NASDAQ: SLSN

Leveraging
a platform of integrated patented and proprietary technologies, we create products with unique performance to enhance end-consumers’
health and well-being. We offer comprehensive production, starting with engineered materials, formulation development, and finished
product development, through commercial manufacturing and packaging capabilities. Our expertise in materials engineering allows
us to effectively coat and disperse materials on a nano and “non-nano” scale for use in a variety of markets in skin
health, including for use in sunscreens as APIs. We believe our innovative approach to creating these materials gives us technological
and competitive advantages in market. In addition to APIs, we produce our finished skin care, sun care, and color cosmetics products
(“Consumer Products”) through the vertical integration of patented and proprietary technologies that offer unique
skin health benefits. We offer these consumer products for sale to brands who ultimately sell products to consumers in both prestige
and mass markets within the beauty industry. Solésence consumer products have received broad acceptance in the marketplace.
Due to the enhanced efficacy and aesthetic qualities offered by our proprietary technology platform, Solésence consumer
products satisfy growing consumer demands across a range of product formats and categories. The vertically integrated nature of
Solésence consumer products helps us to develop ingredient technologies and formulas in tandem. We have leveraged this
to develop specialized formulation know-how with our unique ingredients, improve efficiency, and avoid potential major supply
chain challenges.  

Given
our technological position, in addition to the historical market acceptance of our APIs for use in skin health products and sunscreens,
we have seen rapidly growing sales for our suite of consumer products. Due to the expanding demand from our brand partners, we
have further refined our strategy to reflect our view that consumer products should be the major focus of our growth strategy.
Management believes that this growth is happening now due to a confluence of our technology and market conditions that favor the
types of products we produce. We continue to see unprecedented demand for these products. Coupled with our expanded and growing
expertise in these areas, we believe we are well positioned to enjoy growth into the future. This success had led us to focus
our combined business-, ingredient technology-, and product-development capabilities on products that bring unique performance
to this area. While we will continue to produce and sell materials to our other advanced materials customers, it is not our strategic
focus, and we expect it to make up less of our total business over time. We may develop additional technologies or find unique
applications outside of our core markets in the future, but to maximize the use of our resources today, we plan on expanding efforts
in areas where we have proven we can deliver innovation and growth.

Consumer
Products

During
2015 we were granted a patent on a new type of particle surface treatment (coating) — now called Original Active Stress
Defense™ Technology. This became the cornerstone of our new product development in our consumer product line, with first
revenue recognized during 2017.

We
now offer a suite of three technology platforms under our Active Stress Defense™ family of technologies, each of which offers
a distinct market advantage in terms of performance, aesthetics, and/or “clean” positioning in UV and environmental
protection. We design and market flexible formulas that allow for adoption by a range of brands with different market positions
across beauty, health, and wellness. In 2020, consumer products surpassed our personal care APIs in terms of total revenue. We
believe that Solésence consumer products offer the greatest growth potential of any product line in any market in the Company’s
history.

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We
continue to develop and expand our in-house formulating capability, through which we have created, and now sold, more than 950
SKUs of fully formulated finished cosmetic products in markets focused on skin health, with the majority in prestige beauty. Products
developed and sold through our consumer products line are all produced under the requirements of current Good Manufacturing Practice
standards (“cGMP”), as enforced by the U.S. Food and Drug Administration (“FDA”), which enables us to
leverage the expertise we developed in the manufacture of personal care ingredients. Although our Solésence products are
fully formulated for consumer use, we do not sell directly to consumers or distribute products to consumers under the Solésence
brand through intermediaries or resellers. Instead, we sell our consumer products to customers as market-ready products, as customized
white label products, or as custom-developed products, in each case, for sale or distribution to consumers under our customers’
brand names. For this reason we call our consumer products customers “brand partners.”

