What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-20 compared with 2024-11-14 · 326 added, 212 removed, 48 unchanged (92% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our interim condensed consolidated financial statements and the related notes included in Part I, Item 1 of this Quarterly Report, and our audited consolidated financial statements and related notes included in our Annual Report filed on Form 10-K for the year ended December 31, 2023 (“ Annual Report ”) and our Form 8-K/A filed with the Securities and Exchange Commission (“ SEC ”) on April 15, 2024.

This discussion and analysis may contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties, and assumptions, including, but not limited to, risks and uncertainties discussed under the heading ‘Cautionary Note on Forward-Looking Statements,’ in this Quarterly Report and in Part I, Item 1A “Risk Factors” included in our Annual Report and this Quarterly Report.

In this section, unless otherwise indicated or the context otherwise requires, references in this section to “ Borealis, ” the “Company,” “we,” “us,” “our” and other similar terms refer to Borealis Foods Inc.

References to “ Oxus ” refer to Oxus Acquisition Corp.

Borealis Foods is a pioneering, integrated food manufacturing company with a mission to disrupt and elevate the ready-to-eat meal and dry soup categories by offering premium and super-premium, nutritious products.

Known for popular ramen noodle brands like the high protein Chef Woo, Ramen Express, and Woodles, Borealis Foods brings innovative fusion flavors from diverse culinary traditions, creating delicious and nutritious meal options for consumers.

With U.S.-based production facilities, the company’s portfolio reflects a commitment to quality, innovation, and sustainability.

An essential aspect of Borealis Foods' success is its strategic partnerships with prominent national and international food producers, retailers, and distributors.

Serving as an innovation partner to global food leaders, Borealis Foods leverages these collaborations to expand its offerings, enhance technological capabilities, and deliver food products that embody its values of healthy nutrition, innovation, and sustainability.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion

and analysis of our financial condition and results of operations in conjunction with the interim unaudited condensed consolidated

financial statements and the related notes thereto included in Part I, Item 1 of this Quarterly Report, and our audited consolidated

financial statements and related notes in our Annual Report filed on Form 10-K for the year ended December 31, 2024

(“ Annual Report ”) filed with the Securities and Exchange Commission (“ SEC ”) on April 15, 2025.

The following discussion and analysis may contain

forward-looking statements that involve risks and uncertainties.

Our actual results may differ materially from those anticipated in these

forward-looking statements as a result of various factors, including, those set forth under Item 1.A., “Risk Factors,” included

in Part I of the Annual Report.

Borealis Foods is a pioneering, integrated food science and manufacturing

company that is redefining affordable nutrition.

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

Express, and Woodles, Borealis Foods brings innovative fusion flavors from diverse culinary traditions, creating delicious and nutritious

meal options for consumers.

With U.S.-based production facilities, the company’s portfolio reflects a commitment to quality, innovation,

and sustainability.

The Company continued to execute a strategic repositioning of its revenue

base and customer portfolio in 2025, with an emphasis on gross margin expansion and operational efficiency.

While total revenue declined

compared to the prior year, gross profit turned positive, reflecting improved pricing dynamics, a more favorable product mix, and a deliberate

move away from low-margin, high-volume retail partnerships.

The Reverse Recapitalization

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

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

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

On February 23, 2023, Borealis Foods Inc., a corporation

incorporated under the laws of Canada (“ Legacy Borealis ”), entered into a Business Combination Agreement (as amended,

amended and restated, supplemented, or otherwise modified from time to time, the “ Business Combination Agreement ”)

with Oxus Acquisition Corp.

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

of Oxus (“ Newco ”).

On February 7, 2024, Legacy Borealis, Oxus, and Newco consummated the transactions (collectively,

the “ Reverse Recapitalization ”) contemplated by the Business Combination Agreement by means of a statutory arrangement

under the Canada Business Corporations Act and the Business Corporations Act (Ontario), implemented in accordance with the terms and conditions

set forth in the Business Combination Agreement and the related plan of arrangement (as amended, amended and restated, supplemented, or

otherwise modified from time to time, the “ Plan of Arrangement ”) following the approval at an extraordinary general

meeting of the shareholders of Oxus held on February 2, 2024.

The Reverse Recapitalization (continued)

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

Pursuant to the terms of the Business Combination

Agreement, among other things:

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

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

and (b) following the Legacy Borealis Amalgamation, New Oxus and Amalco amalgamated (the “ Borealis Amalgamation ,” and together with the Legacy Borealis Amalgamation, the “Amalgamations,” and the corporation resulting therefrom, “ Borealis ,” as a corporation amalgamated under the Business Corporations Act (Ontario)), with Borealis surviving the Borealis Amalgamation.

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

“Borealis,” as a corporation amalgamated under the Business Corporations Act (Ontario)), with Borealis surviving

the Borealis Amalgamation.

Borealis continues under the name “ Borealis Foods Inc.

