SOLESENCE, INC. (SLSN)
SIC breadcrumb: Manufacturing > Chemicals And Allied Products > SIC 2844 Perfumes, Cosmetics & Other Toilet Preparations
SEC company page: https://www.sec.gov/edgar/browse/?CIK=883107. Latest filing source: 0001999371-26-007345.
Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
|---|---|---|---|---|
| Revenue | 62,064,000 | USD | 2025 | 2026-03-31 |
| Net income | 1,790,000 | USD | 2025 | 2026-03-31 |
| Assets | 50,055,000 | USD | 2025 | 2026-03-31 |
Financials
Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-31. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000883107.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.
| Metric | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 14,193,000 | 12,509,000 | 17,123,000 | 29,475,000 | 37,317,000 | 37,297,000 | 52,347,000 | 62,064,000 | |||
| Net income | -1,283,000 | -789,000 | -2,081,000 | -3,006,000 | 989,000 | 2,320,000 | -2,623,000 | -4,390,000 | 4,235,000 | 1,790,000 | |
| Operating income | -1,268,000 | -772,000 | -2,023,000 | -2,796,000 | 1,485,000 | 2,559,000 | -2,258,000 | -3,546,000 | 5,132,000 | 1,572,000 | |
| Gross profit | 3,240,000 | 3,850,000 | 3,290,000 | 2,616,000 | 5,990,000 | 8,690,000 | 8,360,000 | 7,825,000 | 16,188,000 | 16,063,000 | |
| Diluted EPS | -0.08 | 0.03 | 0.05 | -0.05 | -0.09 | 0.07 | 0.02 | ||||
| Operating cash flow | -241,000 | -960,000 | -1,342,000 | -2,776,000 | -2,061,000 | 2,321,000 | -1,650,000 | -2,006,000 | 1,971,000 | -8,567,000 | |
| Capital expenditures | 280,000 | 128,000 | 209,000 | 160,000 | 740,000 | 878,000 | 1,874,000 | 2,823,000 | 1,051,000 | 4,558,000 | |
| Assets | 4,842,000 | 6,266,000 | 6,569,000 | 9,372,000 | 13,540,000 | 28,394,000 | 33,558,000 | 32,881,000 | 50,002,000 | 50,055,000 | |
| Stockholders' equity | 2,791,000 | 3,232,000 | 1,384,000 | 1,511,000 | 2,732,000 | 7,465,000 | 5,649,000 | 1,902,000 | 14,946,000 | 17,634,000 | |
| Cash and cash equivalents | 1,779,000 | 1,955,000 | 1,345,000 | 1,194,000 | 957,000 | 657,000 | 2,186,000 | 1,722,000 | 1,409,000 | 1,288,000 | |
| Free cash flow | -369,000 | -1,169,000 | -1,502,000 | -3,516,000 | -2,939,000 | 447,000 | -4,473,000 | -3,057,000 | -2,587,000 |
Ratios
| Metric | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Net margin | -14.66% | -24.03% | 5.78% | 7.87% | -7.03% | -11.77% | 8.09% | 2.88% | |||
| Operating margin | -14.25% | -22.35% | 8.67% | 8.68% | -6.05% | -9.51% | 9.80% | 2.53% | |||
| Return on equity | -45.97% | -24.41% | -150.36% | -198.94% | 36.20% | 31.08% | -46.43% | -230.81% | 28.34% | 10.15% | |
| Return on assets | -26.50% | -12.59% | -31.68% | -32.07% | 7.30% | 8.17% | -7.82% | -13.35% | 8.47% | 3.58% | |
| Current ratio | 2.64 | 2.28 | 1.29 | 1.13 | 1.30 | 1.58 | 1.20 | 1.05 | 1.14 | 2.07 |
Financial Charts
Quarterly
Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-12. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000883107.json.
