10-K: Solsence Shifts to Consumer Products, Reports Mixed 2025 Results

Solsence, Inc. announced its rebranding and strategic pivot to consumer products, reporting increased revenue but a significant drop in net income and negative cash flow from operations in 2025.

Summary

• Solsence, Inc. (formerly Nanophase Technologies Corporation) rebranded on March 7, 2025, focusing on skin health innovation and consumer products.
• Total revenue increased to $62.06 million in 2025 from $52.35 million in 2024, primarily driven by consumer products.
• Consumer products revenue grew to $54.87 million (88% of total revenue) in 2025, up from $44.37 million (85%) in 2024.
• Net income significantly decreased to $1.79 million in 2025 from $4.24 million in 2024.
• Cash used in operating activities was ($8.57) million in 2025, a substantial shift from $1.97 million provided by operating activities in 2024.
• The company received $1.73 million from the Employee Retention Credit (ERC) program and $0.27 million in related interest in June 2025, recognizing $1.23 million ERC and $0.19 million interest income.
• Outstanding debt to related parties (Beachcorp, LLC and Strandler, LLC) increased significantly, with Beachcorp, LLC balances rising from $4.00 million in 2024 to $14.27 million in 2025.
• Jess Jankowski retired as CEO effective November 21, 2025, receiving $366,912 in severance and accelerated option vesting. Kevin Cureton was appointed President and CEO on September 3, 2025.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this filing with mixed sentiment. While revenue growth and strategic focus on high-growth consumer products are positive, the significant decline in net income and negative operating cash flow raise concerns about profitability and operational efficiency, indicating underlying challenges despite market success.

Positives

• Total revenue increased by $9.72 million, or 18.6%, from $52.35 million in 2024 to $62.06 million in 2025.
• Consumer products revenue showed strong growth, increasing to $54.87 million in 2025 from $44.37 million in 2024, now representing 88% of total revenue.
• The company received $1.73 million from the Employee Retention Credit (ERC) program and $0.27 million in related interest in June 2025.
• Solsence won its third consecutive Cosmopack North America Award for best Formulation in 2024 and its third consecutive Cosmetics & Toiletries All Award in March 2025, totaling 9 awards for product and ingredient innovation.
• Consolidated manufacturing operations from Burr Ridge into the Bolingbrook facility in late 2025, aiming for greater efficiency.
• Successfully settled a legal dispute with Solarium Brands, LLC and A-Frame Brands, LLC, receiving a $675,000 settlement payment in December 2025.
• Net cash used in investing activities decreased to ($2.14) million in 2025 from ($4.56) million in 2024.

Negatives

• Net income decreased significantly to $1.79 million in 2025 from $4.24 million in 2024, a 57.8% decline.
• Cash flow from operating activities turned negative, with ($8.57) million used in 2025 compared to $1.97 million provided in 2024.
• Gross profit slightly decreased to $16.06 million in 2025 from $16.19 million in 2024, despite higher revenue, indicating margin pressure.
• Cost of revenue increased to $46.00 million in 2025 from $36.16 million in 2024, driven by higher materials and direct labor costs.
• Selling, general and administrative (SG&A) expense increased to $10.40 million in 2025 from $7.22 million in 2024, primarily due to higher legal costs and labor.
• Net interest expense increased to $0.93 million in 2025 from $0.67 million in 2024 due to increased usage of debt facilities.
• The company maintains a high concentration of revenue from a limited number of key customers, with the top three customers accounting for 55% of total revenue in 2025.
• Inventory reserve increased to $2.72 million in 2025 from $1.99 million in 2024, indicating potential issues with aging, obsolescence, or unused raw materials.
• Deferred revenue decreased significantly to $0.93 million in 2025 from $5.57 million in 2024, suggesting fewer prepayments or faster fulfillment of obligations.

