Borealis Foods Inc.

1. Description of Business and Summary of Significant Accounting Policies

The accompanying consolidated financial statements include the financial statements of Borealis Foods Inc. (“Borealis”), and its subsidiaries: Palmetto Gourmet Foods (Canada) Inc., ("PGF Canada"), Palmetto Gourmet Foods, Inc. (“PGF”), PGF Real Estate I, Inc. (“PGF RE I”), PGF Real Estate II, Inc. (“PGF RE II”), and Borealis IP ("Borealis IP") (collectively, the “Company”).

Borealis is a food technology integrator with a mission to address global food security challenges through the development and commercialization of tasty, affordable and sustainable functional foods. Borealis has developed a range of high-quality, affordable, sustainable, and nutritious premium, ready-to-eat meals sold in the United States, Canada, Central America, South America and Europe.

PGF Canada is a holding company, holding the shares of PGF.

PGF is a food manufacturing company with a BRC AA+ rated food grade facility.

PGF RE I and PGF RE II are holding companies that rent their fixed assets to PGF.

Borealis IP holds the intellectual property of the Company.

Intercompany balances and transactions have been eliminated in consolidation.

Reverse Recapitalization Transaction

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.

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

Reverse Recapitalization Transaction (continued)

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 continues under the name “Borealis Foods Inc.”

The equity structure prior to the reverse merger (Class A, B and C) with unlimited amounts authorized all had the same rights and privileges. With the reverse recapitalization, all outstanding shares of Class A, B and C were combined into common shares of the newly formed Company.

Accounting Impact of the Reverse Recapitalization

The transaction was accounted for as a reverse recapitalization. Oxus was deemed the accounting predecessor and Borealis is the successor Securities and Exchange Commission (“SEC”) registrant.

Under this method of accounting, Oxus was treated as the acquired company for financial statement reporting purposes. For accounting purposes, Legacy Borealis was deemed to be the accounting acquirer in the transaction and, consequently, the transaction was treated as a recapitalization of Legacy Borealis. Accordingly, the consolidated balance sheets and results of operations of Legacy Borealis became the historical financial statements of Borealis, and Oxus’ assets, liabilities, and results of operations were consolidated with Legacy Borealis’ beginning on February 7, 2024. The net assets of Oxus were recognized at carrying value, with no goodwill or other intangible assets recorded. Transaction costs incurred and unpaid by Oxus were converted into debt (Note 4) and shown as a reduction in additional paid-in capital.

Going Concern

The consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As of December 31, 2024, the Company has incurred a net loss and experienced recurring losses from operations including negative cash flows from operations for the period ended December 31, 2024 and 2023. These conditions raise substantial doubt about the Company's ability to continue as a going concern within one year after April 15, 2025.

The Company expects that operating costs will decrease in future periods. During 2024, the Company incurred approximately $1.51 million of transaction expenses, and $1.27 million in employee stock compensation expenses associated with a Reverse Recapitalization. These were non-recurring costs, and management anticipates improved operating efficiency moving forward.

Despite the Company’s current financial position, management is actively pursuing several strategic and operational initiatives to improve liquidity and profitability, including:

•Continued efforts to reduce selling, general, and administrative expenses for the year ended December 31, 2025.

•Exploration of financing options, including equity or debt issuances, to strengthen the balance sheet.

Going Concern (continued)

While these initiatives are designed to support the Company’s ability to meet its obligations as they come due, substantial doubt continues to exist about the ability of the Company to continue as a going concern within one year from April 15, 2025.

Basis of Presentation

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and the Company’s functional currency is the U.S. Dollar.

Estimates

The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents

The Company classifies all highly liquid securities with stated maturities of three months or less from the date of purchase as cash equivalents. There wereno cash equivalents as of December 31, 2024 and December 31, 2023.

Inventories, net

Inventories are stated at the lower of cost or net realizable value. The cost of raw materials is determined using the first-in, first-out method. The cost of finished goods is determined using the weighted average cost method.

