Borealis Foods Inc. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Borealis Foods Inc. (Exact name of registrant as specified in its charter) Ontario 001-40778 98-1638988 (State or other jurisdiction of incorporation or organization) (Commission File Number) (I.R.S. Employer Identification Number) 1540 Cornwall Rd . #104 Oakville , Ontario , Canada L6J 7W5 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (905) 278-2200 Not Applicable (Former name, former address, and former fiscal year, if changed since last report) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class: Trading Symbol: Name of Each Exchange on Which Registered: Common Shares BRLS Nasdaq Warrants BRLSW Nasdaq Capital Market Indicate by check mark whether 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 ☐ Indicate 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 ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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. 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. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of May 20, 2025, 21,381,852 Common Shares of the registrant, no par value, were issued and outstanding. CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q (this “ Quarterly Report ”) filed by Borealis Foods Inc. (the “ Company ” or “ Borealis Foods ”, “ our ”, “ us ” or “ we ”) contains statements that are forward-looking and as such are not historical facts. This includes, without limitation, statements regarding the financial position, business strategy and the plans and objectives of management for future operations. These statements constitute projections, forecasts, and forward-looking statements, and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this Quarterly Report, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strive,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. When we discuss our strategies or plans, we are making projections, forecasts, or forward-looking statements. Such statements are based on the beliefs of, as well as assumptions made by and information currently available to, Borealis Foods’ management. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. These risks and uncertainties include, but are not limited to, the following: ● our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern; ● our limited operating history makes it difficult to evaluate our business and prospects; ● our potential insolvency or inability to pay our debts would have a material adverse effect on our business, financial condition, results of operations and cash flow; ● we may be unable to execute our business plan or maintain our competitive position and high-level customer satisfaction if we fail to maintain adequate operational and financial resources or fail to obtain additional financing, particularly if we continue to grow rapidly; ● we have a substantial debt burden, a significant portion of which matures soon and requires repayment or refinancing; ● our management team has limited experience managing a public company; ● we are an early stage and emerging growth company and, as such, we are subject to all the risks associated with early stage and emerging growth companies; ● we have identified material weaknesses in our internal control over financial reporting; if we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, investors could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our Common Shares; ● a significant portion of our revenue is concentrated with a limited number of customers; ● adverse climate conditions may have an adverse effect on our business. We may take various actions to mitigate our business risks associated with climate change, which may require us to incur substantial costs and may not be successful, due to, among other things, the uncertainty associated with the longer-term projections associated with managing climate risks; ● our dependence on suppliers may materially adversely affect our operating results and financial position; ● manufacturing and production forecasts are based on multiple assumptions. We must adequately estimate our manufacturing capacity and inventory supply. If we overestimate our demand and overbuild our capacity or inventory, we may have significantly underutilized assets. Underutilization of our manufacturing facilities can adversely affect our gross margin and other operating results; ● our business operations and financial results could be adversely affected by changes in trade policies, including the imposition of new tariffs or trade restrictions by the U.S. government. With tariffs and other trade barriers between the U.S. and Canada, Mexico and other jurisdictions, our sales, profitability, and competitive position in those markets could be negatively impacted; ● we may experience volatility in costs for ingredients and packaging due to conditions that are difficult to predict; ● our future success will depend, in part, on our ability to maintain our technological leadership, enhance our current food products, develop new food products that meet changing customer needs and preferences, advertise and market our food products, and influence and respond to emerging industry standards and other technological changes on a timely and cost-effective basis; ● our business depends on our use of proprietary technology relying heavily on laws to protect such technology; ● U.S. shareholders may not be able to obtain judgments or enforce civil liabilities against us or our executive officers or our Board of Directors (our “ Board ”); ● we will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives; and ● other risk factors and uncertainties described in this Quarterly Report, our most recent Annual Report on Form 10-K, and other filings with the SEC. We urge investors to consider all of the risks, uncertainties, and other factors disclosed in this filing carefully in evaluating the forward-looking statements contained in this Quarterly Report. We cannot assure you that the results or developments anticipated by us and reflected or implied by any forward-looking statement contained in this report will be realized or, even if substantially realized, that those results or developments will result in the forecasted or expected consequences for us or affect us, our operations or financial performance as we forecasted or expected. These forward looking statements are based on information available as of the date of this Quarterly Report and current expectations, forecasts, and assumptions, and involve a number of judgments, risks, and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws. We intend the forward-looking statements contained in this Quarterly Report to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the “ Securities Act ”, and Section 21E of the Securities Exchange Act of 1934, as amended, or the “ Exchange Act ”. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. You should not place undue reliance on our forward-looking statements. Page PART I. FINANCIAL INFORMATION 1 Item 1. Financial Statements 1 Unaudited Condensed Consolidated Balance Sheets 1 Unaudited Condensed Consolidated Statements of Operations 2 Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity (Deficit) 3 Unaudited Condensed Consolidated Statements of Cash Flows 4 Notes to the Unaudited Condensed Consolidated Financial Statements 5 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21 Item 3. Quantitative and Qualitative Disclosures About Market Risk 31 Item 4. Controls and Procedures 33 PART II. OTHER INFORMATION 35 Item 1. Legal Proceedings 35 Item 1A. Risk Factors 35 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 36 Item 3. Defaults Upon Senior Securities 36 Item 4. Mine Safety Disclosures 36 Item 5. Other Information 36 Item 6. Exhibits 37 SIGNATURES 38 i PART I – FINANCIAL INFORMATION Item 1. Financial Statements. Borealis Foods, Inc. and Subsidiaries Unaudited Condensed Consolidated Balance Sheets March 31, 2025 December 31, 2024 (Audited) Assets Current Assets Cash $ 192,536 $ 652,965 Accounts receivable, net of allowance for credit losses of $ 200,000 and $ 247,653 as of March 31, 2025 and December 31, 2024, respectively 1,779,092 1,965,748 Inventories, net 7,751,394 8,046,259 Prepaid expenses and other current assets 848,349 1,134,611 Total current assets 10,571,371 11,799,583 Property, plant and equipment, net 45,272,000 45,736,326 Intangible assets 328,822 319,307 Right - of-use asset, net 53,323 63,826 Goodwill 1,917,356 1,917,356 Other non-current assets 254,685 169,685 Total assets $ 58,397,557 $ 60,006,083 Liabilities and Shareholders' (deficit) Current liabilities: Accounts payable and accrued expenses $ 13,047,438 $ 11,529,803 Due to related parties 16,512,453 7,825,792 Notes payable, current portion, net of capitalized loan costs 5,706,085 5,456,934 Operating lease payable, current portion 51,822 55,116 Finance leases payable, current portion 551,428 538,845 Total current liabilities 35,869,226 25,406,490 Due to related parties, net of current portion - 7,601,661 Line of credit 7,600,000 7,600,000 Convertible notes payable, net of current portion 3,000,000 3,000,000 Notes payable, net of current portion 14,305,366 14,478,051 Operating lease payable, net of current portion 4,183 12,015 Finance leases payable, net of current portion 984,167 1,143,829 Deferred tax liability 1,459,923 1,459,923 Total liabilities 63,222,865 60,701,969 Shareholders' (deficit) Common shares, no par value - - Additional paid-in capital 90,154,854 90,096,688 Accumulated deficit ( 94,980,162 ) ( 90,792,574 ) Total shareholders' (deficit) ( 4,825,308 ) ( 695,886 ) Total liabilities and shareholders' (deficit) $ 58,397,557 $ 60,006,083 See accompanying notes to the unaudited condensed consolidated financial statements. 