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Item 1. Financial Statements

2025-05-20 compared with 2024-11-14 · 658 added, 401 removed, 195 unchanged (84% of the section changed)

2 unchanged sentences

and Subsidiaries

Condensed Consolidated Balance Sheets

September 30,

2024 December 31, 2023

Unaudited Condensed Consolidated Balance Sheets

Current Assets

Cash $ 721,542 $ 7,615,630

Accounts receivable, net of allowance for credit losses of $ 320,650 as of September 30, 2024 and $ 224,433 as of December 31, 2023

2,907,790 1,775,756

Accounts receivable, net of allowance for credit losses of $ 200,000 and $ 247,653 as of March 31, 2025 and December 31, 2024, respectively

Inventories, net

8,750,399 6,945,028

Prepaid expenses

1,048,029 845,878

Prepaid expenses and other current assets

Total current assets

13,427,760 17,182,292

Property, plant and equipment, net

46,066,397 46,408,540

Intangible assets

Right - of-use asset, net

1,917,356 1,917,356

Other non-current assets

169,685 169,685

$ 61,911,526 $ 65,786,342

Liabilities and Shareholders' equity (deficit)

Liabilities and Shareholders' (deficit)

Current liabilities:

Accounts payable and accrued expenses

$ 8,596,330 $ 10,887,730

Due to related parties

Convertible notes payable, current portion

Notes payable, current portion, net of capitalized loan costs

5,706,934 681,121

Operating lease payable, current portion

Finance leases payable, current portion

550,212 565,353

Total current liabilities

Due to related parties, net of current portion

Line of credit

1 unchanged sentence

Notes payable, net of current portion

14,149,885 13,509,189

Operating lease payable, net of current portion

Finance leases payable, net of current portion

1,283,129 1,683,308

Deferred tax liability

1,566,233 1,566,233

Total liabilities

56,841,745 87,133,637

Shareholders' equity (deficit)

Shareholders' (deficit)

Common shares, no par value

Additional paid-in capital

90,096,688 44,118,081

Accumulated deficit

Total shareholders' equity (deficit) 5,069,781 ( 21,347,295 )

Total liabilities and shareholders' equity (deficit)

( 94,980,162 )

See accompanying notes to the unaudited condensed consolidated financial statements.

( 90,792,574 )

Total shareholders' (deficit)

( 4,825,308 )

Total liabilities and shareholders' (deficit)

See accompanying notes to the unaudited condensed

consolidated financial statements.

Borealis Foods, Inc.

and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

For the Three Months Ended For the Nine Months Ended

September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Gross sales $ 8,075,788 $ 8,264,745 $ 22,036,285 $ 23,870,009

Unaudited Condensed Consolidated Statements

of Operations

For Three Months Ended March 31,

Sales discounts & allowances

Revenue, net 7,687,899 7,725,353 20,908,612 22,527,210

Cost of goods sold

Depreciation 461,540 996,625 1,861,351 2,938,098

Depreciation and amortization

Total cost of goods sold

Gross profit (loss) 1,273,270 ( 476,799 ) 1,938,166 ( 1,860,357 )

Sales & marketing 1,123,460 312,289 5,073,810 1,677,316

Business development 1,306,589 196,243 2,475,764 435,015

Training 477,752 651,500 1,364,149 2,130,207

General & administrative expenses 1,986,517 2,786,155 8,807,852 9,332,345

Total sales, general & administrative expenses

Loss from operations

Other income expense

Other income (expense) ( 2,765 ) 4,298 3,368 163,588

Interest expense ( 1,207,524 ) ( 2,166,413 ) ( 3,766,542 ) ( 5,535,932 )

( 2,917,118 )

( 6,973,015 )

Other (expense):

Loss on foreign exchange rates

Interest expense, net

( 1,259,423 )

( 1,458,607 )

Total other expense

( 1,270,470 )

( 1,458,607 )

Loss before income taxes

Income tax expense ( 832 ) — ( 14,948 ) ( 15,092 )

Net loss $ ( 4,832,169 ) $ ( 6,585,101 ) $ ( 19,561,531 ) $ ( 20,822,676 )

Earnings per share from net loss

Basic $ ( 0.23 ) $ ( 0.61 ) $ ( 0.98 ) $ ( 1.94 )

Diluted $ ( 0.23 ) $ ( 0.61 ) $ ( 0.98 ) $ ( 1.94 )

( 4,187,588 )

( 8,431,622 )

( 4,187,588 )

( 8,431,622 )

Loss per share from net loss

Weighted average shares outstanding

Basic 21,378,890 10,731,583 19,951,016 10,731,583

Diluted 21,378,890 10,731,583 19,951,016 10,731,583

See accompanying notes to the unaudited condensed consolidated financial statements.

