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Item 7. Management’s Discussion and Analysis

2025-04-15 compared with 2024-04-15 · 256 added, 262 removed, 5 unchanged (99% of the section changed)

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

You should read the following discussion and

analysis of our financial condition and results of operations in conjunction with the audited financial statements and the notes thereto

included in Part II, Item 8 of this Annual Report.

Unless otherwise indicated, references to the

“Company,” “our,” “us” or “we” in this Item 7 refer to Oxus Acquisition Corp., or Oxus,

before the consummation of the Transaction.

References to our “management” or our “management team” refer to our

officers and directors, and references to the “sponsor” refer to Oxus Capital Pte.

The term “New Borealis”

refers to Borealis Foods Inc.

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the audited financial statements and the notes thereto included in Part II, Item 8 of this Annual Report.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Annual Report.

Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Our actual results may differ materially

from those anticipated in these forward-looking statements as a result of various factors, including, those set forth under Item 1.A., "Risk Factors," included in Part I of this Annual Report on Form 10-K.

The preparation of the consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting periods.

Management has not applied any critical accounting estimates but has identified certain accounting policies as critical to understanding the financial condition and results of operations.

For a detailed discussion on the application of these and other accounting policies, see the notes to the consolidated financial statements included in this Annual Report on Form 10-K.

Our historical financial statements have been prepared under the assumption that we will continue as a going concern.

Our registered public accounting firm has issued a report on our consolidated financial statements for the years ended December 31, 2024 and 2023, that includes an explanatory paragraph expressing substantial doubt in our ability to continue as a going concern.

Our ability to continue as a going concern is dependent on our ability to obtain additional equity or debt financing.

Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

However, if adequate funds are not available to us when we need them, we could be unable to fund our ongoing business, which, in turn, could cause our customers or suppliers to decrease the amount of business they do with us or terminate their relationship with us, or we could be unable to fund our ongoing business, which, in turn, could cause our customers or suppliers to decrease the amount of business they do with us or terminate their relationship with us, or we could go into default on our outstanding indebtedness, which, in turn, would permit our creditors to enforce remedies against us and cause us to consider reducing, discontinuing, or selling operations or seeking protection from creditors.

The substantial doubt regarding our potential ability to continue as a going concern may adversely affect our ability to obtain new financing on reasonable terms or at all.

Additionally, if we are unable to continue as a going concern, our shareholders may lose some or all of their investment in our Company.

Any one or more of such events would have a material adverse effect on our business, financial condition, results of operations and cash flow.

Borealis Foods is a pioneering, integrated food science and manufacturing company that is redefining

affordable nutrition.

Known for popular ramen noodle brands like the high protein Chef Woo, Chef

Ramsay, Ramen Express, and Woodles, Borealis Foods brings innovative fusion flavors from diverse

culinary traditions, creating delicious and nutritious meal options for consumers.

With U.S.-based

production facilities, the company’s portfolio reflects a commitment to quality, innovation, and

sustainability.

The Company continued to execute a strategic repositioning of its revenue base and customer portfolio in 2024, with an emphasis on gross margin expansion and operational efficiency.

While total revenue declined compared to the prior year, gross profit turned positive, reflecting improved pricing dynamics, a

more favorable product mix, and a deliberate move away from low-margin, high-volume retail partnerships.

The Reverse Recapitalization

On February 23, 2023, Borealis Foods Inc., a corporation incorporated under the laws of Canada (“ Legacy Borealis ”), entered into a Business Combination Agreement (as amended, amended and restated, supplemented, or otherwise modified from time to time, the " Business Combination Agreement ") with Oxus Acquisition Corp.

(“ Oxus ”) and 1000397116 Ontario Inc., an Ontario corporation and a wholly owned subsidiary of Oxus (“ Newco ”).

On February 7, 2024, Legacy Borealis, Oxus, and Newco consummated the transactions (collectively, the “ Reverse Recapitalization ”) contemplated by the Business Combination Agreement by means of a statutory arrangement under the Canada Business Corporations Act and the Business Corporations Act (Ontario), implemented in accordance with the terms and conditions set forth in the Business Combination Agreement and the related plan of arrangement (as amended, amended and restated, supplemented, or otherwise modified from time to time, the “ Plan of Arrangement ”) following the approval at an extraordinary general meeting of the shareholders of Oxus held on February 2, 2024.

Pursuant to the terms of the Business Combination Agreement, among other things:

(i) Oxus domesticated and continued as a corporation under the laws of Ontario, Canada (“ New Oxus ”);

and (ii) pursuant to the Plan of Arrangement, (a) Newco and Legacy Borealis amalgamated (the “ Legacy Borealis Amalgamation ”, and the amalgamated corporation resulting therefrom, “ Amalco ”), with Amalco surviving the Legacy Borealis Amalgamation as a wholly-owned subsidiary of New Oxus;

and (b) following the Legacy Borealis Amalgamation, New Oxus and Amalco amalgamated (the “ Borealis Amalgamation ,” and together with the Legacy Borealis Amalgamation, the “Amalgamations,” and the corporation resulting therefrom.

"Borealis," as a corporation amalgamated under the Business Corporations Act (Ontario)), with Borealis surviving the Borealis Amalgamation.

