRESS:	
		STREET 1:		453 COMMERCE ST
		CITY:			BURR RIDGE
		STATE:			IL
		ZIP:			60521
		BUSINESS PHONE:		6303231200

	MAIL ADDRESS:	
		STREET 1:		453 COMMERCE STREET
		CITY:			BURR RIDGE
		STATE:			IL
		ZIP:			60521
</SEC-HEADER>
<DOCUMENT>
<TYPE>S-3
<SEQUENCE>1
<FILENAME>c15434sv3.htm
<DESCRIPTION>REGISTRATION STATEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>sv3</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>As filed with the Securities and Exchange Commission on May&nbsp;22, 2007</B>
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Registration No.&nbsp;333-</B>&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</DIV>


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, DC 20549</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM S-3</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 12pt"><b>REGISTRATION STATEMENT<BR>
UNDER<BR>
THE SECURITIES ACT OF 1933</b></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>NANOPHASE TECHNOLOGIES CORPORATION</B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Exact name of registrant as specified in its charter)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Delaware</B><BR>
(State or other jurisdiction of <BR>
incorporation or organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>36-3687863</B><BR>
(I.R.S. Employer Identification No.)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>NANOPHASE TECHNOLOGIES CORPORATION<BR>
1319 Marquette Drive<BR>
Romeoville, Illinois 60446<BR>
(630)&nbsp;771-6708</B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 0pt">(Address, including zip code, and telephone number, including area code, of registrant&#146;s principal executive offices)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 0pt"><B>JOSEPH E. CROSS, CHIEF EXECUTIVE OFFICER<BR>
NANOPHASE TECHNOLOGIES CORPORATION<BR>
1319 Marquette Drive<BR>
Romeoville, Illinois 60446<BR>
(630)&nbsp;771-6700</B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 0pt">(Name, address, including zip code, and telephone number, including area code, of agent for service)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 0pt"><B>COPIES TO:<BR>
JOHN L. EISEL, ESQ.<BR>
GEOFFREY C. COCKRELL, ESQ.<BR>
Wildman, Harrold, Allen &#038; Dixon LLP<BR>
225 West Wacker Drive<BR>
Chicago, Illinois 60606-1229<BR>
(312)&nbsp;201-2000<BR>
(312)&nbsp;201-2555 (fax)</B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Approximate date of commencement of proposed sale to the public: </B>From time to time after
the effective date of this registration statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the only securities being registered on this Form are being offered pursuant to dividend or
interest reinvestment plans, please check the following box.&nbsp;<FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any of the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule&nbsp;415 under the Securities Act of 1933, other than securities
offered only in connection with dividend or interest reinvestment plans, check the following box.&nbsp;<FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same
offering.&nbsp;<FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities
Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.&nbsp;<FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If delivery of the prospectus is expected to be made pursuant to Rule&nbsp;434, please check the
following box.&nbsp;<FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule&nbsp;462(e) under the Securities Act, check the following box.&nbsp;<FONT face="Wingdings">&#111;</FONT></DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule&nbsp;413(b) under the Securities Act, check the following box.&nbsp;<FONT face="Wingdings">&#111;</FONT></DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Calculation of registration fee</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>

    <TD width="1%">&nbsp;</TD>
</TR><TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="18" style="border-bottom: 3px double #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Proposed Maximum</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD nowrap align="center"><B>Title of Each Class of</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount to be</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Aggregate Offering</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount of</B></TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD nowrap align="center"><B>Securities to be Registered (1)</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Registered</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price (2)</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Registration Fee (3)</B></TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
                  <TD style="border-top: 2px solid #000000"><DIV style="margin-left:15px; text-indent:-15px">Common stock</DIV></TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000"><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 2px solid #000000">2,000,000</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 2px solid #000000">$</TD>
    <TD align="right" style="border-top: 2px solid #000000">12,340,000</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 2px solid #000000">$</TD>
    <TD align="right" style="border-top: 2px solid #000000">378.84</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="18" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;There are being registered hereunder by the Registrant 2,000,000 shares of common stock
of the Registrant as shall be offered at prices and on terms to be determined at the time of each
offering.</TD>
</TR>

<TR style="font-size: 3pt">
<TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Estimated solely for the purpose of calculating the amount of the registration fee pursuant to
Rule 457(c) of the Securities Act of 1933, as amended. The proposed maximum aggregate offering
price is based upon the average of the high and low asked prices of the Registrant&#146;s common stock
on May&nbsp;18, 2007 as reported on the Nasdaq Global Market.</TD>
</TR>

<TR style="font-size: 3pt">
<TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Calculated pursuant to Rule 457(c) of the rules and regulations under the Securities Act of
1933, as amended.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE
NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO
SAID SECTION 8(A), MAY DETERMINE.
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>





<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">







<DIV align="left" style="font-size: 10pt; margin-top: 6pt">THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE
SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THE PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Subject to Completion, dated May&nbsp;22, 2007</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>PROSPECTUS</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>2,000,000</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>NANOPHASE TECHNOLOGIES CORPORATION</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>COMMON STOCK</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may offer from time to time up to an aggregate of 2,000,000 shares of common stock, at
prices and on terms to be determined at the time of offering, with an indeterminable aggregate
principal amount.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When we offer securities pursuant to this prospectus, we will deliver to you this prospectus
as well as a prospectus supplement setting forth the specific terms of the securities being
offered. We urge you to read carefully this prospectus and the accompanying prospectus supplement
before you make your investment decision.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is traded on the Nasdaq Global Market under the symbol &#147;NANX&#148;. Any common
stock sold pursuant to a prospectus supplement will be listed on such exchange, subject to official
notice of issuance. On May&nbsp;18, 2007, the closing price of the common stock, as reported on the
Nasdaq Global Market, was $6.29&nbsp;per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will sell these securities directly to our stockholders or to purchasers or through agents
on our behalf or through underwriters or dealers as designated from time to time. If any agents or
underwriters are involved in the sale of any of these securities, the applicable prospectus
supplement will provide the names of the agents or underwriters and any applicable fees,
commissions or discounts.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">INVESTING IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE &#147;RISK FACTORS&#148; BEGINNING ON PAGE 10
OF THIS PROSPECTUS.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The
date of this prospectus is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2007.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101"><B>ABOUT THIS PROSPECTUS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102"><B>WHERE YOU CAN FIND MORE INFORMATION ABOUT US</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#103"><B>PROSPECTUS SUMMARY</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#104"><B>SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#105"><B>RISK FACTORS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#106"><B>USE OF PROCEEDS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>18</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#107"><B>DILUTION</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>18</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#109"><B>DESCRIPTION OF CAPITAL STOCK</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>19</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#110"><B>PLAN OF DISTRIBUTION</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>21</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#111"><B>LEGAL MATTERS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>24</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#112"><B>EXPERTS</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>24</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c15434exv5w1.htm">Opinion of Wildman, Harrold, Allen & Dixon LLP</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="c15434exv23w1.htm">Consent of McGladrey & Pullen, LLP</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
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</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ABOUT THIS PROSPECTUS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus is part of a registration statement filed by us with the Securities and
Exchange Commission, or Commission, utilizing a &#147;shelf&#148; registration process. Under this shelf
process, we may, from time to time, sell up to 2,000,000 of any combination of securities described
in this prospectus in one or more offerings at prices and on terms to be determined at the time of
each offering. This prospectus provides you with a general description of the securities we may
offer. Each time we sell securities, we will provide a prospectus supplement that will contain
specific information about the terms of that offering. The prospectus supplement may also add,
update or change information contained in this prospectus. You should read both this prospectus and
any applicable prospectus supplement together with additional information described below under the
heading &#147;Where You Can Find More Information.&#148; As used in this prospectus, &#147;company,&#148; &#147;we,&#148; &#147;our&#148;
and &#147;us&#148; refer to Nanophase Technologies Corporation, except where the context otherwise requires
or as otherwise indicated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not authorized any dealer, salesman or other person to give any information or to make
any representation other than those contained or incorporated by reference in this prospectus and
the accompanying supplement to this prospectus. You must not rely upon any information or
representation not contained or incorporated by reference in this prospectus or the accompanying
prospectus supplement as if we had authorized it. This prospectus and the accompanying supplement
to this prospectus do not constitute an offer to sell or the solicitation of an offer to buy any
securities other than the registered securities to which they relate, nor do this prospectus and
the accompanying supplement to this prospectus constitute an offer to sell or the solicitation of
an offer to buy securities in any jurisdiction to any person to whom it is unlawful to make such
offer or solicitation in such jurisdiction. You should not assume that the information contained in
this prospectus and the supplement to this prospectus is correct on any date after their respective
dates, even though this prospectus or a supplement is delivered or securities are sold on a later
date.
</DIV>
<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>WHERE YOU CAN FIND MORE INFORMATION ABOUT US</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We file annual, quarterly and special reports, proxy statements and other information with the
SEC. Our SEC filings are available to the public over the Internet at the SEC&#146;s web site at
http://www.sec.gov. You may also read and copy any document we file at the SEC&#146;s public reference
room at room 1024, 450 Fifth Street, N.W., Washington, D.C. Please call the SEC at
1-800-732-0330 for further information on the public reference room.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The SEC allows us to &#147;incorporate by reference&#148; the information we file with them, which means
that we can disclose important information to you by referring you to these documents. The
information incorporated by reference is an important part of this prospectus, and information that
we file later with the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below (and any amendments thereto) and any future filings made
with the SEC under Section&nbsp;13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until
the offering under this registration statement is completed or withdrawn:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Annual Report on Form&nbsp;10&#150;K for the fiscal year ended December&nbsp;31, 2006 filed March&nbsp;14, 2007;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Quarterly Report on Form&nbsp;10&#150;Q for the quarter ended March&nbsp;31, 2007 filed May&nbsp;10, 2007;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Current Reports on Form 8-K filed April&nbsp;12, 2007; April&nbsp;26, 2007; and April&nbsp;30, 2007; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The description of our common stock contained in our
registration statement on Form&nbsp;8-A, including any amendments or
reports filed to update such information.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information incorporated by reference into this prospectus is an important part of this
prospectus. Any statement contained in an incorporated document shall be deemed to be modified or
superseded for purposes of the registration statement or this prospectus to the extent that a
statement contained herein or in any other subsequently filed incorporated documents or in an
accompanying prospectus supplement modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as modified or superseded, to constitute a part
of this prospectus.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To obtain a copy of these filings at no cost, you may telephone us at 630-771-6708 or write us
at Investor Relations Department, Nanophase Technologies Corporation, 1319 Marquette Drive,
Romeoville, Illinois 60446.
Unless otherwise requested, exhibits to an incorporated document will not be provided unless the
exhibit is specifically incorporated by reference into this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we make available free of charge through our website at http://www.nanophase.com
our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
all amendments to those reports as soon as reasonably practicable after such material is
electronically filed with or furnished to the SEC. Other than the information expressly
incorporated by reference into this prospectus, information on, or accessible through, our website
is not a part of this prospectus, any prospectus supplement or the registration statement of which
this prospectus is a part.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">References in this prospectus and any prospectus supplement to our common stock include the
associated preferred stock purchase rights under our 1998 Rights Agreement, as amended.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PROSPECTUS SUMMARY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following summary is qualified in its entirety by reference to, and should be read in
conjunction with, the more detailed information appearing elsewhere in this prospectus or
incorporated by reference herein. Investors should also carefully consider the information set
forth under &#147;Risk Factors&#148; beginning on page 10.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">GENERAL COMPANY INFORMATION
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a nanomaterials developer and commercial manufacturer and produce engineered
nanomaterial products for diverse markets &#151; sunscreens, personal care, architectural coatings,
industrial coating ingredients, plastic additives, water filtration, DNA bio-sensors, semiconductor
polishing, optics polishing and other markets. Additionally, new markets and applications are
constantly emerging and being developed on a global scale. We market our products globally &#151; U.S,
Europe and Asia. The Company was incorporated in Illinois on November&nbsp;25, 1989, and became a
Delaware corporation on November&nbsp;30, 1997. The Company&#146;s common stock trades on the Nasdaq Global
Market under the symbol NANX.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have created a leading commercial platform of integrated nanomaterials technologies that
are designed to deliver an optimal engineered nanomaterial &#145;solution&#146; for a target market or
specific customer application. The Company has complete capability from application development and
laboratory samples through pilot production and, finally, commercial production in metric ton(s)
capacity. We have development and application laboratories and manufacturing capacity in two
locations in the Chicago area. The Company&#146;s manufacturing is based on Lean Six Sigma discipline
and is certified to ISO 9001, American National Standard, Quality Management System Requirements;
ISO 14001, American National Standard, Environmental Management System Requirements; and is
compliant with cGMP for products under FDA regulation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most of the raw materials used in the Company&#146;s various processes are commercially available.
