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Item 7. Management’s Discussion and Analysis

2026-06-02 compared with 2025-04-15 · 465 added, 226 removed, 35 unchanged (95% of the section changed)

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

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

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

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

Our actual results may differ materially

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

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

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

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

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

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

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

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

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

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

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

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

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

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

affordable nutrition.

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

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

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

With U.S.-based

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

sustainability.

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

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

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

The Reverse Recapitalization

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

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

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

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

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

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

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

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

Borealis continues under the name “ Borealis Foods Inc.

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

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

following discussion and analysis of the Company’s consolidated financial condition and results of operations should be read in

conjunction with the audited financial statements and the notes thereto contained elsewhere in this Annual Report.

Certain information

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

actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including,

those set forth under Item 1.A., “Risk Factors,” included in Part I of this Annual Report on Form 10-K.

The accompanying consolidated financial statements have been prepared in

accordance with accounting principles generally accepted in the United States (“U.S.

GAAP”) and our functional currency is the

The consolidated financial statements include the accounts of Borealis Foods Inc.

and its wholly owned subsidiaries.

intercompany balances and transactions have been eliminated in consolidation.

A summary of the significant accounting policies followed

in the preparation of the consolidated financial statements is included in Note 1 to the consolidated financial statements included elsewhere

in this Annual Report.

Our historical financial statements have been

prepared under the assumption that we will continue as a going concern.

Our registered public accounting firms has issued a report on

our consolidated financial statements for the years ended December 31, 2025 and 2024, that includes an explanatory paragraph expressing

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

As of December 31, 2025, we had cash and cash equivalents of approximately

$0.06 million, a working capital deficit of approximately $61.8 million, and an accumulated deficit of approximately $109.8 million.

We have experienced recurring losses from operations and negative cash flows from operating activities.

Our ability to continue as a

going concern is dependent on our ability to generate sufficient cash flows from operations, manage our debt service obligations, and

obtain additional equity or debt financing.

Subsequent to December 31, 2025, we completed the refinancing of our former credit facility

with FrontWell Capital Partners Inc.

through a new Credit Agreement with Oxus Capital PTE Ltd., a related party and a major shareholder.

While the Oxus Credit Agreement eliminated the near-term maturity risk associated with the FrontWell facility, we continue to have substantial

indebtedness, recurring losses, and limited liquidity.

In addition, if the Required Equity Financing under the Conversion Agreement is

not completed by July 1, 2026, approximately $33.3 million of shareholder debt will automatically convert into Common Shares, which would

reduce our debt burden but result in substantial dilution to existing shareholders.

Our financial statements do not include any adjustments

that might result from the outcome of this uncertainty.

If adequate funds are not available to us when we need them, we could be unable

to fund our ongoing business, which, in turn, could cause our customers or suppliers to decrease the amount of business they do with

us or terminate their relationship with us, or we could go into default on our outstanding indebtedness, which, in turn, would permit

our creditors to enforce remedies against us and cause us to consider reducing, discontinuing, or selling operations or seeking protection

from creditors.

The substantial doubt regarding our ability to continue as a going concern may adversely affect our ability to obtain

new financing on reasonable terms or at all.

If we are unable to continue as a going concern, our shareholders may lose some or all of

their investment in our Company.

Any one or more of such events would have a material adverse effect on our business, financial condition,

results of operations and cash flow

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 its strategic

repositioning and channel diversification in 2025, with emphasis on institutional and food service growth, gross margin expansion, and

structural cost reduction.

Net revenue grew 8.7% year-over-year to $30.08 million, gross profit improved 60% to $3.51 million, and total

SG&A declined 35.6% from the prior year.

The net loss of $18.98 million for fiscal 2025 reflects the lingering burden of a capital

structure shaped by the 2024 Reverse Recapitalization, not operational underperformance.

Management is actively engaged in refinancing

discussions and financing initiatives designed to resolve this mismatch and fully unlock the earnings power of our improving operations.

Oxus Capital Term Loan:

Subsequent to December 31,

2025, the Company completed the refinancing of the FrontWell credit facility.

In April 2026, Palmetto Gourmet Foods, Inc.

and its affiliated

entities entered into a $17.0 million term loan credit agreement with Oxus Capital Pte.

