UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Borealis Foods Inc. (Exact name of registrant as specified in its charter) | Ontario | 001-40778 | 98-1638988 | | --- | --- | --- | | (State or other jurisdiction of | (Commission File Number) | (I.R.S. Employer | | incorporation or organization) | | Identification Number) | | 1540 Cornwall Rd. #104 | | ...

Core Insights - Borealis Foods Inc. has announced that its Chef Woo high-protein ramen has received prestigious awards for superior taste from Chefs In America and was also named an Editor's Top Pick by Food & Beverage Magazine [1][2]. Company Overview - Borealis Foods is a pioneering food science and manufacturing company focused on disrupting the ready-to-eat meal and dry soup categories by offering premium, nutritious products [4]. - The company is known for its popular ramen brands, including Chef Woo, Ramen Express, and Woodles, and emphasizes innovative fusion flavors from diverse culinary traditions [4]. Financial Performance - In Q2 2025, Borealis Foods reported net revenue of $7.2 million, a 36% increase from $5.3 million in Q2 2024 [6]. - Gross profit rose to $514,888 compared to $422,322 in the previous year, with non-GAAP gross profit reaching $988,759, up from $818,000 [6]. - Total SG&A expenses decreased by 31% to $3.9 million, down from $5.6 million in Q2 2024, indicating improved efficiency in sales and marketing spending [6]. Strategic Positioning - The company is experiencing significant demand across retail and foodservice channels, supported by the rollout of higher-margin SKUs [4]. - Borealis Foods has established strategic partnerships with national and international food producers, retailers, and distributors to enhance its offerings and technological capabilities [5].

Financial Performance - For the six months ended June 30, 2025, net revenue increased to $14.0 million, a 6% improvement from $13.2 million in the prior-year period, driven by a stronger customer mix and expansion into institutional channels [127]. - Gross profit for the same period was $1.41 million, or 10% of net revenue, compared to $0.67 million, or 5%, in the prior-year period, reflecting operational efficiencies and an improved sales mix [129]. - For the three months ended June 30, 2025, net revenue was $7.2 million, an increase of $1.86 million, or 35%, compared to $5.3 million in the same period of 2024 [153]. - Gross profit for the quarter was $0.50 million, or 7% of net revenue, compared to $0.42 million, or 8% of net revenue, in the same period last year [155]. - Loss from operations narrowed significantly to $(6.27) million compared to $(12.16) million in the first half of 2024, indicating improved gross profit and reduced operating costs [131]. - Loss from operations improved to $(3.36) million from $(5.19) million in the prior-year quarter, a $1.83 million improvement [158]. - Adjusted EBITDA was $(0.80) million compared to $0.68 million in the same period last year, reflecting higher depreciation and absence of one-time cost recoveries [158]. Expenses and Cost Management - Total SG&A expenses declined 42% year-over-year to $7.69 million for the six months ended June 30, 2025, down from $12.83 million in the prior-year period [131]. - Total SG&A expenses for the quarter declined 51% to $3.87 million, compared to $5.61 million in the second quarter of 2024 [158]. - For the six months ended June 30, 2025, Adjusted EBITDA was $1.0 million for depreciation and amortization, $2.5 million for interest expense, and included $1.2 million for new product launches [173]. - For the three months ended June 30, 2025, Adjusted EBITDA included $0.5 million for depreciation and amortization, $1.2 million for interest expense, and $0.7 million for new product launches [173]. Cash Flow and Liquidity - Net cash used in operating activities for the six months ended June 30, 2025, was $3.57 million, an improvement from $11.00 million used in the same period of 2024 [136]. - The company had cash-on-hand of $0.21 million and negative working capital of $29.49 million as of June 30, 2025, indicating liquidity challenges [140]. - The Chairman and CEO advanced funds totaling $3.43 million to support operations during the first half of 2025 [165]. - The company is actively exploring additional financing options to strengthen liquidity, with no external capital raised in the first half of 2025 [143]. Customer and Market Dynamics - A major institutional customer generated $3.9 million in its first two full quarters of shipments, reflecting successful diversification of the customer base [132]. - A major institutional customer contributed approximately $1.9 million in sales during the quarter [159]. - Sales to four customers accounted for approximately 61% of net revenues for the three months ended June 30, 2025 [178]. - Accounts receivable from two customers amounted to approximately 46% of total accounts receivable as of June 30, 2025 [178]. - Purchases from 10 vendors accounted for approximately 54% of purchases during the three months ended June 30, 2025 [179]. Strategic Initiatives - The company anticipates a seasonal uplift with the launch of the Woodles brand and higher-margin SKUs, supported by significant investments in business development and R&D [130]. - Management anticipates improved cash conversion in the second half of 2025 due to higher sales volumes and tighter expense management [162]. - The company is focusing on aligning inventory purchases with committed demand from large institutional customers to enhance working capital efficiency [163]. - Management expects increased contributions from high-volume institutional channels to enhance cash conversion in the remainder of 2025 [166]. Operational Insights - Gross margin, excluding depreciation, improved to 17% from 16% in the prior year, driven by a shift toward higher-margin branded and institutional sales [142]. - Certain Selling, General and Administrative costs include business development costs and research and development costs focused on enhancing existing products and developing new products [183]. - The company has not entered into any hedging arrangements to minimize the impact of foreign currency fluctuations [180]. - The company does not believe that inflation had a significant impact on its results of operations for any periods presented [182].