Solésence
received two industry accolades. In July 2022 at Cosmoprof North America, Solésence was awarded the Cosmopack North America
Award for best Formulation for our product, Multi-Cultural Magic SPF 50+ Featuring Solésence Kleair™, acknowledging
the Company’s technology, formulation, and marketing know-how. In September 2022, Solésence was awarded the Cosmetics
& Toiletries Allē Award for Most Significant Active Ingredient in Sun/Light Protection for Kleair™ technology.
In early 2023, Solésence was named number 2 in the Beauty category of Fast Company’s World’s Most Innovative
Companies list. This prestigious award recognizes the impact we have on the industry we serve and the lives of the people who
use our products. In July of 2023, Solésence was again awarded the Cosmopack North America Award for best Formulation,
this time for its product Natural Glow Face Oil SPF 40+ featuring Kleair™ and Bloom™ technology, recognizing our continued
innovative approach to formulation and product innovation. Also in 2023, Solésence won the 2023 Beauty Matter NEXT Award
for Best Contract Manufacturer and was a winner of the 22nd Chicago Innovation Awards. In 2024, Solésence won its third
consecutive Cosmopack North America Award for best Formulation for its Lip Oil, SPF 40+, making Solésence the first-ever
third-time winner of the Award in Cosmopack North America’s history. Also in 2024, Solésence won its second Cosmetics
& Toiletries Allē Award in the Finished Formula-Prestige category for its market-ready product, Soft Glow SPF 50+. Most
recently in March 2025, Solésence won its third consecutive Cosmetics & Toiletries Allē Award and its second in
the Finished Formula-Prestige category for its finished formula Au Lait Face Milk SPF 50+. To-date Solésence has won 9
awards across product and ingredient innovation and service, highlighting the Company’s know-how across technology, formulation,
and marketing.

Personal
Care Ingredients

Prior
to 2020, our largest product had been the manufacture and sale of APIs in the skin health and sun care markets, which we deliver
to customers through strategic partnerships. We
continue to manufacture and supply hundreds of metric tons of surface engineered zinc oxide and titanium dioxide ingredients to
our customers annually, and these are used by major global consumer products companies for sunscreens and skin health-focused
personal care products. We produce these products using proprietary coating and dispersion technologies that comply with the requirements
of cGMP and are classified as Active Pharmaceutical Ingredients, or APIs, by the FDA.

Advanced
Materials

A
third product for us has historically been the manufacture and sale of advanced nanoparticle materials, including a material used
in life science applications to enhance the performance of PCR test methods. We continue to service other profitable markets where
we have had a degree of success in the past, including applications in food packaging and coatings, but they are not our
strategic focus and related future development in these areas are not being prioritized.

Sources
and Availability of Raw Materials

Most
of the raw materials we use are readily commercially available. In some cases, we rely on sole-source processors of materials
that utilize an array of worldwide sources for the raw materials that they process to our specifications. However, we require
very high purity zinc for our personal care applications that have occasionally seen shortages in prior years. Although we currently
believe we have developed adequate commercial relationships to supply the necessary raw materials for our business which are not
readily commercially available, our business is subject to the pricing and availability of certain raw materials.

Some
of the raw materials that are critical to the production of our products and parts that are critical to the operation of our equipment
are sourced from single suppliers, suppliers from China and Korea. However, we do not knowingly source any materials from the
Xinjiang region of China. We continue to monitor delays in shipping exports from China and Korea. The Company is monitoring the
potential impacts of Chinese tariffs on our cost of materials sourced from China. Despite the Russian invasion of Ukraine, we
do not anticipate any directly related supply disruptions as we do not knowingly source any materials directly from either country.
Additionally, we could be disrupted by conditions unrelated to our business operations or that are beyond our control, including
but not limited to international trade restrictions and conditions related to epidemics. We typically maintain no less than one
month’s supply of raw materials and parts that are sourced from sole suppliers and make efforts to identify additional suppliers
who may be able to provide such raw materials or parts. The Company is actively taking steps to reduce the number of singularly
sourced raw materials.