| Quarter | End Date | Revenue | Net Income | Diluted EPS | Method |
|---|---|---|---|---|---|
| 2022-Q2 | 2022-06-30 | 0.00 | reported discrete quarter | ||
| 2022-Q3 | 2022-09-30 | -0.02 | reported discrete quarter | ||
| 2023-Q1 | 2023-03-31 | -0.02 | reported discrete quarter | ||
| 2023-Q2 | 2023-03-31 | -1,159,000 | reported discrete quarter | ||
| 2023-Q2 | 2023-06-30 | 11,872,000 | 0.01 | reported discrete quarter | |
| 2023-Q3 | 2023-06-30 | 333,000 | reported discrete quarter | ||
| 2023-Q3 | 2023-09-30 | 7,958,000 | -0.03 | reported discrete quarter | |
| 2023-Q4 | 2023-12-31 | 8,011,000 | -2,128,000 | derived Q4 = FY annual - nine-month YTD | |
| 2024-Q1 | 2024-03-31 | 9,868,000 | 893,000 | 0.02 | reported discrete quarter |
| 2024-Q2 | 2024-03-31 | 893,000 | reported discrete quarter | ||
| 2024-Q2 | 2024-06-30 | 13,046,000 | 0.01 | reported discrete quarter | |
| 2024-Q3 | 2024-06-30 | 856,000 | reported discrete quarter | ||
| 2024-Q3 | 2024-09-30 | 16,866,000 | 0.04 | reported discrete quarter | |
| 2024-Q4 | 2024-12-31 | 12,567,000 | -558,000 | derived Q4 = FY annual - nine-month YTD | |
| 2025-Q1 | 2025-03-31 | 14,625,000 | 80,000 | 0.00 | reported discrete quarter |
| 2025-Q2 | 2025-03-31 | 80,000 | reported discrete quarter | ||
| 2025-Q2 | 2025-06-30 | 20,359,000 | 0.04 | reported discrete quarter | |
| 2025-Q3 | 2025-06-30 | 2,667,000 | reported discrete quarter | ||
| 2025-Q3 | 2025-09-30 | 14,597,000 | -0.02 | reported discrete quarter | |
| 2025-Q4 | 2025-12-31 | 12,483,000 | 163,000 | derived Q4 = FY annual - nine-month YTD | |
| 2026-Q1 | 2026-03-31 | 12,957,000 | -766,000 | -0.01 | reported discrete quarter |
Quarterly Charts
Macro Cross-References
- CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- UNRATE - Unemployment Rate
- FEDFUNDS - Federal Funds Effective Rate
- CES0500000003 - Average Hourly Earnings of All Employees, Total Private
- DFEDTARU - Federal Funds Target Range - Upper Limit
- DFEDTARL - Federal Funds Target Range - Lower Limit
- DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
- CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
- CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
- PCEPI - Personal Consumption Expenditures: Chain-type Price Index
- PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- PPIACO - Producer Price Index by Commodity: All Commodities
- T10YIE - 10-Year Breakeven Inflation Rate
- U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- PAYEMS - All Employees, Total Nonfarm
- CIVPART - Labor Force Participation Rate
- EMRATIO - Employment-Population Ratio
- UNEMPLOY - Unemployed
- CE16OV - Employment Level
- ICSA - Initial Claims
- JTSJOL - Job Openings: Total Nonfarm
- JTSQUR - Quits: Total Nonfarm
- GDPC1 - Real Gross Domestic Product
- A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
- INDPRO - Industrial Production: Total Index
- TCU - Capacity Utilization: Total Index
- HOUST - New Privately-Owned Housing Units Started: Total Units
- PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- RSAFS - Advance Retail Sales: Retail Trade
- PCE - Personal Consumption Expenditures
- DSPIC96 - Real Disposable Personal Income
- PSAVERT - Personal Saving Rate
- M2SL - M2
- BOPGSTB - U.S. International Trade in Goods and Services: Balance
- MSPUS - Median Sales Price of Houses Sold for the United States
- HSN1F - New One Family Houses Sold: United States
- RHORUSQ156N - Homeownership Rate in the United States
- TTLCONS - Total Construction Spending: Total Construction in the United States
- RRVRUSQ156N - Rental Vacancy Rate in the United States
- TOTALSL - Total Consumer Credit Owned and Securitized
- REVOLSL - Revolving Consumer Credit Owned and Securitized
- DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
- GDP - Gross Domestic Product
- GPDI - Gross Private Domestic Investment
- GCE - Government Consumption Expenditures and Gross Investment
- PCEC - Personal Consumption Expenditures
- NETEXP - Net Exports of Goods and Services
- GFDEBTN - Federal Debt: Total Public Debt
- GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
- FYFSD - Federal Surplus or Deficit
- FGRECPT - Federal Government Current Receipts
- FGEXPND - Federal Government: Current Expenditures
- MANEMP - All Employees, Manufacturing
- USCONS - All Employees, Construction
- USTRADE - All Employees, Retail Trade
- USFIRE - All Employees, Financial Activities
- USGOVT - All Employees, Government
- AWHAETP - Average Weekly Hours of All Employees, Total Private
- DGORDER - Manufacturers' New Orders: Durable Goods
- NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
- BUSINV - Total Business Inventories
- EXPGS - Exports of Goods and Services
- IMPGS - Imports of Goods and Services
- IR - Import Price Index (End Use): All Commodities
- PPIFIS - Producer Price Index by Commodity: Final Demand
Latest quarter (10-Q)