Unless otherwise indicated, references to the

“Company,” “our,” “us” or “we” in this Item 2 refer to Oxus Acquisition Corp., or Oxus,

before the consummation of the Transaction.

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

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

The term “New Borealis”

refers to Borealis Foods Inc.

after the consummation of the Business Combination.

Accounting Impact of the Reverse Recapitalization

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

Oxus Acquisition Corp.

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

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

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

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

The Reverse Recapitalization transaction was accounted

for as a reverse recapitalization.

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

Under this method of accounting, Oxus was treated

as the acquired company for financial statement reporting purposes.

For accounting purposes, Legacy Borealis was deemed to be the accounting

acquirer in the transaction and, consequently, the transaction was treated as a reverse recapitalization of Legacy Borealis.

the consolidated balance sheets and results of operations of Legacy Borealis became the historical financial statements of Borealis, and

Oxus’ assets, liabilities, and results of operations were consolidated with Legacy Borealis’ beginning on February 7, 2024.

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

Basis of Presentation

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

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

Borealis Foods’ unaudited condensed consolidated

financial statements were prepared in accordance with U.S.

See Note 1 to our unaudited condensed consolidated financial statements

for a full description of our basis of presentation.

Results of Operations

Comparison of the Three Months Ended September 30, 2024 and 2023

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

Three Months Ended September 30,

2024 (Unaudited) 2023 (Unaudited) 2024 vs 2023

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

Gross sales 8,076 8,265 (189)

Sales discounts & allowances (388) (5) % (539) (7) % 151 2 %

Revenue, net 7,688 7,726 (38) — %

Cost of goods sold 5,953 77 % 7,206 93 % (1,253) (16) %

Depreciation 462 6 % 997 13 % (535) (7) %

Total cost of goods sold 6,415 83 % 8,203 106 % (1,788) (23) %

Gross profit (loss) 1,273 17 % (477) (6) % 1,750 23 %

Sales & marketing 1,123 15 % 312 4 % 811 11 %

Business development 1,307 17 % 196 3 % 1,111 14 %

Training 478 6 % 652 8 % (174) (2) %

General & administrative expenses 1,986 26 % 2,786 36 % (800) (10) %

Total sales, general & administrative expenses 4,894 64 % 3,946 51 % 948 13 %

Loss from operations (3,621) (47) % (4,423) (57) % 802 10 %

Total other expense (1,210) (16) % (2,162) (28) % 952 12 %

Loss before income taxes (4,831) (63) % (6,585) (85) % 1,754 22 %

Income tax expense (1) — % — — % (1) — %

Net loss $ (4,832) (63) % $ (6,585) (85) % $ 1,753 22 %

Other financial Data

Adjusted EBITDA

$ 17 — % $ (921) (12) % $ 939 12 %

Adjusted EBITDA is a non-GAAP financial metric.

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

Revenue Performance

In line with Borealis' strategy, we have concentrated our resources on high-margin, premium products like Chef Woo and Woodles, which together represented 39% of quarterly revenue during the third quarter of 2024.

This pivot, involving significant upfront investment in repositioning our product lineup, has improved our overall margin, with the monetization of related marketing and business development expenses expected to be realized over the next quarters.

For the three months ended September 30, 2024, Borealis reported gross sales of $8.08 million, a modest decrease of 2.3% from $8.27 million in the same period in 2023.

This decrease primarily reflects lower demand for Ramen Express noodles, driven by inflationary pressures and competitive dynamics dampening demand for these lower-margin offerings.

However, our premium products, which we believe hold a unique position within the noodle industry, have contributed to a 48% growth in gross revenue since the second quarter of 2024.

We believe that our premium products face limited competition and are well-positioned for long-term growth and profitability in a growing, health-focused market segment.

Cost of Goods Sold (COGS) and Gross Profit

Our strategic shift towards high-margin products has enabled a substantial improvement in cost efficiencies in the three months ended September 30, 2024.

COGS was $6.42 million during the third quarter of 2024, or 83% of net revenue, marking a reduction from 106% of net revenue in the comparable period of 2023.

This 23% improvement reflects a favorable product mix, notably with contributions from Chef Woo and Woodles, which benefit from top-line revenue growth and optimized supply chain efficiencies.

Consequently, Borealis reported a gross profit of $1.27 million for the quarter, achieving a 17% gross margin—up from a negative margin of (6%) in the third quarter 2023.

Our gross margin saw substantial growth of 201% in the three months ended September 30, 2024, compared to the previous three months ended June 30, 2024, with gross margins of $1.27 million versus $0.42 million, respectively.

Gross margin improved from 8% to 17% over this period, underscoring our continued focus on cost efficiency and operational improvements.This improvement is a direct result of our efforts to align product offerings with evolving consumer preferences for premium, protein-rich meals.