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Markets
and Distribution

Consumer
Products

We
partner with beauty, health, and wellness brands on a global basis to develop, manufacture and market products that enhance lives
through healthy skin. These products are fully formulated solutions built around proprietary Solésence technologies, which
are designed to improve skin health for all human beings, and are aligned with consumer demand. Our consumer products customers
(“brand partners”) are positioned in skin care, makeup/cosmetics, and sun care markets, with the majority of our partners
operating in the prestige beauty segment with retail, direct-to-consumer, and/or omnichannel strategies. This represents a move
downstream from our previous position — one of providing ingredients to manufacturers — to offering finished consumer
products that we believe offer a clear and distinct market advantage relative to both aesthetics and performance. With our first
consumer product revenue recognized during 2017, we had our first material amounts of consumer product revenue in 2018 and experienced
significant expansion of these sales through 2025. Consumer products brand partners have experienced strong growth as our products
have seen broad acceptance from retailers, adoption by consumers, and recognition by third-party media outlets through awards
and accolades. We expect our consumer products to enhance both our degree of control of the business development cycle, and to
further enable our ability to grow rapidly.

Personal
Care Ingredients

In
addition to serving strategic partners in diverse markets and geographic locations, we will continue to devote resources to maintaining
and growing our relationship with BASF Corporation (“BASF”), the largest customer in our personal care ingredients
product group. This has been a successful relationship that we expect will contribute to our future growth. BASF, which describes
itself as the world’s leading chemical company with annual revenue of approximately $77 billion, is a “globally leading
supplier of sustainable high-performance ingredients for the personal care industry,” with recognized brands, significant
revenue, and a broad sales network. BASF is primarily responsible for the business development cycle and maintains the direct
customer relationships. We have a long-term exclusive relationship with BASF, primarily to provide nano-scale zinc oxide-based
products made to BASF’s specifications to be used as ingredients in personal care cosmetics, with sunscreens and daily wear
products being the dominant applications. These materials differ significantly in their specifications from those used in the
consumer products line. 

Research
and Development

Most
of our research and development since 2015 has been directly related to the development of Solésence consumer products.
We endeavor to either meet specific customer needs or develop solutions to address unmet or emerging needs where we believe our
technologies will offer a distinct advantage. Our efforts in research and development, cosmetic formulating, process engineering
and advanced engineering groups are focused in three major areas: 1) application development for our products; 2) creating or
obtaining additional technology platforms that have the capability to serve multiple beauty or life science markets; and 3) continuing
to improve manufacturing operations to improve process reliability and reduce costs.

Our
total research and development expense, which includes all expenses relating to our technology and advanced engineering groups
was $4.1 millions and $3.8 million during the years ended December 31, 2025 and 2024, respectively. This represents our share
of these expenses only and does not take into account amounts spent by any of our customers in support of new product development.
Our future success will depend in large part upon our ability to develop products that bring a high degree of value to our customers.
Through the two-year period ended December 31, 2025, we had cumulative research and development expenses of approximately $7.9
million and $0.1 million cumulative capital expenditures on lab and testing equipment improvements.

Competitive
Advantage

Through
our Solésence consumer product line, our Active Stress Defense™ platform of proprietary technologies – which
includes Solésence Kleair™ – offers unique skin health benefits through performance-related and aesthetic advantages
in environmental protection skin health products, including UVA/UVB, pollution and HEV (blue) light protection. These technologies
expand access to healthy skin by improving both the product experience across the full range of skin tones while also leveraging
a unique versatility that enables a variety of novel formats to reach the full range of product preferences and lifestyles. By
combining our market awareness, proprietary dispersion capabilities and formulation know-how, our Solésence products enable
our brand partners to expand the range of products within skin care and color cosmetics categories that can include sun and environmental
protection and consequently fill a unique market segment which drives the growing demand for our consumer products.