Borealis continues under the name “ Borealis Foods Inc.

Unless otherwise indicated, references to the “Company,” “our,” “us” or “we” in this Item 7 refer to Oxus Acquisition Corp., or Oxus, before the consummation of the Transaction.

References to our “management” or our “management team” refer to our officers and directors, and references to the “sponsor” refer to Oxus Capital Pte.

The term “New Borealis” refers to Borealis Foods Inc.

after the consummation of the Business Combination.

The following discussion and analysis of the

Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes

thereto contained elsewhere in this Annual Report.

Certain information contained in the discussion and analysis set forth below includes

forward-looking statements that involve risks and uncertainties.

We are a blank check company incorporated in the

Cayman Islands on February 3, 2021 for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, reorganization

or similar Business Combination with one or more businesses (a “ Business Combination ”).

We intend to effectuate our

initial Business Combination using cash from the proceeds of our IPO and the sale of the private warrants (the “ Private Warrants ”),

our shares, debt or a combination of cash, equity, and debt.

The Business Combination Agreement

On February 23, 2023, we entered into a Business

Combination Agreement with Newco and Legacy Borealis.

The Business Combination Agreement was unanimously approved by Oxus’ and Legacy

Borealis’ respective board of directors.

Pursuant to the Business Combination Agreement, among other things:

(a) Oxus will domesticate

and continue as a corporation existing under the laws of the Province of Ontario, Canada (the “ Continuance ” and, New

(b) on the closing date, Newco and Legacy Borealis will amalgamate in accordance with the terms of the Legacy Borealis Amalgamation,

with Amalco surviving the Legacy Borealis Amalgamation as a wholly-owned subsidiary of New Oxus;

and (c) on the closing date, immediately

following the Borealis Amalgamation, Amalco and New Oxus will amalgamate in accordance with the terms of the Borealis Amalgamation, with

Borealis Foods surviving the Borealis Amalgamation.

Borealis Foods will continue under the name “Borealis Foods Inc.”.

a more detailed discussion of the Business Combination Agreement, the Transaction, and the ancillary agreements, see the Current Report

on Form 8-K filed with the SEC on March 1, 2023.

At the extraordinary general meeting held on March 2, 2023 (the “ Extraordinary

General Meeting ”), our shareholders approved (1) a special resolution (the “ Extension Proposal ”) to amend

our Amended and Restated Memorandum and Articles of Association, as amended (the “ Oxus Charter ”) to extend the date

that we have to consummate a business combination from March 8, 2023 to December 8, 2023, or such earlier date as determined by our board

of directors (and (2) a special resolution (the “ Founder Share Amendment Proposal ”) to amend the Oxus Charter to provide

for the right of a holder of the Class B ordinary shares to convert into the Class A ordinary shares on a one-for-one basis prior to the

closing of a business combination at the election of such holder.

On December 5, 2023, in connection with the Second Extraordinary General

Meeting, the Company filed the Oxus Charter Amendment to extend the date by which the Company must consummate its initial business combination

from December 8, 2023 to June 8, 2024, or such earlier date as determined by the Company’s board of directors (the “ Extended

In connection with the votes to approve the Extension Proposal and the Founder Share Amendment Proposal, the holders

of 15,300,532 Class A ordinary shares of the Company properly exercised their right to redeem their shares for cash at a redemption price

of approximately $10.41 per share, for an aggregate redemption amount of approximately $159.34 million, leaving approximately $20.3 million

in the Trust Account.

On December 5, 2023, at the Second Extraordinary General Meeting, the holders of 9,837 Class A ordinary shares of

the Company properly exercised their right to redeem their shares for cash at a redemption price of approximately $11.20 per share, for

an aggregate redemption amount of approximately $0.11 million, leaving approximately $21.73 million in the Trust Account.

As of December

31, 2023, the Company had $21.92 million of marketable securities held in the Trust Account (including a deposit in transit of $0.05 million).

On the Closing Date, Borealis, the Company, and

Newco, consummated the Transaction, following the approval at an extraordinary general meeting of the shareholders of Oxus held on February

Conversion of Class B Ordinary Shares

On April 5, 2023, in accordance with the provisions

of the Oxus Charter, our Sponsor exercised its right to convert 1,500,000 shares of Class B ordinary shares, par value $0.0001 per share,

of the Company into 1,500,000 shares of Class A ordinary shares, par value $0.0001 per share, of the Company on a one-for-one basis.

As of December 31, 2023, following conversion,

there were 6,552,131 ordinary shares of the Company issued and outstanding, consisting of 3,739,631 Class A ordinary shares (of which

1,939,631 shares are redeemable) and 2,812,500 Class B ordinary shares.

Accounting Impact of the Reverse Recapitalization

The Reverse Recapitalization transaction was accounted for as a reverse recapitalization.

Oxus was deemed the accounting predecessor and Borealis is the successor SEC registrant.

Under this method of accounting, Oxus was treated as the acquired company for financial statement reporting purposes.

For accounting purposes, Legacy Borealis was deemed to be the accounting acquirer in the transaction and, consequently, the transaction was treated as a reverse recapitalization of Legacy Borealis.