As our Chef Woo footprint expands within the United States and Canada advertising spend on brand development increases, while Woodles increase is associated with business development.

As brand awareness expands our footprint, the food industry has entered a time of aggressive promotions and discounts driving demand.

Operating Expenses

Operating expenses increased during the three months ended September 30, 2024 by 13% over the three months ended September 30, 2023, totaling $4.89 million or 64% of net revenue.

Key factors contributing to this increase include:

Operating Expenses (continued)

Sales & Marketing :

Expenditures in the quarter rose to $1.12 million (15% of net revenue), up from $0.31 million (4%) in the comparable period of 2023, primarily due to marketing and brand development efforts supporting Chef Woo and Woodles.

Significant expenses included social media advertising on platforms like Google and Facebook, in-store promotions at Walmart and Sam’s Club, and engagement of influencers and brand ambassadors.

Our multi-platform approach is designed to leverage AI-driven geotargeting and social media engagement to support product visibility, focusing on high-ROI channels.

Significant marketing spend was allocated to Chef Woo and Woodles, which we believe have shown strong consumer acceptance.

Business Development :

Expenses in the quarter rose to $1.32 million during the third quarter of 2024, reflecting our commitment to expanding distribution channels, conducting market research, and strengthening brand equity in key segments.

Investing in new sales channels such as Woodles, beginning in this quarter and the expansion into other highly nutritious meals drives our market expansion.

This represents 17% of net revenue during the third quarter of 2024, a 14% increase from the third quarter of 2023, as Borealis prioritizes growth in high-demand markets.

General and Administrative (G&A) :

G&A expenses improved to $1.99 million (26% of net revenue) during the third quarter of 2024 compared to $2.79 million (36%) in the previous year’s third quarter.

This decrease is primarily due to decreased professional fees as administrative expenses have been optimized to reflect the needs of a public company while controlling incremental costs.

Efforts are underway to refine organizational structure and streamline back-office functions to further support scalability.

For the three months ended September 30, 2024, Borealis reported a net loss of $4.83 million, a modest improvement from a net loss of $6.59 million in the prior year.

This improvement is driven by favorable product mix adjustments and effective cost management, particularly in areas of high-margin product lines.

The impact of interest expense of $1.20 million, or 25% of the net loss and depreciation expense of $0.47 million or 10%of the net loss, coupled with professional fees and other expenses of $0.26 million or 5% of the net loss are all associated with being a newly listed publicly traded entity.

Comparison of the Nine months ended September 30, 2024 and 2023

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

Nine Months Ended September 30,

2024 (Unaudited) 2023 (Unaudited) 2024 vs 2023

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

Gross sales 22,036 23,870 (1,834)

The following sets forth a summary of our results

of operations for the presented months ($ in thousands):

Comparison of the Three Months Ended March

31, 2025 and 2024

2025 (Unaudited)

2024 (Unaudited)

2025 vs 2024 Variance

% of Revenues, net

% of Prior Period

Sales discounts & allowances

Revenue, net 20,909 22,527 (1,618)

Cost of goods sold

Depreciation 1,861 9 % 2,938 13 % (1,077) (4) %

Total cost of goods sold

1 unchanged sentence

Sales & marketing

5,074 24 % 1,677 7 % 3,397 17 %

Business development

2,476 12 % 435 2 % 2,041 10 %

Training 1,364 7 % 2,130 9 % (766) (2) %

General & administrative expenses

8,808 42 % 9,333 41 % (525) 1 %

Total sales, general & administrative expenses

2 unchanged sentences

Loss before income taxes

Income tax expense

(15) — % (15) — % — — %

Net loss $ (19,562) (94) % $ (20,823) (92) % 1,261 (2) %

Income tax benefit

Other financial Data:

Adjusted EBITDA

$ (1,961) (9) % $ (3,695) (16) % 1,734 7 %

Adjusted EBITDA is a non-GAAP financial metric.

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

Revenue Performance

In line with our strategy, Borealis has prioritized high-margin, premium products like Chef Woo and Woodles, which together contributed 41% of year-to-date revenue.

This pivot has strengthened profitability and supports Borealis’s gradual shift away from lower-margin categories.

For the nine months ended September 30, 2024, Borealis reported gross sales of $22.03 million, a slight decrease of 8% from $23.87 million in the comparable period of 2023.

This decline is largely due to reduced performance in Ramen Express noodles, as inflationary pressures and competitive dynamics dampened demand for these lower-margin offerings.

We believe that our premium products occupy a unique space within the noodle industry, facing limited competition in a growing, health-focused market segment.

We believe this positioning enhances our ability to capture long-term value and sustain profitable growth.

Cost of Goods Sold (COGS) and Gross Profit

Our strategic shift towards high-margin products has enabled a substantial improvement in cost efficiencies.

COGS was $18.97 million during the nine months ended September 30, 2024, or 91% of net revenue, marking a reduction from 108% of net revenue in the comparable period of 2023.

