Borealis Foods Inc

Previous wording

The following discussion and analysis should be read in conjunction with our interim condensed consolidated financial statements and the related notes included in Part I, Item 1 of this Quarterly Report, and our audited consolidated financial statements and related notes included in the Company’s Annual Report filed on Form 10-K for the year ended December 31, 2023 (“Annual Report”) and Form 8-K/A filed with the Securities and Exchange Commission (“SEC”) on April 15, 2024. This discussion and analysis may contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties, and assumptions, including, but not limited to, risks and uncertainties discussed under the heading ‘Cautionary Note on Forward-Looking Statements,’ in this Quarterly Report and in Part I, Item 1A “Risk Factors” included in our Annual Report. In this section, unless otherwise indicated or the context otherwise requires, references in this section to “Borealis,” the “Company,” “we,” “us,” “our” and other similar terms refer to Borealis Foods Inc. References to “Oxus” refer to Oxus Acquisition Corp. and “Sponsor” to Oxus Capital Pte Ltd.

Current wording

The following discussion and analysis should be read in conjunction with our interim condensed consolidated financial statements and the related notes included in Part I, Item 1 of this Quarterly Report, and our audited consolidated financial statements and related notes included in the Company’s Annual Report filed on Form 10-K for the year ended December 31, 2023 (“Annual Report”) and our Form 8-K/A filed with the Securities and Exchange Commission (“SEC”) on April 15, 2024. This discussion and analysis may contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties, and assumptions, including, but not limited to, risks and uncertainties discussed under the heading ‘Cautionary Note on Forward-Looking Statements,’ in this Quarterly Report and in Part I, Item 1A “Risk Factors” included in our Annual Report. In this section, unless otherwise indicated or the context otherwise requires, references in this section to “Borealis,” the “Company,” “we,” “us,” “our” and other similar terms refer to Borealis Foods Inc. References to “Oxus” refer to Oxus Acquisition Corp.

Previous wording

On February 23, 2023, Borealis Foods Inc., a corporation incorporated under the laws of Canada (“Legacy Borealis”), entered into a Business Combination Agreement (as amended, amended and restated, supplemented, or otherwise modified from time to time) with Oxus Acquisition Corp. (“Oxus”) and 1000397116 Ontario Inc., an Ontario corporation and a wholly owned subsidiary of Oxus (“Newco”). On February 7, 2024, Legacy Borealis, Oxus, and Newco consummated the transactions (collectively, the “Reverse Recapitalization”) contemplated by the Business Combination Agreement by means of a statutory arrangement under the Canada Business Corporations Act and the Business Corporations Act (Ontario), implemented in accordance with the terms and conditions set forth in the Business Combination Agreement and the related plan of arrangement (as amended, amended and restated, supplemented, or otherwise modified from time to time, the “Plan of Arrangement”) following the approval at an extraordinary general meeting of the shareholders of Oxus held on February 2, 2024.

Current wording

On February 23, 2023, Borealis Foods Inc., a corporation incorporated under the laws of Canada (“Legacy Borealis”), entered into a Business Combination Agreement (as amended, amended and restated, supplemented, or otherwise modified from time to time, the "Business Combination Agreement") with Oxus Acquisition Corp. (“Oxus”) and 1000397116 Ontario Inc., an Ontario corporation and a wholly owned subsidiary of Oxus (“Newco”). On February 7, 2024, Legacy Borealis, Oxus, and Newco consummated the transactions (collectively, the “Reverse Recapitalization”) contemplated by the Business Combination Agreement by means of a statutory arrangement under the Canada Business Corporations Act and the Business Corporations Act (Ontario), implemented in accordance with the terms and conditions set forth in the Business Combination Agreement and the related plan of arrangement (as amended, amended and restated, supplemented, or otherwise modified from time to time, the “Plan of Arrangement”) following the approval at an extraordinary general meeting of the shareholders of Oxus held on February 2, 2024.