In some cases, we rely on sole-source processors of materials who utilize an array of worldwide
sources for the materials that they process to the Company&#146;s specifications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">NANOMATERIALS
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nanomaterials are generally comprised of particles (nanoparticles)&nbsp;that are less than 100
nanometers in diameter, which have a wide range of unique properties owing to their very small
size. A nanometer is one-billionth of a meter, or about 100,000 times smaller in size than the
width of a human hair. To give another perspective, a six-foot tall person is around two-billion
nanometers in height.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nanotechnology involves manipulating the properties of materials, made up of basic elements or
combinations thereof, at the 100-nanometer level or below. At this scale, the relatively small
number of constituent atoms, the large proportion of these atoms on surfaces, and their confined
dimensions lead materials to exhibit unique properties that can be used in many applications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nanomaterials are an important and enabling part of the diverse field of nanotechnology. The
properties of nanomaterials, and hence their ultimate application performance and value, depend on
the composition, size, shape, structure and surface chemistry of their constituent nanoparticles,
as well as the production process used in their fabrication and other key parameters. The Company&#146;s
technologies for engineering and manufacturing nanomaterials control these critical parameters
resulting in nanomaterials that we believe demonstrably offer superior performance in many
applications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nanomaterials have applications in diverse global markets where they are incorporated into a
process, such as semiconductor polishing, or a product, such as an industrial coating to prevent UV
degradation or significantly improve wear resistance. Multiple markets exist for our products since
nanomaterials offer advantages in many applications, such as improved performance, longer wear or
product life, lower overall product cost, or in the development of new products or processes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">THE COMPANY&#146;S TECHNOLOGIES
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have created an integrated platform of commercial nanomaterial technologies that are
patented, patent-pending, or proprietary and designed to deliver a nanomaterial solution for a
targeted market or a specific customer application. The Company&#146;s platform provides flexibility and
capability to engineer nanomaterials that meet a customer&#146;s performance requirements and deliver
its nanomaterial solutions in a readily usable format. Our
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">technologies have been demonstrably scalable and robust, having produced over 400 metric tons
annually.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s nanomaterials platform begins with two distinct manufacturing processes (PVS and
NanoArc&#153; Synthesis) to make nanomaterials or nanoparticles. These technologies allow us to control
critical nanomaterial properties (composition, size, shape, structure, surface chemistry) and
engineer those to meet application performance. Compared to other major known global nanoparticle
processes, the Company believes that its plasma-produced particles have a unique set of bulk and
surface properties and are produced as nonporous, dense, discrete single crystals. We currently
have the capacity to produce over a million pounds of nanomaterials annually.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have developed patented and proprietary technology to coat or surface treat nanoparticles
to further engineer surface chemistry by two main processes. For performance in many applications,
such as sunscreens, this technology is vital to ensure formulation compatibility and, in some
cases, optimal application performance. The Company has the capacity to coat or surface treat
nanoparticles at a rate of about a ton every eight hours and delivers over 300 tons of surface
engineered nanoparticles to its customers annually. As an example, we sell coated nanomaterials
that are used by major global consumer products companies for sunscreens and personal care
products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also have developed proprietary technology to disperse nanoparticles in both aqueous and
several organic solvent systems. Due to its technologies, the Company is able to achieve highly
stable dispersions at high weight loading (18-50% by weight), which are both market advantages.
Dispersed nanomaterials are desired by many customers for use in their processes or products due to
the ease of handling. As examples, dispersed nanomaterials are used in architectural coatings,
industrial coatings, plastic additives and semiconductor polishing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As markets continue to develop and grow, the Company believes that customers&#146; preferred
delivery formats will likely be coated or dispersed nanomaterials. We believe we are well
positioned with our platform of integrated commercial nanomaterial technologies. The Company plans
to maintain and evolve its intellectual property and technologies to remain at the forefront of
nanomaterials development.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have steadily expanded both our patented technologies in the U.S. and internationally, and
our ability to commercially utilize these technologies. Through large-scale manufacturing of
nanomaterials utilized in the manufacture of consumer sunscreen and personal care products, the
Company has developed production expertise that has allowed it to improve processes relating to
those nanomaterials, as well as processes relating to other nanomaterials. This experience has
translated into additional patents, pending patents and proprietary improvement of the Company&#146;s
technologies and manufacturing processes to reduce variable manufacturing cost and improve gross
margins.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">MARKETING
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company sells its products to markets using a dual strategy of market partners and
customers. Markets are selected based on the Company&#146;s assessment of the amount of market-pull and
the product value proposition for its nanomaterial products to avoid situations that are actually a
technology-push with an accompanying unacceptable probability of market success.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s market partners currently include BASF Corporation (&#147;BASF&#148;), a $50&#043;billion
global chemical company; Rohm &#038; Haas Electronic Materials CMP Technologies, part of an $8&nbsp;billion
global chemical company; Altana Chemie, a $1&#043;billion chemical company who is a leader in coating
and plastic additives; and Alfa Aesar, a division of Johnson Matthey. Each market partner is viewed
as a leader in its respective markets with recognized brands and global sales reach. The Company
has long-term exclusive relationships with each of its market partners. Market partners incorporate
the Company&#146;s nanomaterial products into their own products and/or sell the Company&#146;s nanomaterial
products into specific markets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Market partners offer the Company several advantages. We are able to leverage our sales and
distribution capabilities by using those of our market partners to sell our products globally and
reach markets that would be difficult or unattainable for the Company alone. The Company is also
able to leverage its new nanomaterial product development capabilities by collaborating with market
partners&#146; application development scientists and engineers. The Company has current products with
each market partner, in some cases multiple products, and has focused new nanomaterial product
development based on the market partners&#146; knowledge and expertise in each market and product
application. The Company anticipates that revenue generation from current products will continue
growing while new revenues will be generated in the future through focused new product development
and market introduction through its market partners. We also anticipate developing new markets with
new market partners.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BASF markets and distributes the Company&#146;s nanomaterials for sunscreens (beach wear and daily
wear products) and personal care under the Z-Cote brand to consumer products companies globally.
The Company&#146;s revenues from these nanomaterial products grew 23% in 2005 and 13% in 2006 and
continuing growth is expected. We have manufactured and shipped over 1,500 metric tons of Z-Cote
products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2005, the Company was designated a &#145;BASF Strategic Development Partner&#146; for new
products. In the same year, BASF and the Company launched a second line of sunscreen and personal
care nanomaterials under the Z-Cote MAX brand specifically targeted for European and Asian markets.
During 2006, BASF and the Company launched a new product, T-Lite MAX, for the sunscreen market and
anticipate launching another new sunscreen product during 2007. Additional new product development
is also underway for potential personal care products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2000, BASF loaned the Company $1.3&nbsp;million to purchase and install production equipment
to produce nanomaterial products for the Z-Cote brand. As part of the Company&#146;s business model, the
Company expects its market partners to fund equipment that is primarily dedicated to produce their
products. The Company repays such loans through a sales discount on product over time. The BASF
note was retired in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rohm &#038; Haas Electronic Materials CMP Inc. (&#147;RHEM&#148;) uses the Company&#146;s nanomaterial products to
manufacture slurry to polish semiconductors for the STI, SOL, and ILD0 technology nodes. RHEM&#146;s
slurry products are marketed and used globally by semiconductor manufacturers. In 2005, RHEM
awarded the Company its &#147;Excellence in Partnership&#148; award and during 2006 made a $5&nbsp;million equity
investment in the Company for its exclusive use of nanomaterial products for semiconductor
slurries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Altana Chemie, and its subsidiary BYK Chemie, use the Company&#146;s nanomaterial products as
ingredients and additives for paints, coatings, polymers, plastics, inks and sealants under its
NanoBYK brand. Currently, there are approximately eighteen products being distributed globally to
companies in these markets with plans to introduce more new products during 2007. Altana Chemie
made a $10&nbsp;million equity investment in the Company during 2004 to exclusively obtain the Company&#146;s
nanomaterial products for the noted markets, with limited exceptions. Altana Chemie also loaned the
Company $1.6&nbsp;million to purchase and install nanomaterials production equipment during 2006 to
support capacity requirements related to volume growth.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Alfa Aesar is a global distributor of our branded nanomaterials and nanomaterial dispersions
to the research and development community. Through catalogs, websites, and a dedicated
nanomaterials brochure, Alfa Aesar markets approximately 33 of our nanomaterial products to the
global development community. The Company anticipates that as new products or processes are
developed using our nanomaterial products, increasing demand may have a positive impact on revenue
growth.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the Company&#146;s market partners, we utilize market-focused business development
to drive new product applications and customers. Business development includes evaluation and
qualification of potential markets, identification of potential lead customers, and developing a
strategy for successful market penetration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company collaborates with potential customers to develop a nanomaterials solution for
their specific application. This approach increases the probability of application success, allows
the Company to use its integrated platform of nanomaterial technologies to optimize a nanomaterial
solution for the product application, and reduces the time-to-market. Nanophase&#146;s application
scientists work along with the business development and sales team and the customer&#146;s new product
developers to develop a nanomaterial solution to meet the customer&#146;s performance demands.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the applications with market partners, the Company currently has customers
using its nanomaterial products for DNA Bio-Sensors, water filtration, textile coatings,
architectural coatings, optics polishing, LCD screen polishing and other applications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">TECHNOLOGY AND ENGINEERING
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consisting of research and development, process engineering and advanced engineering groups,
the Company&#146;s focus is in three major areas: 1) application development for its nanomaterial
products; 2) creating or obtaining additional core nanomaterial technologies, or nanomaterials,
that have the capability to serve multiple markets; 3) continuing to improve the Company&#146;s core
technologies to improve operations and reduce costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most of the research and development at the Company is directly related to product development
for applications. The Company endeavors to either meet specific customer needs or to develop
applications solutions to
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">unmet needs in a particular market where its materials may offer a distinct performance
advantage. The Company believes that aggressively pursuing applications, inventions and patents
will help Nanophase maintain its position as a technical and commercial innovator in nanomaterials.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s total research and development expense, which includes all expenses relating to
the technology and advanced engineering groups, during the years ended December&nbsp;31, 2006, 2005 and
2004 was $2,127,862, $1,934,528 and $1,929,348, respectively. This represents the Company&#146;s share
of these expenses only and does not take into account amounts spent by our largest customers in
support of our partnerships. The Company&#146;s future success will depend in large part upon its
ability to keep pace with evolving advanced materials technologies and industry standards. Through
the five-year period ended December&nbsp;31, 2006, the Company has had cumulative research and
development expenses of approximately $9.5&nbsp;million and cumulative expenditures on equipment and
leasehold improvements of approximately $4.7&nbsp;million. These investments in technology and
production capacity and capability have helped to take the Company from a development stage company
to full commercialization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">MANUFACTURING OPERATIONS
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has manufacturing capacity based in two locations in the Chicago area. At each of
these facilities, the Company is able to develop and supply nanomaterials in quantities ranging
from grams to metric tons. The Company&#146;s facilities are certified to ISO 9001:2000 international
standards and are current Good Manufacturing Practices (cGMP) compliant for applicable bulk
pharmaceutical manufacturing. The Company&#146;s facilities are also certified to the international
standard for environmental management, ISO 14001:2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All processes are controlled under Lean Six-Sigma discipline with the capability to
manufacture precisely to application requirements. Unlike traditional quality control systems, Lean
Six Sigma provides methods to re-engineer processes to eliminate non-value added steps and create a
system that minimizes errors and defects. The Company&#146;s Director of Quality is a certified Six
Sigma Master Black Belt. The Company requires that its manufacturing supervisors, engineers and
technicians are trained and become, at minimum, certified Green Belts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s operations employ a cellular, team-based manufacturing approach, where workers
operate in work &#147;cells,&#148; under a Lean Manufacturing environment to continuously advance and improve
production capabilities. The Company&#146;s manufacturing approach and targeted engineering actions have
resulted in continuing process innovations and improvements that have reduced the variable
manufacturing cost significantly over the past four years. Using Lean Six Sigma discipline, the
Company has been able to achieve 99% customer service levels with no customer returns over the last
four years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management is committed to a Lean Manufacturing approach, to the extent possible given a
certain measure of irregular demand, where the Company is able to reduce excess labor and manage
the lowest practical inventory and supply levels in order to minimize working capital demands. This
approach complements two of the Company&#146;s major operational goals which are to increase
nanomaterials output without adding to existing equipment and to continually reduce production
costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company relies primarily on a combination of patent, trademark, copyright, trade secret
and other intellectual property law, nondisclosure agreements and other protective measures to
protect its intellectual property. In addition to obtaining patents and trademarks based on the
Company&#146;s inventions and products, we also license certain third-party patents from time-to-time to
expand our technology base.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2006, the Company re-evaluated its intellectual property strategy in view of changes at
the USPTO and the increasing cost of obtaining and maintaining patents. Based on this analysis, the
Company elected to abandon some patents and forgo continuation of some patent applications since
the Company had already improved or surpassed the intellectual property described in the abandoned
patents and patent applications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;14, 2007, the Company owned or licensed 18 US patents and patent applications
consisting of 10 issued or allowed US patents, 7 pending US patent applications, and 1 licensed US
patent. The 10 owned US patents consist of 4 for its nanoparticle synthesis technologies, 2 for its
surface treatment technologies and 4 for its nanoparticle applications. The Company&#146;s pending US
patents consist of 3 in nanoparticle synthesis, 1 in nanoparticle surface treatments, and 3 in
nanoparticle applications. Correspondingly, the Company owns 48 foreign patents and patent
applications consisting of 23 issued or allowed foreign patents and 25 pending foreign patent
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">applications. All of the pending and owned foreign patents are counterparts to domestic
filings covering its platform of nanotechnologies. The Company&#146;s oldest issued patents will begin
to expire in 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has licensed its PVS technology for certain specific markets and certain
geographies to C.I. Kasei, a division of Itochu Corporation (&#147;CIK&#148;). Under this agreement, the
Company earns royalties on net sales of manufactured products containing nanocrystalline materials.
