false 2024 FY --12-31 0000883107

 2024-06-30

 2025-03-28

 us-gaap: ProductMember

 us-gaap: ProductMember

 us-gaap: ProductAndServiceOtherMember

 us-gaap: ProductAndServiceOtherMember

 us-gaap: EquipmentMember
 srt: MinimumMember

 us-gaap: EquipmentMember
 srt: MaximumMember

 us-gaap: LeaseholdImprovementsMember
 srt: MinimumMember

 us-gaap: LeaseholdImprovementsMember
 srt: MaximumMember

 us-gaap: OtherCapitalizedPropertyPlantAndEquipmentMember
 srt: MinimumMember

 us-gaap: OtherCapitalizedPropertyPlantAndEquipmentMember
 srt: MaximumMember

 nanx: PrepaymentsFromCertainCustomersPerCompanyPolicyMember

 nanx: PrepaymentsFromProductDevelopmentAgreementWithAPersonalCareIngredientCustomerMember

 us-gaap: TransferredOverTimeMember

 us-gaap: TransferredOverTimeMember

 nanx: LibertyvilleBankAndTrustMember

 nanx: LibertyvilleBankAndTrustMember

 nanx: LibertyvilleBankAndTrustMember

 nanx: LibertyvilleBankAndTrustOneMember

 nanx: LibertyvilleBankAndTrustOneMember

 nanx: LibertyvilleBankAndTrustOneMember

 nanx: BeachcorpLLCOneMember

 nanx: BeachcorpLLCOneMember

 nanx: BeachcorpLLCOneMember

 2024-12-30

 nanx: BeachcorpLLCOneMember

 nanx: StrandlerLLCOneMember

 nanx: StrandlerLLCOneMember

 nanx: StrandlerLLCOneMember

 us-gaap: LetterOfCreditMember

 2014-07-31

 us-gaap: LetterOfCreditMember

 2014-07-01
 2014-07-31

 us-gaap: LetterOfCreditMember

 2021-12-21

 2022-01-26

 2022-01-27

 2024-02-29

 nanx: InventoryFacilityMember

 nanx: InventoryFacilityMember

 2022-01-27

 nanx: ReplacementPromissoryNoteMember

 nanx: ReplacementPromissoryNoteMember

 2023-11-12

 2023-11-12

 nanx: ReplacementPromissoryNoteMember

 2024-02-29

 nanx: TermLoanMember

 2022-01-27

 nanx: TermLoanMember

 2024-02-29

 nanx: BridgeNoteMember

 nanx: BridgeNoteMember

 2023-11-12

 us-gaap: RelatedPartyMember

 us-gaap: RelatedPartyMember

 us-gaap: RelatedPartyMember

 us-gaap: RelatedPartyMember

 us-gaap: MachineryAndEquipmentMember

 us-gaap: MachineryAndEquipmentMember

 us-gaap: OfficeEquipmentMember

 us-gaap: OfficeEquipmentMember

 us-gaap: FurnitureAndFixturesMember

 us-gaap: FurnitureAndFixturesMember

 us-gaap: LeaseholdImprovementsMember

 us-gaap: LeaseholdImprovementsMember

 us-gaap: ConstructionInProgressMember

 us-gaap: ConstructionInProgressMember

 nanx: Expiring2025To2037Member

 us-gaap: DomesticCountryMember

 us-gaap: TaxYear2018Member

 us-gaap: StateAndLocalJurisdictionMember

 us-gaap: StateAndLocalJurisdictionMember

 nanx: SeriesXPreferredStockMember

 2024-02-29

 nanx: SeriesXPreferredStockMember

 nanx: SeriesXPreferredStockMember

 2024-06-18
 2024-06-20

 2024-06-18
 2024-06-20

 nanx: PriorTo2019PlanMember

 nanx: Options2019PlanMember

 nanx: Options2010PlanMember

 nanx: CustomerOneMember

 nanx: CustomerOneMember

 nanx: CustomerTwoMember

 nanx: CustomerTwoMember

 nanx: CustomerThreeMember

 nanx: CustomerThreeMember

 nanx: CustomersOneThroughThreeMember

 nanx: CustomersOneThroughThreeMember

 nanx: CustomerOneMember

 nanx: CustomerOneMember

 nanx: CustomerTwoMember

 nanx: CustomerTwoMember

 nanx: CustomerThreeMember

 nanx: CustomerThreeMember

 us-gaap: SupplyCommitmentMember

 nanx: EmployeeCostsMember

 nanx: EmployeeCostsMember

 nanx: ContractorsAndProfessionalServicesMember

 nanx: ContractorsAndProfessionalServicesMember

 nanx: MaterialsAndSuppliesMember

 nanx: MaterialsAndSuppliesMember

 nanx: DepreciationMember

 nanx: DepreciationMember

 us-gaap: InterestExpenseMember

 us-gaap: InterestExpenseMember

 us-gaap: OtherIncomeMember

 us-gaap: OtherIncomeMember

 nanx: TaxExpenseMember

 nanx: TaxExpenseMember

 nanx: FacilitiesMember

 nanx: FacilitiesMember

 nanx: ShippingMember

 nanx: ShippingMember

 nanx: TestingMember

 nanx: TestingMember

 nanx: ITServicesMember

 nanx: ITServicesMember

 nanx: InsuranceMember

 nanx: InsuranceMember

 nanx: ManufacturingOtherExpenseMember

 nanx: ManufacturingOtherExpenseMember

 nanx: SellingGeneralAndAdministrativeOtherExpenseMember

 nanx: SellingGeneralAndAdministrativeOtherExpenseMember

 us-gaap: NonUsMember

 us-gaap: NonUsMember

 nanx: ConsumerProductsMember

 nanx: ConsumerProductsMember

 nanx: PersonalCareIngredientsMember

 nanx: PersonalCareIngredientsMember

 nanx: AdvancedMaterialsMember

 nanx: AdvancedMaterialsMember

 nanx: ARRevolverInventoryFacilityAndNewTermLoanMember

 2024-12-29

 nanx: ARRevolverInventoryFacilityAndNewTermLoanMember
 us-gaap: SubsequentEventMember

 2025-01-01
 2025-03-31

 UNITED
STATES

 SECURITIES
AND EXCHANGE COMMISSION

 Washington,
D.C. 20549

 FORM

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For
the fiscal year ended December 31, 2024

 or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 FOR
THE TRANSITION PERIOD FROM_____ TO_____

 COMMISSION
FILE NUMBER 000-22333

 SOLESENCE,
INC.

 (Exact
name of registrant as specified in its charter)

 Delaware

 36-3687863

 (State or other jurisdiction

 (I.R.S. Employer
 Identification No.)

 of incorporation
 or organization)

 1319
Marquette Drive, Romeoville, Illinois 60446

 (Address
of principal executive offices) (zip code)

 Registrant's
telephone number, including area code: (630) 771-6708

 NANOPHASE
TECHNOLOGIES CORPORATION

 (Former
name or former address, if changed since last report)

 Securities
registered pursuant to Section 12(b) of the Act: None

 Securities
registered pursuant to Section 12(g) of the Act:

 Common
Stock, par value $.01 per share

by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
 No

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
 No

by check mark if the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes No

by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files). Yes No

by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer,"
"smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

 Large
 accelerated filer

 Accelerated
 filer

 Non-accelerated
 filer

 Smaller reporting
 company

 Emerging growth
 company

 If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.

 If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements.

by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).

by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 The
aggregate market value of the registrant's voting stock held by non-affiliates of the registrant based upon the last reported
sale price of the registrant's common stock on June 30, 2024 was $ 27,254,231 as of such date.

 The
number of shares outstanding of the registrant's common stock, par value $.01, as of March 28, 2025 was 70,103,279.

 DOCUMENTS
INCORPORATED BY REFERENCE

 None.

 Item 1.

 General

 Company Background

 Personal Care Ingredients

 Advanced Materials

 Sources and Availability of Raw Materials

 Markets and Distribution

 Research and Development

 Competitive Advantage

 Manufacturing Operations

 Intellectual Property and Proprietary Rights

 Competition

 Governmental Regulations, Including Climate Change

 Employees

 Backlog

 Business Segment and Geographical Information

 Key Customers

 Forward-Looking Statements

 Investor Information

 Item 1A.

 Risk Factors

 Item 1B.

 Unresolved Staff Comments

 Item 1C.

 Cybersecurity

 Item 2.

 Properties

 Item 3.

 Legal Proceedings

 Item 4.

 Mine Safety Disclosures

 Item 5.

 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Item 6.

 Selected Financial Data

 Item 7.

 Management's Discussion and Analysis of Financial Condition and Results of Operations

 Item 7A.

 Quantitative and Qualitative Disclosures About Market Risk

 Item 8.

 Financial Statements and Supplementary Data

 Item 9.

 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 Item 9A.

 Controls and Procedures

 Item 9B.

 Other Information

 Item 9C

 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 Item 10.

 Directors, Executive Officers and Corporate Governance

 Item 11.

 Executive Compensation

 Item 12.

 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 Item 13.

 Certain Relationships and Related Transactions, and Director Independence

 Item 14.

 Principal Accounting Fees and Services

 Item 15.

 Exhibits and Financial Statement Schedules

 Item 16.

 Form 10-K Summary

 PART
I

 Item
1. General

 Company
Background

 On
March 7, 2025, Nanophase Technologies Corporation announced its rebranding as Solesence, Inc. ("Sol sence,"
"Company," "we," "our," or "us"), marking a new chapter in its commitment to innovation,
self-expression, and inclusivity in skin health. The company's stock will continue to trade under the NANX ticker symbol.
Its corporate website transitioned to solesence.com. Investor relations information, including historic Nanophase financials and
disclosures, is available at ir.solesence.com. Nanophase Technologies Corporation changed its legal name to Solesence, Inc. by
amending its certificate of incorporation with the state of Delaware on March 10, 2025.

 Sol sence, along with its
wholly owned subsidiary, Sol sence, LLC (our "Sol sence consumer products subsidiary"), is a leading innovator
in scientifically-driven health care solutions across beauty and life science categories, protecting skin from environmental aggressors
and enhancing the aesthetic appeal of healthy products. Skin health, addressed through both our Solesence consumer products and our Active
Pharmaceutical Ingredients ("APIs"), currently make up the great majority of our business, with additional revenue being generated
from other legacy advanced materials applications. The Company was incorporated in Illinois on November 25, 1989 and became a Delaware
corporation during November 1997. Our common stock trades on the OTCQB marketplace under the symbol NANX. We have development and application
laboratories, and manufacturing capacity in three locations in the Chicago, Illinois area.

 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, from engineered materials, formulation development, and finished product development, to 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 market advantages. We also leverage expertise to
develop skin care, sun care, and color cosmetics products ("Sol sence consumer products") that offer unique skin health
benefits. We offer these for sale to brands who ultimately sell products to consumers in both prestige and mass markets within the beauty
industry. Our Sol sence consumer products have received broad acceptance in the marketplace. Due to the enhanced efficacy and aesthetic
qualities offered by our proprietary technology platform, Sol sence consumer products satisfy growing consumer demands for "clean"
and inclusive beauty across a range of product formats and categories. The vertically integrated nature of our Sol sence 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, while also addressing ongoing
sustainability efforts.

 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 Sol sence 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.

 During 2015 we were granted a
patent on a new type of particle surface treatment (coating) — now called Original Active Stress Defense Technology. This
 has become the cornerstone of our new product development in our consumer product line, with first revenue recognized during 2017.
In 2020, Sol sence consumer products revenue doubled revenue from our personal care ingredients products.

 We now offer a suite of three
technologies under our Active Stress Defense platform, 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. In 2020, consumer products surpassed our personal care APIs in terms
of total revenue. We believe that Sol sence consumer products offer the greatest growth potential of any product line in any market
in the Company's history.

 We
continue to develop and expand our in-house formulating capability, through which we have created, and now sold, more than 250
SKUs of fully formulated finished cosmetics products in markets focused on skin health, with the majority in prestige beauty.
Products developed and sold through our Sol sence consumer product line are all produced under the requirements of current
Good Manufacturing 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 Sol sence
products are fully formulated for consumer use, we do not sell directly to consumers or distribute products to consumers under
the Sol sence brand through intermediaries or resellers. Instead, we sell our Sol sence consumer products to brand
partners 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.

 The
extent to which we grow will be dependent upon our ability to effectively expand our capabilities during 2025. As a result, we plan
to continue investments in facilities and equipment as well as in human resources, in 2025 and beyond. We are prioritizing
operational efficiencies, facilities expansion, and capital investment in this product line to allow for continued growth, and
increased profitability.

 In
2022, Sol sence was granted site clearance by Australia's Therapeutic Goods Administration ("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 Sol sence-made products as primary sunscreens in Australia. Our initial focus continues
to be on establishing a footprint with both new and existing Sol sence brand partners, to enable the sale of our patented
skin health products as primary sunscreens. Also in 2022, Sol sence was granted a patent in Korea for the Kleair
technology used exclusively in Sol sence products. Shortly thereafter, Sol sence received two industry accolades.
In July 2022 at Cosmoprof North America, Sol sence was awarded the Cosmopack Award for best Formulation for its product
Multi-Cultural Magic SPF 50+ Featuring Kleair technology, acknowledging the Company's technology, formulation and
marketing know-how. In September 2022, Sol sence was awarded the Cosmetics & Toiletries All Award for Most Significant
Active Ingredient in Sun/Light Protection for Kleair technology, a further acknowledgment of the company's technology
know-how, as well as a recognition for the Company in the areas of innovation and impact. In early 2023, Sol sence was
named number 2 in the Beauty category of Fast Company's World's Most Innovative Companies list. This is a prestigious
award that recognizes the impact we have on the industry we serve and the lives of the people who use our products. In July of
2023, Sol sence was again awarded the Cosmopack 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 development. In 2023, Sol sence also won the 2023 Beauty Matter NEXT Award for Best Contract Manufacturer and
was a winner of the 22nd Chicago Innovation Awards. In 2024, Sol sence won its third consecutive Cosmopack Award for best
Formulation for its Lip Oil, SPF 40+ and its second Cosmetics & Toiletries All Award in the Finished Formula-Prestige
category for its market-ready product, Soft Glow SPF 50+. Most recently in March 2025, Sol sence won its third consecutive
Cosmetics & Toiletries All Award and its second in the Finished Formula-Prestige category for its finished formula Au
Lait Face Milk SPF 50+.

 Personal
Care Ingredients

 Prior
to 2020, our largest of products 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.

 Markets
and Distribution

 Consumer
Products

 We
partner with 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 Sol sence technologies, which are designed to improve
skin health for all human beings, and are aligned with consumer demand for "clean" and inclusive beauty products that
enhance skin health. Our consumer products clients, or 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 Sol sence consumer product revenue recognized during 2017, we had our first material amounts
of consumer product revenue in 2018, and saw significant expansion in these sales through 2024. Sol sence 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 product group 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 significant 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 $65 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 specific 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 over the past few years has been directly related to the development of Sol sence consumer
products. We endeavor to either meet specific customer needs or to develop solutions to address unmet or emerging needs
where we believe our technologies will offer a distinct performance 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 technologies 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
$3.8 million, during the years ended December 31, 2024 and 2023. 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, 2024, we had cumulative research and development expenses of
approximately $7.6 million and $0.1 million cumulative capital expenditures on equipment and leasehold improvements.

 Competitive
Advantage

 Through
our Sol sence consumer product line, our Active Stress Defense platform of proprietary technologies – which
includes Kleair – offers unique skin health benefits through performance-related and aesthetic advantages in environmental
protection skin health products, including in 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 Sol sence 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 Sol sence 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 customer
products and the personal care ingredients have been positively impacted by the growing interest among consumers for mineral-based
sunscreens, which management sees as a validation of the Company strategy.

 Manufacturing
Operations

 We
currently have manufacturing capacity based in three locations in the Chicago area. We are able to 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. We maintain, by participation, support GMP site licenses related to import of our
customer 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 Sol sence
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 10 U.S. patents and 5 pending U.S. patent applications. We also own 108 foreign patents and
patent applications consisting of 68 issued or allowed foreign patents and 40 pending foreign patent applications. All of the
pending and owned foreign patents are counterparts to domestic filings covering our platform of nanotechnologies and surface treatments.

 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 advanced material solutions for customers' specific applications, and
in the case of consumer products line, finished products that impart the benefits of minerals-based products with superior
tactile, visual, and performance characteristics.

 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 and track record of technology improvement and evolution.

 Our
Sol sence consumer products faces competition from a wide variety of offerings in the field of skin care. Our Sol sence
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 Sol sence consumer products customers have internal development
and manufacturing capabilities that are similar to the capabilities of Sol sence and can serve as indirect competition
to our products and services. We believe that our Sol sence consumer products technology and our expertise in the nuances
of formulating products that contain UV protection, coupled with our expanding capability to produce novel formats, will allow
us to become a competitive player in this market on a sustainable basis.

