Overview

Borealis is a food technology company that makes affordable, sustainable, and nutritious plant-based meals sold in the U.S., Canada, and Europe. Borealis wants to address global food security challenges by developing highly nutritious and functional food products that are both affordable and sustainable.

Borealis recently developed and launched mass-produced plant-based ramen meals with 20 grams of protein per serving. This shows Borealis’ commitment to developing innovative solutions to global food issues.

The Reverse Recapitalization

On February 7, 2024, Borealis Foods Inc. completed a complex financial transaction known as a Reverse Recapitalization with two other companies - Oxus Acquisition Corp. and 1000397116 Ontario Inc.

As part of this deal:

• Oxus became a Canadian corporation called New Oxus
• New Oxus merged with 1000397116 Ontario Inc. and Borealis Foods Inc. into a new company called Borealis Foods Inc.

This allowed the privately held Borealis Foods Inc. to become a publicly traded company on the stock exchange.

Accounting Impact

For accounting purposes, Borealis Foods Inc. is considered the acquirer in this merger deal. So Borealis’ financial history becomes the official financial statements going forward.

Oxus’ assets and liabilities were brought onto Borealis’ balance sheet at their carrying value, with no extra goodwill or intangible assets.

Basis of Presentation

Borealis’ financial statements follow U.S. Generally Accepted Accounting Principles (GAAP).

Results of Operations

Quarterly Comparison

Revenue

• Sales decreased due to delayed international expansion plans
• Sales allowances increased due to change in product mix and customers
• Expect allowances to improve with wider distribution

Cost of Goods Sold

• Decreased due to supply chain optimizations although plant running below 20% capacity currently
• As production increases, cost percentages expected to drop significantly

Gross Profit

• Improved by $0.6 million or 171%
• Margin improved from (4%) to 3% of revenue
• Driven by customer and product mix changes
  • Higher margin products were 35% of Q1 2024 sales, up from 10% in Q1 2023
• Raw material costs stabilizing

Expenses

• Training costs dropped as production lines matured
• Sales & Marketing increased for brand ambassador and advertising
• General & Administrative jumped due to Reverse Recapitalization costs
• Depreciation flat although dropped slightly as percentage of revenue
• Other expenses increased driven by higher interest costs

Liquidity and Capital Resources

In August 2023, Borealis secured a $25 million financing facility to fund operations. This consists of:

• $15 million term loan
• $10 million revolving credit facility

In February 2024, approximately $50.3 million of convertible debt converted into equity as part of the Reverse Recapitalization.

Borealis will likely need more funding through March 2025. It has reduced expansion plans to decrease capital needs. It continues to explore financing options.

Cash Flows

Going Concern

Borealis has suffered recurring losses and negative cash flow. This raises doubt about its ability to continue operations long-term. Borealis is pursuing financing and may cut costs to address this risk.

Commitments

Borealis has $53 million in total commitments over the next 5+ years:

• $28.7 million due in less than 1 year
• $11.2 million due in 1-3 years
• $13.1 million due in 4-5 years

Emerging Growth Company

Borealis meets SEC criteria to qualify as an Emerging Growth Company. This allows Borealis to delay adopting certain new accounting standards. This may make financial comparisons with other companies difficult.

Borealis will remain an Emerging Growth Company until December 2026 based on current projections.

Smaller Reporting Company

Borealis also qualifies as a Smaller Reporting Company. This allows Borealis to provide only two years of audited financial statements and take advantage of other reduced disclosure requirements. This may also impact financial comparisons with other public companies.

Borealis will remain a Smaller Reporting Company until it reaches $250 million in public market value and $100 million in annual revenue.

Performance Evaluation

Borealis uses:

• Net Income (Loss) to measure overall profitability
• Adjusted EBITDA to evaluate operational performance excluding one-time or irregular items

Adjusted EBITDA allows management to assess performance on a consistent basis from period to period.

Recent Accounting Standards

See financial statement disclosures for details on recent accounting pronouncements and the potential impact to Borealis’ financial reporting.