Latest 10-Q source: 0001999371-26-010555.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview Solésence is a health-oriented, science-driven company, focused on various skin health, beauty and wellness markets. Our primary skin health products are fully developed prestige skin care formulations with mineral-based UV protection enabled by our proprietary Active Pharmaceutical Ingredients (“APIs”), which are also marketed as APIs for sale to manufacturers of other types of skin health products, including sunscreens and daily care products. Additionally, we continue to sell products in legacy markets including medical diagnostics, architectural coatings, industrial coating applications, abrasion-resistant additives, and plastics additives applications—all of which currently fall into the advanced materials product category. Results of Operations Three Months Ended March 31, 2026 and 2025 Total revenue decreased to $12,957 for the three months ended March 31, 2026, compared to $14,625 for the same period in 2025. Much of our revenue was from our three largest customers for the three-month periods ended March 31, 2026, and 2025, respectively. This reflects sales to our largest customers for our consumer products and sales of APIs to our largest customer in personal care ingredients. This is the revenue breakdown, as a percentage of total revenue, from the customers referenced above during the three-months periods ended March 31, 2026, and 2025, respectively: For the three months ended Product March 31, Customer # Category 2026 2025 1 Consumer Products 37 % 25 % 2 Personal Care Ingredients 21 % 9 % 3 Consumer Products 9 % 8 % Total 67 % 42 % 12 Product revenue, the primary component of our total revenue, decreased to $12,957 for the three months ended March 31, 2026, compared to $14,625 during the same period of 2025. The three-month product revenue was lower due to higher sales in our personal care ingredients category and lower sales in our consumer products and advanced materials product categories. Other revenue decreased to $38 for the three-month period ended March 31, 2026, compared to $50 for the same period in 2025, respectively. Other revenues are typically comprised primarily of developmental fees. Cost of revenue generally includes costs associated with commercial production and customer development arrangements. Cost of revenue decreased to $9,620 for the three months ended March 31, 2026, compared to $11,243 for the same period in 2025. The decrease for the three months in the cost of revenue was primarily driven by decreased volume resulting in decreased labor and material costs. While we typically pass-through costs to our customers, we sometimes cannot pass through 100% of pricing increases on raw materials, and even with pass throughs, our gross margin percentage is negatively impacted by higher material costs. The Company continues to monitor the potential impact of the tariffs and associated legal actions and pricing on our materials sourced internationally. Capacity is a key area of focus to increase throughput first, followed quickly by increased cost efficiency once we can achieve greater scale. Our planning has had us adding to our current fixed manufacturing cost structure through 2026 to accommodate additional growth, and to build a better base for further growth beyond that level. The extent to which margins grow, as a percentage of total revenue, will be dependent upon revenue mix, revenue volume, our ability to cut costs and pass commodity market-driven raw materials increases on to customers, and the speed and efficiency with which we are able to scale up production for our consumer products. We expect that, as product revenue volume increases, our fixed manufacturing costs will be more efficiently absorbed, which should lead to increased margins as we grow. Our most critical operational issue today is reducing controllable variable product manufacturing costs. Research and development expense, which includes all expenses relating to the technology and advanced engineering groups, primarily consists of costs associated with the development or acquisition of new finished product formulations for skin care, new product applications for our skin care ingredients, and the cost of enhancing our manufacturing processes. This includes legal fees related to intellectual property development, protection, and maintenance. As an example, we are currently focusing the bulk of our resources on developing new product formulations, and related new technologies, as we expand marketing and sales efforts relating to our Solésence products. This work has led to several new products and additional potential new products. 