 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 Sol sence-made products as primary sunscreens in Australia. Our initial focus
will be on establishing a footprint with both new and existing Sol sence 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. We believe that our Company has an exemplary safety record.

 Employees

 On
December 31, 2024, we had a total of 98 full-time employees, 13 of whom hold advanced degrees. Additionally, we have a number
of temporary, and temporary-to-permanent employees, typically 125 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 Sol sence 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.

 Key
Customers

 A
limited number of key customers account for a substantial portion of our commercial revenue, and aside from our largest customer, we
are seeing the composition of these key customers change with the growth we are experiencing within our consumers products line,
which has grown to exceed personal care ingredients line significantly. For 2024, total consumer products revenue amounted to $44.4M
or 85% of total revenue compared to $25.2M, or 68% for 2023. In particular, revenue from our three largest customers across all
business areas included our largest customer in personal care applications (BASF) and two of our consumer products customers, which
constituted approximately 13%, 32%, and 7%, respectively, of our 2024 total revenue.

 As
our consumer products continue to represent more of our total revenues, 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 2024 and 2023 and expect it to
continue in 2025 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 both 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
2025 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; the terms of our supply agreements with BASF which could trigger a requirement to sell equipment to that customer;
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; uncertain
demand for, and acceptance of, our Sol sence 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 Sol sence 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 ( 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.

 Item
1A. Risk Factors

 Not
required for a smaller reporting company.

 Item
1B. Unresolved Staff Comments

 Not
required for a smaller reporting company.

 Item
1C. Cybersecurity

 Risk
Assessment and Strategy

 The
Company regularly evaluates cybersecurity risk from computer viruses and more sophisticated and targeted cyber-related attacks
such as ransomware, as well as cybersecurity failures resulting from human error and technological errors.

 Our
overall strategy in combatting known cybersecurity risks includes a variety of individual tactics, including:

 The
 use of antivirus software, virtual private networks, email security, as well as other
 software to prevent and detect data intrusions.

 The
 deployment of updates and patches as they are available and maintaining the current versions
 of major software to reduce the exposure to vulnerabilities.

 If
 necessary, the use of third-party security experts if and when an incident is detected.

 We
are not aware of having experienced any material cybersecurity incidents in 2024. We are not aware of any existent cybersecurity
threats that would materially affect, or are reasonably likely to materially affect, our business strategy, results of operations
or financial conditions.

 Management
Oversight

 Day-to-day
management of cybersecurity threats is conducted by our information technology consultant which is charged with identifying and
reporting threats to senior management, which then reports to the Board of Directors.

 Board
Oversight

 The
Board of Directors is responsible for oversight of management's efforts to eliminate cybersecurity risks.

 Item
2. Properties

 We
operate three facilities in the Chicago suburbs - a 36,000 square-foot production, research and headquarters facility in Romeoville,
Illinois, a 20,000 square-foot production facility in Burr Ridge, Illinois and a 261,000 square-foot production and warehouse
facility in Bolingbrook, Illinois.

 Our
manufacturing operations in Burr Ridge are registered under ISO 9001, and we believe that our manufacturing operations are within
the cGMP requirements of the FDA for products that require such compliance. This facility is also registered under ISO 14001 which
is the international standard for environmental management. The Burr Ridge site is registered with the FDA for API manufacturing.

 The
Romeoville facility houses our headquarters, advanced engineering, manufacturing (including particle coating, particle dispersion
and pilot-scale manufacturing), and research and development with three applications development and formulating laboratories.
The Romeoville facility has a quality control laboratory designed for the dual purposes of validating operations to cGMP and ISO
standards and production process control. This laboratory is equipped to handle many routine analytical and in-process techniques
that are currently required. All Romeoville manufacturing processes are registered under ISO 9001, ISO 22716 and ISO 14001, and
we believe that the particle coating processes used for our ingredients and fully formulated sunscreens and cosmetic products
for personal care are in compliance with the cGMP requirements of the FDA. The Romeoville site is registered with the FDA for
API manufacturing, manufacturing, and packaging.

 The
Bolingbrook facility houses our warehousing operations, sunscreen lotions manufacturing, dispersion manufacturing, filling and
assembly of our Sol sence products and additional quality control spaces. The Bolingbrook facility is registered
with the FDA for OTC drug manufacturing and packaging, site is registered under ISO 9001, ISO 22716 and ISO 14001, and we believe
that the particle coating processes used for our ingredients and fully formulated sunscreens and cosmetic products for personal
care are in compliance with the cGMP requirements of the FDA. The Bolingbrook site is registered with the FDA for API manufacturing,
manufacturing, and packaging.

 We
lease our Romeoville, Burr Ridge and Bolingbrook facilities. The Romeoville lease term was extended to January 31, 2028, in August
2024. The Burr Ridge lease term was extended to September of 2025. During December 2021, we entered into a Standard Form Industrial
Lease for a new facility in Bolingbrook, Illinois, which, among other things, will end in May of 2032, with options to extend
this lease at market rent for each of three concurrent five-year periods.

 With
the addition of the Bolingbrook space in 2021, we believe that our leased facilities will provide sufficient capacity to fulfill
current known customer demand as well as allow for the creation of substantial additional space to enable expansion of key production
processes. We believe we will be able to expand certain operations, and consolidate others, to support additional growth in an
economically efficient manner. We believe that our capital expenditures made in 2024, and projected for 2025, will support currently
anticipated demand from existing and expected customers through 2025 and into 2026. Management continues to spend considerable
time determining how best to optimize our facilities to maximize growth over the next few years. Our actual future capacity requirements
will depend on many factors, including new and potential customer acceptance of our current and potential engineered materials,
applications and products, both expected and currently unplanned growth from existing customers, continued progress in our research
and development activities and product testing programs and the magnitude of these activities and programs.

 Item
3. Legal Proceedings

 As
previously disclosed, in August 2022, BASF Corporation ("BASF") filed a complaint against the Company (the "New
Jersey Complaint") in the Superior Court of New Jersey ("SCNJ") alleging that the Company breached the Zinc
Oxide Supply Agreement dated as of September 16, 1999 between the Company and BASF, as assignee, as amended through January 1,
2019 (the "Agreement"). The New Jersey Complaint specifically alleged that the Company had breached the exclusivity
provision of the Agreement by selling zinc oxide to entities other than BASF, including sales to the Company's subsidiary
Sol sence, LLC ("Sol sence"), in markets designated as being in the field of use (the "Field")
under the Agreement. In February 2023, the Company answered the New Jersey Complaint, denying all wrongdoing and filed counterclaims,
including a request for a declaration that contrary to BASF's views, the exclusivity provision of the Agreement does not
apply to all products containing zinc oxide for uses in the Field nor does the exclusivity provision prohibit the Company's
sales through Sol sence of products containing zinc oxide as an ingredient.

 Following
certain discovery, rulings on several motions, and the parties' extensive negotiations, the Company and BASF entered into
a Settlement Agreement and General Release on April 10, 2024 (the "Settlement Agreement"), providing for settlement
of the New Jersey Complaint and resolution of the parties' disputes. Under the Settlement Agreement, the Company and BASF
agreed to enter into the Amendment (defined below) in exchange for (i) a mutual release of all claims related to the New Jersey
Complaint and any claims based on similar facts or legal theories (collectively, the "Claims"), (ii) the filing of
a Stipulation of Dismissal with the SCNJ voluntarily dismissing the New Jersey Complaint with prejudice, (iii) mutual covenants
by the Company and BASF not to sue the other party for the Claims, (iv) the Company and BASF entering into the Modified Product
MOU (defined below), (v) mutual indemnification as to certain claims arising out of the making, use, purchase, sale, or development
of products in connection with the Modified Product MOU, and (vi) provisions regarding confidentiality of settlement terms and
other customary settlement terms. The Stipulation of Dismissal was filed with the SCNJ on April 11, 2024, thereby concluding the
New Jersey Complaint.

 In
connection with the Settlement Agreement, the Company and BASF entered into Amendment No. 5 (the "Amendment") to the
Agreement, and a Binding Memorandum of Understanding regarding the Company using its commercially reasonable efforts to develop
a modified zinc oxide product for BASF's exclusive purchase under the Agreement (the "Modified Product MOU").
The Amendment includes provisions (a) amending the exclusivity section of the Agreement to provide that (i) BASF has the exclusive
right to use zinc oxide materials that the Company develops, makes, or sells to BASF as an ingredient for uses in the Field, and
(ii) the Company or its affiliates, including Sol sence, can supply and sell both certain finished products containing
zinc oxide for use in the Field to customers anywhere in the world and certain zinc oxide dispersions that the Company developed
or develops for a particular customer, and (b) amending the provisions of the Agreement concerning order forecasting and procedures,
operational planning, inventory and capacity requirements, and periodic facility shutdown arrangements, to more effective serve
each party's business needs with respect to all product that BASF purchases from the Company under the Agreement.

 Item
4. Mine Safety Disclosures

 Not
applicable.

 PART
II

 Item
5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Market
Information; Holders; Dividends

 Our
common stock is traded under the symbol "NANX" on the OTCQB marketplace, operated by OTC Markets Group. The following
table sets forth, for the periods indicated, the range of high and low sale prices for our common stock on the OTCQB marketplace:

 High

 Low

 Fiscal year ended December 31, 2024:

 First Quarter

 $
 0.98

 $
 0.43

 Second Quarter

 1.71

 0.70

 Third Quarter

 1.65

 1.33

 Fourth Quarter

 2.88

 1.30

 Fiscal year ended December 31, 2023:

 First Quarter

 $
 1.79

 $
 1.08

 Second Quarter

 1.45

 0.50

 Third Quarter

 1.40

 0.88

 Fourth Quarter

 1.00

 0.55

 On
 March 28, 2025, the last reported sale price of our common stock was $2.09 per share, and
there were 120 holders of record of our common stock.

 We
have never declared or paid any cash dividends on our common stock and do not currently anticipate paying any cash dividends or
other distributions on our common stock in the foreseeable future. We intend instead to retain any future earnings for reinvestment
in our business. Any future determination to pay cash dividends will be at the discretion of our Board of Directors and will be
dependent upon our financial condition, results of operations, capital requirements and such other factors deemed relevant by
our Board of Directors. Our Business Loan Agreements with Beachcorp, LLC ("Beachcorp"), Strandler, LLC ("Strandler"),
and Libertyville Bank and Trust Company ("Libertyville"), dated as of November 19, 2018, January 28, 2022, and December
21, 2021 respectively, require us to obtain the written consent of the lender prior to paying any cash dividends on our common
stock.

 Item
6. [Reserved]

 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

 Sol sence
is a health-oriented, science-driven company, focused on various skin health and beauty 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.

 Critical
Accounting Estimates

 Management
also 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 2024, management deemed a portion
of inventory will likely experience such an impairment and elected to apply a $1,987,000 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 impact of risks and uncertainties on the 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 2025, 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, 2024 and 2023

 Total
revenue increased to $52,347,000 in 2024, compared to $37,297,000 in 2023. 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, finished
skin health products marketed through our consumer products. Product revenue, the primary component of our total revenue, increased
to $51,890,000 in 2024, compared to $36,641,000 in 2023. 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

 2024

 2023

 Consumer
 Products

 %

 %

 Personal
 Care Ingredients

 %

 %

 %

 %

 Total

 %

 %

 Cost
of revenue generally includes costs associated with commercial production and customer development arrangements. Cost of revenue
increased to $36,159,000 in 2024, compared to $29,472,000 in 2023. 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 supply chain 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 Sol sence products
during 2025 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 Sol sence 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 2025 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, advancement of our medical diagnostics ingredient knowledge, 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 Sol sence 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 remained the same in 2024, totaling $3,837,000, the same as in 2023. In 2024 labor costs were higher than
2023 which were offset by lower legal and consulting costs in 2024 compared to 2023. We expect expenses for research and development
to increase slightly in 2025 depending on growth in our Sol sence line of products, and related technologies. This expense
growth 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 decreased to $7,219,000 in 2024, compared to $7,534,000 in 2023. The net decrease was largely
attributed to a decrease in legal costs. We expect 2025 expenses in this area to be slightly higher due to expanding parts of
our administrative functions, including related staffing additions. The extent to which this increase occurs will be dependent
upon growth.

 Interest
expense decreased to $670,000 in 2024, compared to $838,000 in 2023, due to lower interest rates in 2024 and decreased usage of
the debt facilities. The interest expense for 2024 and 2023 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 2024,
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 2025 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 2024 and 2023 were:

 For the year ended December 31,

 2024

 2023

 Total cash

 $
 1,409,000

 $
 1,722,000

 Cash provided by (used in) operating activities

 1,971,000

 (2,006,000
)

 Net cash used in investing activities

 (4,558,000
)

 (1,051,000
)

 Net cash provided by financing activities

 2,274,000

 2,593,000

 The
$3,977,000 year-over-year increase in cash provided by operating activities for the year ended December 31, 2024 was mainly due
to the Company earning $4,235,000 in net income in 2024 compared to $4,390,000 in net loss in 2023. Cash capital expenditures
amounted to approximately $4,558,000 and $1,051,000 for the years ended December 31, 2024 and 2023, respectively. We did not dispose
of or sell any assets during 2024 or 2023.

 The
Company maintains a credit agreement with Libertyville to support our obligations under our leased manufacturing and warehouse
space in Bolingbrook, Illinois. As of December 31, 2024 there was no outstanding borrowings on this line of credit. This credit
agreement has a maturity of December 22, 2025.

 On
January 28, 2022, to support the working capital demands created by the commercial growth of the Company and its wholly owned
subsidiary, Sol sence, LLC, the Company entered into (i) an Amended and Restated Business Loan Agreement (the "A&R
Loan Agreement"), which amends and restates the Master Agreement, (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 increases 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 is $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.

 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. As of December 31, 2024, the Company's A/R
Revolver, Inventory Facility and New Term Loan matured on October 1, 2025. Since then, the Company's related party debt
holder for the A/R Revolver, Inventory Facility and New Term Loan has committed to refinancing the debt with a new maturity date
after April 1, 2026.

 On
December 31, 2024, the balance on the Term Loan was $1,000,000, the balance on the A/R Revolver Facility was $0, the balance on
the Inventory Facility was $4,000,000. On December 31, 2023, the balance on the Term Loan was $1,000,000, the balance on the Bridge
Load was $2,000,000, the balance on the A/R Revolver Facility was $2,810,000, and the balance on the Inventory Facility was $5,000,000.

 For
more information regarding the New Business Loan Agreement, 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 2025 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 2025 will be between $6 million and $8 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 2025 capital investment to exceed the top
of this range.

 We
have federal net operating loss carryforwards for tax purposes of approximately $42 million on December 31, 2024 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, $36 million of this loss carryforward will expire between 2025 and 2037. Given changes to the IRC, net
operating loss carryforwards generated after January 1, 2018 do not expire, therefore, $6.8 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 $18.2
million on December 31, 2024. Due to the provisions of Illinois Public Act 102-0669 signed November 16, 2021, Illinois net loss
deductions expire between 2030 and 2043.

 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.

 Item
7A. Quantitative and Qualitative Disclosures About Market Risk

 Not
required for a smaller reporting company.

 Item
8. Financial Statements and Supplementary Data

 The
financial statements, with the report of independent auditors, listed in Item 15 appear on pages F-1
through F-21 of this Form 10-K.

 Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 None.

 Item
9A. Controls and Procedures

 Evaluation
of Disclosure Controls and Procedures. We are responsible for establishing and maintaining disclosure controls and procedures
that are designed to ensure that information required to be disclosed by us in the reports filed by us under the Exchange Act
is: (a) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms; and
(b) accumulated and communicated to our management, including our principal executive and principal financial officer, to allow
timely decisions regarding required disclosures. It should be noted that in designing and evaluating our disclosure controls and
procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives, and that our management necessarily was required to apply its judgment
regarding the design of our disclosure controls and procedures. As of the end of the period covered by this report, we conducted
an evaluation, under the supervision (and with the participation) of our management, including our Chief Executive Officer (our
principal executive officer) and our Chief Financial Officer (our principal financial officer), of the effectiveness of the design
and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on
that evaluation, our Chief Executive Officer and Chief Financial Officer (which roles are currently filled by the same person),
concluded that our disclosure controls and procedures were effective at reaching that level of reasonable assurance.