Through
our personal care ingredients product line, we believe that targeted collaborations with our long-standing customers will enable
them to have a competitive advantage which will sustain and/or grow their market share in the sunscreen API market. Both
the consumer products and the personal care ingredients lines have been positively impacted by the growing interest among consumers
for mineral-based sunscreens, which management sees as a validation of the Company strategy.

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Manufacturing
Operations

We
currently have manufacturing capacity based in two locations in the Chicago area. We develop and supply engineered materials and
bulk finished goods in quantities ranging from grams to metric tons. All facilities are registered under the ISO 9001, American
National Standard, Quality Management System Requirements, ISO 22716 American National Standard, Environmental Management System
Requirements, and ISO 14001, American National Standard, Environmental Management System Requirements. We are compliant
with cGMP for products under U.S. Food and Drug Administration (“FDA”) regulation, applying to the manufacture of
APIs and OTC Finished Dosage Form materials (primarily used in sun protection). We have registered some of the chemicals we ship
to customers in Europe pursuant to the European Chemical Agency’s regulations issued to date pertaining to Registration
Evaluation and Authorization of Chemicals (“REACH”). Currently, we have registered Zinc Oxide, Aluminum Oxide, Iron
Oxide and Octyltrimethoxysilane under REACH. The Company supports our Brand Partners GMP site license activities for our consumer
products in Canada and Australia.

Our
operations employ a cellular, team-based manufacturing approach, where workers operate in work “cells,” under a lean
manufacturing environment to continuously advance and improve production capabilities. We have also developed a highly flexible
workforce that has been cross trained to allow it to be employed broadly across our manufacturing processes. Beginning in late
2019, we also began to employ a significant number of temporary operators to assist us in supporting the production of our Solésence
customer products. Our manufacturing approach, targeted engineering actions, and capital investment have resulted in continuing
process innovations and improvements that have reduced the variable manufacturing cost significantly over the past several years,
while increasing our capacity to meet demand.

We
are committed to a Lean Six Sigma manufacturing approach, to the extent possible given a certain measure of irregular demand,
where we are 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 our major operational goals - (1) to increase output without adding unnecessarily
to existing equipment and (2) to continually reduce production costs while consistently producing high quality products.

Intellectual
Property and Proprietary Rights

We
rely on a combination of patent, trademark, copyright, trade secret and other intellectual property laws, nondisclosure agreements
and other protective measures to protect our intellectual property. In addition to obtaining patent and trademarks based on our
inventions and products, we may also license certain third-party patents from time-to-time to expand our technology base.

As
of the date of this filing, we own 11 U.S. patents and 4 pending U.S. patent applications. We also own 123 foreign patents and
patent applications consisting of 91 issued or allowed foreign patents and 32 pending foreign patent applications. All of the
pending and owned foreign patents are counterparts to domestic filings covering our platform of particle technologies and surface
treatments. All of the Company’s patents and patent applications relate to health and wellness.

Competition

Within
each of our targeted markets and product applications, we face potential competition from contract manufacturers and developers,
advanced materials and chemical companies, and suppliers of traditional materials. In many markets, the actual or potential competitors
are larger and more diversified than we are; however, we believe we focus on market segments and opportunities where our materials
and related technologies are superior to those of our competitors, often due to our abilities to produce highly engineered ingredients
to meet specific performance requirements, develop solutions for customers’ specific applications, and in the case of consumer
products line, finished products that impart benefits of these technologies with tactile,
visual, and performance characteristics in line with consumer need and demand.

With
respect to traditional suppliers, we may compete against lower priced traditional materials for certain customer applications.
In some product or process applications the benefits of using advanced materials do not always justify a process change or outweigh
their frequently higher costs.

We
believe that our material technologies and manufacturing platforms are strong. We believe we are well-positioned with our platform
of integrated commercial materials technologies.