Core Viewpoint - Borealis Foods Inc. is strategically positioned as a US-based food producer, focusing on partnerships with leading food producers, distributors, and retailers to enhance its operational efficiency and profitability while mitigating supply chain risks [2][4]. Financial Performance - In the first quarter of 2025, Borealis reported a gross margin of 13%, up from 3% in the same period last year, resulting in a gross profit of approximately $900,000 compared to $242,000 in the prior year [5]. - The company successfully reduced SG&A expenses by 37% to $3.8 million in the first quarter of 2025, driven by lower non-recurring professional services and decreased marketing expenses [4][5]. Strategic Partnerships - Borealis has partnered with a fast-growing grocery chain in the US, becoming the exclusive manufacturing partner for their branded ramen, which supports the grocery chain's expansion [4]. - A significant partnership with one of the largest food service companies in the US generated $2 million in its first full quarter as a customer, primarily supplying ramen to K-12 schools and prisons [5]. - The company began shipping ramen for a partnership with a major multinational food company, marking early success in premium retail [5]. Production Capacity - The technologically advanced ramen manufacturing facility in Saluda, SC, has a production capacity of 600 million meals per year, with a focus on optimizing this capacity to maximize shareholder returns [2][4]. Future Outlook - Borealis is in discussions with various potential financing sources to strengthen its financial position and is committed to developing new healthy products to leverage existing partnerships [6]. - The company aims to be a leading innovative food tech company, focusing on creating nutritious products to combat malnutrition [6].

Financial Performance - For the quarter ended March 31, 2025, net revenue was $6.8 million, a 14% decline from $7.9 million in the prior year period, reflecting SKU rationalization and a strategic pullback from low-margin retail accounts [134]. - Gross profit improved significantly to $0.9 million compared to $0.2 million in Q1 2024, driven by a stronger product mix and improved cost controls [135]. - Gross margin, excluding depreciation, improved to 20% in Q1 2025 from 16% in Q1 2024, indicating a successful pivot to higher-margin products [136]. - Adjusted EBITDA decreased slightly to $(0.6) million from $(0.4) million in Q1 2024, attributed to cost reduction strategies [144]. - For the three months ended March 31, 2025, the company reduced sales, general, and administrative expenses by 47% year-over-year, improving gross margin from 16% to 20% [154]. Cash Flow and Liquidity - Net cash used in operating activities was $1.37 million for Q1 2025, an improvement from $6.77 million in the same period of 2024 [148]. - Net cash provided by financing activities was $0.94 million in Q1 2025, primarily from advances from related parties, compared to $7.85 million in Q1 2024 [150]. - As of March 31, 2025, the company had cash-on-hand of $0.19 million and negative working capital of $25.30 million, indicating a need for additional capital to support operations and expansion [152]. - Liquidity constraints remain, but improved cash flows and working capital efficiency are anticipated through 2025 due to increased contributions from institutional channels [146]. - The company has contractual obligations totaling $61.76 million, with $35.87 million due within one year, which may impact liquidity [157]. Customer and Supplier Concentration - A major institutional customer contributed $2.0 million in its first full quarter, with additional clients contributing $1.95 million and $0.30 million respectively [141]. - Sales to four customers accounted for approximately 60% of net revenues for the three months ended March 31, 2025, highlighting significant customer concentration risk [175]. - Accounts payable to the top 10 vendors accounted for approximately 46% of purchases during the three months ended March 31, 2025, indicating reliance on a limited number of suppliers [176]. Strategic Initiatives and Risks - The company has not raised external capital in Q1 2025 but is actively evaluating financing alternatives, including debt and equity issuances [155]. - Management has identified recurring losses and negative cash flows as factors raising substantial doubt about the company's ability to continue as a going concern [153]. - The company is exposed to foreign currency risk due to transactions in currencies other than U.S. dollars, with a significant portion of operating expenses in Canadian dollars [178]. - Continued innovation and development of new verticals are expected to capture a larger share of consumers [181]. - Monetization of future opportunities created by investments in innovation is expected to be realized in future quarters [181]. Operational Costs - Total SG&A expenses decreased 47% year-over-year to $3.82 million in Q1 2025, reflecting the conclusion of non-recurring fees and reduced marketing expenditures [140]. - Certain Selling, General and Administrative costs have been expensed in the period incurred, including business development costs, transaction costs, and research and development costs [181]. - Scale-up expenses include material waste costs, production personnel costs, and various related expenses focused on enhancing existing product formulations and production processes [181].

