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美國

證券和交易委員會

華盛頓特區 20549

表格 10-Q

x 根據美國證券交易法第13或15(d)條規定提交的季度報告

截至季度結束日期的財務報告2024年9月30日

或

o 根據美國證券交易法第13或15(d)條規定的過渡報告

過渡期從            到             

北極光食品公司.

(根據其章程規定的註冊人準確名稱)

安大略省

001-40778

98-1638988

（國家或其他管轄區的 公司成立或組織）

(設立或其它管轄地的州)

（IRS僱主 （身份證明號碼）

1540 Cornwall Rd. #104 Oakville, 安大略省						L6J 7W5
(主要行政辦公室地址)						(郵政編碼)

公司電話號碼，包括區號：（905) 278-2200

Not Applicable

(如果自上次報告以來有變化，請列出原名稱、原地址和原財政年度)

根據證券法第12(b)條註冊的證券：

每個類的標題：

交易代碼：

所有交易所的名稱：

普通股

BRLS

納斯達克

認購權證

BRLSW

納斯達克 資本市場

請在以下方框內打勾：(1) 在過去的12個月內(或者在註冊公司需要提交此類報告的較短時期內)，公司已經提交了根據證券交易法1934年第13或15(d)條規定需要提交的所有報告；以及 (2) 在過去的90天內，公司一直受到了此類報告提交的要求。是 x 不是 o

用複選標記表明註冊人是否在過去 12 個月內（或者在要求註冊人提交此類文件的較短時間內）以電子方式提交了根據第 S-T 法規（本章第 232.405 節）第 405 條要求提交的所有交互式數據文件。 是的 x 沒有 o

在交易所法案第120億.2條中，勾選表示報告人爲大型加速文件提交人、加速文件提交人、非加速文件提交人、小型報告公司或新成長公司。請參閱「大型加速文件提交者」、「加速文件提交者」、「小型報告公司」和「新興成長公司」的定義。

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大型加速報告人			o			加速文件提交人			o
非加速文件提交人			x			較小的報告公司			x
新興成長公司			x

如果是新興成長型企業，請勾選是否選擇不使用按照《證券交易法》第13(a)條規定的新或修訂財務會計準則的過渡期。 o

請在以下方框內打勾：公司是否是空殼公司(根據證券交易法第12b-2條規定定義）。是o 不是 x

截至2024年11月13日， 21,378,890 發行且流通的註冊公司普通股無面值。

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    關於前瞻性聲明的注意事項

這份關於表格10-Q的季度報告（以下簡稱“季度報告”) Borealis Foods Inc. 提交的文件包含前瞻性陳述，因此並非歷史事實。這包括但不限於有關財務狀況、業務策略以及管理層未來運營的計劃和目標的陳述。這些陳述構成預測、預報和前瞻性聲明，並不保證業績。此類陳述的特徵在於它們並不嚴格與歷史或當前事實相關。當在本季度報告中使用諸如「預期」、「相信」、「繼續」、「可能」、「估計」、「期待」、「打算」、「可能」、「也許」、「計劃」、「可能的」、「潛在的」、「預測」、「項目」、「應當」、「努力」、「會」和類似表達時，可以識別出前瞻性陳述，但這些詞的缺失並不意味着表述不是前瞻性的。當我們討論我們的策略或計劃時，我們是在做出預測、預報或前瞻性聲明。這些陳述基於 Borealis 管理層的信念、假設以及當前可獲得的信息。

前瞻性聲明可能包括，例如，有關以下內容的聲明：

			●			我們有限的運營歷史使得評估我們的業務和前景變得困難；

			●			如果我們未能保持足夠的運營和財務資源，未能獲得額外融資，尤其是在我們持續快速增長的情況下，我們可能無法執行我們的業務計劃或維持我們的競爭地位和高水平的客戶滿意度。
			●			我們有巨大的債務負擔，其中相當一部分即將到期，需要償還或再融資。

			●			我們的管理團隊在管理上市公司方面經驗有限；
			●			我們是一家早期階段和新興增長公司，因此，我們面臨着所有與早期階段和新興增長公司相關的風險；
			●			我們已識別出我們財務報告內部控制的重大缺陷；如果我們未能維持有效的財務報告內部控制系統，我們可能無法準確報告我們的財務結果或防止欺詐。因此，股東可能會對我們的財務和其他公共報告失去信懇智能，這將危害我們的業務及我們普通股的交易價格；
			●			我們的獨立註冊公共會計師事務所對我們能否持續經營表示了重大懷疑；
			●			我們的營業收入很大一部分集中在有限的客戶身上；

			●			不利的氣候條件可能對我們的業務產生不利影響。我們可能會採取各種行動來減輕與氣候變化相關的業務風險，這可能需要我們承擔大量成本，並且可能不會成功，其中包括與管理氣候風險相關的長期預測的不確定性。

			●			我們對供應商的依賴可能會對我們的經營業績和財務狀況產生重大的不利影響；

			●			製造業和生產預測是基於多種假設。我們必須充分評估我們的製造能力和庫存供應。如果我們高估了需求並過度擴建我們的能力或庫存，我們可能會顯著低效使用資產。製造設施的低效使用可能會對我們的毛利率和其他經營結果產生不利影響；

i

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			●			由於難以預測的條件，我們可能會遇到原料和包裝成本的波動；

			●			未來的成功在一定程度上將依賴於我們保持技術領導地位的能力，提升現有食品產品，開發滿足不斷變化的客戶需求和偏好的新食品產品，宣傳和營銷我們的食品產品，以及及時有效地影響和應對新興行業標準和其他技術變化。

			●			我們的業務取決於我們對專有技術的使用，嚴重依賴法律來保護這種技術；

			●			由於作爲一家上市公司運營，我們將面臨顯著增加的成本，同時我們的管理層將需要投入大量時間進行新的合規舉措；並且

			●			其他因素詳見第二部分。項目1A。“風險因素”在本季度報告中。

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report or incorporated by reference in our Form 8-K/A filed with the U.S. Securities and Exchange Commission (the "SEC") on April 15, 2024.

These forward-looking statements are based on information available as of the date of this Quarterly Report and current expectations, forecasts, and assumptions, and involve a number of judgments, risks, and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws. We intend the forward-looking statements contained in this Quarterly Report to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the “Securities Act”, and Section 21E of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”.

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements.

ii

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    Borealis Foods Inc. and Subsidiaries

    Form 10-Q for the Three and Nine Months Ended September 30, 2024

						Page
PART I. FINANCIAL INFORMATION						1
Item 1.			Financial Statements			1
			Condensed Consolidated Balance Sheets (Unaudited)			1
			Condensed Consolidated Statements of Operations (Unaudited)			2
			Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (Unaudited)			3
			Condensed Consolidated Statements of Cash Flows (Unaudited)			5
			Notes to the Unaudited Condensed Consolidated Financial Statements			6
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			36
Item 4.			Controls and Procedures			37
PART II. OTHER INFORMATION
Item 1.			Legal Proceedings			39
Item 1A.			Risk Factors			39
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			54
Item 3.			Defaults Upon Senior Securities			54
Item 4.			Mine Safety Disclosures			54
Item 5.			Other Information			54
Item 6.			Exhibits			55
SIGNATURES						56

iii

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Borealis Foods Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

    

			September 30, 2024						December 31, 2023
			(Unaudited)
Assets
Current Assets
Cash			$	721,542					$	7,615,630
Accounts receivable, net of allowance for credit losses of $320,650 as of September 30, 2024 and $224,433 as of December 31, 2023			2,907,790						1,775,756
Inventories, net			8,750,399						6,945,028
Prepaid expenses			1,048,029						845,878
Total current assets			13,427,760						17,182,292
Property, plant and equipment, net			46,066,397						46,408,540
Intangible assets			253,017						—
Right - of-use asset, net			77,311						108,469
Goodwill			1,917,356						1,917,356
Other non-current assets			169,685						169,685
Total assets			$	61,911,526					$	65,786,342
Liabilities and Shareholders' equity (deficit)
Current liabilities:
Accounts payable and accrued expenses			$	8,596,330					$	10,887,730
Due to related parties			15,427,453						7,825,790
Convertible notes payable, current portion			—						47,300,000
Notes payable, current portion, net of capitalized loan costs			5,706,934						681,121
Operating lease payable, current portion			17,776						43,794
Finance leases payable, current portion			550,212						565,353
Total current liabilities			30,298,705						67,303,788
Line of credit			6,500,000						—
Convertible notes payable, net of current portion			3,000,000						3,000,000
Notes payable, net of current portion			14,149,885						13,509,189
Operating lease payable, net of current portion			43,793						71,119
Finance leases payable, net of current portion			1,283,129						1,683,308
Deferred tax liability			1,566,233						1,566,233
Total liabilities			56,841,745						87,133,637
Shareholders' equity (deficit)
Common shares, no par value			—						—
Additional paid-in capital			90,096,688						44,118,081
Accumulated deficit			(85,026,907)						(65,465,376)
Total shareholders' equity (deficit)			5,069,781						(21,347,295)
Total liabilities and shareholders' equity (deficit)			$	61,911,526					$	65,786,342

See accompanying notes to the unaudited condensed consolidated financial statements.

1

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Borealis Foods Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

			For the Three Months Ended												For the Nine Months Ended
			September 30, 2024						September 30, 2023						September 30, 2024						September 30, 2023
Gross sales			$	8,075,788					$	8,264,745					$	22,036,285					$	23,870,009
Sales discounts & allowances			(387,889)						(539,392)						(1,127,673)						(1,342,799)
Revenue, net			7,687,899						7,725,353						20,908,612						22,527,210
Cost of goods sold			5,953,089						7,205,527						17,109,095						21,449,469
Depreciation			461,540						996,625						1,861,351						2,938,098
Total cost of goods sold			6,414,629						8,202,152						18,970,446						24,387,567
Gross profit (loss)			1,273,270						(476,799)						1,938,166						(1,860,357)
Sales & marketing			1,123,460						312,289						5,073,810						1,677,316
Business development			1,306,589						196,243						2,475,764						435,015
Training			477,752						651,500						1,364,149						2,130,207
General & administrative expenses			1,986,517						2,786,155						8,807,852						9,332,345
Total sales, general & administrative expenses			4,894,318						3,946,187						17,721,575						13,574,883
Loss from operations			(3,621,048)						(4,422,986)						(15,783,409)						(15,435,240)
Other income expense
Other income (expense)			(2,765)						4,298						3,368						163,588
Interest expense			(1,207,524)						(2,166,413)						(3,766,542)						(5,535,932)
Total other expense			(1,210,289)						(2,162,115)						(3,763,174)						(5,372,344)
Loss before income taxes			(4,831,337)						(6,585,101)						(19,546,583)						(20,807,584)
Income tax expense			(832)						—						(14,948)						(15,092)
Net loss			$	(4,832,169)					$	(6,585,101)					$	(19,561,531)					$	(20,822,676)
Earnings per share from net loss
Basic			$	(0.23)					$	(0.61)					$	(0.98)					$	(1.94)
Diluted			$	(0.23)					$	(0.61)					$	(0.98)					$	(1.94)
Weighted average shares outstanding
Basic			21,378,890						10,731,583						19,951,016						10,731,583
Diluted			21,378,890						10,731,583						19,951,016						10,731,583

See accompanying notes to the unaudited condensed consolidated financial statements.