Solésence
consumer products face competition from a wide variety of offerings in health, beauty, and wellness categories. Solésence
products compete with existing solutions as well as new solutions from various sources, including other product developers and
manufacturers who seek to serve skin care brands and integrated brands who also manufacture their own products in-house, and we
must differentiate our value proposition in order to gain traction in this marketplace. The complexities of sunscreen regulation
and the nuances of the development and manufacture of sunscreen products present a barrier for brands with integrated manufacturing
in other skin care and cosmetics areas. Still, several Solésence consumer products customers have internal development
and manufacturing capabilities that are similar to the capabilities of Solésence and can serve as indirect competition
to our products and services. We believe that our Solésence consumer products technologies and our expertise in the nuances
of formulating products that contain UV protection, coupled with our capability to produce novel formats, will allow us to be
a competitive player in this market on a sustainable basis.

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Governmental
Regulations, Including Climate Change

The
manufacture and use of certain products that contain Active Pharmaceutical Ingredients are subject to governmental regulations.
As a result, we are required to adhere to the cGMP requirements of the FDA and similar regulations that include testing, control
and documentation requirements enforced by periodic inspections. We also comply with the European Chemical Agency’s regulations
issued to date pertaining to the chemicals we have registered under REACH. In early 2022, we were granted site clearance by Australia’s
TGA for the full finished product manufacture of creams, lotions, sprays, sticks and all topical sunscreen forms. TGA site clearance
is legally required for brands to market Solésence-made products as primary sunscreens in Australia. Our initial focus
will be on establishing a footprint with both new and existing Solésence brand partners, to enable the sale of our patented
skin health finished products as primary sunscreens.

We
are committed to environmental health and safety (“EH&S”). We believe we comply with all applicable exposure limit
standards issued by the United States Department of Labor’s Occupational Health and Safety Administration (“OSHA”).
Because nanotechnology remains an emerging and evolving science, there are no currently required measurements or personal protective
equipment available that are specific to nanoparticle safety. Accordingly, we rely on general chemical safety and process safety
requirements to identify safe personal protective equipment and appropriate handling protocols. We believe that we have taken
a leadership position on EH&S in our operations and have internal and external review and monitoring of our practices.

In
addition, our facilities and 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. Further, we believe our processes to be highly efficient, generating very
low levels of waste and emissions. For this reason, we do not view issues surrounding climate change and any currently foreseeable
related regulations as materially impacting our business and financial statements, beyond any inestimable impact on the macro-economic
environment.

We
have taken a responsible, proactive approach to EH&S by implementing appropriate procedures and processes to have our facilities
registered under ISO 14001, American National Standard, Environmental Management System Requirements. We are also involved with
leading industry groups that are defining nanomaterial standards and protocols. These currently include the ASTM International
Committee on Nanotechnology, and the US TAG to ISO TC 229 Nanotechnology committee managed by the American National Standards
Institute committee (ANSI). We also participate in FDA reviews relative to cosmetic and applicable drug applications. We have
a full-time, advanced degreed professional, along with a supporting staff, who spend a significant amount of time managing governmental
regulation compliance and EH&S.

Employees

On
December 31, 2025, we had a total of 115 full-time employees, 15 of whom hold advanced degrees. Additionally, we have a number
of temporary, and temporary-to-permanent employees, typically 90 to 225 on a demand-driven basis, and a number of contractors
with specific industry experience that have become a part of our talent pool. We have no collective bargaining agreements and
believe that we have a strong relationship with our employees, whom management believes represent the strength of our Company.

Backlog

We
do not believe that a backlog as of any particular date is indicative of future results. Our sales are primarily pursuant to purchase
orders for delivery of our Solésence formulated products, personal care ingredients, and advanced materials. We have some
agreements that give customers the right to purchase a specific quantity of ingredients during a specified time period. These
agreements, however, do not obligate the customers to purchase any minimum quantity of such ingredients. 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’s needs. For these reasons we do not believe that such agreements are meaningful for determining backlog
amounts.

Business
Segment and Geographical Information

Our
operations comprise a single business segment and all of our long-lived assets are located within the United States. See Note
13 to the accompanying Financial Statements for additional information.