Accordingly, the consolidated balance sheets and results of operations of Legacy Borealis became the historical financial statements of Borealis, and Oxus’ assets, liabilities, and results of operations were consolidated with Legacy Borealis’ beginning on February 7, 2024.

The net assets of Oxus were recognized at carrying value, with no goodwill or other intangible assets recorded.

Basis of Presentation

Borealis Foods’ consolidated financial statements were prepared in accordance with U.S.

See Note 1 to our consolidated financial statements for a full description of our basis of presentation.

Results of Operations

We have neither engaged in any operations nor

generated any revenues through the balance sheet date.

Our only activities from February 3, 2021 (inception) through December 31, 2023, were related to the Company’s

formation and the Initial Public Offering, and since the offering, identifying and evaluating prospective acquisition targets for a Business

We do not expect to generate any operating revenues until after the completion of our Business Combination.

generate non-operating income in the form of interest income or dividend income on marketable securities held after the Initial Public

We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance),

as well as for due diligence expenses.

For the year ended December 31, 2023, we had a

net loss of $2.94 million, which consisted of dividend income of $2.20 million, interest income of $5,159, foreign exchange loss of $17,334

and operating expenses of $5.13 million.

For the year ended December 31, 2022, we had a

net loss of $0.30 million, which consisted of dividend income of $2.58 million, interest income of $4,010, foreign exchange gains of $1,073

and operating expenses of $2.89 million.

Liquidity and Going Concern

Until the consummation of the Initial Public Offering,

our only source of liquidity was an initial purchase of ordinary shares by the Sponsor and loans from the Sponsor.

On September 8, 2021, the Company consummated

the Initial Public Offering of 15,000,000 units, at a price of $10.00 per unit, generating gross proceeds of $150.00 million.

Simultaneously

with the closing of the Initial Public Offering, we consummated the sale of 8,400,000 Private Warrants at a price of $1.00 per warrant

in a private placement to Sponsor and the underwriters, generating gross proceeds of $8.40 million.

On September 13, 2021, the underwriters

exercised the over-allotment option in full and purchased an additional 2,250,000 units, generating gross proceeds of $22.50 million.

In connection with the underwriters’ full exercise of the over-allotment option, the Company issued an additional 900,000 Private

Warrants at a price of $1.00 per warrant in a private placement to Sponsor and the underwriters, generating gross proceeds of $0.90 million.

Following the Initial Public Offering and the

private placement, a total of $175.95 million was placed in the Trust Account (at $10.20 per Unit).

We incurred $4.15 million in transaction

costs, including $3.45 million of underwriting fees and $0.70 million of other offering costs.

On August 10, 2023, Legacy Borealis entered

into a $25,000,000 financing agreement with a maturity date in July 2026.

Under this agreement, Borealis Foods (as successor-in-interest

to Legacy Borealis) has a $15,000,000 term facility which was used to pay off amounts outstanding under, and to terminate, a then existing

line of credit.

In addition to the term facility, Legacy Borealis entered into a $10,000,000 revolving line of credit.

The term facility

and the revolving line of credit are secured by liens on substantially all of the assets of Borealis Foods (as successor-in-interest to

Legacy Borealis) and its subsidiaries.

Interest is payable under the term facility and the revolving line of credit at the annual rate

of Prime + 4.75 % and Prime + 4.5%, respectively.

As of March 31, 2024, $15 million principal amount was outstanding under the term

facility and no principal amount was outstanding under the revolving line of credit.

2024, the Company completed its Business Combination, resulting in approximately $50.3 million of convertible debt converting into equity.

At the completion of the Business Combination, the Company had marketable securities in the Trust Account of $0.6 million.

The reduction

in Trust Account holdings resulted principally from shareholder redemptions.

The Company expects lower operating expenses in 2024 with

the completion of the merger.

For the year ended December 31, 2023, cash used in operating activities

was $2.34 million.

Net loss of $2.94 million which consisted of the dividend received of $2.20 million and foreign exchange loss of $17,334.

Changes in operating assets and liabilities provided $2.79 million of total cash for operating activities.

For the year ended December 31, 2022, cash used

in operating activities was $2.11 million.

Net loss of $0.30 million which consisted of the dividend received of $2.58 million and foreign

exchange gain of $1,073.

Changes in operating assets and liabilities provided $0.78 million of total cash for operating activities.

As of December 31, 2023, and December 31, 2022,

we had marketable securities held in the Trust Account of $21.92 million (including a deposit in transit of $0.05 million) and $178.53

million, respectively.

The reduction in Trust Account holdings resulted principally from shareholder

Based on its present business plan and taking

into account Borealis Foods’ working capital and cash anticipated to be generated through operations, Borealis Foods will require

additional capital to fund its anticipated funding needs through March 31, 2025.

The amount of additional capital required to fund Borealis

Foods through March 31, 2025 has been reduced as a result of a change in Borealis Foods’ business plan that reduced the need for

additional capital expenditures relating to the expansion of its production lines beyond the current four production lines.

Borealis Foods continues to seek additional financing.

There can be no assurance that such additional financing will be available to Borealis

Foods on terms acceptable to Borealis Foods or at all.