The agreement provides for minimum royalty payments to maintain exclusivity. The agreement expires
on March&nbsp;31, 2013 unless earlier terminated as provided therein. Upon the expiration, the license
will become non-exclusive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;Risk Factors&#148; for a discussion of risks related to our intellectual property and
proprietary rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">COMPETITION
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Within each of its targeted markets and product applications, the Company faces potential
competition from advanced materials and chemical companies and suppliers of traditional materials.
In many markets, the Company&#146;s potential competitors are larger and more diversified than the
Company; although management believes its materials and related technologies are superior to those
of its competitors in terms of the Company&#146;s ability to produce highly engineered products to meet
specific performance requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect to traditional suppliers, the Company may compete against lower priced
traditional materials for certain customer applications. In some product or process applications
the benefits of using nanomaterials do not always outweigh their typically higher costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect to larger producers of nanomaterials, while many of these producers do not
currently offer directly competitive products, these companies have greater financial and technical
resources, larger research and development staffs and greater manufacturing and marketing
capabilities and could begin to compete directly against the Company. In addition, the number of
development-stage companies involved in nanocrystalline materials continues to grow on a global
basis, posing increasing competitive risks. Many of these companies are associated with university
or national laboratories and use chemical and physical methods to produce nanocrystalline
materials. Management believes that most of these companies are engaged primarily in funded
research and is not aware that any of them have commercial production capabilities; however, they
may represent competitive risks in the future. Some development stage companies, especially in
other countries, receive significant government assistance. Management anticipates that foreign
competition may play a greater role in the nanomaterials arena in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company believes that its nanomaterial technology platform is currently at the forefront
of nanomaterials. Relative to potential competition, the Company believes it is well positioned
with its platform of integrated commercial nanomaterial technologies and its current plans for
continual technology improvement and evolution.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">GOVERNMENTAL REGULATIONS
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The manufacture and use of certain of the products that contain the Company&#146;s nanocrystalline
materials are subject to governmental regulations. As a result, the Company is required to adhere
to the current Good Manufacturing Practices (cGMP) requirements of the U.S. Food and Drug
Administration (&#147;FDA&#148;) and similar regulations that include testing, control and documentation
requirements enforced by periodic inspections.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is committed to environmental health and safety (&#147;EH&#038;S&#148;). We comply with all
permissible exposure limits standards issued by OSHA. Because nanotechnology remains an emerging
and evolving science, there are no currently accepted standards, measurements or personal
protective equipment available that are <U>specific</U> to nanoparticle safety. Accordingly, the
Company relies on nuisance dust standards and general chemical safety to identify safe personal
protective equipment and appropriate handling protocols. The Company believes that it has taken a
leadership position on EH&#038;S in its operations and fugitive emissions, and has internal and external
review and monitoring of its practices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the Company&#146;s facilities and all of its operations are subject to the plant and
laboratory safety requirements of various environmental and occupational safety and health laws. We
believe we are in compliance with all such laws and regulations and to date, those regulations have
not materially restricted or impeded operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has taken a responsible, proactive approach to Environmental Health and Safety by
implementing appropriate procedures and processes to have its facilities certified to ISO 14001,
American National
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Standard, Environmental Management System Requirements. The Company is also involved with
leading industry groups that are defining nanomaterial standards and protocols. These currently
include the ASTM International Committee on Nanotechnology, the National Pollution Prevention and
Toxics Advisory Committee &#151; TSCA Voluntary Program, the American National Standards Institute
(ANSI), and participate in FDA reviews relative to cosmetic applications. The Company has a
fulltime, advanced degreed professional to manage government regulation compliance and EH&#038;S.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">EMPLOYEES
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective January&nbsp;8, 2007, the Company hired Kevin J. Wenta as its Executive Vice President of
Sales and Marketing. He brings twenty years of business development, sales, marketing, finance and
operations experience to Nanophase. Prior to joining the company, Mr.&nbsp;Wenta was a Partner at
Accenture, a global consultancy. Previous to that he was a General Manager at Eastman Chemical
Company and held the position of Director of Corporate Strategy. Previous experience also includes
positions at ChemConnect (formerly CheMatch), ARCO and Shell Chemical. Mr.&nbsp;Wenta holds a B.S.
degree in Chemical Engineering from the University of Texas at Austin and a M.B.A. degree from the
University of Chicago.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;31, 2006, the Company had a total of 60 full-time employees, 11 of who hold
advanced degrees. The Company has no collective bargaining agreements or relationships.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">BACKLOG
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company does not believe that a backlog as of any particular date is indicative of future
results. The Company&#146;s sales are made primarily pursuant to purchase orders for delivery of
nanomaterials. The Company has some agreements that give customers the right to purchase a specific
quantity of nanomaterials during a specified time period. These agreements, however, often do not
obligate the customers either to purchase any particular quantity of such nanomaterials at all, or
in the case where an obligation exists, the risk to the customer for not purchasing nanomaterials
is the loss of exclusivity. The quantities actually purchased by the customer, as well as the
shipment schedules, are frequently revised during the agreement term to reflect changes in the
customer&#146;s needs. The Company does not believe that such agreements are meaningful for determining
backlog amounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">BUSINESS SEGMENT AND GEOGRAPHICAL INFORMATION
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue from international sources approximated $664,500, $1,094,200 and $673,900 for the
years ended December&nbsp;31, 2006, 2005 and 2004, respectively. As part of its revenue from
international sources, the Company recognized approximately $249,800 and $59,515 in product revenue
from several German and Taiwan companies respectively, and $300,000 in other revenue from a
technology license fee from its Japanese licensee for the year ended December&nbsp;31, 2006. Revenue
from these same international sources approximated $479,400, $220,200 and $306,800 for the year
ended December&nbsp;31, 2005, compared to $299,200, $1,900 and $322,500 for the same period in 2004,
respectively. The $300,000 technology license fee typically received every twelve months from our
Japanese licensee is included in each of the three years presented.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s operations comprise a single business segment and all of the Company&#146;s
long-lived assets are located within the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">KEY CUSTOMERS
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A limited number of key customers account for a substantial portion of the Company&#146;s
commercial revenue. In particular, revenue from BASF, the Company&#146;s new significant customer in
architectural coatings and RHEM constituted approximately 56.1%, 22.1% and 9.5%, respectively, of
the Company&#146;s 2006 total revenue. The Company&#146;s customers are significantly larger than the Company
and are able to exert a high degree of influence over the Company. While the Company&#146;s agreements
with two of these customers are long-term agreements, they may be terminated by the customer with
reasonable notice and do not provide any guarantees that these customers will continue to buy the
Company&#146;s products. The loss of one of these key customers or the failure to attract new customers
could have a material adverse effect on the Company&#146;s business, results of operations and financial
condition. See &#147;Risk factors&#148; below for additional discussion.
</DIV>

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<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We want to provide investors with more meaningful and useful information. As a result, this
prospectus contains and incorporates by reference certain &#147;forward-looking statements,&#148; as defined
in Section&nbsp;21E of the Securities Exchange Act of 1934, as amended. These statements reflect our
current expectations of the future results of our operations, performance and achievements.
Forward-looking statements are covered under the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. We have tried, wherever possible, to identify these statements by
using words such as &#147;anticipates&#148;, &#147;believes&#148;, &#147;estimates&#148;, &#147;expects&#148;, &#147;plans&#148;, &#147;intends&#148; and
similar expressions. These statements reflect our current beliefs and are based on information now
available to us. Accordingly, these statements are subject to certain risks, uncertainties and
contingencies that could cause our actual results, performance or achievements in 2007 and beyond
to differ materially from those expressed in, or implied by, such statements. These risks,
uncertainties and factors include, without limitation: a decision by a customer to cancel a
purchase order or supply agreement in light of our dependence on a limited number of key customers;
uncertain demand for, and acceptance of, our nanomaterials; our manufacturing capacity and product
mix flexibility in light of customer demand; our limited marketing experience; changes in
development and distribution relationships; the impact of competitive products and technologies;
our dependence on patents and protection of proprietary information; the resolution of litigation
in which we may become involved; and other risks set forth under the caption &#147;Risk Factors&#148; below.
You should not place undue reliance on any forward-looking statements. Except as required by
federal securities laws, we undertake no obligation to update or revise these forward-looking
statements to reflect new events or uncertainties.
</DIV>

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<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RISK FACTORS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This offering involves a high degree of risk. Before making an investment decision, you should
carefully consider the following risks and the risks set forth in the supplement which accompanies
this prospectus and in our periodic reports on Form&nbsp;10-K and
Form&nbsp;10-Q which have been filed with
the SEC and are incorporated by reference into this prospectus. The trading price of our common
stock could decline due to any of these risks, and you could lose all or part of your investment.