 Management's
Annual Report on Internal Control Over Financial Reporting. Management is responsible for the preparation, integrity and fair
presentation of the financial statements and Notes to the financial statements. Management is also responsible for establishing
and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities
Exchange Act of 1934. The Company's internal control over financial reporting is designed under the supervision of the Company's
principal executive officer and principal financial officer in order to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. The Company's internal control over financial reporting includes those policies and procedures that:

 (i)
 Pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets
of the Company;

 (ii)
 Provide reasonable
 assurance that transactions are recorded as necessary to permit preparation of financial
 statements in accordance with generally accepted accounting principles, and that receipts
 and expenditures of the Company are being made only in accordance with authorizations
 of management and directors of the Company; and

 (iii)
 Provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's
assets that could have a material effect on the financial statements.

 Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 Management
assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2024. In making
this assessment, management used the criteria established in Internal Control–Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission ("COSO").

 Based
on our assessment and those criteria, our management, including our Chief Executive Officer (our principal executive officer)
and our Chief Financial Officer (our principal financial officer) (which roles are currently filled by the same person), believes
that the Company maintained effective internal control over financial reporting as of December 31, 2024.

 Changes
in Internal Control over Financial Reporting. The Company's management, including the Chief Executive Officer (our principal
executive officer) and Chief Financial Officer (our principal financial officer), confirm that there was no change in the Company's
internal control over financial reporting during the quarter ended December 31, 2024 that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial reporting.

 This
annual report does not include an attestation report of the Company's registered public accounting firm regarding internal
control over financial reporting. Management's report was not subject to attestation by the Company's registered public
accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the Company to provide only management's
report in this Form 10-K.

 Item
9B. Other Information

 None.

 Item
9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 Not
applicable.

 PART
III

 Item
10. Directors, Executive Officers and Corporate Governance

 DIRECTORS

 Set
forth below is certain information regarding the directors of the Company.

 Name

 Age

 Position
 with Company

 Since

 Term
 Expires

 Class

 R. Janet Whitmore

 Chair of the Board
 of Directors

 2003

 2025

 I

 Laura M. Beres

 2020

 2025

 I

 Mark
E. Miller

 2023

 2027

 III

 Jess A. Jankowski

 President, Chief
 Executive Officer, Chief Financial Officer, and Director

 2009

 2027

 III

 Ms.
Whitmore joined the board in November 2003. She is a former director of Silverleaf Resorts, Inc., where she served as Chair
of the Compensation Committee and as a member of the Audit Committee. She is also a former director of Epoch Biosciences, a supplier
of proprietary products used to accelerate genomic analysis. Ms. Whitmore is Founder of Benton Consulting, LLC, which specializes
in business development and processes. From 1976 through 1999, Ms. Whitmore held numerous engineering and finance positions at
Mobil Corporation, including Mobil's Chief Financial Analyst and Controller of Mobil's Global Petrochemicals Division.
Ms. Whitmore holds a B.S. degree in Chemical Engineering from Purdue University and an M.B.A. from Lewis University. We believe
that Ms. Whitmore's combination of global financial, engineering, and management expertise makes her a valuable member of
our Board of Directors. Ms. Whitmore is the sister of Bradford T. Whitmore, and herself beneficially owned approximately 3% of
the outstanding shares of our common stock as of October 20, 2023. Mr. Whitmore, together with his affiliate Grace Investments,
LP., beneficially owned approximately 63% of the outstanding shares of our common stock as of October 20, 2023. He is also the
manager of Beachcorp, LLC and Strandler, LLC. The Company has entered into loan agreements with both Beachcorp, LLC, and Strandler,
LLC.

 Ms.
Beres has served as a director of the Company since October, 2020. She has spent her career in corporate strategy and operations
in retail and consumer industries, transforming programs and building new organizational and market-facing capabilities. Ms. Beres
currently serves as the VP Merchandising, Strategy & Growth at Ulta Beauty, having previously served as the VP, Enterprise
Transformation. Previously, she has worked at Deloitte Consulting, advising primarily on growth and transformation strategies
in large-scale, consumer-facing companies, with additional leadership roles in the CMO practice, developing and executing strategies
on global accounts. Ms. Beres started her career working in the financial services, focused on small and middle market companies,
with responsibilities including commercial lending and credit evaluation, and credit transaction negotiation. She earned her M.B.A.
from The University of Chicago Booth School of Business and has a B.S. in Finance and B.A. in Oboe Performance from Butler University.
Ms. Beres also serves on the Board of Directors for Youth Guidance, and has similarly served non-profit organizations on various
Associate and Auxiliary Boards in Chicago. We believe that Ms. Beres' broad strategic experience in CPG, and specific experience
with cosmetics, along with her strong financial background makes her a valuable member of our Board of Directors.

 Mr.
Miller has served as a Director of the Company since July, 2023. He has spent most of his career in leadership and operations
roles in chemical manufacturing companies in the personal care and pharmaceutical industries. Mr. Miller currently serves as Chief
Executive Officer and Board Chair at MetiSense LLC. He also serves on the Board of Directors with Cupron, Inc. and Curie Co.,
two privately held organizations in advanced materials. Previously he was the President and Chief Operating Officer at Nagase
Specialty Materials, where he led the North American organization, and he has worked at Business Performance Consultancy as a
Principal and in Executive roles at Lonza and BASF. He earned his JD from the University of Illinois Chicago, M.B.A. from the
University of Illinois Urbana-Champaign, and has a BBA in Business Administration from the University of Notre Dame. We believe
that Mr. Miller's broad strategic experience in personal care chemical manufacturing along with his strong executive leadership
background makes him a valuable member of our Board of Directors.

 Mr.
Jankowski joined the Board in February 2009. He has served as the Company's President and Chief Executive Officer since
that time. Mr. Jankowski also served as the Company's principal financial officer and principal accounting officer from
November 2017 until March 2018, and again from April 2019 through the current time. After joining the Company in 1995, Mr. Jankowski
held offices including Vice President of Finance, Chief Financial Officer, Secretary, Treasurer and Controller. Prior to joining
the Company, he served as Controller for two building and public works contractors in the Chicago area, during which time he had
significant business development responsibilities. He began his career working for Kemper Financial Services. Mr. Jankowski holds
a B.S. from Northern Illinois University and an M.B.A. from Loyola University. He was appointed to serve on the board of directors
of the Northern Illinois Technology Foundation, an economic development and technology transfer entity that is part of Northern
Illinois University (2009-2018). Mr. Jankowski was also appointed to serve on the Due Diligence Team of the State's Invest
Illinois Venture Fund (2011-2015). He also served on the TechAmerica Midwest Board (2008-2012). Mr. Jankowski was also appointed
to serve on the Romeoville Economic Development Commission (2004-2010). He has also served on the advisory board of NITECH (Formerly
WESTEC), an Illinois Technology Enterprise Center focusing on the commercialization of advanced manufacturing technologies (2003-2008).
Mr. Jankowski has served on the Advisory Board of the Nanobusiness Commercialization Association since 2009. We believe that Mr.
Jankowski's long-term and intimate experience with the Company's operations and business development process, his
financial and management expertise, and his extensive industry relationships, make him a valuable member of our Board of Directors.

 Meetings
of the Board and Committees During the year ended December 31, 2024, the Board of Directors ("BOD") held sixteen meetings.
All directors attended all meetings of the BOD and related committee meetings in 2024 with the exception of one committee meeting
where Ms. Beres was absent.

 Committees
of the Board of Directors -- The Board of Directors has established an Audit and Finance Committee, Compensation Committee
and Nominating and Corporate Governance Committee. Each operates in accordance with its charter (available on our website www.solesence.com
under the "Investor Relations" section). The current members of the Audit and Finance Committee are Ms. Whitmore,
Ms. Beres (Chair), and Mr. Miller. The members of the Compensation Committee are Ms. Whitmore (Chair), Ms. Beres, and Mr. Miller.
The members of the Nominating and Corporate Governance Committee are Ms. Whitmore (Chair), Ms. Beres, and Mr. Miller.

 The
Audit and Finance Committee generally has responsibility for retaining the Company's independent public auditors, reviewing
the plan and scope of the accountants' annual audit, reviewing the Company's internal control functions and financial
management policies, reviewing and approving all related party transactions, and reporting to the Board of Directors regarding
all of the foregoing. The Audit and Finance Committee held six meetings during 2024. The Board of Directors has determined that
Ms. Whitmore is an "audit committee financial expert" as described in applicable SEC rules. The Board of Directors
has not determined affirmatively that Ms. Whitmore is independent under the Nasdaq Stock Market rules, but such rules are inapplicable
to the Company because the Company is no longer listed on Nasdaq.

 The
Compensation Committee generally has responsibility for establishing executive officer and key employee compensation, reviewing,
and establishing the Company's executive compensation, evaluating our Outside Director compensation, and reporting to the
Board of Directors regarding the foregoing. The Compensation Committee also has responsibility for administering the 2019 Equity
Compensation Plan (the "2019 Equity Plan"), determining the number of options, if any, to be granted to the Company's
employees and consultants pursuant to the 2019 Equity Plan, and reporting to the Board of Directors regarding the foregoing. Regarding
most compensation matters, including executive compensation, our management provides recommendations to the Compensation Committee;
however, the Compensation Committee does not delegate any of its functions to others in setting compensation. The Compensation
Committee does not currently utilize external consultants in executive or director compensation matters. The Compensation Committee
held three meetings during 2024. Each member of the Compensation Committee is a "non-employee director" as defined in
Rule 16b-3 under the Exchange Act and is an "Outside Director" as defined by the regulations under Section 162(m)
of the Internal Revenue Code.

 The
Nominating and Corporate Governance Committee generally has responsibility for evaluating and nominating candidates to serve on
the Board of Directors, and for establishing and reviewing our Corporate Governance Principles. The Nominating and Corporate Governance
Committee held one meeting during 2024.

 The
Board of Directors considers its role in risk oversight to focus primarily on evaluating risk at the entity and strategic levels,
with management primarily responsible for managing day-to-day risk factors and presenting summary materials for those positions
to the Board of Directors. Consistent with this philosophy, the Board of Directors has no formal policy as to whether the roles
of Chief Executive Officer and board Chair should be segregated or combined. The Board of Directors considers the circumstances
of the Company and makes a determination as to the appropriate leadership structure for the Company at that time. As of the time
of this filing, the positions of CEO and Board Chair are held by two individuals – Ms. Whitmore serves as Chair and Mr.
Jankowski serves as CEO. Ms. Whitmore brings extensive experience in corporate leadership from her own working experience and
from a number of boards on which she has served in the past, and Mr. Jankowski is expected to benefit from that experience. The
Board of Directors believes this to be the most appropriate structure for the Company at this time. Under our Corporate Governance
Principles, in the event that the Chair of the Board is not an Outside Director, the Board will elect a lead independent director,
who will have the responsibility to schedule and prepare agendas for meetings of the Outside Directors, communicate with the CEO,
disseminate information to the rest of the Board and raise issues with management on behalf of the Outside Directors when appropriate.
The Board evaluates its leadership structure on an ongoing basis and may change it as circumstances warrant.

 The
Board of Directors does not have a stated policy regarding diversity, although pursuant to our Corporate Governance Principles,
diversity is one factor that the Nominating and Corporate Governance Committee considers when recommending directors for stockholder
approval. The Board seeks experienced individuals for service who bring extensive experience in leadership, operations, finance,
and engineering, particularly in areas directly applicable to the Company or its intended future endeavors.

 EXECUTIVE
OFFICERS

 Set
forth below is certain information regarding the executive officers of the Company as of the date of this Form 10-K who are not
identified above as directors.

 Name

 Age

 Position

 Kevin Cureton

 Chief Operating Officer

 Mr.
Cureton joined the Company in November 2012 as Vice President of Sales, Marketing and Business Development. Effective January
1, 2018, Mr. Cureton was named Chief Commercial Officer, and became the Company's Chief Operating Officer in December 2019.
His chemical industry experience has spanned more than twenty years, the majority of which has been in the personal care industry,
including twelve years at AMCOL International Corporation, where he served as the founder and Managing Director of its skin care
and dermatology technology business. Prior to AMCOL, he made significant contributions at Air Products, Borden, and other entities.
Mr. Cureton holds a Bachelor of Science in chemical engineering from Carnegie Mellon University and an M.B.A. from the University
of Chicago Booth School of Business.

 The
Board of Directors elects executive officers and such executive officers, subject to the terms of their employment agreements,
serve at the discretion of the Board of Directors. Messrs. Jankowski and Cureton each have employment agreements with the Company.
See Item 11 below. There are no family relationships among any of the directors or officers of the Company.

 DELINQUENT
SECTION 16(a) REPORTS

 Section
16 of the Exchange Act requires the Company's officers (as defined under Section 16), directors and persons who beneficially
own greater than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with
the SEC. Based solely on a review of the forms we have received, we believe that during 2024 all Section 16 filing requirements
applicable to our officers, directors and 10% beneficial owners were complied with by such persons, with the exception of two
late Form 4 filings by Ms. Whitmore.

 CODE
OF ETHICS

 We
have adopted a Code of Business Conduct and Ethics ("Code of Ethics") that applies to, among others, our principal
executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions.
The Code of Ethics is posted on our Internet website www.solesence.com under the "Investor Relations" section. In
the event that we make any amendment to, or grant any waiver from, a provision of the Code of Ethics that requires disclosure
under applicable SEC rules, we intend to disclose such amendment or waiver on our website.

 INSIDER
TRADING POLICY

 Our
 insider trading policy includes provisions that prohibit officers, directors, advisory board members, employees and independent
contractors, as well as each of those person's spouse, minor child, any person living in their household from engaging in
short sales, put or call options, hedging transactions, pledging, or other derivative transactions involving Sol sence
stock. The Company's Insider Trading Policy is attached in Exhibit 19.

 Item
11. Executive Compensation

 SUMMARY
COMPENSATION TABLE

 The
following table sets forth a summary of the compensation for each of our named executive officers in U.S. dollars for the years
ended December 31, 2024 and 2023.

 Name
 and Principal Position

 Year

 Salary

 ($)

 Bonus

 ($) (1)

 Option

 Awards
 ($) (2)

 All

 Other Compensation
 ($) (3)

 Total

 ($)

 Jess
 Jankowski

 2024

 $

 357,072

 $

 —

 $

 39,738

 $

 26,969

 $

 423,779

 Chief
 Executive Officer

 2023

 $

 341,409

 $

 —

 $

 5,521

 $

 27,919

 $

 374,849

 Kevin
 Cureton

 2024

 $

 309,256

 $

 —

 $

 39,738

 $

 21,299

 $

 370,293

 Chief
 Operating Officer

 2023

 $

 294,492

 $

 —

 $

 5,521

 $

 22,704

 $

 322,687

 (1)

 Any amounts earned
 during 2024 and 2023 would typically have been paid in early-to-mid 2025 and 2024, respectively. Bonus compensation is driven
 by Company performance against its goals as ultimately determined by the Compensation Committee of the Board of Directors
 ("Compensation Committee"). A set of Company-level objectives is created at the beginning of the year, focusing
 on total revenue, revenue growth, particular sources of revenue growth, business development achievements, cash flows and
 related targets, as well as a small discretionary component designed to capture items not specifically listed. Each measure
 has varying levels of achievement, which is reflected in the aggregate bonus measurement. The resulting bonus calculation
 is then applied to each individual's bonus potential as a percentage of salary. Performance milestones were achieved
 in 2024 and related bonuses will be paid. Performance milestones were not achieved in 2023 and related bonuses were not paid.

 (2)

 The amounts in this
 column represent the aggregate grant date fair value of awards granted in 2024 and 2023 in accordance with FASB ASC Topic
 718. See Note 10 of the notes to our financial statements contained elsewhere in this Form 10-K for a discussion of all assumptions
 made by us in determining the FASB ASC Topic 718 values.

 (3)

 The amounts in this
 column represent 401(k) match (total for executive officers of $14,305 during 2024 and $14,585 during 2023), and the value
 of the Company portion of the health and life insurance including employer HSA contributions. Health insurance benefits are
 the same for all employees. Life insurance is provided to all employees in the amount of the employee's annual base
 salary, capped at a maximum of $150,000.

 Employment
Agreements

 Effective
as of August 12, 2009, we entered into an employment agreement with Jess Jankowski in connection with his services as President
and Chief Executive Officer. No term has been assigned to Mr. Jankowski's employment agreement.

 Pursuant
to the terms of his employment agreement, Mr. Jankowski will receive an annual base salary of not less than $275,000. In addition,
Mr. Jankowski will be eligible for discretionary bonuses for services to be performed as an executive officer of the Company based
on performance and achieving milestones approved by our Board of Directors (the "Board").

 Mr.
Jankowski will be eligible for such stock options and other equity compensation as the Board deems appropriate, subject to the
provisions of the 2019 Equity Compensation Plan. Mr. Jankowski will also be entitled to the employee benefits made available by
us generally to all of our other executive officers, subject to the terms and conditions of our employee benefit plan in effect
from time to time.

