Advance Nanotech Reports Third Quarter 2009 Financial Results

MONTEBELLO, NY, Nov 20, 2009 (MARKETWIRE via COMTEX) --
AVNA | Quote | Chart | News | PowerRating -- Advance Nanotech, Inc. (OTCBB: AVNA | Quote | Chart | News | PowerRating) reports financial results this
week for the three months ended September 30, 2009. The Company
reported net income of $2,417,351, or $0.04 per share, compared to a
loss of $382,555, or $0.01 per share, for the three months ended
September 30, 2008, an increase of approximately $2,800,000. During
the nine months ended September 30, 2009, the Company reported a net
loss of $3,662,926, or $0.07 per share, compared to a net loss of
$3,831,661, or $0.10 per share, for the nine months ended September
30, 2008, a decrease of 4 percent.

A summary of the highlights from the quarter include:

--  Operating costs were reduced by over 55 percent for the nine month
    period in 2009, versus the comparable 2008 period
--  Awarded new contract development work for Alphasense, a leading gas
    sensor company based in the UK
--  Issuance of one additional granted patents bringing granted patented
    portfolio to five, with nine further patent applications pending
--  Continued focused resources on funded application development
    contracts with current partners offering near term revenue potential

Revenues generated were related to sales of its Lonestar and Vapor
Generator products, along with contracted, instructional and set-up
services provided to customers. Although revenue decreased by 30
percent for the three months ended September 30, 2009, cost of sales
decreased by over 67 percent during the same period. Similarly,
while revenues decreased by 23 percent during the first nine months
compared to the same period in 2008, cost of sales decreased by over
56 percent. The decrease in cost of sales reflects higher margin
contracted revenue recognized for the corresponding periods.

"We are pleased with our application development efforts and
continued advances within our core partner programs," commented Bret
Bader, CEO of Advance Nanotech. "Even with limited capital
resources, our sales, research and development teams have been
successful with new contract wins and advancements with existing
contracts that we believe will lead to near term revenues. In
October, we received our NRC exempt radiation license, which allows
us to ship systems in the US while eliminating many regulatory
requirements for our customers. Our capital constraints continue to
affect our business, delaying, but not losing, revenue opportunities
for our Lonestar platform. We continue to work towards full funding
of our business through various financing channels. In such
capacity, we have worked closely with our advisers, existing lenders,
noteholders and strategic partners on all available financing
options. We have continued to fund our operations with short term
notes, and expect to affect a longer term solution in the fourth
quarter. Despite these capital challenges, our product and
technology remains in a class above others in the chemical sensing
industry, and we believe more than ever that the profound nature of
the technology continues to have potential to revolutionize the
chemical sensing industry."

The Company recognized net income from continuing operations,
including non-controlling interest, during the third quarter of 2009
of $2,147,533, or $0.04 per basic share, compared to a loss of
$474,767, or $0.01 per basic share for the same period in 2008. The
increase in net income was related to the decrease in operating
expenses as well as a non-cash gain recognized as of September 30,
2009 for the warrant and derivative re-valuations of $3,291,676. The
Company had net income attributable to the Company (net of
non-controlling interest) of $2,183,505, or $0.04 per basic share,
compared with a loss of $205,078, or $0.01 per basic share for the
same period in 2008. The Company reported a comprehensive gain
(inclusive of loss from discontinued operations and foreign currency
translation adjustments) of $2,294,495, or $0.04 per basic share,
compared with a comprehensive loss of $82,034, for the same period in
2008.

Selling, general and administrative expenses for the third quarter
were $642,741, a decrease of $802,210 or over 55 percent compared to
the third quarter 2008 level of $1,444,951. Total operating
expenses were $1,195,822, down from $1,945,580 when compared to the
third quarter of 2008. The loss from operations during the current
third quarter was $635,711 compared to $1,385,633 for the same period
in 2008, representing a decrease of $749,922 or 54 percent.

The Company incurred interest expense during the third quarter of
2009 of $646,588, an increase of $447,563 from the previous year
third quarter level due to an increase in short term secured notes of
$1,500,000. Other expenses during the third quarter included a
non-cash late registration accrual of $109,555 relating to the
registration obligations to the convertible note holders. The
Company also incurred a non-cash gain of $3,291,676 during the third
quarter 2009 for the fair value re-valuation of the Company's warrant
and derivative liabilities. During the same period of the prior
year, the Company recognized a non-cash gain of $1,140,885.

As of December 31, 2008, the Company had net operating loss carry
forwards for income tax reporting purposes of approximately
$29,200,000 that may be offset against future taxable income through
2028.

