(11) Restatement of Previously Issued Consolidated Financial Statements 

Nature of the errors

During its review of inventory accounting in connection with the preparation of its unaudited condensed consolidated financial statements for the quarter ended June 30, 2026, Solésence, Inc. (the “Company”) identified errors in its historical accounting for labor and overhead included in inventories. The historical process allocated certain labor and overhead between raw materials, work in process and finished goods using budget-based percentages and allocation bases that were not sufficiently supported. The process also did not consistently limit capitalized costs to eligible acquisition and production costs, allocate variable overhead based on actual activity, allocate fixed overhead based on normal capacity, or adjust standard or budgeted amounts so that they approximated actual cost. The Company concluded that the historical process did not comply with the inventory-costing requirements in ASC 330, Inventory.

As a result, inventories were overstated and cost of revenue were misstated. The errors also affected gross profit, operating income (loss), income (loss) before income taxes, net income (loss), basic and diluted earnings (loss) per share, accumulated deficit, total stockholders’ equity and related disclosures in the periods affected. The Company determined the correction from its accounting records, including general-ledger and inventory detail, cost-pool and burden-rate schedules, inventory roll-forwards and the Company’s internal inventory-cost model.

Restatement conclusion and affected filings

After considering the requirements of ASC 250, Accounting Changes and Error Corrections, and the quantitative and qualitative factors in SEC Staff Accounting Bulletin (“SAB”) Topic 1.M and Topic 1.N, on August 17, 2026, the Audit Committee, Board of Directors and Executive Officers concluded that the Company’s previously issued consolidated financial statements as of and for December 31, 2023, March 31, 2024, June 30, 2024, September 30, 2024, December 31, 2024, March 31, 2025, June 30, 2025, September 30, 2025, December 31, 2025 and March 31, 2026 should no longer be relied upon and should be restated. The Company will reiterate its report of the corrections in a Current Report on Form 8-K filed on August 20, 2026. The Company expects to file amendments to its Annual Reports on Form 10-K which may include the years ended December 31, 2023, 2024 & 2025 and its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2024, June 30, 2024, September 30, 2024, March 31, 2025, June 30, 2025, September 30, 2025 and March 31, 2026 in the coming weeks.

Based on the Company’s preliminary analysis (subject to revision, if determined to be appropriate, in the amendments to the Reports listed in the immediately preceding paragraph), the accompanying unaudited condensed consolidated financial statements for the three and six months ended June 30, 2025 and the related notes have been restated to correct the errors. The balance sheet as of December 31, 2025 also has been restated. The financial statements for the three and six months ended June 30, 2026 were prepared using the corrected inventory-costing methodology and therefore are not themselves restated

The effects of the restatement on the previously issued financial statements presented or otherwise required to be disclosed in this Quarterly Report are set forth below. “As Previously Reported” amounts are derived from the applicable filed financial statements. “Adjustment” amounts reflect the correction of the inventory-costing errors and the related income-tax and per-share effects. Certain amounts may not sum due to rounding.

Effect on the consolidated balance sheet

December 31, 2025

Effect on the consolidated statements of operations

Three months ended June 30, 2025

Six months ended June 30, 2025

Effect on the previously issued first-quarter 2026 financial statements

March 31, 2026 — consolidated balance sheet

The cumulative pretax inventory overstatement at December 31, 2024 was $4,613. The corresponding opening-equity adjustment must be stated net of the final income-tax effect and must be aligned with the earliest period presented after the complete December 31, 2023 bridge is available.

Related disclosures

The Company has updated Note 7 Inventories, net to present corrected inventory by class. The Company also evaluated the effects of the restatement on its debt arrangements, liquidity disclosures and classification of obligations; see Note 6 for additional information.

Independent Accountant Review Not Completed

 The Company's independent registered public accounting firm has not completed its review of the accompanying interim financial statements in accordance with the standards of the Public Company Accounting Oversight Board.  Accordingly, these unaudited interim financial statements should be considered “not reviewed."

 The Company is filing this Quarterly Report on Form 10-Q prior to completion of the auditor’s review. Upon completion of the review, and if necessary, the Company intends to file an amendment to this Form 10-Q to include any required updates and remove this disclosure regarding the incomplete review.