See accompanying notes to the unaudited condensed

consolidated financial statements.

Borealis Foods, Inc.

and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Unaudited)

Three and Nine Months Ended September 30, 2023

Class A Common Shares Class B Common Shares Class C Common Shares Additional Paid-In Capital Accumulated Deficit Total Shareholders’ Deficit

Number of Shares Common Shares Number of Shares Common Shares Number of Shares Common Shares

Unaudited Condensed Consolidated

Statements of Changes in Shareholders’ Equity (Deficit)

Three Months Ended March 31, 2025 and 2024

Balance at January 1, 2024

Expense related to stock options (Note 8) — — — — — — 193,554 — 193,554

Net loss — — — — — — — ( 5,935,580 ) ( 5,935,580 )

$ ( 65,465,376 )

$ ( 21,347,295 )

Expense related to stock

options (Note 8)

Convertible debt converted to equity

from reverse recapitalization

Assumption of debt from

( 10,285,918 )

reverse recapitalization

Conversion to Newco shares

( 78,621,110 )

( 57,117,774 )

( 6,345,000 )

from reverse recapitalization

( 8,431,622 )

Balance at March 31, 2024

Expense related to stock options (Note 8) — — — — — — 98,436 — 98,436

Net loss — — — — — — — ( 8,301,995 ) ( 8,301,995 )

Balance at June 30, 2023 100,000,000 — 56,008,749 — 6,345,000 — 42,917,776 ( 52,223,704 ) ( 9,305,928 )

Expense related to stock options (Note 8) — — — — — — 100,151 — 100,151

Marketing representative issued equity (Note 1) — — 1,109,205 — — — 1,000,000 — 1,000,000

Net loss — — — — — — — ( 6,585,101 ) ( 6,585,101 )

Balance at September 30, 2023 100,000,000 $ — 57,117,954 $ — 6,345,000 $ — $ 44,017,927 $ ( 58,808,805 ) $ ( 14,790,878 )

See accompanying notes to the unaudited condensed consolidated financial statements.

Borealis Foods Inc.

and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Unaudited)

Three and Nine Months Ended September 30, 2024

Class A Common Shares Class B Common Shares Class C Common Shares Additional Paid-In Capital Accumulated Deficit Total Shareholders’ Deficit

Number of Shares Common Shares Number of Shares Common Shares Number of Shares Common Shares

$ ( 73,896,998 )

Balance at January 1, 2025

Expense related to stock options (Note 8) — — — — — — 1,273,053 — 1,273,053

Convertible debt converted to equity from reverse recapitalization — — — — — — 54,991,472 — 54,991,472

Assumption of debt from reverse recapitalization — — — — — — ( 10,285,918 ) — ( 10,285,918 )

Conversion to Newco shares from reverse recapitalization ( 78,621,110 ) — ( 56,008,749 ) — ( 6,345,000 ) — — — —

Net loss — — — — — — — ( 8,431,622 ) ( 8,431,622 )

$ ( 90,792,574 )

$ ( 695,886 )

Exercise of restricted share units

Expense related to restricted share units

( 4,187,588 )

Balance at March 31, 2025

Net loss — — — — — — — ( 6,297,740 ) ( 6,297,740 )

Balance at June 30, 2024

$ ( 94,980,162 )

Net loss — — — — — — — ( 4,832,169 ) ( 4,832,169 )

Balance at September 30, 2024 21,378,890 $ — — $ — — $ — $ 90,096,688 $ ( 85,026,907 ) $ 5,069,781

See accompanying notes to the unaudited condensed consolidated financial statements.

$ ( 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.