You also should refer to the other information appearing elsewhere in this prospectus, or
incorporated by reference into this prospectus.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>We have a limited operating history and may not be able to address difficulties encountered by
companies in new and rapidly evolving markets.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have only a limited operating history. We were formed in November&nbsp;1989 and began our
commercial nanomaterials operations in January&nbsp;1997. We have not yet generated a significant amount
of revenue from our nanomaterials operations. Because of our limited operating history and the
early stage of development of our rapidly evolving market, we have limited insight into trends that
may emerge and adversely affect our business and cannot be certain that our business strategy will
be successful or that it will successfully address these risks. In addition, our efforts to address
any of these risks may distract personnel or divert resources from other more important
initiatives, such as attracting and retaining customers and responding to competitive market
conditions.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>We have a history of losses that may continue in the future.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have incurred net losses in each year since our inception with net losses of $6.45&nbsp;million
in 2004, $5.38&nbsp;million in 2005 and $5.18&nbsp;million in 2006. As of December&nbsp;31, 2006, we had an
accumulated deficit of approximately $62.74&nbsp;million and could expect to continue to incur losses on
an annual basis through at least the end of 2007. We believe that our business depends, among other
things, on our ability to significantly increase revenue. If revenue fails to grow at anticipated
rates or if operating expenses increase without a commensurate increase in revenue, or if we fail
to adjust operating expense levels accordingly, then the imbalance between revenue and operating
expenses will negatively impact our cash balances and our ability to achieve profitability in
future periods.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>We depend on a small number of customers for a high percentage of our sales, and the loss of orders
from a significant customer could cause a decline in revenue and/or increases in the level of
losses incurred.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales to our customers are executed pursuant to purchase orders and long-term supply
contracts; however, customers can cease doing business with us at any time with limited advance
notice. We expect a significant portion of our future sales to remain concentrated within a limited
number of strategic customers. We may not be able to retain our strategic customers, such customers
may cancel or reschedule orders, or in the event of canceled orders, such orders may not be
replaced by other sales or by sales that are on as favorable terms. In addition, sales to any
particular customer may fluctuate significantly from quarter to quarter, which could affect our
ability to achieve anticipated revenues on a quarterly basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue from BASF Corporation, the Company&#146;s new significant customer in architectural
coatings and RHEM, accounted for approximately 88% of total revenue for the year ended December&nbsp;31,
2006, and revenue from the same three customers accounted for approximately 79% of total revenue in
2005. For the years ended December&nbsp;31, 2006 and 2005, BASF accounted for 56% and 66% of our total
revenue, respectively. If we were to lose, or receive significantly decreased orders from any of
these three customers, then our results of operations would be materially harmed. While our
agreements with our largest customers are long-term agreements, they may be terminated by the
customer with reasonable notice and do not provide any guarantees that these customers will
continue to buy our products. In addition, while our agreements with BASF contain certain order
requirements, the only repercussion under the agreements for BASF missing the order requirements is
that we would be freed from the exclusivity obligations under the BASF contracts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have been consistently expanding both our marketing and business development efforts and
our production efficiency in order to address the issues of our dependence upon a limited amount of
customers,
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">enhancement of gross profit and operating cash flows, and the achievement of profitability. We
currently have customers that may grow to the point where they generate significant revenues and
margins as relationships expand. Given the special nature of our products, and the fact that
markets for them are not yet fully developed, it is difficult to accurately predict when additional
large customers will materialize. Going forward, the Company&#146;s margins, as a percentage of revenue,
will be dependent upon revenue mix, revenue volume and the Company&#146;s ability to continue to cut
costs. The extent of the growth in revenue volume and the related gross profit that this revenue
generates, will be the main drivers in generating positive operating cash flows and, ultimately,
net income.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Any downturn in the markets served by us would harm our business.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A majority of our products are incorporated into our customers&#146; products such as sunscreens,
architectural coatings, polishing slurries, personal care, and to a lesser extent, medical
diagnostics, abrasion-resistant coatings for flooring, and other products. These markets have from
time to time experienced cyclical, depressed business conditions, often in connection with, or in
anticipation of, a decline in general economic conditions. These industry downturns have resulted
in reduced product demand and declining average selling prices. Our business would be harmed by any
future downturns in the markets that we serve.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Our products often have long adoption cycles, which could make it difficult to achieve market
acceptance and makes it difficult to forecast revenues.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to their often novel characteristics and the unfamiliarity with them that exists in the
marketplace, our nanomaterials often require longer adoption cycles than materials technologies.
Our nanomaterials have to receive appropriate attention within any potential customer&#146;s
organization, then they must be tested to prove a performance advantage over existing materials,
typically on a systems-cost basis. Once we have proven initial commercial viability, pilot scale
production runs must be completed by the customer, followed by further testing. Once
production-level commercial viability is established, then our nanomaterials can be introduced,
often to a downstream marketplace that needs to be familiarized with them. If we are unable to
demonstrate to our potential customers the performance advantages and economic value of our
nanomaterials over existing and competing materials and technologies, we will be unable to generate
significant sales. Our long adoption cycle makes it difficult to predict when sales will occur.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>We frequently depend on collaborative development relationships with our customers and do not have
a substantial direct sales force or an established distribution network apart from the distribution
networks of our strategic partners. If we are unable to initiate or sustain such collaborative
relationships or if the terms of these relationships limit the distribution of our products or if
our strategic partners are unable to distribute our products efficiently, then we may be unable to
independently develop, manufacture or market our current and future nanomaterials or applications.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have established, and will continue to pursue, strategic relationships with many of our
customers and do not have a substantial direct sales force or an established distribution network
(other than distribution arrangements for research samples). Through these relationships, we seek
to develop new applications for our nanomaterials and share development and manufacturing
resources. We also seek to coordinate the development, manufacture and marketing of our
nanomaterials products. Future success will depend, in part, on our continued relationships with
these customers and our ability to enter into similar strategic relationships with other customers.
Our customers may not continue in these collaborative development relationships, may not devote
sufficient resources to the development or sale of our materials or may enter into strategic
development relationships with our competitors. These customers may also require a share of control
of these collaborative programs. Some of our agreements with these customers limit our ability to
license our technology to others and/or limit our ability to engage in certain product development
or marketing activities with others. These relationships generally can be terminated unilaterally
by customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally, except for our research quantities distribution agreement with Alfa Aesar, these
customers generally require exclusive distribution arrangements within the field of application
covered by our agreement with these customers, and the very nature of these strategic relationships
limits the distribution of our products to the distribution networks available to our strategic
relationship partners. In addition, the development agreements with some of our larger customers
contain provisions that require us to license our intellectual property to these
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">customers on disadvantaged terms and/or sell equipment to these customers in the event that we
materially breach these agreements or fail to satisfy certain financial covenants. For example, see
&#147;Risk Factors &#151; We may need to raise additional capital in the future.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we are unable to initiate or sustain such collaborative relationships or if the terms of
these relationships materially limit our access to distribution channels for our products, then we
may be unable to independently develop, manufacture or market our current and future nanomaterials
or applications.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>If commodity metal prices increased at such a rate that we were unable to recover lost margins on a
timely basis or that our products became uncompetitive in their current marketplaces, our financial
and liquidity position and results of operations would be substantially harmed.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many of our significant raw materials come from commodity metal markets that may be subject to
rapid price increases. While we generally pass commodity price increases on to our customers, it is
possible that, given our limited customer base and the limited control we have over it, commodity
metal prices could increase at such a rate that could hinder our ability to recover lost margins
from our customers on a timely basis. It is also possible that such drastic cost increases could
render some of our materials uncompetitive in their current marketplaces when considered relative
to other materials on a cost benefit basis. If either of these potential results occurred, our
financial and liquidity position and results of operations would be substantially harmed.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>If a catastrophe strikes either of our manufacturing facilities or if we were to lose our lease for
either facility due to non-renewal or other unforeseen events, we may be unable to manufacture our
materials to meet customers&#146; demands.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our manufacturing facilities are located in Romeoville and Burr Ridge, Illinois. These
facilities and some of our manufacturing and testing equipment would be difficult to replace in a
timely manner. Therefore, any material disruption at one of our facilities due to a natural or
man-made disaster or a loss of lease due to non-renewal or other unforeseen events could have a
material adverse effect on our ability to manufacture products to meet customers&#146; demands. While we
maintain customary property insurance, this insurance may not adequately compensate us for all
losses that we may incur and would not compensate us for any interruption in our business.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>If we are unable to expand our production capabilities to meet unexpected demand, we may be unable
to manage our growth and our business would suffer.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success will depend, in part, on our ability to manufacture nanomaterials in significant
quantities, with consistent quality and in an efficient and timely manner. We expect to continue to
expand our current facilities or obtain additional facilities in the future in order to respond to
unexpected demand for existing materials or for new materials that we do not currently make in
substantial quantities. Such unplanned demand, if it resulted in rapid expansion, could create a
situation where growth could become difficult to manage, which could cause us to lose potential
revenue.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Protection of our intellectual property is limited and uncertain</I>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our intellectual property is important to our business. We seek to protect our intellectual
property through patent, trademark, trade secret protection and confidentiality or license
agreements with our employees, customers, suppliers and others. Our means of protecting our
intellectual property rights in the United States or abroad may not be adequate and others,
including our competitors, may use our proprietary technology without our consent. We may not
receive the necessary patent protection for any applications pending with the U.S. Patent and
Trademark Office (&#147;USPTO&#148;) and any of the patents that we currently own or license may not be
sufficient to keep competitors from using our materials or processes. In addition, patents that we
currently own or license may not be held valid if subsequently challenged by others and others may
claim rights in the patents and other proprietary technology that we own or license. Additionally,
others may have already developed or may subsequently develop similar products or technologies
without violating any of our proprietary rights. If we fail to obtain patent protection or preserve
our trade secrets, we may be unable to effectively compete against others offering similar products
and services. In addition, if we fail to operate without infringing the proprietary rights of
others or lose any license to technology that we currently have or will acquire in the future, we
may be unable to continue making the products that we currently
make.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Moreover, at times, attempts may be made to challenge the prior issuance of our patents. For
example, the USPTO has granted a third-party request for re-examination with respect to one patent
relating to one of our nanoparticle manufacturing processes. On September&nbsp;7, 2005, our
representatives conducted an interview with the Examiner assigned to the re-examination at the
USPTO, resulting in the Examiner preparing an interview summary indicating that rejections to
issued claims may be formally withdrawn. However, prior to the USPTO issuing a formal notice
confirming patentability, the same unidentified third party filed a second request for
re-examination of the patent (which second request, the USPTO has since denied). Nonetheless, a
second interview was conducted, resulting in an amendment to all patent claims. Thereafter, a third
request for re-examination was filed and granted by the USPTO. We subsequently conducted a third
interview with the Examiner and responded to the third request. While we will continue to
vigorously defend our patent position, we may not ultimately be successful in maintaining the scope
of the claims of this patent during re-examination. While the Company intends to vigorously defend
its patent protection against such claims, it does not believe that these patent claims pose a risk
of material harm to the Company&#146;s business prospects or competitive positions. If the scope of the
Company&#146;s claims protected by the patent in question were ultimately reduced through the pending
re-examination proceedings before the USPTO, the Company would still continue to be able to conduct
its business as currently conducted, including the use of the technology that is the subject of the
patented claims. A reduction in the scope of the claims protected by the Company&#146;s patent in
question would limit the Company&#146;s ability to assert infringement claims and suits against other
parties using the same or sufficiently similar nanomaterial manufacturing process technology. The
Company believes that while patent protection is a valuable asset, a reduction in the scope of the
claims protected by the Company&#146;s patent in question would not materially alter the competitive
environment in which the Company operates or result in a material loss.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore, litigation may be necessary to enforce our intellectual property rights, to
protect our trade secrets, to determine the validity and scope of the proprietary rights of others,
or to defend against claims of infringement or invalidity. Such litigation could result in
substantial costs and diversion of resources and could harm our business, operating results and
financial condition. In addition, if others assert that our technology infringes their intellectual
property rights, resolving the dispute could divert our management team and financial resources.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the future, we may license certain of our intellectual property, such as trademarks or
copyrighted material, to third parties. While we would attempt to ensure that any licensees
maintain the quality and value of our brand, these licenses might diminish this quality and value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may be subject to claims that one or more of the business methods used by us infringe upon
patents held by others. The defense of any claims of infringement made against us by third parties
could involve significant legal costs and require our management to divert time and other resources
from our business operations. Either of these consequences of an infringement claim could have a
material adverse effect on our operating results. If we are unsuccessful in defending any claims of
infringement, we may be forced to obtain licenses or pay royalties to continue to use our
technology. We may not be able to obtain any necessary licenses on commercially reasonable terms or
at all. If we fail to obtain necessary licenses or other rights, or if these licenses are costly,
our operating results may suffer either from reductions in revenue through our inability to serve
clients or from increases in costs to license third-party technology.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Our industry is experiencing rapid changes in technology. If we are unable to keep pace with these
changes, our business will not grow.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rapid changes have occurred, and are likely to continue to occur, in the development of
advanced materials and processes. Our success will depend, in large part, upon our ability to keep
pace with advanced materials technologies, industry standards and market trends and to develop and
introduce new and improved products on a timely basis. We expect to commit substantial resources to
develop our technologies and product applications and, in the future, to expand our commercial
manufacturing capacity as volume grows. Our development efforts may be rendered obsolete by the
research efforts and technological advances of others and other advanced materials may prove more
advantageous than those we produce.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The markets we serve are highly competitive, and if we are unable to compete effectively, then our
business will not grow.</I>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The advanced materials industry is new, rapidly evolving and intensely competitive, and we
expect competition to intensify in the future. The market for materials having the characteristics
and potential uses of our nanomaterials is the subject of intensive research and development
efforts by both governmental entities and private enterprises around the world. We believe that the
level of competition will increase further as more product applications with significant commercial
potential are developed. The nanomaterials product applications that we are developing will compete
directly with products incorporating both conventional and advanced materials and technologies.