Financial Performance - Net revenue declined 8% year-over-year to $27.7 million in 2024, primarily due to the rationalization of low-margin SKUs and reduced volume with mass retail partners [217]. - Gross profit improved to $2.2 million in 2024, compared to a gross loss of $1.3 million in the prior year, resulting in a net gross margin increase from 9% to 16% [217]. - Sales, General, and Administrative (SG&A) expenses rose 21% year-over-year to $22.6 million, or 82% of net revenue, compared to 62% in the prior year [222]. - Interest expense decreased to $5.1 million from $7.9 million in the prior year, attributed to improved product mix and operational efficiencies [224]. - Net cash used in operating activities for 2024 was $15.09 million, an improvement from $18.01 million in 2023, driven by enhanced gross profit from high-margin products [233]. - Net cash used in investing activities was $1.91 million in 2024, a decrease from $4.47 million in 2023, reflecting a focused approach to capital expenditures [234]. - Net cash provided by financing activities was $10.03 million in 2024, down from $24.94 million in 2023, primarily supporting working capital needs and strategic investments [235]. - Adjusted EBITDA for 2024 was impacted by various non-recurring costs, including $3.73 million for new product launches and $3.17 million for business transaction costs [254]. Revenue Concentration and Customer Relationships - Revenue concentration with Walmart decreased to 22% of total sales from 57% in the prior year, reflecting a strategic pivot to high-margin flagship brands [218]. - Chef Woo, the flagship brand, generated $10.4 million in revenue, a 200% increase year-over-year, representing 38% of total gross sales [220]. - Sales to two customers accounted for approximately 33% and sales to one customer accounted for approximately 57% of net revenues for the fiscal year December 31, 2024 and 2023, respectively [260]. - Accounts receivable from three and two customers amounted to approximately 37% and 50% of total accounts receivable as of December 31, 2024 and 2023, respectively [260]. Liquidity and Capital Structure - As of year-end, the company had $0.65 million in cash, down from $7.62 million the previous year, indicating liquidity constraints [228]. - Following the SPAC merger, the company did not receive any proceeds from the SPAC trust due to 100% redemption, impacting available working capital [229]. - Liquidity constraints limited the company's ability to pursue new customer relationships and invest in marketing initiatives, significantly affecting gross margins [230]. - As of December 31, 2024, cash-on-hand was $0.65 million with negative working capital of $13.61 million, indicating a need for additional capital [237]. - The company incurred approximately $1.51 million in transaction expenses and $1.27 million in employee stock compensation expenses related to the reverse recapitalization in 2024 [239]. - Total contractual obligations and commitments amounted to $59.24 million, with $33.84 million due within one year [240]. - The company is exploring financing options to strengthen its balance sheet and improve liquidity [242]. - Management has identified recurring losses and negative cash flows as factors raising substantial doubt about the company's ability to continue as a going concern [238]. Vendor Relationships and Purchases - Purchases from 10 vendors accounted for approximately 47% and 50% of purchases during the fiscal year December 31, 2024 and 2023, respectively [261]. - Accounts payable to these vendors totaled approximately $3,217,000 and $430,000 as of December 31, 2024 and 2023, respectively [261]. Currency and Costs - A majority of sales have been denominated in U.S. dollars, while a significant portion of operating expenses are in Canadian dollars [262]. - The company has not entered into any hedging arrangements to minimize the impact of foreign currency exchange rate fluctuations [262]. - Certain Selling, General and Administrative costs include business development, transaction costs, and research and development costs, focusing on enhancements to existing products and new product development [265]. - The company believes that continued innovation and new verticals are expected to capture a larger share of consumers [265].