1 Borealis Foods, Inc. and Subsidiaries Unaudited Condensed Consolidated Statements of Operations For Three Months Ended March 31, 2025 2024 Gross sales 7,224,957 8,484,021 Sales discounts & allowances ( 379,287 ) ( 588,588 ) Revenue, net 6,845,670 7,895,433 Cost of goods sold 5,465,314 6,648,272 Depreciation and amortization 480,554 1,004,588 Total cost of goods sold 5,945,868 7,652,860 Gross profit 899,802 242,573 Total sales, general & administrative expenses 3,816,920 7,215,588 Loss from operations ( 2,917,118 ) ( 6,973,015 ) Other (expense): Loss on foreign exchange rates ( 11,047 ) - Interest expense, net ( 1,259,423 ) ( 1,458,607 ) Total other expense ( 1,270,470 ) ( 1,458,607 ) Loss before income taxes ( 4,187,588 ) ( 8,431,622 ) Net loss ( 4,187,588 ) ( 8,431,622 ) Loss per share from net loss Basic $ ( 0.20 ) $ ( 0.49 ) Diluted $ ( 0.20 ) $ ( 0.49 ) Weighted average shares outstanding Basic 21,379,347 17,079,576 Diluted 21,379,347 17,079,576 See accompanying notes to the unaudited condensed consolidated financial statements. 2 Borealis Foods, Inc. and Subsidiaries Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity (Deficit) Three Months Ended March 31, 2025 and 2024 Class A Common Stock Class B Common Stock Class C Common Stock Additional Number of Common Number of Common Number of Common Paid-In Accumulated Shares Stock Shares Stock Shares Stock Capital Deficit Total Balance at January 1, 2024 100,000,000 $ - 57,117,774 $ - 6,345,000 $ - $ 44,118,081 $ ( 65,465,376 ) $ ( 21,347,295 ) Expense related to stock options (Note 8) -- -- -- -- -- -- 1,273,053 -- 1,273,053 Convertible debt converted to equity -- -- -- -- -- -- 54,991,472 -- 54,991,472 from reverse recapitalization Assumption of debt from -- -- -- -- -- -- ( 10,285,918 ) -- ( 10,285,918 ) reverse recapitalization Conversion to Newco shares ( 78,621,110 ) -- ( 57,117,774 ) -- ( 6,345,000 ) -- -- -- -- from reverse recapitalization Net loss -- -- -- -- -- -- -- ( 8,431,622 ) ( 8,431,622 ) Balance at March 31, 2024 21,378,890 $ -- -- $ -- -- $ -- $ 90,096,688 $ ( 73,896,998 ) $ 16,199,690 Balance at January 1, 2025 21,378,890 -- -- -- -- -- $ 90,096,688 $ ( 90,792,574 ) $ ( 695,886 ) Exercise of restricted share units 2,962 -- -- -- -- -- 17,490 -- 17,490 Expense related to restricted share units 40,676 40,676 Net loss -- -- -- -- -- -- -- ( 4,187,588 ) ( 4,187,588 ) Balance at March 31, 2025 21,381,852 $ -- -- $ -- -- $ -- $ 90,154,854 $ ( 94,980,162 ) $ ( 4,825,308 ) Common shares, no par value, unlimited number of shares authorized (21,381,852 issued and outstanding) Class B shares, no par value, unlimited number of shares authorized Class C shares, no par value, unlimited number of shares authorized See accompanying notes to the unaudited condensed consolidated financial statements. 3 Borealis Foods Inc. and Subsidiaries Unaudited Condensed Consolidated Statements of Cash Flows Three Months Ended March 31, 2025 Three Months Ended March 31, 2024 Cash Flows from Operating Activities: Net loss $ ( 4,187,588 ) $ ( 8,431,622 ) Adjustments to reconcile net loss to net cash used in operating activities: Non-cash compensation expense related to stock options 58,166 1,273,053 Depreciation and amortization 480,554 994,202 Amortization of loan costs 76,466 77,316 Provision for credit losses ( 47,653 ) 306,000 Provision for inventory reserve ( 126,323 ) 42,449 Changes in operating assets and liabilities: Accounts receivable 234,308 ( 3,300,756 ) Inventories 421,189 99,097 Operating lease ( 624 ) ( 7,395 ) Prepaid expenses and other current assets 201,262 ( 1,551,597 ) Accounts payable and accrued expenses 1,517,638 3,729,820 Net cash used in operating activities ( 1,372,605 ) ( 6,769,433 ) Cash flows from investing activities Purchases of intangible assets ( 9,515 ) - Proceeds from reverse capitalization - 63,575 Purchases of property, plant and equipment, net ( 16,229 ) ( 550,984 ) Net cash used in investing activities ( 25,744 ) ( 487,409 ) Cash flows from financing activities Proceeds from related parties 1,085,000 - Proceeds from convertible notes payable - 3,000,000 Payments on finance leases payable ( 147,080 ) ( 147,738 ) Borrowings on line of credit - 5,000,000 Net cash provided by financing activities 937,920 7,852,262 Net change in cash ( 460,429 ) 595,420 Cash, beginning of period 652,965 7,615,630 Cash, end of period $ 192,536 $ 8,211,050 Supplemental cash flow data Cash paid during the period for: Interest $ 243,500 $ 651,208 Non-cash investing and financing activities Conversion of notes payable into Class A shares (Note 4) - ( 54,991,472 ) Note payable supplier finance (Note 4) - 10,349,494 See accompanying notes to the unaudited condensed consolidated financial statements. 4 Borealis Foods Inc. and Subsidiaries Notes to the Unaudited Condensed Consolidated Financial Statements 1. Description of Business and Summary of Significant Accounting Policies Overview The accompanying unaudited condensed consolidated financial statements include the financial statements of Borealis Foods Inc. (“ Borealis ”), and its subsidiaries: Palmetto Gourmet Foods (Canada) Inc., (“ PGF Canada ”), Palmetto Gourmet Foods, Inc. (“ PGF ”), PGF Real Estate I, Inc. (“ PGF RE I ”), PGF Real Estate II, Inc. (“ PGF RE II ”), and Borealis IP (“ Borealis IP ”) (collectively, the “ Company ”). Borealis is a food technology integrator with a mission to address global food security challenges through the development and commercialization of tasty, affordable and sustainable functional foods. Borealis has developed a range of high-quality, affordable, sustainable, and nutritious premium, ready-to-eat meals sold in the United States, Canada, Central America, South America and Europe. PGF Canada is a holding company, holding the shares of PGF. PGF is a food manufacturing company with a BRC AA+ rated food grade facility. PGF RE I and PGF RE II are holding companies that rent their fixed assets to PGF. Borealis IP holds the intellectual property of the Company. Intercompany balances and transactions have been eliminated in consolidation. Reverse Recapitalization Transaction 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.” 5 Borealis Foods Inc. and Subsidiaries Notes to the Unaudited Condensed Consolidated Financial Statements 1. Description of Business and Summary of Significant Accounting Policies (continued) Going Concern The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. For the three months ended March 31, 2025, the Company has incurred recurring losses from operations and negative cash flows from operating activities. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after May 20, 2025. Management has implemented several strategic and operational initiatives aimed at improving sales and financial performance. For the three months ended March 31, 2025, the Company significantly reduced sales, general, and administrative expenses by 47 % year-over-year, driven by the conclusion of one-time transaction-related costs and a disciplined reduction in discretionary spending. Gross margin, excluding depreciation, a non GAAP measurement, improved to 20 % from 16 % in the prior year period, reflecting a shift toward higher-margin branded and institutional sales. The Company has not raised external capital in the first quarter of 2025 but is actively evaluating financing alternatives, including debt and equity issuances, to support ongoing operations and strengthen the balance sheet. Management is also aligning inventory and production levels with committed demand from stable institutional customers, which is expected to enhance working capital efficiency and cash flow conversion through the remainder of the year. While these measures represent meaningful progress toward operational stability, the Company’s ability to continue as a going concern remains subject to successful execution of its strategic plan and securing additional financing, if needed. Accordingly, substantial doubt remains about the Company’s ability to continue as a going concern within one year from the date these unaudited condensed consolidated financial statements are issued. Basis of Presentation The accompanying unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“ US GAAP ”) and the Company’s functional currency is the U.S. Dollar. We have condensed certain categories of information in our unaudited condensed consolidated financial statements to enhance the readability and understanding of those statements by making them more succinct. As a result, certain footnote disclosures we normally include in our annual consolidated financial statements have been omitted but remain prepared in accordance with US GAAP and the rules and regulations of the SEC. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “ 2024 Annual Report ”). In management’s opinion, we have made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present our unaudited condensed consolidated balance sheets and unaudited condensed consolidated statements of operations, changes in shareholders’ equity (deficit), and cash flows. Our interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. 6 Borealis Foods Inc. and Subsidiaries Notes to the Unaudited Condensed Consolidated Financial Statements 1. Description of Business and Summary of Significant Accounting Policies (continued) Estimates The preparation of the unaudited condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash Equivalents The Company classifies all highly liquid securities with stated maturities of three months or less from the date of purchase as cash equivalents. There were no cash equivalents as of March 31, 2025 and December 31, 2024. Inventories, net Inventories are stated at the lower of cost or net realizable value. The cost of raw materials is determined using the first-in, first-out method. The cost of finished goods is determined using the weighted average cost method. A reserve is recorded for any food inventory that is expired (or expected to expire before sale) and any raw materials for projects that have been discontinued. Prepaid Expenses Prepaid expenses were approximately $ 848,000 and $ 1,135,000 , composed primarily of prepaid insurance, deposits on inventory purchases and property, plant and equipment purchases, as of March 31, 2025 and December 31, 2024, respectively. Property, Plant and Equipment, net Property, plant, and equipment are recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets or, where applicable, based on actual machine hours utilized. Management has opted to depreciate the manufacturing lines and related assets using the machine hours method, as it provides a more accurate reflection of the actual utilization and wear of these assets. This approach ensures that the depreciation expense aligns more closely with the assets’ usage patterns, thereby improving the matching of costs with related revenues. 