 In
the event Mr. Jankowski's employment is terminated other than for "cause" (as such term is defined in the employment
agreement), Mr. Jankowski will receive a sum equal to Mr. Jankowski's base salary in effect at the time of termination for
52 full weeks after the effective date of termination, payable in proportionate amounts on our regular pay cycle for professional
employees, provided that Mr. Jankowski signs, without subsequent revocation, a separation agreement and release in a form acceptable
to us. In addition, all stock options granted to Mr. Jankowski prior to termination will become fully vested and exercisable in
accordance with the applicable option grant agreement and the 2019 Equity Compensation. If he is terminated for cause, or if he
resigns as an employee of the Company, Mr. Jankowski will not be entitled to any severance or other benefits accruing after the
term of the employment agreement and such rights will be forfeited immediately upon the end of such term.

 If,
within two years after the occurrence of a change in control, as defined in his employment agreement, Mr. Jankowski's employment
is terminated other than for cause, his responsibilities or annual compensation are materially reduced without his prior consent,
or we cease to be publicly held (each, a "Trigger"), then, subject to Mr. Jankowski signing, without subsequently
revoking, a separation agreement and release in a form acceptable to us, Mr. Jankowski will receive a sum equal to his base salary
for 104 full weeks after the date the Trigger occurs. In addition, all stock options granted to Mr. Jankowski prior to the Trigger
will become fully vested and exercisable in accordance with the applicable option grant agreement and the 2019 Equity Compensation
Plan.

 Effective
as of November 28, 2012, we entered into an employment agreement with Mr. Kevin Cureton providing for an annual base salary of
not less than $190,000. No term has been assigned to Mr. Cureton's employment agreement. If Mr. Cureton is terminated other
than for "cause" (as such term is defined in Mr. Cureton's employment agreement), then, subject to Mr. Cureton
signing, without revoking, a separation agreement and release in a form acceptable to us, Mr. Cureton will receive severance benefits
in an amount equal to Mr. Cureton's base salary for 26 weeks. In addition, all stock options granted to Mr. Cureton prior
to termination will become fully vested and exercisable in connection with the applicable option grant agreement and the 2019
Equity Compensation Plan. A signing bonus of $25,000 was paid upon Mr. Cureton's acceptance of employment.

 OUTSTANDING
EQUITY AWARDS AT YEAR-END

 The
following table sets forth information regarding each unexercised option held by each of our named executive officers as of December
31, 2024.

 Option
 Awards

 Stock
 Awards

 Name

 Number
 of Securities Underlying Unexercised Options (#) Exercisable

 Number
 of Securities Underlying Unexercised Options (#) Unexercisable

 Option
 Exercise Price ($)

 Option
 Expiration Date

 Number
 of Shares of
 Stock
 That Have
 Not
 Vested
 (#)

 Market
 Value of Shares of Stock That Have Not Vested ($)

 Jess
 Jankowski

 69,000

 -0-

 $

 0.42

 02/23/26

 81,000

 -0-

 $

 0.68

 02/21/27

 -0-

 $

 0.82

 05/23/28

 16,500

 -0-

 $

 0.51

 05/22/29

 -0-

 $

 0.45

 06/18/27

 -0-

 $

 4.17

 12/28/28

 48,000

 24,000

 (1)

 $

 1.17

 12/20/29

 4,200

 8,400

 (2)

 $

 0.61

 12/27/30

 —

 —

 -0-

 22,500

 (3)

 $

 2.44

 12/31/31

 —

 —

 Kevin
 Cureton

 43,500

 -0-

 $

 0.42

 02/23/26

 50,000

 -0-

 $

 0.68

 02/21/27

 80,000

 -0-

 $

 0.82

 05/23/28

 16,500

 -0-

 $

 0.51

 05/22/29

 -0-

 $

 0.45

 06/18/27

 -0-

 $

 4.17

 12/28/28

 48,000

 24,000

 (1)

 $

 1.17

 12/20/29

 4,200

 8,400

 (2)

 $

 0.61

 12/27/30

 -0-

 22,500

 (3)

 $

 2.44

 12/31/31

 —

 —

 (1)

 These
 grants expiring December 20, 2029 vest in three equal installments on December 20, 2023, 2024, and 2025.

 (2)

 These grants expiring
 December 27, 2030 vest in three equal installments on December 27, 2024, 2025, and 2026.

 (3)

 These grants expiring
 December 31, 2031 vest in three equal installments on December 31, 2025, 2026, and 2027.

 POTENTIAL
PAYMENT UPON TERMINATION OR CHANGE IN CONTROL

 Severance
Benefits. Please see discussion of severance benefits under "Employment Agreements" above.

 Change
in Control. Upon a change in control, the 2019 Equity Compensation Plan provides that: (1) vesting under all outstanding
stock options will automatically accelerate and each option will become fully exercisable; (2) the restrictions and conditions
on all outstanding restricted shares shall immediately lapse; and (3) the holders of performance shares will receive a payment
in settlement of the performance shares, in an amount determined by the Compensation Committee, based on the target payment for
the performance period and the portion of the performance period that precedes the change in control. If the Company is not the
surviving entity, the successor is required to assume all unexercised options.

 Payments.
 The following table quantifies the estimated payments that would be made in each covered circumstance to the following
named executive officers:

 Name

 Termination By Company Without

 Cause (1)(4)

 Change In
 Control (2)(4)

 Involuntary
 Termination In Connection
 With
 or
 Following a
 Change In
 Control (3)(4)

 Jess Jankowski

 $
 367,000

 $
 36,000

 $
 770,000

 Kevin Cureton

 $
 160,000

 $
 36,000

 $
 196,000

 (1)

 This amount represents
 the severance benefits that would be received under the executive officer's employment agreement as described had the
 executive officer been terminated by the Company without cause on December 31, 2023, including the value of any stock options
 that would have accelerated vesting in connection with such termination.

 (2)

 This amount represents
 an estimate of the value that would have been received under the 2019 Equity Compensation Plan had a change in control occurred
 as of December 31, 2024, and the executive officers benefited from an acceleration of vesting in the 2019 Equity Compensation
 Plan awards, as described above.

 (3)

 This
 amount represents an estimate of the payments and value (including acceleration of vesting of equity-based awards) that
 would have been received by the executive officers had the executive officers been terminated by the Company without cause
 on December 31, 2024 in connection with a change in control on this date.

 (4)

 In all three columns,
 for purposes of calculating the value of the acceleration of vesting of equity-based awards relating to a change in control
 on December 31, 2024, the closing price of our common stock as of December 31, 2024, was used. The amount represents the difference
 between the exercise price of any unvested options and $2.26.

 DIRECTOR
COMPENSATION

 Upon
first being elected to the Board of Directors, each director of the Company who is not an employee or consultant of the Company
(an "Outside Director") is granted stock options to purchase shares of common stock at the closing price as of the
date of issuance (the fair market value). This initial option grant to an Outside Director typically vests over three years, though
may accelerate upon termination from the Board of Directors.

 In
2024, we paid quarterly compensation to the Chairman of the Board of Directors, for an annual total of $24,000. Our other two
then Outside Directors, Ms. Beres and Mr Miller were each paid quarterly compensation for an annual total of $18,000. This compensation
was made solely for services performed by each in their capacities as directors.

 During
the fourth quarter of 2024, we granted our Outside Directors stock options totaling 30,000 shares under the 2019 Equity Plan,
as follows: the Chairman of the Board of Directors received stock options to purchase 12,000 shares of our common stock, while
the other two of the then Outside Directors received stock options to purchase 9,000 shares of our common stock. Our current Outside
Directors had the following shares of our common stock underlying stock options (both vested and unvested) outstanding as of December
31, 2024: Ms. Whitmore: 59,934 shares; Ms. Beres: 61,600 shares; and Mr. Miller: 31,600 shares.

 In
2005, we adopted, and our stockholders approved, the 2005 Non-Employee Director Restricted Stock Plan (the "Director Restricted
Stock Plan") which reserved 150,000 shares of our common stock to be issued to Outside Directors in the form of restricted
shares. In 2005, no awards were made under the Director Restricted Stock Plan. In 2005, we also adopted the Non-Employee Director
Deferred Compensation Plan (the "Director Deferred Compensation Plan") which permits an Outside Director to defer
the receipt of director fees until separation from service or the Company undergoes a change in control. We amended the Director
Restricted Stock Plan in 2005 to permit an Outside Director to defer receipt of restricted stock granted under it. The deferred
restricted shares are accounted for under the Director Deferred Compensation Plan and issued upon separation from service or the
Company's change in control. Under the Director Deferred Compensation Plan, the deferred fees that would have been paid
in cash are deemed invested in 5-year U.S. Treasury Bonds during the deferral period. The accumulated hypothetical earnings are
paid following the Outside Director's separation from service or the Company's change in control. The deferred fees
that would have been paid as restricted shares are deemed invested in our common stock during the deferral period. The Director
Deferred Compensation Plan is an unfunded, nonqualified deferred compensation arrangement. In 2009, all Outside Directors elected
to defer receipts of all of the restricted shares they became entitled to under the Director Restricted Stock Plan, which was
consolidated into the 2010 Equity Plan. In November 2019, the 2010 Equity Plan was consolidated in to the 2019 Equity Compensation
Plan.

 All
Outside Directors are reimbursed for their reasonable out-of-pocket expenses incurred in attending board and committee meetings.

 2024 Outside Director Compensation

 Name

 Fees Earned
 or Paid in
 Cash
 ($)

 Option Awards ($) (1)

 Total ($)

 R. Janet Whitmore

 $
 24,000

 $
 21,193

 $
 45,193

 Laura M. Beres

 $
 18,000

 $
 15,895

 $
 33,895

 Mark E. Miller

 $
 18,000

 $
 15,895

 $
 33,895

 (1)

 The amounts in this
 column represent the aggregate grant date fair value of awards granted in 2024 in accordance with FASB ASC Topic 718. See
 Note 10 of the notes to our financial statements contained elsewhere in this Form 10-K for a discussion of all assumptions
 made by us in determining the FASB ASC Topic 718 values.

 It
is not the Company's practice to issue named executive officer or other employees option grants before or after the disclosure
of material non-public information. The board of directors approve all option grants. For the last several years options have
been granted one time a year in December to named executive officers and other employee. The only exception to this practice is
when option grants are made to qualifying new hires on or near their hire date. It is not the board's policy or practice
to time the release of material non-public information and the issuance of option grants to affect the value of the named executives'
compensation.

 Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLAN

 The
following table gives information about our common stock that may be issued upon the exercise of options and rights under our
2019 Equity Compensation Plan (the "2019 Equity Plan") and our 2010 Equity Compensation Plan (the "2010 Equity
Plan") on December 31, 2024. The 2019 Equity Plan replaced the 2010 Equity Plan.

 (a)

 (b)

 (c)

 Plan Category

 Number of securities to be issued upon exercise of outstanding options, warrants and rights

 Weighted - average exercise price of outstanding options, warrants and rights

 Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

 Plans Approved by Shareholders

 3,212,000

 $
 1.47

 63,000

 Plans Not Approved by Shareholders

 None

 $
 —

 None

 SECURITY
OWNERSHIP OF MANAGEMENT

 AND
PRINCIPAL STOCKHOLDERS

 The
following table sets forth, as of March 28, 2025 certain information with respect to the beneficial ownership of our common stock
by (1) each person known by us to own beneficially more than 5% of the outstanding shares of common stock, (2) each of our directors,
(3) each of our named executive officers and (4) all of our named executive officers and directors as a group. There were 70,103,279
shares of common stock outstanding as of March 28, 2025.

 Name

 Number of
 Beneficially

Owned (1)

 Percent of

Beneficially

Owned

 Bradford T. Whitmore

 49,826,805
 (2)

 71.08
 %

 R. Janet Whitmore

 2,082,009
 (3)

 2.97
 %

 Jess A. Jankowski

 698,150
 (4)

 *

 Kevin Cureton

 614,412
 (5)

 *

 Beres, Laura M

 39,200
 (6)

 *

 Miller, Mark E

 7,533
 (7)

 *

 All current executive officers and directors as a group (5 persons)

 3,441,304
 (8)

 4.84
 %

 *
Denotes beneficial ownership of less than one percent.

 Unless
otherwise indicated below, the person's address is the same as the address for the Company.

 (1)

 Beneficial ownership
 is determined in accordance with the rules of the SEC. Unless otherwise indicated below, the persons in the above table have
 sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.

 (2)

 Includes 25,358,879
 shares of common stock held by Whitmore Holdings, LLC, 675,515 shares of common stock held by Grace Investments, LP, 23,684,270
 shares of common stock held by Strandler, LLC and 108,141 shares held by Bradford T. Whitmore. Mr. Whitmore is
 a manager of Whitmore Holdings, LLC. In such capacities, Mr. Whitmore shares voting and investment power with respect
 to the shares of common stock held by Whitmore Holdings, LLC. Mr. Whitmore is a manager of Strandler, LLC. In
 such capacities, Mr. Whitmore shares voting and investment power with respect to the shares of common stock held by Strandler,
 LLC. Mr. Whitmore is a general partner of Grace Investments, LP. In such capacities, Mr. Whitmore shares
 voting and investment power with respect to the shares of common stock held by the Grace Investments, LP. This
 information is based on information reported on a Form 4 filed on September 3, 2024 with the SEC. The address of the stockholder
 is 5215 Old Orchard Road Suite 620, Illinois 60077.

 (3)

 Includes Ms. Whitmore's
 32,867 shares of common stock issuable upon exercise of options exercisable currently or within 60 days of March 25, 2025.

 (4)

 Includes Mr. Jankowski's
 488,700 shares of common stock issuable upon exercise of options exercisable currently or within 60 days of March 25, 2025,
 as well as 1,000 shares held by his spouse.

 (5)

 Includes
 Mr. Cureton's 488,700 shares of common stock issuable upon exercise of options exercisable currently or within 60 days
 of March 25, 2025.

 (6)

 Includes
Ms. Beres' 39,200 shares of common stock issuable upon exercise of options exercisable currently or within 60 days of March
25, 2025.

 (7)

 Includes
Mr. Miller's 7,533 shares of common stock issuable upon exercise of options exercisable currently or within 60 days of March
25, 2025.

 (8)

 Includes
 all current executive officers and directors as a group's 990,500 shares of common stock issuable upon exercise of options
 exercisable currently or within 60 days of March 25, 2025.

 Item
13. Certain Relationships and Related Transactions, and Director Independence

 We
have engaged in a series of debt and equity transactions with Bradford T. Whitmore since January 1, 2023, as described above in
Item 7. Together with his affiliates Grace Brothers, Ltd., Grace Investments, Ltd., Mr. Whitmore beneficially owned approximately
71% of the outstanding shares of our common stock as of March 28, 2025. Mr. Whitmore is the brother of R. Janet Whitmore, who
has been the Chair of the Board of Directors since November 19, 2019 and one of our directors since 2003, and who is also a stockholder.
Through his affiliates Beachcorp, LLC and Strandler, LLC, Mr. Whitmore is also a substantial lender to the Company under the Business
Loan Agreement, dated November 16, 2018 (see Note 3) to our financial statements included in this Annual Report on Form 10-K).

Independence. The Board of Directors has determined that the following Company directors are "independent" as
that term is defined in the rules and regulations of the SEC and the Nasdaq Stock Market: Ms. Beres and Mr. Miller. Though we
are not currently listed on Nasdaq, our Board of Directors used the Nasdaq listing standards in making its independence determinations.
Under the Nasdaq Stock Market rules, the Company would qualify as a "controlled company" because of the direct and
indirect ownership of Bradford T. Whitmore. As a controlled company, the Company would be exempt from the requirements under those
rules to have a majority of independent directors, to have an independent compensation committee, or to have independent director
oversight of director nominations.

 The
Board of Directors has established an Audit and Finance Committee, Compensation Committee and Nominating and Corporate Governance
Committee (the "Standing Committees"). Ms. Whitmore, Ms. Beres, and Mr. Miller are members of the Standing Committees,
and Ms. Whitmore serves as Chair of each committee.

 Item
14. Principal Accounting Fees and Services

 Audit
Fees. The aggregate amount billed by our principal accountant, RSM US LLP ("RSM"), for audit services performed
for the fiscal years ended December 31, 2024 and 2023 was approximately $270,000 and $263,000 respectively. Audit services include
the auditing of financial statements and quarterly reviews.

 Audit
Related Fees. There were approximately $26,000 in audit related fees billed by RSM for the years ended December
31, 2024 and 2023, which may include costs incurred for reviews of registration statements, assistance with Staff
comment letters, and consultation on various accounting matters in support of our financial statements.

 Tax
Fees. There were no fees billed by our principal accountant for tax related services for the fiscal years ended December 31,
2024 and 2023.

