Borealis Foods(BRLS) - 2025 Q2 - Quarterly Report

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].