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 core materials technologies and/or materials that have the capability to serve multiple skin health-related markets; and 3) continuing to improve our core technologies to improve manufacturing operations and reduce costs. Research and development expense increased to $1,042 for the three months ended March 31, 2026, compared to $1,018 for the same period in 2025. The increase is due in large part to increased legal costs related to research and development, and salaries in 2026 compared to 2025. Selling, general and administrative expense increased to $2,799 for the three months ended March 31, 2026, compared to $2,108 for the same period in 2025. The increase is due to an increase in legal costs and increased employee-related costs in 2026 to when compared to 2025. Inflation In Company-wide operations, we believe inflation has not had a material effect on our operations or financial position for 2025, although we have seen increases in our costs. We expect supplier price increases and wage and benefit inflation, both of which represent a significant component of our costs of operations, may have a material effect on our operations and financial position in 2026 and beyond. We will apply our best efforts to pass through cost increases to our customers. If we are unable to pass through any increases due to contractual limitations or conditions in our markets specifically, this could reduce margins and net income. Liquidity and Capital Resources Cash, cash proceeds and use of cash for the three months ended March 31, 2026, and 2025, and year ended December 31, 2025 were: In 000’s Three months ended March 31, 2026 Three months ended March 31, 2025 Year ended December 31, 2025 Total cash $ 573 $ 1,817 $ 1,288 Cash provided by (used in) operating activities 1,517 (7,221 ) (8,567 ) Net cash (used in) provided by investing activities (528 ) 133 (2,143 ) Net cash (used in) provided by financing activities (1,704 ) 7,496 10,589 The net cash provided by operating activities during the three months ended March 31, 2026 was primarily due to increase in accounts payable and deferred revenue, offset by net income (loss) and decrease in inventory. Net cash used in investing activities was attributable to expenditures on capital equipment for all periods presented above. The net cash used in financing activities was attributable to the decreased use of debt. 13 Our actual future capital requirements in 2026 and beyond will depend on many factors, including customer acceptance of our current and potential future consumer products, applications, and products, continued progress in research and development activities and product testing programs, the magnitude of these activities and programs, and the costs necessary to increase and expand our manufacturing capabilities and to market and sell these products and ingredients. Other important issues that will drive future capital requirements will be the development of new markets and new customers as well as the potential for significant unplanned growth with existing customers. Depending on the success of certain projects, and conditions within the markets supplying labor and materials for capital equipment, we expect that capital spending relating to currently known capital needs for 2026 will be between $0.5 million and $1.5 million, to be funded by profit from operations, our existing loans and lines of credit, and possible new debt financing. If those projects are delayed or ultimately prove unsuccessful, or if we fail to be able to support the additional cost of funding them in the near term, we expect our capital expenditures may fall below the lower end of the range. Similarly, substantial success in business development projects may cause the actual 2026 capital investment to exceed the top of this range. Additional Consideration We had federal net operating loss carryforwards for tax purposes of approximately $36.9 million on December 31, 2025. Because the Company may experience “ownership changes” within the meaning of the U.S. Internal Revenue Code (“IRC”) in connection with any future equity offerings, future utilization of this carryforward may be subject to certain limitations as defined by the IRC. If not utilized, $30.7 million of this loss carryforward will expire between 2026 and 2038. Given changes to the IRC, net operating loss carryforwards generated after January 1, 2018 do not expire, therefore, $6.2 million in net operating losses generated since January 1, 2018 do not expire. We had Illinois net loss deduction carryforwards for tax purposes of approximately $20 million on December 31, 2025. Due to the provisions of Illinois Public Act 102-0669 signed November 16, 2021, Illinois net loss deductions expire between 2029 and 2039. As a result of the annual limitation and uncertainty as to the amount of future taxable income that will be earned prior to the expiration of the carryforward, we have concluded that it is likely that some portion of this carryforward will expire before ultimately becoming available to reduce income tax liabilities. Off-Balance Sheet Arrangements We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purposes of raising capital, incurring debt or operating our business. We do not have any off-balance sheet arrangements or relationships with entities that are not consolidated into our financial statements that are reasonably likely to materially affect our liquidity or the availability of capital resources. Safe Harbor Provision We want to provide investors with more meaningful and useful information. As a result, this Quarterly Report on Form 10-Q (the “Form 10-Q”) contains and incorporates by reference certain “forward-looking statements”, as defined in 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 [Excerpt truncated for page length; source filing is linked above.]