Previous wording

Pursuant to the terms of the Business Combination Agreement, among other things: (i) Oxus domesticated and continued as a corporation under the laws of Ontario, Canada (“New Oxus”); and (ii) pursuant to the Plan of Arrangement, (a) Newco and Legacy Borealis amalgamated (the “Legacy Borealis Amalgamation”, and the amalgamated corporation resulting therefrom, “Amalco”), with Amalco surviving the Legacy Borealis Amalgamation as a wholly-owned subsidiary of New Oxus; and (b) following the Legacy Borealis Amalgamation, New Oxus and Amalco amalgamated (the “Borealis Amalgamation,” and together with the Legacy Borealis Amalgamation, the “Amalgamations,” and the corporation resulting therefrom, “Borealis,” as a corporation amalgamated under the Business Corporations Act (Ontario)), with Borealis surviving the Borealis Amalgamation. Borealis will continue under the name “Borealis Foods Inc.”

Current wording

Amalgamation as a wholly-owned subsidiary of New Oxus; and (b) following the Legacy Borealis Amalgamation, New Oxus and Amalco amalgamated (the “Borealis Amalgamation,” and together with the Legacy Borealis Amalgamation, the “Amalgamations,” and the corporation resulting therefrom, “Borealis,” as a corporation amalgamated under the Business Corporations Act (Ontario)), with Borealis surviving the Borealis Amalgamation. Borealis continues under the name “Borealis Foods Inc.”

Previous wording

*Training.*Training costs decreased by 6% as a percentage of net sales during the three months ended March 31, 2024, driven by enhanced operational efficiency as two production lines entered their second year. Personnel numbers are expected to fluctuate in response to demand and capacity requirements. Our emphasis on providing training and continuing education continues to have a positive impact on efficiency and productivity, allowing Borealis to compete in the highly competitive food sector on a global scale.

Current wording

Training. Training costs decreased by 3% as a percentage of net sales during the six months ended June 30, 2024, driven by enhanced operational efficiency as two production lines entered their second year. Personnel numbers are expected to fluctuate in response to demand and capacity requirements. Our emphasis on providing training and continuing education continues to have a positive impact on efficiency and productivity, improving Borealis' competitive position to compete in the highly competitive food sector on a global scale.

Previous wording

G&A. General and Administrative expenses increased by $1.8 million and represented 55% of net sales in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase is primarily due to professional fees incurred in connection with the Reverse Recapitalization of approximately $1.5 million. Salaries and benefits increased by $0.2 million, insurance increased $0.2 million due to additional insurance as a result of the Reverse Capitalization, and increase of $1.1 million in stock compensation expense during the first quarter of 2024 as a result of fully vesting and converting into shares of the Company in conjunction with the Reverse Recapitalization.

Current wording

G&A. General and Administrative expenses increased by $1.7 million and represented 60% of net sales in the six months ended June 30, 2024 compared to 42% in the six months ended June 30, 2023. The increase is primarily due to professional fees incurred in connection with the Reverse Recapitalization of approximately $1.5 million. Salaries and benefits increased by $0.7 million, insurance increased $0.1 million due to additional insurance as a result of the Reverse Recapitalization, and increase of $1.1 million in stock compensation expense during the first quarter of 2024 as a result of stock options fully vesting and converting into shares of the Company in conjunction with the Reverse Recapitalization.

Previous wording

*Net Sales.*We generate revenue from the sale of plant-based, ready-to-eat meals. Net Sales are reported net of discounts, returns, and allowances. In the three months ended March 31, 2024, net sales decreased by $0.5 million or 5% over the three months ended March 31, 2023 due to a delay in mod review associated with our international distribution and institutional sales. The first and second quarters of our fiscal years have historically been our slow seasons due to cultural practices of consuming soup products in fall and winter months. Our new retail distribution and institutional sales will commence in third and fourth quarters of 2024. Sales discounts and allowances increased to 7% of net sales in the first fiscal quarter of 2024 from 5% in the corresponding quarter of 2023. This increase can be attributed primarily to changes in product mix and decreased reliance on one single customer. Slotting fees increased as we reduced our concentration of credit risk by diversifying our customer mix. We anticipate that the impact of sales discounts and allowances, including slotting fees, will soften as we expand our distribution globally.