7 Borealis Foods Inc. and Subsidiaries Notes to the Unaudited Condensed Consolidated Financial Statements 1. Description of Business and Summary of Significant Accounting Policies (continued) Property, Plant and Equipment, net (continued) This change in depreciation method was a change in estimate effected by a change in accounting principle and accordingly was accounted for prospectively in accordance with relevant guidance. The change in the method of calculating depreciation resulted in an increase in net income of $ 605,000 for the three months ended March 31, 2025. Since this adjustment is applied prospectively, it has no impact on the financial results for periods prior to June 30, 2024. The total cost basis of machinery subject to depreciation over machine hours was approximately $ 38,601,000 as of March 31, 2025 and December 31, 2024. Straight-line assets: Buildings and improvements 10 - 30 years Furniture, fixtures and equipment 3 - 15 years Machine hours assets: Furniture, fixtures and equipment 89,232 machine hours Construction in progress includes the cost of property, plant and equipment being constructed or otherwise not yet in service. Costs include materials, labor, capitalized interest, engineering and testing costs, and other costs necessary to get the assets ready for their intended use. Intangible Assets Patents are recorded at cost and are amortized on a straight-line basis over their estimated useful lives. The carrying value of patents is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Loan Costs The costs of obtaining equipment leases and debt issuance costs are amortized over the term of the respective obligations, using the straight-line method. US GAAP requires that the effective yield method be used to amortize debt issuance costs; however, the effect of using the straight-line method is not materially different from the results that would have been obtained under the effective yield method. Amortization of loan costs is included as a component of interest expense in the accompanying unaudited condensed consolidated statements of operations. Loan costs are shown as reduction of related debt balances for financial statement presentation. 8 Borealis Foods Inc. and Subsidiaries Notes to the Unaudited Condensed Consolidated Financial Statements 1. Description of Business and Summary of Significant Accounting Policies (continued) Goodwill The Company’s goodwill resulted from a prior year acquisition. Goodwill is not amortized but is reviewed annually for impairment or more frequently as events or circumstances indicate its carrying amount may not be recoverable. No impairment losses were recorded for the three months ended March 31, 2025 and 2024. Amounts Due to Related Parties Amounts due to related parties (Company shareholders and entities controlled by Company shareholders) totaled $ 16,512,453 as of March 31, 2025 and $ 15,427,453 as of December 31, 2024. This related party liability is comprised of multiple notes payable to a shareholder in the amount of $ 8,025,790 and $ 7,325,790 as of March 31, 2025 and December 31, 2024, respectively, and is due on demand and bears interest at 10 % annually. An additional note payable to a shareholder in the amount of $ 500,000 as of March 31, 2025 and December 31, 2024, bears interest at 10 % annually and is due December 31, 2025. Additional notes payable to a shareholder in the amount of $ 385,000 as of March 31, 2025, bears interest at 10 % annually and are due on demand. The remaining $ 7,601,661 shareholder note payable was a result of expenses recognized by Oxus and resulted in reduction of contributed equity at the Reverse Recapitalization. This note matures in February 2026 after extension and is non-interest bearing. Related parties debt balances outstanding as of March 31, 2025 are due as follows: $ 8,911,000 in 2025 and $ 7,602,000 in 2026. The salary of the Company’s CEO was accrued and not paid during the first quarter. The Company recorded approximately $ 100,000 in accrued payroll expense to reflect compensation for services performed. Impairment of Long-Lived Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. No impairment losses were recorded for three months ended March 31, 2025 and 2024. Revenue and Cost Recognition and Accounts Receivable The Company’s revenue is primarily generated from the sale of food products. These sales contain a single performance obligation. Revenue is recognized at a point in time and the Company recognizes revenue upon shipment of goods when ownership, risk, and rewards transfer to the customer. Certain of the Company’s contracts with customers include variable consideration consisting of payment discounts and promotions. These programs include rebates, temporary on-shelf price reductions, off-invoice discounts, retailer advertisements, product coupons, slotting fees and other trade activities. Provision for discounts and incentives are recorded in the same period in which the related revenues are recognized. Gross revenues were approximately $ 7,225,000 and $ 8,484,000 for the three months ended March 31, 2025 and 2024, respectively. Total payment discounts and promotions were approximately $ 379,000 and $ 589,000 resulting in net revenues of approximately $ 6,846,000 and $ 7,895,000 for the three months ended March 31, 2025 and 2024, respectively. 9 Borealis Foods Inc. and Subsidiaries Notes to the Unaudited Condensed Consolidated Financial Statements 1. Description of Business and Summary of Significant Accounting Policies (continued) Revenue and Cost Recognition and Accounts Receivable (continued) The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. The incremental cost to obtain contracts was not material. Accounts receivable related to product sales typically have payment terms of 30 days. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The allowance for credit losses reflects the Company’s estimate of probable losses related to its accounts receivable. Collections from customers are continuously monitored and an allowance for credit losses is maintained based on historical experience adjusted for current conditions and reasonable forecasts taking into account geographical and industry-specific economic factors. The Company also considers specific customer collection issues. Since the Company’s accounts receivable are largely similar, the Company evaluates its allowance for credit losses as one portfolio segment. At origination, the Company evaluates credit risk based on a variety of credit quality factors including prior payment experience, customer financial information, credit ratings, probabilities of default, industry trends and other internal metrics. On a continuing basis, data for each major customer is regularly reviewed based on past-due status to evaluate the adequacy of the allowance for credit losses; actual write-offs are charged against the allowance. The Company incurred significant production training expenses for the three months ended March 31, 2025 and 2024 totaling approximately $ 201,000 and $ 482,000 , due to PGF adding production capabilities during both periods. Such amounts are recorded in sales, general and administrative costs in the accompanying unaudited condensed consolidated statement of operations as these costs are not directly attributable to finished goods production. The Company’s cost of goods sold represent materials, direct labor costs, and allocated overheads associated with the sale of finished goods to customers. Advertising Costs associated with advertising are expensed as incurred and are included in sales, general and administrative expenses. Advertising costs expensed for the three months ended March 31, 2025 and 2024 were approximately $ 566,000 and $ 1,526,000 , respectively. Research and Development Costs Research and development costs have been expensed in the period incurred. Research and development costs consist primarily of personnel and related expenses for our research and development staff, including salaries, benefits, share-based compensation, scale-up expenses, depreciation and amortization expenses on research and development assets, and facility lease costs. Scale-up expenses include material waste costs, production personnel costs, and related expenses. Research and development efforts are focused on enhancements to our existing product formulations and production processes in addition to the development of new products. The Company expects to continue investing in research and development over time, as research and development and innovation are core elements of our business strategy, and the Company believes they represent a critical competitive advantage. The Company believes continued innovation will capture a larger share of consumers through additional revenue streams. Research and development expenses for the three months ended March 31, 2025 and 2024 were approximately $ 52,000 and $ 37,000 , respectively, and are included in sales, general, and administrative expenses in the accompanying unaudited condensed consolidated statements of operations. 