2                              

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Borealis Foods Inc. and Subsidiaries

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

			Three and Nine Months Ended September 30, 2023
			Class A Common Shares												Class B Common Shares												Class C Common Shares															Additional Paid-In Capital						Accumulated Deficit									Total Shareholders’ Deficit
			Number of Shares						Common Shares						Number of Shares						Common Shares						Number of Shares						Common Shares
Balance at January 1, 2023			100,000,000						$	—					56,008,749						$	—					6,345,000						$	—														$	42,625,786					$	(37,986,129)								$	4,639,657
Expense related to stock options (Note 8)			—						—						—						—						—						—															193,554						—									193,554
Net loss			—						—						—						—						—						—															—						(5,935,580)									(5,935,580)
Balance at March 31, 2023			100,000,000						—						56,008,749						—						6,345,000						—															42,819,340						(43,921,709)									(1,102,369)
Expense related to stock options (Note 8)			—						—						—						—						—						—															98,436						—									98,436
Net loss			—						—						—						—						—						—															—						(8,301,995)									(8,301,995)
Balance at June 30, 2023			100,000,000						—						56,008,749						—						6,345,000						—															42,917,776						(52,223,704)									(9,305,928)
Expense related to stock options (Note 8)			—						—						—						—						—						—															100,151						—									100,151
Marketing representative issued equity (Note 1)			—						—						1,109,205						—						—						—															1,000,000						—												1,000,000
Net loss			—						—						—						—						—						—															—						(6,585,101)									(6,585,101)
Balance at September 30, 2023			100,000,000						$	—					57,117,954						$	—					6,345,000						$	—														$	44,017,927					$	(58,808,805)											$	(14,790,878)

See accompanying notes to the unaudited condensed consolidated financial statements.

3

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Borealis Foods Inc. and Subsidiaries

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

			Three and Nine Months Ended September 30, 2024
			Class A Common Shares												Class B Common Shares												Class C Common Shares																		Additional Paid-In Capital						Accumulated Deficit									Total Shareholders’ Deficit
			Number of Shares						Common Shares						Number of Shares						Common Shares						Number of Shares						Common Shares
Balance at January 1, 2024			100,000,000						$	—					56,008,749						$	—					6,345,000						$	—																	$	44,118,081					$	(65,465,376)								$	(21,347,295)
Expense related to stock options (Note 8)			—						—						—						—						—						—																		1,273,053						—									1,273,053
Convertible debt converted to equity from reverse recapitalization			—						—						—						—						—						—																		54,991,472						—									54,991,472
Assumption of debt from reverse recapitalization			—						—						—						—						—						—																		(10,285,918)						—									(10,285,918)
Conversion to Newco shares from reverse recapitalization			(78,621,110)						—						(56,008,749)						—						(6,345,000)						—																		—						—									—
Net loss			—						—						—						—						—						—																		—						(8,431,622)									(8,431,622)
Balance at March 31, 2024			21,378,890						—						—						—						—						—																		90,096,688						(73,896,998)									16,199,690
Net loss			—						—						—						—						—						—																		—						(6,297,740)									(6,297,740)
Balance at June 30, 2024			21,378,890						$	—					—						$	—					—						$	—																	$	90,096,688					$	(80,194,738)								$	9,901,950
Net loss			—						—						—						—						—						—																		—						(4,832,169)									(4,832,169)
Balance at September 30, 2024			21,378,890						$	—					—						$	—					—						$	—																	$	90,096,688					$	(85,026,907)								$	5,069,781

See accompanying notes to the unaudited condensed consolidated financial statements.

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Borealis Foods Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited)
			For the Nine Months Ended September 30, 2024						For the Nine Months Ended September 30, 2023
Cash Flows from Operating Activities:
Net loss			$	(19,561,531)					$	(20,822,676)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash compensation expense related to stock options			1,273,053						392,141
Depreciation and amortization			1,861,351						2,938,098
Amortization of loan costs			232,798						28,266
Provision for credit losses			96,217						49,642
Provision for inventory reserve			(33,534)						(141,440)
Changes in operating assets and liabilities:
Accounts receivable			(1,228,251)						(726,552)
Inventories			(1,771,837)						(389,911)
Prepaid expenses and other			(202,151)						119,921
Operating lease payable			(22,185)						—
Accounts payable and accrued expenses			5,085,952						2,497,246
Net cash used in operating activities			(14,270,118)						(16,055,265)
Cash flows from investing activities
Purchases of property, plant and equipment			(1,519,208)						(3,516,490)
Purchases of intangible assets			(253,017)						—
Proceeds from reverse capitalization			63,575						—
Net cash used in investing activities			(1,708,650)						(3,516,490)
Cash flows from financing activities
Net payments to related parties			—						(500,000)
Proceeds from convertible notes payable			3,000,000						25,000,000
Payments on convertible notes payable			—						(4,500,000)
Payments on finance leases payable			(415,320)						(366,846)
Borrowings on line of credit			6,500,000						—
Payments on line of credit			—						(10,630,000)
Proceeds from notes payable			—						15,000,000
Payments on loan fees			—						(607,436)
Net cash provided by financing activities			9,084,680						23,395,718
Net change in cash			(6,894,088)						3,823,963
Cash, beginning of period			7,615,630						5,146,616
Cash, end of period			$	721,542					$	8,970,579
Supplemental cash flow data
Cash paid during the period for:
Interest			$	2,314,683					$	2,540,446
Income taxes			14,116						15,092
Non-cash investing and financing activities
Conversion of notes payable into Class A shares			(54,991,472)						—
Note payable supplier finance			2,747,833						—
Note payable accounted for as due to related party			7,601,661						—

See accompanying notes to the unaudited condensed consolidated financial statements.

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Borealis Foods Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

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

1. Description of Business and Summary of Significant Accounting Policies

Overview

These unaudited condensed consolidated financial statements include the financial statements of Borealis Foods Inc. (“Borealis”), and its subsidiaries: Palmetto Gourmet Foods (Canada) Inc., ("PGF Canada"), Palmetto Gourmet Foods, Inc. (“PGF”), PGF Real Estate I, Inc. (“PGF RE I”), PGF Real Estate II, Inc. (“PGF RE II”), and Borealis IP Inc ("Borealis IP") (collectively, the “Company”).

Borealis is a food technology integrator with a mission to address global food security challenges through the development and commercialization of tasty, affordable and sustainable functional foods. Borealis has developed a range of high-quality, affordable, sustainable, and nutritious premium, ready-to-eat meals sold in the United States, Canada, Central America, South America and Europe.

PGF Canada is a holding company, holding the shares of PGF.

PGF is a food manufacturing company with a BRC AA+ rated food grade facility .

PGF RE I and PGF RE II are holding companies that rent their fixed assets to PGF.

Borealis IP holds the intellectual property of the Company.

Intercompany balances and transactions have been eliminated in consolidation.

Reverse Recapitalization Transaction

On February 23, 2023, Borealis Foods Inc., a corporation incorporated under the laws of Canada (“Legacy Borealis”) entered into a Business Combination Agreement (as amended, amended and restated, supplemented, or otherwise modified from time to time, the "Business Combination Agreement") with Oxus Acquisition Corp. (“Oxus”) and 1000397116 Ontario Inc., an Ontario corporation and a wholly owned subsidiary of Oxus (“Newco”). On February 7, 2024, Legacy Borealis, Oxus, and Newco consummated the transactions (collectively, the “Reverse Recapitalization”) contemplated by the Business Combination Agreement by means of a statutory arrangement under the Canada Business Corporations Act and the Business Corporations Act (Ontario), implemented in accordance with the terms and conditions set forth in the Business Combination Agreement and the related plan of arrangement (as amended, amended and restated, supplemented, or otherwise modified from time to time, the “Plan of Arrangement”) following the approval at an extraordinary general meeting of the shareholders of Oxus held on February 2, 2024.

Pursuant to the terms of the Business Combination Agreement, among other things: (i) Oxus domesticated and continued as a corporation under the laws of Ontario, Canada (“New Oxus”); and (ii) pursuant to the Plan of

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Borealis Foods Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

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

Reverse Recapitalization Transaction (continued)

Arrangement, (a) Newco and Legacy Borealis amalgamated (the “Legacy Borealis Amalgamation”, and the amalgamated corporation resulting therefrom, “Amalco”), with Amalco surviving the Legacy Borealis Amalgamation as a wholly-owned subsidiary of New Oxus; and (b) following the Legacy Borealis Amalgamation, New Oxus and Amalco amalgamated (the “Borealis Amalgamation,” and together with the Legacy Borealis Amalgamation, the “Amalgamations,” and the corporation resulting therefrom, “Borealis,” as a corporation amalgamated under the Business Corporations Act (Ontario)), with Borealis surviving the Borealis Amalgamation. Borealis continues under the name “Borealis Foods Inc.”

Accounting Impact of the Reverse Recapitalization

The transaction was accounted for as a reverse recapitalization. Oxus Acquisition Corp. was deemed the accounting predecessor and Borealis is the successor Securities and Exchange Commission (“SEC”) registrant.

Under this method of accounting, Oxus was treated as the acquired company for financial statement reporting purposes. For accounting purposes, Legacy Borealis was deemed to be the accounting acquirer in the transaction and, consequently, the transaction was treated as a recapitalization of Legacy Borealis. Accordingly, the consolidated balance sheets and results of operations of Legacy Borealis became the historical financial statements of Borealis, and Oxus’ assets, liabilities, and results of operations were consolidated with Legacy Borealis’ beginning on February 7, 2024. The net assets of Oxus were recognized at carrying value, with no goodwill or other intangible assets recorded. Transaction costs incurred and unpaid by Oxus were converted into debt (Note 4) and show as a reduction in additional paid-in capital.

Going Concern

The unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company suffered recurring losses from operations through September 30, 2024 that raise substantial doubt about its ability to continue as a going concern.

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

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

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

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and the Company’s functional currency is the U.S. Dollar.

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Borealis Foods Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

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

Basis of Presentation (continued)

We have condensed certain categories of information in our consolidated financial statements to enhance the readability and understanding of those statements by making them more succinct. As a result, certain footnote disclosures we normally include in our annual consolidated financial statements have been omitted but remain prepared in accordance with US GAAP and the rules and regulations of the SEC. In management’s opinion, we have made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present our unaudited condensed consolidated balance sheets and unaudited condensed consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows. Our interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2023 contained in Form 8-K/A filed with the SEC by Borealis on April 15, 2024. Certain prior period amounts have been reclassified to conform to current period presentation.

Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Cash Equivalents

The Company classifies all highly liquid securities with stated maturities of three months or less from the date of purchase as cash equivalents. There were no cash equivalents as of September 30, 2024 and December 31, 2023.

Inventories, net

Inventories are stated at the lower of cost or net realizable value. The cost of raw materials is determined using the first-in, first-out method. The cost of finished goods is determined using the weighted average cost method.

A reserve is recorded for any food inventory that is expired (or expected to expire before sale) and any raw materials for projects that have been discontinued.