Ltd., a major related party shareholder, which

was used to repay and fully discharge the FrontWell credit facility.

The Oxus Term Loan bears interest at 12% per annum, is interest-only

during Year 1 (with Oxus Capital having the option to convert Year 1 accrued interest into common equity of Borealis Foods Inc.), amortizes

on a straight-line basis over 48 months commencing May 2027, and matures in April 2031.

Additional Financing:

We are pursuing equity offerings, convertible

debt, strategic partnerships, and other financing alternatives to provide the working capital required to scale production and normalize

vendor payment terms.

Any completed financing transaction will be disclosed promptly in our SEC filings.

Reverse Recapitalization

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.

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

(i) Oxus domesticated and continued as a corporation under the

laws of Ontario, Canada (“ New Oxus ”);

and (ii) pursuant to the Plan of Arrangement, (a) Newco and Legacy Borealis

amalgamated (the “ Legacy Borealis Amalgamation ”, and the amalgamated corporation resulting therefrom, “ Amalco ”),

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

and (b) following the Legacy Borealis

Amalgamation, New Oxus and Amalco amalgamated (the “ Borealis Amalgamation ,” and together with the Legacy Borealis

Amalgamation, the “Amalgamations,” and the corporation resulting therefrom.

“Borealis,” as a corporation amalgamated

under the Business Corporations Act (Ontario)), with Borealis surviving the Borealis Amalgamation.

Borealis continues under the name

“ Borealis Foods Inc.

otherwise indicated, references to the “Company,” “our,” “us” or “we” in this Item 7

refer to Oxus Acquisition Corp., or Oxus, before the consummation of the Transaction.

References to our “management” or our

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

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

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Accounting Impact of the Reverse Recapitalization

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

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

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

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

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

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

Basis of Presentation

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

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

Results of Operations

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

Comparison of the Years Ended December 31, 2024 and 2023

Years Ended December 31,

2024 2023 2024 vs 2023

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

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

Reverse Recapitalization transaction was accounted for as a reverse recapitalization.

Oxus was deemed the accounting predecessor and

Borealis is the successor SEC registrant.

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

For accounting purposes,

Legacy Borealis was deemed to be the accounting acquirer in the transaction and, consequently, the transaction was treated as a reverse

recapitalization of Legacy Borealis.

Accordingly, the consolidated balance sheets and results of operations of Legacy Borealis became

the historical financial statements of Borealis, and Oxus’ assets, liabilities, and results of operations were consolidated with

Legacy Borealis’ beginning on February 7, 2024.

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

intangible assets recorded.

of Presentation

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

See Note 1 to our consolidated financial statements

for a full description of our basis of presentation.

of Operations

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

of the Years Ended December 31, 2025 and 2024

For the Years Ended December 31,

($ in thousands)

2025 (Unaudited)

2024 (Unaudited)

2025 vs 2024 Variance

% of Revenues, net

% of Prior Period

Sales discounts & allowances

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

Cost of goods sold

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

Total cost of goods sold

Gross profit (loss)

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

Business development

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

General & administrative expenses

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Loss from operations

Other income (expense):

Impairment loss

Gain (loss) on foreign exchange rates

Interest expense

Total other expense

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Income tax benefit

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

Other financial Data:

Adjusted EBITDA

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

Adjusted EBITDA is a non-GAAP financial metric.

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

Revenue and Customer Trends

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

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

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

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

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

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

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

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

Product Mix and Margin Enhancement

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

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

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

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

Key drivers of margin expansion included:

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.

revenues increased $2.4 million, or 8.7%, to $30.1 million for the year ended December 31, 2025, compared to $27.7 million for the year

ended December 31, 2024.

Gross sales increased $2.4 million, or 8.2%, to $31.5 million for the year ended December 31, 2025.

was driven by continued expansion of our institutional food service channel, increasing volumes from key partners and the ongoing ramp-up

of our higher-margin Chef Woo branded products.

We have deliberately and successfully executed

a channel diversification strategy.

Our largest customer represented approximately 57% of revenues in 2023, approximately 22% of revenues

in 2024 and approximately 23% of revenues in 2025.