In the event Borealis Foods’ additional financing efforts are not successful,

Borealis Foods may seek to pursue alternatives which may include, among other things, scaling down research and development, business

develop investments, and global distribution expansion until such time that new capital has been secured..

The following sets forth a summary of our results of operations for the presented months ($ in thousands):

Comparison of the Years Ended December 31, 2024 and 2023

Years Ended December 31,

2024 2023 2024 vs 2023

$ % of Revenues, net $ % of Revenues, net $ % of Prior Period

Gross sales 29,100 31,377 (2,277)

Sales discounts & allowances (1,431) (5)% (1,392) (5)% (39) —%

Revenue, net 27,669 29,985 (2,316)

Cost of goods sold 23,156 84% 27,352 91% (4,196) (7)%

Depreciation 2,324 8% 3,937 13% (1,613) (5)%

Total cost of goods sold 25,480 92% 31,289 104% (5,809) (12)%

Gross profit (loss) 2,189 8% (1,304) (4)% 3,493 12%

Sales & marketing 5,733 21% 2,238 7% 3,495 14%

Business development 2,395 9% 819 3% 1,576 6%

Training 1,715 6% 2,727 9% (1,012) (3)%

General & administrative expenses 12,751 46% 12,861 43% (110) 3%

Total sales, general & administrative expenses 22,594 82% 18,645 62% 3,949 20%

Loss from operations (20,405) (74)% (19,949) (67)% (456) (7)%

Total other expense (5,057) (18)% (7,866) (26)% 2,809 8%

Loss before income taxes (25,462) (92)% (27,815) (93)% 2,353 1%

Income tax benefit 135 —% 336 1% (201) (1)%

Net loss $ (25,327) (92)% $ (27,479) (92)% $ 2,152 —%

Other financial Data

Adjusted EBITDA

$ (4,822) (17)% $ (5,133) (17)% $ 312 —%

Adjusted EBITDA is a non-GAAP financial metric.

See “Reconciliation of EBITDA and Adjusted EBITDA” below for a reconciliation of net income to EBITDA and Adjusted EBITDA for each applicable period.

Revenue and Customer Trends

Net Revenue declined 8% year-over-year to $27.7 million in 2024.

The decline was primarily driven by the rationalization of low-margin SKUs and the reduction in volume with mass retail partners.

Gross profit improved to $2.2 million, compared to a gross loss of $1.3 million in the prior year.

Net gross margin, less depreciation improved from 9% ($-1.3 million + $3.9 million divided by $30.0 million) to 16% ($2.2 million + $2.3 million divided by $27.7 million), a 7% increase year-over-year.

Revenue concentration with Walmart was reduced to 22% of total sales, from 57% in the prior year.

We replaced most of our Ramen Express brand shelf space to launch Chef Woo and Gordon Ramsay products in the soup aisle, a major pivot to our high margin flag ship brands.

This change in strategy allows major national ramp up of our high protein ramen products without pricing pressure from low cost competition.

The launch of our products in food service to supply educational and other institutional customers is expected to be a major driver of the company's future revenues.

Product Mix and Margin Enhancement

Chef Woo - High Protein Ramen, our flag ship brand, generated revenue of $10.4 million, an increase of 200% year over year, representing 38% of total gross sales.

We also launched our Food Service product line, which generated revenue totaling $3.75 million in its first year.

Gross margin less depreciation improved to 16% in 2024, compared to 9% in 2023.

This turnaround was driven by an improved product mix, SKU optimization, and enhanced operational controls.

Key drivers of margin expansion included:

• Product Mix

• Customer Mix

• Operational efficiencies

The increased contribution from Chef Woo and the launch of Food Service product lines played a significant role in enhancing profitability, reflecting our efforts to emphasize branded, premium-positioned offerings.

Operating Expenses and SG&A Trends

Sales, General, and Administrative (SG&A) expenses rose 21% year over year to $22.6 million, or 82% of net revenue, compared to 62% in the prior year.

The increase reflected ongoing investments in organizational development, brand building, and customer acquisition.

Sales and Marketing expenses nearly doubled to $5.73 million.

Within that, advertising costs increased to $4.49 million, primarily associated with brand development and influencer/social media driven marketing for national launch of products.

Major effort was made in 2024 to develop new business channels and strategic partnerships with significant monetization opportunity.

Administrative expenses decreased to $12.75 million, a decrease of 1% year-over-year, driven by:

• A decline in professional fees of $2.1 million, as one-time legal and audit costs from the prior year did not recur.

Professional fees and transactional expenses related to the merger, meeting public-company regulatory requirements in the prior year.

• A 50% increase in wages and benefits to $3.8 million, reflecting added headcount and increased compensation results in a 5% increase as a percentage of sales.

• An $832,000 increase in freight costs due to our broader distribution and diversification of customer mix.

Stock-based compensation expense, related to the immediate vesting of stock options associated with the reverse recapitalization, totaled $1.3 million, representing non-cash charges related to long-term incentive programs.

Interest and Other Income/Expense

Interest expense totaled $5.1 million, a decline from $7.9 million in the prior year.

The reduction resulted from:

• Conversion of debt to equity

• Lower reliance on high-interest debt instruments.