A reserve is recorded for any food inventory that is expired (or expected to expire before sale) and any raw materials for projects that have been discontinued.

Prepaid Expenses

Prepaid expenses include approximately $1,135,000 and $846,000 composed primarily of prepaid insurance, deposits on inventory purchases and property, plant and equipment purchases as of December 31, 2024 and December 31, 2023, respectively. Prepaid expenses and other current assets as of December 31, 2024 include a significant insurance recovery, representing approximately $643,000 of the total balance.

Property, Plant and Equipment, net

Property, plant, and equipment are recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets or, where applicable, based on actual machine hours utilized.

Management has opted to depreciate the manufacturing lines and related assets using the machine hours method, as it provides a more accurate reflection of the actual utilization and wear of these assets. This approach ensures that the depreciation expense aligns more closely with the assets' usage patterns, thereby improving the matching of costs with related revenues.

Property, Plant and Equipment, net (continued)

This change in depreciation method was a change in estimate effected by a change in accounting principle and accordingly was accounted for prospectively in accordance with relevant guidance. The change in the method of calculating depreciation resulted in an increase in net income of $1,796,000 for the year ended December 31, 2024. This increase in net income resulted in an improvement of $0.09 to loss per share. Since this adjustment is applied prospectively, it has no impact on the financial results for 2023. The total cost basis of machinery subject to depreciation over machine hours was approximately $38,601,000 as of December 31, 2024 and $35,255,000 as of December 31, 2023.

Straight-line assets:

Machine hours assets:

Construction in progress includes the cost of property, plant and equipment being constructed or otherwise not yet in service. Costs include materials, labor, capitalized interest, engineering and testing costs, and other costs necessary to get the assets ready for their intended use.

Intangible Assets

Patents are recorded at cost and are amortized on a straight-line basis over their estimated useful lives. The carrying value of patents is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Loan Costs

The costs of obtaining equipment leases and debt issuance costs are amortized over the term of the respective obligations, using the straight-line method. US GAAP requires that the effective yield method be used to amortize debt issuance costs; however, the effect of using the straight-line method is not materially different from the results that would have been obtained under the effective yield method. Amortization of loan costs is included as a component of interest expense in the accompanying consolidated statements of operations. Loan costs are shown as reduction of related debt balances for financial statement presentation.

Goodwill

The Company’s goodwill resulted from a prior year acquisition. Goodwill is not amortized but is reviewed annually for impairment or more frequently as events or circumstances indicate its carrying amount may not be

recoverable. No impairment losses were recorded for the year ended December 31, 2024 and 2023.

Amounts Due to Related Parties

Amounts due to related parties (Company shareholders and entities controlled by Company shareholders) total $15,427,453 as of December 31, 2024 and $7,825,790 as of December 31, 2023. This related party liability is comprised of a note payable to a shareholder in the amount of $7,325,790, due on demand and bearing interest at 10% annually. An additional note payable to a shareholder in the amount of $500,000 as of December 31, 2024 and December 31, 2023, respectively, bears interest at 10% annually and is due December 31, 2025. The remaining $7,601,661 shareholder note payable was a result of expenses recognized by Oxus and resulted in reduction of contributed equity at the Reverse Recapitalization. This note matures in February 2026 after extension, and is non-interest bearing.

Food Systems for the Future is a related party by virtue of its affiliation with a member of our Board of Directors. As of December 31, 2024, the Organization had a total payable of $45,000 to Food Systems for the Future. Total purchases from this related party during the year ended December 31, 2024, amounted to $389,000.