Our revenue mix reflects a substantially broader and higher-quality customer

base across institutional food service, specialty retail, and select mass channel partners.

This diversification strengthens our revenue

resilience and supports margin improvement.

In 2024, approximately 33% of our total revenues were derived from two customers.

our two largest customers in the aggregate represented approximately 35% of net revenues, with no single customer representing more than

23% of net revenues.

Our revenue mix continues to broaden across institutional food service, specialty retail, and select mass channel

of Goods Sold and Gross Profit

Chef Woo, High Protein Ramen, our flagship brand,

continued its strong growth trajectory in 2025, contributing to meaningful gross margin expansion.

Combined with the growing contribution

of Woodles to school meal programs and the ramp of our food service product lines, the mix shift toward higher-margin branded and institutional

products is the primary driver of our gross margin improvement.

● Product Mix:

Continued shift toward Chef Woo branded and institutional products, which carry higher average

margins than our legacy Ramen Express retail business.

● Customer Mix:

Deliberate reduction in reliance on low-margin mass retail volume and expansion into institutional

accounts with more favorable margin structures.

Operational Efficiencies:

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

Operating Expenses and SG&A Trends

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

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

Sales and Marketing expenses nearly doubled to $5.73 million.

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

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

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

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

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

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

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

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

Interest and Other Income/Expense

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

The reduction resulted from:

• Conversion of debt to equity

• Lower reliance on high-interest debt instruments.

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

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

Liquidity and Capital Resources

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

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

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

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

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

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

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

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

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

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

Tighter inventory management at PGF, with

inventory spoilage charges of approximately $1.1 million concentrated in the first half of the year, declining materially in second half

2025 as we aligned inventory to contracted institutional demand

Gross profit improved $1.32 million, or 60.4%,

to $3.51 million for the year ended December 31, 2025, compared to $2.19 million in 2024 as compared to the negative gross margins of

2022 and 2023.

Gross margin reached 11.7% for the full year, with the fourth quarter averaging 15.0%, its highest quarterly level of the

year, primarily related to product mix with management’s focus on higher margin products.

Expenses and SG&A Trends

Total selling, general and administrative expenses

(“SG&A”) declined 35.6% year-over-year to $14.55 million, or 48.4% of net revenue, compared to $22.59 million, or 81.7%

of net revenue, in the prior year.

This is structural cost reduction, not cosmetic, it reflects the normalization of our cost base following

the Reverse Recapitalization and the maturation of our food service channel investment.

General and administrative expenses were $9.03

million for 2025, compared to $12.75 million in 2024.

The decrease reflects primarily lower freight and distribution costs, lower professional

fees and stock compensation expense, as one-time transaction costs did not recur in 2025.

The prior year also included approximately $1.51

million in one-time SPAC transaction-related costs and approximately $1.27 million in non-recurring stock-based compensation, neither

of which recurred.

Sales and marketing expenses of $5.73 million

recorded in 2024, primarily associated with the national launch of Chef Woo and Gordon Ramsay products and the build-out of our food service

business development pipeline did not recur at the same level in 2025.

In 2025, these costs have been substantially normalized as our

channel strategy has matured.

Training costs declined to $0.95 million in 2025

from $1.72 million in 2024, reflecting the maturation of our production team at PGF as manufacturing capabilities stabilized.

are recorded in SG&A as they are not directly to finished goods production.

A non-cash goodwill impairment charge of $1.92 million and a trademark

impairment charge of $0.09 million were recorded in Q4 2025, reducing the goodwill and trademark balance to zero.

The impairment was determined

following our annual goodwill impairment assessment under ASC 350, reflecting current market conditions and the Company’s capital structure.

This charge has no impact on our liquidity, cash flows, or operational capacity and should not be read as indicative of any deterioration

in our underlying business.

and Capital Resources

Our primary sources of liquidity are borrowings

under the FrontWell credit facility and advances from related parties.

While cash generated from operations has not yet been sufficient

to fully fund our operating requirements at the current stage of development, we believe the trajectory of our operating results including

8.7% net revenue growth, 60.4% gross profit improvement, and 35.6% core SG&A reduction in 2025 demonstrates an operating business

that is approaching the inflection point at which self-funded growth becomes achievable.