10 Borealis Foods Inc. and Subsidiaries Notes to the Unaudited Condensed Consolidated Financial Statements 1. Description of Business and Summary of Significant Accounting Policies (continued) Business Development Costs Business development expenses include all costs associated with directly growing and expanding a business segment, such as advertising, market research and training. These costs include staff salaries, travel expenses, and consulting expenses that the Company incurs while searching for new opportunities and maintaining current relationships. Business development expenses for the three months ended March 31, 2025 and 2024 were approximately $ 607,000 and $ 759,000 , respectively. Business development expenses are included in sales, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations. In April 2023, the Company entered into a multi-year agreement for a marketing representative to assist in the recipes for three co-branded private label ramen noodles as well to be utilized in marketing of the Company for the marketing representative’s name, image, likeness and voice. This agreement includes a service fee, an investment stake in the Company, and a royalty agreement on future co-branded sales. The service fee under this agreement is expensed on a straight-line basis under the terms of the contract. The marketing representative has a world-wide reputation within the gourmet food industry. We believe this agreement will assist us to increase our presence in the ramen noodle market. Transaction Costs On February 23, 2023, Legacy Borealis entered into a definitive business combination agreement with Oxus, which was consummated on February 7, 2024 and is described further in Note 1. In connection with this agreement, the Company has incurred transaction costs of approximately $ 0 and $ 1,506,000 for the three months ended March 31, 2025 and 2024, respectively. Transaction costs have been expensed as incurred and are included in sales, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations. Concentration of Risk At times the Company maintains cash balances at financial institutions in excess of federally insured limits. The Company has not experienced any losses related to these balances. The Federal Deposit Insurance Corporation insures eligible accounts up to $ 250,000 per depositor at each financial institution. The Company holds cash at well-known banks and does not believe that it is exposed to any significant credit risks on its cash. 11 Borealis Foods Inc. and Subsidiaries Notes to the Unaudited Condensed Consolidated Financial Statements 1. Description of Business and Summary of Significant Accounting Policies (continued) Concentration of Risk (continued) 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 four customers accounted for approximately 60 % and sales to two customers accounted for approximately 58 % of net revenues for March 31, 2025 and 2024, respectively. Accounts receivable from two and three customers amounted to approximately 35 % and 37 % of total accounts receivable as of March 31, 2025 and December 31, 2024, respectively. Substantially all of the Company’s sales for the three months ended March 31, 2025 and 2024 occurred in the United States, Canada, Central America, South America, and Europe. Purchases from 10 vendors accounted for approximately 46 % and 57 % of purchases during the three months ended March 31, 2025 and 2024, respectively. Accounts payable to these vendors totaled approximately $ 2,678,000 and $ 1,880,000 as of March 31, 2025 and 2024, respectively. Fair Value Measurements In accordance with US GAAP, the Company defines fair value as the price that would be received to sell an asset or the price paid to transfer a liability in an orderly transaction between market participants at the measurement date. US GAAP establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available. The hierarchy is condensed into three levels based on the reliability of inputs as follows: Level 1: Observable inputs, such as quoted market prices in active markets for the identical asset or liability that are accessible at the measurement date. Level 2: Inputs, other than quoted market prices included in Level 1, that are observable either directly or indirectly for the asset or liability. Level 3: Unobservable inputs that reflect the entity’s own assumptions about the exit price of the asset or liability. Unobservable inputs may be used if there is little or no market data for the asset or liability at the measurement date. 12 Borealis Foods Inc. and Subsidiaries Notes to the Unaudited Condensed Consolidated Financial Statements 1. Description of Business and Summary of Significant Accounting Policies (continued) Fair Value Measurements (continued) The Company does not have assets measured at fair value on a recurring basis. The following methods and assumptions were used to estimate the fair value of each class of financial instruments: The carrying amounts reported in the unaudited condensed consolidated balance sheets for accounts receivable and accounts payable approximate their fair values due to the short-term nature of these instruments. There is no material difference between the carrying amounts and fair values of the Company’s debt obligations, notes payable, line of credit and convertible notes payable, as interest rates approximate current market rates for similar types of debt instruments (Level 2). Disclosures about the fair value of financial instruments are based on pertinent information available to management as of March 31, 2025 and December 31, 2024. Although management is not aware of any factors that would significantly affect the reasonableness of the fair value amounts, such amounts were not comprehensively revalued for purposes of these unaudited condensed consolidated financial statements and current estimates of fair value may differ significantly from the amounts presented herein. Stock Based Compensation The Company accounts for its stock compensation arrangements at fair value in accordance with Accounting Standards Codification (“ ASC ”) 718 - Compensation - Stock Compensation. Compensation cost relating to share-based payment transactions is recognized in the Company’s unaudited condensed consolidated financial statements based on the estimated fair value of the instruments issued. The Company measures the cost of employees’ services in exchange for stock awards based on the grant-date fair value of the award using the Black Scholes model and recognizes the cost over the period the employee is required to provide services for the award, which is the vesting period. The Company accounts for forfeitures as they occur. Warrants Outstanding warrants were assumed at the Reverse Recapitalization. The fair value of the warrants was determined using the Monte Carlo analysis at the date of the transaction. The Company accounts for its Public and Private warrants as equity-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ ASC 480 ”) and ASC 815, Derivatives and Hedging (“ ASC 815 ”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent year end date while the warrants are outstanding. It was determined at the date of completion of the Reverse Capitalization that there were no changes to the classes or language that would impact the original assessment that the warrants should be classified as equity. 13 Borealis Foods Inc. and Subsidiaries Notes to the Unaudited Condensed Consolidated Financial Statements 1. Description of Business and Summary of Significant Accounting Policies (continued) Shipping and Handling Costs Shipping and handling costs are expensed as incurred and are included in sales, general and administrative expense in the unaudited condensed consolidated statements of operations. Recent Accounting Pronouncements In December 2023, the Financial Accounting Standards Board (“ FASB ”) issued Accounting Standards Update (“ ASU ”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , to enhance transparency into income tax disclosures. The amendments require annual disclosure of certain information relating to the rate reconciliation, income taxes paid by jurisdiction, income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign, income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign. The amendments also eliminate certain requirements relating to unrecognized tax benefits and certain deferred tax disclosure relating to subsidiaries and corporate joint ventures. The ASU is effective for years beginning after December 15, 2024, and interim periods within years beginning after December 15, 2025. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its condensed consolidated financial statements and related disclosures. In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures which requires entities to (i) disclose amounts of (a) purchase of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortization recognized as part of oil-and gas-producing activities, (ii) include certain amounts that are already required to be disclosed under current U.S. GAAP in the same disclosures as other disaggregation requirements, (iii) disclose a qualitative description of the amounts remaining in relevant expense captions that are not necessarily disaggregated quantitatively, and (iv) disclose the total amount of selling expenses, in annual reporting periods, an entity’s definition of selling expense. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating ASU 2024-03 to determine the impact it may have on its condensed consolidated financial statements. 