Impairment of Long-Lived Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Revenue and Cost Recognition and Accounts Receivable

The Company's revenue is primarily generated from the sale of food products. These sales contain a single performance obligation. Revenue is recognized at a point in time and the Company recognizes revenue upon shipment of goods when ownership, risk, and rewards transfer to the customer. Certain of the Company's contracts with customers include variable consideration consisting of payment discounts and promotions. These programs include rebates, temporary on-shelf price reductions, off-invoice discounts, retailer advertisements, product coupons, slotting fees and other trade activities. Provision for discounts and incentives are recorded in the same period in which the related revenues are recognized. Gross revenues were approximately $29,100,000 and $31,377,000 for the years ended December 31, 2024 and 2023, respectively.

Total payment discounts and promotions were approximately $1,431,000 and $1,392,000 resulting in net revenues of approximately $27,669,000 and $29,985,000 for the years ended December 31, 2024 and 2023, respectively.

The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. The incremental cost to obtain contracts was not material.

Accounts receivable related to product sales typically have payment terms of 30 days. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. The allowance for credit losses reflects the Company’s estimate of probable losses related to its accounts receivable. Collections from

Revenue and Cost Recognition and Accounts Receivable (continued)

customers are continuously monitored and an allowance for credit losses is maintained based on historical experience adjusted for current conditions and reasonable forecasts taking into account geographical and

industry-specific economic factors. The Company also considers specific customer collection issues. Since the Company’s accounts receivable are largely similar, the Company evaluates its allowance for credit losses as one portfolio segment. At origination, the Company evaluates credit risk based on a variety of credit quality factors including prior payment experience, customer financial information, credit ratings, probabilities of default, industry trends and other internal metrics. On a continuing basis, data for each major customer is regularly reviewed based on past-due status to evaluate the adequacy of the allowance for credit losses; actual write-offs are charged against the allowance.

The Company incurred significant production training expenses for the years ended December 31, 2024 and 2023, totaling approximately $1,715,000 and $2,727,000, due to PGF adding production capabilities during both periods. Such amounts are recorded in sales, general and administrative costs in the accompanying consolidated statement of operations as these costs are not directly attributable to finished goods production.

The Company’s cost of goods sold represent materials, direct labor costs, and allocated overheads associated with the sale of finished goods to customers.

Advertising

Costs associated with advertising are expensed as incurred and are included in selling, general and administrative expenses. Advertising costs expensed for the years ended December 31, 2024 and 2023 were approximately $5,733,000 and $2,238,000, respectively.

Research and Development Costs

Research and development costs have been expensed in the period incurred. Research and development costs consist primarily of personnel and related expenses for our research and development staff, including salaries, benefits, share-based compensation, scale-up expenses, depreciation and amortization expenses on research and development assets, and facility lease costs. Scale-up expenses include material waste costs, production personnel costs, and related expenses. Research and development efforts are focused on enhancements to our existing product formulations and production processes in addition to the development of new products. The Company expects to continue investing in research and development over time, as research and development and innovation are core elements of our business strategy, and the Company believes they represent a critical competitive advantage. The Company believes continued innovation will capture a larger share of consumers through additional revenue streams. Research and development expenses for the years ended December 31, 2024 and 2023 were approximately $197,000 and $460,000, respectively, and are included in selling, general, and administrative expenses in the accompanying consolidated statements of operations.

Business Development Costs

Business development expenses include all costs associated with directly growing and expanding a business segment, such as advertising, market research, and training. These costs include staff salaries, travel expenses, and consulting expenses that the Company incurs while searching for new opportunities and maintaining current relationships. Business development expenses for the years ended December 31, 2024 and 2023 were approximately $2,395,000 and $819,000, respectively. Business development expenses are included in sales, general and administrative expenses in the accompanying consolidated statements of operations.

In April 2023, the Company entered into a multi-year agreement for a marketing representative to assist in the recipes for three co-branded private label ramen noodles as well to be utilized in marketing of the Company for the marketing representative's name, image, likeness and voice. This agreement includes a service fee, an investment stake in the Company, and a royalty agreement on future co-branded sales. The service fee under this agreement is expensed on a straight-line basis under the terms of the contract. The marketing representative has a world-wide reputation within the gourmet food industry. We believe this agreement will assist us to increase our presence in the ramen noodle market.