Management is actively pursuing targeted refinancing

and additional capital to bridge to that inflection point.

As of December 31, 2025, we had cash and cash equivalents

of $0.06 million, compared to $0.65 million as of December 31, 2024.

We have a working capital deficit of approximately $(61.76) million

as of December 31, 2025 and a deficit of $(13.61) million as of December 31, 2024 The significant increase in the working capital

deficit from the prior year is primarily attributable to the reclassification of the FrontWell term facility and certain related party

advances to current liabilities as those obligations approach scheduled maturity.

These reclassifications are accounting-driven;

is engaged in active discussions to refinance, extend, or restructure these obligations prior to their maturity dates.

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

Years Ended December 31,

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Financing Activities

Operating Activities

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

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

Investing Activities

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

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

Financing Activities

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

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

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

Balance Sheet and Contractual Obligations

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

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

Future Capital Requirements and Liquidity

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

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

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

We are actively exploring additional financing options to strengthen liquidity;

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

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

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

Going Concern

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

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

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

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

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

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

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

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

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

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

Net cash used in operating activities for the

year ended December 31, 2025, was $6.60 million, compared to $15.09 million for the year ended December 31, 2024, an improvement of $8.49

The improvement reflects lower operating losses driven by gross margin expansion and SG&A reduction, partially offset by

changes in working capital including a reduction in accounts payable.

Non-cash adjustments included depreciation and amortization of $1.84

million, non-cash compensation expense of $0.44 million, and the non-cash goodwill and trademark impairment of $2.0 million.

operating cash usage to continue to moderate as gross margins expand and revenue grows toward the volume levels at which fixed overhead

is more fully leveraged.

Net cash used in investing activities was $(0.06)

million for the year ended December 31, 2025, compared to $(1.91) million for the year ended December 31, 2024.

Capital expenditures were

minimal in 2025, reflecting management’s deliberate decision to preserve liquidity.

Our manufacturing infrastructure requires limited

incremental capital investment to support the revenue growth contemplated in management’s plans, as our Saluda, South Carolina facility

has significant installed capacity available to deploy with working capital and customer demand rather than new capital expenditure

Net cash from financing activities reflects payment

activity on finance leases, borrowings and repayments under credit facilities, and related party advance activity during the year.

2025, financing activities provided $6.08 million, driven by the advancement of related party loans and year 2024 of $10.03 million, driven

primarily by proceeds from the $7.60 million line of credit draw and convertible debt proceeds.

Sheet and Contractual Obligations

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.

Capital Requirements and Liquidity

We need additional capital to meet our funding requirements through fiscal 2026 to scale production toward the

utilization levels at which our operating economics become self-reinforcing.

The August 2026 balloon maturity risk associated with the

FrontWell term facility has been eliminated as a result of the Oxus Term Loan described above, which extends our primary debt maturity

to April 2031.

As of December 31, 2025, we had cash on hand of $0.06 million and a negative working capital of approximately $(61.76)

Notes Payable.

We have outstanding convertible notes payable of $3.00 million as of December 31, 2025.

These notes are convertible

into common shares at the option of the holder on or before the earlier of the maturity date or a qualified financing event, as defined

in the note agreements.

completion of the Oxus Term Loan in April 2026 has resolved the most critical capital structure constraint identified at year-end 2025

and materially reduces the total external capital required to reach operational sustainability.

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

as a going concern.

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

financing to address these risks.

The consolidated financial statements have been prepared under the assumption of ongoing operations,

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

Substantial doubt continues to exist about the ability of the

Company to continue as a going concern within one year after the date these consolidated financial statements are issued.

believes the going concern condition is a capital structure challenge, not a reflection of the operating business.

Our manufacturing

facility, our institutional customer base, and our improving unit economics are intact and improving.

Management has implemented the

following strategic and operational initiatives to address the going concern conditions and provide a pathway to financial sustainability:

Revenue and Margin Growth:

Continued expansion of our institutional food service channel with committed demand from several partners.

Chef Woo, our flagship high-protein brand, continues to grow and carries our highest product margins.