 All
Other Fees. Other than those fees described above, during the fiscal years ended December 31, 2024 and 2023, there were no
other fees billed for services performed by our principal accountant.

 All
of the fees described above were approved by our Audit and Finance Committee.

 Audit
and Finance Committee Pre-Approval Policies and Procedures. Our Audit and Finance Committee pre-approves the audit and non-audit
services performed by RSM, our principal accountants, in order to assure that the provision of such services does not impair RSM's
independence. Unless a type of service to be provided by RSM has received general pre-approval, it will require specific pre-approval
by the Audit and Finance Committee. In addition, any proposed services exceeding pre-approval cost levels or budgeted amounts
will require specific pre-approval by the Audit and Finance Committee.

 The
term of any pre-approval is 12 months from the date of pre-approval, unless the Audit and Finance Committee specifically provides
for a different period. The Audit and Finance Committee will periodically revise the list of pre-approved services, based on subsequent
determinations, and has delegated pre-approval authority to the Chairman of the Audit and Finance Committee. In the event the
Chairman exercises such delegated authority, he shall report such pre-approval decisions to the Audit and Finance Committee at
its next scheduled meeting. The Audit and Finance Committee does not delegate its responsibilities to pre-approve services performed
by the independent auditor to management.

 PART
IV

 Item
15. Exhibits and Financial Statement Schedules

 (a)

 The following documents
 are filed as part of this Form 10-K:

 1.

 The following financial
 statements of the Company, with the report of independent registered public accounting firm, are filed as part of this Form
 10-K:

 Report
of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2024 and 2023

Consolidated Statements of Operations for the Years Ended December 31, 2024 and 2023

Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2024 and 2023

Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023

 Notes
to Consolidated Financial Statements

 2.

 A list of exhibits
 required to be filed as part of this Form 10-K is set forth in the Exhibit Index beginning on page E-1 of this Form 10-K,
 and is incorporated herein by reference.

 Item
16. Form 10-K Summary

 NONE.

 SOLESENCE, INC

 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 Page

 Report of Independent Registered Public Accounting Firm (PCAOB ID No. 49)

 Consolidated Balance Sheets as of December 31, 2024 and 2023

 Consolidated Statements of Operations for the years ended December 31, 2024 and 2023

 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2024 and 2023

 Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023

 Notes to the Consolidated Financial Statements

 F- 1

 Report of Independent Registered Public
Accounting Firm

 To the Stockholders and the Board of Directors of Solesence, Inc.

 Opinion on the Financial Statements

 We have audited the accompanying consolidated balance sheets of Solesence,
Inc. and its subsidiaries, formerly known as Nanophase Technologies Corporation, (the Company) as of December 31, 2024 and 2023, the related
consolidated statements of operations, stockholders' equity and cash flows for the years then ended, and the related notes to the
consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in
all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its
cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 Basis for Opinion

 These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.

 We conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion.

 Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation
of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 Critical Audit Matters

 The critical audit matters communicated below are matters arising from
the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and
that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements,
taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.

 F- 2

 Inventory Excess and Obsolete Reserve

 As described within Note 1 and Note 4 to the consolidated financial statements,
the Company has recorded an allowance to reduce inventory relating to excess quantities or the obsolescence of certain products. As of
December 31, 2024, the Company has reported inventories of approximately $20,267,000, net of an excess and obsolete reserve of $1,987,000.
The Company monitors the value of inventory for the effects of aging, obsolescence, and seasonality, and recognizes a reserve equal to
the value of inventory that will likely not be consumed in production or sold and therefore will experience an impairment. Such inventory
may consist of materials nearing expiration, soon-to-be obsolete products or raw materials that are no longer regularly used.

 We identified the valuation of the inventory excess and obsolete reserve
as a critical audit matter because of the significant assumption and judgments made by management. Auditing management's assumption
and judgments regarding their expectations of inventory that will not be consumed in production or sold, and evaluating evidence obtained,
involved a high degree of auditor judgment, subjectivity and increased audit effort.

 Our audit procedures related to the Company's evaluation of the excess
and obsolete inventory reserve included the following primary procedures, among others:

 We reviewed the Company's accounting policy to understand management's
estimation methodology and their significant assumption, assess consistency and identify changes from prior years.

 We performed corroborative inquiries with management and those in purchasing,
operations, warehousing and production to understand the basis for the reserve.

 We evaluated the reasonableness of the significant assumption used by management
including those related to identifying materials nearing expiration, soon-to-be obsolete products or raw materials that are no longer
regularly used.

 We tested the completeness, accuracy and relevance of the underlying data
used in management's estimate of excess and obsolete inventory.

 We tested the calculations and application of management's methodologies
related to the valuation of excess and obsolete inventory.

 We performed a comparison of current year activity to the prior year reserve
to assess the reasonableness of the Company's reserves and identify potential indicators of management bias that may be present.

 We obtained management's evaluation of the reasonableness of their significant
assumption and reperformed calculations within to test for mathematical accuracy. We tested the completeness of the inventory subjected
to their analysis. In addition, we tested the reliability of data underpinning management's analysis, including historical sales and usage
data.

 /s/ RSM US LLP

 We have served as the Company's auditor since 2001.

 Milwaukee, Wisconsin

 March 31, 2025

 F- 3

 SOLESENCE, INC.

 CONSOLIDATED BALANCE SHEETS

 2024

 2023

 (in thousands except share and
 per share data)

 ASSETS

 Current assets:

 Cash

 $
 1,409

 $
 1,722

 Trade accounts receivable

 5,655

 3,692

 Allowance for credit losses

 ( 786
)

 ( 225
)

 Trade accounts receivable, net

 4,869

 3,467

 Inventories, net

 20,267

 10,031

 Prepaid expenses and other current assets

 2,803

 1,082

 Total current assets

 29,348

 16,302

 Equipment and leasehold improvements, net

 12,734

 8,668

 Operating leases, right of use

 7,917

 7,907

 Other assets, net

 Total assets

 $
 50,002

 $
 32,881

 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities:

 Line of credit – accounts receivable, related party

 $
 —

 $
 2,810

 Line of credit – inventory, related party

 4,000

 —

 Current portion of term debt, related party

 —

 2,000

 Term debt, related party

 1,000

 —

 Current portion of operating lease obligations

 1,260

 1,297

 Accounts payable

 9,093

 6,260

 Deferred revenue

 5,571

 2,353

 Accrued expenses

 4,849

 Total current liabilities

 25,773

 15,589

 Long-term portion of operating lease obligations

 9,037

 9,152

 Long-term line of credit – inventory, related party

 —

 5,000

 Long-term debt, related party

 —

 1,000

 Asset retirement obligations

 Total long-term liabilities

 9,283

 15,390

 Stockholders' equity:

 Preferred stock, $.01 par value, 24,088 shares authorized, and no shares issued and outstanding

 —

 —

 Common stock, $.01 par value, 95,000,000 and 60,000,000 shares authorized; 70,103,279 and 49,627,254 shares issued and outstanding on December 31, 2024 and 2023, respectively

 Additional paid-in capital

 114,674

 106,069

 Accumulated deficit

 ( 100,428
)

 ( 104,663
)

 Total stockholders' equity

 14,946

 1,902

 Total liabilities and stockholders' equity

 $
 50,002

 $
 32,881

 (See accompanying
Notes to Consolidated Financial Statements)

 F- 4

 SOLESENCE, INC.

 CONSOLIDATED STATEMENTS OF OPERATIONS

 Years ended December 31,

 2024

 2023

 (in thousands except share and
 per share data)

 Revenue:

 Product revenue

 $
 51,890

 $
 36,641

 Other revenue

 Total revenue

 52,347

 37,297

 Operating expense:

 Cost of revenue

 36,159

 29,472

 Gross profit

 16,188

 7,825

 Research and development expense

 3,837

 3,837

 Selling, general and administrative expense

 7,219

 7,534

 Net income (loss) from operations

 5,132

 ( 3,546
)

 Interest expense

 Net income (loss) before provision for income taxes

 4,462

 ( 4,384
)

 Provision for income taxes

 Net income (loss)

 $
 4,235

 $
)

 Net income (loss) per share-basic

 $
 0.07

 $
 ( 0.09
)

 Weighted average number of basic common shares outstanding

 62,350,459

 49,556,305

 Net income (loss) per share-diluted

 $
 0.07

 $
 ( 0.09
)

 Weighted average number of diluted common shares outstanding

 65,028,815

 49,556,305

 (See accompanying Notes
to Consolidated Financial Statements)

 F- 5

 SOLESENCE INC.

 CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY

 (in thousands except share data)

 Preferred Stock

 Common Stock

 Additional

 Description

 Amount

 Amount

 Paid-in
 Capital

 Accumulated
Deficit

 Total

 Balance on December 31, 2022

 —

 $
 —

 49,320,680

 $

 $
 105,226

 $
 ( 100,070
)

 $
 5,649

 Cumulative effect of accounting changes related to expected credit losses

 —

 —

 —

 —

 —

 ( 203
)

 ( 203
)

 Issuances of shares and stock option exercises

 —

 —

 306,574

 —

 Stock-based compensation

 —

 —

 —

 —

 —

 Rights offering expense

 —

 —

 —

 —

 ( 81
)

 —

 ( 81
)

 Net loss for the year ended December 31, 2023

 —

 —

 —

 —

 —

)

)

 Balance on December 31, 2023

 —

 $
 —

 49,627,254

 $

 $
 106,069

 $
 ( 104,663
)

 $
 1,902

 Issuances of shares and stock option exercises

 —

 —

 20,476,025

 7,880

 —

 8,084

 Stock-based compensation

 —

 —

 —

 —

 —

 Net income for the year ended December 31, 2024

 —

 —

 —

 —

 —

 4,235

 4,235

 Balance on December 31, 2024

 —

 $
 —

 70,103,279

 $

 $
 114,674

 $
 ( 100,428
)

 $
 14,946

 (See accompanying Notes
to Consolidated Financial Statements)

 F- 6

 SOLESENCE INC.

 CONSOLIDATED STATEMENTS OF CASH FLOWS

 Years Ended December 31,

 2024

 2023

 (in thousands)

 Operating activities:

 Net income (loss)

 $
 4,235

 $
)

 Adjustments to reconcile net income (loss) to cash
 provided by (used) in operating activities:

 Depreciation and amortization

 Share-based compensation

 Changes in assets and liabilities related to operations:

 Trade accounts receivable, net

 ( 1,402
)

 1,064

 Inventories, net

 ( 10,236
)

 ( 1,192
)

 Prepaid expenses and other assets

 ( 1,721
)

 ( 216
)

 Accounts payable

 2,399

 ( 503
)

 Deferred revenue

 3,218

 Accrued expenses

 3,988

 ( 146
)

 Net changes in right-of-use assets and lease liabilities – operating

 ( 163
)

 1,697

 Net cash provided by (used in) operating activities

 1,971

 ( 2,006
)

 Investing activities:

 Acquisition of equipment and leasehold improvements

 ( 4,558
)

 ( 1,051
)

 Net cash used in investing activities

 ( 4,558
)

 ( 1,051
)

 Financing activities:

 Payments to line of credit – accounts receivable, related party

 ( 2,810
)

 ( 1,472
)

 (Payments to) proceeds from line of credit - inventory, related party

 ( 1,000
)

 2,000

 Payments to term loans, related party

 ( 2,000
)

 ( 1,346
)

 Proceeds from term loans, related party

 —

 3,338

 Proceeds from issuance of mezzanine preferred stock

 6,000

 —

 Proceeds from exercise of stock options

 2,084

 Net cash provided by financing activities

 2,274

 2,593

 Decrease in cash

 ( 313
)

 ( 464
)

 Cash at beginning of period

 1,722

 2,186

 Cash at end of period

 $
 1,409

 $
 1,722

 Supplemental cash flow information:

 Cash paid for interest

 $

 $

 Supplemental non-cash investing and financing activity:

 Accounts payable incurred for the purchase of equipment and leasehold improvements

 $

 $

 Conversion of mezzanine preferred stock

 6,000

 —

 Right-of-use asset obtained in exchange for a lease liability

 1,019

 (See accompanying Notes
to Consolidated Financial Statements)

 F- 7

 SOLESENCE, INC

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 (In thousands, except share and per share
data or as otherwise noted herein)

 (1)

 Description of Business

 Nanophase Technologies
Corporation, now known as Solesence, Inc. ("Sol sence," "Company," "we," "our,"
or "us"), is a science-driven company which, along with its wholly owned subsidiary, Sol sence, LLC (our "Sol sence
consumer products subsidiary"), is focused in various skin health- and beauty-markets. Using consumer health as our
end-goal and science and innovation to guide the path, skin health and medical diagnostics combined currently make up the great
majority of our business and drive our forward growth strategy. We offer engineered materials, formulation development and
commercial manufacturing through an integrated family of technologies. Our expertise in materials engineering allows us to effectively
coat and disperse particles on a nano and "non-nano" scale for use in a variety of skin health markets, including for
use in sunscreens as active ingredients and as fully developed prestige skin care and cosmetics products, marketed and sold through
our consumer products line. Additionally, we continue to sell products in legacy markets, including medical
diagnostics, architectural coatings, industrial coating applications, abrasion-resistant additives, and plastics additives, all
of which fall into the advanced materials product category.

 We target markets,
primarily related to skin health products and ingredients where we believe our materials and products offer practical and competitive
minerals-based solutions. We traditionally work closely with current customers in these target markets to identify their material
and performance requirements. We market our Sol sence products to cosmetics and skin care brands, and our other materials
to various end-use applications manufacturers.

 Recently developed
technologies have made certain new products possible and opened potential new markets. During 2015 we were granted a patent on
a new type of particle surface treatment (coating) — now called Original Active Stress Defense Technology —
which has become the cornerstone of our new product development in consumer products line, with first revenue recognized during
2016. Active Stress Defense now refers to a suite of three proprietary technologies — Original Active Stress Defense,
Kleair, and Bloom — all three of which either utilize a unique and proprietary, mineral-based technology or
work synergistically with one of our unique and proprietary, mineral-based technologies to improve performance and/or aesthetics.
Our ongoing innovation efforts include new IP in areas that advance environmental protection, align with market needs, and complement
our existing technologies Through the creation of our consumer products line, we utilize our technology suite to manufacture and
sell fully developed solutions to targeted customers in the skin care industry, typically in prestige skin care and cosmetics markets,
in addition to the ingredients we have traditionally sold in the personal care area.

 Although our primary
strategic focus has been the North American market, we currently sell materials to customers overseas and have been working to
expand our reach within foreign markets. Our common stock trades on the OTCQB marketplace under the symbol NANX.

 While product sales
comprise the majority of our revenue, we also recognize revenue from other sources from time to time. These activities are not
expected to drive the long-term growth of the business. For this reason, we classify such revenue as "other revenue"
in our Consolidated Statements of Operations, as it does not represent revenue directly from the sale of our products.

 The Company recorded
a net profit and positive cash flow from operations in 2024. In addition, the company reduced outstanding debt. While the
Company's debt currently matures in the next year, management has a commitment from its related party debt holder that the
debt will be refinanced with a maturity date after April 1, 2026. Management believes that current
liquidity and expected borrowing capacity are sufficient to fund operations and substantial doubt is not raised regarding the Company's
ability to continue as a going concern.

 (2)

 Summary of Significant Accounting Policies

 Use of Estimates and Risks and Uncertainties

 The preparation of
financial statements requires us to make estimates and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates. Certain assumptions are also necessary to assess the
impact of risks and uncertainties on the financial statements, 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. These risks and uncertainties
are further discussed in Note 12. Any changes in these assumptions or business plans could have a material impact on the financial
statements.

 F- 8

 Cash

 The Cash balance on
December 31, 2024 consists of funds borrowed from our Revolving Line of Credit, which is facilitated by Beachcorp, LLC. Our ability
to access cash from our credit facilities depends on carrying an Accounts Receivable or Inventory balance greater than the outstanding
loan balances in the Revolving Lines of Credit. As part of the agreement, we are required to have a bank account in place to act
as a depository account for our customers. This account is referred to as the Control Account. Furthermore, there is an Account
Control Agreement in place which provides Beachcorp, LLC the ability to exercise control over the account via approval of requested
transfers. According to our agreements with Beachcorp, LLC, Sol sence is to be the party initiating any transfers, whether
to Sol sence or to Beachcorp, LLC, and approval to access any monies within this account can only be withheld by Beachcorp,
LLC if the borrowing base falls below the Company's qualified receivables, or if we are in arrears with respect to interest
payments due Beachcorp, LLC. The failure of Sol sence to remedy the previously mentioned conditions could lead to Beachcorp,
LLC gaining the right, through a "springing" feature administered by Libertyville Bank and Trust, a Wintrust Community
Bank ("Libertyville"), to transfer funds to itself without direct approval from Sol sence. Cash is held
at a federally insured institution, but our cash balances at times exceed insured limits. The Company has not experienced any losses
related to these statutory limits.