Current wording

Net Sales. We generate revenue from the sale of plant-based, ready-to-eat meals. Net Sales are reported net of discounts, returns, and allowances. In the three months ended June 30, 2024, net sales decreased by $1.1 million, or 17%, over the three months ended June 30, 2023 due to pricing negotiations with our largest customer and significant price reductions. At the end of 2023, management chose to seek to improve profitability through customer and product mix diversification. We believe that, despite the challenges over the past quarters, our customer revenue mix highlights resilience and strategic gains across key customer segments. Our efforts in diversifying our client base and strengthening relationships have resulted in notable improvements, setting a positive trajectory for anticipated sustained growth. The first and second quarters of our fiscal years have historically been our slow seasons due to cultural practices of consuming soup products in fall and winter months. Our new retail distribution, strategic partnerships with major multi-national food companies and institutional sales are expected to commence in third and fourth quarters of 2024. Sales discounts and allowances decreased to 3% of net sales in the second fiscal quarter of 2024 from 6% in the corresponding quarter of 2023. This increase can be attributed primarily to changes in product mix and decreased reliance on one single customer. Slotting fees increased as we reduced our concentration of credit risk by diversifying our customer mix. We anticipate that the impact of sales discounts and allowances, including slotting fees, will soften as we expand our distribution globally.

Previous wording

*Cost of Goods Sold.*Our cost of goods sold decreased by $1.1 million in the three months ended March 31, 2024, representing a 7% improvement as a percentage of net sales compared to the three months ended March 31, 2023. Cost of goods sold is divided into five categories: raw material costs, direct and indirect labor, freight (including inbound and inter-company), overhead costs (primarily energy expenses) and depreciation. We are optimizing our supply chain with better pricing from suppliers as inflation pressures decrease. Notwithstanding the decrease in cost of goods sold, we experienced an increase in raw material costs, direct and indirect labor, and energy expenses as a percentage of net revenues that were disproportionately high due to plant capacity utilization under 20%. As we increase our plant utilization the labor and overhead rates, as a percentage of sales are expected to improve significantly.

Current wording

Cost of Goods Sold. Our cost of goods sold decreased by $2.6 million in the three months ended June 30, 2024, representing a 24% improvement as a percentage of net sales compared to the three months ended June 30, 2023. Cost of goods sold is divided into five categories: raw material costs, direct and indirect labor, freight (including inbound and inter-company), overhead costs (primarily energy expenses) and depreciation. We are seeking to optimize our supply chain with better pricing from suppliers as inflation pressures decrease. We experienced a decrease in raw material costs, direct and indirect labor, and energy expenses as a percentage of net revenues that were disproportionately high due to plant capacity utilization under 12%. As we increase our plant utilization the labor and overhead rates, as a percentage of sales are expected to improve.

Previous wording

*Gross Profit.*Gross profit increased by $0.6 million or 171% for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. Additionally, gross profit of $0.2 million, or 3% of net sales, for the three months ended March 31, 2024 increased 7% from (4)% of net sales for the quarter ended March 31, 2023. Gross profits improvement is a direct result of customer diversification and product mix. During the first quarter of 2024, higher margin products accounted for 35% of net sales, for the three months ended March 31, 2024 compared to 10% for the three months ended March 31, 2023.

Current wording

Gross Profit. Gross profit increased by $1.5 million, or 24%, as a percentage of net sales for the three months ended June 30, 2024, compared to the three months ended June 30, 2023. Gross profit improvement is a direct result of customer diversification and product mix. During the second quarter of 2024, higher margin products accounted for 22% of net sales, for the three months ended June 30, 2024 compared to 7% for the three months ended June 30 2023.

Previous wording

By the end of the first quarter of 2023, raw material pricing began to stabilize from the peaks observed in 2022. Delays in modular reviews were experienced due to year-end customer inventory concerns., food service sales slated for 2023 were postponed to 2024 due to the timing of the school calendar. Numerous bids have been awarded which we anticipate will result in a significant increase in school orders for the 2024-2025 school year.

Current wording

By the end of the second quarter of 2023, raw material pricing began to stabilize from the peaks observed in 2022. During the first quarter of 2024, a major retailer requested significant price deductions by way of promotions. Management’s decision in not agreeing to price deductions resulted in our ability to manage customer and product mix which contributed to our gross profit improvement for the quarter. Food service sales slated for 2023 were postponed to 2024 due to the timing of the school calendar. Numerous bids have been awarded which we anticipate will result in a significant increase in school orders for the 2024-2025 school year.