While we are not currently aware of the existence of commercially available competitive products
with the same attributes as those we offer, other companies may develop and introduce new or
competitive products. Our competitors may succeed in developing or marketing materials,
technologies and better or less expensive products than the ones we offer. In addition, many of our
potential competitors have substantially greater financial and technical resources, and greater
manufacturing and marketing capabilities than we do. If we fail to improve our current and
potential nanomaterials product applications at an acceptable price, or otherwise compete with
producers of conventional materials, we will lose market share and revenue to our competitors.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>We may need to raise additional capital in the future. If we are unable to obtain adequate funds,
we may be required to delay, scale-back or eliminate some of our manufacturing and marketing
operations or we may need to obtain funds through arrangements on less favorable terms or we may be
required to sell equipment to our largest customer.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We expect to expend significant resources on research, development and product testing, and in
expanding current capacity or capability for new business. In addition, we may incur significant
costs in preparing, filing, prosecuting, maintaining and enforcing our patents and other
proprietary rights. If necessary, we may seek funding through public or private financing and
through contracts with government or other companies. Additional financing may not be available on
acceptable terms or at all. If we are unable to obtain adequate funds, we may be required to delay,
scale-back or eliminate some of our manufacturing and marketing operations or we may need to obtain
funds through arrangements on less favorable terms. If we obtain funding on unfavorable terms, we
may be required to relinquish rights to some of our intellectual property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To raise additional funds in the future, we would likely sell our equity securities or enter
into loan agreements. To the extent that we enter into loan agreements, we may become subject to
financial, operational and other covenants that we must observe. In the event that we were to
breach any of these covenants, then the amounts due under such loans could become immediately
payable by us, which could significantly harm us. To the extent that we sell additional shares of
our equity securities, our stockholders may face economic dilution and dilution of their percentage
of ownership.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently have supply agreements with BASF and RHEM that contain provisions which could
potentially result in a mandatory license of technology and sale of production equipment to the
customer providing capacity sufficient to meet its production needs. Under our supply agreement
with BASF, a &#147;triggering event&#148; also would occur if:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our earnings for a twelve month period ending with our most recently
published quarterly financial statements are less than zero and our
cash, cash equivalents and investments are less than $2,000,000, or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the acceleration of any debt maturity having a principal amount of
more than $10,000,000, or we become insolvent as defined in the
supply agreement.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event of a triggering event where we are required to sell to BASF production equipment
providing capacity sufficient to meet BASF&#146;s production needs, the equipment would be sold at 115%
of the equipment&#146;s net book value. Under another of our supply
agreements with BASF, upon the breach of certain contractual
obligations to BASF, we would be required to sell BASF certain
production equipment at the greater of 30% of the original book value
of such equipment and any associated upgrades to it or 115% of the
equipment&#146;s net book value.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that we have sufficient cash balances to avoid the first triggering event for the
foreseeable future. If a triggering event were to occur and BASF elected to proceed with the
license and related sale mentioned above, we would lose both significant revenue and the ability to
generate significant revenue to replace that which was lost in the near term. Replacement of
necessary equipment that would be purchased and removed by BASF pursuant to this triggering event
could take six months to a year. Any additional capital outlays required to rebuild
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">capacity would probably be greater than the proceeds from the purchase of the assets pursuant
to our agreement with BASF. This shortfall might put us in a position where it would be difficult
to secure additional funding given what would then be an already tenuous cash position. Such an
event would also result in the loss of many of our key staff and line employees due to economic
realities. We believe that our employees are a critical component of our success and would be
difficult to quickly replace and train. Given the occurrence of such an event, we might not be able
to hire and retrain skilled employees given the stigma relating to such an event and its impact on
us. We might elect to effectively reduce our size and staffing to a point where we could remain a
going concern in the near term.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>We depend on key personnel, and their unplanned departure could harm our business.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success will depend, in large part, upon our ability to attract and retain highly
qualified research and
development, management, manufacturing, marketing and sales personnel on favorable terms. Due to
the specialized nature of our business, we may have difficulty locating, hiring and retaining
qualified personnel on favorable terms. If we were to lose the services of any of our key executive
officers or other key personnel, or if we are unable to attract and retain other skilled and
experienced personnel on acceptable terms in the future, or if we are unable to implement a
succession plan to prepare qualified individuals to assume key roles upon any loss of our key
personnel, then our business, results of operations and financial condition would be materially
harmed. In addition, we do not currently have &#147;key-man&#148; life insurance policies covering all of our
executive officers or key employees, nor do we presently have any plans to purchase such policies.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>We face potential product liability risks which could result in significant costs that exceed our
insurance coverage, damage our reputation and harm our business.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may be subject to product liability claims in the event that any of our nanomaterials
product applications are alleged to be defective or cause harmful effects to humans or physical
environments. Because our nanomaterials are used in other companies&#146; products, to the extent our
customers become subject to suits relating to their products, such as cosmetic, skin-care,
architectural coatings and personal-care products, these claims may also be asserted against us. We
may incur significant costs including payment of significant damages, in defending or settling
product liability claims. We currently maintain insurance coverage in the amount of $10&nbsp;million for
product liability claims, which may prove not to be sufficient. Even if a suit is without merit and
regardless of the outcome, claims can divert management time and attention, injure our reputation
and adversely affect demand for our nanomaterials.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>We are subject to governmental regulations. The costs of compliance and liability for noncompliance
with governmental regulations could have a material adverse effect on our business, results of
operations and financial condition.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current and future laws and regulations may require us to make substantial expenditures for
preventive or remedial action. Our operations, business or assets may be materially and adversely
affected by governmental interpretation and enforcement of current or future environmental, health
and safety laws and regulations. In addition, our coating and dispersion operations pose a risk of
accidental contamination or injury. The damages in the event of an accident or the costs to prevent
or remediate a related event could exceed both the amount of our liability insurance and our
resources or otherwise have a material adverse effect on our business, results of operations and
financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, both of our facilities and all of our operations are subject to the plant and
laboratory safety requirements of various occupational safety and health laws. We believe we have
complied in all material respects with governmental regulations applicable to us. However, we may
have to incur significant costs in defending or settling future claims of alleged violations of
governmental regulations and these regulations may materially restrict or impede our operations in
the future. In addition, our efforts to comply with or contest any regulatory actions may distract
personnel or divert resources from other important initiatives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The manufacture and use of certain products that contain our nanomaterials are subject to
extensive governmental regulation, including regulations promulgated by the U.S. Food and Drug
Administration, the U.S. Environmental Protection Agency and the U.S. Occupational Safety and
Health Administration. As a result, we are required to adhere to the requirements of the
regulations of governmental authorities in the United States and other
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">countries. These regulations could increase our cost of doing business and may render some
potential markets prohibitively expensive.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>We have implemented anti-takeover provisions which could discourage or prevent a takeover, even if
an acquisition could be beneficial to our stockholders.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;1998, we entered into a Rights Agreement, commonly referred to as a &#147;poison pill.&#148;
The provisions of this agreement and some of the provisions of our certificate of incorporation,
our bylaws and Delaware law could, together or separately:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>discourage potential acquisition proposals;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>delay or prevent a change in control; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>limit the price that investors might be willing to pay in the future for shares of our common stock.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In particular, our board of directors is authorized to issue up to 24,088 shares of preferred
stock (less any outstanding shares of preferred stock) with rights and privileges that might be
senior to our common stock, without the consent of the holders of the common stock, including up to
2,500 shares of Series&nbsp;A Junior Participating Preferred Stock issuable under the 1998 Rights
Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, Section&nbsp;203 of the Delaware General Corporations Law (&#147;DCGL&#148;) relating to
business combinations with related stockholders and the terms of our stock option plans relating to
changes of control may discourage, delay or prevent a change in control of our Company.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Future sales of our common stock by existing stockholders could negatively affect the market price
of our stock and make it more difficult for us to sell stock in the future.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of our common stock in the public market, or the perception that such sales could occur,
could result in a decline in the market price of our common stock and make it more difficult for us
to complete future equity financings. A substantial number of shares of our common stock and shares
of common stock subject to outstanding warrants and options may be resold pursuant to currently
effective registration statements. As of May&nbsp;18, 2007, there are:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>16,070,294 shares of common stock that have been issued in registered
offerings, upon the exercise of options under our equity incentive
plan or in private placements and are freely tradable in the public
markets,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1,410,490 shares of common stock that may be issued on the exercise
of stock options outstanding and exercisable under our equity
incentive plan;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>906,002 shares of common stock that were issued pursuant to our
September&nbsp;8, 2003 private placement and the related warrant which was
exercised on September&nbsp;2, 2004. The resale of these shares has been
registered pursuant to a Registration Statement on Form S-3 which was
declared effective by the Securities and Exchange Commission on
August&nbsp;13, 2004; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1,256,281 shares of common stock that were issued pursuant to our
March&nbsp;23, 2004 private placement and may be registered for resale
after March&nbsp;23, 2006 pursuant to a Registration Statement on Form S-3
which was filed with the Securities and Exchange Commission on
February&nbsp;5, 2007 and declared effective on May&nbsp;18, 2007.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>847,918 shares of common stock that were issued pursuant to our
August&nbsp;25, 2006 private placement and may be registered for resale
after August&nbsp;25, 2008 pursuant the terms of the Registration Rights
Agreement executed in connection with this private placement.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot estimate the number of shares of common stock that may actually be resold in the
public market because this will depend on the market price for our common stock, the individual
circumstances of the sellers, and other factors. If stockholders sell large portions of their
holdings in a relatively short time, for liquidity or other reasons, the market price of our common stock could decline significantly.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Bradford T. Whitmore has significant influence on all matters requiring stockholder approval
because he beneficially owns a large percentage of our common stock, and he may vote the common
stock in ways with which our other stockholders disagree.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;1, 2007, Bradford T. Whitmore, together with his affiliates, Grace Brothers, Ltd.