 Trade Accounts Receivable, Net

 Trade accounts receivable
are carried at original invoice amount less an estimate made for future credit losses based on a review of all outstanding amounts
on a monthly basis, and written off when deemed uncollectible We determine the allowance for credit losses by identifying troubled
accounts and by using historical experience applied to an aging of accounts, as well as expected losses based on the current and
anticipated macroeconomic environment. Recoveries of trade accounts receivable previously written off are recorded when received.
Our typical credit terms are between thirty and sixty days from shipment and invoicing.

 2024

 2023

 Balance, beginning

 $

 $

 Current period provisions

 Write offs

 ( 3)

 ( 9)

 Balance, ending

 $

 $

 Inventories, Net

 Inventories are stated
at the lower of cost, maintained on an average cost basis, or net realizable value. We have recorded allowances to reduce inventory
relating to excess quantities of certain materials. Write-downs of inventories establish a new cost basis, which is not increased
for future increases in market value of inventories or changes in estimated excess quantities.

 Equipment and Leasehold Improvements

 Equipment is stated
at cost and is being depreciated over its estimated useful life ( 3 - 20 years) using the straight-line method. Leasehold improvements
are stated at cost and are being amortized using the straight-line method over the shorter of the useful life of the asset or the
term of the lease ( 3 - 7 years). Depreciation expense for leased assets is included with depreciation expense for owned assets. From
time to time we have self-constructed assets. These assets are stated at cost plus the capitalization of labor and are depreciated
over an estimated useful life ( 7 - 10 years) using the straight-line method.

 Long Lived Assets

 We review long-lived
assets for impairment whenever events or changes in circumstances indicate that the asset's carrying amount may not be recoverable.
We conduct long-lived asset impairment analyses in accordance with ASC 360-10-15, Impairment or Disposal of Long-Lived Assets.
ASC 360-10-15 requires us to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent
of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash
flows. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is
measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flow analysis
or appraisals. Based upon our analysis, there were no impairment charges recognized in either period presented.

 Deferred Revenue

 The Company records
a contract liability for development projects due to the contractual billing of these projects not always aligning with revenue
recognition. In addition, it is now the Company's policy to frequently require deposits relating to the production of our
Sol sence products. Of the total $ 5,571 in deferred revenue reported in 2024, 99 % related to prepayments received from certain
customers per Company policy, and the remaining 1 % related to prepayments from a product development agreement with a personal
care ingredient customer.

 Financial Instruments

 We follow ASC Topic
820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value,
and expands disclosures about fair value measurements. The fair value framework requires the categorization of assets and liabilities
into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable
measure of fair value, whereas Level 3 generally requires significant management judgment.

 F- 9

 Our financial instruments
include cash, accounts receivable, accounts payable and accrued expenses, along with any short-term and long-term
borrowings as described in Note 3. The carrying values of cash and cash equivalents, accounts receivable, and accounts payable
and accrued expenses are reasonable estimates of their fair value due to the short-term nature. The fair value of short-term and
long-term debt approximates carrying value based on comparison of terms to similar debt offering in the marketplace.

 There were no financial
instruments adjusted to fair value on December 31, 2024 and 2023.

 Product Revenue

 Revenues are recognized
when control of the promised goods is transferred to customers, in an amount that reflects the consideration we expect to receive
in exchange for those goods. When our ingredients and finished products are shipped, with control being transferred at the shipping
point, is the point in time at which we recognize the related revenue.

 We generally expense
sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within
selling, general and administrative expenses. Customers' deposits, deferred revenue and other receipts are deferred and recognized
when the revenue is realized and earned. Cash payments to customers are classified as reductions of revenue in our statements of
operations. For select customers the Company may pay volume rebates which are variable in nature due the amount the select customer
will take. In 2024 one customer earned a volume rebate of $ 35,000. In 2023 no volume rebates were recorded because the customers
did not meet required volumes.

 As part of the sales
process, it is common for the Company to receive customer deposits. These deposits are typically held for less than a year and
do not result in a financing component to the sales. The customer deposits are recognized as revenue when the Company ships the
finished goods to the customer. Revenue is recognized when the goods are shipped

 The
Company will for some customers arrange for the shipping of the finished goods. Revenues and costs associated with the shipment of
the finished goods are recorded separately within product revenue and cost of revenue, respectively, on the consolidation statement
of operations. With regard to revenue recognition, shipping activities that occur prior to the customers' obtaining control of
the goods are not a promised service to the customer, but rather activities to fulfill the Company's promise to transfer the
goods. As such, these activities are not deemed a performance obligation requiring allocation of the transaction price. Similarly,
shipping activities that occur after the customers' obtaining control of the goods are, as a matter of policy, also not a
promised service to the customer, but rather an activity to fulfill the Company's promise to transfer the good.

 Contract balances for
the years ended December 31, 2024, 2023, and 2022 are as follows:

 Accounts Receivable

 Contract Liabilities

 2022

 $
 4,734

 2,188

 2023

 3,467

 2,353

 2024

 4,869

 5,571

 Revenue recognized
in the reporting period that was included in the contract liability balance at the beginning of the period was $ 2,074 and $ 2,084
for the years ended December 31, 2024, and 2023, respectively.

 Other Revenue

 Other revenue may include revenue from technology
license fees and paid development projects. Technology license fees and paid development projects are recognized over time when
the obligations under the agreed upon contractual arrangements are performed on our part. Revenue recognized over time was
$ 457 and $ 656 for the years ended December 31, 2024 and 2023, respectively.

 Research and Development Expenses

 Research and development
expenses are recognized as expense when incurred.

 Income Taxes

 We account for income
taxes using the asset-and-liability approach. As such, deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Deferred tax assets and liabilities are calculated using the enacted tax rates and laws that are expected to be in effect when
the anticipated reversal of these differences is scheduled to occur. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some or all of the deferred tax assets will not be realized.

 F- 10

 When tax returns are
filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others
are subject to uncertainty about merits of the position taken or the amount of the position that would be ultimately sustained.
The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence,
management believes it is more likely than not that the position will be sustained upon examination, including the resolution
of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions
that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50
percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with
tax positions taken that exceeds the amount measured, as described above, is reflected as a liability for uncertain tax benefits
in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities
upon examination.

 We have not recorded
a reserve for any tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about
the timing of such deductibility. We file tax returns in all appropriate jurisdictions, which includes a federal tax return and
Illinois state tax return. When and if applicable, potential interest and penalty costs are accrued as incurred, with expenses
recognized in selling, general and administrative expenses in the statements of operations. As of December 31, 2024, and 2023,
we had no liability for unrecognized tax benefits.

 Earnings Per Share

 Included in the computation of diluted earnings
per share for the year ended December 31, 2024, was a total of 2,678,000 in potential shares of common stock. Options to purchase
approximately 889,000 shares of common stock that were outstanding as of December 31, 2023 were not included in the computation
of earnings per share for the year ended December 31, 2023, as they would have been anti-dilutive owing to the loss reported for
the period.

 Earnings applicable to common stock and
common stock shares used in the calculation of basic and diluted earnings per share are as follows:

 Years Ended December 31,

 2024

 2023

 Numerator: (in Thousands)

 Net income (loss)

 $
 4,235

 $
)

 Denominator:

 Weighted average number of basic common shares outstanding

 62,350,459

 49,556,305

 Weighted average additional shares assuming conversion of in-the-money stock options to common shares

 2,678,356

 —

 Weighted average number of diluted common shares outstanding

 65,028,815

 49,556,305

 Basic earnings per common share:

 Net income (loss) per share – basic

 $
 0.07

 $
 ( 0.09
)

 Diluted earnings per common share:

 Net income (loss) per share – diluted

 $
 0.07

 $
 ( 0.09
)

 Recently Adopted Pronouncements

 In November
2023 the FASB issued ASU 2023-07 " Improvements to Reportable Segment Disclosures ", which the Company adopted
in 2024. The amendments in this Update improve financial reporting by requiring disclosure of incremental segment information on
an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses.

 Topic 280
requires that a public entity disclose certain information about its reportable segments. For example, a public entity is required
to report a measure of segment profit or loss that the Chief Operating Decision Maker uses to assess segment performance and make
decisions about allocating resources. Topic 280 also requires other specified segment items and amounts, such as depreciation,
amortization, and depletion expense, to be disclosed under certain circumstances. The amendments in this Update do not change or
remove those disclosure requirements.

 F- 11

 The amendments
in this Update also do not change how a public entity identifies its operating segments, aggregates those operating segments, or
applies the quantitative thresholds to determine its reportable segments.

 This Update
did not have a significant impact on the Company.

 Recently Issued Pronouncements

 On
December 14, 2023 the FASB issued a final standard on improvements to income tax disclosures. The standard requires disaggregated
information about a reporting entity's effective tax rate reconciliation as well as information on income taxes paid. The
standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital
allocation decisions. ASU 2023-09, Improvements to Income Tax Disclosures, applies to all entities subject to income
taxes. This new requirement will be effective for Sol sence for annual periods beginning December 31, 2025. The Company
is currently evaluating the impact of the adoption of this standard on the consolidated financial statements.

 (3)

 Related Party Notes and Lines of Credit

 Notes and lines of
credit consist of the following:

 2024

 2023

 Rate

 Available

 Outstanding
 Balance

 Available

 Outstanding
 Balance

 Libertyville Bank & Trust (1)

 8.50 %

 $

 $
 —

 $

 $
 —

 Libertyville Bank & Trust (2)

 8.50 %

 —

 —

 Beachcorp, LLC (3)

 8.25 %

 5,604

 —

 3,298

 2,810

 Beachcorp, LLC (4)

 8.25 %

 5,200

 4,000

 5,200

 5,000

 Strandler, LLC (5)

 8.25 %

 1,000

 1,000

 1,000

 1,000

 Strandler, LLC (6)

 9.25 %

 —

 —

 2,000

 2,000

 1)
 Since July 2014, we have maintained a bank-issued letter of credit for up to $ 30 in borrowings,
with interest at the prime rate plus 1 %, to support our obligations under our Romeoville, Illinois facility lease agreement. No
borrowings have been incurred under this promissory note. It is our intention to renew this note annually. Because there were no
amounts outstanding on the note at any time during 2024 or 2023, we have recorded no related liability on our balance sheet.

 2)
 On December 21, 2021, the existing credit agreement with Libertyville was converted for use to
support our obligations under our newly leased manufacturing and warehouse space in Bolingbrook, Illinois. Interest on drawn balances
will be at the prime rate plus 1 %. This credit agreement has a maturity of December 22, 2025. We expect to
renew this agreement annually, as the lease requires. This credit agreement is secured by all the unencumbered assets of the Company
and has superior collateral rights to those credit facilities with Beachcorp, LLC and Strandler, LLC.

 3)
 On January 28, 2022, the Company entered into an Amended and Restated Business Loan Agreement (the
"A&R Loan Agreement"), which amends and restates the Master Agreement between the Company and Beachcorp, LLC, and
a new promissory note in order to evidence the A/R Revolver facility, including an amendment to expand the limit on the A/R Revolver
Facility from $ 6,000 to $ 8,000, reduce the interest rate to the prime rate plus 0.75 %, and extend the maturity of the A/R Revolver
Facility to March 31, 2024. On March 1, 2024, the company entered into a Second Amendment to the Amended and Restated Business
Loan Agreement extending the maturity of the A/R Revolver Facility to October 1, 2025.

 4)
 On January 28, 2022, the Company entered into the A&R Loan Agreement and a new revolving loan
agreement ("Inventory Facility") with Beachcorp, LLC, and a new promissory note in order to evidence the Inventory
Facility. The maximum borrowing amount under the Inventory Facility was $ 4,000, with a borrowing base consisting of up to 50 % of
the value of qualified inventory of the Company. The interest rate for the Inventory Revolver is at the prime rate plus 0.75 %,
and it was set to matured on March 31, 2024. On November 13, 2023, the Company entered into a Replacement Promissory Note with
Beachcorp, LLC replacing the Inventory Facility promissory note executed on January 28, 2022. The maximum borrowing amount under
the replacement Inventory Facility was increased to $ 5,200, with a borrowing base consisting of up to 55 % of the value of qualified
inventory of the Company. The interest rate for the replacement Inventory Revolver remains at the prime rate plus 0.75 %. On March
1, 2024, the company entered into a Second Amendment to the Business Loan Agreement extending the maturity of the Inventory Revolver
Facility to October 1, 2025.

 F- 12

 5)
 On January 28, 2022, the Company entered into an additional Business Loan Agreement (the "New
Term Loan Agreement") with Strandler, LLC, which effectively transferred or assigned the Term Loan to Strandler, LLC from
Beachcorp, LLC. Interest on the New Term Loan is at the prime rate plus 0.75 %. Strandler, LLC is also an affiliate of Bradford
T. Whitmore. On March 1, 2024, the company entered into a Second Amendment to the Business Loan Agreement extending the maturity
of the Term Maturity Note to October 1, 2025.

 6)
 On November 13, 2023, the Company entered into a new Promissory Note (the "Bridge Note")
with Strandler, LLC. The maximum borrowing amount under the Bridge Note was $ 2,000. The interest rate for the Bridge Note was at
the prime rate plus 0.75 %, and it was to mature on May 13, 2024. The Bridge Note was repaid in February 2024.

 The Company
classifies the line of credit – accounts receivable as current because we are required to pay back the borrowings as cash
is received from our customers. The company's remaining debt is presented within the Consolidated Balance Sheet as of December
31, 2024, and 2023 in accordance with the maturity dates in the financing agreements.

 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 A/R Revolver Facility, the Inventory Facility and the New Term Loan are all secured by all the unencumbered assets of the Company
and subordinated to the Company's credit facility with Libertyville Bank & Trust. The Company's loan agreements
with Strandler, LLC and Beachcorp, LLC currently are set to expire on October 1, 2025, which could become an operating risk if
we are not able to refinance or extend the maturity dates.

 Related party interest
expense consists of the following:

 Twelve Months Ended December 31,

 2024

 2023

 Interest expense, related parties

 $

 $

 Accrued interest consists
of the following:

 2024

 2023

 Accrued interest expense, related parties

 $

 $

 Outstanding balances
associated with related parties are as follows:

 2024

 2023

 Beachcorp, LLC

 $
 4,000

 $
 7,810

 Strandler, LLC

 1,000

 3,000

 (4)

 Inventories, net

 Inventories consist of the following:

 2024

 2023

 Raw materials

 $
 17,396

 $
 8,524

 Finished goods

 4,858

 2,184

 Inventory reserve

 ( 1,987
)

 ( 677
)

 Total Inventories, net

 $
 20,267

 $
 10,031

 F- 13

 (5)

 Equipment and Leasehold Improvements

 Equipment and leasehold improvements consist of the following:

 2024

 2023

 Machinery and equipment

 $
 23,551

 $
 23,339

 Office equipment

 1,014

 1,014

 Office furniture

 Leasehold improvements

 5,153

 5,157

 Construction in progress

 5,706

 35,550

 30,567

 Less: Accumulated depreciation and amortization

 ( 22,816
)

 ( 21,899
)

 $
 12,734

 $
 8,668

 Depreciation expense
was $ 918 and $ 732, for the years ended December 31, 2024 and 2023, respectively.

 (6)

 Lease Commitments

 The Company's
operating lease portfolio is comprised of operating leases for office, warehouse space and equipment. Certain of the Company's
leases include one or more options to renew or terminate the lease at the Company's discretion. The Company regularly evaluates
the renewal and termination options and when they are reasonably certain of exercise, includes the renewal or termination option
in our lease term. The Company has one sublease of currently unused floorspace that is month-to-month.

 The discount rates
used for leases accounted for under ASC 842 are based on an interest rate yield curve developed for the leases in the Company's
portfolio.

 On September 1 st of 2024 the
facility located at 1319 Marquette Drive in Romeoville was extended through January 31, 2028. Additionally, on that same day, the
facility located at 453 Commerce St in Burr Ridge was extended for one year. The present value of future lease payments associated
with these extensions resulted in the addition of a ROU asset and lease liability totaling $ 1,019.

 The office leases contain
variable lease payments which consist primarily of taxes, insurance, and common area or other maintenance costs, which are paid
based on actual costs incurred by the lessor. The Company has elected to utilize the available practical expedient to combine lease
and non-lease components for building leases.