2. Inventories, net Inventories were as follows: March 31, 2025 December 31, 2024 Raw materials $ 6,101,780 $ 6,712,529 Finished goods 2,415,373 2,225,813 Reserve for obsolete inventory ( 765,759 ) ( 892,083 ) $ 7,751,394 $ 8,046,259 14 Borealis Foods Inc. and Subsidiaries Notes to the Unaudited Condensed Consolidated Financial Statements 3. Property, Plant and Equipment, net Property, plant and equipment were as follows: March 31, 2025 December 31, 2024 Building and improvements $ 10,110,188 $ 10,110,188 Furniture, fixtures and equipment 48,512,919 48,517,228 Construction in progress 899,758 879,220 59,522,865 59,506,636 Less: accumulated depreciation ( 14,250,865 ) ( 13,770,310 ) $ 45,272,000 $ 45,736,326 Depreciation and amortization expense recorded in the three months ended March 31, 2025 and 2024 was approximately $ 481,000 and $ 994,000 , respectively, which is included as a component of cost of goods sold. 4. Debt In 2022, the Company issued $ 20,000,000 of convertible notes payable that, after an extension was negotiated, had a stated maturity of February 2024 (unless converted) and bore interest at 10 % annually. On or before the earlier of the maturity date or a “qualified financing event”, as defined in the note agreements, the outstanding principal and interest were convertible, at the option of the holder, into common shares of the Company. The notes and accrued interest were converted into 2,189,997 common shares with the consummation of the Reverse Recapitalization with Oxus. In 2022, the Company issued $ 4,800,000 in convertible notes payable. During 2023, $ 4,500,000 of the notes matured without conversion and were repaid by the Company. The remaining $ 300,000 of convertible notes payable bore interest at 10 % annually and, after an extension was negotiated, had a state maturity of February 2024 (unless converted). The outstanding principal and interest under the remaining convertible notes were convertible, at the option of the holder, into the same equity as issued upon the Company’s issuance of preferred or common shares of at least $ 10,000,000 . The notes and accrued interest thereon were converted into 40,544 common shares with the consummation of the Reverse Recapitalization with Oxus. In 2023, the Company issued $ 27,000,000 of convertible notes payable, of which $ 27,000,000 had a maturity date in 2024 (unless converted) and bore interest at 10 % annually. On or before the earlier of the maturity date or a “qualified financing event”, as defined in the note agreements, the outstanding principal and interest were convertible, at the option of the holder, into common shares of the Company. The notes and accrued interest were converted into 3,787,585 common shares in connection with the consummation of the Reverse Recapitalization with Oxus. 15 Borealis Foods Inc. and Subsidiaries Notes to the Unaudited Condensed Consolidated Financial Statements 4. Debt (continued) In 2021, the Company issued a $ 3,000,000 convertible note that matures in 2026 (unless converted) and bears interest at 3 % annually. Accrued interest is payable monthly. The outstanding principal and interest under the convertible note may be converted, at the option of the holder, into the same equity as issued upon the Company’s issuance of preferred or common shares of at least $ 10,000,000 (a “qualified financing event”), either as a single round or a lead round, at 85 % of the per share price paid during the qualified financing event. The note holder elected not to convert at the Reverse Recapitalization and therefore the note is due at maturity. In January 2024, the Company issued a $ 3,000,000 convertible note payable that had a maturity date in 2024 (unless converted) and bore interest at 10 % annually. The note was converted into 375,925 common shares with the consummation of the Reverse Recapitalization with Oxus. During 2023, the Company entered into a $ 25,000,000 financing agreement with a maturity date in August 2026. Under this agreement, the Company has a $ 15,000,000 term facility which was used to pay off its then existing line of credit. In March 2024, the Company entered into an amendment that extended the date of the first principal payment to March 2025. In February 2025, a second amendment was executed that extended the first principal payment date to September 2025. Under the amendment, payments of $ 83,000 are due monthly beginning in September 2025 with a lump sum payment of $ 14,083,000 due at maturity. Interest accrues at the prime rate plus an applicable margin of 4.75 % per annum and is payable monthly. The financing agreement is secured by a collateral package that includes substantially all of the assets of PGF, PGF RE I, and PGF RE II. Amortization expense of approximately $ 76,000 and $ 77,000 was recorded on the capitalized loan fees for the three months ended March 31, 2025 and 2024, respectively. In addition to the term facility, the Company obtained a $ 10,000,000 line of credit to fund working capital needs in support of its growth strategy. Interest accrues at the prime rate plus the applicable margin of 4.50 %. Interest is due and payable monthly beginning in September 2023. The line of credit includes an unused line fee of 0.25 % per annum beginning on closing date through six months and increases to 0.50 % per annum thereafter. As of March 31, 2025 and December 31, 2024 the line of credit had $ 7,600,000 drawn upon it. 16 Borealis Foods Inc. and Subsidiaries Notes to the Unaudited Condensed Consolidated Financial Statements 4. Debt (continued) In the period leading up to the Reverse Recapitalization, significant transaction costs were incurred by both parties. In total, three notes payable of $ 5,433,713 were issued for the transaction debt. Details for the notes are as follows: Note 1 – Incurred by Borealis. The related expenses were recognized as incurred by Borealis and the trade payable was subsequently reclassified to notes payable. Note 1 was issued in the original principal amount of $ 2,138,838 . The note has been extended with a maturity date in July 2025 , and bears interest at 10 % per annum. Note 2 – Incurred by Borealis. The related expenses were recognized as incurred by Borealis and the trade payable was subsequently reclassified to notes payable. Note 2 was issued in the original principal amount of $ 1,314,875 . The note has been extended with a maturity date in July 2025 , and bears interest at 10 % per annum. Note 3 – Incurred by Oxus. The related expenses were recognized by Oxus and resulted in a reduction of contributed equity at the Reverse Recapitalization. Note 3 was issued in the original principal amount of $ 1,980,000 . The note has been extended with a maturity date in June 2025 , and bears interest at 8 % per annum. Debt balances outstanding as of March 31, 2025 are due as follows: $ 5,767,000 in 2025 and $ 25,267,000 in 2026; $ 0 in 2027; and $ 0 in 2028. 5. Income Taxes The Company accounts for income taxes using the liability method. Deferred income tax assets and liabilities are determined based on differences between the financial statement and income tax basis of the respective assets and liabilities, using enacted tax rates in effect for the years when the differences are expected to reverse. Borealis is taxed under Canadian tax laws at a rate of 26.5 %. Borealis does not file a consolidated tax return. PGF, PGF RE I, and PGF RE II (the “ United States subsidiaries ”) are taxed as C corporations, with a statutory rate of 21 %. The total income tax provision (benefit) expense recorded for the three months ended March 31, 2025 and 2024 was $ 0 , respectively, on a consolidated pre-tax book loss of approximately $ 4,188,000 and $ 8,432,000 in the three months ended March 31, 2025 and 2024, respectively. The Company’s tax provision is based on a projected effective rate based on annualized amounts applied to actual income to date. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of capital loss and net operating loss (“ NOL ”) carryforwards is dependent upon the generation of future capital gains and taxable income in periods prior to their expiration. The Company currently provides a valuation allowance against the full amount of the NOLs since the Company is uncertain as to the realization of the full amount of benefits in the future. The Company will continue to assess the need for, and the amount of, the valuation allowance at each reporting period. 17 Borealis Foods Inc. and Subsidiaries Notes to the Unaudited Condensed Consolidated Financial Statements 5. Income Taxes (continued) Transactions for which tax deductibility or the timing of tax deductibility is uncertain are analyzed by management based on their technical characteristics. The Company recognizes accrued interest and penalties, if any, related to uncertain tax positions in income tax expense. Management has determined that the Company does not have any uncertain tax positions or associated unrecognized tax benefits that materially impact the unaudited condensed consolidated financial statements or related disclosures. As a result, at March 31, 2025, and 2024, the Company did not have a liability for unrecognized tax benefits, interest or penalties under United States or Canadian tax law. The Company paid no penalties during the three month period ending March 31, 2025. The Company files income tax returns in the Canadian and U.S. federal jurisdictions, and in South Carolina. The Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2021. There are no tax examinations currently in progress. 6. Contingencies From time to time, the Company is involved in legal proceedings in the normal course of business. Management does not believe that the final resolution of any such legal proceedings will have a material effect on the consolidated financial position or results of operations of the Company. 7. Warrants The following represents a summary of warrants outstanding and exercisable as of March 31, 2025 and December 31, 2024: Description Issue Date Classification Exercise Price Expiration Date Outstanding Shares Exercisable Shares Private Placement Warrants 9/13/21 Equity $ 11.50 2/7/29 9,300,000 9,300,000 Public Warrants 9/13/21 Equity $ 11.50 2/7/29 17,250,000 17,250,000 26,550,000 26,550,000 Following the closing of the Reverse Recapitalization, Borealis 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 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 due to the expiration of the transfer of the private placement warrants 30 days after the completion of the Reverse Recapitalization. 