and Grace Investments, Ltd., beneficially owned approximately 19% of the outstanding shares of our
common stock. As a result, he has significant influence on matters submitted to our stockholders
for approval, including proposals regarding:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any merger, consolidation or sale of all or substantially all of our assets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the election of members of our board of directors; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any amendment to our certificate of incorporation.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The ownership position of Mr.&nbsp;Whitmore could delay, deter or prevent a change of control or
adversely affect the price that investors might be willing to pay in the future for shares of our
common stock. Mr.&nbsp;Whitmore&#146;s interests may be significantly different from the interests of our
other stockholders and he may vote the common stock he beneficially owns in ways with which our
other stockholders disagree. Investors in the Company should also note that R. Janet Whitmore, one
of our directors, is the sister of Mr.&nbsp;Whitmore.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>We have been involved in litigation. If we are involved in similar litigation in the future, the
expense of defending such litigation and the potential costs of judgments against us and the costs
of maintaining insurance coverage could have a material adverse effect on our financial
performance.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have been involved in three securities class action lawsuits, one of which was a
consolidation of several related lawsuits. While all of these lawsuits have been settled and
dismissed with all settlements funded by our directors and officers liability insurance, we may be
the target of additional securities lawsuits in the future. If we are involved in similar
litigation in the future, the expense of defending such litigation, the potential costs of
judgments against us, the costs of maintaining insurance coverage and the diversion of management&#146;s
attention could have a material adverse effect on our financial performance.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Our stock price is volatile.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The stock markets in general, and the stock prices of technology-based companies in
particular, have experienced extreme volatility that often has been unrelated to the operating
performance of any specific public company. The market price of our common stock has fluctuated in
the past and is likely to fluctuate in the future as well. Our future financial performance and
stock price may be subject to significant volatility, particularly on a quarterly basis. Shortfalls
in our revenues in any given period relative to the levels expected by investors could immediately,
significantly and adversely affect the trading price of our common stock.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Dilutive Effect of Private Placements</I>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;8, 2003 we sold 453,001 shares of our common stock to Grace Brothers, Ltd. at a
purchase price of $4.415 per share together with a warrant to purchase a like number of shares of
common stock during the next twelve months also at a price of $4.415 per share. This warrant was
exercised on September&nbsp;2, 2004 to acquire 453,001 newly issued shares of common stock. The share
price for the common stock was determined based on the fifteen-day market closing average for our
stock ending September&nbsp;5, 2003. On September&nbsp;8, 2003 and September&nbsp;2, 2004 the closing sale price
of our common stock as reported on NASDAQ, was $5.50 and $5.49 respectively, per share. On March
23, 2004 we sold 1,256,281 shares of our common stock to Altana at a purchase price of $7.96 per
share. The share price for the common stock was determined based on the ten-day market closing
average for our stock ending March&nbsp;18, 2004. On March&nbsp;23, 2004 the closing sale price of our common
stock, as reported on NASDAQ, was $8.26 per share. On August&nbsp;25, 2006 we sold 847,918 shares of our
common stock to Rohm and Haas Electronics Materials CMP Holdings, Inc. at a purchase price of
$5.8968 per share. The share price for the common stock was determined based on the twenty-five-day
market closing average for our stock ending August&nbsp;21,
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2006. On August&nbsp;25, 2006 the closing price of our common stock, as reported on NASDAQ, was
$6.71 per share. Each of these averages was negotiated with the respective investors in an effort
to approximate a market price, given volatility. Each of these issuances of stock, at their
respective subsequent closing dates, represented below then-current market pricing (looking only at
that closing date for this measurement) and, in that context, had a dilutive effect on existing
common stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>We have never paid dividends.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently intend to retain earnings, if any, to support our growth strategy. We do not
anticipate paying dividends on our stock in the foreseeable future.
</DIV>
<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>USE OF PROCEEDS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise specified in the prospectus supplement, we intend to use the net proceeds
from the sale of the securities offered by this prospectus and any accompanying prospectus
supplement for (1)&nbsp;acquiring, installing and commissioning equipment, and expanding the Company&#146;s
facilities, to support anticipated increases in the volume of nanomaterials currently being
produced, and in expected development of new nanomaterials, and (2)&nbsp;for other general corporate
purposes, which might include working capital, increase in technology development, increase in
business development, additional capital expenditures, the repayment of indebtedness and
acquisitions. Pending use for these purposes, we expect to invest proceeds from the sale of the
securities in short-term marketable securities. The precise amount and timing of sales of any
securities will be dependent on market conditions and the availability and cost of other funds to
us.
</DIV>
<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DILUTION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the securities offered hereby are common stock, the prospectus supplement will include
a dilution table setting forth any increase in net tangible book value to existing stockholders and
any dilution to new investors based on the proposed number of shares of common stock to be offered
and the assumed public offering price at the time of such offering.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->18<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DESCRIPTION OF CAPITAL STOCK</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">GENERAL
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus describes the general terms of our capital stock. For a more detailed
description of these securities, you should read the applicable provisions of Delaware law and our
certificate of incorporation and bylaws. When we offer to sell a particular series of these
securities, we will describe the specific terms of the series in a supplement to this prospectus.
Accordingly, for a description of the terms of any series of securities, you must refer to both the
prospectus supplement relating to that series and the description of the securities described in
this prospectus. To the extent the information contained in the prospectus supplement differs from
this summary description, you should rely on the information in the prospectus supplement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our certificate of incorporation, the total number of shares of all classes of stock
that we have authority to issue is 30,024,088 consisting of 30,000,000 shares of common stock, par
value $0.01 per share, and 24,088 shares of preferred stock, par value $0.01 per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">COMMON STOCK
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of May&nbsp;18, 2007 we had 19,080,495 shares of common stock outstanding. The holders of
our common stock are entitled to one vote for each share on all matters voted on by stockholders.
The holders of our common stock do not have cumulative voting rights, which means that holders of
more than one-half of the shares voting for the election of directors can elect all of the
directors then being elected. Subject to the preferences of any of our outstanding preferred stock
from time to time outstanding, the holders of our common stock are entitled to a proportional
distribution of any dividends that may be declared by the board of directors. In the event of a
liquidation or dissolution of Nanophase, the holders of our common stock are entitled to share
equally in all assets remaining after payment of liabilities and any payments due to holders of any
outstanding shares of our preferred stock from time to time outstanding. The outstanding shares of
our common stock are, as will the shares offered by this prospectus be, when issued, fully paid and
nonassessable. The rights, preferences and privileges of holders of our common stock are subject
to, and may be adversely affected by, the rights of the holders of shares of any of our outstanding
preferred stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">PREFERRED STOCK
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors has the authority to issue up to 24,088 shares of preferred stock with
rights and privileges that might be senior to our common stock, without the consent of the holders
of the common stock, including up to 2,500 shares of Series&nbsp;A Junior Participating Preferred Stock
issuable under our shareholder rights plan discussed below. No shares of preferred stock are
presently outstanding, and no shares are expected to be issued except in connection with the
shareholder rights plan referred to below. The issuance of preferred stock with voting and
conversion rights may adversely affect the voting power of the holders of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">SHAREHOLDER RIGHTS PLAN
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;1998, we declared a dividend of one preferred stock purchase right for each
outstanding share of Company common stock on November&nbsp;10, 1998. Each right entitles the holder,
upon the occurrence of certain specified events, to purchase from the Company one ten-thousandth of
a share of the Company&#146;s Series&nbsp;A Junior Participating Preferred Stock at a purchase price of $25
per one-ten thousandth of a share. The rights further provide that each right will entitle the
holder, upon the occurrence of certain specified events (and without the necessity of purchasing
the one ten-thousandth of a share of the Company&#146;s Series&nbsp;A Junior Participating Preferred Stock),
to purchase from us, common stock having a value of twice the purchase price and, upon the
occurrence of certain other specified events, to purchase from another entity into which we are
merged or which acquires 50% or more of our assets or earnings power, common stock of such other
entity having a value of twice the purchase price. The rights are not presently exercisable. The
rights generally become exercisable if a person or group acquires 35% or more of our common stock
or commences a tender offer that could result in such person or group owning 35% or more of our
common stock. In general, the rights may be redeemed by us at a price of $0.01 per right. The
rights expire on October&nbsp;28, 2008.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">ANTI-TAKEOVER PROVISIONS
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a corporation organized under the laws of the State of Delaware, we are subject to Section
203 of the General Corporation Law of the State of Delaware, which restricts our ability to enter
into business combinations with an interested stockholder or a stockholder owning 15% or more of
our outstanding voting stock, or that stockholder&#146;s affiliates or associates, for a period of three
years. These restrictions do not apply if:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>prior to becoming an interested stockholder, our board of directors
approves either the business combination or the transaction in which the
stockholder becomes an interested stockholder;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>upon consummation of the transaction in which the stockholder becomes
an interested stockholder, the interested stockholder owns at least 85% of our
voting stock outstanding at the time the transaction commenced, subject to
exceptions; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>on or after the date a stockholder becomes an interested stockholder,
the business combination is both approved by our board of directors and authorized
at an annual or special meeting of our stockholders by the affirmative vote of at
least two-thirds of the outstanding voting stock not owned by the interested
stockholder.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some provisions of our certificate of incorporation and bylaws could also have anti-takeover
effects. These provisions which are described below:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>permit the board of directors to increase its own size and fill the
resulting vacancies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>provide for a board comprised of three classes of directors with each
class serving a staggered three-year term;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>authorize the issuance of preferred stock in one or more series; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>prohibit stockholder action by written consent.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These provisions are intended to enhance the likelihood of continuity and stability in the
composition of the policies formulated by the board of directors. In addition, these provisions are
intended to ensure that the board of directors will have sufficient time to act in what it believes
to be in the best interests of Nanophase and its stockholders. These provisions also are designed
to reduce our vulnerability to an unsolicited proposal for a takeover of Nanophase that does not
contemplate the acquisition of all of our outstanding shares or an unsolicited proposal for the
restructuring or sale of all or part of Nanophase. The provisions are also intended to discourage
some tactics that may be used in proxy fights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">CLASSIFIED BOARD OF DIRECTORS
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The certificate of incorporation provides for the board of directors to be divided into three
classes of directors, with each class as nearly equal in number as possible, serving staggered
three-year terms. As a result, approximately one-third of the board of directors will be elected each year. The classified board
provision will help to assure the continuity and stability of the board of directors and the
business strategies and policies of Nanophase as determined by the board of directors. The
classified board provision could have the effect of discouraging a third party from making a tender
offer or attempting to obtain control of Nanophase. In addition, the classified board provision
could delay stockholders who do not agree with the policies of the board of directors from removing
a majority of the board of directors for two years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The certificate of incorporation provides that stockholder action can only be taken at an
annual or special meeting of stockholders and prohibits stockholder action by written consent in
lieu of a meeting. The certificate of incorporation also provides that special meetings of
stockholders may be called only by the board of directors, its
chairman, the president or the secretary of Nanophase. Stockholders are not permitted to call a
special meeting of stockholders or to require that the board of directors call a special meeting.
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">NUMBER OF DIRECTORS; REMOVAL; FILLING VACANCIES
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The certificate of incorporation provides that the board of directors will consist of between
five and nine members, the exact number to be fixed by resolution adopted by affirmative vote of a
majority of the board of directors. The board of directors currently consists of seven directors.
Further, the certificate of incorporation authorizes the board of directors to fill newly created
directorships. Accordingly, this provision could prevent a stockholder from obtaining majority
representation on the board of directors by permitting the board of directors to enlarge the size
of the board and fill the new directorships with its own nominees. A director so elected by the
board of directors holds office until the next election of the class for which the director has
been chosen and until his or her successor is elected and qualified. The certificate of
incorporation also provides that directors may be removed only for cause and only by the
affirmative vote of holders of a majority of the total voting power of all outstanding securities.
The effect of these provisions is to preclude a stockholder from removing incumbent directors
without cause and simultaneously gaining control of the board of directors by filling the vacancies
created by the removal with its own nominees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">TRANSFER AGENT AND REGISTRAR
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Transfer Agent and Registrar for our common stock is LaSalle Bank National Association.