Borealis Foods Inc.

and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the Nine Months Ended September 30, 2024 For the Nine Months Ended September 30, 2023

Unaudited Condensed Consolidated Statements

of Cash Flows

Three Months Ended

Cash Flows from Operating Activities:

Net loss $ ( 19,561,531 ) $ ( 20,822,676 )

$ ( 4,187,588 )

$ ( 8,431,622 )

Adjustments to reconcile net loss to net cash used in operating activities:

6 unchanged sentences

Accounts receivable

Inventories ( 1,771,837 ) ( 389,911 )

Prepaid expenses and other ( 202,151 ) 119,921

Operating lease payable ( 22,185 ) —

( 3,300,756 )

Operating lease

Prepaid expenses and other current assets

( 1,551,597 )

Accounts payable and accrued expenses

Net cash used in operating activities

( 1,372,605 )

( 6,769,433 )

Cash flows from investing activities

Purchases of property, plant and equipment ( 1,519,208 ) ( 3,516,490 )

Purchases of intangible assets

Proceeds from reverse capitalization

Purchases of property, plant and equipment, net

Net cash used in investing activities

Cash flows from financing activities

Net payments to related parties — ( 500,000 )

Proceeds from related parties

Proceeds from convertible notes payable

Payments on convertible notes payable — ( 4,500,000 )

Payments on finance leases payable

Borrowings on line of credit

Payments on line of credit — ( 10,630,000 )

Proceeds from notes payable — 15,000,000

Payments on loan fees — ( 607,436 )

Net cash provided by financing activities

4 unchanged sentences

Cash paid during the period for:

Interest $ 2,314,683 $ 2,540,446

Income taxes 14,116 15,092

Non-cash investing and financing activities

Conversion of notes payable into Class A shares ( 54,991,472 ) —

Note payable supplier finance 2,747,833 —

Note payable accounted for as due to related party 7,601,661 —

See accompanying notes to the unaudited condensed consolidated financial statements.

Conversion of notes payable into Class A shares (Note 4)

( 54,991,472 )

Note payable supplier finance (Note 4)

See accompanying notes to the unaudited condensed

consolidated financial statements.

Borealis Foods Inc.

and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2024 and 2023

Description of Business and Summary of Significant Accounting Policies

These unaudited condensed consolidated financial statements include the financial statements of Borealis Foods Inc.

(“ Borealis ”), and its subsidiaries:

Notes to the Unaudited Condensed Consolidated

Financial Statements

Description of Business and Summary of Significant

Accounting Policies

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.

1 unchanged sentence

(“ PGF RE I ”), PGF Real Estate II, Inc.

(“ PGF RE II ”), and Borealis IP Inc (" 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.

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

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

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.

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

(“ 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.

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

(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.

continues under the name “Borealis Foods Inc.”

Borealis Foods Inc.

and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2024 and 2023

Reverse Recapitalization Transaction (continued)

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.

Accounting Impact of the Reverse Recapitalization

The transaction was accounted for as a reverse recapitalization.

Oxus Acquisition Corp.

was deemed the accounting predecessor and Borealis is the successor Securities and Exchange Commission (“ 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 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.

Transaction costs incurred and unpaid by Oxus were converted into debt (Note 4) and show as a reduction in additional paid-in capital.

Notes to the Unaudited Condensed Consolidated

Financial Statements

Description of Business and Summary of Significant

Accounting Policies (continued)

Going Concern

The unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

The Company suffered recurring losses from operations through September 30, 2024 that raise substantial doubt about its ability to continue as a going concern.

The Company was in a net loss position and had negative cash flows from operations for the periods ended September 30, 2024 and 2023.

The Company expects lower operating costs for the remainder of 2024 as the Company incurred approximately $ 1,506,000 of transaction expenses, and $ 1,273,000 of employee stock compensation expenses related to the Reverse Recapitalization.

As a result, substantial doubt continues to exist about the ability of the Company to continue as a going concern within one year from November 13, 2024, the date that the condensed consolidated financial statements were available to be issued.

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.

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.

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

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.

Borealis Foods Inc.

and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2024 and 2023

Basis of Presentation (continued)

We have condensed certain categories of information in our 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.

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 stockholders’ 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.

These unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2023 contained in Form 8-K/A filed with the SEC by Borealis on April 15, 2024.

