Borealis Foods Inc.: Form 10-K for the period ended Dec 31, 2023

Overview

The following discussion reflects the business of Borealis Foods, as currently embodied by Borealis Foods.

Borealis Foods is a food technology company that has developed high-quality, affordable, sustainable, and nutritious ready-to-eat meals. We are a mission-driven company committed to utilizing our products to help solve the national and global food security and nutrition challenges. Our commitment to nutrition, affordability, and sustainability reflects our goal of positively impacting both human life and the planet.

Food and nutritional insecurity impact an estimated 821 million people across the globe, according to the World Health Organization. Food production accounts for approximately 30% of the world’s energy consumption and 22% of global greenhouse gas emissions. Feeding the world’s population a healthy diet within the earth’s boundaries requires an urgent transition to a sustainable model. While the scale of the challenge is undeniably significant, we believe our innovative technology not only offers a pathway to a more sustainable future, but a potential tool in the fight against global malnutrition.

Borealis Foods has developed the first complete protein dough containing all nine essential amino acids. It entered the market with ready-to-eat meals, featuring 20 grams of complete plant-based protein per serving, distributed through both retail and foodservice channels. The Company also developed first of its kind ambient ready-to-eat high-protein meals for U.S. and global humanitarian food programs. Borealis Foods’ innovative model and products have allowed it to appeal to a broad range of consumers, positioning it to compete directly in the global ramen market, which was estimated $54.6 billion global market in 2022 according to the Instant Noodles Global Market Report 2023. The Company’s strategy includes partnering with Non-Governmental Organizations (“NGOs”), government programs, and food service providers to offer these and other products to institutional clients such as schools and other organizations that help feed those with insufficient access to nutritious meals.

The Company’s innovative technology was used in the development of its first vertical, ramen noodles. Lovingly made in the U.S., Chef Woo and Ramen Express branded ramen noodles are produced and packaged by the Company’s wholly-owned technologically advanced manufacturing company, Palmetto Gourmet Foods, or “PGF”. Nestled in scenic Saluda, South Carolina, the factory is one of the largest and most advanced ramen noodle producers in North America. With a widespread presence, Borealis Foods’ products are currently available in over approximately 22,000 points of distribution primarily in the U.S., Canada, Mexico, and Europe. The products can be found across several channels of mass merchandisers (Walmart), club stores (Costco and Sam’s Club), limited assortments retailers (Aldi and Save-a-lot), traditional supermarkets (Albertson, Winn-Dixie, and Save Mart), regional retailer channels, and e-commerce distributors (Amazon and Walmart.com).

Research, development, and innovation are core elements of our business strategy, which we see as a critical competitive advantage. Through continuous R&D and partnerships with other advanced food-tech companies, our team focuses on making continuous improvements to our existing technology and product formulations, in addition to developing new products across our platform.

We intend to continue to invest in innovation, supply chain capabilities, manufacturing, and marketing initiatives, as we believe the demand for our products will continue to accelerate across retail and e-commerce channels. In addition, we plan to develop additional channels for our products through NGOs, government programs, and food services.

The Borealis Foods Strategic Difference

Unique Approach to the Product

We developed and launched the first plant-based instant ramen meals providing 20 grams of complete protein per serving. We believe our unique approach to making ready-made ramen makes us a disruptor in one of the most widely consumed food categories.

Our Chef Woo ramen serves as a complete source of protein because it includes all nine essential amino acids and provides over one-third of a person’s daily recommended protein in one serving. Complete proteins are essential to a healthy diet. They contribute to muscle growth, repair, and maintenance and also play a role in bolstering the immune system, aiding in the production of antibodies and enzymes that defend against infections and promote faster healing. Complete proteins are also involved in hormone production, helping to regulate various bodily functions, including metabolism and mood. Our commitment to providing higher protein content in our ramen sets us apart from the other instant noodle cups on the market. Additionally, we use a protein source that is free of anti-digestive factors that hinder protein digestibility, further enhancing the bioavailability of the protein.

Plant-based protein is a highly convenient and cost-effective source of protein which is hard to match from a cost perspective when compared to other sources of protein. Legacy vegetarian brands have typically aimed to compensate for poor taste appeal by positioning their products as a noble sacrifice — something consumers should do for the benefit of their health, the environment, and/or animal welfare. Our breakthrough product innovations have enabled a paradigm shift in both marketing and target audience — tapping into the enthusiastic pull from mainstream consumers for delicious and satisfying, yet better-for-you plant-based meals. Our patent-pending technology can be deployed in other applications to make additional high-protein ready-made meals and snacks.

Unique Approach to the Market

The ramen market has seen limited product innovation and differentiation resulting from product positioning which generates low retail profit margins. We are changing that paradigm with our innovative food technology, providing consumers with a healthy, affordable, shelf-stable, convenient meal. We are re-inventing instant ramen noodles while maintaining flavor consistency, palatability, and affordability. Our know-how allows us to customize products for different subsets based on the desired dietary-specific requirements (i.e., high-fiber, gluten-free, high-protein, low sodium, keto-friendly, and micronutrients). We are focused on a multi-prong approach that consists of expanding our distribution through the following channels:

• Traditional Retail: Remain focused on existing customers while expanding into new markets in the U.S., Canada, Mexico, and Europe, and long-term expansion into South America and the Middle East.
• Non-Governmental Organizations: Supply NGOs with sustainable and affordable high-protein meals with micronutrients to help fight world hunger and malnutrition. Our products are shelf-stable and low-cost compared to other foods with the equivalent amount of protein. With inflation increasing the cost for NGOs to operate and purchase food, we believe our ready-made meals could be a tool used to fight malnutrition, including vitamin and mineral deficiencies. NGOs assist over 100 million people in over 120 countries and territories across the world, creating a unique opportunity for us to supply large quantities of products and contribute to ending world hunger.
• Government Programs: Supply schools with healthy, affordable, and sustainable lunch options. One in eight children in America live in households without consistent access to adequate food. Subsidized or free lunches provided by schools feed approximately 30 million students each day. Schools face procurement and cost challenges as well as specific nutritional requirements for the food they provide. Our innovative technology and products are well positioned to solve these challenges. Our products are customizable to meet the school’s specific nutritional requirements and can be mass-produced at an affordable cost. In addition, the products are shelf-stable with a long shelf life, helping to prevent food waste.
• Military: Supply militaries with an extra high-protein version of our products. With our stable shelf life and convenient preparation requirements, our products would be ideal for use as a field ration.
• Food Services: Expand our products into the food services space as a healthy ready-made food option for convenient grab-and-go meals.
• Hospitals & Nursing Homes: Supply hospitals and care facilities with a variety of dietary-specific healthy products (i.e., high-fiber, high-protein, low sodium with micronutrients). Our technology allows our products to be customized to meet the specific nutritional needs of patients and facility operators.