Prepaid Expenses

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

Property, Plant and Equipment, net

Property, plant, and equipment are recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets or, where applicable, based on actual machine hours utilized.

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Borealis Foods Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

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

Property, Plant and Equipment, net (continued)

Management has opted to depreciate the manufacturing lines and related assets using the machine hours method, as it provides a more accurate reflection of the actual utilization and wear of these assets. This approach ensures that the depreciation expense aligns more closely with the assets' usage patterns, thereby improving the matching of costs with related revenues.

This change in depreciation method was a change in estimate effected by a change in accounting principle and accordingly was accounted for prospectively in accordance with relevant guidance. The change in the method of calculating depreciation resulted in an increase in net income of $548,000 for the three-month period ended and $1,158,000 for the nine-month period ended September 30, 2024. Since this adjustment is applied prospectively, it has no impact on the financial results for periods prior to June 30, 2024. The total cost basis of machinery subject to depreciation over machine hours was approximately $35,275,000 as of September 30, 2024 and $35,255,000 as of December 31, 2023.

Straight-line assets:

Buildings and improvements			10-30 years
Furniture, fixtures and equipment			3-15 years

Machine hours assets:

Furniture, fixtures and equipment			89,232 machine hours

Construction in progress includes the cost of property, plant and equipment being constructed or otherwise not yet in service. Costs include materials, labor, capitalized interest, engineering and testing costs, and other costs necessary to get the assets ready for their intended use.

Intangible Assets

Patents are recorded at cost and are amortized on a straight-line basis over their estimated useful lives. The carrying value of patents is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Loan Costs

The costs of obtaining equipment leases and debt issuance costs are amortized over the term of the respective obligations, using the straight-line method. US GAAP requires that the effective yield method be used to amortize debt issuance costs; however, the effect of using the straight-line method is not materially different from the results that would have been obtained under the effective yield method. Amortization of loan costs is included as a component of interest expense in the accompanying consolidated statements of operations. Loan costs are shown as reduction of related debt balances for financial statement presentation.

9

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Borealis Foods Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

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

Goodwill

The Company’s goodwill resulted from a prior year acquisition. Goodwill is not amortized but is reviewed annually for impairment or more frequently as events or circumstances indicate its carrying amount may not be

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

Amounts Due to Related Parties

Amounts due to related parties (Company shareholders and entities controlled by Company shareholders) total $15,427,453 as of September 30, 2024 and $7,825,790 as of December 31, 2023. This related party liability is comprised of a note payable to a shareholder in the amount of $7,325,790, due on demand and bearing interest at 10% annually. An additional note payable to a shareholder in the amount of $500,000 as of September 30, 2024 and December 31, 2023, respectively, bears interest at 10% annually and is due December 31, 2024. The remaining $7,601,661 shareholder note payable was a result of expenses recognized by Oxus and resulted in reduction of contributed equity at the Reverse Recapitalization. This note matures in February 2025, and is non-interest bearing.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Revenue and Cost Recognition and Accounts Receivable

The Company's revenue is primarily generated from the sale of food products. These sales contain a single performance obligation.  Revenue is recognized at a point in time and the Company recognizes revenue upon shipment of goods when ownership, risk, and rewards transfer to the customer. Certain of the Company's contracts with customers include variable consideration consisting of payment discounts and promotions.  These programs include rebates, temporary on-shelf price reductions, off-invoice discounts, retailer advertisements, product coupons, slotting fees and other trade activities. Provision for discounts and incentives are recorded in the same period in which the related revenues are recognized.  Gross revenues for the three and nine month periods ended September 30, 2024 and 2023 were approximately $8,076,000 and $8,265,000 for the three months ended and $22,036,000 and $23,870,000 for the nine months ended September 30, 2024 and 2023, respectively.

Total payment discounts and promotions were approximately $388,000 and $539,000 resulting in net revenues of approximately $7,688,000 and $7,725,000 for the three month periods ended September 30, 2024 and 2023, respectively. Total payment discounts and promotions were approximately $1,128,000 and $1,343,000 resulting in net revenues of approximately $20,909,000 and $22,527,000 for the nine month periods ended September 30, 2024 and 2023, respectively.

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Borealis Foods Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

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

Revenue and Cost Recognition and Accounts Receivable (continued)

The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. The incremental cost to obtain contracts was not material.

Accounts receivable related to product sales typically have payment terms of 30 days. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The allowance for credit losses reflects the Company’s estimate of probable losses related to its accounts receivable. Collections from customers are continuously monitored and an allowance for credit losses is maintained based on historical experience adjusted for current conditions and reasonable forecasts taking into account geographical and

industry-specific economic factors. The Company also considers specific customer collection issues. Since the Company’s accounts receivable are largely similar, the Company evaluates its allowance for credit losses as one portfolio segment. At origination, the Company evaluates credit risk based on a variety of credit quality factors including prior payment experience, customer financial information, credit ratings, probabilities of default, industry trends and other internal metrics. On a continuing basis, data for each major customer is regularly reviewed based on past-due status to evaluate the adequacy of the allowance for credit losses; actual write-offs are charged against the allowance.

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

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

Advertising

Costs associated with advertising are expensed as incurred and are included in selling, general and administrative expenses. Advertising costs expensed for the three and nine month periods ended September 30, 2024 and 2023 were approximately $1,123,000 and $312,000 for the three months ended and $5,074,000 and $1,677,000 for the nine months ended, respectively.

In April 2023, the Company entered into a multi-year agreement for a marketing representative to assist in the recipes for three co-branded private label ramen noodles as well to be utilized in marketing of the Company for the marketing representative's name, image, likeness and voice. This agreement includes a service fee, an investment stake in the Company, and a royalty agreement on future co-branded sales. The service fee under this agreement is expensed on a straight-line basis under the terms of the contract. Prepayments made under the agreement are included in prepaid expenses. No sales subject to the royalty agreement were made for the three and nine months ended September 30, 2024 and 2023. The marketing representative has a world-wide reputation within the gourmet food industry. We believe this agreement will assist us to increase our presence in the ramen noodle market.

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Borealis Foods Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

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

Research and Development Costs

Research and development costs have been expensed in the period incurred. Research and development costs consist primarily of personnel and related expenses for our research and development staff, including salaries, benefits, share-based compensation, scale-up expenses, depreciation and amortization expenses on research and development assets, and facility lease costs. Scale-up expenses include material waste costs, production personnel costs, and related expenses. Research and development efforts are focused on enhancements to our existing product formulations and production processes in addition to the development of new products. The Company expects to continue investing in research and development over time, as research and development and innovation are core elements of our business strategy, and the Company believes they represent a critical competitive advantage. The Company believes continued innovation will capture a larger share of consumers through additional revenue streams. Research and development expenses for the three and nine months ended September 30, 2024 and 2023 were approximately $56,000 and $37,000 for the three months ended and $142,000 and $423,000 for the nine months ended, respectively, and are included in selling, general, and administrative expenses in the accompanying condensed consolidated statements of operations.

Business Development Costs

Business development expenses include all costs associated with directly growing and expanding a business segment, such as advertising, market research, and training. These costs include staff salaries, travel expenses, and consulting expenses that the Company incurs while searching for new opportunities and maintaining current relationships. Business development expenses for the three and nine months ended September 30, 2024 and 2023 were approximately $1,307,000 and $196,000 for the three months ended and $2,476,000 and $435,000 for the nine months ended, respectively.

Transaction Costs

On February 23, 2023, the Company signed a definitive business combination agreement with Oxus which was consummated on February 7, 2024 and described further in Note 1. In connection with this agreement, the Company has incurred transaction costs of approximately $0 and $1,241,000 for the three months ended and $1,506,000 and $4,005,000 for the nine months ended September 30, 2024 and 2023, respectively. Transaction costs have been expensed as incurred and are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

Concentration of Risk

The Company maintains cash balances at financial institutions in excess of federally insured limits as of September 30, 2024 and December 31, 2023. The Company has not experienced any losses related to these balances. The Federal Deposit Insurance Corporation insures eligible accounts up to $250,000 per depositor at each financial institution. The Company holds cash at well-known banks and does not believe that it is exposed to any significant credit risks on its cash.

The Company extends unsecured credit to its customers in the ordinary course of business. Payment terms are generally net 30 days with discounts amounting up to 2% for early payments. Accounts receivable are written

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Borealis Foods Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

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

Concentration of Risk (continued)

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

Sales to four customers accounted for approximately 53% and sales to three customers accounted for approximately 77% of net revenues for the three month periods ended September 30, 2024 and 2023, respectively. Sales to three customers accounted for approximately 45% and 74% of net revenues for the nine month periods ended September 30, 2024 and 2023, respectively. Accounts receivable from one and three customers amounted to approximately 19% and 80% of total accounts receivable as of September 30, 2024 and 2023, respectively. Substantially all of the Company’s sales for the three and nine month periods ended September 30, 2024 and 2023 occurred in the United States, Canada, Central America, South America, and Europe.

Purchases from 10 vendors accounted for approximately 51% and 52% of purchases during the three months ended and 54% and 52% of purchases during the nine month periods ended September 30, 2024 and 2023, respectively. Accounts payable to these vendors totaled approximately $2,570,000 and $1,218,000 as of September 30, 2024 and 2023, respectively.

Fair Value Measurements

In accordance with US GAAP, the Company defines fair value as the price that would be received to sell an asset or the price paid to transfer a liability in an orderly transaction between market participants at the measurement date. US GAAP establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available.

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

Level 1:     Observable inputs, such as quoted market prices in active markets for the identical asset or liability that are accessible at the measurement date.

Level 2:     Inputs, other than quoted market prices included in Level 1, that are observable either directly or indirectly for the asset or liability.

Level 3: Unobservable inputs that reflect the entity’s own assumptions about the exit price of the asset or liability. Unobservable inputs may be used if there is little or no market data for the asset or liability at the measurement date.

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Borealis Foods Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

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

Fair Value Measurements (continued)

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company does not have assets measured at fair value on a recurring basis. The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

The carrying amounts reported in the condensed consolidated balance sheets for accounts receivable and accounts payable approximate their fair values due to the short-term nature of these instruments.

There is no material difference between the carrying amounts and fair values of the Company’s debt obligations, notes payable, line of credit and convertible notes payable, as interest rates approximate current market rates for similar types of debt instruments (Level 2).

Disclosures about the fair value of financial instruments are based on pertinent information available to management as of September 30, 2024 and December 31, 2023. Although management is not aware of any factors that would significantly affect the reasonableness of the fair value amounts, such amounts were not comprehensively revalued for purposes of these unaudited condensed consolidated financial statements and current estimates of fair value may differ significantly from the amounts presented herein.

Stock Based Compensation

The Company accounts for its stock compensation arrangements at fair value in accordance with Accounting Standards Codification ("ASC") 718 - Compensation - Stock Compensation. Compensation cost relating to share-based payment transactions is recognized in the Company’s condensed consolidated financial statements based on the estimated fair value of the instruments issued. The Company measures the cost of employees’ services in exchange for stock awards based on the grant-date fair value of the award using the Black Scholes model and recognizes the cost over the period the employee is required to provide services for the award, which is the vesting period. The Company accounts for forfeitures as they occur.