Latest 10-K MD&A
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with risks discussed in the financial statements and related notes thereto appearing elsewhere in this Form 10-K. When used in the following discussions, the words “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends” and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks, uncertainties and contingencies that could cause actual results, performance or achievements to differ materially from those expressed in, or implied by, such statements. See the “Forward Looking Statements” section in Part 1, Item 1, of this Form 10-K. Overview Solésence is a health-oriented, science-driven company, focused on various skin health, beauty and wellness markets. Our primary skin health products are fully developed prestige skin care formulations with mineral-based UV protection enabled by our proprietary Active Pharmaceutical Ingredients (“APIs”), which are also marketed as APIs for sale to manufacturers of other types of skin health products, including sunscreens and daily care products. Additionally, we continue to sell products in legacy markets including medical diagnostics, architectural coatings, industrial coating applications, abrasion-resistant additives, and plastics additives applications— all of which currently fall into the advanced materials product category. 10 Critical Accounting Estimates Management monitors the value of inventory for the effects of aging, obsolescence, and seasonality. Consistent with the provisions in FASB ASC 330-10-35, we adjust inventory valuation upon management’s determination that the potential for obsolete materials exist. The majority of the reserve is done by specific identification. Factors include inventory in quarantine, aging finished goods or obsolete materials as identified by management. In the application of this policy in 2025 and 2024, management deemed a portion of inventory will likely experience such an impairment and elected to apply a $2,721,000 and $1,987,000, respectively, inventory reserve in anticipation. Some of the materials in question are nearing expiration and therefore more difficult to sell, some represent soon-to-be obsolete products, and some are raw materials that we no longer use regularly. Certain assumptions are necessary to assess the risk and uncertainty of financial information, such as cash flow projections, availability of capital if needed to support the ongoing operations of the business, and our expected compliance with contractual commitments. Any changes in those plans or assumptions could have a material impact on our liquidity and financial condition. While we have seen costs continue to increase on an inflationary basis as we enter 2026, it is our belief that we will be able to offset much of this cost as we gain greater production efficiencies and seek to increase our pricing where possible. Results of Operations Years Ended December 31, 2025 and 2024 Total revenue increased to $62,064 in 2025, compared to $52,347 in 2024. A substantial majority of our revenue for each year is from our largest customers, in particular, sales to our largest customer in skin care and sunscreen applications and finished skin health products marketed through our consumer products. Product revenue, the primary component of our total revenue, increased to $61,794 in 2025, compared to $51,890 in 2024. This increase was due to an increase in revenue from our consumer products partially offset by decreased personal care ingredients and advanced materials products. Current Significant Customers For the years ended December 31, Customer # Product Category 2025 2024 1 Consumer Products 29 % 32 % 2 Consumer Products 16 % – % 3 Personal Care Ingredients 10 % 13 % Total 55 % 45 % Cost of revenue generally includes costs associated with commercial production and customer development arrangements. Cost of revenue increased to $46,001 in 2025, compared to $36,159 in 2024. The increase in cost of revenue was primarily driven by higher materials and direct labor costs related to the increased sales volume. Also contributing to the higher cost of revenue was increased costs associated with quality and maintenance activities costs due to the increased sales volume. We expect to continue new materials development and dispersion technologies for personal care applications and for our formulated consumer products during 2026 and beyond, as part of our business model. At current revenue levels we have generated a positive gross margin, though margins can be impeded by the cyclicality of our demand, often leading to the Company not having enough revenue to efficiently absorb manufacturing overhead that is required to work with current customers and expected future customers. We believe that our current fixed manufacturing cost structure is sufficient to support higher levels of revenue volume. The extent to which margins grow, as a percentage of total revenue, will be dependent upon revenue mix, revenue volume, our ability to cut costs and pass commodity market-driven raw materials increases on to customers, and the speed and efficiency with which we are able to scale up production for our Solésence products. We expect that, as