No gains or losses were recognized on the sale of assets in the current year as compared to $963,000 loss recognized during the prior year.

Foreign currency gains were minimal, totaling $3,600.

Liquidity and Capital Resources

As of year-end, we had $0.6 5 million in cash, $1.97 million in accounts receivable, net and $2.23 million in finished good inventory compared to $7.62 million in cash, $1.78 million in accounts receivable net and $1.94 million in finished goods inventory as of the prior year end.

The reduction in cash was attributable to operating cash use, inventory build-up to support institutional accounts, and SG&A expenditures.

Following our SPAC merger and public listing on Nasdaq, we did not receive any proceeds from the SPAC trust, as redemption totaled 100%.

Additionally, the Company incurred substantial transaction-related costs, which placed immediate strain on available working capital.

This liquidity constraint limited the Company’s ability to pursue new customer relationships, fund promotions, and invest in broader marketing initiatives.

In addition, one-time extraordinary cost of shipping in raw materials precluded the Company from taking advantage of quantity discounts.

Liquidity constraints had a major impact on the cost of raw materials impacting the company's gross margin significantly.

With improved liquidity savings in cost of raw materials and shipping is expected to have a significant impact on the Company's gross margins.

Current liabilities decreased 62% to $25.4 million, primarily driven by the conversion of notes payable to equity as a result of the reverse recapitalization.

The following table sets forth our cash flows for the periods indicated ($ in thousands):

Years Ended December 31,

Net cash (used in) provided by:

Operating Activities $ (15,090) $ (18,005)

Investing Activities (1,907) (4,466)

Financing Activities 10,034 24,940

Operating Activities

Net cash used in operating activities for the year ended December 31, 2024, was $15.09 million, primarily driven by the net loss of $25.33 million, adjusted for non-cash charges of $2.32 million for depreciation and amortization, and $1.27 million for stock-based compensation.

This represents an improvement from the $18.01 million used in the same period of 2023, as Borealis Foods benefited from enhanced gross profit due to the performance of high-margin products like Chef Woo and Woodles, which partially offset operational expenses.

Investing Activities

Net cash used in investing activities was $1.91 million for the year ended December 31, 2024, primarily attributable to purchases of property and equipment, offset by proceeds from the reverse recapitalization, to support production scale and efficiency improvements.

This increase from $4.47 million in 2023 aligns with our focused approach to capital expenditures, particularly as the Company seeks to improve asset utilization and operational efficiencies without significant expansion of its production line.

Financing Activities

Net cash provided by financing activities during the year ended December 31, 2024, was $10.03 million, driven by proceeds from convertible debt and additional credit facility utilization.

In comparison, financing activities in the year ended December 31, 2023, were $24.94 million, largely attributable to the Reverse Recapitalization proceeds and debt restructuring efforts.

The financing activities in 2024 primarily support working capital needs and strategic investments in growth initiatives.

Balance Sheet and Contractual Obligations

Our cash position, though lower than prior periods, reflects its active investment in operational scale-up and the expansion of high-margin product lines.

Borealis Foods’ contractual obligations, including operating leases, accounts payable, and convertible notes, remain in line with planned financial commitments and reflect our strategic focus on sustainable growth.

Future Capital Requirements and Liquidity

We need additional capital to meet our funding requirements through fiscal 2025, particularly to support our expansion in retail and digital channels.

As of December 31, 2024, we had cash-on-hand of $0.65 million and negative working capital of $13.61 million.

Our current business plan has mitigated some capital expenditure requirements, as operational efficiencies in existing production lines have reduced the need for immediate expansion.

We are actively exploring additional financing options to strengthen liquidity;

however, there can be no assurance that such funding will be available on favorable terms or at all.

If we cannot obtain adequate additional financing, among other things, we may have to substantially curtail or limit our research, marketing, production or distribution activities, sell assets of the Company or seek protection from creditors under bankruptcy laws, which could materially and adversely affect our business plan.

Inadequate financial resources could also continue to raise substantial doubt about our ability to continue as a going concern.

Going Concern

Management has identified recurring losses and negative cash flows from operations as factors raising substantial doubt about our ability to continue as a going concern.

We are focused on executing our strategic initiatives to drive revenue growth, manage expenses, and secure additional financing to address these risks.

The consolidated financial statements have been prepared under the assumption of ongoing operations, as we seek to navigate these challenges and achieve financial stability.

Substantial doubt continues to exit about the ability of the Company to continue as a going concern within one year from April 15, 2025.

The Company expects that operating costs will decrease in future periods.

During 2024, the Company incurred approximately $1.51 million of transaction expenses, and $1.27 million in employee stock compensation expenses associated with a Reverse Recapitalization.

These were non-recurring costs, and management anticipates improved operating efficiency moving forward.

Despite the Company’s current financial position, management is actively pursuing several strategic and operational initiatives to improve liquidity and profitability, including:

• Continued efforts to reduce sales, general, and administrative expenses for the year ended December 31, 2025.

• Exploration of financing options, including equity or debt issuances, to strengthen the balance sheet.