Previous wording

*Sales and Marketing.*Sales and Marketing expenses increased by $1.7 million in the three months ended March 31, 2024, representing a 22% increase as a percentage of net sales compared to the Sales and Marketing expenses in the three months ended March 31, 2023. We allocate a significant portion of our Sales and Marketing budget to cover various expenses, including personnel costs, advertising expenditures, distribution costs, and associated occupancy expenses. The increase in Sales and Marketing expenses is primarily attributable to the addition of a brand ambassador to our team. Marketing spend will continue to focus on creating awareness of the food brands and supporting sales. Our strategic approach has balanced traditional and digital marketing tactics in support of our retail relationships. This has included retailer specific, digital advertising, e-commerce programs, social media content and ads, social media influencers as well as major celebrity alliances to drive sales. Our multi-platform approach is a competitive strategy that leverages advanced algorithmic and artificial intelligence (AI) tools to increase our speed of execution as well as being able to geo-target ads and content to specific customer markets.

Current wording

Sales, Marketing and Business Development. Sales, Marketing and Business Development expenses increased by $0.8 million in the three months ended June 30, 2024, representing a 20% increase as a percentage of net sales compared to the Sales and Marketing expenses in the three months ended June 30, 2023. We allocate a significant portion of our Sales and Marketing budget to cover various expenses, including personnel costs, advertising expenditures, distribution costs, and associated occupancy expenses. The increase in Sales, Marketing and Business Development expenses is primarily attributable to one time business development costs to Walmart and Sam’s Club of $1.2 million, brand ambassador costs $0.4 million and Feeding America $0.2 million are included in the three months ended June 30, 2024. Marketing spend will continue to focus on creating awareness of the food brands and supporting sales. Our strategic approach has balanced traditional and digital marketing tactics in support of our retail relationships. This has included retailer specific, digital advertising, e-commerce programs, social media content and ads, social media influencers as well as major celebrity alliance to drive sales. Our multi-platform approach is a competitive strategy that leverages advanced algorithmic and artificial intelligence (AI) tools to increase our speed of execution as well as being able to geo-target ads and content to specific customer markets.

Previous wording

*Other Expense (Income).*Other expenses increased by $0.1 million in the three months ended March 31, 2024, with interest expenses accounting for a significant portion of the increase. Other expense increased by 2% as a percentage of sales over the three months ended March 31, 2023, resulting from higher aggregate principal amounts of indebtedness outstanding and increased interest accruals. Future increases in interest expense are expected to depend on market conditions as well as capital needs, availability, and financing decisions.

Current wording

Other expenses decreased by $0.7 million in the three months ended June 30, 2024, with interest expenses accounting for a significant portion of the decrease in conjunction with the Reverse Recapitalization. Other expense increased by 8% as a percentage of sales over the three months ended June 30, 2023, resulting from higher aggregate principal amounts of indebtedness outstanding and increased interest accruals. Future increases in interest expense are expected to depend on market conditions as well as capital needs, availability, and financing decisions.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

Based on Borealis’ present business plan and taking into account its working capital and cash anticipated to be generated through operations, Borealis will require additional capital to meet its anticipated funding needs through June 30, 2025. The amount of additional capital required to fund Borealis through June 30, 2025 has been reduced as a result of a change in its business plan that reduced the need for additional capital expenditures relating to the expansion of our production lines beyond the current four production lines. In addition, Borealis continues to seek additional financing. There can be no assurance that such additional financing will be available to Borealis on terms acceptable to it or at all. In the event Borealis’ additional financing efforts are not successful, Borealis may seek to pursue alternatives which may include, among other things, scaling down research and development, business develop investments, and global distribution expansion until such time that new capital has been secured.

Previous wording

Net cash used in operating activities during the three months ended March 31, 2024 was $6.8 million, resulting primarily from a net loss of $8.4 million, adjusted for non-cash charges of $1.1 million in depreciation and amortization, and $1.3 thousand in stock-based compensation.

Current wording

Net cash used in operating activities during the six months ended June 30, 2024 was $11 million, resulting primarily from a net loss of $14.7 million, adjusted for non-cash charges of $1.4 million in depreciation and amortization, and $1.3 million in stock-based compensation.

Previous wording

Net cash used in operating activities during the three months ended March 31, 2023 was $5.9 million, resulting primarily from a net loss of $5.9 million, adjusted for non-cash charges of $1.0 million in depreciation and amortization and $0.2 million in stock-based compensation.

Current wording

Net cash used in operating activities during the six months ended June 30, 2023 was $11.2 million, resulting primarily from a net loss of $14.2 million, adjusted for non-cash charges of $1.9 million in depreciation and amortization and $0.3 million in stock-based compensation.