product revenue volume increases, our fixed manufacturing costs will be more efficiently absorbed, which should lead to increased margins as we grow. We expect to continue to focus on reducing controllable variable product manufacturing costs, with potential variability related to the commodity metals markets and cost and wage inflation but may or may not realize gross margin percentage growth through 2026 and beyond, dependent upon the factors discussed above. Research and development expense, which includes all expenses relating to the technology and advanced engineering groups, primarily consists of costs associated with the development or acquisition of new finished product formulations for skin care, new product applications for our skin care ingredients, and the cost of enhancing our manufacturing processes. This includes legal fees related to intellectual property development, protection, and maintenance. As an example, we are currently focusing the bulk of our resources on developing new product formulations, and related new technologies, as we expand marketing and sales efforts relating to our Solésence products. This work has led to several new products and additional potential new products. 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 core materials technologies and/or materials that have the capability to serve multiple skin health-related markets; and 3) continuing to improve our core technologies to improve manufacturing operations and reduce costs. 11 Research and development expense increased to $4,090 in 2025, compared to $3,837 in 2024. In 2025 labor costs were higher than 2024 and legal and consulting costs were also higher in 2025 compared to 2024. We expect expenses for research and development to remain about the same or decrease slightly in 2026 depending on growth in our consumer products, and related technologies. This expense change will be dependent upon the success we have in developing new products, which adds significantly to outside testing fees to both enhance product development and comply with regulatory requirements. Selling, general and administrative expense increased to $10,401 in 2025, compared to $7,219 in 2024. The net increase was largely attributed to an increase in legal costs and labor. We expect 2026 expenses in this area to be slightly lower due to controlling our administrative functions costs, including related staffing. The extent to which this occurs will be dependent upon growth. Net interest expense increased to $931 in 2025, compared to $670 in 2024, increased usage of the debt facilities and partially offset by lower interest rates than in 2024. The interest expense for 2025 and 2024 related to interest paid relating to our revolving lines of credit for working capital funding and term loans supporting some of our equipment. In Company-wide operations, we believe inflation has not had a material effect on our operations or financial position for 2025, although we have seen increases in our costs. We expect supplier price increases and wage and benefit inflation, both of which represent a significant component of our costs of operations, may have a material effect on our operations and financial position in 2026 and beyond. We will apply our best efforts to pass through cost increases to our customers. If we are unable to pass through any increases due to contractual limitations or conditions in our markets specifically, this could reduce margins and net income. Liquidity and Capital Resources Cash, cash proceeds and use of cash for 2025 and 2024 were: For the year ended December 31, 2025 2024 Total cash $ 1,288,000 $ 1,409,000 Cash (used in) provided by operating activities (8,567,000 ) 1,971,000 Net cash used in investing activities (2,143,000 ) (4,558,000 ) Net cash provided by financing activities 10,589,000 2,274,000 The approximate $10,538,000 year-over-year increase in cash used in operating activities for the year ended December 31, 2025 was mainly due to the Company earning $1,790,000 in net income in 2025 compared to $4,235, payments made to reduce accounts payable and accrued expenses, and performance of deferred revenue obligations. Cash capital expenditures amounted to approximately $2,525,000 and $4,558,000 for the years ended December 31, 2025 and 2024, respectively. We did not dispose of or sell any assets during 2025 or 2024. The Company maintains a credit agreement with Libertyville Bank & Trust to support our obligations under our leased manufacturing and warehouse space in Bolingbrook, Illinois. As of December 31, 2025 there was no outstanding borrowings on this line of credit. This credit agreement has a maturity of December 22, 2026, and the Company plans on renewing on a yearly basis. On January 28, 2022, to support the working capital demands created by the commercial growth of the Company and its wholly owned subsidiary, Solésence, LLC, the Company entered into (i) an Amended and Restated Business Loan Agreement (the “A&R Loan Agreement”), with Beachcorp, LLC, (ii) a Business Loan Agreement (the “New Term Loan Agreement”) with Strandler, LLC, (iii) a Business Loan Agreement (the “New Revolving Loan Agreement” and together with the A&R Loan Agreement and