This 18% improvement reflects a favorable product mix, particularly with contributions from Chef Woo and Woodles, which benefit from lower raw material costs and optimized supply chain efficiencies.

Consequently, Borealis reported a gross profit of $1.94 million year-to-date, achieving a 9% gross margin—up from a negative margin of (8%) in the comparable period of 2023.

This improvement is a direct result of our efforts to align product offerings with evolving consumer preferences for premium, protein-rich meals.

As our Chef Woo footprint expands within the United States and Canada advertising spend on brand development increases, while Woodles increase is associated with business development.

As brand awareness expands our footprint, the food industry has entered a time of aggressive promotions and discounts driving demand.

Operating Expenses

Operating expenses increased during the nine months ended September 30, 2024 by 25% over the nine months ended September 30, 2023, totaling $17.72 million or 85% of net revenue.

Key factors contributing to this increase include:

Sales & Marketing:

Expenditures on sales and marketing rose to $5.07 million (24% of net revenue) during the nine months ended September 30, 2024, up from $1.68 million (7%) in the comparable 2023, primarily due to promotional efforts supporting Chef Woo noodles and Woodles.

Significant expenses included social media advertising on platforms like Google and Facebook, in-store promotions at Walmart and Sam’s Club, and engagement of influencers and brand ambassadors.

Our multi-platform approach is designed to leverage AI-driven geotargeting and social media engagement to support product visibility, focusing on high-ROI channels.

Significant marketing spend was allocated to Chef Woo and Woodles, which we believe have shown strong consumer acceptance .

Business Development:

Expenses rose to $2.48 million during the nine months ended September 30, 2024, reflecting our commitment to expanding distribution channels, conducting market research, and strengthening brand equity in key segments.

Investing in new sales channels such as Woodles, beginning in this quarter and the expansion into other highly nutritious meals drives our market expansion.

This represents 12% of net revenue, a 10% increase from 2023, as Borealis prioritizes growth in high-demand markets.

General and Administrative (G&A):

G&A expenses rose to $8.81 million (42% of net revenue) during the nine month ended September 30, 2024 compared to $9.33 million (41%) in the comparable period of previous year.

This increase is primarily due to staffing for expanded operations, professional fees linked to the Reverse Recapitalization, and incremental costs associated with being a publicly traded company.

Administrative expenses have been optimized to reflect the needs of a public company while controlling incremental costs.

Efforts are underway to refine organizational structure and streamline back-office functions to further support scalability.

For the nine months ended September 30, 2024, Borealis reported a net loss of $19.56 million, a modest improvement from a net loss of $20.82 million in the prior year.

This improvement is driven by favorable product mix adjustments and effective cost management, particularly in areas of high-margin product lines.

The impact of interest expense of $3.77 million, or 19%of the net loss and depreciation expense $1.86 million, or 10%of the net loss, coupled with professional fees and other expenses of $1.70 million, or 9%of the net loss are all associated with being a newly listed publicly traded entity.

Looking forward, Borealis is committed to scaling high-margin, premium products while managing the phased transition away from legacy offerings.

The company expects robust demand for Chef Woo and Woodles, with new retail partnerships and distribution channels expanding our market reach in the upcoming quarters.

While inflationary pressures and raw material costs remain a concern, we are confident in our ability to leverage cost efficiencies and strategic pricing to maintain margins.

Management remains focused on bolstering our market position through innovation, cost management, and disciplined growth initiatives.

See “How we Evaluate

Our Operations” below for an explanation of the terms EBITDA and Adjusted EBITDA and a reconciliation of net income to EBITDA and

Adjusted EBITDA for each applicable period.

Revenue and Customer Trends

For the quarter ended March 31, 2025, the Company reported net revenue

was $6.8 million, representing a 14% decline from $7.9 million in the prior year period.

This decline reflects the ongoing impact of SKU

rationalization efforts and the strategic pullback from low-margin mass retail accounts initiated in 2024.

Revenue and Customer Trends (continued)

Despite lower top-line revenue, gross profit improved

significantly to $0.9 million compared to $0.2 million in the first quarter of 2024, driven by stronger product and customer mix and improved

cost controls.

Gross margin, excluding depreciation, a non-GAAP

measurement, improved to 20% in the first quarter of 2025 (calculated as $0.9 million + $0.48 million / $6.85 million), compared to 16%

in the prior-year quarter, illustrating the successful pivot to higher-margin branded products and institutional accounts.

The Company continued to diversify its customer

base in the first quarter of 2025.

● Revenue concentration from a previously dominant retail partner was

reduced substantially.

● A major institutional customer became a significant contributor, generating

$2.0 million in its first full quarter.

● Two additional institutional clients expanded their volume, contributing

$1.95 million and $0.30 million, respectively.

● A prominent global brand was launched as a new customer, representing

early traction in the premium retail segment.