Transaction Costs

On February 23, 2023, the Company signed a definitive business combination agreement with Oxus which was consummated on February 7, 2024 and described further in Note 1. In connection with this agreement, the Company has incurred transaction costs of approximately $1,506,000 and $5,414,000 for the years ended December 31, 2024 and 2023, respectively. Transaction costs have been expensed as incurred and are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Concentration of Risk

The Company maintains cash balances at financial institutions in excess of federally insured limits as of December 31, 2024 and December 31, 2023. The Company has not experienced any losses related to these balances. The Federal Deposit Insurance Corporation insures eligible accounts up to $250,000 per depositor at each financial institution. The Company holds cash at well-known banks and does not believe that it is exposed to any significant credit risks on its cash.

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 10% 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 two customers accounted for approximately 33% and sales to one customer accounted for approximately 57% of net revenues for the years ended December 31, 2024 and 2023, respectively. 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. Substantially all of the Company’s sales for the years ended December 31, 2024 and 2023 occurred in the United States, Canada, Central America, South America, and Europe.

Concentration of Risk (continued)

Purchases from 10 vendors accounted for approximately 47% and 50% of purchases during the years ended December 31, 2024 and 2023, respectively. Accounts payable to these vendors totaled approximately $3,217,000 and $430,000 as of December 31, 2024 and 2023, respectively.

Fair Value Measurements

In accordance with US GAAP, the Company defines fair value as the price that would be received to sell an asset or the price paid to transfer a liability in an orderly transaction between market participants at the measurement date. US GAAP establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available.

The hierarchy is broken down into three levels based on the reliability of inputs as follows:

Level 1: Observable inputs, such as quoted market prices in active markets for the identical asset or liability that are accessible at the measurement date.

Level 2: Inputs, other than quoted market prices included in Level 1, that are observable either directly or indirectly for the asset or liability.

Level 3: Unobservable inputs that reflect the entity’s own assumptions about the exit price of the asset or liability. Unobservable inputs may be used if there is little or no market data for the asset or liability at the measurement date.

The Company does not have assets measured at fair value on a recurring basis. The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

The carrying amounts reported in the consolidated balance sheets for accounts receivable and accounts payable approximate their fair values due to the short-term nature of these instruments.

There is no material difference between the carrying amounts and fair values of the Company’s debt obligations, notes payable, line of credit and convertible notes payable, as interest rates approximate current market rates for similar types of debt instruments (Level 2).

Disclosures about the fair value of financial instruments are based on pertinent information available to management as of December 31, 2024 and December 31, 2023. Although management is not aware of any factors that would significantly affect the reasonableness of the fair value amounts, such amounts were not comprehensively revalued for purposes of these consolidated financial statements and current estimates of fair value may differ significantly from the amounts presented herein.

Stock Based Compensation

The Company accounts for its stock compensation arrangements at fair value in accordance with Accounting Standards Codification ("ASC") 718 - Compensation - Stock Compensation. Compensation cost relating to share-based payment transactions is recognized in the Company’s consolidated financial statements based on the estimated fair value of the instruments issued. The Company measures the cost of employees’ services in exchange for stock awards based on the grant-date fair value of the award using the Black Scholes model and recognizes the cost over the period the employee is required to provide services for the award, which is the vesting period. The Company accounts for forfeitures as they occur.

Warrants

Outstanding warrants were assumed at the Reverse Recapitalization. The fair value of the warrants was determined using the Monte Carlo analysis at the date of the transaction. The Company accounts for its Public and Private warrants as equity-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity classification.

This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent year end date while the warrants are outstanding. It was determined at the Transaction Date that there were no changes to the classes or language that would impact the original assessment that the Public and Private warrants should be classified as equity.