Certain prior period amounts have been reclassified to conform to current period presentation .

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.

Notes to the Unaudited Condensed Consolidated

Financial Statements

Description of Business and Summary of Significant Accounting Policies (continued)

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 September 30, 2024 and December 31, 2023.

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.

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.

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 include approximately $ 1,048,000 and $ 846,000 composed primarily of prepaid insurance, deposits on inventory purchases and property, plant and equipment purchases as of September 30, 2024 and December 31, 2023, respectively.

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.

Property, plant, and equipment are recorded at

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.

Borealis Foods Inc.

and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2024 and 2023

Notes to the Unaudited Condensed Consolidated

Financial Statements

Description of Business and Summary of Significant Accounting Policies (continued)

Property, Plant and Equipment, net (continued)

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.

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 $ 548,000 for the three-month period ended and $ 1,158,000 for the nine-month period ended September 30, 2024.

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

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 $ 35,275,000 as of September 30, 2024 and $ 35,255,000 as of December 31, 2023.

The total cost basis of machinery subject to depreciation over machine hours was approximately $ 38,601,000 as of March 31, 2025 and December

Straight-line assets:

Buildings and improvements 10 - 30 years

Furniture, fixtures and equipment 3 - 15 years

Buildings and improvements

10 - 30 years

Furniture, fixtures and equipment

Machine hours assets:

1 unchanged sentence

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.

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.

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 consolidated statements of operations.

Loan costs are shown as reduction of related debt balances for financial statement presentation.

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.

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.

Borealis Foods Inc.

and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2024 and 2023

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

No impairment losses were recorded for the nine month period ended September 30, 2024 or for the year ended December 31, 2023.

Notes to the Unaudited Condensed Consolidated

Financial Statements

Description of Business and Summary of Significant Accounting Policies (continued)

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) total $ 15,427,453 as of September 30, 2024 and $ 7,825,790 as of December 31, 2023.

This related party liability is comprised of a note payable to a shareholder in the amount of $ 7,325,790 , due on demand and bearing interest at 10 % annually.

An additional note payable to a shareholder in the amount of $ 500,000 as of September 30, 2024 and December 31, 2023, respectively, bears interest at 10 % annually and is due December 31, 2024.

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 2025, and is non-interest bearing.

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.

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

Revenue and Cost Recognition and Accounts Receivable

The Company's revenue is primarily generated from the sale of food products.

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.

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 for the three and nine month periods ended September 30, 2024 and 2023 were approximately $ 8,076,000 and $ 8,265,000 for the three months ended and $ 22,036,000 and $ 23,870,000 for the nine months ended September 30, 2024 and 2023, respectively.

Total payment discounts and promotions were approximately $ 388,000 and $ 539,000 resulting in net revenues of approximately $ 7,688,000 and $ 7,725,000 for the three month periods ended September 30, 2024 and 2023, respectively.

Total payment discounts and promotions were approximately $ 1,128,000 and $ 1,343,000 resulting in net revenues of approximately $ 20,909,000 and $ 22,527,000 for the nine month periods ended September 30, 2024 and 2023, respectively.

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.

Borealis Foods Inc.

and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2024 and 2023

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.

Notes to the Unaudited Condensed Consolidated

Financial Statements

Description of Business and Summary of

Significant Accounting Policies (continued)

Revenue and Cost Recognition and Accounts Receivable

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.

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;

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 and nine month periods ended September 30, 2024 and 2023, totaling approximately $ 478,000 and $ 651,000 for the three months ended and $ 1,364,000 and $ 2,130,000 for the nine months ended, respectively, due to PGF adding production capabilities during both periods.

The Company’s cost of goods sold represent materials, direct labor costs, and allocated overheads associated with the sale of finished goods to customers.

Costs associated with advertising are expensed as incurred and are included in selling, general and administrative expenses.

Advertising costs expensed for the three and nine month periods ended September 30, 2024 and 2023 were approximately $ 1,123,000 and $ 312,000 for the three months ended and $ 5,074,000 and $ 1,677,000 for the nine months ended, respectively.

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.

Prepayments made under the agreement are included in prepaid expenses.