Warrants

Outstanding warrants were assumed at the Reverse Recapitalization. The fair value of the warrants was determined using the Monte Carlo analysis at the time of the transaction. The Company accounts for its Public and Private warrants as equity-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity classification.

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Borealis Foods Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

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

Warrants (continued)

This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. It was determined at the Transaction Date that there were no changes to the classes or language that would impact the original assessment that the Public and Private warrants should be classified as equity.

Recent Accounting Pronouncements

In November 2023, the FASB issued 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, to enhance disclosures about significant segment expenses for public entities reporting segment information under ASC Topic 280. The amendments require public entities to disclose significant expense categories for each reportable segment, other segment items, the title and position of the chief operating decision-maker, and interim disclosures of certain segment-related information previously required only on an annual basis. The amendments clarify that entities reporting single segments must disclose both the new and existing disclosures under Topic 280, and a pubic entity is permitted to disclose multiple measures of segment profit or loss if certain criteria are met. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of this standard on its condensed consolidated financial statements and related disclosures.

2. Inventories, net    

Inventories were as follows:    

			September 30, 2024						December 31, 2023
Raw materials			$	6,759,946					$	5,190,811
Finished goods			2,212,620						1,942,850
Reserve for obsolete inventory			(222,167)						(188,633)
			$	8,750,399					$	6,945,028

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Borealis Foods Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

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

3. Property, Plant and Equipment, net

Property, plant and equipment were as follows:

			September 30, 2024						December 31, 2023
Building and improvements			$	10,110,188					$	10,108,917
Furniture, fixtures and equipment			43,871,755						42,594,605
Construction in progress			5,316,728						5,078,103
			59,298,671						57,781,625
Less: accumulated depreciation			(13,232,274)						(11,373,085)
			$	46,066,397					$	46,408,540

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

4. Debt

In 2022, the Company issued $20,000,000 of convertible notes payable that, after an extension was negotiated, had a maturity in February 2024 (unless converted) and bore interest at 10% annually. On or before the earlier of the maturity date or a “qualified financing event”, as defined in the note agreements, the outstanding principal and interest were convertible, at the option of the holder, into common shares of the Company. The notes and accrued interest were converted into 2,189,997 common shares with the consummation of the Reverse Recapitalization with Oxus.

In 2022, the Company issued $4,800,000 in convertible notes payable. During 2023, $4,500,000 of these notes matured without conversion and were repaid by the Company. The remaining $300,000 of convertible notes payable bore interest at 10% annually and, after an extension was negotiated, mature in February 2024 (unless converted). The outstanding principal and interest under the remaining convertible notes were convertible, at the option of the holder, into the same equity as issued upon the Company’s issuance of preferred or common shares of at least $10,000,000. The notes and accrued interest were converted into 40,544 common shares with the consummation of the Reverse Recapitalization with Oxus.

In 2023, the Company issued $27,000,000 of convertible notes payable, of which $27,000,000 had a maturity date in 2024 (unless converted) and bore interest at 10% annually. On or before the earlier of the maturity date or a “qualified financing event”, as defined in the note agreements, the outstanding principal and interest were convertible, at the option of the holder, into common shares of the Company.

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

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Borealis Foods Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

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

4. Debt (continued)

In 2021, the Company issued a $3,000,000 convertible note that matures in 2026 (unless converted) and bears interest at 3% annually. Accrued interest is payable monthly. The outstanding principal and interest under the convertible note may be converted, at the option of the holder, into the same equity as issued upon the Company’s issuance of preferred or common shares of at least $10,000,000 (a “qualified financing event”), either as a single round or a lead round, at 85% of the per share price paid during the qualified financing event. The note holder elected not to convert at the Reverse Recapitalization and therefore the note is due at maturity.

In January 2024, the Company issued a $3,000,000 convertible note payable that had a maturity date in 2024 (unless converted) and bore interest at 10% annually. The note was converted into 375,925 common shares with the consummation of the Reverse Recapitalization with Oxus.

During 2023, the Company entered into a $25,000,000 financing agreement with a maturity date in August 2026. Under this agreement, the Company has a $15,000,000 term facility which was used to pay off its then existing line of credit. In March 2024, the company entered into an amendment to extend the maturity date of the term facility to March 2028. Under the amendment, payments of $83,000 are due monthly beginning in March 2025 with a lump sum payment of $12,167,000 due at maturity. Interest accrues at the prime rate plus an applicable margin of 4.75% per annum and is payable monthly.

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

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

In addition to the term facility, the Company obtained a $10,000,000 line of credit to fund working capital needs in support of its growth strategy. Interest accrues at the prime rate plus the applicable margin of 4.50%. Interest is due and payable monthly beginning in September 2023. The line of credit includes an unused line fee of 0.25% per annum beginning on closing date through six months and increases to 0.50% per annum thereafter. As of September 30, 2024 and December 31, 2023 the line of credit had $6,500,000 and $0 drawn upon it, respectively.

In the period leading up to the Reverse Recapitalization, significant transaction costs were incurred by both parties. In total, four notes payable of $13,035,374 were issued for the transaction debt and mature in 2025. Details for the notes are as follows:

Note 1 – Incurred by Borealis. The related expenses were recognized as incurred by Borealis and the trade payable was subsequently reclassified to notes payable. Note 1 was issued in the original principal amount of $2,138,828. The note matures in February 2025, and bears interest at 10% per annum.

Note 2 – Incurred by Borealis. The related expenses were recognized as incurred by Borealis and the trade payable was subsequently reclassified to notes payable. Note 2 was issued in the original principal amount of $1,314,875. The note matures in February 2025, and bears interest at 10% per annum.

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Borealis Foods Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

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

4. Debt (continued)

Note 3 – Incurred by Oxus. The related expenses were recognized by Oxus and resulted in a reduction of contributed equity at the Reverse Recapitalization. Note 3 was issued in the original principal amount of $1,980,800. The note matures in February 2025, and bears interest at 8% per annum.

Note 4 – Incurred by Oxus. The related expenses were recognized by Oxus and resulted in a reduction of contributed equity at the Reverse Recapitalization. Note 4 was issued in the original principal amount of $7,601,661. The note matures in February 2025, is non-interest bearing and payable to a related party.

Debt balances outstanding as of September 30, 2024 are due as follows: $6,267,000 in 2025; $10,500,000 in 2026; $1,000,000 in 2027; and $12,167,000 in 2028.

5. Income Taxes

The Company accounts for income taxes using the liability method. Deferred income tax assets and liabilities are determined based on differences between the financial statement and income tax basis of the respective assets and liabilities, using enacted tax rates in effect for the years when the differences are expected to reverse. 

Borealis is taxed under Canadian tax laws at a rate of 26.5%. Borealis does not file a consolidated tax return. PGF, PGF RE I, and PGF RE II (the “United States subsidiaries”) are taxed as C corporations, with a statutory rate of 21%.

The total income tax (benefit) expense recorded for the three months ended September 30, 2024 and 2023 was $1,000 and $0, respectively, on a consolidated pre-tax book loss of approximately $4,831,000 and $6,585,000 in the three month periods ended September 30, 2024 and 2023, respectively. The total income tax expense recorded for the nine months ended September 30, 2024 and 2023 was approximately $15,000 and $15,000, respectively, on a consolidated pre-tax book loss of approximately $19,547,000 and $20,808,000 in the nine month periods ended September 30, 2024 and 2023, respectively.

The Company’s tax provision is based on a projected effective rate based on annualized amounts applied to actual income to date. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of capital loss and net operating loss (“NOL”) carryforwards is dependent upon the generation of future capital gains and taxable income in periods prior to their expiration. The Company currently provides a

valuation allowance against the full amount of the NOLs since the Company is uncertain as to the realization of the full amount of benefits in the future. The Company will continue to assess the need for, and the amount of, the valuation allowance at each reporting period.

Transactions for which tax deductibility or the timing of tax deductibility is uncertain are analyzed by management based on their technical characteristics. The Company recognizes accrued interest and penalties, if any, related to uncertain tax positions in income tax expense. Management has determined that the Company does not have any uncertain tax positions or associated unrecognized tax benefits that materially impact the

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Borealis Foods Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

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

5. Income Taxes (continued)

condensed consolidated financial statements or related disclosures.  As a result, at September 30, 2024, the Company did not have a liability for unrecognized tax benefits, interest or penalties under United States or Canadian tax law. The Company paid no penalties during the three and nine month period ending September 30, 2024. The Company files income tax returns in the Canadian and U.S. federal jurisdictions, and in South Carolina. The Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2021. There are no tax examinations currently in progress.

6. Contingencies

From time to time, the Company is involved in legal proceedings in the normal course of business. Management does not believe that the final resolution of any such legal proceedings will have a material effect on the unaudited condensed consolidated financial position or results of operations of the Company.

7. Warrants

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

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

8. Stock Option Plan

During 2022, the Company created a stock option plan (the “Plan”) that provides for the granting of options to certain employees for the purchase of the Company’s class D common shares. The Plan provides for the grant

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Borealis Foods Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

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

8. Stock Option Plan (continued)

of stock options for eligible employees as determined by the Board of Directors and does not guarantee employment rights. During the nine month period ended September 30, 2024 and 2023 the Company granted options to purchase 333,574 and 227,666 shares, respectively, of the Company’s common shares at an exercise price of $0.0001 per share. The weighted-average grant date fair values of options granted was $0.60 per share. The fair values of the stock-based awards granted were calculated with the following assumptions:

Risk-free interest rate						3.81		%
Expected term (years)						5-10
Expected volatility						80.00		%
Dividend yield						0.00		%

For the three and nine month periods ended September 30, 2024 and 2023, the Company recorded approximately $0 and $100,000 for the three months ended and $1,273,000 and $392,000 for the nine months ended, respectively, of stock-based compensation expense. On February 7, 2024, as a result of the Reverse Recapitalization (Note 1), 4,000,000 stock options were exercised and converted at an exchange ratio of 0.0661 into 264,400 shares of Newco Class A common stock. This stock option plan was closed upon the business combination and a new equity incentive plan was approved and implemented as of February 7, 2024.

Stock option activity for the periods ended September 30, 2024 and 2023 is summarized as follows:

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Borealis Foods Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

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

			Shares			Weighted Average Exercise Price			Weighted Remaining Contractual Life(Years)
Options outstanding at December 31, 2022			3,468,760			$	0.0001		6.65
Granted			227,666			0.0001			6.65
Exercised			—			—			—
Expired or forfeited			—			—			—
Options outstanding at September 30, 2023			3,696,426			$	0.0001		5.90

Options outstanding at December 31, 2023			3,666,426			$	0.0001		8.10
Granted			333,574			0.0001			8.10
Exercised			(4,000,000)			0.0001			—
Expired or forfeited			—			—			—
Options outstanding at September 30, 2024			—			—			—

9. Earnings per share

Basic earnings or loss per share is based on the weighted average of number of common shares outstanding for the period. For the purposes of calculating diluted earnings per share, the number of shares outstanding has been adjusted for the dilutive effects of warrants.