Contractual Obligations and Commitments

The following table summarizes our non-cancellable contractual obligations and other commitments as of December 31, 2024, and the effects that such obligations are expected to have on our liquidity and cash flow for future periods (in thousands):

Payments due by period

Total Less than 1 year 1-3

years More than 5 years

Contractual obligations and other commitments * $ 59,242 $ 25,406 $ 33,836 $ — $ —

(*) Includes operating lease liabilities for certain of our offices and facilities, accounts payable, and accrued expenses including related party notes

The commitment amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts.

The table does not include obligations under agreements that we can cancel without a significant penalty.

Off-Balance Sheet Arrangements

We have no obligations, assets, or liabilities,

which would be considered off-balance sheet arrangements as of December 31, 2023.

We do not participate in transactions that create relationships

with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established

for the purpose of facilitating off-balance sheet arrangements.

We have not entered into any off-balance sheet financing arrangements,

established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

Contractual Obligations

We do not have any long-term debt, capital lease

obligations, operating lease obligations or long-term liabilities, other than described below.

We have engaged the Underwriters as advisors in connection with our Business Combination to assist the Company in holding meetings with its shareholders

to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors

that are interested in purchasing the Company’s securities in connection with a Business Combination, assist the Company in obtaining

shareholder approval for the Business Combination and assist the Company with its press releases and public filings in connection with

the Business Combination.

The Company will pay the Underwriters a cash fee for such services upon the consummation of

a Business Combination of $5.2 million that equals to 3.0% of the gross proceeds of Initial Public Offering (exclusive of any applicable

finders’ fees which might become payable).

Critical Accounting Estimates

The preparation of financial statements in conformity

with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities

and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during

the reporting period.

Making estimates requires management to exercise significant judgment.

It is at least reasonably possible that the

estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statement, which management

considered in formulating its estimate, could change in the near term due to one or more future confirming events.

Estimates made in preparing

these financial statements include, among other things, the fair value measurement of shares transferred by the Sponsor to independent

director nominees and fair value of shares to be transferred on completion of the Business Combination as per the Incentive agreements

entered by the Sponsor and officers of the Company.

Actual results could differ from those estimates.

We do not use derivative instruments to hedge

exposures to cash flow, market, or foreign currency risks.

We evaluate all of our financial instruments, including issued stock purchase

warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480

and ASC 815-15.

We account for the public warrants (the “Public

Warrants” and together with Private Warrants, collectively, the “Warrants”), as either equity or liability-classified

instruments based on an assessment of the specific terms of the Warrants and the applicable authoritative guidance in Financial Accounting

Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging (“ASC 815”).

The assessment considers whether the Warrants meet all of the requirements for equity classification under ASC 815, including whether

the Warrants are indexed to our own ordinary shares and whether the warrant holders could potentially require “net cash settlement”

in a circumstance outside of our control, among other conditions for equity classification.

This assessment, which requires the use of

professional judgment, is conducted at the time of issuance of the Warrants and as of each subsequent quarterly period end date while

the Warrants are outstanding.

For issued or modified warrants that meet all

of the criteria for equity classification, such warrants are required to be recorded as a component of additional paid-in capital at

the time of issuance.

For issued or modified warrants that do not meet all the criteria for equity classification, such warrants are

required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter.

Changes in the estimated

fair value of liability-classified warrants are recognized as a non-cash gain or loss on the statements of operations.

We evaluated the

Public Warrants and Private Warrants in accordance with ASC 815-40, “Derivatives and Hedging — Contracts in Entity’s

Own Equity,” and concluded that they met the criteria for equity classification and are required to be recorded as part a component

of additional paid-in capital at the time of issuance.

Class A Ordinary Shares Subject to Possible

The Company accounts for its Class A ordinary

shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.”

Class A ordinary shares subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value.

Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control

of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified

as temporary equity.

At all other times, ordinary shares are classified as shareholders’ equity.

The Company’s ordinary shares

feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain

future events.

Accordingly, as of December 31, 2023 and December 31, 2022, 1,939,631 and 17,250,000 shares of Class A ordinary shares

subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ deficit section

of the Company’s balance sheets, respectively.

Net Loss Per Ordinary Share

We comply with accounting and disclosure requirements of Financial

Accounting Standards Board Accounting Standard Codification, or FASB ASC, Topic 260, “Earnings Per Share.” Net loss per ordinary

share is computed by dividing net loss by the weighted average number of ordinary shares outstanding during the period.

The Company applies

the two-class method in calculating earnings per share.

Re-measurement associated with the redeemable shares of Class A ordinary share

is excluded from EPS as the redemption value approximates fair value.

Recently Adopted Accounting Pronouncements

In June 2022, the FASB issued ASU 2022-03, which

amends Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ ASU

ASU 2022-03 clarifies guidance for fair value measurement of an equity security subject to a contractual sale restriction

and establishes new disclosure requirements for such equity securities.

The Company elected to early adopt ASU 2022-03 on July 1, 2023,

and applied the amendment in measuring fair value of shares to be transferred on closing of a business combination.

As of December 31, 2024 and December 31, 2023, we did not engage in any off-balance sheet arrangements, including the use of structured finance, special purpose entities, or variable interest entities.