Risks

• Ability to achieve consistent profitability despite historical losses.
• Dependence on a limited number of key customers, with the risk of purchase order or supply agreement cancellations.
• Potential inability to obtain working capital when needed on acceptable terms or at all.
• Difficulty in obtaining raw materials, including high purity zinc, at costs that can be passed through to customers, exacerbated by supply chain pressures and tariffs.
• Uncertain demand for and acceptance of Solsence products and advanced materials.
• Challenges related to manufacturing capacity and product mix flexibility in response to customer demand.
• Limited marketing experience, particularly with the growing suite of consumer products.
• Changes in development and distribution relationships.
• Impact of competitive products and technologies.
• Dependence on patents and protection of proprietary information.
• Ability to maintain an appropriate electronic trading venue for securities.
• Impact of potential new governmental regulations, especially those focusing on nanomaterials, which could be costly or difficult to comply with.
• Business interruptions due to unexpected events or public health crises, such as viral pandemics.
• Resolution of litigation or other legal proceedings.
• Inflationary pressures on supplier prices, wages, and benefits, which may not be fully offset by efficiencies or price increases, potentially reducing margins and net income.
• Contingencies in exclusive supply agreements with BASF Corporation that could result in the sale of production equipment and loss of significant revenue if performance requirements are not met.
• The IRS reserves the right to audit Employee Retention Credit (ERC) payments for several years after they were requested, creating a contingent liability of $572,000.

Future Outlook

Solsence expects continued growth in its consumer products line, which is now the major strategic focus due to unprecedented demand. Management anticipates that increased product revenue volume will lead to more efficient absorption of fixed manufacturing costs and increased margins. However, the company also expects supplier price increases and wage and benefit inflation to materially affect operations in 2026 and beyond, and may not realize gross margin percentage growth if cost increases cannot be passed through to customers. Capital spending for 2026 is projected to be between $1 million and $3 million, to be funded by profit from operations, existing loans, and possible new financing, with potential for this range to be exceeded or undershot depending on business development success or delays.

Management Comments

• "Management believes that this growth [in consumer products] 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."
• "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 believe that Solsence consumer products offer the greatest growth potential of any product line in any market in the Company's history."
• "Management believes that our current fixed manufacturing cost structure is sufficient to support higher levels of revenue volume."
• "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 expenses for research and development to remain about the same or decrease slightly in 2026 depending on growth in our consumer products, and related technologies."
• "We expect 2026 expenses in [selling, general and administrative] area to be slightly lower due to controlling our administrative functions costs, including related staffing."
• "In Company-wide operations, we believe inflation has not had a material effect on our operations or financial position for 2025, although we have seen increases in our costs. We expect supplier price increases and wage and benefit inflation, both of which represent a significant component of our costs of operations, may have a material effect on our operations and financial position in 2026 and beyond."
• "Management continues to spend considerable time determining how best to optimize our facilities to maximize growth over the next few years."

Industry Context

StockSavvy.ai notes that Solsence's strategic pivot towards consumer products, particularly in prestige beauty and skin health, aligns with broader industry trends favoring science-backed, high-performance, and "clean" beauty solutions. The company's numerous awards for formulation and ingredient innovation, such as the Cosmopack North America Award and Cosmetics & Toiletaries All Award, demonstrate strong product differentiation in a competitive market. The growing consumer interest in mineral-based sunscreens further validates Solsence's core technology platform, positioning it well against competitors relying on traditional chemical formulations. The shift from ingredient supplier to finished product manufacturer (white label) allows Solsence to capture more value downstream and exert greater control over the product development cycle, a common strategy for specialized ingredient companies seeking higher margins and brand recognition in the evolving beauty and wellness sector.

Comparison to Industry Standards

• Solsence's focus on proprietary Active Stress Defense technology, including Kleair and Bloom, for UV and environmental protection in skin health products, positions it against established players like L'Oréal (with brands like La Roche-Posay and SkinCeuticals) and Estée Lauder Companies (with brands like Clinique and Origins) that also emphasize scientific innovation in their prestige skincare lines.
• The company's success in securing multiple industry awards, such as the Cosmopack North America Award for best Formulation and Cosmetics & Toiletries All Award for active ingredients, suggests a strong competitive edge in product efficacy and aesthetic qualities, which are critical differentiators in the premium beauty market.
• The vertical integration strategy, from engineered materials to finished product development and manufacturing, is a competitive advantage, allowing for specialized formulation know-how and supply chain control, similar to how some larger beauty conglomerates manage their in-house R&D and production to maintain quality and innovation.
• The reliance on mineral-based sunscreens aligns with a growing consumer preference for "clean beauty" and natural ingredients, a trend that has seen brands like Supergoop! and Drunk Elephant gain significant market share by offering mineral-only SPF products. Solsence's technology aims to overcome the traditional aesthetic drawbacks (white cast) of mineral sunscreens, a key challenge in the market.