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Borealis Foods Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

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

Basic earnings (loss) per share calculation			Three months ended						Nine Months ended
			September 30, 2024			September 30, 2023			September 30, 2024			September 30, 2023
Net income (loss) available to common shareholders			$	(4,832,169)		$	(6,585,101)		$	(19,561,531)		$	(20,822,676)
Weighted average common shares outstanding (basic)			21,378,890			10,731,583			19,951,016			10,731,583
Basic earnings (loss) per share from net income			$	(0.23)		$	(0.61)		$	(0.98)		$	(1.94)
Diluted earnings (loss) per share calculation
Net income (loss) available to common shareholders			$	(4,832,169)		$	(6,585,101)		$	(19,561,531)		$	(20,822,676)
Weighted average common shares outstanding (basic)			21,378,890			10,731,583			19,951,016			10,731,583
Warrants			—			—			—			—
Weighted average common shares outstanding (diluted)			21,378,890			10,731,583			19,951,016			10,731,583
Diluted earnings (loss) per share from net income *			$	(0.23)		$	(0.61)		$	(0.98)		$	(1.94)

*In periods where the Company has incurred a net loss, diluted earnings per share is based on the number of common shares issued and outstanding as including the effects of warrants would be anti-dilutive.

10. Subsequent Events

The Company evaluated events and transactions after September 30, 2024 through November 14, 2024, the date the unaudited condensed consolidated financial statements were available to be issued, for subsequent events requiring disclosure in these financial statements. The Company did not identify any subsequent events that required disclosure.

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ITEM 2. 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.

Overview

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.

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.

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The Reverse Recapitalization (continued)

Pursuant to the terms of the Business Combination Agreement, among other things: (i) Oxus domesticated and continued as a corporation under the laws of Ontario, Canada (“New Oxus”); and (ii) pursuant to the Plan of Arrangement, (a) Newco and Legacy Borealis amalgamated (the “Legacy Borealis Amalgamation”, and the amalgamated corporation resulting therefrom, “Amalco”), with Amalco surviving the Legacy Borealis Amalgamation as a wholly-owned subsidiary of New Oxus; and (b) following the Legacy Borealis Amalgamation, New Oxus and Amalco amalgamated (the “Borealis Amalgamation,” and together with the Legacy Borealis Amalgamation, the “Amalgamations,” and the corporation resulting therefrom, “Borealis,” as a corporation amalgamated under the Business Corporations Act (Ontario)), with Borealis surviving the Borealis Amalgamation. Borealis continues under the name “Borealis Foods Inc.”

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 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. GAAP. See Note 1 to our 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):

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			Three Months Ended September 30,
			2024 (Unaudited)						2023 (Unaudited)						2024 vs 2023 Variance
			$			% of Revenues, net			$			% of Revenues, net			$			% of Prior Period
Revenues
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.

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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:

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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.

Net Loss

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.

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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 Variance
			$			% of Revenues, net			$			% of Revenues, net			$			% of Prior Period
Revenues
Gross sales			22,036						23,870						(1,834)
Sales discounts & allowances			(1,127)			(5)		%	(1,343)			(6)		%	216			1		%
Revenue, net			20,909						22,527						(1,618)
Cost of goods sold			17,110			82		%	21,450			95		%	(4,340)			(13)		%
Depreciation			1,861			9		%	2,938			13		%	(1,077)			(4)		%
Total cost of goods sold			18,971			91		%	24,388			108		%	(5,417)			(17)		%
Gross profit (loss)			1,938			9		%	(1,861)			(8)		%	3,799			17		%
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			17,722			85		%	13,575			60		%	4,147			25		%
Loss from operations			(15,784)			(75)		%	(15,436)			(69)		%	(348)			(5)		%
Total other expense			(3,763)			(18)		%	(5,372)			(24)		%	1,609			6		%
Loss before income taxes			(19,547)			(93)		%	(20,808)			(92)		%	1,261			(1)		%
Income tax expense			(15)			—		%	(15)			—		%	—			—		%
Net loss			$	(19,562)		(94)		%	$	(20,823)		(92)		%	1,261			(2)		%
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.

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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.

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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.

Net Loss

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.

Outlook

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.

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

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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.

Cash Flows

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
Net cash (used in) provided by:
Operating Activities			$	(14,270)		$	(16,055)		$	(18,005)		$	(24,053)
Investing Activities			(1,709)			(3,516)			(4,466)			(3,329)
Financing Activities			9,085			23,396			24,940			29,624

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.

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.

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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. The financing activities in 2024 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.

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.

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.

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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):

			Payments due by period
			Total			Less than 1 year			1-3 years			4-5 years			More than 5 years
Contractual obligations and other commitments *			$	55,276		$	30,076		$	12,783		$	12,417		$	—

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

The commitment amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts. The table does not include obligations under agreements that we can cancel without a significant penalty.

Off-Balance Sheet Arrangements

As of 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.

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.

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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.

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.

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.

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How We Evaluate Our Operations (continued)

We view EBITDA as an important indicator of performance. We define EBITDA as net income/(loss) plus net interest expense, income taxes, depreciation, and amortization. We define Adjusted EBITDA as EBITDA further adjusted for any foreign exchange gains/(losses), share-based compensation expense and non-recurring items if identified. EBITDA and Adjusted EBITDA are supplemental measures utilized by our management and other users of our financial statements such as investors, research analysts and others, to assess the financial performance of our assets without regard to financing methods, capital structure or historical cost basis. Adjusted EBITDA is a key performance measure that our management uses to assess its operating performance. We facilitate internal comparisons of our operating performance on a more consistent basis. We use these performance measures for business planning purposes and forecasting. We believe that EBITDA and Adjusted EBITDA enhances an investor’s understanding of our financial performance as they are useful in assessing our operating performance from period-to-period by excluding certain items that we believe are not representative of our core business.

“Adjusted EBITDA,” a non-GAAP measure, is defined as net income attributable to us before (1) income 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. 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

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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. 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.

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.

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Item 3.     Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in foreign currency exchange rates.

Concentration Risk

The Company extends unsecured credit to its customers in the ordinary course of business. Payment terms are generally net 30 days with discounts amounting up to 2% for early payments. Accounts receivable are written off when they are determined to be uncollectible based on the financial stability of its customers and existing economic conditions.

Sales to four customers accounted for approximately 53% and sales to three customers accounted for approximately 77% of net revenues for the three month periods ended September 30, 2024 and 2023, respectively. Sales to three customers accounted for approximately 45% and 74% of net revenues for both the nine month periods ended September 30, 2024 and 2023, respectively. Accounts receivable from one and three customers amounted to approximately 19% and 80% of total accounts receivable as of September 30, 2024 and 2023, respectively. Substantially all of the Company’s sales for the nine month periods ended September 30, 2024 and 2023 sales occurred in the United States, Canada, Central America, South America and Europe.

Purchases from 10 vendors accounted for approximately 51% and 52% of purchases during the three months ended and 54% and 52% of purchases for the nine month periods ended September 30, 2024 and 2023, respectively. Accounts payable to these vendors totaled approximately $2,570,000 and $1,218,000 as of September 30, 2024 and 2023, respectively.

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. dollars). To date, a majority of our sales have been denominated in U.S. dollars and a significant portion of our operating expenses are denominated in Canadian dollars. We also purchase certain of our key manufacturing inputs in Euros. As we expand our presence in international markets, our results of operations and cash flows may increasingly be subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign currency exchange rates. To date, we have not entered into any hedging arrangements to minimize the impact of these fluctuations in the exchange rates. We will periodically reassess our approach to manage our risk relating to fluctuations in currency rates.

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

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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.

Item 4.     Controls and Procedures

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Evaluation of Disclosure Controls and Procedures

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. Our internal control over financial reporting is a process

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Evaluation of Disclosure Controls and Procedures (continued)

designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our condensed consolidated financial statements for external purposes in accordance with U.S. GAAP.

Internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error or overriding of controls. Because of the inherent limitations, only reasonable assurance with respect to financial statement preparation and presentation can be provided and misstatements may not be prevented or detected. Management evaluated the design and effectiveness of the Company’s internal control over financial reporting as of September 30, 2024 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control Integrated Framework 2013. Based on its evaluation, management concluded that our internal control over financial reporting was not effective as of September 30, 2024 due to material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.

Consistent with December 31, 2023, the Company did not effectively design, implement and operate effective process-level control activities related to inventory management and analysis of complex technical accounting matters.

As a result of these deficiencies, material misstatements were identified and corrected in the consolidated financial statements as of and for the year ended December 31, 2023. Because there is a reasonable possibility that material misstatements of the consolidated financial statements will not be prevented or detected on a timely basis, we concluded the deficiencies represent material weaknesses in our internal control over financial reporting and our internal controls over financial reporting was not effective as of September 30, 2024. However, we have been in the process of remediating the internal control integrated framework in order to address this weakness. In addition, we have hired additional technical accounting consultants to assist with any knowledge gaps to address the deficiencies.

Our Chief Executive Officer and Chief Financial Officer have taken additional steps to support that the condensed consolidated financial statements as of and for the nine-month period ended September 30, 2024 are presented fairly in accordance with U.S. GAAP.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Exchange Act Rule 13a–15(f) and 15d-15(f)) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Remediation Plan

Subsequent to the year ended December 31, 2023, and under the direction of our Chief Executive Officer and Chief Financial Officer, we have been developing and implementing a comprehensive plan to remediate the identified material weaknesses. We began implementing certain measures as part of the remediation plan including: (i) development of a detailed remediation plan addressing the material weaknesses related to the control environment, risk assessment and monitoring, (ii) institution of policies and processes to support the functioning of internal controls over financial reporting, (iii) design and implementation of a comprehensive risk assessment process, (iv) installation of new ERP system (v) hiring/outsourcing of individuals with appropriate skills and experience.

The material weaknesses being addressed by the above-mentioned remediation plan will not be considered remediated until the applicable controls operate for a sufficient period of time, and management concludes, through testing, that these controls are operating effectively. This has not occurred to date.

Although we have commenced the remediation process and intend to complete it as promptly as possible, we cannot estimate how long it will take to remediate these material weaknesses. In addition, new material weaknesses may be discovered that require additional time and resources to remediate. Until the remediation is complete, we plan to continue to perform additional analyses and other procedures to ensure that our condensed consolidated financial statements are prepared in accordance with U.S. GAAP.

PART II – OTHER INFORMATION

Item 1.     Legal Proceedings

We are not currently a party to any litigation or claims that, if determined adversely against us, would have a material adverse effect on our business operating results, financial condition, or cash flows. We may, from time to time, be party to litigation and subject to claims in the ordinary course of business. Regardless of the outcome, litigation can have an adverse impact on us because of the defense and settlement costs, diversion of management resources, and other factors.

Item 1A.     Risk Factors

You should consider carefully the risks and uncertainties described below or incorporated by reference in our Form S-4 filed with the SEC on January 11, 2024, Form 8-K/A filed with the SEC on April 15, 2024, together with all of the other information contained in this Quarterly Report. If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business or results of operations.

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Item 1A.     Risk Factors (continued)

We have a limited operating history which makes it difficult to evaluate our business and prospects.

