Borealis Foods(US:BRLS)2025-05-20 20:05Financial 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].