18 Borealis Foods Inc. and Subsidiaries Notes to the Unaudited Condensed Consolidated Financial Statements 8. Stock Option Plan During 2022, the Company created a stock option plan (the “ Plan ”) that provides for the granting of options to certain employees for the purchase of the Company’s common shares. The Plan provides for the grant of stock options for eligible employees as determined by the Board of Directors and does not guarantee employment rights. During the three months ended March 31, 2025 and 2024, the Company granted options to purchase 0 and 333,574 shares, respectively, of the Company’s common shares at an exercise price of $ 0.0001 per share. The weighted-average grant date fair values of options granted was $ 0.60 per share. The fair values of the stock-based awards granted were calculated with the following assumptions: Risk-free interest rate 3.81 % Expected term (years) 5 - 10 Expected volatility 80.00 % Dividend yield 0.00 % For the three months ended March 31, 2025 and 2024, the Company recorded approximately $ 0 and $ 1,273,000 , respectively, of stock-based compensation expense under this plan. On February 7, 2024, as a result of the Reverse Recapitalization (Note 1), 4,000,000 stock options were exercised and converted at an exchange ratio of 0.0661 into 264,400 shares of common stock. This stock option plan was closed upon the business combination and a new equity incentive plan was approved and implemented as of February 7, 2024. Stock option activity for the three months ended March 31, 2024 is summarized as follows: Shares Weighted Average Exercise Price Weighted Remaining Contractual Life(Years) Options outstanding at December 31, 2023 3,666,426 0.0001 8.10 Granted 333,574 0.0001 8.10 Exercised ( 4,000,000 ) 0.0001 — Expired or forfeited — — — Options outstanding at March 31, 2024 — — — For the three months ended March 31, 2025, the Company issued 16,916 restricted stock units under the new equity incentive plan, that vest over a three-to-six-month period. The Company recognized approximately $ 58,000 of stock compensation related to such restricted stock units and 2,962 of such units were exercised during the three months ended March 31, 2025. 19 Borealis Foods Inc. and Subsidiaries Notes to the Unaudited Condensed Consolidated Financial Statements 9. Earnings per share Basic earnings or loss per share is based on the weighted average number of common shares outstanding for the period. For the purposes of calculating diluted earnings per share, the number of shares outstanding has been adjusted for the dilutive effects of warrants. Basic (loss) per share calculation For Three Months Ended March 31, 2025 March 31, 2024 Net (loss) available to common shareholders $ ( 4,187,588 ) $ ( 8,431,622 ) Weighted average common shares outstanding (basic) 21,379,347 17,079,576 Basis (loss) per share from net loss $ ( 0.20 ) $ ( 0.49 ) Diluted (loss) per share calculation Net (loss) available to common shareholders $ ( 4,187,588 ) $ ( 8,431,622 ) Weighted average common shares outstanding (basic) 21,379,347 17,079,576 Warrants — — Weighted average common shares outstanding (diluted) 21,379,347 17,079,576 Diluted (loss) per share from net loss * $ ( 0.20 ) $ ( 0.49 ) * In periods where the Company has incurred a net loss, diluted earnings per share is based on the number of common shares issued and outstanding as including the effects of warrants would be anti-dilutive. 10. Segment Reporting The Company has a single reportable segment focused around the sale of similar products. This reportable segment derives revenues from the manufacture and sale of high quality, affordable and nutritious ready to eat meals. The Company’s chief operating decision-maker (the “ CODM ”), who is the chief executive officer, assesses performance for the reportable segment and decides how to allocate resources using net income (loss) as the primary measure of profitability. The CODM is not regularly provided with specific segment expenses, but focuses on revenue, gross profit, and net income (loss). Expense information, including cost of sales can be easily computed from the provided information. These segment (and consolidated) measures of profitability are shown in the unaudited condensed consolidated statements of operations. The measure of segment assets is reported on the consolidated balance sheets as total assets. 11. Subsequent Events The Company evaluated events and transactions after March 31, 2025 through May 20, 2025, the date the unaudited condensed consolidated financial statements were issued, for subsequent events requiring disclosure in these unaudited condensed consolidated financial statements. Subsequent to March 31, 2025, the Chairman and Chief Executive Officer advanced funds to the Company in the amounts of $ 1,500,000 and $ 200,000 , respectively. In addition, the Chief Executive Officer deferred approximately $ 69,000 in compensation through May 20, 2025. 20 ITEM 2. 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 interim unaudited condensed consolidated financial statements and the related notes thereto included in Part I, Item 1 of this Quarterly Report, and our audited consolidated financial statements and related notes in our Annual Report filed on Form 10-K for the year ended December 31, 2024 (“ Annual Report ”) filed with the Securities and Exchange Commission (“ SEC ”) on April 15, 2025. The following discussion and analysis may contain 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 the Annual Report. Overview 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 2025, 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. 21 The Reverse Recapitalization (continued) 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 2 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. Ltd. The term “New Borealis” refers to Borealis Foods Inc. after the consummation of the Business Combination. 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’ unaudited condensed consolidated financial statements were prepared in accordance with U.S. GAAP. See Note 1 to our unaudited condensed consolidated financial statements for a full description of our basis of presentation. 22 Results of Operations The following sets forth a summary of our results of operations for the presented months ($ in thousands): Comparison of the Three Months Ended March 31, 2025 and 2024 2025 (Unaudited) 2024 (Unaudited) 2025 vs 2024 Variance $ % of Revenues, net $ % of Revenues, net $ % of Prior Period Revenues Gross sales $ 7,225 $ 8,484 $ (1,259 ) Sales discounts & allowances (379 ) (6 )% (589 ) (7 )% 210 1 % Revenue, net 6,846 7,895 (1,049 ) Cost of goods sold 5,465 80 % 6,648 84 % (1,183 ) (4 )% Depreciation 481 7 % 1,005 13 % (524 ) (6 )% Total cost of goods sold 5,946 87 % 7,653 97 % (1,707 ) (10 )% Gross profit (loss) 900 13 % 242 3 % 658 10 % Sales & marketing 566 8 % 1,526 19 % (960 ) (11 )% Business development 607 9 % 759 10 % (152 ) (1 )% Training 201 3 % 482 6 % (280 ) (3 )% General & administrative expenses 2,442 36 % 4,449 56 % (2,007 ) (20 )% Total sales, general & administrative expenses 3,817 56 % 7,216 91 % (3,399 ) (35 )% Loss from operations (2,917 ) (43 )% (6,974 ) (88 )% 4,057 45 % Total other expense (1,270 ) (19 )% (1,459 ) (18 )% 189 (1 )% Loss before income taxes (4,187 ) (61 )% (8,433 ) (107 )% 4,246 46 % Income tax benefit 0 % 0 % 0 % Net loss $ (4,187 ) (61 )% $ (8,433 ) (107 )% $ 4,246 46 % Other financial Data: Adjusted EBITDA $ (557 ) (8 )% $ (387 ) (5 )% $ (170 ) (3 )% Adjusted EBITDA is a non-GAAP financial metric. See “How we Evaluate Our Operations” below for an explanation of the terms EBITDA and Adjusted EBITDA and a reconciliation of net income to EBITDA and Adjusted EBITDA for each applicable period. Revenue and Customer Trends For the quarter ended March 31, 2025, the Company reported net revenue was $6.8 million, representing a 14% decline from $7.9 million in the prior year period. This decline reflects the ongoing impact of SKU rationalization efforts and the strategic pullback from low-margin mass retail accounts initiated in 2024. 23 Revenue and Customer Trends (continued) Despite lower top-line revenue, gross profit improved significantly to $0.9 million compared to $0.2 million in the first quarter of 2024, driven by stronger product and customer mix and improved cost controls. Gross margin, excluding depreciation, a non-GAAP measurement, improved to 20% in the first quarter of 2025 (calculated as $0.9 million + $0.48 million / $6.85 million), compared to 16% in the prior-year quarter, illustrating the successful pivot to higher-margin branded products and institutional accounts. The Company continued to diversify its customer base in the first quarter of 2025. ● Revenue concentration from a previously dominant retail partner was reduced substantially. ● A major institutional customer became a significant contributor, generating $2.0 million in its first full quarter. ● Two additional institutional clients expanded their volume, contributing $1.95 million and $0.30 million, respectively. ● A prominent global brand was launched as a new customer, representing early traction in the premium retail segment. These results reflect the Company’s strategic focus on food service and institutional markets, which provide improved pricing power and margin stability. Product Mix and Margin Enhancement The Chef Woo High Protein Ramen brand continued to lead the Company’s branded portfolio, generating $1.66 million in the first quarter of 2025, accounting for approximately 24% of total sales. While this was down from its peak in the third quarter of 2024, Chef Woo remains central to the Company’s growth strategy. Ramen Express Flats, which had previously been a Walmart-focused