These results reflect the Company’s strategic

focus on food service and institutional markets, which provide improved pricing power and margin stability.

Product Mix and Margin Enhancement

The Chef Woo High Protein Ramen brand continued to lead the Company’s

branded portfolio, generating $1.66 million in the first quarter of 2025, accounting for approximately 24% of total sales.

was down from its peak in the third quarter of 2024, Chef Woo remains central to the Company’s growth strategy.

Ramen Express Flats,

which had previously been a Walmart-focused product, demonstrated strong growth to $1.96 million, reflecting renewed demand in institutional

The continued shift toward Chef Woo, Gordon Ramsay

Cups, and food service SKUs has allowed the Company to sustain margin improvements.

Key drivers of margin expansion in the quarter included:

● An increase in institutional and branded sales

● Elimination of discount - driven mass retail

● Lower freight and promotional costs relative

to prior quarters

Gross margin excluding depreciation (net gross margin, a non-GAAP measure)

was 20% in the first quarter of 2025, compared to 16% in the first quarter of 2024, reflecting operational discipline and improved leverage

on fixed production costs.

Operating Expenses and SG&A Trends

Total SG&A expenses declined 47% year-over-year to $3.82 million

in the first quarter of 2025.

This reduction reflects the conclusion of non-recurring professional fees and scaled-back marketing expenditures.

● Completion of non-recurring professional services

● Lower marketing and promotional spending

● Reduced training costs, which fell to $0.2 million as institutional

customers onboarding processes became more efficient

Operating Expenses and SG&A Trends (continued)

Adjusted EBITDA non-GAAP measure decreased slightly to $(0.6) million

from $(0.4) million in the first quarter of 2024, a negative $0.2 million.

This decrease is attributed to management’s cost reduction

strategy within sales, marketing, and general and administrative costs.

Liquidity and Capital Resources

Borealis has undergone significant changes in its capital structure, operational funding, and financial strategy following its Reverse Recapitalization with Oxus Acquisition Corp.

As of September 30, 2024, Borealis continues to pursue a growth-oriented approach to expand its market presence and product offerings in the high-demand, plant-based food sector.

The Company's liquidity and capital

Liquidity and Capital Resources (continued)

resources and operational and financing activities reflect a balance between maintaining liquidity and pursuing strategic growth investments and the Company expects to continue to monitor and adjust its operational and financing activities in response to its liquidity and capital resources available from time to time.

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

Nine Months Ended September 30, Year Ended December 31,

2024 2023 2023 2022

As of March 31, 2025, liquidity constraints continued

to pose challenges, but operating improvements have begun to stabilize working capital requirements.

Reduced SG&A expenditures, narrowing

losses, and a more favorable product mix are expected to support improving cash conversion.

The Company did not raise external capital in the first quarter of

The Chairman and Chief Executive Officer advanced funds to the Company in the amounts of $700,000 and $385,000, respectively, in

the three months ended March 31, 2025.

If we cannot obtain adequate additional financing, among other things, we may have to substantially

curtail or limit our research, marketing, production or distribution activities, sell assets of the Company or seek protection from creditors

under bankruptcy laws, which could materially and adversely affect our business plan.

The Company remains focused on cash preservation.

Inventory levels are being managed conservatively to align with committed demand from large institutional accounts.

With increased contribution

from high-volume, predictable food service channels, management anticipates improved cash flows and working capital efficiency through

the remainder of 2025.

The following table sets forth our cash flows for the periods indicated

($ in thousands):

Three Months Ended

Net cash (used in) provided by:

3 unchanged sentences

Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2024, was $14.27 million, primarily driven by the net loss of $19.56 million, adjusted for non-cash charges of $1.86 million for depreciation and amortization, and $1.27 million for stock-based compensation.

This represents an improvement from the $16.06 million used in the same period of 2023, as Borealis benefited from enhanced gross profit due to the performance of high-margin products like Chef Woo and Woodles, which partially offset operational expenses.

Net cash used in operating activities for the

three months ended March 31, 2025 was $1.37 million, primarily driven by the net loss of $4.19 million, adjusted for non-cash charges

of $0.48 million for depreciation and amortization, and $0.06 million for stock-based compensation.

This represents an improvement from

the $6.77 million used in the same period of 2024, as Borealis benefited from enhanced gross profit due to the performance of high-margin

products like Chef Woo and Woodles, which partially offset operational expenses.

Investing Activities

Net cash used in investing activities was $1.71 million for the nine months ended September 30, 2024, primarily reflecting property and equipment investments to support production scale and efficiency improvements.

This decrease from $3.52 million in 2023 aligns with Borealis' focused approach to capital expenditures, particularly as the company seeks to improve asset utilization and operational efficiencies without significant expansion of its production line.

Net cash used in investing activities was $0.03 million for the three

months ended March 31, 2025, primarily attributable to purchases of property and equipment to support production scale and efficiency

improvements.