Shipping and Handling Costs

Shipping and handling costs are expensed as incurred and are included in general and administrative expense in the consolidated statements of operations.

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, to enhance disclosures about significant segment expenses for public entities reporting segment information under ASC Topic 280. The amendments require public entities to disclose significant expense categories for each reportable segment, other segment items, the title and position of the chief operating decision-maker, and interim disclosures of certain segment-related information previously required only on an annual basis. The amendments clarify that entities reporting single segments must disclose

Recent Accounting Pronouncements (continued)

both the new and existing segment disclosures under Topic 280, and a public entity is permitted to disclose multiple measures of segment profit or loss if certain criteria are met. The ASU is effective for years beginning after December 15, 2023, and interim periods within years beginning after December 15, 2024. The adoption of ASU 2023-07 did not have a significant impact on the Company's consolidated financial statements. See Note 11, Segment Reporting, for the required disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance transparency into income tax disclosures. The amendments require annual disclosure of certain information relating to the rate reconciliation, income taxes paid by jurisdiction, income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign, income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign. The amendments also eliminate certain requirements relating to unrecognized tax benefits and certain deferred tax disclosure relating to subsidiaries and corporate joint ventures. The ASU is effective for years beginning after December 15, 2024, and interim periods within years beginning after December 15, 2025. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures(“ASU 2024-03”) which requires entities to (i) disclose amounts of (a) purchase of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and, (e) depreciation, depletion, and amortization recognized as part of oil-and gas-producing activities, (ii) include certain amounts that are already required to be disclosed under current U.S. GAAP in the same disclosures as other disaggregation requirements, (iii) disclose a qualitative description of the amounts remaining in relevant expense captions that are not necessarily disaggregated quantitatively, and (iv) disclose the total amount of selling expenses, in annual reporting periods, an entity’s definition of selling expense. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating ASU 2024-03 to determine the impact it may have on its consolidated financial statements.

2. Inventories, net

Inventories were as follows:

3. Property, Plant and Equipment, net

Property, plant and equipment were as follows:

Depreciation and amortization expense recorded in the years ended December 31, 2024 and 2023 was approximately $2,324,000 and $3,937,000, respectively, which is included as a component of cost of goods sold.

During the years ended December 31, 2024 and 2023, interest capitalized to property, plant and equipment under construction was approximately $0 and $266,000, respectively.

4. Debt

In 2022, the Company issued $20,000,000 of convertible notes payable that, after an extension was negotiated, had a maturity in February 2024 (unless converted) and bore interest at 10% annually. On or before the earlier of the maturity date or a “qualified financing event”, as defined in the note agreements, the outstanding principal and interest were convertible, at the option of the holder, into common shares of the Company. The notes and accrued interest were converted into 2,189,997 common shares with the consummation of the Reverse Recapitalization with Oxus.

In 2022, the Company issued $4,800,000 in convertible notes payable. During 2023, $4,500,000 of these notes matured without conversion and were repaid by the Company. The remaining $300,000 of convertible notes payable bore interest at 10% annually and, after an extension was negotiated, mature in February 2024 (unless converted). The outstanding principal and interest under the remaining convertible notes were convertible, at the option of the holder, into the same equity as issued upon the Company’s issuance of preferred or common shares of at least $10,000,000. The notes and accrued interest were converted into 40,544 common shares with the consummation of the Reverse Recapitalization with Oxus.

In 2023, the Company issued $27,000,000 of convertible notes payable, of which $27,000,000 had a maturity date in 2024 (unless converted) and bore interest at 10% annually. On or before the earlier of the maturity date or a “qualified financing event”, as defined in the note agreements, the outstanding principal and interest were convertible, at the option of the holder, into common shares of the Company.

The notes and accrued interest were converted into 3,787,585 common shares in connection with the consummation of the Reverse Recapitalization with Oxus.