No sales subject to the royalty agreement were made for the three and nine months ended September 30, 2024 and 2023.

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 .

Borealis Foods Inc.

and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2024 and 2023

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.

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.

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 and nine months ended September 30, 2024 and 2023 were approximately $ 56,000 and $ 37,000 for the three months ended and $ 142,000 and $ 423,000 for the nine months ended, respectively, and are included in selling, general, and administrative expenses in the accompanying condensed consolidated statements of operations.

Research and development

efforts are focused on enhancements to our existing product formulations and production processes in addition to the development of new

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.

Borealis Foods Inc.

and Subsidiaries

Notes to the Unaudited Condensed Consolidated

Financial Statements

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 and nine months ended September 30, 2024 and 2023 were approximately $ 1,307,000 and $ 196,000 for the three months ended and $ 2,476,000 and $ 435,000 for the nine months ended, respectively.

Business development expenses include all

costs associated with directly growing and expanding a business segment, such as advertising, market research and training.

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, the Company signed a definitive business combination agreement with Oxus which was consummated on February 7, 2024 and described further in Note 1.

In connection with this agreement, the Company has incurred transaction costs of approximately $ 0 and $ 1,241,000 for the three months ended and $ 1,506,000 and $ 4,005,000 for the nine months ended September 30, 2024 and 2023, respectively.

Transaction costs have been expensed as incurred and are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

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

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

The Company maintains cash balances at financial institutions in excess of federally insured limits as of September 30, 2024 and December 31, 2023.

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.

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 2% for early payments.

Accounts receivable are written

Federal Deposit Insurance Corporation insures eligible accounts up to $ 250,000 per depositor at each financial institution.

holds cash at well-known banks and does not believe that it is exposed to any significant credit risks on its cash.

Borealis Foods Inc.

and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2024 and 2023

Notes to the Unaudited Condensed Consolidated

Financial Statements

Description of Business and Summary of

Significant Accounting Policies (continued)

Concentration of Risk (continued)

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 53 % and sales to three customers accounted for approximately 77 % of net revenues for the three month periods ended September 30, 2024 and 2023, respectively.

Sales to three customers accounted for approximately 45 % and 74 % of net revenues for the nine month periods ended September 30, 2024 and 2023, respectively.

Accounts receivable from one and three customers amounted to approximately 19 % and 80 % of total accounts receivable as of September 30, 2024 and 2023, respectively.

Substantially all of the Company’s sales for the three and nine month periods ended September 30, 2024 and 2023 occurred in the United States, Canada, Central America, South America, and Europe.

Purchases from 10 vendors accounted for approximately 51 % and 52 % of purchases during the three months ended and 54 % and 52 % of purchases during the nine month periods ended September 30, 2024 and 2023, respectively.

Accounts payable to these vendors totaled approximately $ 2,570,000 and $ 1,218,000 as of September 30, 2024 and 2023, respectively.

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.

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 broken down into three levels based on the reliability of inputs as follows:

Observable inputs, such as quoted market prices in active markets for the identical asset or liability that are accessible at the measurement date.

Inputs, other than quoted market prices included in Level 1, that are observable either directly or indirectly for the asset or liability.

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.

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:

Observable inputs, such as quoted market prices in active

markets for the identical asset or liability that are accessible at the measurement date.

Inputs, other than quoted market prices included in Level

1, that are observable either directly or indirectly for the asset or liability.

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.

Borealis Foods Inc.

and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2024 and 2023

Notes to the Unaudited Condensed Consolidated

Financial Statements

Description of Business and Summary of Significant Accounting Policies (continued)

Fair Value Measurements (continued)

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company does not have assets measured at fair value on a recurring basis.

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 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 September 30, 2024 and December 31, 2023.

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.

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 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 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.

Outstanding warrants were assumed at the Reverse Recapitalization.

The fair value of the warrants was determined using the Monte Carlo analysis at the time 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 whether the warrants 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.

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.

Borealis Foods Inc.

and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2024 and 2023

Warrants (continued)

This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

It was determined at the Transaction Date that there were no changes to the classes or language that would impact the original assessment that the Public and Private warrants should be classified as equity.

Notes to the Unaudited Condensed Consolidated

Financial Statements

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 November 2023, the FASB issued 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, to enhance disclosures about significant segment expenses for public entities reporting segment information under ASC Topic 280.