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Key
Customers

A
limited number of key customers account for a substantial portion of our commercial revenue. We are seeing the composition of
these key customers change with the growth we are experiencing within our consumer products line, which has grown to exceed our
personal care ingredients line significantly. For 2025, total consumer products revenue amounted to $54.9M or 88% of total
revenue compared to $44.4M, or 85% for 2024. In particular, revenue from our three largest customers across all business
areas included two of our consumer products customers and our largest customer in personal care ingredients (BASF), constituted
approximately 29%, 16%, and 10%, respectively, of our 2025 total revenue.

As
our consumer products continue to represent more of our total revenue, we expect to see a number of smaller (sub-10% of revenue)
customers represent a more significant portion of our total revenue. We have experienced this in 2025 and 2024 and expect it to
continue in 2026 and beyond.

While
our agreements with BASF are long-term agreements, they may be terminated by BASF under certain circumstances with contractually
required notice and do not provide any guarantees that BASF will buy our products. The loss of one of our largest customers or
the failure to attract new customers could have a material adverse effect on our business, results of operations and financial
condition. To reduce the impact of having a high concentration of sales to a limited number of customers, we have pursued new
customers through our market focused business model, and particularly through our consumer products. To the extent we are successful
in adding a large number of customers through this model, and maintaining or expanding our existing partners, we believe we will
be able to best manage the risks associated with customer concentration.

Forward-Looking
Statements

We
want to provide investors with more meaningful and useful information. As a result, this Annual Report on Form 10-K (the “Form
10-K”) contains certain “forward-looking statements”, as defined in Section 27A of the Securities Act of 1933,
as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). 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 “anticipates”, “believes”,
“estimates”, “expects”, “plans”, “intends” and similar expressions. These statements
reflect management’s current beliefs and are based on information now available to it. Accordingly, these statements are
subject to certain risks, uncertainties and contingencies that could cause our actual results, performance or achievements in
2026 and beyond to differ materially from those expressed in, or implied by, such statements. These risks, uncertainties and factors
include, without limitation: our ability to be consistently profitable despite the losses we have incurred since our incorporation;
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; our potential inability to obtain working capital when needed on acceptable terms or at all; our ability to obtain
materials at costs we can pass through to our customers, including high purity zinc, and other items impacted by supply chain
pressures, including tariffs; uncertain demand for, and acceptance of, our Solésence products, and our advanced materials;
our manufacturing capacity and product mix flexibility in light of customer demand; our limited marketing experience, including
with our suite of consumer products; changes in development and distribution relationships; the impact of competitive products
and technologies; our dependence on patents and protection of proprietary information; our ability to maintain an appropriate
electronic trading venue for our securities; the impact of any potential new governmental regulations, especially any new governmental
regulations focusing on the processing, handling, storage or sale of nanomaterials as it could impact our personal care ingredients
business, that could be difficult to respond to or costly to comply with; business interruptions
due to unexpected events or public health crises, including viral pandemics such as COVID-19; and the resolution of litigation
or other legal proceedings in which we may become involved. In addition, our forward-looking statements could be affected by general
industry and market conditions and growth rates. Readers of this Form 10-K 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.

Investor
Information

We
are subject to the informational requirements of the Exchange Act and, accordingly, file periodic reports, proxy statements and
other information with the Securities and Exchange Commission (the “SEC”). Such reports, proxy statements and other
information may be obtained by visiting the Public Reference Room of the SEC at 100 F Street, N.E., Washington, DC 20549 or by
calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding issuers that file electronically.

Financial
and other information may also be accessed at our website. The address is to ir.solesence.com. We make available, free
of charge, copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after
filing such material electronically with, or otherwise furnishing it to, the SEC, and intend to make all such reports and amendments
to reports available free of charge on our website. We have included our website address throughout this Form 10-K as textual
references only. The information contained on, or accessible through, our website is not incorporated into this Form 10-K.

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