4. Debt (continued)

In 2021, the Company issued a $3,000,000 convertible note that matures in 2026 (unless converted) and bears interest at 3% annually. Accrued interest is payable monthly. The outstanding principal and interest under the convertible note may be converted, at the option of the holder, into the same equity as issued upon the Company’s issuance of preferred or common shares of at least $10,000,000 (a “qualified financing event”), either as a single round or a lead round, at 85% of the per share price paid during the qualified financing event. The note holder elected not to convert at the Reverse Recapitalization and therefore the note is due at maturity.

In January 2024, the Company issued a $3,000,000 convertible note payable that had a maturity date in 2024 (unless converted) and bore interest at 10% annually. The note was converted into 375,925 common shares with the consummation of the Reverse Recapitalization with Oxus.

During 2023, the Company entered into a $25,000,000 financing agreement with a maturity date in August 2026. Under this agreement, the Company has a $15,000,000 term facility which was used to pay off its then existing line of credit. . In March 2024, the Company entered into an amendment that extended the date of the first principal payment to March 2025. In February 2025, a second amendment was executed that extended the first principal payment date to September 2025. Under the amendment, payments of $83,000 are due monthly beginning in September 2025 with a lump sum payment of $14,083,000 due at maturity. Interest accrues at the prime rate plus an applicable margin of 4.75% per annum and is payable monthly. The FrontWell financing agreement is secured by a collateral package that includes substantially all of the assets of PGF, PGF RE I, and PGF RE II.

In conjunction with this agreement, loan fees of approximately $931,000 were capitalized in 2023.

Amortization expense of approximately $311,000 and $121,000 was recorded on the fees for the years ended December 31, 2024.

In addition to the term facility, the Company obtained a $10,000,000 line of credit to fund working capital needs in support of its growth strategy. Interest accrues at the prime rate plus the applicable margin of 4.50%.

Interest is due and payable monthly beginning in September 2023. The line of credit includes an unused line fee of 0.25% per annum beginning on closing date through six months and increases to 0.50% per annum thereafter. As of December 31, 2024 and December 31, 2023 the line of credit had $7,600,000 and $0 drawn upon it, respectively.

In the period leading up to the Reverse Recapitalization, significant transaction costs were incurred by both parties. In total, four notes payable of $13,035,374 were issued for the transaction debt and mature in 2025. Details for the notes are as follows:

Note 1 – Incurred by Borealis. The related expenses were recognized as incurred by Borealis and the trade payable was subsequently reclassified to notes payable. Note 1 was issued in the original principal amount of $2,138,838. The note matures in May 2025, and bears interest at 10% per annum.

Note 2 – Incurred by Borealis. The related expenses were recognized as incurred by Borealis and the trade payable was subsequently reclassified to notes payable. Note 2 was issued in the original principal amount of $1,314,875. The note matures in May 2025, and bears interest at 10% per annum.

4. Debt (continued)

Note 3 – Incurred by Oxus. The related expenses were recognized by Oxus and resulted in a reduction of contributed equity at the Reverse Recapitalization. Note 3 was issued in the original principal amount of $1,980,000. The note matures in June 2025, and bears interest at 8% per annum.

Note 4 – Incurred by Oxus. The related expenses were recognized by Oxus and resulted in a reduction of contributed equity at the Reverse Recapitalization. Note 4 was issued in the original principal amount of $7,601,661. The note matures in February 2026, is non-interest bearing and payable to a related party.

Debt balances outstanding as of December 31, 2024 are due as follows: $5,767,000 in 2025 and $25,267,000 in 2026; $0 in 2027; and $0 in 2028.

5. Income Taxes

The Company accounts for income taxes using the liability method. Deferred income tax assets and liabilities are determined based on differences between the financial statement and income tax basis of the respective assets and liabilities, using enacted tax rates in effect for the years when the differences are expected to reverse.

Borealis is taxed under Canadian tax laws at a rate of 26.5%. Borealis does not file a consolidated tax return. PGF, PGF RE I, and PGF RE II (the “United States subsidiaries”) are taxed as C corporations, with a statutory rate of 21%.