This decrease from $0.49 million in 2024 aligns with our focused approach to capital expenditures, particularly as the Company

seeks to improve asset utilization and operational efficiencies without significant expansion of its production line.

Financing Activities

Net cash provided by financing activities during the nine months ended September 30, 2024, was $9.09 million, driven by proceeds from convertible debt and additional credit facility utilization.

In comparison, financing activities in the nine months ended September 30, 2023, were $23.40 million, largely attributable to the Reverse Recapitalization proceeds and debt restructuring efforts.

Net cash provided by financing activities during the three months ended

March 31, 2025, was $0.94 million, financing was driven by advances from related parties.

In comparison, net cash provided by financing

activities in the three months ended, was $7.85 million, and largely attributable to borrowings on the line of credit and proceeds from

convertible debt.

The financing activities in 2025 primarily support working capital needs and strategic investments in growth initiatives.

Balance Sheet and Contractual Obligations

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

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

Our cash position, though lower than prior periods,

reflects its active investment in operational scale-up and the expansion of high-margin product lines.

Borealis Foods’ contractual

obligations, including operating leases, accounts payable, and convertible notes, remain in line with planned financial commitments and

reflect our strategic focus on sustainable growth.

Future Capital Requirements and Liquidity

This updated section reflects the latest financial performance metrics, emphasizing Borealis' current liquidity status, funding needs, and strategic financial adjustments aimed at sustaining operational growth.

Borealis anticipates needing additional capital to meet its funding requirements through fiscal 2025, particularly to support its expansion in retail and digital channels.

As of September 30, 2024, the Company had cash-on-hand of $721,542 and negative working capital of ($16.87 million).

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

Borealis is actively exploring additional financing options to strengthen liquidity;

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

In the absence of sufficient financing, Borealis may adjust its spending on research, marketing, and distribution to align with available capital resources and take other measures that it deems appropriate to address its working capital deficiency and then available capital resources.

We need additional capital to meet our funding

requirements through fiscal year 2025, particularly to support our expansion into the premium retail segment with a prominent global brand.

As of March 31, 2025, we had cash-on-hand of $0.19 million and negative working capital of $25.30 million.

Our current business plan has

mitigated some capital expenditure requirements, as operational efficiencies in existing production lines have reduced the need for immediate

We are actively exploring additional financing options to strengthen liquidity;

however, there can be no assurance that such

funding will be available on favorable terms or at all.

If we cannot obtain adequate additional financing, among other things, we may

have to substantially curtail or limit our research, marketing, production or distribution activities, sell assets of the Company or seek

protection from creditors under bankruptcy laws, which could materially and adversely affect our business plan.

Inadequate financial resources

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

Going Concern

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

The Company is focused on executing its strategic initiatives to drive revenue growth, manage expenses, and secure additional financing to address these risks.

The unaudited condensed consolidated financial statements have been prepared under the assumption of ongoing operations, as Borealis seeks to navigate these challenges and achieve financial stability.

Management has identified recurring losses

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

are focused on executing our strategic initiatives to drive revenue growth, manage expenses, and secure additional financing to

address these risks.

The unaudited condensed consolidated financial statements have been prepared under the assumption of ongoing

operations, as we seek to navigate these challenges and achieve financial stability.

Substantial doubt continues to exit about the

ability of the Company to continue as a going concern within one year from May 20, 2025.

Going Concern (continued)

Management has implemented several strategic and

operational initiatives aimed at improving liquidity and financial performance.

For the three months ended March 31, 2025, the Company

significantly reduced sales, general, and administrative expenses by 47% year-over-year, driven by the conclusion of one-time transaction-related

costs and a disciplined reduction in discretionary spending.

Gross margin, excluding depreciation, a non-GAAP measurement, improved to

20% from 16% in the prior year period, reflecting a shift toward higher-margin branded and institutional sales.

The Company has not raised external capital

in the first quarter of 2025 but is actively evaluating financing alternatives, including debt and equity issuances, to support

ongoing operations and strengthen the balance sheet.

Management is also aligning inventory and production levels with committed

demand from stable institutional customers, which is expected to enhance working capital efficiency and cash flow conversion through

the remainder of the year.

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

we cannot obtain adequate additional financing, among other things, we may have to substantially curtail or limit our research,

marketing, production or distribution activities, sell assets of the Company or seek protection from creditors under bankruptcy

laws, which could materially and adversely affect our business plan.

Inadequate financial resources could also continue to raise

substantial doubt about our ability to continue as a going concern.

Contractual Obligations and Commitments

The following table summarizes our non-cancellable contractual obligations and other commitments as of September 30, 2024, and the effects that such obligations are expected to have on our liquidity and cash flow for future periods (in thousands):

The following table summarizes our non-cancellable

contractual obligations and other commitments as of March 31, 2025, and the effects that such obligations are expected to have on our

liquidity and cash flow for future periods (in thousands):

Payments due by period

Total Less than 1 year 1-3

years More than 5 years

Contractual obligations and other commitments *

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

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

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

(*) Includes operating lease liabilities for certain of our offices

and facilities, accounts payable, and accrued expenses including related party notes.