product, demonstrated strong growth to $1.96 million, reflecting renewed demand in institutional channels. The continued shift toward Chef Woo, Gordon Ramsay Cups, and food service SKUs has allowed the Company to sustain margin improvements. Key drivers of margin expansion in the quarter included: ● An increase in institutional and branded sales mix ● Elimination of discount - driven mass retail exposure ● Lower freight and promotional costs relative to prior quarters Gross margin excluding depreciation (net gross margin, a non-GAAP measure) was 20% in the first quarter of 2025, compared to 16% in the first quarter of 2024, reflecting operational discipline and improved leverage on fixed production costs. Operating Expenses and SG&A Trends Total SG&A expenses declined 47% year-over-year to $3.82 million in the first quarter of 2025. This reduction reflects the conclusion of non-recurring professional fees and scaled-back marketing expenditures. ● Completion of non-recurring professional services ● Lower marketing and promotional spending ● Reduced training costs, which fell to $0.2 million as institutional customers onboarding processes became more efficient 24 Operating Expenses and SG&A Trends (continued) Adjusted EBITDA non-GAAP measure decreased slightly to $(0.6) million from $(0.4) million in the first quarter of 2024, a negative $0.2 million. This decrease is attributed to management’s cost reduction strategy within sales, marketing, and general and administrative costs. Liquidity and Capital Resources As of March 31, 2025, liquidity constraints continued to pose challenges, but operating improvements have begun to stabilize working capital requirements. Reduced SG&A expenditures, narrowing losses, and a more favorable product mix are expected to support improving cash conversion. The Company did not raise external capital in the first quarter of 2025. The Chairman and Chief Executive Officer advanced funds to the Company in the amounts of $700,000 and $385,000, respectively, in the three months ended March 31, 2025. If we cannot obtain adequate additional financing, among other things, we may have to substantially curtail or limit our research, marketing, production or distribution activities, sell assets of the Company or seek protection from creditors under bankruptcy laws, which could materially and adversely affect our business plan. The Company remains focused on cash preservation. Inventory levels are being managed conservatively to align with committed demand from large institutional accounts. With increased contribution from high-volume, predictable food service channels, management anticipates improved cash flows and working capital efficiency through the remainder of 2025. Cash Flows The following table sets forth our cash flows for the periods indicated ($ in thousands): Three Months Ended March 31, 2025 2024 Net cash (used in) provided by: Operating Activities $ (1,373 ) $ (6,769 ) Investing Activities (26 ) (487 ) Financing Activities 938 7,852 Operating Activities Net cash used in operating activities for the three months ended March 31, 2025 was $1.37 million, primarily driven by the net loss of $4.19 million, adjusted for non-cash charges of $0.48 million for depreciation and amortization, and $0.06 million for stock-based compensation. This represents an improvement from the $6.77 million used in the same period of 2024, as Borealis benefited from enhanced gross profit due to the performance of high-margin products like Chef Woo and Woodles, which partially offset operational expenses. 25 Investing Activities Net cash used in investing activities was $0.03 million for the three months ended March 31, 2025, primarily attributable to purchases of property and equipment to support production scale and efficiency improvements. This decrease from $0.49 million in 2024 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 three months ended March 31, 2025, was $0.94 million, financing was driven by advances from related parties. In comparison, net cash provided by financing activities in the three months ended, was $7.85 million, and largely attributable to borrowings on the line of credit and proceeds from convertible debt. The financing activities in 2025 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 year 2025, particularly to support our expansion into the premium retail segment with a prominent global brand. As of March 31, 2025, we had cash-on-hand of $0.19 million and negative working capital of $25.30 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 unaudited condensed 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 May 20, 2025. 26 Going Concern (continued) Management has implemented several strategic and operational initiatives aimed at improving liquidity and financial performance. For the three months ended March 31, 2025, the Company significantly reduced sales, general, and administrative expenses by 47% year-over-year, driven by the conclusion of one-time transaction-related costs and a disciplined reduction in discretionary spending. Gross margin, excluding depreciation, a non-GAAP measurement, improved to 20% from 16% in the prior year period, reflecting a shift toward higher-margin branded and institutional sales. The Company has not raised external capital in the first quarter of 2025 but is actively evaluating financing alternatives, including debt and equity issuances, to support ongoing operations and strengthen the balance sheet. Management is also aligning inventory and production levels with committed demand from stable institutional customers, which is expected to enhance working capital efficiency and cash flow conversion through the remainder of the year. 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. Contractual Obligations and Commitments The following table summarizes our non-cancellable contractual obligations and other commitments as of March 31, 2025, 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 4-5 years More than 5 years Contractual obligations and other commitments * $ 61,763 $ 35,869 $ 25,894 $ — $ — (*) 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 As of March 31, 2025 and December 31, 2024, we did not engage in any off-balance sheet arrangements, including the use of structured finance, special purpose entities, or variable interest entities. 27 Warrants The following represents a summary of warrants outstanding and exercisable on March 31, 2025 and December 31, 2024: Description Issue Date Classification Exercise Price Expiration Date Outstanding Shares Exercisable Shares Private Placement Warrants 9/13/21 Equity $ 11.50 2/7/29 9,300,000 9,300,000 Public Warrants 9/13/21 Equity $ 11.50 2/7/29 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 due to the expiration on the transfer of, the private placement warrants 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 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. 28 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 the Company’s 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. 29 Adjusted EBITDA (continued) For the three months ended March 31, 2025, “Adjusted EBITDA,” a non-GAAP measure, is defined as net income attributable to us before (1) depreciation and amortization, of $0.5 million, (2) interest expense, of $1.3 million, (3) new product launch of $0.6 million, (4) training, of $0.2 million, (5) deferred stock compensation $0.1 million, (6) business transaction costs, of $0.5 million, and (7) business development and other extraordinary charges, of $0.6 million. 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 U.S. GAAP. For the three months ended March 31, 2024, “Adjusted EBITDA,” a non-GAAP measure, is defined as net income attributable to us before (1) income taxes, (2) interest expense, of $1.5 million, (3) depreciation and amortization, of $1.0 million, (4) other non-operating items, net, of $1.5 million, (5) training, of $0.5 million, (6) deferred stock compensation, of $1.3 million ( 7) M&A due diligence costs, of $1.5 million, (8) new product launch of $0.8 million. 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 U.S. GAAP. 30 Recent Accounting Pronouncements See Note 1 to Borealis Foods’ unaudited condensed consolidated financial statements included elsewhere in this Quarterly 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. Item 3. 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 four customers accounted for approximately 60% and sales to two customers accounted for approximately 58% of net revenues for the three months ended March 31, 2025 and 2024, respectively. Accounts receivable from two and three customers amounted to approximately 35% and 37% of total accounts receivable as of March 31, 2025 and December 31, 2024, respectively. Substantially all of the Company’s sales for the three months ended March 31, 2025 and 2024 occurred in the United States, Canada, Central America, South America, and Europe. Purchases from 10 vendors accounted for approximately 46% and 57% of purchases during the three months ended March 31, 2025 and 2024, respectively. Accounts payable to these vendors totaled approximately $2,678,000 and $1,880,000 as of March 31, 2025 and 2024, respectively. 31 Foreign Currency Risk Our customers are primarily located in the United States, Central America, South America, Europe, and Canada; therefore, foreign exchange risk exposures arise from transactions denominated in currencies other than our functional and reporting currency (U.S. dollars). 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 unaudited condensed 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. 