We have a limited operating history, which makes it difficult to evaluate our business and prospects to forecast our future results. We were founded in 2019. Although we have experienced substantial revenue growth on an

annual basis, we have incurred losses since inception. As of September 30, 2024, we had an approximate accumulated deficit of $85.0 million. There can be no assurance that revenue growth will continue in the future.

In addition, we may experience substantial fluctuations in operating results in the future caused by various factors, including:

			●			general economic conditions;

			●			specific economic conditions in the food and agriculture industry;

			●			the impact of inflation and rising interest rates across the economy, including higher food, grocery, raw materials, transportation, energy, labor and fuel costs;

			●			increases in the price of raw materials, labor, wages or other inputs that our suppliers use in manufacturing and supplying products, along with logistics, transportation, shipping and other related costs, may lead to higher production and shipping costs for our products. Any increase in the cost of inputs to our production could lead to higher costs for products in retail channels and could negatively impact our operating results and future profitability;

			●			the introduction of new products by us or our competitors; and

			●			the mix of products sold and the mix of channels through which those products are sold.

As a strategic response to a changing competitive environment, we may elect from time to time to make, among other things, certain pricing, product, or marketing decisions, and any such decisions could have a material adverse effect on our periodic results of operations, including revenue and profits from quarter to quarter.

Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.

Our historical financial statements have been prepared under the assumption that it will continue as a going concern. Our registered public accounting firm has issued a report on our financial statements for the years ended December 31, 2023 and 2022, that includes an explanatory paragraph expressing substantial doubt in our ability to continue as a going concern. As of September 30, 2024, we had cash-on-hand of $721,542 and negative working capital of ($16.87 million). 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

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Item 1A.     Risk Factors (continued)

we need them, we could go into default on our outstanding indebtedness, which would, in turn, permit our creditors to enforce remedies against us and cause us to consider reducing, discontinuing, or selling operations

or seeking protection from creditors, and further raise substantial doubt about our ability to continue as a going concern. The 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 Borealis Foods.

If we fail to maintain adequate operational and financial resources, particularly if we continue to grow rapidly, we may be unable to execute our business plan or maintain our competitive position and high-level customer satisfaction.

We must continue to expand in order to maintain our competitive position and continue to meet our customers’ increasing demands for product, variety, quality and availability, and price/performance targets. Our ability to grow depends, to a significant extent, on our ability to expand our food processing operations, which requires significant advance capital expenditures, as well as advance expenditures and commitments for facilities, personnel, and advertising. Timely access to capital markets is essential for us to achieve our business plan. We will need to raise additional capital from equity or debt sources in order to address our liquidity deficiency and to finance our growth and capital expenditures contemplated for future periods. There can be no assurance that we will be able to raise such capital on favorable terms or at all. In the event that we are unable to obtain such additional capital, we may be required to reduce the scope of our presently anticipated expansion. Our inability to achieve projected growth could have a material adverse effect on our results of operations and could adversely impact our ability to compete.

The war in Ukraine, and the sanctions in place, could adversely affect global energy and financial markets thus potentially affecting our business and customers.

The outbreak of war in Ukraine has already affected global economic markets, including a dramatic increase in the price of oil and gas, and the uncertain resolution of this conflict could result in protracted and/or severe damage to the global economy. Russia’s military interventions in Ukraine have led to, and may lead to, additional sanctions being levied by the United States, European Union, and other countries against Russia. Russia’s military incursion and the resulting sanctions could adversely affect global energy and financial markets and thus could affect the global markets, our customers’ businesses and potentially our business. At this time, we (i) do not have any direct business or contracts with any Russian or Ukraine entity as a supplier or customer, (ii) do not have any knowledge whether any of our customers or suppliers have any direct business or contracts with any Russian entity, (iii) do not believe that our business segments, products, lines of service, projects or operations are materially impacted by supply chain disruptions resulted from the war in Ukraine, and (iv) have not been materially financially affected by the war in Ukraine. The extent and duration of the military action, sanctions, and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions caused by Russian military action or resulting sanctions may magnify the impact of other risks described in this section.

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Item 1A.     Risk Factors (continued)

We cannot predict the progress or outcome of the situation in Ukraine, as the conflict and governmental reactions are rapidly developing and beyond their control. Prolonged unrest, intensified military activities, or more extensive sanctions impacting the region could have a material adverse effect on the global economy, and such effect could in turn have a material adverse effect on our business, financial condition, results of operations, and prospects.

We do not anticipate any new or heightened risk of potential cyberattacks by state actors or others since Russia’s invasion of Ukraine, and we have not taken any actions to mitigate such potential risks. Our management team will continue to monitor any potential risks that might arise due to the war in Ukraine which are specific to us, including but not limited to risks related to cybersecurity, sanctions, and supply chain, suppliers, or service providers in affected regions.

We face market competition, and if we are unable to compete effectively with our competitors, our business and operating results could be materially adversely affected.

The food and agriculture business is highly competitive, and faces increased competition as a result of consolidation, channel proliferation, and the growth of online food retailers and new market participants. Currently, the leading providers of food and agriculture products include large food and agriculture companies, as well as a number of smaller companies. Many of these companies possess financial resources significantly greater than those of ours, and accordingly, could initiate and support prolonged price competition to gain market share. In particular, the large food and agriculture companies could significantly undercut our pricing for our products. If significant price competition were to develop, we likely would be forced to lower our prices, possibly for a protracted period, which would have a material adverse effect on our financial results and could threaten our economic viability. In addition, many of these large competitors possess marketing, agricultural and food processing resources greater than those of ours. Smaller competitors, although often faced with financial barriers, typically compete on the basis of their ability to create niche markets by rapidly introducing products of interest to local customers and then expanding. The resulting price pressure and niche loyalties present substantial competitive challenges for us.

Our management team has limited experience managing a public company.

Some members of our management team have limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company that is subject to significant regulatory oversight and reporting obligations under the federal, foreign and state or provincial securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could harm our business, results of operations, and financial condition.

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Item 1A.     Risk Factors (continued)

Our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) collectively have no prior experience managing a public company and no meaningful financial reporting education or experience. They are and currently will continue to be heavily dependent on engaging and dealing with outside professional advisors, primarily accountants, lawyers, and financial advisors who are not and will not be affiliated with Borealis’ independent auditors. We do not have any formal arrangements with professionals to help our CEO and CFO and cannot provide any assurance that we will be able to establish arrangements with professionals on terms or costs that are acceptable or affordable to us.

We have identified weaknesses in our internal control over financial reporting. If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our Common Shares.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in its implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with our review of the adequacy of our disclosure controls and procedures or internal controls over financial reporting, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. For example, during the preparation of the financial statements as of and for the year ended December 31, 2022, management discovered an error relating to our accounting for a business acquisition that was completed in a year prior to 2021. As a result, management recorded a prior period adjustment as of January 1, 2021 to correct this error. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock. In addition, we did not effectively design, implement and operate effective process-level control activities related to inventory management and analysis of complex technical accounting matters. As a result of these deficiencies, material misstatements were identified and corrected in the consolidated financial statements as of and for the year ended December 31, 2023. Because there is a reasonable possibility that material misstatements of the consolidated financial statements will not be prevented or detected on a timely basis, we concluded the deficiencies represent material weaknesses in our internal control over financial reporting. As of September 30, 2024 our internal control over financial reporting was not effective. We are in the process of remediating and implementing the internal control over integrated framework in order to address this weakness. In addition, we have hired additional technical accounting consultants to assist with any knowledge gaps to address the deficiencies.

We are required to disclose changes made in our internal controls and procedures on a quarterly basis and our management will be required to assess the effectiveness of these controls annually. However, for as long as we are an emerging growth company as defined in the Securities Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting. We could be an emerging growth company for up to five years. An independent assessment of the effectiveness of our

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Item 1A.     Risk Factors (continued)

internal controls over financial reporting could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls over financial reporting could lead to restatements of our financial statements and require us to incur the expense of remediation.

A significant portion of our revenue is concentrated with a limited number of customers.

A significant portion of our revenue is concentrated with a limited number of customers. Approximately 52% of our total revenue was derived from three customers during the nine months ended September 30, 2024. A disruption in our relationship with one of these customers could materially adversely affect our business, results of operations, cash flows, and financial position. We could experience fluctuations in our customer base or the mix of revenue by customers as markets and strategies evolve or are affected by changes in the general economy or the food industry among other things. Our customers’ demand for our products may fluctuate due to factors beyond our or any such customer’s control. For example, in 2023, our customer orders were not placed at the volume nor pace that was anticipated due to a number of factors that include, among others, the Ukraine conflict, increased transportation costs, warehouse availability at customer and retailer concerns about a potential shift in retail consumption patterns as the COVID-19 pandemic subsided, all of which negatively impacted our revenue growth. Even a meaningful change in a customers’ inventory strategy could impact the industries demand and growth for our product. If these customers were to reduce their purchases, we would lose a material amount or most of our current revenue. This would result in lower margins and materially adversely impact our business, results of operations, cash flows, and financial position.

We may not continue to grow or maintain our active customer base, may not be able to achieve or maintain profitability, and may not be aligned with customer trends and preferences.

There are a number of trends in consumer preferences which have an impact on us and the food industry as a whole. These include, among others, preferences for speed, convenience and ease of food preparation, natural, nutritious, and well-proportioned meals, products that are sustainably sourced and produced and are otherwise environmentally friendly, as well as a recent trend toward meat substitutes. Concerns as to the health impacts and nutritional value of certain foods may increasingly result in food producers being encouraged or required to produce products with reduced levels of salt, sugar, and fat and to eliminate trans-fatty acids and certain other ingredients. Consumer preferences are also shaped by concern over waste reduction and the environmental impact of products. Our success depends on both the continued appeal of our products and, given the varied backgrounds and tastes of our customer base, our ability to offer a sufficient range of products to satisfy a broad spectrum of preferences. Any shift in consumer preferences in the material markets in which we operate could have a material adverse effect on our business. Consumer tastes are also susceptible to change. In addition, the growing presence of alternative retail channels could negatively impact our sales if we fail to adapt. For example, consumers with increasingly busy lifestyles are choosing the online grocery channel as a more convenient and faster way of purchasing their food products, and are also increasingly using the internet for meal ideas. Our competitiveness, therefore, depends on our ability to predict and quickly adapt to consumer preferences and trends, exploiting profitable opportunities for product development without alienating our existing consumer base or focusing excessive resources or attention on unprofitable or short-lived trends. All of

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Item 1A.     Risk Factors (continued)

these efforts require significant research and development and marketing investments. If we are unable to respond on a timely and appropriate basis to changes in demand or consumer preferences and trends, our sales volumes and margins could be materially adversely affected.

We will need to grow the size of our organization, and we may experience difficulties in managing this growth.

We are currently experiencing rapid growth and expansion. This rapid growth has placed, and is expected to continue to place, a significant strain on our administrative, operational, and financial resources and increased demands on our systems and controls. While we believe that our operating and financial control systems and controls are adequate to address expansion plans for the next 12 months, there can be no assurance that such systems and controls will be adequate to maintain and effectively monitor future growth. Failure to continue to upgrade the operating and financial control systems or unexpected expansion difficulties could adversely affect our business, results of operations, and financial condition. We anticipate that our continued growth will require us to recruit and hire a substantial number of new managerial, agricultural and food processing, and sales and marketing personnel.