The following represents a summary of warrants outstanding and exercisable on December 31, 2024:

Description Issue Date Classification Exercise Price Expiration Date Outstanding Shares Exercisable Shares

Private Placement Warrants 9/13/2021 Equity $ 11.50 2/7/2029 9,300,000 9,300,000

Public Warrants 9/13/2021 Equity $ 11.50 2/7/2029 17,250,000 17,250,000

26,550,000 26,550,000

Following the closing of the Reverse Recapitalization, Borealis Foods has the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $ 0.01 per warrant, provided that the last reported sales price of Common Shares equals or exceeds $ 18.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) for any 20 days within a 30 trading day period commencing once the warrants become exercisable and ending on the third trading day prior to the date on which Borealis Foods gives proper notice of such redemption and provided certain other conditions are met.

The public warrants are identical to the private placement warrants in material terms and provisions, except the private placement warrants were not transferable, assignable or salable until 30 days after the completion of the Reverse Recapitalization.

Emerging Growth Company Status

Section 102(b)(1) of the Jumpstart Our Business Startups Act (the " JOBS Act ") exempts “emerging growth companies” (as defined in Section 2(a) of the Securities Act) from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards.

The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to not take advantage of the extended transition period is irrevocable.

Oxus was an emerging growth company and elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards.

Following the consummation of the Reverse Recapitalization, Borealis Foods expects to continue taking advantage of the benefits of the extended transition period, although it may decide to early adopt new or revised accounting standards to the extent permitted by such standards and relevant laws and regulations.

This may make it difficult or impossible to compare Borealis Foods' financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to

Emerging Growth Company Status (continued)

take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of common shares that are held by non-affiliates equals or exceeds $700 million as of the end of that year’s second fiscal quarter, (ii) the last day of the fiscal year in which Borealis Foods has total annual gross revenue of $1.235 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which Borealis Foods has issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) December 31, 2026, which is the last day of the fiscal year following the fifth anniversary of Oxus’ initial public offering.

Implications of being a Smaller Reporting Company

Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K.

Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.

We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of common shares held by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter, or (ii) our annual revenues exceeded $100 million during such completed fiscal year and the market value of common shares held by non-affiliates equals or exceeds $700 million as of the end of that year’s second fiscal quarter.

To the extent we take advantage of such reduced disclosure obligations, we may also make comparison of our financial statements with other public companies difficult or impossible.

How We Evaluate Our Operations

Net Income/(Loss)

We measure performance based on our overall return to shareholders based on consolidated net income or net loss.

We do not review a measure of operating result at a lower level than the consolidated company and we only have one reportable segment.

Adjusted EBITDA

Our adjustments to EBITDA are related to expenses and gains that we believe are not indicative of normal, ongoing operations.

While these items may be recurring in nature and should not be disregarded in evaluation of our earnings performance, it is useful to exclude such items when analyzing current results and trends as these items can vary significantly from period to period depending on specific underlying transactions or events that may occur.

Therefore, while we may incur or recognize these types of expenses and gains in the future, we believe that removing these items for purposes of calculating the Adjusted EBITDA financial measures provides a more focused presentation of our ongoing operating performance.

We view EBITDA as an important indicator of performance.

We define EBITDA as net income/(loss) plus net interest expense, income taxes, depreciation, and amortization.

We define Adjusted EBITDA as EBITDA further adjusted for any foreign exchange gains/(losses), share-based compensation expense and non-recurring items if identified.

EBITDA and Adjusted EBITDA are supplemental measures utilized by our management and other users of our financial statements such as investors, research analysts and

others, to assess the financial performance of our assets without regard to financing methods, capital structure or historical cost basis.

Adjusted EBITDA is a key performance measure that our management uses to assess its operating performance.

We facilitate internal comparisons of our operating performance on a more consistent basis.

We use these performance measures for business planning purposes and forecasting.

We believe that EBITDA and Adjusted EBITDA enhances an investor’s understanding of our financial performance as they are useful in assessing our operating performance from period-to-period by excluding certain items that we believe are not representative of our core business.

“Adjusted EBITDA,” a non-GAAP measure, is defined as net income attributable to us before (1) income tax benefit, of $(0.13) million, (2) grant revenue, of $—, (3) exchange rate, of $—, (4) loss on disposal, of $—, (5) interest expense, of $5.06 million, (6) depreciation and amortization, of $2.32 million, (7) training, of $1.72 million, (8) business transaction costs, of $3.17 million, (9) new product launch of $3.73 million, (10) business development and other extraordinary charges, of $3.37 million, and (11) deferred stock compensation $1.27 million, all for the fiscal year ended December 31, 2024.

Management and our Board of Directors use this non-GAAP measure for purposes of evaluating our performance.

Furthermore, the Compensation Committee of our Board of Directors uses such measure to evaluate management’s performance.

We, therefore, believe that the use of this non-GAAP measure provides useful information to investors and other stakeholders by allowing them to view our business through the eyes of management and our Board of Directors, facilitating comparisons of results across historical periods and focus on the underlying ongoing operating performance of our business.

As noted above, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.