</DIV>
<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PLAN OF DISTRIBUTION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may offer and sell the securities described in this prospectus:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>through agents;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>through one or more underwriters or dealers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>through a block trade in which the broker or dealer engaged to handle
the block trade will attempt to sell the securities as agent; but may position and
resell a portion of the block as principal to facilitate the transaction;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>directly to one or more purchasers (through a specific bidding or
auction process or otherwise); or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>through a combination of any of these methods of sale.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The distribution of the securities described in this prospectus may be effected from time to
time in one or more transactions either:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>at a fixed price or prices, which may be changed;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>at market prices prevailing at the time of sale;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>at prices relating to the prevailing market prices; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>at negotiated prices (which may potentially raise the dilutive effect of such issuance).</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Offers to purchase the securities may be solicited by agents designated by us from time to
time. Any agent involved in the offer or sale of the securities will be named, and any commissions
payable by us to the agent will be described, in the applicable prospectus supplement. Unless
otherwise indicated in the applicable prospectus supplement, any such agent will be acting on a
best efforts basis for the period of its appointment. Any agent may be
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">deemed to be an underwriter, as such term is defined in the Securities Act of 1933, of the
securities so offered and sold.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we offer and sell securities through an underwriter or underwriters, we will execute an
underwriting agreement with the underwriter or underwriters. The names of the specific managing
underwriter or underwriters, as well as any other underwriters, and the terms of the transactions,
including compensation of the underwriters and dealers, which may be in the form of discounts,
concessions or commissions, if any, will be described in the applicable prospectus supplement,
which will be used by the underwriters to make resales of the securities. That prospectus
supplement and this prospectus will be used by the underwriters to make resales of the securities.
If underwriters are used in the sale of any securities in connection with this prospectus, those
securities will be acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at fixed public offering
prices or at varying prices determined by the underwriters and us at the time of sale. Securities
may be offered to the public either through underwriting syndicates represented by managing
underwriters or directly by one or more underwriters. If any underwriter or underwriters are used
in the sale of securities, unless otherwise indicated in a related prospectus supplement, the
underwriting agreement will provide that the obligations of the underwriters are subject to some
conditions precedent and that with respect to a sale of these securities the underwriters will be
obligated to purchase all such securities if any are purchased.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may grant to the underwriters options to purchase additional securities to cover
over-allotments, if any, at the public offering price, with additional underwriting commissions or
discounts, as may be set forth in a related prospectus supplement. The terms of any over-allotment
option will be set forth in the prospectus supplement for those securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any underwriters are involved in the offer and sale, they will be permitted to engage in
transactions that maintain or otherwise affect the price of the securities. These transactions may
include over-allotment transactions, purchases to cover short positions created by the underwriter
in connection with the offering and the imposition of penalty bids. If an underwriter creates a
short position in the securities in connection with the offering, i.e., if it sells more securities
than set forth on the cover page of the applicable prospectus supplement, the underwriter may
reduce that short position by purchasing the securities in the open market. In general, purchases
of a security to reduce a short position could cause the price of the security to be higher than it
might be in the absence of such purchases. As noted above, underwriters may also choose to impose
penalty bids on other underwriters and/or selling group members. This means that if underwriters
purchase securities on the open market to reduce their short position or to stabilize the price of
the securities, they may reclaim the amount of the selling concession from those underwriters
and/or selling group members who sold such securities as part of the offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither we nor any underwriter make any representation or prediction as to the direction or
magnitude of any effect that the transactions described above may have on the price of the
securities. In addition, neither we nor any underwriter make any representation that such
underwriter will engage in such transactions or that such transactions, once commenced, will not be
discontinued without notice.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we offer and sell securities through a dealer, we or an underwriter will sell the
securities to the dealer, as principal. The dealer may then resell the securities to the public at
varying prices to be determined by the dealer at the time of resale. Any such dealer may be deemed
to be an underwriter, as such term is defined in the Securities Act of 1933, of the securities so
offered and sold. The name of the dealer and the terms of the transactions will be set forth in the
applicable prospectus supplement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may solicit offers to purchase the securities directly, and we may sell the securities
directly to institutional or other investors, who may be deemed an underwriter within the meaning
of the Securities Act of 1933 with respect to any resales of those securities. The terms of these
sales, including the terms of any bidding or auction process, if utilized, will be described in the
applicable prospectus supplement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may enter into agreements with agents, underwriters and dealers under which we may agree to
indemnify the agents, underwriters and dealers against certain liabilities, including liabilities
under the Securities Act of 1933, or to contribute to payments they may be required to make with
respect to these liabilities. The terms and conditions of this indemnification or contribution will
be described in the applicable prospectus supplement.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->22<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Some of the agents, underwriters or dealers, or their affiliates may be customers of, engage in
transactions with or perform services for us in the ordinary course of business.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may authorize our respective agents or underwriters to solicit offers to purchase
securities at the public offering price under delayed delivery contracts. The terms of these
delayed delivery contracts, including when payment for and delivery of the securities sold will be
made under the contracts and any conditions to each party&#146;s performance set forth in the contracts,
will be described in the applicable prospectus supplement. The compensation received by
underwriters or agents soliciting purchases of securities under delayed delivery contracts will
also be described in the applicable prospectus supplement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise indicated in the applicable prospectus supplement, each series of offered
securities will be a new issue of securities with no established trading market, except for our
common stock, which is listed on the NASDAQ Global Market. Unless otherwise indicated in the
applicable prospectus supplement, we do not expect to list the securities on a securities exchange,
except for our common stock, which is listed on the NASDAQ Global Market. Underwriters involved in
the public offering and sale of these securities may make a market in the securities. They are not
obligated to make a market, however, and may discontinue market making activity at any time. We
cannot give any assurance as to the liquidity of the trading market for any of these securities. In
order to comply with the securities laws of some states, if applicable, the securities offered
hereby will be sold in those jurisdictions only through registered or licensed brokers or dealers.
In addition, in some states securities may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration or qualification
requirement is available and complied with.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->23<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>LEGAL MATTERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Wildman, Harrold, Allen &#038; Dixon LLP, Chicago, Illinois is giving an opinion of the validity of
the issuance of the securities offered in this prospectus.
</DIV>
<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXPERTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
balance sheets of Nanophase Technologies Corporation as of
December&nbsp;31, 2006 and 2005, and the related statements of
operations, stockholders&#146; equity, and cash flows for each of the
years in the three year period ended December&nbsp;31, 2006 appearing in Nanophase Technologies Corporation&#146;s 2006 Annual Report
(Form&nbsp;10-K) for the year ended December&nbsp;31, 2006, have been
audited by McGladrey &#038; Pullen, LLP, an independent registered accounting
firm, as set forth in their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in reliance upon such report given
on the authority of such firm as experts in accounting and auditing.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->24<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>INFORMATION NOT REQUIRED IN PROSPECTUS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;14. Other Expenses of Issuance and Distribution</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="85%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SEC Registration Fee
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top">378.84</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Accounting Fees and Expense
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top">10,000.00</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Legal Fees and Expenses
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top">10,000.00</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Miscellaneous
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top">0.00</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;Total
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top">20,378.84</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All fees and expenses other than the SEC registration fee are estimated. The expenses listed
above will be paid by the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;15. Indemnification of Officers and Directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Section&nbsp;145 of the General Corporation Law of the State of Delaware (the &#147;DGCL&#148;), a
corporation may indemnify its directors, officers, employees and agents and its former directors,
officers, employees and agents and those who serve, at the corporation&#146;s request, in such
capacities with another enterprise, against expenses (including attorney&#146;s fees), as well as
judgments, fines and settlements in nonderivative lawsuits, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding in which they or any of them were or
are made parties or are threatened to be made parties by reason of their serving or having served
in such capacity. The DGCL provides, however, that such person must have acted in good faith and in
a manner he or she reasonably believed to be in (or not opposed to) the best interests of the
corporation and, in the case of a criminal action, such person must have had no reasonable cause to
believe his or her conduct was unlawful. In addition, the DGCL does not permit indemnification in
an action or suit by or in the right of the corporation, where such person has been adjudged liable
to the corporation, unless, and only to the extent that, a court determines that such person fairly
and reasonably is entitled to indemnity for costs the court deems proper in light of liability
adjudication. Indemnity is mandatory to the extent a claim, issue or matter has been successfully
defended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our certificate of incorporation provides that to the fullest extent permitted by Delaware
law, it shall indemnify and advance indemnification expenses to all of its directors and officers.
In addition, the certificate of incorporation provides that to the fullest extent permitted by
Delaware law, a director shall not be liable to Nanophase Technologies Corporation or its
stockholders for breach of fiduciary duty as a director.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into indemnification agreements with each director providing for
indemnification to the fullest extent permitted by Delaware law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16. List of Exhibits</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Exhibits
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Underwriting or Distribution Agreement.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Specimen stock certificate representing Common Stock, incorporated by reference
to Exhibit&nbsp;4.1 to the Company&#146;s Registration Statement on Form&nbsp;S-1 (File No.&nbsp;333-36937)
(the &#147;IPO S-1&#148;).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rights Agreement dated as of October&nbsp;28, 1998 by and between the Company and
LaSalle National Bank, incorporated by reference to Exhibit&nbsp;1 to the Company&#146;s
Registration Statement on Form&nbsp;8-A, filed October&nbsp;28, 1998.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certificate of Designation of Series&nbsp;A Junior Participating Preferred Stock
incorporated by reference to Exhibit&nbsp;4.4 to the Company&#146;s Annual Report on Form&nbsp;10-K
for the year ended December&nbsp;31, 1998 (the &#147;1998 10-K&#148;).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Rights Agreement dated August&nbsp;1, 2001 between the Company and
LaSalle National Association, as Rights Agent, incorporated by reference to Exhibit&nbsp;4.5
to the Company&#146;s Quarterly Report on Form&nbsp;10-Q for the quarter ended June&nbsp;30, 2001.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->II-1<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2001 Nanophase Technologies Corporation Equity Compensation Plan, incorporated
by reference to Exhibit&nbsp;4.3 to the Company&#146;s Registration Statement on Form&nbsp;S-8 (File
No.&nbsp;333-74170) filed October&nbsp;29, 2001.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amendment to Rights Agreement dated May&nbsp;24, 2002 between the Company and
LaSalle National Association, as Rights Agent, incorporated by reference to Exhibit&nbsp;4.7
to the Company&#146;s Registration Statement on Form&nbsp;S-3 (File No.&nbsp;333-90326) filed June&nbsp;12,
2002.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Third Amendment to Rights Agreement dated September&nbsp;5, 2003 between the Company
and LaSalle National Association, as Rights Agent, incorporated by reference to Exhibit
99.1 to the Company&#146;s Form&nbsp;8-K filed September&nbsp;10, 2003.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.8
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subscription Agreement dated September&nbsp;8, 2003 between the Company and Grace
Brothers, Ltd., incorporated by reference to Exhibit&nbsp;99.2 to the Company&#146;s Current
Report on Form&nbsp;8-K filed September&nbsp;10, 2003.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.9
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stock Purchase Agreement dated March&nbsp;23, 2004 between the Company and Altana
Chemie AG, incorporated by reference to Exhibit&nbsp;4.10 to the Company&#146;s Annual Report on
Form&nbsp;10-K for the year ended December&nbsp;31, 2003 (the &#147;2003 10-K).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.10
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Registration Rights Agreement dated March&nbsp;23, 2004 between the Company and
Altana Chemie AG, incorporated by reference to Exhibit&nbsp;4.11 to the 2003 10-K.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.11
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2004 Nanophase Technologies Corporation Equity Compensation Plan, incorporated
by reference to Exhibit&nbsp;4 to the Company&#146;s Registration Statement on Form&nbsp;S-8 (File No.