The commitment amounts in the table above are

associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum

services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts.

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

Off-Balance Sheet Arrangements

As of September 30, 2024 and December 31, 2023, we did not engage in any off-balance sheet arrangements, including the use of structured finance, special purpose entities, or variable interest entities.

As of March 31, 2025 and December 31, 2024, we

did not engage in any off-balance sheet arrangements, including the use of structured finance, special purpose entities, or variable interest

The following represents a summary of warrants outstanding and exercisable

on March 31, 2025 and December 31, 2024:

Classification Exercise

Expiration Date

Outstanding Shares

Exercisable Shares

Private Placement Warrants

Public Warrants

Following the closing of the Reverse Recapitalization,

Borealis Foods has the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration,

at a price of $0.01 per warrant, provided that the last reported sales price of Common Shares equals or exceeds $18.00 per share (as adjusted

for share splits, share dividends, reorganizations, recapitalizations and the like) for any 20 days within a 30 trading day period commencing

once the warrants become exercisable and ending on the third trading day prior to the date on which Borealis Foods gives proper notice

of such redemption and provided certain other conditions are met.

The public warrants are identical to the private placement warrants

in material terms and provisions due to the expiration on the transfer of, the private placement warrants 30 days after the completion

of the Reverse Recapitalization.

Emerging Growth Company Status

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

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

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

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

This may make it difficult or impossible to compare Borealis’ financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.

Emerging Growth Company Status (continued)

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

Section 102(b)(1) of the Jumpstart Our Business

Startups Act (the “ JOBS Act ”) exempts “emerging growth companies” (as defined in Section 2(a) of the Securities

Act) from being required to comply with new or revised financial accounting standards until private companies are required to comply with

the new or revised financial accounting standards.

The JOBS Act provides that a company can choose not to take advantage of the extended

transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to not take advantage

of the extended transition period is irrevocable.

Oxus was an emerging growth company and elected to take advantage of the benefits of

the extended transition period for new or revised financial accounting standards.

Following the consummation of the Reverse Recapitalization,

Borealis Foods expects to continue taking advantage of the benefits of the extended transition period, although it may decide to early

adopt new or revised accounting standards to the extent permitted by such standards and relevant laws and regulations.

This may make it

difficult or impossible to compare Borealis Foods’ financial results with the financial results of another public company that is either

not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period

exemptions because of the potential differences in accounting standards used.

We will remain an emerging growth company until

the earliest of (i) the last day of the fiscal year in which the market value of common shares that are held by non-affiliates equals

or exceeds $700 million as of the end of that year’s second fiscal quarter, (ii) the last day of the fiscal year in which Borealis

Foods has total annual gross revenue of $1.235 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which

Borealis Foods has issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) December 31, 2026, which

is the last day of the fiscal year following the fifth anniversary of Oxus’ initial public offering.

Implications of being a Smaller Reporting Company

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

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

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

To the extent Borealis takes advantage of such reduced disclosure obligations, it may also make comparison of its financial statements with other public companies difficult or impossible.

Additionally, we are a “smaller reporting

company” as defined in Item 10(f)(1) of Regulation S-K.

Smaller reporting companies may take advantage of certain reduced disclosure

obligations, including, among other things, providing only two years of audited financial statements.

We will remain a smaller reporting

company until the last day of the fiscal year in which (i) the market value of common shares held by non-affiliates exceeds $250 million

as of the end of that year’s second fiscal quarter, or (ii) our annual revenues exceeded $100 million during such completed fiscal

year and the market value of common shares held by non-affiliates equals or exceeds $700 million as of the end of that year’s second

fiscal quarter.

To the extent we take advantage of such reduced disclosure obligations, we may also make comparison of our financial statements

with other public companies difficult or impossible.

How We Evaluate Our Operations

Net Income/(Loss)

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

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

We measure performance based on our overall return

to shareholders based on consolidated net income or net loss.

We do not review a measure of operating result at a lower level than the

consolidated company and we only have one reportable segment.

Adjusted EBITDA

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

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

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

How We Evaluate Our Operations (continued)

Our adjustments to EBITDA are related to expenses

and gains that we believe are not indicative of normal, ongoing operations.

While these items may be recurring in nature and should not

be disregarded in evaluation of our earnings performance, it is useful to exclude such items when analyzing current results and trends

as these items can vary significantly from period to period depending on specific underlying transactions or events that may occur.

while we may incur or recognize these types of expenses and gains in the future, we believe that removing these items for purposes of

calculating the Adjusted EBITDA financial measures provides a more focused presentation of our ongoing operating performance.