History

We were founded in 2019 with a vision of building sustainable, affordable, and nutritious food products. This vision was developed in response to growing global challenges in the areas of health, climate change, natural resource use, and helping find an affordable option to fight world hunger.

Our Co-Founder and CEO, Reza Soltanzadeh, a medical doctor by training, entered the business world after devoting his time to helping malnourished men, women, and children in remote villages of India to the science of affordable and nutritious food. Mr. Soltanzadeh has over 28 years of experience in the field of food sciences and food mass production. Mr. Soltanzadeh was the CEO of IIIC Investment Group for 13 years, an emerging market multi-billion dollar food-focused buyout firm, leading category consolidations to bring scale and efficiency resulting in low-cost production in highly fragmented food categories. Mr. Soltanzadeh was intrigued by the ramen craze taking place around the globe, observing the universal appeal of the noodle dish he saw an opportunity to marry his passion for the environment and the fight against world hunger by creating an affordable plant-based, high-protein ramen.

Our other Co-Founder and Non-Executive Chairman, Barthelemy Helg, an attorney by training, has focused his career on the food and biotech industries. Mr. Helg was Vice-President at Nestle S.A. overseeing Mergers and Acquisitions — contributing notably to the advancement of Nestle’s pet food division. Mr. Helg founded several companies in the food industry, and through his network and relationships, he has been instrumental in developing partnerships with food-tech companies and investors for us.

Fascinated with the food-tech revolution, our Co-Founders focused on opportunities for a more sustainable and affordable way to provide high-protein meals to consumers. Rather than trying to invent a new product category, they focused on improving and transforming an existing, highly popular product, ultimately identifying a high-protein and plant-based ramen as the ideal opportunity and solution. Our ramen takes the delicious food loved by many and upgrades it with added nutrients, enriching the comforting bowl of instant ramen. This reimagined ramen captures the same satisfying ramen feeling with a makeover of better ingredients and crafted flavors for a more nutritious and equally delicious product. Chef Woo Ramen was named after Song Sao Wu, the legendary female chef from ancient China, whose soup became so famous that it lifted her community out of hard times. Like its namesake, Chef Woo Ramen is attempting to lift the global community by contributing to a more sustainable planet while combating world hunger.

We have built a core team with experts across the food industry. Through our acquisition of PGF, we acquired a manufacturing and distribution facility capable of producing 600 million meals per year. We aim to develop food that will create lasting benefits for society and the environment.

Industry

Market Opportunity

We operate in the large global food industry. Instant noodle products are our first (currently only) vertical. Instant ramen noodles are one of the most widely consumed packaged foods enjoyed by over 5 billion people in an estimated $54.6 billion global market in 2022. The ramen noodle market is estimated to grow at a CAGR of 5.80% during 2023-2028 to reach approximately $70 billion by 2028. Our core target market is North America, which ranks sixth in the world for consumption of instant noodles. In 2022, according to the World Instant Noodles Association, the global demand for instant noodles was over 100 billion servings.

Various industry studies indicate that consumers want healthier and more convenient food options. We believe our innovative food offerings converge with consumer trends and demands for great-tasting, wholesome, plant-based foods made from sustainably sourced ingredients, including preferences for vegetarian, vegan, and organic lifestyles. The United States is experiencing a trend where consumers are willing to pay a premium for U.S. made foods; we believe there is a growing concern over quality, ingredient origins, contaminants, and questionable labor policies. A Reuters poll in 2017 found 70% of Americans think it is “very important” or “somewhat important” to buy U.S.-made products.In addition, 68% of global consumers are more likely to purchase food products that are locally grown and produced. Further research shows that North American plant-based protein consumers will drive the premium product category — growing at a faster pace over the next five years.

We believe we can capture an increased share of the broader U.S. instant meals and plant-based protein category, supported by a number of key drivers, including the amount of protein included in its products, continued mainstream acceptance of its products with the instant meal consumer, heightened consumer awareness of the role that food and nutrition play in long-term health and wellness, and growing concerns related to the negative environmental effects of meat-based proteins.

We believe there is significant demand for our products across the globe in retail and e-commerce channels, as well as the potential to source NGOs and government programs with nutritious, sustainable, and affordable high-protein food. In markets excluding Canada and the U.S., the number of instant noodles consumed has continued to grow worldwide. Our initial international target markets include expansion into Europe and Mexico with further future expansion in South America and the Middle East, where we have received strong inbound interest for our instant noodle products. Millennials and young adults make up the largest consumer group, together consisting of approximately 4.9 billion people worldwide as of the end of 2019, according to market research. These generations possess a strong understanding of health and environmental issues, and they demonstrate their focus on these issues through their on-shelf purchase decisions. In addition, market studies have found that consumers are four to six times more likely to purchase and champion purpose-driven companies.

The lasting impacts of the pandemic, geopolitical issues, and high inflation have had a negative impact on the economy. As a result, the cost of animal-based protein has increased making our planet-based high-protein meals an accessible and healthy alternative for consumers.

Environmental Impact

Consumer interest in plant-based foods, particularly among millennial and younger generations, has been driven in part by growing awareness of the health and environmental impact that animal-based proteins have on the environment. We believe that, now that consumers have access to unprecedented levels of information provided via the Internet and social media channels, global awareness of these issues will continue to grow and have a positive impact on consumer demand for our products.