        COMPARATIVE STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
                        Three Months Ended          Nine Months Ended
                    --------------------------  --------------------------
                      30-Sep-09     30-Sep-08     30-Sep-09     30-Sep-08
                    ------------  ------------  ------------  ------------
Net Revenue         $    705,518  $  1,009,240  $  1,916,951  $  2,497,855
Cost of Sales           (145,407)     (449,293)     (438,586)   (1,007,239)
                    ------------  ------------  ------------  ------------
Gross Margin             560,111       559,947     1,478,365     1,490,616
                    ------------  ------------  ------------  ------------
Research and
 development            (553,081)     (500,629)   (1,446,763)   (1,709,462)
Selling, general
 and administrative     (642,741)   (1,444,951)   (2,396,629)   (5,112,549)
                    ------------  ------------  ------------  ------------
Total operating
 expenses             (1,195,822)   (1,945,580)   (3,843,392)   (6,822,011)
                    ------------  ------------  ------------  ------------
Loss from
 operations         $   (635,711) $ (1,385,633) $ (2,365,027) $ (5,331,395)
Other income /
 (expense)             2,783,244       910,866    (1,690,985)    1,143,028
                    ------------  ------------  ------------  ------------
Gain / (loss)
 including
 non-controlling
 interest           $  2,147,533  $   (474,767) $ (4,056,012) $ (4,188,367)
Less: Net loss
 attributable to
 non-controlling
 interest                 35,972       269,688       156,834       989,149
                    ------------  ------------  ------------  ------------
Gain / (loss)
 attributable to
 the Company        $  2,183,505  $   (205,079) $ (3,899,178) $ (3,199,218)
Gain / (loss) from
 discontinued
 operations              233,846      (177,476)      236,252      (632,443)
                    ------------  ------------  ------------  ------------
Net gain / (loss)   $  2,417,351  $   (382,555) $ (3,662,926) $ (3,831,661)
Foreign currency
 translation
 adjustment
 gain/(loss)            (122,856)      300,521       565,067       317,886
                    ------------  ------------  ------------  ------------
Comprehensive
 gain / (loss)      $  2,294,495  $    (82,034) $ (3,097,859) $ (3,513,775)
                    ============  ============  ============  ============
Net income (loss)
 per common stock
 (basic and
 diluted):
Continuing
 operations         $       0.04  $      (0.01) $      (0.07) $      (0.08)
Discontinued
 operations         $       0.00  $      (0.00) $      (0.00) $      (0.02)
                    ------------  ------------  ------------  ------------
   Total            $       0.04  $      (0.01) $      (0.07) $      (0.10)
                    ============  ============  ============  ============
Weighted Average
 Shares Outstanding   56,481,379    39,501,968    55,715,610    37,613,562
                    ============  ============  ============  ============

About Advance Nanotech, Inc. and Owlstone Nanotech, Inc.

Advance Nanotech, Inc. (d/b/a Owlstone) is in the process of
realigning its business and becoming an operating company focused on
its majority owned subsidiary Owlstone Nanotech's next generation
chemical detection technology. Owlstone Nanotech, Inc. ("Owlstone")
is a pioneer in the commercialization of chemical detection products.
The Owlstone detector is a revolutionary dime-sized sensor that can
be programmed to detect a wide range of chemical agents that may be
present in extremely small quantities. Using leading-edge micro- and
nano-fabrication techniques, Owlstone has created a complete chemical
detection sensor that is significantly smaller and can be produced
more cost effectively than products using existing technology. There
are numerous applications -- across industries from security and
defense to industrial process, air quality control and healthcare --
that depend on the rapid, accurate detection and measurement of
chemical compounds. Owlstone works with market leaders within these
industries to integrate the detector into next generation chemical
sensing products and solutions. Owlstone's technology offers a unique
combination of benefits, including small size, low manufacturing
costs, minimal power consumption, reduced false-positives, and a
customizable platform. For more information about Advance Nanotech,
Inc. and Owlstone, please visit www.owlstonenanotech.com.

The information contained in this news release, other than historical
information, consists of forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Exchange Act of 1934. These statements may involve risks and
uncertainties that could cause actual results to differ materially
from those described in such statements. Although the Company
believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors,
including general economic conditions, spending levels, market
acceptance of product lines, the recent economic slowdown affecting
technology companies, the future success of scientific studies,
ability to successfully develop products, rapid technological change,
changes in demand for future products, legislative, regulatory and
competitive developments, the Company's ability to secure additional
working capital and/or generate sufficient cash flow to support its
operations, and other factors could cause actual results to differ
materially from the Company's expectations. Advance Nanotech's Annual
Report on Form 10-K, recent and forthcoming Quarterly Reports on Form
10-Q, recent Current Reports and other SEC filings discuss some of
the important risk factors that may affect Advance Nanotech's
business, results of operations and financial condition. The Company
undertakes no obligation to revise or update publicly any
forward-looking statements for any reason.

For more information, contact:

    Investor Relations
    (845) 533-4225
    ir@advancenanotech.com

SOURCE: Advance Nanotech, Inc.

mailto:ir@advancenanotech.com

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