Financial Performance - Third quarter net sales reached $7.7 million, a 45% increase from $5.3 million in Q2 2024[2] - Gross margin improved to 17%, more than doubling from 8% in Q2 2024, and non-GAAP gross margin reached 23%[2] - Gross profit for the third quarter was $1.3 million, more than tripling from $0.4 million in the second quarter[2] - Net loss improved to $(4.8) million from $(6.3) million in Q2 2024[4] - Net loss for the nine months ended September 30, 2024, was $19.56 million, a slight improvement from a net loss of $20.82 million in the same period of 2023, representing a 6.06% decrease[29] - Adjusted EBITDA for the nine months ended September 30, 2024, was $(1.96) million, compared to $(3.70) million in the same period of 2023, indicating a 47.03% improvement[33] Revenue Sources - The Chef Woo and Woodles product lines accounted for approximately 39% of third quarter revenue[2] - Full-scale shipments of Woodles to schools began in Q3, with further expansion expected in Q4 and 2025[2] - The company announced a partnership for its Palmetto Gourmet Foods subsidiary to be the exclusive US ramen manufacturing partner for a global food conglomerate, expected to contribute revenue in Q1 2025[2] Cash Flow and Liquidity - As of September 30, 2024, the company had $0.7 million in cash and $3.5 million in borrowing capacity available[4] - Cash flows from operating activities showed a net cash used of $14.27 million for the nine months ended September 30, 2024, down from $16.06 million in the same period of 2023, reflecting a 10.93% reduction[29] - Cash at the end of the period was $721,542, a significant decrease from $8.97 million at the end of the same period in 2023, representing an 91.93% decline[29] - The company incurred non-cash compensation expense related to stock options of $1.27 million for the nine months ended September 30, 2024, compared to $392,141 in the same period of 2023, reflecting a 224.67% increase[29] - The company’s cash flows from investing activities showed a net cash used of $1.71 million for the nine months ended September 30, 2024, down from $3.52 million in the same period of 2023, indicating a 51.32% reduction[29] - Proceeds from convertible notes payable were $3 million for the nine months ended September 30, 2024, compared to $25 million in the same period of 2023, representing an 88% decrease[29] Operational Expansion - Borealis expanded its retail presence to over 23,000 stores in the US and Canada, with new Walmart locations added[2] - Anticipated sales expansion is expected to drive improving operating cash flow to support future growth[4] - The company aims to leverage strategic partnerships to enhance technological capabilities and expand its offerings in the food manufacturing sector[35] Expenses - Total non-recurring expenses for the nine months ended September 30, 2024, amounted to $11.96 million, compared to $8.64 million in the same period of 2023, marking a 38.88% increase[33] - The company reported a provision for credit losses of $96,217 for the nine months ended September 30, 2024, compared to $49,642 in the same period of 2023, indicating a 93.83% increase[29]