Management Changes

Corporate Governance

Legal Proceedings

• On October 31, 2025, the company entered into a Confidential Settlement Agreement and Release with Solarium Brands, LLC and A-Frame Brands, LLC to settle disputes regarding consumer personal care products.
• Solarium agreed to pay a one-time settlement payment of $675,000 on or before January 15, 2026, which was received in December 2025.

Related Party Transactions

• The company has engaged in a series of debt and equity transactions with Bradford T. Whitmore (controlling shareholder, brother of Board Chair R. Janet Whitmore) since January 1, 2023.
• Mr. Whitmore, through his affiliates Beachcorp, LLC and Strandler, LLC, is a substantial lender to the company under various Business Loan Agreements.
• Outstanding balances with Beachcorp, LLC increased from $4.00 million in 2024 to $14.27 million in 2025.
• Outstanding balances with Strandler, LLC remained at $1.00 million in both 2024 and 2025.
• Related party interest expense increased to $1.12 million in 2025 from $0.66 million in 2024.
• Accrued interest expense to related parties increased to $0.10 million in 2025 from $0.04 million in 2024.
• On March 1, 2024, the company issued 15,000 shares of Series X Preferred Stock to Strandler, LLC for $6.0 million, which was later converted into 15,000,000 shares of Common Stock.

Stakeholder Impact

• Shareholders: Experienced diluted earnings per share ($0.02 in 2025 vs. $0.07 in 2024) and a significant drop in net income. The stock price on March 30, 2026, was $0.90, significantly lower than the 2025 highs. The company's status as a "controlled company" limits certain corporate governance protections for minority shareholders.
• Employees: The company had 115 full-time employees and 90-225 temporary employees as of December 31, 2025. Management believes it has a strong relationship with employees. Employee costs increased in 2025.
• Customers (Brand Partners): Benefit from Solsence's innovative consumer products and proprietary technologies, which have received multiple industry awards. However, the company's dependence on a limited number of key customers poses a risk if relationships deteriorate.
• Suppliers: The company relies on sole-source processors for some critical raw materials and is monitoring supply chain issues and tariffs, which could impact supplier relationships and costs.
• Creditors: Related party lenders (Beachcorp, LLC and Strandler, LLC) have significantly increased their outstanding loan balances to the company, indicating a reliance on these affiliates for financing. These loans are secured by unencumbered assets and subordinated to Libertyville Bank & Trust.

Next Steps

• Continue to develop and expand in-house formulating capability for consumer products.
• Expand marketing and sales efforts relating to Solsence products.
• Focus R&D efforts on application development, creating/obtaining additional technology platforms, and improving manufacturing operations to reduce costs.
• Actively take steps to reduce the number of singularly sourced raw materials.
• Monitor delays in shipping exports from China and Korea and potential impacts of Chinese tariffs.
• Establish a footprint with new and existing Solsence brand partners in Australia following TGA site clearance.
• Optimize facilities to maximize growth over the next few years.
• Fund 2026 capital spending ($1 million to $3 million) through profit from operations, existing loans, and possible new financing.
• Apply best efforts to pass through cost increases (inflation) to customers in 2026 and beyond.
• Renew Libertyville Bank & Trust credit agreement annually (maturity December 22, 2026).
• Evaluate the impact of ASU 2024-03 (Disaggregation of Income Statement Expenses) and ASU 2025-05 (Measurement of Credit Losses for Accounts Receivable and Contract Assets) on consolidated financial statements.

Key Dates

Recommendation

While Solsence demonstrates strong revenue growth in its strategically important consumer products segment and has garnered significant industry recognition for its innovation, the substantial decline in net income and negative operating cash flow in 2025 are concerning. The increased reliance on related-party debt for liquidity, coupled with persistent customer concentration risks and inflationary pressures, suggests underlying operational challenges despite market success. The stock's performance, with a significant drop in price by March 2026, reflects these mixed signals. A "hold" recommendation is appropriate as the company navigates its strategic pivot and aims to translate revenue growth into sustainable profitability and positive cash flow, requiring investors to monitor these key financial and operational improvements closely before considering further investment.

Keywords

Solsence, Nanophase Technologies, Consumer Products, Skin Health, APIs, Active Pharmaceutical Ingredients, Beauty, Wellness, Mineral-based Sunscreens, SEC Filing, 10-K, Financial Results, Revenue Growth, Net Income, Cash Flow, Debt Financing, Related Party Transactions, Corporate Rebranding, Intellectual Property, Manufacturing, Supply Chain, Regulatory Compliance, NASDAQ, SLSN