32 Item 4. Controls and Procedures Limitations on Effectiveness of Controls and Procedures In designing and evaluating our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Evaluation of Disclosure Controls and Procedures Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our unaudited condensed consolidated financial statements for external purposes in accordance with U.S. GAAP. Internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error or overriding of controls. Because of the inherent limitations, only reasonable assurance with respect to financial statement preparation and presentation can be provided and misstatements may not be prevented or detected. Management evaluated the design and effectiveness of the Company’s internal control over financial reporting as of March 31, 2025 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control Integrated Framework 2013. Based on its evaluation, management concluded that our internal control over financial reporting was not effective as of March 31, 2025 due to material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. Consistent with December 31, 2024, the Company did not effectively design, implement and operate effective process-level control activities related to inventory management. 33 Evaluation of Disclosure Controls and Procedures (continued) As a result of these deficiencies, material misstatements were identified and corrected in the consolidated financial statements as of and for the year ended December 31, 2024. Because there is a reasonable possibility that material misstatements of the consolidated financial statements will not be prevented or detected on a timely basis, we concluded the deficiencies represent material weaknesses in our internal control over financial reporting and our internal controls over financial reporting was not effective as of March 31, 2025. However, we have been in the process of remediating the internal control integrated framework in order to address this weakness. Our Chief Executive Officer and Chief Financial Officer have taken additional steps to support that the unaudited condensed consolidated financial statements as of and for the three-month period ended March 31, 2025 are presented fairly in accordance with U.S. GAAP. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting (as such term is defined in Exchange Act Rule 13a–15(f) and 15d-15(f)) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Remediation Plan Subsequent to the year ended December 31, 2024, and under the direction of our Chief Executive Officer and Chief Financial Officer, we have been developing and implementing a comprehensive plan to remediate the identified material weaknesses. We began implementing certain measures as part of the remediation plan including: (i) development of a detailed plan addressing the material weaknesses related to the control environment, risk assessment and monitoring, (ii) institution of policies and processes to support the functioning of internal controls over financial reporting, (iii) design and implementation of a comprehensive risk assessment process, (iv) installation of new ERP system (v) hiring/outsourcing of individuals with appropriate skills and experience. The material weaknesses being addressed by the above-mentioned remediation plan will not be considered remediated until the applicable controls operate for a sufficient period of time, and management concludes, through testing, that these controls are operating effectively. This has not occurred to date. Although we have commenced the remediation process and intend to complete it as promptly as possible, we cannot estimate how long it will take to remediate these material weaknesses. In addition, new material weaknesses may be discovered that require additional time and resources to remediate. Until the remediation is complete, we plan to continue to perform additional analyses and other procedures to ensure that our unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP. 34 PART II – OTHER INFORMATION Item 1. Legal Proceedings We are not currently a party to any litigation or claims that, if determined adversely against us, would have a material adverse effect on our business operating results, financial condition, or cash flows. We may, from time to time, be party to litigation and subject to claims in the ordinary course of business. Regardless of the outcome, litigation can have an adverse impact on us because of the defense and settlement costs, diversion of management resources, and other factors. Item 1A. Risk Factors Our risk factors are disclosed in Part I, Item 1A of our Annual Report on Form 10-K, filed with the SEC on April 15, 2025. There have been no material changes during the three months ended March 31, 2025 from or updates to the risk factors discussed in Part I, Item 1A, Risk Factors, of our Annual Report, except as set forth below. The risk factor titled “ Our potential insolvency, inability to pay our debt or bankruptcy would have a material adverse effect on our business, financial condition, results of operations, cash flow, cash available for distribution as well as our ability to service our debt obligations, and could result in our inability to continue as a going concern” is amended and restated as follows: Our potential insolvency, inability to pay our debt or bankruptcy would have a material adverse effect on our business, financial condition, results of operations, cash flow, cash available for distribution as well as our ability to service our debt obligations, and could result in our inability to continue as a going concern. If we were to default on our debt obligations, it would likely cause a significant or complete reduction in the operating cash flow generated by our product sales. As of the three months ended March 31, 2025 the amount we owe on outstanding Notes exceed the amount of cash on hand and consequently, unless we are able to raise funds to pay off the Notes, generate sufficient cash to pay off the Notes or extend and amend the maturity dates the Company is at substantial risk that the noteholders could assert rights against the Company. There can be no assurance that we would be able to avoid insolvency or to make timely payments on our debt or payments to our suppliers. If we were to default, we may incur substantial costs, that could have a severe adverse effect on our business, financial condition, results of operations and cash flow, and we might take actions to respond to any default including the curtailment or reduction in operations, the sale of assets of the Company, or seeking protection from creditors under bankruptcy or insolvency laws. The risk factor titled “ We have a limited operating history which makes it difficult to evaluate our business and prospects ” is amended and restated as follows: We have a limited operating history which makes it difficult to evaluate our business and prospects. We have a limited operating history, which makes it difficult to evaluate our business and prospects to forecast our future results. We were founded in 2019. Although we have experienced substantial revenue growth on an annual basis, we have incurred losses since inception. As of March 31, 2025, we had cash-on-hand of $0.19 million and a negative working capital of $25.30 million USD. 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. There can be no assurance that revenue growth will continue in the future. In addition, we may experience substantial fluctuations in operating results in the future caused by various factors, including: ● general economic conditions; ● specific economic conditions in the food and agriculture industry; ● the impact of inflation and rising interest rates across the economy, including higher food, grocery, raw materials, transportation, energy, labor and fuel costs; ● increases in the price of raw materials, labor, wages or other inputs that our suppliers use in manufacturing and supplying products, along with logistics, transportation, shipping and other related costs, may lead to higher production and shipping costs for our products. Any increase in the cost of inputs to our production could lead to higher costs for products in retail channels and could negatively impact our operating results and future profitability; ● the introduction of new products by us or our competitors; and ● the mix of products sold and the mix of channels through which those products are sold. 35 As a strategic response to a changing competitive environment, we may elect from time to time to make, among other things, certain pricing, product, or marketing decisions, and any such decisions could have a material adverse effect on our periodic results of operations, including revenue and profits from quarter to quarter. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds We did not sell any equity securities during the period covered by this Quarterly Report that were not registered under the Securities Act. We did not purchase any common shares during the period covered by this Quarterly Report under the Borealis stock buyback program as previously reported by Borealis in its Current Report on Form 8-K filed with the SEC on June 6, 2024. Item 3. Defaults Upon Senior Securities None. Item 4. Mine Safety Disclosures Not Applicable. Item 5. Other Information None . 36 Item 6. Exhibits Exhibit Number Description 4.1 Form of Promissory Note (incorporated by reference to Exhibit 10.1 to Borealis Foods, Inc. Form 8-K, filed with the SEC on May 20, 2025). 31.1* Certification of Principal Executive Officer Pursuant to Rules 13A-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Principal Financial Officer Pursuant to Rules 13A-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1** Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2** Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS Inline XBRL Instance Document. 101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Filed herewith. ** Furnished herewith. 37 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: May 20, 2025 By: /s/ Reza Soltanzadeh Reza Soltanzadeh Chief Executive Officer & Director Date: May 20, 2025 -and- By: /s/ Stephen Wegrzyn Stephen Wegrzyn Chief Financial Officer 38