We run the risk of crop failures largely dependent on factors outside of our control.

Our ability to ensure a continuing supply of ingredients at competitive prices depends on many factors beyond our control, such as the number and size of farms that grow certain crops such as wheat, the vagaries of these farming businesses (including poor harvests impacting the quality of the peas grown), changes in national and world economic conditions, including as a result of COVID-19 or the outbreak of hostilities or war, tariffs and our ability to forecast our ingredient requirements. The high-quality ingredients used in many of our products are vulnerable to adverse weather conditions and natural disasters, such as floods, droughts, frosts, earthquakes, hurricanes, and pestilence. Adverse weather conditions and natural disasters can lower crop yields and reduce crop size and quality, which in turn could reduce the available supply of, or increase the price of, quality ingredients. In addition, we purchase some ingredients and other materials offshore, and the price and availability of such ingredients and materials may be affected by political events or other conditions in these countries or tariffs, trade wars, or the outbreak of hostilities or war. We also compete with other food producers in the procurement of ingredients, and this competition may increase in the future if consumer demand for plant-based protein products increases. If supplies of quality ingredients are reduced or there is greater demand for such ingredients from us and others, we may not be able to obtain sufficient supply that meets our strict quality standards on favorable terms, or at all, which could materially adversely impact our ability to supply products and may materially adversely affect our business, results of operations, and financial condition.

Adverse climate conditions may have an adverse effect on our business. We may take various actions to mitigate our business risks associated with climate change, which may require us to incur substantial costs and may not be successful, due to, among other things, the uncertainty associated with the longer-term projections associated with managing climate risks.

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Item 1A.     Risk Factors (continued)

Increasing concentrations of greenhouse gases in the atmosphere have generally been concluded to lead to increased ambient global temperatures, as well as changes in weather patterns and the frequency and severity of extreme weather and natural disasters. Adverse climate conditions, weather patterns, and the impact of such conditions and patterns such as drought, flood, wildfires, and rising ambient temperatures adversely impact product cultivation conditions for farmers and agricultural productivity, including by disrupting ecosystems and severely altering the growing conditions, nutrient levels, soil moisture, and water availability necessary for the growth and cultivation of crops, which would adversely affect the product quality, availability or cost of certain commodities that are necessary for our products, such as flour, paper, and edible oil. Due to climate change, we may also be subjected to decreased availability of water, deteriorated quality of water or less favorable pricing for water, which could adversely impact our manufacturing and distribution operations. These and other changes to the physical environment may adversely impact our operations or those of the suppliers on whom we rely. While we may take various actions to mitigate our business risks associated with climate change, this may require us to incur substantial costs and may not be successful, due to, among other things, the uncertainty associated with managing climate risks. Such climate risks may materially adversely affect our business, results of operations and financial condition.

The spread of contagious diseases, natural disasters, severe weather, actual or threatened hostilities or war, terrorist activity, political unrest, civil strife, and other geopolitical uncertainty may cause global economic disruption, and its impact on our business is uncertain.

The global economy can be negatively impacted by a variety of factors such as the spread or fear of spread of contagious diseases (such as the COVID-19 pandemic, other pandemics, epidemics, or other public health crises) in locations where our products are sold, man-made or natural disasters, severe weather, actual or threatened hostilities or war, terrorist activity, political unrest, civil strife, and other geopolitical uncertainty.

Such adverse and uncertain economic conditions may impact distributor, retailer, food service, and consumer demand for our products and may lead to material and volatile increases in commodity pricing of raw materials used by us and in other costs incurred by us. For example, in connection with the war in Ukraine, governments in the U.S., U.K. and the EU have each imposed export controls on certain products and financial and economic sanctions on certain industry sectors and parties in Russia. The uncertainty resulting from the military conflict in Europe has given rise and may continue to give rise to increases in costs of goods and services, scarcity of certain ingredients, increased trade barriers or restrictions on global trade. Further escalation of geopolitical tensions could have a broader impact that expands into other markets where we do business, which could materially adversely affect our business and/or our supply chain, business partners or customers in the broader region, including potential destabilizing effects that such conflicts may pose for the European continent or the

global oil and natural gas markets. In addition, our ability to manage normal commercial relationships with our suppliers, co-manufacturers, distributors, retailers, food service customers, consumers, and creditors may suffer. As global economic conditions and commodity pricing of raw materials used by us continue to be volatile or uncertain and recessionary or inflationary pressures exist, trends in consumer discretionary spending also remain unpredictable and subject to changes. We have seen consumers shift purchases to lower-priced or other perceived value offerings during economic downturns as a result of various factors, including job losses,

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Item 1A.     Risk Factors (continued)

inflation, higher taxes, reduced access to credit, change in federal economic policy and recent international trade disputes. In particular, consumers have reduced the amount of plant-based food products that they purchase where there are conventional animal-based protein offerings, which generally have lower retail prices. In addition, consumers may choose to purchase private label products, rather than branded products, because they are generally less expensive. Distributors, retailers and food service customers have become more conservative in response to these conditions and have sought to reduce their inventories. Our results of operations depend upon, among other things, our ability to maintain and increase sales volume with our existing distributors, retailer and food service customers, our ability to attract new consumers, the financial condition of our consumers and our ability to provide products that appeal to consumers at the right price. Decreases in demand for our products without a corresponding decrease in costs could put downward pressure on margins and may materially adversely impact our financial results and financial position. Prolonged unfavorable economic conditions or uncertainty would be expected to have an adverse effect on our sales and profitability, which could be material, and may result in consumers making long-lasting changes to their discretionary spending behavior on a more permanent basis.

The loss of key personnel, or failure to attract and retain other highly qualified personnel in the future, could harm our business.

Our success depends to a significant degree upon the continued contributions of our senior operating management, including our co-founders, Reza Soltanzadeh, CEO, and Barthelemy Helg, Non-Executive Chairman of the Board. The loss of the services of Mr. Soltanzadeh or Mr. Helg could have a material adverse effect on our business, results of operations, and financial condition. Our success and future growth also will depend on our ability to attract and retain qualified management, manufacturing, technical and sales and marketing personnel. Competition for such personnel in the industry is intense. There can be no assurance that we will be successful in attracting and retaining such personnel.

Our dependence on suppliers may materially adversely affect our operating results and financial position.

We have no long-term contracts with our suppliers. Although we attempt to maintain generally a minimum of two vendors for each required food ingredient, certain raw materials and products used by us in processing our products are currently acquired or available from only one source. We have from time-to-time experienced significant delays in the receipt of certain of these ingredients. For example, we have a preferred provider that we rely on for our pea protein, which is an ingredient in our ramen products. In the event of a disruption with our preferred provider, we would source our pea protein from one of our other providers. A failure by a supplier to deliver quality ingredients on a timely basis, or the inability to develop alternative sources if and as required, could result in delays which could materially adversely affect our operating results and financial position.

Manufacturing and production forecasts are based on multiple assumptions. We must adequately estimate our manufacturing capacity and inventory supply. If we overestimate our demand and overbuild our capacity or inventory, we may have significantly underutilized assets. Underutilization of our manufacturing facilities can adversely affect our gross margin and other operating results.

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Item 1A.     Risk Factors (continued)

We must accurately forecast demand for each of our products and inventory needs in order to ensure we have adequate available manufacturing capacity for each such product and to ensure we are effectively managing our inventory. Our forecasts are based on multiple assumptions which may cause our estimates to be inaccurate and affect our ability to obtain adequate manufacturing capacity and adequate inventory supply in order to meet the demand for our products, which could prevent us from meeting increased customer demand and harm our brand and our business and, in some cases, may result in fines or indemnification obligations we must pay customers or distributors if we are unable to fulfill orders placed by them in a timely manner or at all. If we overestimate our demand and overbuild our capacity or inventory, we may have significantly underutilized assets. Underutilization of our manufacturing facilities can adversely affect our gross margin and other operating results. If demand for our products experiences a prolonged decrease, we may be required to terminate or make penalty-type payments under certain supply chain arrangements, close or idle facilities and write down our long-lived assets or shorten the useful lives of underutilized assets and accelerate depreciation, which would increase expenses.

If demand does not materialize at the rate forecasted, we may not be able to scale back our manufacturing expenses or overhead costs quickly enough to correspond to the lower than expected demand. Approximately 74% of our revenue was derived from three customers. If those customers reduce their purchases or cancel their contracts, we would lose most of our current revenue. This could result in lower margins and adversely impact our business, results of operations, and financial position. Additionally, if product demand decreases or we fail to forecast demand accurately, our results may be adversely impacted due to higher costs resulting from lower manufacturing utilization, causing higher fixed costs per unit produced. Further, we may be required to recognize excess or obsolete inventory write-off charges, or excess capacity charges, which would have a material negative impact on our results of operations and financial position.

We may experience volatility in costs for ingredients and packaging due to conditions that are difficult to predict.

We purchase large quantities of food ingredients. In addition, we purchase and use significant quantities of paper and film to package our products. Costs of food ingredients and packaging are volatile and can fluctuate due to conditions that are difficult to predict, including global competition for resources, weather conditions, consumer demand, and changes in governmental trade and agricultural programs. Volatility in the prices of ingredients and other supplies we purchase could increase our cost of sales and reduce our profitability. Moreover, we may not be able to implement price increases for our products to cover any increased costs, and any price increases we do implement may result in lower sales volumes. If we are not successful in managing our ingredient and packaging costs, if we are unable to increase our prices to cover increased costs or if such price increases reduce our sales volumes, then such increases in costs may materially adversely affect our business, results of operations and financial condition.

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Item 1A.     Risk Factors (continued)

Our future success will depend, in part, on our ability to maintain our technological leadership, enhance our current food products, develop new food products that meet changing customer needs and preferences, advertise and market our food products, and influence and respond to emerging industry standards and other technological changes on a timely and cost-effective basis.

The market for processing our food products is characterized by rapidly changing technology, evolving industry standards, changes in customer needs and preferences and frequent new product introductions. Our future success will depend, in part, on our ability to maintain our technological leadership, enhance our current food products, develop new food products that meet changing customer needs and preferences, advertise and market our food products, and influence and respond to emerging industry standards and other technological changes on a timely and cost-effective basis. There can be no assurance that we will be successful in developing new food products or enhancing our existing food products on a timely basis, or that such new food products or enhancements will achieve market acceptance. In addition, there can be no assurance that food products or technologies developed by others will not render our food products or technology noncompetitive or obsolete.

Our business depends on our use of proprietary technology relying heavily on laws to protect.

Our success and ability to compete is dependent in part upon our technology, although we believe that our success is more dependent upon our development and distribution expertise than our proprietary rights. We rely on a combination of patent, copyright, trademark and trade secret laws, and contractual restrictions to establish and protect our technology. There can be no assurance that the steps taken by us will be adequate to prevent misappropriation of our technology or that our competitors will not independently develop technologies that are substantially equivalent or superior to our technology.

Inadequate technical and legal intellectual property (IP) protections could prevent us from defending or securing our proprietary technology and IP.