The global livestock industry is estimated to be responsible for a significant portion of global greenhouse gas emissions, such as methane and nitrous oxide. Estimates range from 18% to 51%. The landmark Intergovernmental Panel on Climate Change (“IPCC”) Report highlighted that climate change is expected to cause “severe, widespread, and irreversible impacts” on the natural environment unless carbon emissions are cut sharply and rapidly. The report highlighted behavioral changes, which include dietary changes such as eating less meat, can play a significant role in cutting emissions.

Rising global meat consumption and livestock production have been shown to have major negative impacts on the environment due to the burden placed on land and water resources. According to the Food and Agriculture Organization (“FAO”), livestock occupies 30% of the planet’s land surface and accounts for 78% of all agricultural land use. The World Resources Institute (“WRI”) Water Report also indicates that 29% of the water in agriculture is directly or indirectly used for animal production. Meat consumption is also burdensome on the environment in terms of production inputs. According to the WRI Water Report, beef is highly inefficient to produce because only 1% of the feed consumed by cattle is converted to calories that people consumed from eating beef while pork converts approximately 10% and poultry converts approximately 11% of feed to human-edible calories.

In 2021, we engaged the University of Michigan to conduct a peer-reviewed, third party-led Life Cycle Assessment comparing the environmental impact of animal-based protein sources against our plant-based protein sources as well as our competitors in the plant-based space (the “Assessment”). In particular, this study focused on greenhouse gas emissions, fossil energy use, land use, and water use against suppliers of meals with an equivalent amount of protein derived from meat. Part of the Assessment was to provide an estimate of the environmental performance of replacing meat consumption with the consumption of plant-based instant ramen noodles. The Assessment shows that when comparing an equivalent provision of protein, the greenhouse gas emissions are significantly less than beef or pork and somewhat less than the meat replacement product Beyond Burger. The fossil energy use is significantly less than beef and somewhat less than pork and a Beyond Burger. The land use is significantly less than beef. Water use is significantly less than beef and pork and somewhat less than chicken. The conclusion from the report is that Chef Woo ramen’s 20 grams of plant-based protein led to significantly fewer impacts across all categories when measured against beef, significantly less greenhouse gas emissions and water use when measured against pork, and somewhat less greenhouse gas emissions and water use when comparing against chicken and Beyond Burger.

Competitive Strengths

We are on a mission to make good healthy food that is accessible and affordable to all. At the core of our business model is sustainability, which means ensuring what is good for people is also good for the planet. Our first product line, ramen, takes the delicious food loved by many and upgrades it with added nutrients, enriching the comforting bowl of instant ramen. This reimagined ramen can be customized to meet the specific nutritional requirements of many different consumer subsects. It can be mass-produced at an affordable cost, creating a unique opportunity for us to expand our distribution to other avenues beyond traditional retail.

Focus on Innovation

We intend to increase our investment in product development capabilities to continue to innovate within our core product categories. In addition to the development of plant-based proteins, we are looking to expand our product line into high-fiber, gluten-free, low-carb, and keto-friendly products. We also intend to increase our investment in product development to address emerging market demands and food trends for healthy plant-based high-protein snacks. Our continued investment in our technology will allow for increased investment into various food markets. We are committed to providing healthy, plant-based high-protein meals not only to the everyday consumer but to those who would otherwise not be able to purchase quality, nutritious foods through our low-cost efforts and collaboration with NGOs and governmental organizations.

Mission Aligned with Consumer Trends

We believe that our products align with current major food trends, with our plant-based ramen meeting the demands of consumers who seek to follow a natural and “cleaner-label” diet. Moreover, our products are kosher, halal, vegan, and vegetarian certified, which management believes will broaden our appeal to those consumers as well as those who wish to follow a vegetarian or vegan diet.

We believe that the plant-based food category will continue to grow based on studies which show that nearly half of U.S. consumers want to eat more plant-based foods. The number of people eating plant-based alternative foods has nearly doubled over the last decade.

Experienced and Passionate Executive Team

Our founders assembled a multidisciplinary team with in-depth knowledge and experience gained from diverse career paths and backgrounds to execute the founders’ passion for feeding and nourishing people while supporting a more sustainable planet.

We are led by a proven and experienced management team. Reza Soltanzadeh, our CEO and Co-Founder has over 28 years of experience in the field of food sciences and food production, both in management roles and as an investor. He has an extensive track record of successful involvement with multibillion-dollar food-focused company mergers and acquisitions and green-stage investments.

Barthelemy Helg is a Co-Founder and serves as the Non-Executive Chairman of the Board of Directors. Mr. Helg, has over 25 years of experience in various industries, including the food industry and the biotech industry, working at Nestle S.A. overseeing numerous mergers and acquisition transactions. Mr. Helg co-founded a biotech company which focused on treatment of rare autoimmune diseases and has extensive experience working with entrepreneurial companies and his wide-ranging experience in the food industry.

Growth Strategy

Growth Across Distribution Channels

We believe there is a significant opportunity to expand beyond our current retail and e-commerce footprint. Our early focus was the establishment of a presence in retail channels, highlighted by the successful penetration into 22,000 points of distribution across Canada, Europe, Mexico, and the U.S. The long-term plan includes potential expansion into South America and the Middle East. We believe increased distribution will lead more consumers to purchase our products.

We have developed a strategy to pursue growth within the following distribution channels:

• Retail: Building on the success of Chef Woo, we intend to increase our presence as the first plant-based high-protein offering on the ramen shelf. We have a strong presence at leading food retailers, including across channels of mass merchandisers (Walmart), clubs (Costco), limited assortments retailers (Aldi and Save a Lot), and traditional supermarkets (Albertson, Winn-Dixie, Save Mart), as well as e-commerce distributors (Amazon and Walmart.com) that continue to grow. We have recently expanded our product distribution to include pharmacies and drug stores (CVS and Rite Aid). We have a significant opportunity to grow our sales within Canadian and U.S. retail by focusing on increasing sales at our existing points of distribution. We also expect to grow our retail distribution by establishing commercial relationships with new customers.
• Non-Governmental Organizations: We aim to become a meal supplier to NGOs. Our sustainable and affordable high-protein shelf-stable meals have the potential to be a powerful tool in the fight against world hunger and malnutrition.
• Government Programs: We supply U.S. schools with healthy and affordable lunch options. Schools face procurement and cost challenges as well as specific nutritional requirements for the food they provide. Our products are well positioned to solve these challenges. Our high-protein plant-based products are customizable to meet the school’s specific nutritional requirements and can be mass-produced at an affordable cost.
• Military: We see an opportunity to supply militaries with an extra high-protein version of our products. With our stable shelf life and our convenient preparation requirement, our products would be ideal for use as a field ration.
• Food Services: Expand our products into the food services space as a healthy ready-made food option.
• Hospitals & Nursing Homes: Supply hospitals and care facilities with a variety of dietary-specific healthy products. Our products can be customized to meet patients’ specific nutritional requirements and can be mass-produced at an affordable cost.

Invest in Infrastructure and Capabilities

We are committed to prioritizing investment in our infrastructure and capabilities. As a fast-growing company, we continue to make significant investments in hiring the best people, maximizing our supply chain capabilities, and optimizing our systems in order to establish a sustainable market-leading position for the long-term future. We make continuous efforts to enhance our manufacturing facility in Saluda, South Carolina, which has allowed us to significantly increase our production capacity. We are constantly evaluating and improving our supply chain processes and partnerships so that we can increase manufacturing efficiencies and quality while reducing costs. In addition to our efforts to enhance our manufacturing facility, we are working to convert our facility to operate on solar power. Our goal is to be able to power our entire facility using only renewable energy — thus becoming Scope two carbon neutral.

Expand Product Offerings

The successes of our ramen products have confirmed our belief that there is significant demand for additional plant-based high-protein, sustainable, and affordable products. We intend to strengthen our product offering by improving the formulations for our existing portfolio of products and by creating new products that expand the portfolio. We are continuously refining our products to improve their taste, texture, and aroma. In addition, we are committed to increasing our investment in research and development to continue to innovate within our core platform to create exciting new product lines such as snacks and improve the formulations for our existing portfolio of products.

Continue to Grow the Brand

We continue to develop brand awareness of Chef Woo. We plan to continue to create relevant content with our network of celebrities, influencers, and brand ambassadors, who will help build significant brand awareness for us by supporting our mission and products and incorporating our products into their daily lifestyle.

Remain Mission Focused

We are a mission-driven business. We strive to operate in a socially responsible and environmentally sustainable manner and are committed to making a positive impact on both human life and the planet.

Products

Our principal products include:

• Chef Woo super premium High-Protein instant ramen with 20 grams of plant-based complete protein that is kosher, halal, vegan, and vegetarian certified, egg and dairy-free, TBHQ and added MSG free, and available in the following flavors: Roasted Chicken, Braised Beef, Spicy Tequila Lime, Thai Lemongrass, Sweet Chili Togarashi, and Chili Chicken.
• Ramen Express premium ramen that is kosher, halal, vegan, vegetarian certified, egg and dairy-free, and TBHQ and added MSG free, and comes in the following flavors: Chicken Flavor, Beef Flavor, Shrimp Flavor, Hotter & Spicier, Lime & Chili Shrimp Flavor, Hot & Spicy Chicken Flavor, Hot & Spicy Beef Flavor, Hot & Spicy Shrimp Flavor, Magic Noodles, and Soy Sauce Flavor.

Customers and Distributors

Retail

We remain focused on addressing existing demand from current customers and expanding our business with these customers. Our products are distributed in major retail partner locations across the U.S., Canada, Mexico and Europe, including approximately 18,000 stores in the U.S. including Walmart, Costco, Albertsons, and Aldi and approximately 3,300 stores in Canada.

E-Commerce

We remain focused on expanding our presence on Amazon and Walmart.com and growing these channels as a bigger stream of revenue.

Expansion to New Geographic Markets

We expanded our distribution into Europe in the fourth quarter of 2023. We intend to explore opportunities to expand our products in the long term in South America and the Middle East.

Material Agreements with Key Customers

We have customer concentration in two retail customers, including Walmart Inc. (“Walmart”) and Costco Wholesale Corporation (“Costco”) and one co-manufacturing customer, United Exchange Corporation (“UEC”). The terms of the material agreements with these principal retail and co-manufacturing customers are as follows:

Walmart Inc.

On February 26, 2020, our subsidiary, Palmetto Gourmet Foods, Inc. (“PGF”), and Walmart entered into a Supplier Agreement. The Supplier Agreement provides the basic terms under which, from time to time, Walmart may order merchandise to be supplied by PGF and does not impose a requirement on Walmart to order any prescribed amount of merchandise. All payment terms are set forth in the business terms in the Supplier Agreement. In the event of a reduction in price of PGF’s merchandise, under the Supplier Agreement, Walmart is entitled to that reduction in price for any existing merchandise on hand, in warehouses or in transit. PGF is responsible for verifying the accuracy of all terms of sale on all orders placed by Walmart. Under the Supplier Agreement, PGF is to send to Walmart invoices electronically for all merchandise requested. The Supplier Agreement provides that PGF, at its own cost, is required to obtain and maintain insurance coverage during the term of the Supplier Agreement, and in the two years after. In addition, PGF must indemnify Walmart from claims or actions relating to, among others, intellectual property, personal injury, property damage and violations of law. The Supplier Agreement continues in effect until terminated by either party on 30 days’ notice for cause or convenience.

Costco Wholesale Corporation

On January 29, 2021, PGF and Costco entered into a Basic Supplier Agreement. The Basic Supplier Agreement provides the essential terms under which, from time to time, Costco may order products to be supplied by PGF and does not impose a requirement on Costco to order any prescribed amount of products. The Basic Supplier Agreement requires PGF to comply with all Costco’s packaging and payment requirements and to supply an invoice within six months after the products are delivered. Costco retains the right to cancel late shipments. PGF must obtain and maintain insurance coverage at its own expense during the term of the Basic Supplier Agreement. The Basic Supplier Agreement provides Costco the right to reject or return to PGF any of PGF’s products. Under the Basic Supplier Agreement, PGF must indemnify Costco from claims or actions relating to, among others, intellectual property, personal injury, property damage, breach of contract and violations of law. Under the Basic Supplier Agreement, Costco reserves the right to inspect PGF’s premises, among other things, with respect to quality, safety, worker protection, supply chain security and other matters relevant to PGF’s products. In addition, PGF has provided Costco with record inspection rights and rights to confer on violations of law. The Basic Supplier Agreement provides that Costco can terminate its relationship with PGF, in its sole right, for any violation or unsatisfactory performance under the supplier code of conduct.

United Exchange Corporation

On January 23, 2020, PGF and UEC entered into a Contract Manufacturing Agreement. The Contract Manufacturing Agreement provides the essential terms under which, from time to time, UEC may order products to be supplied by PGF. Under the Contract Manufacturing Agreement, PGF must provide UEC with 30 days’ written notice for an increase in pricing on any products. The Contract Manufacturing Agreement provides that PGF must obtain and maintain product liability insurance coverage at its own expense during the term of the Contract Manufacturing Agreement. Under the Contract Manufacturing Agreement, PGF must indemnify UEC from claims or actions relating to product liability, personal liability, property damage or other claims relating to the manufacture of the products. The Contract Manufacturing Agreement automatically renews each year for one additional year term unless terminated by either party on 90 days’ written notice prior to the expiration of such term.

Supply Chain

Sourcing and Suppliers

The principal ingredients used to manufacture our chef woo product include pea protein, organic flour, sunflower oil, and our plant-based flavors. We procure our packaging materials from a number of different suppliers. Although most of the raw materials we require are typically readily available from multiple sources, we rely on one single source supplier, Puris Foods, for the pea protein used for our ramen products.

We continue to expand our supply chain to ensure the certainty of supply of the highest quality raw materials that meet our requirements for quality.

We secure our supplies on a purchase-order basis. As most of the raw materials we use are readily available in the market from many suppliers, we believe that we can within a reasonable period of time make satisfactory alternative arrangements in the event of an interruption of supply from our vendors.

Manufacturing

We fully own our manufacturing facility located in Saluda, South Carolina, operated by our wholly-owned subsidiary, PGF. The advanced production facility is over 200,000 square feet. The facility is British Retail Consortium or (“BRC”) AA+ rated food-grade facility certified. Currently, there are four fully automated cup and pillow production lines with advanced high-speed packaging machinery. There is the capacity to host six instant noodle production lines capable of producing 600 million meals per year. We believe our current facility is adequate to meet ongoing demand and is capable of hosting additional production lines to support our future ramp-up. In addition, we are in the process of obtaining permits to convert to solar power in hopes of becoming Scope two carbon neutral.

Food Safety and Quality Control

We utilize a comprehensive food safety and quality management program, which employs strict manufacturing procedures, expert technical knowledge of food safety science, employee training, ongoing process innovation, use of quality ingredients, and both internal and independent auditing.

Our Saluda, South Carolina facility has a Food Safety Plan (“FSP”) that focuses on preventing food safety risks and is compliant with the requirements set forth under the Food Safety Modernization Act or (“FSMA”). In addition, our facility has at least one Preventive Controls Qualified Individual who has successfully completed training in the development and application of risk-based preventive controls at least equivalent to that received under a standardized curriculum recognized by the FDA.

Our manufacturing site and suppliers comply with the Global Food Safety Initiative. Our manufacturing site is certified against a standard recognized by BRC AA+. These standards are integrated food safety and quality management protocols designed specifically for the food sector and offer a comprehensive methodology to manage food safety and quality. Certification provides an independent and external validation that a product, process or service complies with applicable regulations and standards.

In addition to third-party inspections of our facility, we have instituted audits to address topics such as allergen control; ingredient, packaging, and product specifications; and sanitation. Under FSMA, our manufacturing facility is required to have an FSP and a Hazard Analysis Critical Control Plant plan that identifies critical pathways for contaminants and mandates control measures that must be used to prevent, eliminate, or reduce relevant food-borne hazards.

Distribution

Distribution of our products occurs from our in-house manufacturing facilities in Saluda, South Carolina. The 75,000 square feet facility has the capacity to store over 150 truckloads of finished goods, ideal for supplying large national retailers. The facility is strategically located near rail, intermodal, and port distribution hubs. Our products are transferred by third-party logistics providers to distribution centers or are directly shipped to the customer. At present, we do not utilize internal software to track loads but leverage the systems of our transportation partners to manage our supply chain through retail distribution.

Sales and Marketing and Consumer Outreach

Sales

We have a hybrid sales organization that uses sales agencies and brokers to cover our accounts. The sales agency has an extensive range of experience and provides many resources such as syndicated data, retail coverage, and schematic planogram merchandising (“POG”). In addition, the sales team works in close coordination with a national network of broker and distributor sales teams that provide us access to accounts across the United States, Canada, and Europe.

Marketing

Our marketing efforts take on a multi-channel approach to ensure multiple touch points with our consumers. Our customer and demographic profile for the product category and age range is broad (18 – 55+). As a result, our targeting is based on mindset and universal attitudes that can be common across many demographics.

• Ramen Express — caters to the college crowd and cost-conscious families who desire a healthy alternative to traditional instant ramen at an affordable price. This product is vegetarian friendly as well as Kosher and Halal.
• Chef Woo — targets home chefs, millennials wanting purpose-driven products, and health/fitness enthusiasts wanting healthier lifestyle choices with a plant-based and organic focus.

Our marketing strategy is to connect with our customer base in a genuine, authentic manner that aligns with similar aspirations of our demographic by creating products that are tasty, healthy, affordable, made in a sustainable way, and have a positive impact on the environment.

Our marketing activities include ongoing social media including Instagram and user-generated content on TikTok.

• Social media has been the foundation for finding and engaging consumers. We have experienced steady growth in our following, including engagement with audiences beyond our core group. Since our inception, followers have grown more than 1,500% and continue to grow. Content is refreshed weekly with recipes and interesting posts about the products.
• We utilize influencers at various levels to help expand our customer base. By specifically engaging influencers that include home chefs, fitness celebrities and everyday consumers We have been able to connect with a wider audience.
• Our ultimate influencer is renowned Celebrity Chef Gordon Ramsay.
• Chef Gordon Ramsay endorses and aligns with our vision of providing accessible healthy, nutritious, and tasty food to the world. We have partnered with Mr. Ramsay to promote the Chef Woo brand in various capacities. As our official brand ambassador, Mr. Ramsay, will work with us to develop new products.
• Targeted Digital Advertising is used on an ongoing basis to support retail sales as well as brand awareness.

We recently announced our participation with Feeding America®, the largest U.S. domestic hunger-relief organization, in a program to provide meals to persons facing hunger through the Sam’s Club “Fight Hunger. Spark Change.” Campaign. This initiative has made our Chef Woo products available in the nearly 600 Sam’s Club stores.

Competition

We operate in a highly competitive environment. We believe that we compete with both plant-based protein brands producers, such as Beyond Meat, Tattooed Chef, and Impossible Foods as well as traditional ramen producers, such as Nissin Foods, Maruchan, and other ramen brands. We believe the principal competitive factors in our industry are:

• Taste
• Nutritional profile
• Ingredients
• Convenience
• Cost
• Brand awareness and loyalty among consumers
• Product variety and packaging
• Access to major retailer shelf space and retail locations
• Intellectual property protection on products

We believe we compete effectively with respect to each of these factors. However, many companies in our industry have substantially greater financial resources, more comprehensive product lines, broader market presence, longer standing relationships with distributors and suppliers, longer operating histories, greater production and distribution capabilities, stronger brand recognition, and greater marketing resources than we have.

Employees

As of December 31, 2023, we had 176 full-time employees, including 159 in manufacturing operations, two in research and development, five in sales and marketing, two in human resources and eight in finance and legal. Our employees are all employees at will and are not subject to any collective bargaining agreements.

Intellectual Property

We own trademarks, trademark applications, registrations, and other proprietary rights that are important to our business. Depending upon the jurisdiction, trademarks, and their corresponding registrations are valid if they are used in the regular course of trade and/or their registrations are properly maintained. Borealis’ primary trademarks include the “Chef Woo Ramen” and “Ramen Express”.

We aggressively protect our intellectual property rights by relying on trademark, copyright, trade dress, and trade secret laws. We own several domain names.

We do not have any issued patents but have two patent applications pending.

We consider our marketing and products as a trade secret and thus, keep this information confidential. In addition, we consider proprietary information related to formulas, processes, know-how, and methods used in production and manufacturing as trade secrets. We believe we have taken reasonable measures to keep the aforementioned items reasonably protected, and they are, accordingly, not readily ascertainable by the public.

Seasonality

We have generally experienced in the past, and expect to continue to experience, seasonal fluctuations in our retail sales as a result of consumer and customer spending patterns. Historically, the months of August to September and January to March result in the greatest retail sales due to back-to-school purchasing in the fall and renewed consumer focus on healthy living following New Year’s Day. We believe these consumer spending patterns are driven primarily by the predisposition of consumers to adjust their approach to nutrition at certain times of the year. We are unique in that our innovative technology allows us to tailor our products to specific nutritional needs allowing us to potentially access alternative distribution channels e.g., NGOs, government programs, militaries, and hospitals. Over time, these potential additional distribution channels should help reduce the seasonal fluctuations in our retail sales.

Government Regulation

Along with our brokers, distributors, ingredients, and packaging suppliers, we are subject to extensive laws and regulations in the U.S. by federal, state, and local government authorities. In the United States, the primary federal agencies governing the manufacturing, distribution, labeling, and advertising of our products are the U.S. Food and Drug Administration, or FDA, and the U.S. Federal Trade Commission, or FTC. Under various federal statutes and implementing regulations, these agencies, among other things, prescribe the requirements and establish the standards for quality and safety and regulate our product composition, manufacturing, labeling, and other marketing and advertising to consumers. Among other things, the facility in which our products and ingredients are manufactured must register with the FDA, comply with current good manufacturing practices, or cGMPs, and comply with a range of food safety requirements established by and implemented under the Food Safety Modernization Act of 2011. The FDA has the authority to inspect our facility to evaluate compliance with these requirements. The FDA also requires that certain nutrition and product information appear on our product labels and, more generally, that our labels and labeling be truthful and non-misleading. Similarly, the FTC requires that our marketing and advertising be truthful, non-misleading, and not deceptive to consumers. We are also restricted from making certain types of claims about our products, including nutrient content claims, health claims, and claims regarding the effects of our products on any structure or function of the body, whether express or implied unless we satisfy certain regulatory requirements.

Available Information

Our website address is www.borealisfoods.com (http://www.borealisfoods.com). The contents of, or information accessible through, our website are not incorporated by reference herein and are not a part of this Annual Report. We make our filings with the SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports, as well as beneficial ownership filings available free of charge on our website under the “Investors,” “Financials” section as soon as reasonably practicable after we file such reports with, or furnish such reports to, the SEC.

We may use our website as a distribution channel of material information about us. Financial and other important information about us is routinely posted on and accessible through the Investors section of our website at www.investors.borealisfoods.com/overview/default.aspx (http://www.investors.borealisfoods.com/overview/default.aspx).

Our manufacturing facility is located in Saluda, South Carolina, operated by PGF. The facility is BRC AA+ rated food-grade facility certified. Currently, there are four fully automated cup and pillow production lines with advanced high-speed packaging machinery. There is the capacity to host six instant noodle production lines capable of producing 600 million meals per year. We believe our current facility is adequate to meet ongoing demand and is capable of hosting additional production lines to support our future ramp-up. In addition, we are in the process of obtaining permits to convert to solar power in hopes of becoming Scope two carbon neutral.

Our principal office is located at 1540 Cornwall Rd., Suite 104, Oakville, Ontario L6J7W5, Canada.

In the ordinary course of business, we are involved in various pending and threatened litigation matters. In the future, we may be subject to additional legal proceedings, the scope and severity of which is unknown and could adversely affect our business. In addition, from time to time, we may receive letters or other forms of communication asserting claims against us.

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

Unless otherwise indicated, references to the “Company,” “our,” “us” or “we” in this Item 7 refer to Oxus Acquisition Corp., or Oxus, before the consummation of the Transaction. References to our “management” or our “management team” refer to our officers and directors, and references to the “sponsor” refer to Oxus Capital Pte. Ltd. The term “New Borealis” refers to Borealis Foods Inc. after the consummation of the Business Combination.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Annual Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Overview

We are a blank check company incorporated in the Cayman Islands on February 3, 2021 for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, reorganization or similar Business Combination with one or more businesses (a “Business Combination”). We intend to effectuate our initial Business Combination using cash from the proceeds of our IPO and the sale of the private warrants (the “Private Warrants”), our shares, debt or a combination of cash, equity, and debt.

The Business Combination Agreement

On February 23, 2023, we entered into a Business Combination Agreement with Newco and Legacy Borealis. The Business Combination Agreement was unanimously approved by Oxus’ and Legacy Borealis’ respective board of directors. Pursuant to the Business Combination Agreement, among other things: (a) Oxus will domesticate and continue as a corporation existing under the laws of the Province of Ontario, Canada (the “Continuance” and, New Oxus); (b) on the closing date, Newco and Legacy Borealis will amalgamate in accordance with the terms of the Legacy Borealis Amalgamation, with Amalco surviving the Legacy Borealis Amalgamation as a wholly-owned subsidiary of New Oxus; and (c) on the closing date, immediately following the Borealis Amalgamation, Amalco and New Oxus will amalgamate in accordance with the terms of the Borealis Amalgamation, with Borealis Foods surviving the Borealis Amalgamation. Borealis Foods will continue under the name “Borealis Foods Inc.”. For a more detailed discussion of the Business Combination Agreement, the Transaction, and the ancillary agreements, see the Current Report on Form 8-K filed with the SEC on March 1, 2023.

Extension

At the extraordinary general meeting held on March 2, 2023 (the “Extraordinary General Meeting”), our shareholders approved (1) a special resolution (the “Extension Proposal”) to amend our Amended and Restated Memorandum and Articles of Association, as amended (the “Oxus Charter”) to extend the date that we have to consummate a business combination from March 8, 2023 to December 8, 2023, or such earlier date as determined by our board of directors (and (2) a special resolution (the “Founder Share Amendment Proposal”) to amend the Oxus Charter to provide for the right of a holder of the Class B ordinary shares to convert into the Class A ordinary shares on a one-for-one basis prior to the closing of a business combination at the election of such holder. On December 5, 2023, in connection with the Second Extraordinary General Meeting, the Company filed the Oxus Charter Amendment to extend the date by which the Company must consummate its initial business combination from December 8, 2023 to June 8, 2024, or such earlier date as determined by the Company’s board of directors (the “Extended Date”). In connection with the votes to approve the Extension Proposal and the Founder Share Amendment Proposal, the holders of 15,300,532 Class A ordinary shares of the Company properly exercised their right to redeem their shares for cash at a redemption price of approximately $10.41 per share, for an aggregate redemption amount of approximately $159.34 million, leaving approximately $20.3 million in the Trust Account. On December 5, 2023, at the Second Extraordinary General Meeting, the holders of 9,837 Class A ordinary shares of the Company properly exercised their right to redeem their shares for cash at a redemption price of approximately $11.20 per share, for an aggregate redemption amount of approximately $0.11 million, leaving approximately $21.73 million in the Trust Account. As of December 31, 2023, the Company had $21.92 million of marketable securities held in the Trust Account (including a deposit in transit of $0.05 million).

On the Closing Date, Borealis, the Company, and Newco, consummated the Transaction, following the approval at an extraordinary general meeting of the shareholders of Oxus held on February 2, 2024.

Conversion of Class B Ordinary Shares

On April 5, 2023, in accordance with the provisions of the Oxus Charter, our Sponsor exercised its right to convert 1,500,000 shares of Class B ordinary shares, par value $0.0001 per share, of the Company into 1,500,000 shares of Class A ordinary shares, par value $0.0001 per share, of the Company on a one-for-one basis.

As of December 31, 2023, following conversion, there were 6,552,131 ordinary shares of the Company issued and outstanding, consisting of 3,739,631 Class A ordinary shares (of which 1,939,631 shares are redeemable) and 2,812,500 Class B ordinary shares.

Results of Operations

We have neither engaged in any operations nor generated any revenues through the balance sheet date. Our only activities from February 3, 2021 (inception) through December 31, 2023, were related to the Company’s formation and the Initial Public Offering, and since the offering, identifying and evaluating prospective acquisition targets for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We expect to generate non-operating income in the form of interest income or dividend income on marketable securities held after the Initial Public Offering. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the year ended December 31, 2023, we had a net loss of $2.94 million, which consisted of dividend income of $2.20 million, interest income of $5,159, foreign exchange loss of $17,334 and operating expenses of $5.13 million.

For the year ended December 31, 2022, we had a net loss of $0.30 million, which consisted of dividend income of $2.58 million, interest income of $4,010, foreign exchange gains of $1,073 and operating expenses of $2.89 million.

Liquidity and Going Concern

Until the consummation of the Initial Public Offering, our only source of liquidity was an initial purchase of ordinary shares by the Sponsor and loans from the Sponsor.

On September 8, 2021, the Company consummated the Initial Public Offering of 15,000,000 units, at a price of $10.00 per unit, generating gross proceeds of $150.00 million. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 8,400,000 Private Warrants at a price of $1.00 per warrant in a private placement to Sponsor and the underwriters, generating gross proceeds of $8.40 million. On September 13, 2021, the underwriters exercised the over-allotment option in full and purchased an additional 2,250,000 units, generating gross proceeds of $22.50 million. In connection with the underwriters’ full exercise of the over-allotment option, the Company issued an additional 900,000 Private Warrants at a price of $1.00 per warrant in a private placement to Sponsor and the underwriters, generating gross proceeds of $0.90 million.

Following the Initial Public Offering and the private placement, a total of $175.95 million was placed in the Trust Account (at $10.20 per Unit). We incurred $4.15 million in transaction costs, including $3.45 million of underwriting fees and $0.70 million of other offering costs.

On August 10, 2023, Legacy Borealis entered into a $25,000,000 financing agreement with a maturity date in July 2026. Under this agreement, Borealis Foods (as successor-in-interest to Legacy Borealis) has a $15,000,000 term facility which was used to pay off amounts outstanding under, and to terminate, a then existing line of credit. In addition to the term facility, Legacy Borealis entered into a $10,000,000 revolving line of credit. The term facility and the revolving line of credit are secured by liens on substantially all of the assets of Borealis Foods (as successor-in-interest to Legacy Borealis) and its subsidiaries. Interest is payable under the term facility and the revolving line of credit at the annual rate of Prime + 4.75 % and Prime + 4.5%, respectively. As of March 31, 2024, $15 million principal amount was outstanding under the term facility and no principal amount was outstanding under the revolving line of credit.

In February 2024, the Company completed its Business Combination, resulting in approximately $50.3 million of convertible debt converting into equity. At the completion of the Business Combination, the Company had marketable securities in the Trust Account of $0.6 million. The reduction in Trust Account holdings resulted principally from shareholder redemptions. The Company expects lower operating expenses in 2024 with the completion of the merger.

For the year ended December 31, 2023, cash used in operating activities was $2.34 million. Net loss of $2.94 million which consisted of the dividend received of $2.20 million and foreign exchange loss of $17,334. Changes in operating assets and liabilities provided $2.79 million of total cash for operating activities.

For the year ended December 31, 2022, cash used in operating activities was $2.11 million. Net loss of $0.30 million which consisted of the dividend received of $2.58 million and foreign exchange gain of $1,073. Changes in operating assets and liabilities provided $0.78 million of total cash for operating activities.

As of December 31, 2023, and December 31, 2022, we had marketable securities held in the Trust Account of $21.92 million (including a deposit in transit of $0.05 million) and $178.53 million, respectively. The reduction in Trust Account holdings resulted principally from shareholder redemptions.

Based on its present business plan and taking into account Borealis Foods’ working capital and cash anticipated to be generated through operations, Borealis Foods will require additional capital to fund its anticipated funding needs through March 31, 2025. The amount of additional capital required to fund Borealis Foods through March 31, 2025 has been reduced as a result of a change in Borealis Foods’ business plan that reduced the need for additional capital expenditures relating to the expansion of its production lines beyond the current four production lines. In addition, Borealis Foods continues to seek additional financing. There can be no assurance that such additional financing will be available to Borealis Foods on terms acceptable to Borealis Foods or at all. In the event Borealis Foods’ additional financing efforts are not successful, Borealis Foods may seek to pursue alternatives which may include, among other things, scaling down research and development, business develop investments, and global distribution expansion until such time that new capital has been secured..

Off-Balance Sheet Arrangements

We have no obligations, assets, or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2023. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than described below.

We have engaged the Underwriters as advisors in connection with our Business Combination to assist the Company in holding meetings with its shareholders to discuss the potential Business Combination and the target business’ attributes, introduce the Company to potential investors that are interested in purchasing the Company’s securities in connection with a Business Combination, assist the Company in obtaining shareholder approval for the Business Combination and assist the Company with its press releases and public filings in connection with the Business Combination. The Company will pay the Underwriters a cash fee for such services upon the consummation of a Business Combination of $5.2 million that equals to 3.0% of the gross proceeds of Initial Public Offering (exclusive of any applicable finders’ fees which might become payable).

Critical Accounting Estimates

The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statement, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Estimates made in preparing these financial statements include, among other things, the fair value measurement of shares transferred by the Sponsor to independent director nominees and fair value of shares to be transferred on completion of the Business Combination as per the Incentive agreements entered by the Sponsor and officers of the Company. Actual results could differ from those estimates.

Warrants

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15.

We account for the public warrants (the “Public Warrants” and together with Private Warrants, collectively, the “Warrants”), as either equity or liability-classified instruments based on an assessment of the specific terms of the Warrants and the applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the Warrants meet all of the requirements for equity classification under ASC 815, including whether the Warrants are indexed to our own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of our control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of issuance of the Warrants and as of each subsequent quarterly period end date while the Warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, such warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, such warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of liability-classified warrants are recognized as a non-cash gain or loss on the statements of operations. We evaluated the Public Warrants and Private Warrants in accordance with ASC 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity,” and concluded that they met the criteria for equity classification and are required to be recorded as part a component of additional paid-in capital at the time of issuance.

Class A Ordinary Shares Subject to Possible Redemption

The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of December 31, 2023 and December 31, 2022, 1,939,631 and 17,250,000 shares of Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ deficit section of the Company’s balance sheets, respectively.

Net Loss Per Ordinary Share

We comply with accounting and disclosure requirements of Financial Accounting Standards Board Accounting Standard Codification, or FASB ASC, Topic 260, “Earnings Per Share.” Net loss per ordinary share is computed by dividing net loss by the weighted average number of ordinary shares outstanding during the period. The Company applies the two-class method in calculating earnings per share. Re-measurement associated with the redeemable shares of Class A ordinary share is excluded from EPS as the redemption value approximates fair value.

Recently Adopted Accounting Pronouncements

In June 2022, the FASB issued ASU 2022-03, which amends Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). ASU 2022-03 clarifies guidance for fair value measurement of an equity security subject to a contractual sale restriction and establishes new disclosure requirements for such equity securities. The Company elected to early adopt ASU 2022-03 on July 1, 2023, and applied the amendment in measuring fair value of shares to be transferred on closing of a business combination.

Recent Accounting Pronouncements

In August 2020, FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments.

The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2023, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 on its financial statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and decision usefulness of income tax disclosures. This ASU will be effective for the annual period ending December 31, 2025. The Company is currently evaluating the timing and impacts of adoption of this ASU.

In June 2016, the FASB issued ASU 2016-12, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. ASU 2016-13 also requires additional disclosures regarding significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. The Company adopted the provisions of this guidance with effect from January 1, 2023. The adoption did not have a material impact on the Company’s consolidated financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.