We view EBITDA as an important indicator of performance.

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

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

EBITDA and Adjusted EBITDA are supplemental measures utilized by our management and other users of our financial statements such as investors, research analysts and others, to assess the financial performance of our assets without regard to financing methods, capital structure or historical cost basis.

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

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

We define Adjusted EBITDA as EBITDA

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

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

research analysts and others, to assess the financial performance of our assets without regard to financing methods, capital structure

or historical cost basis.

Adjusted EBITDA is a key performance measure that our management uses to assess the Company’s operating

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

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

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

“Adjusted EBITDA,” a non-GAAP measure, is defined as net income attributable to us before (1) income taxes, of $0.02 million, (2) interest expense, of $3.77 million, (3) depreciation and amortization, of $1.86 million (4) training, of $1.36 million, (5) business transaction costs, of $1.77 million, (6) new product launch of $5.07 million, (7) one-time formulation and product development costs, of $2.48 million, and (8) deferred stock compensation $1.27 million, all for the nine months ended September 30, 2024.

“Adjusted EBITDA,” a non-GAAP measure, is defined as net income attributable to us before (1) income taxes, (2) interest expense, of $1.21 million, (3) depreciation and amortization, of $0.47 million (4) other non-operating items, net, of $0.01 million, (5) training, of $0.48 million, (6) business transaction costs, of $0.26 million, (7) new product launch, of $1.12 million, (8) one-time formulation and product development costs, of $1.31 million all for the three months ended September 30, 2024.

We use these performance measures

for business planning purposes and forecasting.

We believe that EBITDA and Adjusted EBITDA enhances an investor’s understanding

of our financial performance as they are useful in assessing our operating performance from period-to-period by excluding certain items

that we believe are not representative of our core business.

Adjusted EBITDA (continued)

For the three months ended March 31, 2025, “Adjusted

EBITDA,” a non-GAAP measure, is defined as net income attributable to us before (1) depreciation and amortization, of $0.5 million,

(2) interest expense, of $1.3 million, (3) new product launch of $0.6 million, (4) training, of $0.2 million, (5) deferred stock compensation

$0.1 million, (6) business transaction costs, of $0.5 million, and (7) business development and other extraordinary charges, of $0.6 million.

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

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

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

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

“Adjusted EBITDA,” a non-GAAP measure, is defined as net income attributable to us before (1) income taxes, of $0.02 million, (2) interest expense, of $5.54 million, (3) depreciation and amortization, of $2.94 million (4) training, of $2.13 million, (5) business transaction costs, $4.01 million, (6) new product launch, $1.68 million, (7) one-time formulation and product development costs, $0.44 million, and (8) deferred stock compensation $0.39 million, all for the nine months ended September 30, 2023.

“Adjusted EBITDA,” a non-GAAP

How We Evaluate Our Operations (continued)

measure, is defined as net income attributable to us before (1) income taxes, (2) interest expense, of $2.17 million, (3) depreciation and amortization, of $1.00 million (4) training, of $0.65 million, (5) business transaction costs, $1.24 million, (6) new product launch, of $0.31 million, (7) one-time formulation and product development costs, $0.20 million, and (8) deferred stock compensation $0.10 million, all for the three months ended September 30, 2023.

Furthermore, the Compensation

Committee of our Board of Directors uses such measure to evaluate management’s performance.

We, therefore, believe that the use

of this non-GAAP measure provides useful information to investors and other stakeholders by allowing them to view our business through

the eyes of management and our Board of Directors, facilitating comparisons of results across historical periods and focus on the underlying

ongoing operating performance of our business.

As noted above, Adjusted EBITDA has limitations as an analytical tool, and you should not

consider it in isolation or as a substitute for analysis of our results as reported under U.S.

For the three months ended March 31, 2024, “Adjusted

EBITDA,” a non-GAAP measure, is defined as net income attributable to us before (1) income taxes, (2) interest expense, of $1.5

million, (3) depreciation and amortization, of $1.0 million, (4) other non-operating items, net, of $1.5 million, (5) training, of $0.5

million, (6) deferred stock compensation, of $1.3 million ( 7) M&A due diligence costs, of $1.5 million, (8) new product launch of

$0.8 million.

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

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

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

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

We, therefore, believe

that the use of this non-GAAP measure provides useful information to investors and other stakeholders by allowing them to view our business

through the eyes of management and our Board of Directors, facilitating comparisons of results across historical periods and focus on

the underlying ongoing operating performance of our business.

As noted above, Adjusted EBITDA has limitations as an analytical tool, and

you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S.

Recent Accounting Pronouncements

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

See Note 1 to Borealis Foods’

unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for information about recent

accounting pronouncements, the timing of their adoption, and Borealis Foods’ assessment, if any, of their potential impact on

Borealis Foods’ financial condition and results of operations.

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 2. Management’s Discussion and Analysis