The amendments require public entities to disclose significant expense categories for each reportable segment, other segment items, the title and position of the chief operating decision-maker, and interim disclosures of certain segment-related information previously required only on an annual basis.

The amendments clarify that entities reporting single segments must disclose both the new and existing disclosures under Topic 280, and a pubic entity is permitted to disclose multiple measures of segment profit or loss if certain criteria are met.

The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company is currently evaluating the impact of this standard on its condensed consolidated financial statements and related disclosures.

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

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.

Inventories, net

Inventories were as follows:

September 30, 2024 December 31, 2023

Raw materials

1 unchanged sentence

Reserve for obsolete inventory

$ 8,750,399 $ 6,945,028

Borealis Foods Inc.

and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2024 and 2023

Notes to the Unaudited Condensed Consolidated

Financial Statements

Property, Plant and Equipment, net

Property, plant and equipment were as follows:

September 30, 2024 December 31, 2023

Building and improvements

1 unchanged sentence

Construction in progress

59,298,671 57,781,625

accumulated depreciation

( 14,250,865 )

Depreciation expense recorded in the three and nine month periods ended September 30, 2024 and 2023 was approximately $ 462,000 and $ 997,000 for the three months ended and $ 1,861,000 , and $ 2,938,000 for the nine months ended, respectively, which is included as a component of cost of goods sold.

In 2022, the Company issued $ 20,000,000 of convertible notes payable that, after an extension was negotiated, had a maturity in 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 these 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, mature in 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 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.

The notes and accrued interest were converted into 3,787,585 common shares in connection with the consummation of the Reverse Recapitalization with Oxus.

( 13,770,310 )

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.

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 .

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.

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.

and accrued interest were converted into 3,787,585 common shares in connection with the consummation of the Reverse Recapitalization

Borealis Foods Inc.

and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2024 and 2023

Notes to the Unaudited Condensed Consolidated

Financial Statements

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.

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 to extend the maturity date of the term facility to March 2028.

Under the amendment, payments of $ 83,000 are due monthly beginning in March 2025 with a lump sum payment of $ 12,167,000 due at maturity.

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

In February 2025, a second amendment was executed that extended the first principal payment date to September 2025.

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.

In conjunction with this agreement, loan fees of approximately $ 931,000 were capitalized in 2023.

Amortization expense of approximately $ 78,000 and $ 233,000 was recorded on the fees for the three and nine month periods ended September 30, 2024.

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 %.

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.

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 September 30, 2024 and December 31, 2023 the line of credit had $ 6,500,000 and $ 0 drawn upon it, respectively.

In the period leading up to the Reverse Recapitalization, significant transaction costs were incurred by both parties.

In total, four notes payable of $ 13,035,374 were issued for the transaction debt and mature in 2025.

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 $ 2,138,828 .

The note matures in February 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 matures in February 2025, and bears interest at 10 % per annum.

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

As of March 31, 2025 and December 31, 2024 the line of credit had $ 7,600,000 drawn upon it.

Borealis Foods Inc.

and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2024 and 2023

Notes to the Unaudited Condensed Consolidated

Financial Statements

Debt (continued)

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 $ 1,980,800 .

The note matures in February 2025, and bears interest at 8 % per annum.

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.

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 4 was issued in the original principal amount of $ 7,601,661 .

The note matures in February 2025, is non-interest bearing and payable to a related party.

Debt balances outstanding as of September 30, 2024 are due as follows:

$ 6,267,000 in 2025;

$ 10,500,000 in 2026;

$ 1,000,000 in 2027;

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;

and $ 0 in 2028.

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%.

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 (benefit) expense recorded for the three months ended September 30, 2024 and 2023 was $ 1,000 and $ 0 , respectively, on a consolidated pre-tax book loss of approximately $ 4,831,000 and $ 6,585,000 in the three month periods ended September 30, 2024 and 2023, respectively.

The total income tax expense recorded for the nine months ended September 30, 2024 and 2023 was approximately $ 15,000 and $ 15,000 , respectively, on a consolidated pre-tax book loss of approximately $ 19,547,000 and $ 20,808,000 in the nine month periods ended September 30, 2024 and 2023, 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.

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.

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

Borealis Foods Inc.

and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2024 and 2023

Notes to the Unaudited Condensed Consolidated

Financial Statements

Income Taxes (continued)

condensed consolidated financial statements or related disclosures.

As a result, at September 30, 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 and nine month period ending September 30, 2024.

The Company files income tax returns in the Canadian and U.S.

Transactions for which tax deductibility or

the timing of tax deductibility is uncertain are analyzed by management based on their technical characteristics.

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.

Company paid no penalties during the three month period ending March 31, 2025.

The Company files income tax returns in the Canadian

federal jurisdictions, and in South Carolina.

The Company is no longer subject to U.S.

federal, state and local, or non-U.S.

federal, state and local, or

income tax examinations by tax authorities for years before 2021.

1 unchanged sentence

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 unaudited condensed consolidated financial position or results of operations of the Company.

The following represents a summary of warrants outstanding and exercisable on September 30, 2024:

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.

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

2 unchanged sentences

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 Borealis 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 New 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, except the private placement warrants were not transferable, assignable or salable until 30 days after the completion of the Reverse Recapitalization.

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 class D common shares.

The Plan provides for the grant

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.

Borealis Foods Inc.

and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2024 and 2023

Stock Option Plan (continued)

of stock options for eligible employees as determined by the Board of Directors and does not guarantee employment rights.

During the nine month period ended September 30, 2024 and 2023 the Company granted options to purchase 333,574 and 227,666 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.

Notes to the Unaudited Condensed Consolidated

Financial Statements

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:

3 unchanged sentences

Dividend yield

For the three and nine month periods ended September 30, 2024 and 2023, the Company recorded approximately $ 0 and $ 100,000 for the three months ended and $ 1,273,000 and $ 392,000 for the nine months ended, respectively, of stock-based compensation expense.

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 Newco Class A 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 periods ended September 30, 2024 and 2023 is summarized as follows:

Borealis Foods Inc.

and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2024 and 2023

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)

3 unchanged sentences

Expired or forfeited —

Options outstanding at September 30, 2023 3,696,426 $ 0.0001 5.90

Options outstanding at December 31, 2023 3,666,426 $ 0.0001 8.10

333,574 0.0001 8.10

( 4,000,000 ) 0.0001 —

Expired or forfeited

Options outstanding at September 30, 2024 — — —

Earnings per share

Basic earnings or loss per share is based on the weighted average of 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.

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.

Borealis Foods Inc.

and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three and Nine Months Ended September 30, 2024 and 2023

Basic earnings (loss) per share calculation Three months ended Nine Months ended

September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

Net income (loss) available to common shareholders $ ( 4,832,169 ) $ ( 6,585,101 ) $ ( 19,561,531 ) $ ( 20,822,676 )

Notes to the Unaudited Condensed Consolidated

Financial Statements

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

Net (loss) available to common shareholders

$ ( 4,187,588 )

$ ( 8,431,622 )

Weighted average common shares outstanding (basic)

Basic earnings (loss) per share from net income $ ( 0.23 ) $ ( 0.61 ) $ ( 0.98 ) $ ( 1.94 )

Diluted earnings (loss) per share calculation

Net income (loss) available to common shareholders $ ( 4,832,169 ) $ ( 6,585,101 ) $ ( 19,561,531 ) $ ( 20,822,676 )

Basis (loss) per share from net loss

Diluted (loss) per share calculation

Net (loss) available to common shareholders

$ ( 4,187,588 )

$ ( 8,431,622 )

Weighted average common shares outstanding (basic)

Warrants — — — —

Weighted average common shares outstanding (diluted)

Diluted earnings (loss) per share from net income * $ ( 0.23 ) $ ( 0.61 ) $ ( 0.98 ) $ ( 1.94 )

Diluted (loss) per share from net loss *

* 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.

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.

Subsequent Events

The Company evaluated events and transactions after September 30, 2024 through November 14, 2024, the date the unaudited condensed consolidated financial statements were available to be issued, for subsequent events requiring disclosure in these financial statements.

The Company did not identify any subsequent events that required disclosure.

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.

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

What changed 10-Q

Item 1. Financial Statements