“Adjusted EBITDA,” a non-GAAP measure, is defined as net income attributable to us before (1) income tax benefit, of $(0.34) million, (2) grant revenue, of $(0.30) million, (3) exchange rate, of $(0.07) million, (4) loss on disposal, of $0.96 million, (5) interest expense, of $7.24 million, (6) depreciation and amortization, of $3.94 million, (7) training, of $2.73 million, (8) business transaction costs, $5.41 million, (9) new product launch, $0.82 million, (10) business development and other extraordinary charges, $1.46 million, and (11) deferred stock compensation $0.49 million, all for the fiscal year end December 31, 2023.

Management and our Board of Directors use this non-GAAP measure for purposes of evaluating our performance.

Furthermore, the Compensation Committee of our Board of Directors uses such measure to evaluate management’s performance.

As noted above, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.

Recent Accounting Pronouncements

In August 2020, FASB issued Accounting Standards

Update (“ ASU ”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts

in Entity’s Own Equity (Subtopic 815-40) (“ ASU 2020-06 ”) to simplify accounting for certain financial instruments.

ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible

instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s

The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed

to and settled in an entity’s own equity.

ASU 2020-06 amends the diluted earnings per share guidance, including the requirement

to use the if-converted method for all convertible instruments.

The provisions of ASU 2020-06 are applicable for

fiscal years beginning after December 15, 2023, with early adoption permitted no earlier than fiscal years beginning after December 15,

The Company is currently evaluating the impact of ASU 2020-06 on its financial statements.

In December 2023, the FASB issued ASU 2023-09,

“Income Taxes (Topic 740):

Improvements to Income Tax Disclosures”, which requires disaggregated information about a reporting

entity’s effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and

decision usefulness of income tax disclosures.

This ASU will be effective for the annual period ending December 31, 2025.

is currently evaluating the timing and impacts of adoption of this ASU.

In June 2016, the FASB issued ASU 2016-12, “Financial

Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments”, which requires entities to measure

all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable

and supportable forecasts.

ASU 2016-13 also requires additional disclosures regarding significant estimates and judgments used in estimating

credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio.

The Company adopted the provisions

of this guidance with effect from January 1, 2023.

The adoption did not have a material impact on the Company’s consolidated financial

Management does not believe that any other recently

issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.

Quantitative and Qualitative Disclosures

About Market Risk.

We are a smaller reporting company as defined

by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

See Note 1 to Borealis Foods’ financial statements included elsewhere in this Annual Report for information about recent accounting pronouncements, the timing of their adoption, and Borealis Foods’ assessment, if any, of their potential impact on Borealis Foods’ financial condition and results of operations.

Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risk in the ordinary course of our business.

Market Risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.

Our market risk exposure is primarily the result of fluctuations in foreign currency exchange rates.

Concentration Risk

The Company extends unsecured credit to its customers in the ordinary course of business.

Payment terms are generally net 30 days with discounts amounting up to 10% for early payments.

Accounts receivables are written off when they are determined to be uncollectible based on the financial stability of its customers and existing economic conditions.

Sales to two customers accounted for approximately 33% and sales to one customer accounted for approximately 57% of net revenues for the fiscal year December 31, 2024 and 2023, respectively.

Accounts receivable from three and two customers amounted to approximately 37% and 50% of total accounts receivable as of December 31, 2024 and 2023, respectively.

Substantially all of the Company's sales for the years ended December 31, 2024 and 2023 occurred in the United States, Canada, Central America, South America, and Europe.

Purchases from 10 vendors accounted for approximately 47% and 50% of purchases during the fiscal year December 31, 2024 and 2023, respectively.

Accounts payable to these vendors totaled approximately $3,217,000 and $430,000 as of December 31, 2024 and 2023, respectively.

Foreign Currency Risk

Our customers are primarily located in the United States, Central America, South America, Germany, and Canada;

therefore, foreign exchange risk exposures arise from transactions denominated in currencies other than our functional and reporting currency (U.S.

To date, a majority of our sales have been denominated in U.S.

dollars and a significant portion of our operating expenses are denominated in Canadian dollars.

We also purchase certain of our key manufacturing inputs in Euros.

As we expand our presence in international markets, our results of operations and cash flows may increasingly be subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign currency exchange rates.

To date, we have not entered into any hedging arrangements to minimize the impact of these fluctuations in the exchange rates.

We will periodically reassess our approach to manage our risk relating to fluctuations in currency rates.

We do not believe that foreign currency risk had a material effect on our business, financial condition, or results of operations during the periods presented.

Inflation Risk

We do not believe that inflation had a significant impact on our results of operations for any periods presented in our consolidated financial statements.

Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs with product price increases, and our inability or failure to do so could harm our business, financial condition, and results of operations.

Matching Revenues with Costs

Certain Selling, General and Administrative costs have been expensed in the period incurred.

These costs, include business development costs, transaction costs and research and development costs, consist primarily of personnel and related expenses including salaries, benefits, share-based compensation, scale-up expenses, depreciation and amortization expenses, and facility lease costs.

Scale-up expenses includes material waste costs, production personnel costs and various related expenses.

These costs are focused on enhancements to our existing product formulations and production processes, as well as the scientific development of new products and economic verticals.

We believe continued innovation and these new verticals are expected to capture a larger share of consumers.

Monetization of future opportunities created by the above investment are expected to be realized in future quarters.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis