Borealis Foods Inc.: Form 10-Q for the period ended Mar 31, 2026

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the interim unaudited condensed consolidated financial statements and the related notes thereto included in Part I, Item 1 of this Quarterly Report, and our audited consolidated financial statements and related notes in our Annual Report filed on Form 10-K for the year ended December 31, 2025 (“Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on June 2, 2026.

The following discussion and analysis may contain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, those set forth under Item 1.A., “Risk Factors,” included in Part I of the Annual Report.

Overview

Borealis Foods is a pioneering, integrated food science and manufacturing company that is redefining affordable nutrition. Known for popular ramen noodle brands including the high-protein Chef Woo, Chef Ramsay, Ramen Express, and Woodles, Borealis Foods brings innovative fusion flavors from diverse culinary traditions, creating delicious and nutritious meal options for consumers. With U.S.-based production facilities, the company’s portfolio reflects a commitment to quality, innovation, and sustainability.

The first quarter of 2026 reflects continued operational progress against our core strategic priorities: institutional channel expansion, gross margin defense, and SG&A rationalization. Net revenue increased 8.0% year-over-year to $7.37 million, loss from operations improved 29.3% to $(2.06) million from $(2.92) million in Q1 2025, and total SG&A declined 24.0% to $2.90 million. Net loss improved 16.1% to $(3.51) million from $(4.19) million in the prior year period.

Consistent with Borealis Foods’ strategy of partnership with prominent national and international food producers, retailers and distributors, the Company expanded institutional manufacturing partnerships and food service customer base through the addition of two global food manufacturers. One production arrangement was entered into during the first quarter of 2026 and the second was entered shortly after quarter-end. Under these arrangements, a leading global cereal and snack food company and a major multinational consumer packaged goods company now have production arrangements with the Company for manufacturing at our Saluda, South Carolina facility.

These relationships build upon the Company’s existing network of institutional partnerships and further expand our contracted demand pipeline and accelerate the path toward higher capacity utilization. Management believes these partnerships are an important step in the continued development of the Company’s institutional manufacturing business. The Company believes these relationships reflect confidence in the quality and capabilities of the PGF facility; as production volumes under these arrangements increase, the Company expects they may contribute to improved capacity utilization and greater absorption of fixed manufacturing costs, although the timing and extent of such benefits will depend on customer demand and production schedules.

Basis of Presentation

The unaudited condensed consolidated financial statements included in this Quarterly Report have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026.

Results of Operations

Comparison of the Three Months Ended March 31, 2026 and 2025.

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

Adjusted EBITDA is a non-GAAP financial metric. See “How we Evaluate Our Operations” below for an explanation of the terms EBITDA and Adjusted EBITDA and a reconciliation of net income to EBITDA and Adjusted EBITDA for each applicable period.

Revenue and Customer Trends

Net revenue increased 8.0% year-over-year to $7.37 million for the three months ended March 31, 2026, compared to $6.85 million for the three months ended March 31, 2025. Gross sales increased 8.0% to $7.78 million from $7.23 million in the prior year period. The growth was driven by continued expansion of our institutional food service channel, including increased volumes from existing partners and the initial contribution from new major manufacturing partnerships entered into during the first quarter.

The quarter marks the beginning of a meaningful expansion in our customer base and contracted production volume. During Q1 2026, the Company entered into production arrangements with two globally recognized consumer food companies, one a leading global cereal and snack manufacturer and the other a major multinational consumer packaged goods company with an extensive food and beverage portfolio. These arrangements add two significant sources of contracted volume to our existing institutional relationships and are expected to contribute meaningfully to revenue and capacity utilization beginning in the second quarter of 2026 and accelerating through the remainder of the year.

The annualized revenue run-rate implied by Q1 2026 net revenue is approximately $29.47 million. Management anticipates this run-rate to increase materially as the new co-packing arrangements and expanded institutional volumes ramp through the remainder of 2026. Revenue concentration with any single mass retail partner has continued to decline, consistent with our strategic objective of building a diversified, high-quality institutional manufacturing portfolio that generates consistent large-order volume at favorable margins.

Sales discounts and allowances were $0.41 million for Q1 2026, or 6.0% of gross sales, consistent with Q1 2025 at $0.38 million (also 6.0% of gross sales), reflecting stable promotional discipline as our customer mix continues to evolve toward institutional and manufacturing channels with lower promotional requirements.

Product Mix and Margin Performance

Gross profit for the three months ended March 31, 2026 was $0.84 million (11.0% of net revenue), compared to $0.90 million (13.0% of net revenue) for the three months ended March 31, 2025, a decrease of $0.06 million. Non-GAAP gross margin, less depreciation, was 16.0% for Q1 2026 compared to 20.0% for Q1 2025. The year-over-year margin comparison reflects a product mix shift in Q1 2026 as we onboard new partners initial production runs which typically carry lower per-unit margins as lines are qualified and production efficiencies are established. Management expects gross margin to recover and expand as these new relationships scale to full volume and line efficiencies are optimized.

The primary drivers of the gross profit variance are:

Volume-driven COGS increase: Cost of goods sold, excluding depreciation, increased $0.68 million year-over-year commensurate with the 8.0% increase in revenue, reflecting higher raw material and direct labor costs on the larger production base. As a percentage of net revenue, cost of goods sold (excluding depreciation) was 83.4% in Q1 2026 versus 80.0% in Q1 2025.

New customer onboarding costs: Q1 2026 reflects the initial production qualification runs and related efficiency ramp-up costs associated with the new major manufacturing partnerships. These are transitional costs that are expected to normalize as production volumes reach steady-state.

Depreciation reduction: Depreciation within cost of goods sold declined to $0.39 million in Q1 2026 from $0.48 million in Q1 2025, a reduction of $0.09 million, reflecting the continued benefit of the machine-hours depreciation method under which charges vary with actual production utilization.

The capacity utilization opportunity remains the most powerful lever available to the Company. Our Saluda, South Carolina facility operates at an installed capacity of 600 million meals per year, and current production levels represent a small fraction of that capacity. The addition of the new manufacturing partnerships in Q1 2026 is the most direct mechanism available to us for increasing utilization. We believe the contracted demand pipeline now in place with our institutional and co-packing partners provides the clearest pathway we have had to date toward achieving that utilization level.’

Operating Expenses and SG&A Trends

Total selling, general and administrative expenses declined 24.0% year-over-year to $2.90 million, or 39.0% of net revenue, for the three months ended March 31, 2026, compared to $3.82 million, or 56.0% of net revenue, for the three months ended March 31, 2025. This represents the continuation of the structural SG&A reduction that accelerated in the second half of fiscal 2025. The $0.92 million reduction in Q1 2026 SG&A is broad-based across all expense categories and reflects normalization of our cost base as the food service channel matures.

Key drivers of the Q1 2026 SG&A improvement include:

• General and administrative expenses declined $0.59 million, or 24.0%, to $1.86 million, driven by lower professional fees, reduced legal and audit costs, and tighter management of discretionary administrative spending.
• Sales and marketing expenses declined $0.10 million, or 18.2%, to $0.46 million, reflecting the normalization of marketing spend following the intensive national launch activities of early 2025.
• Business development expenses declined $0.16 million, or 27.0%, to $0.45 million, as the food service channel build-out costs have moderated with the establishment of recurring institutional relationships.
• Training and start-up costs declined $0.07 million, or 33.0%, to $0.13 million, reflecting continued stabilization of the PGF manufacturing team as production capabilities have matured.

The Q1 2026 annualized SG&A run-rate of approximately $11.60 million continues the downward trajectory. Management expects this run-rate to remain stable or continue to improve, with the new manufacturing relationships not expected to require material incremental SG&A investment given the institutional nature of those arrangements.

Cash Flows

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

Operating Activities

Net cash used in operating activities for the three months ended March 31, 2026 was $0.12 million, primarily driven by the net loss of $3.51 million, adjusted for non-cash charges of $0.39 million for depreciation and amortization. This represents a 91% improvement from the $1.37 million used in the same period of 2025 primarily as a result of favorable changes in working capital, including a $0.87 million decrease in accounts receivable and a $1.08 million decrease in inventories, partially offset by a slight year-over-year decline in gross profit ($0.84 million in Q1 2026 compared to $0.90 million in Q1 2025).

Investing Activities

Net cash used in investing activities was $0 million for the three months ended March 31, 2026. This decrease from $0.03 million in the three months ended March 31, 2025 aligns with our focused approach to capital expenditures, particularly as the Company seeks to improve asset utilization and operational efficiencies without significant expansion of its production line.

Financing Activities

Net cash provided by financing activities during the three months ended March 31, 2026, was $0.54 million, financing was driven by advances from related parties. In comparison, net cash provided by financing activities in the three months ended March 31, 2025, was $0.94 million, and largely attributable to borrowings on the line of credit, proceeds from convertible debt and related party advances.

Liquidity and Capital Resources

As of March 31, 2026, our primary sources of liquidity were borrowings under the FrontWell Capital Partners credit facility and advances from related parties, as cash generated from operations were not sufficient to fund our operating requirements. As of the balance sheet date, we had cash and cash equivalents of approximately $0.48 million and a working capital deficit of approximately $(65.02) million. The Company was reliant on related party funding and vendor payment timing to meet near-term obligations as of March 31, 2026.

As of March 31, 2026, the FrontWell term facility carried a balloon payment of approximately $14.08 million due in August 2026, with an additional $2.21 million outstanding under the revolving line of credit. This scheduled maturity, occurring within twelve months of the balance sheet date, represented the most significant near-term capital structure risk as of March 31, 2026. Management was actively engaged in discussions with FrontWell and evaluating alternative secured financing arrangements supported by the Company’s $43.51 million net PP&E asset base in order to refinance or extend this obligation prior to its maturity.

The addition of two major global food manufacturers as manufacturing customers, one at the end of Q1 2026 and one shortly thereafter, is expected to improve the Company’s liquidity trajectory by generating contracted, large-order institutional volume that improves working capital predictability and strengthens the borrowing base. Management believes this expanded demand pipeline positions the Company to improve its working capital profile as these relationships reach full production volume in the quarters ahead.

Subsequent to March 31, 2026, the Company completed two related-party financing transactions that materially changed its capital structure and liquidity position. The April 27, 2026 Oxus Credit Agreement was previously disclosed in the Company's Annual Report on Form 10-K; the May 29, 2026 Oxus Convertible Promissory Note was not.

On April 27, 2026, the FrontWell credit facility was retired in full through a $17.00 million term loan from Oxus Capital, a related-party major shareholder controlled by Kenges Rakishev, eliminating the August 2026 balloon maturity. On May 29, 2026, the Company issued a separate $3.0 million senior unsecured convertible promissory note to Oxus Capital, bearing interest at 10% per annum and maturing August 29, 2026 (subject to automatic extension pending receipt of required shareholder approvals), convertible at Oxus Capital's election at maturity into Common Shares at $1.45 per share, subject to a 49.9% beneficial ownership blocker. These transactions are described in detail under “Subsequent Events” above and are not reflected in the March 31, 2026 balance sheet.

Balance Sheet and Contractual Obligations

Our cash position, though lower than prior periods, reflects its active investment in operational scale-up and the expansion of high-margin product lines. Borealis Foods’ contractual obligations, including operating leases, accounts payable, and convertible notes, remain in line with planned financial commitments and reflect our strategic focus on sustainable growth.

Future Capital Requirements and Liquidity

We need additional capital to meet our funding requirements through the next twelve months, particularly to support our expansion into the premium retail segment with a prominent global brand. As of March 31, 2026, we had cash-on-hand of $0.48 million and negative working capital of $65.02 million. Our current business plan has mitigated some capital expenditure requirements, as operational efficiencies in existing production lines have reduced the need for immediate expansion. We are actively exploring additional financing options to strengthen liquidity; however, there can be no assurance that such funding will be available on favorable terms or at all. If we cannot obtain adequate additional financing, among other things, we may have to substantially curtail or limit our research, marketing, production or distribution activities, sell assets of the Company or seek protection from creditors under bankruptcy laws, which could materially and adversely affect our business plan. Inadequate financial resources could also continue to raise substantial doubt about our ability to continue as a going concern.

Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As of March 31, 2026, conditions existed that raised substantial doubt about the Company’s ability to continue as a going concern within one year after the date these financial statements are issued. Those conditions included: (i) recurring net losses, including a net loss of $3.51 million for the three months ended March 31, 2026; (ii) net cash used in operating activities of approximately $0.12 millon for the three months ended March 31, 2026; (iii) a working capital deficit of approximately $(65.02) million as of March 31, 2026; and (iv) the FrontWell term facility balloon payment of approximately $14.08 million due in August 2026, which was within twelve months of the balance sheet date.

As of March 31, 2026, management’s plans to address the going concern conditions included the following:

FrontWell Refinancing: Management was actively engaged in discussions with FrontWell Capital Partners regarding the refinancing, amendment, or extension of the term facility prior to its August 2026 maturity. The Company’s $43.51 million net PP&E asset base, representing one of the most advanced ramen manufacturing facilities in North America, was expected to support asset-based refinancing at a scale sufficient to materially extend the Company’s debt runway.

New Institutional Manufacturing Partnerships: During the first quarter of 2026 and shortly thereafter, the Company entered into production arrangements with two major global food manufacturers. These relationships were expected to generate meaningful contracted production volume beginning in Q2 2026, improving capacity utilization, revenue predictability, and the Company’s borrowing base.

Continued Related Party Financial Support: The Company’s Chairman and CEO have historically provided, and as of March 31, 2026 were expected to continue providing, financial support as needed. Advances of $2.05 million and $0.28 million, respectively, had been provided by the Chairman and CEO subsequent to December 31, 2025 and prior to the filing date of the Annual Report on Form 10-K and their continued support was considered a mitigating factor in management’s going concern assessment.

Additional Financing: The Company was actively pursuing additional equity offerings, convertible debt, and strategic financing arrangements to provide working capital to support the institutional production ramp and to strengthen the balance sheet.

SG&A Cost Reduction: Total SG&A for the three months ended March 31, 2026 was $2.90 million, a 24.0% reduction from the prior year period, reflecting a lower and more sustainable operating cost structure that reduces the amount of revenue required to achieve operating breakeven.

Subsequent to March 31, 2026, the Company executed certain elements of its plan: on April 27, 2026, the FrontWell credit facility was retired in full through the $17.0 million Oxus Credit Agreement with Oxus Capital, a related-party major shareholder controlled by Kenges Rakishev, and on May 29, 2026, the Company issued a separate $3.00 million unsecured convertible promissory note to Oxus Capital. These transactions eliminate the August 2026 FrontWell balloon maturity that was the most significant near-term capital structure risk identified as of the balance sheet date. Notwithstanding these transactions, management has concluded under ASC 205-40 that substantial doubt about the Company's ability to continue as a going concern has not been alleviated. Material conditions remain, including: (i) the requirement to consummate at least $70.00 million of equity financing at $9.00 per share on or before July 1, 2026, for which the Company has no commitments and which threshold is substantially above recent trading prices of the Common Shares; (ii) if such financing is not consummated, the contractual conversion of approximately $29.13 million of related-party indebtedness (plus approximately $4.26 million of accrued interest as of June 30, 2026) into Common Shares, which conversion is itself subject to receipt of shareholder approvals required under Nasdaq Listing Rules 5635(b) and 5635(d) that have not been obtained; (iii) the Company’s continued reliance on demand and past-due obligations to related parties; and (iv) the fact that the Company’s total liabilities continue to exceed total assets.

Contractual Obligations and Commitments

The following table summarizes our non-cancellable contractual obligations and other commitments as of March 31, 2026, and the effects that such obligations are expected to have on our liquidity and cash flow for future periods (in thousands):

(*) 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 March 31, 2026 and December 31, 2025, we did not engage in any off-balance sheet arrangements, including the use of structured finance, special purpose entities, or variable interest entities.

Warrants

The following represents a summary of warrants outstanding and exercisable as of March 31, 2026:

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 Common Shares equals or exceeds $18.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) for any 20 days within a 30 trading day period commencing once the warrants become exercisable and ending on the third trading day prior to the date on which Borealis gives proper notice of such redemption and provided certain other conditions are met.

The public warrants are identical to the 2021 private placement warrants in material terms and provisions, except the private placement warrants were not transferable, assignable or salable until 30 days after the completion of the Reverse Recapitalization.

Subsequent Events

The Company evaluated events and transactions occurring after March 31, 2026 through the date these financial statements were available to be issued. The following subsequent events are disclosed as they are material to the financial condition and results of operations of the Company.

Related Party Refinancing — April 27, 2026

On April 27, 2026, the Company's subsidiaries entered into the Oxus Credit Agreement with Oxus Capital PTE Ltd., a major shareholder of the Company controlled by Kenges Rakishev (the beneficial owner of approximately 39.09% of the Company's outstanding Common Shares), as more fully described in Note 4 and Note 11 to the unaudited condensed consolidated financial statements. The proceeds from this loan were used to: (i) retire in full the outstanding principal and accrued interest under the FrontWell Capital Partners credit facility, including both the term loan (with an approximately $14.08 million balloon that had been due in August 2026) and the revolving line of credit (approximately $2.69 million outstanding as of December 31, 2025); and (ii) repay a portion of existing related party obligations. The transaction eliminates the August 2026 FrontWell maturity event that had been identified as the most significant near-term capital structure risk in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

Conversion Agreement. In connection with the Oxus Credit Agreement, the Company entered into a Conversion Agreement with Oxus Capital, Reza Soltanzadeh (“CEO”), and Barthelemy Helg (“Non-Executive Chairman”) (collectively, the “Shareholders”). Pursuant to the Conversion Agreement, approximately $29.1 million in aggregate principal amount of indebtedness previously advanced by the Shareholders to the Company, plus approximately $4.3 million in accrued interest (calculated through June 30, 2026), will automatically convert into Common Shares if the Company does not consummate one or more equity financings resulting in aggregate gross proceeds of at least $70 million at a price of $9.00 per share on or before July 1, 2026. The term loan under the Oxus Credit Agreement is expressly excluded from the indebtedness subject to conversion. If the automatic conversion occurs, existing shareholders would experience substantial dilution. Board Reconstitution. Pursuant to the Oxus Credit Agreement, the Company was required, no later than May 11, 2026, to reconstitute its Board of Directors by appointing Pavel Mynzhanov and Zaure Algaziyeva (or such other individuals acceptable to Oxus Capital). Pavel Mynzhanov, who has served as a Director of Oxus Capital since June 2022, was appointed to the Board in May 2026.

Nasdaq Shareholder Approval Requirements. The issuance of Common Shares upon (i) the automatic conversion of approximately $29.1 million of related-party indebtedness (plus approximately $4.3 million of accrued interest as of June 30, 2026) under the Conversion Agreement and (ii) the conversion of the Oxus Convertible Promissory Note described above is expected to require shareholder approval under Nasdaq Listing Rules 5635(b) (change of control) and potentially 5635(d) (issuance of 20% or more of outstanding Common Shares at a price below the Nasdaq minimum price). Shareholder approval of these matters was not sought at the Company’s June 29, 2026 annual meeting. The Conversion Agreement and the Note each contain provisions that defer the applicable conversion and extend the applicable maturity until the required shareholder approvals are obtained. The Company intends to convene a special meeting of shareholders, or to include the required proposals at its next annual meeting, to seek the required approvals. There can be no assurance that such approvals will be obtained.

Additional Related Party Financing — May 29, 2026

On May 29, 2026, the Company issued a $3.0 million senior unsecured convertible promissory note to Oxus Capital, bearing interest at 10% per annum and maturing August 29, 2026 (subject to automatic extension if required shareholder approvals for conversion have not been obtained). The Note is convertible at Oxus Capital's election at maturity into Common Shares at $1.45 per share, subject to a 49.9% beneficial ownership blocker. The Note constitutes a related party transaction. See Note 11.

The April 27, 2026 and May 29, 2026 related party financings collectively: (i) eliminate the August 2026 FrontWell balloon maturity that had constituted the most critical near-term going concern trigger; (ii) consolidate the Company’s secured debt into related party obligations with, management believes, more flexible repayment terms; and (iii) provide $3.00 million in incremental working capital to support the operational ramp. Notwithstanding these transactions, substantial doubt about the Company’s ability to continue as a going concern has not been alleviated under ASC 205-40, as more fully described above under “Going Concern” and in Note 1 to the unaudited condensed consolidated financial statements.

EarlyBirdCapital Escrow Shares. As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, in November 2025, in connection with the extension of a promissory note originally issued to EarlyBirdCapital, Inc. (“EBC”), Barthelemy Helg and Reza Soltanzadeh (through Zagros Alpine Capital ULC) each provided 500,000 Common Shares as collateral. Following an alleged default under the note, the escrowed shares were transferred to EBC. In late April 2026, EBC advised the Company that a portion of such shares had been sold and the proceeds applied against amounts outstanding. On May 8, 2026, the Board of Directors determined that such shares had been provided solely for the benefit of the Company and resolved that the Company would take appropriate steps to make Mr. Helg and Mr. Soltanzadeh whole. As of the date of this Quarterly Report, no replacement shares have been issued.

Between April 1, 2026 and May 29, 2026, the Company received additional unsecured advances from the Chairman of the Board of Directors in the amount of $910,000.

Emerging Growth Company Status

Section 102(b)(1) of the Jumpstart Our Business Startups Act (the “JOBS Act”) exempts “emerging growth companies” (as defined in Section 2(a) of the Securities Act) from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to not take advantage of the extended transition period is irrevocable. Oxus was an emerging growth company and elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. Following the consummation of the Reverse Recapitalization, Borealis Foods expects to continue taking advantage of the benefits of the extended transition period, although it may decide to early adopt new or revised accounting standards to the extent permitted by such standards and relevant laws and regulations. This may make it difficult or impossible to compare Borealis Foods’ financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.

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

Implications of being a Smaller Reporting Company

Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of common shares held by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter, or (ii) our annual revenues exceeded $100 million during such completed fiscal year and the market value of common shares held by non-affiliates equals or exceeds $700 million as of the end of that year’s second fiscal quarter. To the extent we take advantage of such reduced disclosure obligations, we may also make comparison of our financial statements with other public companies difficult or impossible.

How We Evaluate Our Operations

Net Income/(Loss)

We measure performance based on our overall return to shareholders based on consolidated net income or net loss. We do not review a measure of operating result at a lower level than the consolidated company and we only have one reportable segment.

Adjusted EBITDA

Our adjustments to EBITDA are related to expenses and gains that we believe are not indicative of normal, ongoing operations. While these items may be recurring in nature and should not be disregarded in evaluation of our earnings performance, it is useful to exclude such items when analyzing current results and trends as these items can vary significantly from period to period depending on specific underlying transactions or events that may occur. Therefore, while we may incur or recognize these types of expenses and gains in the future, we believe that removing these items for purposes of calculating the Adjusted EBITDA financial measures provides a more focused presentation of our ongoing operating performance.

We view EBITDA as an important indicator of performance. We define EBITDA as net income/(loss) plus net interest expense, income taxes, depreciation, and amortization. We define Adjusted EBITDA as EBITDA further adjusted for any foreign exchange gains/(losses), share-based compensation expense and non-recurring items if identified. EBITDA and Adjusted EBITDA are supplemental measures utilized by our management and other users of our financial statements such as investors, research analysts and others, to assess the financial performance of our assets without regard to financing methods, capital structure or historical cost basis. Adjusted EBITDA is a key performance measure that our management uses to assess the Company’s 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.

For the three months ended March 31, 2026, “Adjusted EBITDA,” a non-GAAP measure, is defined as net loss attributable to us before (1) income taxes, (2) depreciation and amortization, of $0.39 million, (3) interest expense, of $1.45 million, (4) new product launch of $0.46 million, (5) training, of $0.13 million, (6) deferred stock compensation $0.04 million, (7) professional fees, of $0.42 million, and (8) business development and other extraordinary charges, of $0.44 million. For the three months ended March 31, 2025, “Adjusted EBITDA,” a non-GAAP measure, is defined as net loss attributable to us before (1) income taxes, (2) depreciation and amortization, of $0.48 million, (3) interest expense, of $1.26 million, (4) new product launch of $0.57 million, (5) training, of $0.20 million, (6) deferred stock compensation $0.04 million, (7) business professional fees, of $0.48 million, and (8) business development and other extraordinary charges, of $0.61 million. Management and our Board of Directors use this non-GAAP measure for purposes of evaluating our performance. Furthermore, the Compensation Committee of our Board of Directors uses such measure to evaluate management’s performance. We, therefore, believe that the use of this non-GAAP measure provides useful information to investors and other stakeholders by allowing them to view our business through the eyes of management and our Board of Directors, facilitating comparisons of results across historical periods and focus on the underlying ongoing operating performance of our business. As noted above, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP.

Recent Accounting Pronouncements

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

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

Sales to three customers accounted for approximately 58% and sales to four customers accounted for approximately 60% of net revenues for three month periods ended March 31, 2026 and 2025, respectively. Accounts receivable from two customers amounted to approximately 31% and accounts receivable from three customers amounted to approximately 51% of total accounts receivable as of March 31, 2026 and December 31, 2025, respectively. The Company’s sales for the periods presented were generated primarily in the United States, with the balance generated in international markets including Canada, Central America, South America, and Europe. See Note 10 for revenue disaggregated by geographic region.

Purchases from 10 vendors accounted for approximately 46% and 46% of purchases during the three months ended March 31, 2026 and 2025, respectively. Accounts payable to these vendors totaled approximately $1,501,000 and $2,678,000 as of March 31, 2026 and 2025, respectively.

Foreign Currency Risk

Our customers are primarily located in the United States, Central America, South America, Europe, 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.

Inflation Risk

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

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

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2026. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2026, our disclosure controls and procedures were not effective at the reasonable assurance level, as a result of the material weaknesses in internal control over financial reporting described below.

Evaluation of Internal Control over Financial Reporting

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 designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our unaudited 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 March 31, 2026 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 March 31, 2026 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 the material weaknesses identified as of December 31, 2025 and disclosed in our Annual Report on Form 10-K, management concluded that the following material weaknesses continued to exist as of March 31, 2026: (i) the Company had insufficient accounting and financial reporting resources and lacked appropriate segregation of duties within its financial reporting process; and (ii) the Company did not maintain effective controls over the identification, authorization, and disclosure of related-party transactions and over monitoring of compliance with debt covenants. As a result of these material weaknesses, management concluded that the Company’s internal control over financial reporting was not effective as of March 31, 2026.

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, 2025. 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 March 31, 2026. However, we have been in the process of remediating the internal control integrated framework in order to address this weakness.

Our Chief Executive Officer and Chief Financial Officer have taken additional steps to support that the unaudited condensed consolidated financial statements for the period ended March 31, 2026 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.

Our risk factors are disclosed in Part I, Item 1A of our Annual Report on Form 10-K, filed with the SEC on June 2, 2026.

The risk factors set forth below update and supplement the risk factors disclosed in the Annual Report. Except as set forth below, there have been no material changes from the risk factors disclosed in the Annual Report. The risk factors disclosed in the Annual Report, together with the updated and supplemental risk factors set forth below, should be carefully considered, together with the other information in this Quarterly Report and our other filings with the SEC, in evaluating the Company and our Common Shares and Warrants. The risks described in the Annual Report and below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, financial condition, or results of operations.

Approximately $33.3 million of related-party indebtedness is subject to contractual automatic conversion into Common Shares on or after July 1, 2026, and any such conversion will result in substantial dilution to existing shareholders.

On April 27, 2026, in connection with the Oxus Credit Agreement, we entered into a Conversion Agreement with Oxus Capital PTE Ltd. (“Oxus Capital”), our Chief Executive Officer Reza Soltanzadeh, and our Non-Executive Chairman Barthelemy Helg (together, the “Shareholders”), and a Subscription Agreement with Oxus Capital. Pursuant to the Subscription Agreement, we are obligated to use commercially reasonable efforts to consummate one or more equity financings resulting in aggregate gross proceeds of at least $70.0 million at a price of not less than $9.00 per share on or before July 1, 2026 (the “Equity Financing Condition”). If the Equity Financing Condition is not satisfied, the Conversion Agreement provides for the automatic conversion of approximately $29.1 million of indebtedness previously advanced by the Shareholders to the Company, plus approximately $4.3 million of accrued interest (calculated through June 30, 2026), into Common Shares.

We do not currently have any commitments for the equity financing contemplated by the Subscription Agreement, and the $9.00 per share threshold is substantially above recent trading prices of our Common Shares. As a result, we expect that the Equity Financing Condition will not be satisfied by July 1, 2026, and that the conversion contemplated by the Conversion Agreement will be triggered. The number of Common Shares issuable upon conversion will depend on the conversion price determined under the Conversion Agreement, and the conversion price is expected to be substantially below the $9.00 per share threshold contemplated by the Subscription Agreement. Accordingly, if and when the conversion is effected, the conversion will result in substantial dilution to our existing shareholders and a significant further increase in the beneficial ownership and voting power of Oxus Capital and its affiliates, who are already our controlling shareholder group.

As described in the following risk factor, the issuance of Common Shares upon the conversion contemplated by the Conversion Agreement is expected to require shareholder approval under Nasdaq Listing Rules 5635(b) and potentially 5635(d). The Conversion Agreement contains a “Required Approvals” provision that defers the conversion and correspondingly extends the maturity of the related indebtedness until such shareholder approvals are obtained. The interaction between the July 1, 2026 contractual conversion trigger and the Nasdaq-driven deferral creates a continuing overhang on our Common Shares, the duration and ultimate resolution of which depends on factors outside our control, including the timing of any shareholder meeting we are able to convene and the outcome of the shareholder vote.

Issuances of Common Shares upon conversion of related-party indebtedness require shareholder approval under Nasdaq Listing Rules 5635(b) and 5635(d), which approval has not been obtained and was not sought at our June 29, 2026 annual meeting of shareholders.

The issuance of Common Shares upon (i) the conversion of approximately $29.1 million of related-party indebtedness (plus approximately $4.3 million of accrued interest as of June 30, 2026) under the Conversion Agreement and (ii) the conversion of the $3.0 million convertible promissory note issued to Oxus Capital on May 29, 2026 described in Note 11 (collectively, the “Required Issuances”) is expected to require the prior approval of our shareholders under Nasdaq Listing Rule 5635(b) (change of control) and potentially Nasdaq Listing Rule 5635(d) (issuance of 20% or more of the outstanding Common Shares at a price less than the Nasdaq minimum price).

The Required Issuances were not submitted to a vote of our shareholders at our June 29, 2026 annual meeting of shareholders. The Conversion Agreement and the Note each defer the applicable conversion and extend the applicable maturity until the required shareholder approvals are obtained. We intend to convene a special meeting of shareholders, or to include the required proposals at our next annual meeting of shareholders, to seek the required approvals.

We cannot assure you that we will obtain the required shareholder approvals on a timely basis or at all. Under Nasdaq’s voting requirements applicable to issuances under Listing Rule 5635, the shares to be issued in the transactions, and shares held by Oxus Capital and its affiliates as interested parties, may be subject to limitations on voting on the related proposals. If we fail to obtain the required shareholder approvals, the conversion contemplated by the Conversion Agreement will continue to be deferred, the related indebtedness will remain outstanding (subject to the corresponding maturity extensions and continuing accrual of interest at the contractual rates), and the overhang created by the Conversion Agreement will continue to weigh on the trading price of our Common Shares. In addition, if we are required to restructure or amend the Conversion Agreement or the Oxus Credit Agreement in order to address the deferral or to obtain shareholder approval, any such restructuring or amendment could be on terms less favorable to us and our non-affiliated shareholders than the existing terms. Failure to obtain the required approvals could also adversely affect our continued listing on the Nasdaq Capital Market.

Substantial doubt about our ability to continue as a going concern has not been alleviated.

As disclosed in the Annual Report, our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern. Notwithstanding the refinancing of the FrontWell Capital Partners credit facility through the April 27, 2026 Oxus Credit Agreement and the additional $3.0 million provided under the May 29, 2026 amendment thereto, management has concluded under ASC 205-40 that substantial doubt has not been alleviated, because management’s plans cannot be assessed as probable of being effectively implemented. Material conditions continue to exist, including our need to consummate at least $70.0 million of equity financing at $9.00 per share on or before July 1, 2026 (for which we have no commitments), the conversion overhang and Nasdaq shareholder-approval requirements described above, our continued reliance on demand and past-due obligations to related parties, and the fact that our total liabilities continue to exceed our total assets. See Note 1 to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.

Oxus Capital and its controlling shareholder exercise significant influence over our Company and may increase that influence further upon conversion of related-party indebtedness.

Oxus Capital, our former SPAC sponsor, beneficially owns, through its controlling shareholder Kenges Rakishev, approximately 39.09% of our outstanding Common Shares. Oxus Capital is also our senior secured lender under the Oxus Credit Agreement (as amended), holds a portion of the related-party indebtedness subject to the Conversion Agreement, and is entitled to appoint two members of our Board of Directors, one of whom (Pavel Mynzhanov) was appointed in May 2026. As a result, Oxus Capital and Mr. Rakishev have significant influence over our business, strategy, financing, and governance, including the ability to influence or determine the outcome of most matters submitted to our shareholders for approval. If the conversion contemplated by the Conversion Agreement is effected following receipt of the required shareholder approvals, the beneficial ownership and voting power of Oxus Capital and its affiliates will increase further, potentially to a level that constitutes majority ownership and control of the Company. The interests of Oxus Capital and Mr. Rakishev may differ from those of our other shareholders, and conflicts of interest may arise in connection with related-party transactions, financings, and other matters in which Oxus Capital has a direct or indirect interest.

We are not yet confirmed as compliant with Nasdaq Listing Rule 5620(a).

On January 12, 2026, we received a notice from the Nasdaq Listing Qualifications Department that we were not in compliance with Nasdaq Listing Rule 5620(a), which requires listed companies to hold an annual meeting of shareholders within twelve months of the end of each fiscal year. Nasdaq granted us an extension until June 29, 2026 to regain compliance. We held our annual meeting of shareholders on June 29, 2026. We expect to receive confirmation from Nasdaq that we have regained compliance with Listing Rule 5620(a); however, we have not received such confirmation as of the date of this Quarterly Report. If, contrary to our expectations, Nasdaq determines that we have not regained compliance, our Common Shares and Warrants could become subject to delisting from the Nasdaq Capital Market, which would materially and adversely affect the liquidity and trading price of our securities, our ability to raise additional capital, and our relationships with customers, suppliers, and other counterparties.