333-119466) filed October&nbsp;1, 2004.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.12
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment to 2004 Nanophase Technologies Corporation Equity Compensation
Plan, incorporated by reference to Exhibit&nbsp;99.1 to the Company&#146;s Current Report on Form
8-K filed July&nbsp;27, 2006.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.13
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Stock Option Agreement under the 2004 Equity Plan, incorporated by
reference to Exhibit&nbsp;4.13 to the Company&#146;s Annual Report on Form&nbsp;10-K
filed March&nbsp;15, 2005.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.14
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Restricted Share Grant Agreement under the 2004 Equity Plan,
incorporated by reference to Exhibit&nbsp;4.14 to the Company&#146;s Annual Report
on Form&nbsp;10-K filed March&nbsp;15, 2005.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.15
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Performance Share Grant Agreement under the 2004 Equity Plan,
incorporated by reference to Exhibit&nbsp;4.15 to the Company&#146;s Annual Report
on Form&nbsp;10-K filed March&nbsp;15, 2005.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.16
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2005 Nanophase Technologies Corporation Equity Compensation Plan,
incorporated by reference to Exhibit&nbsp;4 to the Company&#146;s Non-Employee
Director Restricted Stock Plan, incorporated by reference to Exhibit&nbsp;A to
the Company&#146;s Definitive Proxy Statement on Form&nbsp;DEF14A filed May&nbsp;17,
2005.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.17
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment to the Nanophase Technologies Corporation 2005
Non-Employee Director Restricted Stock Plan, incorporated by reference to
Exhibit&nbsp;99.1 to the Company&#146;s Current Report on Form&nbsp;8-K filed January&nbsp;9,
2006.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="right" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">5.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Opinion of Wildman, Harrold, Allen &#038; Dixon LLP</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of McGladrey &#038; Pullen, LLP</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Wildman, Harrold, Allen &#038; Dixon LLP (included in Exhibit&nbsp;5.1)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">24
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power of Attorney (included on signature page)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 12pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>To be filed, if necessary, subsequent to the effectiveness of this registration
statement by an amendment to the registration statement or incorporated by reference
pursuant to a Current Report on Form 8-K in connection with the offering of securities
registered hereunder.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Financial Statement Schedule
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;17. Undertakings</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned Registrant hereby undertakes:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">(1)&nbsp;To file, during any period in which offers or sales are being made, a post-effective
amendment to this registration statement: (i)&nbsp;To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933; (ii)&nbsp;To reflect in the prospectus any facts or
events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and
any deviation from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the &#147;Calculation of Registration Fee&#148; table
in the effective registration statement; (iii)&nbsp;To include any material information with
respect to the distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; provided, however, that
paragraphs (a)(1)(i) and (a)(1)(ii) of this section do not apply if the registration
statement is on Form S-3 or Form S-8, and the information required to be included in a
post-effective amendment by those paragraphs is conformed in periodic reports filed by the
Registrant
pursuant to Section&nbsp;13 or Section 15(d) of the 1934 Act that are incorporated by reference
in the registration statement.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->II-2<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">(2)&nbsp;That, for the purpose of determining any liability under the Securities Act of 1933,
each post-effective amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">(3)&nbsp;To remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned Registrant hereby undertakes that, for purposes of determining any liability
under the Securities Act, each filing of the registrant&#146;s annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned Registrant undertakes that: (1)&nbsp;for purposes of determining any liability
under the Securities Act of 1933, the information omitted from the form of prospectus filed as part
of the registration statement in reliance upon Rule&nbsp;430A and contained in the form of prospectus
filed by the Registrant pursuant to Rule&nbsp;424(b)(1) or (4)&nbsp;or 497(h) under the Securities Act shall
be deemed to be part of the registration statement as of the time it was declared effective; and
(2)&nbsp;for the purpose of determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insofar as indemnification for liabilities arising under the Securities Act may be permitted
to directors, officers and controlling persons of the Registrant pursuant to the Registration
Certificate of Incorporation, Bylaws, indemnification agreements or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by Registrant of
expenses incurred or paid by a director, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of such issue.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->II-3<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Act of 1933, Nanophase Technologies Corporation
certifies that it has reasonable grounds to believe that it meets all of the requirements for
filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized in Romeoville, Illinois as of May&nbsp;22, 2007.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">NANOPHASE TECHNOLOGIES CORPORATION<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ JOSEPH E. CROSS
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Joseph E. Cross,&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">President and Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears immediately below
constitutes and appoints Joseph E. Cross or Jess Jankowski or any of them, his or her true and
lawful attorney-in-fact and agent, with full power of substitution, for him or her and in his or
her name, place and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and any and all additional registration
statements pursuant to Rule 462(b) under the Securities Act of 1933, as amended, in connection with
or related to the offering contemplated by this Registration Statement and its amendments, if any,
and to file the same with all exhibits thereto, and other documents in connection therewith, with
the Commission, granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent or his or her substitute or substitutes may lawfully do or cause to
be done by virtue hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities indicated as of May&nbsp;22, 2007.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ JOSEPH E. CROSS
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Joseph E. Cross
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President and Chief Executive Officer&nbsp;&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ JESS JANKOWSKI
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Jess Jankowski
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer, Vice President
and Corporate Controller (Principal Accounting
and Financial Officer)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ DONALD PERKINS
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Donald Perkins
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the Board&nbsp;&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ JAMES HENDERSON
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
James Henderson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ JAMES McCLUNG
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
James McClung
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ JERRY PEARLMAN
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Jerry Pearlman
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ RICHARD SIEGEL
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Richard Siegel
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ R. JANET WHITMORE
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
R. Janet Whitmore
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->II-4<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT INDEX</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">5.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Opinion of Wildman, Harrold, Allen &#038; Dixon LLP</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of McGladrey &#038; Pullen, LLP</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Wildman, Harrold, Allen &#038; Dixon LLP (included in Exhibit&nbsp;5.1)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">24
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power of Attorney (included on signature page)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->II-5<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-5.1
<SEQUENCE>2
<FILENAME>c15434exv5w1.htm
<DESCRIPTION>OPINION OF WILDMAN, HARROLD, ALLEN & DIXON LLP
<TEXT>
<HTML>
<HEAD>
<TITLE>exv5w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;5.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;Wildman, Harrold, Allen &#038; Dixon LLP Letterhead&#093;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">May&nbsp;22, 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Nanophase Technologies Corporation<BR>
453 Commerce Street<BR>
Burr Ridge, Illinois 60521

</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 9%; margin-top: 6pt">Re: Registration Statement on Form&nbsp;S-3
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Ladies and Gentlemen:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are acting as special counsel to Nanophase Technologies Corporation, a Delaware corporation
(the &#147;Company&#148;), in connection with the proposed registration by the Company of up to an aggregate
of 2,000,000 of the Company&#146;s Common Stock (the &#147;Securities&#148;), pursuant to a Registration Statement
on Form S-3 to be filed with the Securities and Exchange Commission (the &#147;Commission&#148;) on or about
the date hereof under the Securities Act of 1933, as amended (the &#147;Securities Act&#148;) (such
Registration Statement, as amended or supplemented, the &#147;Registration Statement&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Securities may be sold separately or as units with other Securities. The amounts, prices,
and other specific terms of the Securities offered and sold under the Registration Statement will
be set forth in the prospectus constituting a part of the Registration Statement and in one or more
supplements to such prospectus (collectively, the &#147;Prospectus&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The terms of the Securities to be issued by the Company from time to time will be approved by
the Board of Directors of the Company or a committee thereof or certain authorized officers of the
Company as part of the corporate action taken (the &#147;Corporate Proceeding&#148;) in connection with the
issuance of the Securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have examined originals, or copies certified or otherwise identified to our satisfaction,
of such documents, corporate records and other instruments as we have deemed necessary for the
purposes of this opinion, including (i)&nbsp;the corporate and organizational documents of the Company,
(ii)&nbsp;minutes and records of the Corporate Proceedings of the Company and (iii)&nbsp;the Registration
Statement and exhibits thereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of this opinion, we have assumed the authenticity of all documents submitted to
us as originals, the conformity to the originals of all documents submitted to us as copies and the
authenticity of the originals of all documents submitted to us as copies. We have also assumed the
genuineness of the signatures of persons signing all documents in connection with which this
opinion is rendered, the authority of such persons signing on behalf of the parties thereto other
than the Company, and the due authorization, execution and delivery of all documents by the parties
thereto other than the Company. As to any facts material to the opinions expressed herein which we
have not independently established or verified, we have relied upon statements and representations
of officers and other representatives of the Company and others. We have also made other
assumptions which we believe to be appropriate for purposes of this letter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based upon and subject to the qualifications, assumptions and limitations set forth in this
letter, we are of the opinion that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;The Company is a corporation existing and in good standing under the General Corporation
Law of the State of Delaware.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;When, as and if (i)&nbsp;the Registration Statement shall have become effective pursuant to the
provisions of the Securities Act, (ii)&nbsp;the Securities shall have been issued as described in the
Prospectus and in accordance with the resolutions of the Company&#146;s Board of Directors (or
authorized committee thereof) authorizing the foregoing and any legally required consents,
approvals, authorizations and other orders of the Commission and any other regulatory authorities
are obtained, and (iii)&nbsp;appropriate certificates representing the Securities are duly
executed by the Company and countersigned by the transfer agent and delivered to the purchasers
against payment of the agreed consideration, the Securities when issued will be validly issued.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The foregoing opinions assume that (i)&nbsp;the consideration designated in the applicable Corporate
Proceeding for any Securities shall have been received by the Company and (ii)&nbsp;the Registration
Statement shall have become effective under the Securities Act.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our opinions expressed above are subject to the qualifications that we express no opinion as
to the applicability of, compliance with or effect of (i)&nbsp;any bankruptcy, insolvency,
reorganization, fraudulent transfer, fraudulent conveyance, moratorium or other similar laws
affecting the enforcement of creditors&#146; rights generally, (ii)&nbsp;general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at law), (iii)&nbsp;public
policy considerations which may limit the rights of parties to obtain certain remedies and (iv)
other commonly recognized statutory and judicial constraints on enforceability, including, without
limitation, statutes of limitations. Our advice on every legal issue addressed in this letter is
based exclusively on the internal law of the State of Illinois, the General Corporation Law of the
State of Delaware or the federal law of the United States, and represents our opinion as to how
that issue would be resolved were it to be considered by the highest court in the jurisdiction
which enacted such law. The manner in which any particular issue would be treated in any actual
court case would depend in part on facts and circumstances particular to the case and would also
depend on how the court involved chose to exercise the wide discretionary authority generally
available to it. This letter is not intended to guarantee the outcome of any legal dispute which
may arise in the future. We advise you that issues addressed by this letter may be governed in
whole or in part by other laws, but we express no opinion as to whether any relevant difference
exists between the laws upon which our opinions are based and any other laws which may actually
govern. For purposes of the opinions in paragraph 1, we have relied exclusively upon a recent
certificate issued by the Delaware Secretary of State, and such opinion is not intended to provide
any conclusion or assurance beyond that conveyed by such certificate. We have assumed without
investigation that there has been no relevant change or development between the date of such
certificate and the date of this letter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not find it necessary for the purposes of this opinion, and accordingly we do not
purport to cover herein, the application of the securities or &#147;Blue Sky&#148; laws of the various states
to the issuance of the Securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This opinion is furnished to you in connection with the filing of the Registration Statement,
and is not to be used, circulated, quoted or otherwise relied upon for any other purposes. This
opinion is limited to the specific issues addressed herein, and no opinion may be inferred or
implied beyond that expressly stated herein. We assume no obligation to revise or supplement this
opinion should the present laws of the State of Illinois, the General Corporation Law of the State
of Delaware or the federal laws of the United States be changed by legislative action, judicial
decision or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We hereby consent to the filing of this opinion as Exhibit&nbsp;5.1 to the Registration Statement.
We also consent to the reference to our firm under the heading &#147;Legal Matters&#148; in the Registration
Statement. In giving this consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section&nbsp;7 of the Securities Act of the rules and regulations of the
Commission.
</DIV>

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    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Very truly yours, <BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Wildman, Harrold, Allen &#038; Dixon LLP
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Wildman, Harrold, Allen &#038; Dixon LLP&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

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<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>3
<FILENAME>c15434exv23w1.htm
<DESCRIPTION>CONSENT OF MCGLADREY & PULLEN, LLP
<TEXT>
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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;23.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have
issued our report, dated March&nbsp;14, 2007, on the financial
statements and internal controls over financial reporting of
Nanophase Technologies Corporation as of December&nbsp;31, 2006. We
hereby consent to the use of our report in the Registration Statement
on Form&nbsp;S-3 of Nanophase Technologies Corporation. We also
consent to the reference to our Firm under the caption
&#147;Experts&#148; in the Prospectus.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Schaumburg, Illinois<BR>
May&nbsp;22, 2007
</DIV>


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    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ McGladrey &#038; Pullen, LLP
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">McGladrey &#038; Pullen, LLP&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


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