the New Term Loan Agreement, the “Loan Agreements”) with Beachcorp, LLC, and (iv) three promissory notes in order to evidence the loans pursuant to the Loan Agreements (the “Notes”). Beachcorp, LLC and Strandler, LLC are affiliates of Mr. Bradford T. Whitmore, who beneficially owns a majority of the Company’s common stock and is the brother of Ms. R. Janet Whitmore, a director of the Company and the chair of the Company’s board of directors. The Loan Agreements changed the terms of both the Company’s asset-based revolving loan facility (the “A/R Revolver Facility”) and the secured advance (the “Term Loan”, which was assigned from Beachcorp, LLC to Strandler, LLC) under the Master Agreement and provide a new asset-based revolving loan facility based on inventory (the “Inventory Facility”). The maximum borrowing amount under the A/R Revolver Facility increased from $6,000,000 to $8,000,000, with a borrowing base consisting of qualified accounts receivable of the Company. The maximum borrowing amount under the Inventory Facility was $4,000,000, with a borrowing base consisting of up to 50% of the value of qualified inventory of the Company. The Loan Agreements also extended the date for which all principal and accrued interest under the A&R Revolver Facility and the Term Loan are due from March 31, 2023 and March 31, 2022, respectively, to March 31, 2024, which was also the maturity date for the Inventory Facility. The Loan Agreements reduce interest on outstanding borrowings under the A/R Revolver Facility and the Term Loan from the prime rate plus 2% and 5.25% per year, to a floating rate equal to the prime rate plus 0.75%, which is also the interest rate for borrowings under the Inventory Facility. The amount of the Term Loan remains $1,000,000. The A/R Revolver Facility, the Inventory Facility and the Term Loan are all secured by all the unencumbered assets of the Company and subordinated to the Company’s revolving line of credit with Libertyville Bank & Trust. 12 On November 13, 2023 to support working capital demands the Company entered into (i) a new Promissory Note (“Bridge Note”) with Strandler, LLC, with a maximum borrowing amount of $2,000,000, interest rate at the prime rate plus 0.75%, and set to mature on May 13, 2024, and (ii) amendments to the Loan Agreements increasing the principal amount of the Inventory Facility to $5,200,000, increased the borrowing base to 55% of eligible inventory, up from 50% and extending the maturity date under the Loan Agreement to March 31, 2025. The Bridge Note was repaid in full in connection with the Purchase Agreement referred to below. On March 1, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”), between the Company and Strandler, LLC (“Strandler”). Pursuant to the Purchase Agreement, the Company issued to Strandler 15,000 shares of the Company’s Series X Preferred Stock (the “Series X Preferred Stock”) at a purchase price per share of $400, for total consideration of $6,000,000, in a transaction exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof. The terms of the Preferred Stock are set forth in the Company’s Certificate of Designations to its Certificate of Incorporation, filed with the Secretary of State of the State of Delaware on March 4, 2024 (the “Certificate of Designations”). Under the Purchase Agreement, the Company granted Strandler customary registration rights with respect to shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), it may receive in connection with any conversion of Series X Preferred Stock into Common Stock, as described below. For so long as any amount of Preferred Stock is outstanding, the Purchase Agreement also (i) prevented the Company from paying any dividend on any shares of the Company’s capital stock (other than dividends consisting solely of Common Stock or rights to purchase Common Stock), (ii) prevented the Company from repurchasing any Common Stock, and (iii) subject to certain permitted exceptions, restricted the Company’s ability to permit any lien or other encumbrance on Company assets. At any time and from time to time, in whole or in part, following the Company properly filing an amendment (the “Certificate Amendment”) to its Certificate of Incorporation to increase the number of authorized shares of its Common Stock from 60,000,000 to 95,000,000, each share of Series X Preferred Stock was convertible, at the option of the holder, into 1,000 shares of Common Stock at no additional cost. If the Company had not properly filed, upon shareholder approval, the Certificate Amendment on or before August 1, 2024, then each share of Series X Preferred Stock would have been redeemable at the holder’s option, in whole or in part, without penalty or premium, at a redemption price equal to $420 per share (each, a “Redemption”). If the Company had failed to fully pay any Redemption within five days of receiving notice, all unpaid amounts will have born interest at a rate of 10% per annum. In addition, in the event of a Change in Control (as defined in the Certificate of Designations) of the Company, each share of the Series X Preferred Stock would have been redeemable at the option of the holder, without penalty or premium, at a redemption price