The food service channel launched in fiscal 2024 has grown into a meaningful revenue contributor and is expected to be a major driver of the Company’s future revenues and margin expansion.

We have not generated a negative gross margin quarter since the second quarter of 2025.

● Institutional

Revenue Pipeline:

We have contracted institutional relationships with leading global retailers, multinational food and beverage companies

and other food service customers whose combined demand, if fulfilled, would bring our facility to and beyond the utilization levels needed

for sustained profitability.

These relationships represent real contracted revenue not aspirational projections and we believe they provide

the most direct path to the volume levels that transform our fixed cost structure from a headwind into an advantage.

Refinancing Completed — Oxus Capital Term Loan:

Subsequent to December 31, 2025, the Company completed the refinancing of the FrontWell credit facility.

In April 2026, Palmetto Gourmet Foods, Inc.

and its affiliated entities entered into a $17.0 million term loan credit agreement with Oxus Capital Pte.

Ltd., which was used to repay and fully discharge the FrontWell credit facility.

The Oxus Term Loan bears interest at 12% per annum, is interest-only during Year 1 (with Oxus Capital having the option to convert Year 1 accrued interest into common equity of Borealis Foods Inc.), amortizes on a straight-line basis over 48 months commencing May 2027, and matures in April 2031.

We are pursuing equity offerings, convertible debt, strategic partnerships, and other financing alternatives to provide the

working capital required to scale production and normalize vendor payment terms.

Any completed financing transaction will be disclosed

promptly in our SEC filings.

financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of

liabilities in the normal course of business.

The financial statements do not include any adjustments that might result from the outcome

of this uncertainty.

Management is confident that the combination of its operational progress, institutional demand pipeline, asset base,

and ongoing financing initiatives provides a credible pathway to financial sustainability;

however, there can be no assurance that management’s

plans will be achieved within the timeframes required.

Contractual Obligations and Commitments.

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

following table summarizes our non-cancellable contractual obligations and other commitments as of December 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.

operating lease liabilities for certain of our offices and facilities, accounts payable, and accrued expenses including related party

commitment amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant

terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the

actions under the contracts.

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

Off-Balance Sheet Arrangements

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

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

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

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

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

26,550,000 26,550,000

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

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

Emerging Growth Company Status

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

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

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

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

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

Emerging Growth Company Status (continued)

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

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

Implications of being a Smaller Reporting Company

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

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

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

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

How We Evaluate Our Operations

Net Income/(Loss)

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

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

Adjusted EBITDA

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

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

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

We view EBITDA as an important indicator of performance.

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

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

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

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

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

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

Sheet Arrangements

of December 31, 2025 and December 31, 2024, we did not engage in any off-balance sheet arrangements, including the use of structured

finance, special purpose entities, or variable interest entities.

following represents a summary of warrants outstanding and exercisable on December 31, 2025:

Classification Exercise

Expiration Date

Outstanding Shares

Exercisable Shares

Private Placement Warrants

Public Warrants

Private Placement Warrants

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 2021 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.

Growth Company Status

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

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.

of being a Smaller Reporting Company

Additionally,

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

Smaller reporting companies may take

advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.

We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of common shares held

by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter, or (ii) our annual revenues exceeded

$100 million during such completed fiscal year and the market value of common shares held by non-affiliates equals or exceeds $700 million

as of the end of that year’s second fiscal quarter.

To the extent we take advantage of such reduced disclosure obligations, we

may also make comparison of our financial statements with other public companies difficult or impossible.

We Evaluate Our Operations

Income/(Loss)

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.

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

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.

view EBITDA as an important indicator of performance.

We define EBITDA as net income/(loss) plus net interest expense, income taxes,

depreciation, and amortization.

We define Adjusted EBITDA as EBITDA further adjusted for any foreign exchange gains/(losses), share-based

compensation expense and non-recurring items if identified.

EBITDA and Adjusted EBITDA are supplemental measures utilized by our management

and other users of our financial statements such as investors, research analysts and others, to assess the financial performance of our

assets without regard to financing methods, capital structure or historical cost basis.

Adjusted EBITDA is a key performance measure

that our management uses to assess its operating performance.