 Quantitative information
regarding the Company's leases is as follows:

 Twelve Months Ended December 31, 2024

 Twelve Months Ended December 31, 2023

 Components of lease cost

 Operating lease cost components:

 Operating lease cost

 1,944

 1,881

 Variable lease cost

 Short-term lease cost

 Sub-lease income

 ( 511
)

 ( 786
)

 Total operating lease costs

 2,451

 1,788

 Total lease cost

 $
 2,451

 $
 1,788

 F- 14

 Supplemental cash flow
information related to leases is as follows for the years ended December 31, 2024 and 2023:

 2024

 2023

 Cash paid for amounts included in the measurement of lease liabilities:

 Operating cash outflow from operating leases

 $
 2,115

 $

 Lease liabilities arising from obtaining right-of-use assets

 $
 1,019

 $

 Weighted-average remaining lease term-operating leases (in years)

 6.8

 7.9

 Weighted-average discount rate-operating leases

 7.6
 %

 7.1
 %

 The future maturities
of the Company's operating leases as of December 31, 2024 are as follows:

 2025

 $
 1,975

 2026

 1,909

 2027

 1,965

 2028

 1,587

 2029

 1,591

 Thereafter

 4,021

 Total payments

 $
 13,048

 Less amounts representing interest

 ( 2,752
)

 Total minimum payments required

 $
 10,296

 The Company subleases a portion of a leased
industrial building that is used primarily for the storage of furniture, equipment and displays used for retail sales. The arrangement
is not with a related party.

 Payments received by the Company for this
sublease are comprised of two components, which include base rent and Common Area Maintenance (CAM) charges. While the base rent
is fixed, the CAM charges are indexed directly to the Master Lease and are expected to be adjusted periodically as actual costs
are incurred. However, the executed sublease agreement specifically itemizes these costs with a provision that informs the sublessee
that the CAM charges will be adjusted (up or down) based on actual amounts once this information becomes known. As such, the nature
of the charges is more closely representative of a fixed payment (an "in-substance fixed" charge) with the adjustments
occurring simply to "true up" the listed CAM charges once actual charges from the head lessor become known. As sublessor,
the Company has elected the practical expedient to not separate lease and nonlease components in disclosing future undiscounted
cashflows and treats the combined components as a single lease component.

 As sublessor, the Company is subletting
to one tenant on a month-to-month arrangement.

 (7)

 Accrued Expenses

 Accrued expenses consist of the following:

 2024

 2023

 Accrued payroll and related expenses

 $
 1,824

 $

 Accrued accounts payable

 1,597

 Other

 1,428

 Total

 $
 4,849

 $

 F- 15

 (8)
 Income Taxes

 Our net income tax
provision, including both current and deferred, related to U.S. federal and state income taxes, is $ 227. Our current federal and
deferred tax expenses are zero.

 A reconciliation of
income tax benefit to the amount computed by applying the Federal income tax rate to loss before provision for income taxes as
of December 31, 2024 and 2023 is as follows:

 2024

 2023

 Income tax credit at statutory rates

 $

 $
 ( 921
)

 Under accrual of income taxes

 ( 1
)

 ( 3
)

 Nondeductible expenses

 Record tax credits

 ( 116
)

 ( 118
)

 Permanent tax deduction stock options exercised

 ( 27
)

 ( 63
)

 State income tax, net of federal benefits

 ( 165
)

 Expiration of net operating losses and credits

 1,492

 Effect of change in deferred tax rate

 Expiration of stock options

 Other

 ( 39
)

 —

 Change in valuation allowance

 ( 1,138
)

 ( 344
)

 $

 $

 Deferred income taxes
reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of our deferred income taxes consist of the following:

 2024

 2023

 Deferred tax liabilities:

 Excess tax depreciation

 $
 ( 496
)

 ( 477
)

 ASC 842 operating lease asset

 ( 1,938
)

 ( 1,975
)

 Total deferred tax liabilities

 ( 2,434
)

 ( 2,452
)

 Deferred tax assets:

 Net operating loss carryforwards

 $
 10,218

 $
 12,020

 179 Carryforwards

 —

 163(j) Business interest limitation carryforwards

 —

 Inventory and other allowances

 Excess book amortization

 174 research and experimental expenditures

 1,053

 Share-based compensation

 Tax credits

 ASC 842 operating lease liability

 2,520

 2,610

 Other accrued costs

 Total deferred tax assets

 15,885

 17,039

 Less: valuation allowance

 ( 13,451
)

 ( 14,587
)

 Deferred income taxes

 $
 —

 $
 —

 F- 16

 The valuation allowance
decreased approximately $ 1.1 million and $ 0.3 million for the years ended December 31, 2024 and 2023, respectively (net of approximately
$ 8.1 million and $ 7.1 million for the years ended December 31, 2024 and 2023, respectively, for expiring net operating loss carryforwards
and credits) due principally to the change in the net operating loss carryforward and uncertainty as to whether future taxable
income will be generated prior to the expiration of the carryforward period. Under the Internal Revenue Code, certain ownership
changes, including the prior issuance of preferred stock and our public offering of common stock, may subject us to annual limitations
on the utilization of our net operating loss carryforward. As of December 31, 2024, it has been determined that we are not subject
to annual limitations on the utilization of our net operating loss carryforward.

 We have federal net
operating loss carryforwards for tax purposes of approximately $ 42 million on December 31, 2024. $ 36 million expire between
 2025 and 2037. All net operating loss carryforwards generated after January 1, 2018 do not expire. Therefore, $ 6.8 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 $ 18.2 million on December 31, 2024. Due to the provisions of Illinois Public Act 102-0669 signed November 16,
2021, Illinois net loss deductions expire between 2029 and 2039.

 (9)

 Capital
Stock

2024, and 2023, we had 24,088 authorized but unissued shares of preferred stock.

 Pursuant to the Securities Purchase Agreement
executed on March 1, 2024, 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 was 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 failed to fully pay any Redemption within five days of receiving notice, all unpaid amounts would bear 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) had no voting rights, and (iii) would
have received a liquidation preference of $ 400 per share. The Series X Preferred Stock ranked senior in right of payment
to all securities designated as junior securities, including Common Stock.

 ASC 815-15-25-17D provides guidance for
assessing host contracts in the form of preferred shares, in which 25-17D(b) states that an investor's ability to "convert
a preferred share into a fixed number of common shares generally is viewed as an equity-like characteristic". Because conversion
of the Series X Preferred Shares were at the discretion of the Holder, conversion was in a fixed number of shares, dividends are
not typically paid and cash settlement would only occur in the unlikely event of change in control, the host contract had the characteristics
of, and was classified as, an equity instrument, and the embedded derivatives and host contract were considered clearly and closely
related. As such, the embedded derivative did not require bifurcation and the Series X Preferred Shares were reported as mezzanine
equity on the balance sheet during the period when these instruments were issued and outstanding.

 Issuance costs associated with issuance
of the Series X Preferred Stock were immaterial.

 F- 17

 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.

 (10)

 Stock Options and Stock Grants

 We have entered into
stock option agreements with certain officers, employees and directors. The stock options granted prior to the adoption of the
2019 Equity Compensation Plan (the "2019 Plan") on November 19, 2019 expire seven years from the date of grant.
Future options to be granted under the 2019 Plan will expire seven years from the date of grant.

 Employee Stock Options

 We follow ASC Topic 718, Share-Based Payments,
in which compensation expense is recognized only for share-based payments expected to vest.

 Years ended
 December 31,

 2024

 2023

 Share-based compensation expense

 $

 $

 Remaining unrecognized compensation expense

 1,057

 1,118

 Remaining weighted average-period, expense recognition (years)

 2.4

 1.8

 We use the Black-Scholes
option pricing model to determine the fair value of stock-based compensation. The Black-Scholes model requires us to make several
assumptions, including the estimated length of time employees will retain their vested stock options before exercising them ("expected
term"), the estimated volatility of our common stock price over the expected term, and estimated forfeitures. Expected price
volatility is based on the daily market rate changes of our stock. The active shares granted prior to fiscal 2020 had a contractual
life of 10 years as dictated by the 2010 Plan. The Black-Scholes model also requires a risk-free interest rate, which is based
on the U.S. Treasury yield curve in effect at the time of the grant, and the dividend yield on our common stock, which is assumed
to be zero since we do not pay dividends and have no current plans to do so in the future. Changes in these assumptions can materially
affect the estimate of fair value of stock-based compensation and consequently, the related expense recognized on the statement
of operations. We recognize stock-based compensation expense on a straight-line basis over the requisite service period.

 The following table
illustrates the various assumptions used to calculate the Black-Scholes option pricing model for options granted for all years
presented:

 Years Ended December 31,

 2024

 2023

 Weighted-average risk-free interest rates:

 4.3
 %

 3.8
 %

 Dividend yield:

 %

 %

 Weighted-average expected life (years) of the option:

 Weighted-average expected stock price volatility:

 %

 %

 Weighted-average fair value of the options granted:

 $
 1.74

 $
 0.50

 F- 18

 Additional disclosures
for options granted for all years presented:

 Years Ended December 31,

 2024

 2023

 Vesting period (years) of shares granted in period

 Contractual life (years) of shares granted in period

 Estimated forfeitures

 %

 %

 The following table summarizes
the option activity for our employees and directors during the year ended December 31, 2024:

 Weighted

 Weighted

 Average

 Aggregate

 Average

 Remaining

 Intrinsic

 Exercise Price

 Contractual

 Value

 Options

 (Rounded)

 per Share

 Term (Years)

 (000s)

 Outstanding on January 1, 2024

 3,525,966

 $
 1.22

 4.2

 $

 Granted

 388,000

 $
 2.40

 Exercised

 ( 455,995
)

 $
 0.52

 Forfeited or expired

 ( 246,232
)

 $
 1.13

 Outstanding on December 31, 2024

 3,211,739

 $
 1.47

 4.4

 $
 3,961

 Exercisable on December 31, 2024

 2,206,666

 $
 1.46

 3.6

 $
 2,984

 Shares available for grant

 62,900

 The aggregate intrinsic
value in the table above is based on our closing stock price of $ 2.26 on the last business day for the year ended December 31,
2024.

 Years ended
 December 31,

 2024

 2023

 Shares exercised

 455,995

 294,074

 Total intrinsic value

 $

 $

 Cash received

 $

 $

 Based on our election
of the "with and without" approach, no realized tax benefits from stock options were recognized for the years ended
December 31, 2024 and 2023.

 (11)

 401(k) Profit-Sharing Plan

 We have a 401(k) profit-sharing
plan covering substantially all employees who meet defined service requirements. Contributions made in 2024 and 2023 aggregated
to $ 206 and $ 191, respectively.

 (12)

 Significant Customers

 We had three significant
customers for the year ended December 31, 2024.

 F- 19

 Revenues from these
three customers, as a percentage of total Company revenue, was approximately:

 For the years ended

 December 31,

 Customer #

 Product Category

 2024

 2023

 %

 %

 Personal Care Ingredients

 %

 %

 %

 %

 Total

 %

 %

 Accounts receivable balances for these
three customers, as a percentage of total Company accounts receivable, was approximately:

 As of
 December 31,

 Customer #

 Product Category

 2024

 2023

 $
 2,366

 $
 1,288

 Personal Care Ingredients

 —

 Total

 $
 2,835

 $
 2,152

 We currently
have exclusive supply agreements with BASF Corporation ("BASF"), our second largest customer, that have contingencies
outlined which could potentially result in the sale of production equipment from the Company to the customer intended to provide
capacity sufficient to meet the customer's production needs. This outcome may occur if we fail to meet certain performance
requirements. In the event of an equipment sale, upon incurring a triggering event, the equipment would be sold to the customer
at either 115 % of the equipment's net book value or the greater of 30 % of the original book value of such equipment, and
any associated upgrades to it, or 115 % of the equipment's net book value, depending on the equipment and related products.

 If a triggering event
were to occur and BASF elected to proceed with the equipment 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
could be purchased and removed by the customer pursuant to this triggering event could take in excess of twelve months. Any additional
capital outlays required to rebuild capacity would probably be greater than the proceeds from the purchase of the assets as dictated
by our agreement with the customer. Similar consequences would occur if we were determined to have materially breached certain
other provisions of the supply agreement with BASF. Any such event could result in the loss of some of our key staff and line employees
due to economic realities. We believe that our employees are a critical component of our success, and it could be difficult to
replace them quickly. Given the occurrence of any such event, we might not be able to hire and retain skilled employees given the
stigma relating to such an event and its impact on us.

 (13)

 Business Segmentation and Geographical Distribution

 The Company operates
as a single business segment, in which the factors used to make this determination include differences in products, services, geographical
areas, regulatory environment, and other such criteria considered for the appropriateness of aggregation. The types of products
and services for which the sole reportable segment, which is the same as the Company as a whole, offered by the company is discussed
in Note 1. Since the Company operates as a single segment, there were no intra-entity sales or transfers.

 The role of Chief Operating
Decision Maker for the Company is comprised of a committee that includes the Chief Executive and Chief Operating Officers. The
Chief Operating Decision Maker assesses performance for the single segment and decides how to allocate resources based on net income
that also is reported on the income statement as net income. The measure of segment assets is reported on the balance sheet as
total assets. The accounting policies of the sole segment are the same as those described in the summary of significant accounting
policies in Note 2.

 F- 20

 The Chief Operating
Decision Maker uses gross profit and net income to evaluate Company performance and in what way to allocate resources. Significant
segment expenses, which are the same as the entity as a whole, are as follows:

 2024

 2023

 Total revenue

 $
 52,347

 $
 37,297

 Employee costs

 12,933

 10,811

 Contractors and professional services

 7,815

 6,588

 Materials and supplies

 15,559

 14,669

 Depreciation

 Interest expense

 Other income

 ( 2
)

 ( 4
)

 Tax expense

 Facilities

 3,413

 2,870

 Shipping

 1,193

 Testing

 1,078

 IT services

 1,091

 1,060

 Insurance

 Manufacturing other expense

 Selling, general and administrative other expense

 1,500

 Total Expense

 48,112

 41,687

 Net Income (loss)

 $
 4,235

 $
)

 Revenue from international
sources approximated $ 1,825 and $ 2,918 for the years ended December 31, 2024 and 2023, respectively. As part of our revenue from
international sources, we recognized approximately $ 366 and $ 1,664 in product revenue from German companies, in the aggregate,
for the years ended December 31, 2024 and 2023, respectively.

 Our operations comprise
a single business segment and all of our long-lived assets are located within the United States. We categorize our revenue stream
into three main product categories, personal care ingredients, advanced materials and consumer products. The revenues for 2024
and 2023 by category are as follows:

 For the years ended
 December 31

 Product Category

 2024

 2023

 $
 44,373

 $
 25,211

 Personal Care Ingredients

 6,827

 9,277

 Advanced Materials

 1,147

 2,809

 Total Sales

 $
 52,347

 $
 37,297

 (14)

 Subsequent Event

 On March 7, 2025, the Company announced
its rebranding as Solesence, Inc., marking a new chapter in its commitment to innovation, self-expression, and inclusivity in skin
health. The company's stock will continue to trade under the NANX ticker symbol. Its corporate website transitioned to solesence.com,
historic Company financials and disclosures are now available at ir.solesence.com. Nanophase Technologies Corporation changed its
legal name to Solesence, Inc. by amending its certificate of incorporation with the state of Delaware on March 10, 2025.

 As of December 31, 2024, the Company's
A/R Revolver, Inventory Facility and New Term Loan mature on October 1, 2025. Since then, the Company's related party debt
holder for the A/R Revolver, Inventory Facility and New Term Loan has committed to refinancing the debt with a new maturity date
after April 1, 2026.

 F- 21

 EXHIBIT INDEX

 Exhibit
 Number

 2.1

 Plan and Agreement of Merger dated as of November 25, 1997 by and between the Company and its Illinois predecessor, incorporated by reference to Exhibit 2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997 (the "1997 10-K"), SEC File No. 000-22333.

 3(i).1

 Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 to the 1997 10-K, SEC File No. 000-22333.

 3(i).2

 First Amendment to the Certificate of Incorporation of the Company dated July 27, 2006, incorporated by reference to Exhibit 99.3 to the Company's Current Report on Form 8-K filed July 27, 2006, SEC File No. 000-22333.

 3(i).3

 Second Amendment to the Certificate of Incorporation of the Company dated August 23, 2010, incorporated by reference to Exhibit A of the Company's Definitive Proxy Statement on Schedule 14A filed July 9, 2010, SEC File No. 000-22333.

 3(i).4

 Third Amendment to the Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed August 29, 2016.

 3(i).5

 Fourth Amendment to the Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed November 22, 2019.

 3(i).6

 Fifth Amendment to the Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3(i).6 to the Company's Annual Report on Form 10-K filed March 28, 2024.

 3(i).7

 Sixth Amendment to the Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed January 16, 2025.

 3(i).8

 Seventh Amendment to the Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed March 12, 2025.

 3(ii).1

 By-Laws of the Company, incorporated by reference to Exhibit 3.2 to the 1997 10-K, SEC File No. 000-22333.