Our commercial success depends in part on our ability to protect our intellectual property and proprietary technologies. We rely on a combination of patent protection, where appropriate and available, copyrights, trade secrets and trademark laws, as well as confidentiality and other contractual restrictions to protect our proprietary technology. However, these legal means afford only limited protection and may not adequately protect our proprietary technology or permit us to gain or keep a competitive advantage. Our intellectual property consists principally of patents, trademarks, and trade secrets. There can be no assurance about which, if any, patents will issue from these applications, the breadth of any such patents, or whether any issued patents will be found invalid and unenforceable or will be threatened by third parties. Any successful opposition to these patents or any other patents owned by or, if applicable in the future, licensed to us could deprive us of rights necessary for the successful commercialization of products that we may develop. Since patent applications in most countries are confidential for a period of time after filing (in most cases 18 months after the filing of the priority application), we cannot be certain that we were the first to file on the technologies covered in several of the patent applications related to our technologies or products.

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Item 1A.     Risk Factors (continued)

Patent law can be highly uncertain and involve complex legal and factual questions for which important principles remain unresolved. In the United States, and in many international jurisdictions, policy regarding the breadth of claims allowed in patents can be inconsistent or unclear. The U.S. Supreme Court and the Court of Appeals for the Federal Circuit have made, and will likely continue to make, changes in how the patent laws of the United States are interpreted. Similarly, international courts and governments have made, and will continue to make, changes in how the patent laws in their respective countries are interpreted. We cannot predict future changes in the interpretation of patent laws by judicial bodies or changes to patent laws that might be enacted into law by legislative bodies.

Any cybersecurity-related attack, significant data breach, or disruption of the information technology systems, infrastructure, network, third-party processors, or platforms on which we rely could damage our reputation and materially adversely affect our business, and financial results.

Our operations rely on information technology systems for the use, storage, and transmission of sensitive and confidential information with respect to our customers, our employees, and other third parties. A malicious cybersecurity-related attack, intrusion, or disruption by either an internal or external source or other breach of the systems on which our platform and products operate, and on which our employees conduct business, could lead to unauthorized access to, use of, loss of, or unauthorized disclosure of sensitive and confidential information, disruption of our services, viruses, worms, spyware, or other malware being served from our platform, networks, or systems; and resulting regulatory enforcement actions, litigation, indemnity obligations, and other possible liabilities, as well as negative publicity, which could damage our reputation, impair sales, and

harm our business. Cyberattacks and other malicious internet-based activity continue to increase, and cloud-based platform providers of products and services have been and are expected to continue to be targeted. In addition to traditional computer “hackers,” malicious code (such as viruses and worms), phishing, employee theft, or misuse and denial-of-service attacks, sophisticated nation-state and nation-state supported actors now engage in attacks (including advanced persistent threat intrusions). Cyberattacks may also gain publishing access to our customers’ accounts on our platform, using that access to publish content without authorization. Despite efforts to create security barriers to such threats, it is not feasible, as a practical matter, for us to entirely mitigate these risks. If our security measures are compromised as a result of third-party action, employee, customer, or user error, malfeasance, stolen, or fraudulently obtained log-in credentials or otherwise, our reputation would be damaged, our data, information or intellectual property, or those of our customers may be destroyed, stolen, or otherwise compromised, our business may be harmed and we could incur significant liability. We have not always been in the past and may be unable to in the future to anticipate or prevent techniques used to obtain unauthorized access to or compromise of our systems because they change frequently and are generally not detected until after an incident has occurred. We cannot be certain that we will be able to prevent vulnerabilities in our software or address vulnerabilities that we may become aware of in the future. In

the past, we have experienced a cybersecurity-related incident. While it is believed that no information of ours or our customers was compromised as a result of the incident, we cannot be certain that will be the case in the future.

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Item 1A.     Risk Factors (continued)

Further, as we rely on third-party cloud infrastructure, we depend in part on third-party security measures to protect against unauthorized access, cyberattacks, and the mishandling of data and information. If these third parties fail to adhere to adequate data security procedures, or in the event of a breach of their networks, our own, and our customers’ data may be improperly accessed, used, or disclosed. Any cybersecurity event, including any vulnerability in our software, cyberattack, intrusion, or disruption or any failure or breach unrelated to our own action or inaction, could result in significant increases in costs, including costs for remediating the effects of such an event; lost revenue due to network downtime, a decrease in customer and user trust; increases in insurance premiums due to cybersecurity incidents; increased exposure to a risk of litigation and possible liability; increased costs to address cybersecurity issues and attempts to prevent future incidents; and harm to our business, or financial results, and our reputation because of any such incident.

Our existing general liability insurance coverage and coverage for cyber liability or errors or omissions may not continue to be available on acceptable terms or may not be available in sufficient amounts to cover one or more large claims and our insurer may deny coverage with respect to future claims. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, would harm our business. Many governments have enacted laws requiring companies to provide notice of data security incidents involving certain types of personal data.

We are subject to government regulation and industry policy risks that may change and cause us to no longer comply.

Our operations are subject to extensive regulation by the U.S. Food and Drug Administration, the U.S. Department of Agriculture and other national, state, and local authorities. Specifically, we are subject to the Food, Drug and Cosmetic Act and regulations promulgated thereunder by the FDA. This comprehensive regulatory program governs, among other things, the manufacturing, composition and ingredients, packaging, and safety of food. Under this program the FDA regulates manufacturing practices for foods through its current

good manufacturing practices regulations and specifies the recipes for certain foods. Our processing facilities and products are subject to periodic inspection by federal, state, and local authorities. We seek to comply with applicable regulations through a combination of employing internal personnel to ensure quality-assurance compliance (for example, assuring that food packages contain only ingredients as specified on the package labeling) and contracting with third-party laboratories that conduct analyses of products for the nutritional-labeling requirements.

Our failure to comply with applicable laws and regulations or maintain permits and licenses relating to our operations could subject us to civil remedies, including fines, injunctions, recalls, or seizures, as well as potential criminal sanctions, which could result in increased operating costs resulting in a material adverse effect on our results of operations and financial condition.

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Item 1A.     Risk Factors (continued)

We may be subject to changes in laws or regulations that can change on any given day.

The manufacture and marketing of food products is highly regulated. We are subject to a variety of laws and regulations, which apply to many aspects of our business, including the sourcing of raw materials, manufacturing, packaging, labeling, distribution, advertising, sale, quality, and safety of our products. Laws and regulations are subject to change or to the adoption of new laws and regulations. Since the food industry is rapidly changing due to technological and other developments, there is a material likelihood that the laws and regulations applicable to us and our business will change or be newly adopted, particularly since we expect to be a developer or early adopter of technological and other developments in the food industry.

For example, the FDA and the U.S. Department of Agriculture, other state regulators in the United States, and other similar international regulatory authorities could take action to further impact our ability to use or refer to certain terms to describe or advertise our products. In addition, a food may be deemed misbranded if our labeling is false or misleading in any particular way, and the FDA, CFIA, EU member state authorities or other regulators could interpret the use of a term to describe our premium products as false or misleading or likely to create an erroneous impression regarding their composition.

Should regulatory authorities take action with respect to the use of a specific term, such that we are unable to use those terms with respect to our premium products, we could be subject to enforcement action or could be required to recall our products marketed using these terms. Thus, we may be required to modify our marketing strategy, and our business, financial condition, and results of operations could be adversely affected.

Changes in or the adoption of laws and regulations could have a material effect on us, our business, results of operations and financial condition.

We are subject to multinational requirements beyond our control.

A key component of our strategy is our planned expansion into international markets. There can be no assurance as to our ability to obtain the capital we require to finance our expansion into these markets. In addition, there can be no assurance as to our ability to obtain the permits and operating licenses required for us to operate or to hire and train employees or market, sell, and deliver high quality food products in these markets. In addition to the uncertainty as to our ability to expand our international presence, there are certain risks inherent to doing business on an international level, such as unexpected changes in regulatory requirements, tariffs and other trade barriers, difficulties in staffing and managing foreign operations, longer payment cycles, problems in collecting accounts receivable, political instability, fluctuations in currency exchange rates, seasonal reductions in business activity during the summer months in Europe and certain other parts of the world and potentially adverse tax consequences, which could adversely impact the success of, our international operations. There can be no assurance that such factors will not have a material adverse effect on our future international operations and, consequently, on our business, results of operations and financial condition.

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Item 1A.     Risk Factors (continued)

Shareholders may experience dilution of their ownership interests if we issue additional capital stock or make investments.

We expect to issue additional capital stock in connection with potential future financings, acquisitions, investments, our stock incentive plans, or otherwise. Such issuances will result in dilution to all other shareholders. We expect to grant equity awards to employees, directors, and consultants under our stock incentive plans. We also may raise capital through equity financings in the future. As part of our business strategy, we may acquire or make investments in complementary companies, products, or technologies and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital stock may cause shareholders to experience significant dilution of their ownership interests and the per share value of our common stock to decline.

We are incurring significant increased costs as a result of operating as a public company, and our management is required to devote substantial time to new compliance initiatives.

As a public company, we incur significant legal, accounting, and other expenses that we did not incur as a private company. We are subject to the reporting requirements of the Exchange Act, which require, among other things, that we file with the SEC annual, quarterly and current reports with respect to our business and financial condition. In addition, the Sarbanes-Oxley Act, as well as rules adopted by the SEC and The Nasdaq Global Market to implement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial reporting controls and changes in corporate governance practices. Further, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, imposes significant corporate governance and executive compensation related provisions on public companies.

Recent legislation permits companies that are emerging growth companies within the meaning of the federal securities laws to implement many of these requirements over a longer period and up to five years from the time of becoming a publicly traded company. Shareholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways that cannot currently be anticipated.

The rules and regulations applicable to public companies have increased substantially our legal and financial compliance costs and makes some activities more time-consuming and costly. If these requirements divert the attention of our management and personnel from other business concerns, they could have an adverse effect on our business. The increased costs will decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products or services. For example, it is expected that these rules and regulations will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantial costs to maintain the same or similar coverage. The amount or timing of additional costs we may incur to respond to these requirements cannot be

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Item 1A.     Risk Factors (continued)

predicted or estimated. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

We did not sell any securities during the period covered by this Quarterly Report that were not registered under the Securities Act. We did not purchase any common shares during the period covered by this Quarterly Report under the Borealis stock buyback program as previously reported by Borealis in its Current Report on Form 8-K filed with the SEC on June 6, 2024.

Item 3.     Defaults Upon Senior Securities

None.

Item 4.     Mine Safety Disclosures

Not Applicable.

Item 5.     Other Information

None.

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Item 6. Exhibits

Exhibit Number						Description
31.1*						Certification of Principal Executive Officer Pursuant to Rules 13A-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of Principal Financial Officer Pursuant to Rules 13A-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**						Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**						Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS						Inline XBRL Instance Document.
101.SCH						Inline XBRL Taxonomy Extension Schema Document.
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: November 14, 2024
			By:			/s/ Reza Soltanzadeh
						Reza Soltanzadeh
						Chief Executive Officer & Director

Date: November 14, 2024			-and-
			By:			/s/ Stephen Wegrzyn
						Stephen Wegrzyn
						Chief Financial Officer

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