We facilitate internal comparisons of our operating performance on a more

consistent basis.

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

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

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

We believe that EBITDA and Adjusted

EBITDA enhances an investor’s understanding of our financial performance as they are useful in assessing our operating performance

from period-to-period by excluding certain items that we believe are not representative of our core business.

“Adjusted EBITDA,” a non-GAAP measure,

is defined as net income attributable to us before (1) income tax benefit, of $(0.07) million, (2) exchange rate, of $(0.01), (3) interest

expense, of $5.99 million, (4) depreciation and amortization, of $1.84 million, (5) training, of $0.95 million, (6) business development,

of $2.21 million, (7) deferred stock compensation $0.44 million, and (8) marketing $2.35 million, all for the fiscal year ended December

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

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

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

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

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

Furthermore, the

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

We, therefore, believe

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

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

the underlying ongoing operating performance of our business.

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

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

“Adjusted EBITDA,” a non-GAAP measure,

is defined as net income attributable to us before (1) income tax benefit, of $(0.13) million, (2) interest expense, of $5.06 million,

(3) depreciation and amortization, of $2.32 million, (4) training, of $1.72 million, (5) business transaction costs, of $3.17 million ,

(6) business development, of $2.40 million, (7) deferred stock compensation $1.27 million, and (8) marketing $5.73 million, all for the

fiscal year ended December 31, 2024.

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

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

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

Recent Accounting Pronouncements

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

Furthermore, the Compensation Committee of our Board of Directors uses such measures 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.

Accounting Pronouncements

Note 1 to Borealis Foods’ financial statements included elsewhere in this Annual Report for information about recent accounting

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

financial condition and results of operations.

Quantitative and Qualitative Disclosures About Market Risk.

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

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

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

Concentration Risk

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

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

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

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

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

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

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

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

Market Risk represents the risk of loss that may impact our financial

position due to adverse changes in financial market prices and rates.

Our market risk exposure is primarily the result of fluctuations

in foreign currency exchange rates.

Concentration

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 2.5% for early payments.

Accounts receivables are written off when they are determined to be uncollectible based on the

financial stability of its customers and existing economic conditions.

Sales to two customers accounted for approximately

35% and 33% of net revenues for the years ended December 31, 2025 and 2024, respectively.

Accounts receivable from three customers amounted

to approximately 51% and 37% of total accounts receivable as of December 31, 2025 and 2024, respectively.

Substantially all of the Company’s

sales for the years ended December 31, 2025 and 2024 occurred in the United States, Canada, Central America, South America, and Europe.

from 10 vendors accounted for approximately 54% and 47% of purchases during the fiscal years ended December 31, 2025 and 2024, respectively.

Accounts payable to these vendors totaled approximately $2,764,000 and $3,217,000 as of December 31, 2025 and 2024, respectively

Foreign Currency Risk

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

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

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

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

Currency Risk

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

therefore, foreign exchange

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

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

dollars and a significant portion of our operating expenses are denominated

in Canadian dollars.

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

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

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

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

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

Inflation Risk

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

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

Matching Revenues with Costs

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

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

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

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

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

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

As we expand our presence in international markets,

our results of operations and cash flows may increasingly be subject to fluctuations due to changes in foreign currency exchange rates

and may be adversely affected in the future due to changes in foreign currency exchange rates.

To date, we have not entered into any

hedging arrangements to minimize the impact of these fluctuations in the exchange rates.

We will periodically reassess our approach to

manage our risk relating to fluctuations in currency rates.

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

the periods presented.

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

Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset

such higher costs with product price increases, and our inability or failure to do so could harm our business, financial condition, and

results of operations.

Revenues with Costs

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

These costs, include business development costs,

transaction costs and research and development costs, consist primarily of personnel and related expenses including salaries, benefits,

share-based compensation, scale-up expenses, depreciation and amortization expenses, and facility lease costs.

Scale-up expenses includes

material waste costs, production personnel costs and various related expenses.

These costs are focused on enhancements to our existing

product formulations and production processes, as well as the scientific development of new products and economic verticals.

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

Monetization of future opportunities

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

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

What changed 10-K

Item 7. Management’s Discussion and Analysis