Previous wording

Net cash used in investing activities during the three months ended March 31, 2024 was $0.5 million, representing $0.5 million in property and equipment purchases.

Current wording

Net cash used in investing activities during the six months ended June 30, 2024 was $1.2 million, representing $1.1 million in property and equipment purchases.

Previous wording

Net cash used in investing activities during the three months ended March 31, 2023 was $0.9 million, representing additions of $0.9 million in property and equipment purchases.

Current wording

Net cash used in investing activities during the six months ended June 30, 2023 was $2.9 million, representing additions of $2.9 million in property and equipment purchases.

Previous wording

Net cash provided by financing activities during the three months ended March 31, 2024 was $7.9 million, representing proceeds from convertible debt of $3.0 million, $5.0 million in borrowing on line of credit, offset by $0.1 million in finance lease payments.

Current wording

Net cash provided by financing activities during the six months ended June 30, 2024 was $7.7 million, representing proceeds from convertible debt of $3.0 million, $5.0 million in borrowing on the line of credit, offset by $0.3 million in finance lease payments.

Previous wording

Net cash provided by financing activities during the three months ended March 31, 2023 was $14.4 million, which represents $15.0 million in proceeds from convertible debt less $0.5 million in payments to related parties and $0.1 million in finance lease payments.

Current wording

Net cash provided by financing activities during the six months ended June 30, 2023 was $21.6 million, which represents $25.0 million in proceeds from convertible debt less $0.5 million in payments to related parties, $2.6 million in note payments and $0.2 million in finance lease payments.

Previous wording

Borealis 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 stock that is 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 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 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.

Current wording

Borealis 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 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 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.

Previous wording

Additionally, Borealis is 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. Borealis will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of common stock held by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter, or (ii) Borealis’ annual revenues exceeded $100 million during such completed fiscal year and the market value of common stock held by non-affiliates equals or exceeds $700 million as of the end of that year’s second fiscal quarter. To the extent Borealis takes advantage of such reduced disclosure obligations, it may also make comparison of its financial statements with other public companies difficult or impossible.

Current wording

Additionally, Borealis is 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. Borealis 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) Borealis’ 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 Borealis takes advantage of such reduced disclosure obligations, it may also make comparison of its financial statements with other public companies difficult or impossible.

Previous wording

“Adjusted EBITDA,” a non-GAAP measure, is defined as net income attributable to us before (1) income taxes, (2) interest expense, of $1.5 million, (3) depreciation and amortization, net, of $1.0 million (4) other non-operating items, net, of $0.1 million, (5) Training, of $0.5 million, (6) M&A due diligence costs, of $1.3 million, (7) new product launch of $0.8 million, (8) one-time formulation and product development costs, of $0.5 million all for the three months ended March 31, 2024. “Adjusted EBITDA,” a non-GAAP measure, is defined as net income attributable to us before (1) income taxes, (2) interest expense, of $1.6 million, (3) depreciation and amortization, net, of $1.0 million (4) other non-operating items, net, of $0.1 million, (5) Training, of $0.8 million, (6) M&A due diligence costs, of $1.5 million, (7) new product launch, of $0.2 million, (8) one-time formulation and product development costs, of $0.1 million all for the three months ended March 31, 2023. Management and our Board of Directors use this non-GAAP measure for purposes of evaluating our performance. Furthermore, the Leadership Development and 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 GAAP.

Current wording

“Adjusted EBITDA,” a non-GAAP measure, is defined as net income attributable to us before (1) income taxes, (2) interest expense, of $2.6 million, (3) depreciation and amortization, of $1.4 million (4) other non-operating items, net, of $0.1 million, (5) Training, of $0.9 million, (6) M&A due diligence costs, of $1.5 million, (7) new product launch of $0.8 million, and (8) one-time formulation and product development costs, of $1.3 million, all for the six months ended June 30, 2024. “Adjusted EBITDA,” a non-GAAP measure, is defined as net income attributable to us before (1) income taxes, (2) interest expense, of $1.1 million, (3) depreciation and amortization, of $0.4 million (4) other non-operating items, net, of $0.0 million, (5) Training, of $0.7 million, (6) M&A due diligence costs, of $0.0 million, (7) new product launch, of $0.4 million, and (8) one-time formulation and product development costs, of $0.4 million all for the three months ended June 30, 2024. 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 GAAP.

Previous wording

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

Current wording

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