Financial Performance - Borealis reported net revenues of $7.69 million for Q3 2024, a slight decrease of 0.5% from $7.73 million in Q3 2023[124] - Gross sales for Q3 2024 were $8.08 million, down 2.3% from $8.27 million in the same period last year, primarily due to lower demand for Ramen Express noodles[126] - Borealis reported a net loss of $4.83 million for Q3 2024, an improvement from a net loss of $6.59 million in Q3 2023, driven by favorable product mix and cost management[132] - For the nine months ended September 30, 2024, Borealis reported gross sales of $22.03 million, an 8% decrease from $23.87 million in the same period of 2023[136] - Net revenue for the same period was $20.91 million, down from $22.53 million in 2023, reflecting a decline of $1.62 million[136] - The net loss for the nine months ended September 30, 2024, was $19.56 million, an improvement from a net loss of $20.82 million in the prior year[142] Cost and Profitability - Cost of goods sold (COGS) decreased to $5.95 million, representing 77% of net revenue, down from 93% in Q3 2023, reflecting a 23% improvement[124] - Borealis achieved a gross profit of $1.27 million in Q3 2024, resulting in a gross margin of 17%, a significant increase from a negative margin of (6%) in Q3 2023[127] - Cost of goods sold (COGS) was $18.97 million, representing 91% of net revenue, a significant improvement from 108% in the prior year[137] - Borealis achieved a gross profit of $1.94 million, resulting in a gross margin of 9%, up from a negative margin of (8%) in the comparable period of 2023[137] Operating Expenses - Operating expenses totaled $4.89 million in Q3 2024, representing 64% of net revenue, an increase of 13% compared to the same period in 2023[128] - Sales and marketing expenses rose to $1.12 million, accounting for 15% of net revenue, up from $0.31 million (4%) in Q3 2023, driven by marketing efforts for Chef Woo and Woodles[129] - Business development expenses increased to $1.32 million, representing 17% of net revenue, reflecting a 14% increase from Q3 2023 as Borealis expands distribution channels[130] - General and administrative expenses improved to $1.99 million, or 26% of net revenue, down from $2.79 million (36%) in the prior year, due to optimized administrative costs[131] - Operating expenses totaled $17.72 million, which is 85% of net revenue, marking a 25% increase from the previous year[138] Cash Flow and Capital Needs - Cash used in operating activities was $14.27 million, an improvement from $16.06 million used in the same period of 2023[147] - Borealis anticipates needing additional capital to meet funding requirements through fiscal 2025, with cash-on-hand of $721,542 and negative working capital of ($16.87 million) as of September 30, 2024[153] Business Strategy and Market Position - The company is focused on scaling high-margin, premium products while managing the transition away from legacy offerings, expecting robust demand for Chef Woo and Woodles[143] - Borealis remains an emerging growth company until the market value of common shares held by non-affiliates equals or exceeds $700 million or total annual gross revenue reaches $1.235 billion[160] - Borealis is classified as a smaller reporting company, allowing it to provide only two years of audited financial statements until market value exceeds $250 million or annual revenues exceed $100 million[161] Risks and Challenges - Sales to four customers accounted for approximately 53% of net revenues for the three months ended September 30, 2024, indicating significant customer concentration risk[174] - Purchases from 10 vendors accounted for approximately 51% of total purchases during the three months ended September 30, 2024[175] - Foreign currency risk arises from transactions in currencies other than U.S. dollars, with a significant portion of operating expenses in Canadian dollars and key inputs in Euros[176] - Inflation has not significantly impacted Borealis' results, but potential inflationary pressures could affect the ability to offset higher costs with price increases[179] Adjusted EBITDA - Adjusted EBITDA for Q3 2024 was $17, a significant improvement from an adjusted EBITDA of $(921) in the same period last year[124] - Adjusted EBITDA for the nine months ended September 30, 2024, was impacted by expenses including new product launch costs of $5.07 million and business transaction costs of $1.77 million[166] Selling, General and Administrative Costs - Selling, General and Administrative costs include business development and research and development expenses, focusing on product enhancements and new product development[180]

Core Insights - Borealis Foods has entered a partnership to produce an exclusive line of ramen noodles for a major food conglomerate, significantly expanding production at its Palmetto Gourmet Foods facility [1][2] - The collaboration aims to introduce a leading global ramen brand to the U.S. market, which is enjoyed by over a billion people worldwide [3] - Six new SKUs are set to launch nationally in Q1 2025, reflecting the company's commitment to innovation and market expansion [4] Company Overview - Borealis Foods is a pioneering integrated food manufacturing company focused on disrupting the ready-to-eat meal and dry soup categories with premium, nutritious products [5] - The company is known for its high-protein ramen brands, including Chef Woo, Ramen Express, and Woodles, and emphasizes innovative fusion flavors from diverse culinary traditions [5] - Borealis Foods maintains strategic partnerships with national and international food producers, retailers, and distributors to enhance its offerings and technological capabilities [6]

Core Insights - Borealis Foods Inc. has successfully expanded its Woodles noodle brand into over 4,000 school lunch programs across the United States, aiming to provide nutritious and delicious meal options for students [1][2][4] - The initiative aligns with growing concerns about childhood nutrition and the demand for healthier food options, positioning Borealis as a trusted supplier in the school nutrition sector [3][4] Company Expansion - Borealis Foods' subsidiary, Palmetto Gourmet Foods, is focusing on eco-friendly meal solutions that meet USDA guidelines, featuring low-sodium and whole-grain rich ingredients [3][4] - The company is actively partnering with major school districts to offer nutritious meals, with plans to expand offerings across all states and develop tailored meals for school programs [4][5] Market Demand and Response - The rapid acceptance of Woodles in school menus indicates a strong demand for healthier meal options that are easy to prepare and appealing to students [5] - The rollout to approximately 4,000 schools is expected to positively impact the company's revenues and gross profits in the third and fourth quarters of 2024 [5] Future Plans - Borealis Foods plans to introduce new products and flavors tailored to regional tastes and school requirements, indicating a commitment to ongoing innovation in the school nutrition space [5] - The company aims to further establish itself as a trusted partner for national foodservice distributors, with potential opportunities in universities and hospitals [5] Company Mission - Borealis Foods is dedicated to addressing human health and global food security challenges by developing nutritious, flavorful, affordable, and sustainable food products [6]