 4.1

 Specimen stock certificate representing common stock, incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-1/A filed November 4, 1997 (File No. 333-36937) (the "Form S-1/A").

 4.2

 Form of Warrants, incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-1 filed October 1, 1997 (File No. 333-36937) (the "IPO S-1").

 4.3

 Certificate of Designations of Series A Junior Participating Preferred Stock, incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998, SEC File No. 000-22333.

 4.4

 Stock Purchase Agreement dated August 25, 2006 between the Company and Rohm and Haas Electronic Materials CMP Holdings, Inc., incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed August 28, 2006, SEC File No. 000-22333.

 4.5

 Registration Rights Agreement dated August 25, 2006 between the Company and Rohm and Haas Electronic Materials CMP Holdings, Inc., incorporated by reference to Exhibit 99.2 to the Company's Current Report on Form 8-K filed August 28, 2006, SEC File No. 000-22333.

 4.6

 Common Stock Purchase Agreement, dated February 10, 2016, between the Company and Bradford T. Whitmore, incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K filed February 10, 2016.

 4.7

 Common Stock Purchase Agreement, dated December 19, 2017, between the Company and Bradford T. Whitmore, incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K filed December 21, 2017.

 E- 1

 4.8

 Common Stock Purchase Agreement, dated May 13, 2019, between the Company and Bradford T. Whitmore, incorporated by reference to Exhibit 4.1 of the Company's Quarterly Report on Form 10-Q filed May 15, 2019

 4.9

 Securities Purchase Agreement, dated November 13, 2019, between the Company and Bradford T. Whitmore, incorporated by reference to Exhibit 4.1 of the Company's Quarterly Report on Form 10-Q filed November 14, 2019.

 4.10

 Commercial Security Agreement, dated November 20, 2019, between the Company, Sol sence, LLC and Bradford T. Whitmore, incorporated by reference to Exhibit 4.2 of the Company's Quarterly Report on Form 10-Q filed November 14, 2019.

 4.11

 Certification of Designation of Series X Preferred Stock, incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed March 5, 2024, EC File No. 000-22333.

 10.1

 Industrial Building Lease dated September 15, 2004 between the Company and the Village of Burr Ridge, incorporated by reference to Exhibit 10.32 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004 (the "2004 10-K"), SEC File No. 000- 22333.

 10.2

 Industrial Building Lease Agreement between Centerpoint Properties Trust (formerly CP Financing Trust) and the Company, dated June 15, 2000, incorporated by reference to Exhibit 10.23 to the Company's Annual Report on Form 10-K for the year ended December 31, 2000 (the "2000 10-K"), SEC File No. 000-22333.

 10.3

 Lease Amendment effective October 1, 2005 between the Company and Centerpoint Properties Trust, incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed October 20, 2005, SEC File No. 000-22333.

 10.4

 Second Amendment to Industrial Lease Agreement, dated as of November 13, 2014 between the Company and MLRP 1319 Marquette LLC, successor-in-interest to Centerpoint Properties Trust, incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10- K for the year ended December 31, 2014.

 10.5

 Third Amendment to Industrial Lease Agreement, entered into on October 17, 2016 and effective October 1, 2016, by and between the Company and 1319 Marquette, LLC, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed October 19, 2016.

 10.6

 Mutual Cooperation Agreement entered into on January 17, 2012, by and among the Company, C.I. Kasei Co., Ltd. and CIK NanoTek Corporation, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed January 20, 2012, SEC File No. 000-22333.

 10.7

 Trademark Ownership Assignment Agreement, dated March 31, 2012, between the Company and CIK NanoTek Corporation, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed April 4, 2012, SEC File No 000-22333.

 10.8

 Memorandum on the Payment of Royalty, dated March 31, 2012, between the Company and CIK NanoTek Corporation, incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed April 4, 2012, SEC File No 000-22333.

 10.9

 Supply Agreement between the Company and Schering-Plough HealthCare Products, Inc. dated as of March 15, 1997, incorporated by reference to Exhibit 10.17 to the Form S-1/A.

 10.10*

 Zinc Oxide Supply Agreement dated as of September 16, 1999 between the Company and BASF Corporation, as assignee, incorporated by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999, SEC File No. 000-22333.

 10.11*

 Amendment No. 1 to Zinc Oxide Supply Agreement dated as of January, 2001 between the Company and BASF Corporation, incorporated by reference to Exhibit 10.24 to the 2000 10-K, SEC File No. 000-22333.

 10.12

 Amendment No. 2. to Zinc Oxide Supply Agreement dated as of March 17, 2003 between the Company and BASF Corporation, incorporated by reference to Exhibit 10.26 to the Company's Annual Report on Form 10-K for the year ended December 31, 2002 (the "2002 10-K"), SEC File No. 000-22333.

 E- 2

 10.13*

 Amendment No. 3 to Zinc Oxide Supply Agreement entered into on December 12, 2012, between the Company and BASF Corporation, incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed December 6, 2012, SEC File No. 000-22333.

 10.14*

 Amendment No. 4 to Zinc Oxide Supply Agreement, dated as of January 1, 2019 and entered into on March 11, 2019, between the Company and BASF Corporation, incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q filed May 15, 2019.

 10.15*

 Amendment No. 5 effective as of April 10, 2024, to Zinc Oxide Supply Agreement, dated as of September 16, 1999, between the Company and BASF Corporation, incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q filed April 11, 2024.

 10.16

 Z-COTE HP-2 Brand Supply Agreement dated May 15, 2006 between the Company and BASF Corporation, incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed June 20, 2006, SEC File No. 000-22333.

 10.17*

 Amended and Restated Cooperation Agreement dated August 25, 2006 between the Company and Rohm and Haas Electronic Materials CMP Inc., incorporated by reference to Exhibit 99.3 to the Company's Current Report on Form 8-K filed August 28, 2006, SEC File No. 000- 22333.

 10.18

 Supply Agreement effective as of March 23, 2009, between the Company and Rohm and Haas Electronic Materials CMP Inc., incorporated by reference to Exhibit 10.56 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008, SEC File No. 000-22333.

 10.19*

 Distributor Agreement dated October 24, 2005 between Johnson Matthey Catalog Company, Inc., d/b/a ALFA AESAR and the Company, incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed November 1, 2005, SEC File No. 000-22333.

 10.20*

 Supply Agreement dated March 3, 2006 between Roche Diagnostics GmbH and the Company, incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed March 9, 2006, SEC File No. 000-22333.

 10.21*

 First Amendment to the Supply Agreement entered into on November 19, 2014 between the Company and Roche Diagnostics GmbH, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed November 25, 2014.

 10.22*

 Second Amendment to the Supply Agreement, entered into on November 21, 2016, between the Company and Roche Diagnostics GmbH, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed November 28, 2016.

 10.23*

 Third Amendment to the Supply Agreement, entered into on February 3, 2023, between the Company and Roche Diagnostics GmbH

 10.24

 Joint Development Agreement dated March 23, 2004 between the Company and Altana Chemie AG, incorporated by reference to Exhibit 10.29 to the 2003 10-K, SEC File No. 000-22333.

 10.25*

 Agreement dated July 7, 2008 between the Company and Altana Chemie GmbH, incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed July 18, 2008, SEC File No. 000-22333.

 10.26*

 Settlement and Termination Agreement, dated August 20, 2010, between the Company and Altana Chemie GmbH, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed August 25, 2010, SEC File No. 000-22333.

 10.27*

 Supply Agreement, dated as of March 31, 2016, between the Company and Ester Solutions Company, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed April 6, 2016.

 10.28

 First Amendment to Supply Agreement, dated May 21, 2018, by and between Nanophase Technologies Corporation and Hallstar Ester Solutions Corporation (formerly known as Ester Solutions Company), incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed May 25, 2018.

 10.29

 Joint Development Agreement, dated as of July 31, 2019, between the Company and Sumitomo Corporation of Americas, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed August 2, 2019.

 E- 3

 10.30

 Joint Development & Supply Agreement, dated December 12, 2016, by and between Sol sence, LLC and Colorescience Inc., incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed May 24, 2018.

 10.31

 Amended and Restated Joint Development & Supply Agreement, executed by Sol sence, LLC on May 18, 2018, by and between Sol sence, LLC and Colorescience Inc., incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed May 24, 2018.

 10.32

 Promissory Note, dated March 4, 2015, granted by the Company in favor of Libertyville Bank and Trust Company, incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed March 10, 2015.

 10.33

 Commercial Security Agreement, dated March 4, 2015, between the Company and Libertyville Bank and Trust Company, incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed March 10, 2015.

 10.34

 Change in Terms Agreement, dated March 4, 2016, between the Company and Libertyville Bank and Trust Company, incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed March 10, 2016.

 10.35

 Change in Terms Agreement, dated February 14, 2017, between the Company and Libertyville Bank and Trust Company, incorporated by reference to Exhibit 10.32 to the Company's Annual Report on Form 10-K for the year ended December 31, 2016.

 10.36

 Promissory Note, executed by the Company on March 26, 2018, granted by the Company in favor of Libertyville Bank and Trust Company, incorporated by reference to Exhibit 10.34 to the Company's Annual Report on Form 10-K for the year ended December 31, 2017.

 10.37

 Commercial Security Agreement, executed by the Company on March 26, 2018, between the Company and Libertyville Bank and Trust Company, incorporated by reference to Exhibit 10.35 to the Company's Annual Report on Form 10-K for the year ended December 31, 2017.

 10.38

 Business Loan Agreement, executed by the Company on March 22, 2019, between the Company and Libertyville Bank and Trust Company, incorporated by reference to the Exhibit 10.32 of the Company's Annual Report on Form 10-K for the year ended December 31, 2018.

 10.39

 Change in Terms Agreement, executed by the Company on March 22, 2019, between the Company and Libertyville Bank and Trust Company, incorporated by reference to the Exhibit 10.33 of the Company's Annual Report on Form 10-K for the year ended December 31, 2018.

 10.40

 Business Loan Agreement, dated November 16, 2018, between the Company and Beachcorp, LLC, incorporated by reference to the Company's Quarterly Report on Form 10-Q filed November 19, 2018.

 10.41

 Promissory Note, dated November 19, 2018, made by the Company and payable to the order of Beachcorp, LLC to evidence a term loan in the original principal amount of up to $500,000, incorporated by reference to the Company's Quarterly Report on Form 10-Q filed November 19, 2018.

 10.42

 Promissory Note, dated November 19, 2018, made by the Company and payable to the order of Beachcorp, LLC to evidence revolving borrowings in a principal amount of up to $2,000,000, incorporated by reference to the Company's Quarterly Report on Form 10-Q filed November 19, 2018.

 10.43

 First Amendment to Business Loan Agreement, dated March 23, 2020, between the Company and Beachcorp, LLC, incorporated by reference to the Company's Annual Report on Form 10-K filed March 30, 2020.

 10.44

 Fourth Amendment to Business Loan Agreement, dated April 21, 2021, between the Company and Beachcorp, LLC, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed April 21, 2021.

 10.45

 Business Loan Agreement, dated January 28, 2022, between the Company and Beachcorp, LLC, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed February 2, 2022.

 10.46

 Business Loan Agreement, dated January 28, 2022, between the Company and Strandler, LLC, incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed February 2, 2022.

 E- 4

 10.47

 Amended and Restated Business Loan Agreement, dated January 28, 2022, between the Company and Beachcorp, LLC, incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed February 2, 2022.

 10.48

 Replacement Promissory Note, dated January 28, 2022, made by the Company and payable to the order of Beachcorp, LLC to evidence revolving borrowings in a principal amount of up to $8,000,000, incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed February 2, 2022.

 10.49

 Promissory Note, dated January 28, 2022, made by the Company and payable to the order of Strandler, LLC to evidence a term loan in the original principal amount of up to $1,000,000, incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed February 2, 2022.

 10.50

 Promissory Note, dated January 28, 2022, made by the Company and payable to the order of Beachcorp, LLC to evidence revolving borrowings in a principal amount of up to $4,000,000, incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed February 2, 2022.

 10.51

 First Amendment to Amended and Restated Business Loan Agreement with Beachcorp, LLC, incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, SEC File No. 000-22333.

 10.52

 Replacement Promissory Note with Beachcorp, LLC, incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, SEC File No. 000-22333.

 10.53

 First Amendment to Business Loan Agreement with Beachcorp, LLC, incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, SEC File No. 000-22333.

 10.54

 First Amendment to Business Loan Agreement with Strandler, LLC, incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, SEC File No. 000-22333.

 10.55

 Promissory Note with Strandler, LLC, incorporated by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, SEC File No. 000-22333.

 10.56

 Securities Purchase Agreement with Strandler, LLC, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed March 5, 2024, SEC File No. 000-22333.

 10.57

 Second Amendment to Business Loan Agreement with Strandler, LLC, incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed March 5, 2024, SEC File No. 000-22333.

 10.58

 Second Amendment to Amended and Restated Business Loan Agreement with Beachcorp, LLC, incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed March 5, 2024, SEC File No. 000-22333.

 10.59

 Second Admendment to Business Loan Agreement with Beachcorp, LLC, incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed March 5, 2024, SEC File No. 000-22333.

 10.60

 Employment Agreement effective August 12, 2009 between the Company and Jess Jankowski, incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, SEC File No. 000-22333. +

 10.61

 Employment Agreement dated November 28, 2012, between the Company and Kevin Cureton, incorporated by reference to Exhibit 10.36 to the Company's Annual Report on Form 10-K for the year ended December 31, 2012, SEC File No. 000-22333. +

 10.62

 Nanophase Technologies Corporation 2004 Equity Compensation Plan ("2004 Equity Plan"), incorporated by reference to Exhibit 4 to the Company's Registration Statement on Form S-8 (File No. 333-119466). +

 10.63

 2008 Long-Term Cash Incentive Plan, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed July 25, 2008, SEC File No. 000-22333.+

 10.64

 Nanophase Technologies Corporation 2010 Equity Compensation Plan, as amended, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed August 29, 2016.+

 E- 5

 10.65

 Form of Stock Option Award Agreement under the 2010 Equity Compensation Plan, incorporated by reference to Exhibit 10.47 to the Company's Annual Report on Form 10-K for the year ended December 31, 2013.+

 10.66

 Nanophase Technologies Corporation 2019 Equity Compensation Plan, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed November 22, 2019.+

 10.67

 Building Lease, dated as of September 15, 2010, between the Company and the Village of Burr Ridge, incorporated by reference to Exhibit 10.50 to the Company's Annual Report on Form 10-K for the year ended December 31, 2016.

 10.68

 Building Lease, dated as of March 13, 2017, between the Company and the Village of Burr Ridge, incorporated by reference to Exhibit 10.51 to the Company's Annual Report on Form 10-K for the year ended December 31, 2016.

 10.69*

 Know-How License Agreement, executed by the Company on June 26, 2017, between the Company and Eminess Technologies, Inc., incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed June 29, 2017.

 10.70

 Technology Development Agreement, executed by the Company on June 26, 2017, between the Company and Eminess Technologies, Inc., incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K filed June 29, 2017.

 10.71*

 Exclusive Supply Agreement, effective April 1, 2021, between Sol sence, LLC and Ilia Beauty, Inc., incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed June 14, 2021.

 10.72*

 Lease, effective December 1, 2021, between the Company and FR JH 10, LLC, incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed December 9, 2021.

 Sol sence Insider Trading Policy

 21.1

 Subsidiary of the Company.

 23.1

 Consent of RSM US LLP. (filed herewith)

 31.1

 Certification of the Chief Executive Officer (principal executive officer) pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act. (filed herewith)

 31.2

 Certification of the Chief Financial Officer (principal financial officer) pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act. (filed herewith)

 Certification of the Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) pursuant to 18 U.S.C. Section 1350. (filed herewith)

 *

 Confidentiality previously granted for portions of this agreement.

 +

 Indicates management contracts or compensatory plans or arrangements.

 E- 6

 SIGNATURES

 Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, on the 31 st day of March, 2025.

 SOLESENCE INC.

 By:

 /s/ Jess A. Jankowski

 Jess A. Jankowski

 President and Chief Executive Officer

 Pursuant to the requirements
of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant
and in the capacities indicated on the 31 st day of March, 2025.

 Signature

 Title

 /s/ Jess A. Jankowski

 President, Chief Executive Officer (principal executive officer,

 Jess A. Jankowski

 principal financial officer, and principal accounting officer) and Director

 /s/ R. Janet Whitmore

 Chair of the Board of Directors

 R. Janet Whitmore

 /s/ Laura M. Beres

 Laura M. Beres

 /s/ Mark E. Miller

 Mark E. Miller