equal to $420 per share. Upon any conversion of Preferred Stock into Common Stock by Strandler, Strandler is required to hold the Common Stock received in the conversion for a period of 12 months. Holders of Series X Preferred Stock (i) were not entitled to receive dividends, subject to customary anti-dilution protections, (ii) have no voting rights, and (iii)receive a liquidation preference of $400 per share. The Series X Preferred Stock ranks senior in right of payment to all securities designated as junior securities, including Common Stock. On June 18, 2024, the Company held a special meeting of stockholders where the Certificate Amendment was approved. The Certificate Amendment was filed with the State of Delaware on June 19, 2024. On June 20, 2024, Strandler converted its 15,000 shares of Series X Preferred Stock to 15,000,000 shares of Common Stock. In connection with the Company’s entry into the Purchase Agreement, the Company also entered into (i) a Second Amendment to Business Loan Agreement (the “Term Loan Agreement Amendment”) with Strandler, LLC, (ii) a Second Amendment to Business Loan Agreement (the “A&R Loan Agreement Amendment”) with Beachcorp, LLC, which is also an affiliate of our controlling shareholder, Bradford T. Whitmore (“Beachcorp”), and (iii) a Second Amendment to Business Loan Agreement with Beachcorp (the “Revolving Loan Agreement Amendment” and together with the Term Loan Agreement Amendment and the A&R Term Loan Agreement Amendment, the “Loan Agreement Amendments”). The Loan Agreement Amendments extend the maturity date under each respective loan agreement from March 31, 2025 to October 1, 2025. 13 On May 27, 2025, the Company entered into a Third Amendment to the A&R Loan Agreement, Business Loan Agreement, and New Term Loan Agreement extending the maturity of the loans to April 30, 2027, to expand the limit on the A&R Loan Agreement from $8,000,000 to $12,000,000 and to expand the limit on the Business Loan Agreement from $5,200,000 to $10,000,000. On December 31, 2025, the balance on the Term Loan was $1,000,000, the balance on the A/R Revolver Facility was $4,767,397, the balance on the Inventory Facility was $9,500,000. On December 31, 2024, the balance on the Term Loan was $1,000,000, the balance on the A/R Revolver Facility was $0, and the balance on the Inventory Facility was $4,000,000. For more information regarding the New Business Loan Agreements, see Note 3 to our Financial Statements referred to in Part II, Item 8 of this Annual Report on Form 10-K. Our actual future capital requirements in 2026 and beyond will depend on many factors, including customer acceptance of our current and potential consumer products, APIs sold as ingredients in to the skin health markets, medical diagnostics ingredients, and other engineered materials, applications, and products, continued progress in research and development activities and product testing programs, the magnitude of these activities and programs, and the costs necessary to increase and expand our manufacturing capabilities and to market and sell these products and ingredients. Other important issues that will drive future capital requirements will be the development of new markets and new customers as well as the potential for significant unplanned growth with existing customers. Depending on the success of certain projects, we expect that capital spending relating to currently known capital needs for 2026 will be between $1 million and $3 million, to be funded by profit from operations, our existing loans and lines of credit, and possible new financing. If those projects are delayed or ultimately prove unsuccessful, or if we fail to be able to support the additional cost of funding them in the near term, we expect our capital expenditures may fall below the lower end of the range. Similarly, substantial success in business development projects may cause the actual 2026 capital investment to exceed the top of this range. We have federal net operating loss carryforwards for tax purposes of approximately $36.9 million on December 31, 2025. Because the Company may experience “ownership changes” within the meaning of the U.S. Internal Revenue Code (“IRC”) in connection with any future equity offerings, future utilization of this carryforward may be subject to certain limitations as defined by the IRC. If not utilized, $30.7 million of this loss carryforward will expire between 2026 and 2038. Given changes to the IRC, net operating loss carryforwards generated after January 1, 2018 do not expire, therefore, $6.2 million in net operating losses generated since January 1, 2018 do not expire. We have Illinois net loss deduction carryforwards for tax purposes of approximately $20 million on December 31, 2025. Due to the provisions of Illinois Public Act 102-0669 signed November 16, 2021, Illinois net loss deductions expire between 2029 and 2039. As a result of the annual limitation and uncertainty as to the amount of future taxable income that will be earned prior to the expiration of the carryforward, we have concluded that it is likely that some portion of this carryforward will expire before ultimately becoming available to reduce income tax liabilities.