For the years ended December 31, 2024 and 2023, the benefit (provision) for income taxes consisted of the following:

5. Income Taxes (continued)

Deferred income tax assets are recognized to the extent it is probable that the temporary differences and unused net operating tax losses will be realized. The realization of deferred income tax assets is reviewed each reporting period and includes the consideration of historical operating results, projected future taxable income (exclusive of reversing temporary differences and carryforwards), the scheduled reversal of deferred income tax liabilities, and potential tax planning strategies.

At December 31, 2024 and 2023, deferred income tax assets and liabilities consisted of the following:

Due to net operating losses, the Company was in a net deferred tax asset position, but because of the uncertainty of realization, the Company has fully reserved the net deferred income tax asset as of December 31, 2024.

The effective income tax rate differs from the federal statutory income tax rate for 2024 and 2023 as follows:

5. Income Taxes (continued)

PGF, PGF RE I, and PGF RE II (United States subsidiaries) had net operating loss carryforwards of approximately $26,154,000 for federal and state income tax reporting purposes at December 31, 2024. Net operating loss carryforwards for federal income tax purposes do not expire under United States tax laws. Net operating loss carryforwards for state income tax reporting purposes begin to expire in 2039.

Transactions for which tax deductibility or the timing of tax deductibility is uncertain are analyzed by management based on their technical characteristics. The Company recognizes accrued interest and penalties, if any, related to uncertain tax positions in income tax expense. Management has determined that the Company does not have any uncertain tax positions or associated unrecognized tax benefits that materially impact the

consolidated financial statements or related disclosures. As a result, at December 31, 2024, the Company didnot have a liability for unrecognized tax benefits, interest or penalties under United States or Canadian tax law. The Company paid no penalties for the year ending December 31, 2024.

The Company files income tax returns in the Canadian and U.S. federal jurisdictions, and in South Carolina. The Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2021. There are no tax examinations currently in progress.

6. Contingencies

From time to time, the Company is involved in legal proceedings in the normal course of business. Management does not believe that the final resolution of any such legal proceedings will have a material effect on the consolidated financial position or results of operations of the Company.

7. Leases

The Company leases certain equipment from third-parties. The determination of whether an arrangement is a lease is made at the lease’s inception. In accordance with US GAAP, a contract is (or contains) a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control is defined as having both the right to obtain substantially all of the economic benefits from use of the asset and the right to direct the use of the asset. Management only reassesses its determination if the terms and conditions of the contract are changed.

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, and lease obligations represent the Company’s obligation to make lease payments over that term. ROU assets and lease obligations are recognized at the lease commencement date based on the present value of lease payments calculated using the implicit rate when it is readily determinable. In the absence of an implicit rate, management may use the Company’s incremental borrowing rate based on the information available at lease commencement. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised.

ROU assets associated with operating leases recorded net of accumulated amortization were approximately $64,000 and $108,000 as of December 31, 2024 and December 31, 2023, respectively. ROU assets associated with finance leases recorded net of accumulated amortization of approximately $1,390,000 and $2,027,000 at

December 31, 2024 and 2023, respectively, and are included with property, plant and equipment, net. The Company recognized interest expense on its lease obligations of approximately $417,000 and $482,000 during the years ended December 31, 2024 and 2023, respectively.

For the years ended December 31, 2024 and 2023, the Company recognized rent expense associated with leases as follows:

ROU assets and lease liabilities consist of the following as of December 31, 2024:

Future minimum payments due under operating and finance leases as of December 31, 2024 consisted of the following:

As of December 31, 2024 the weighted average remaining lease term and weighted average discount rate for operating leases was 1.41 years and 10.00%, respectively.

As of December 31, 2023 the weighted average remaining lease term and weighted average discount rate for operating leases was 2.41 years and 10.00%, respectively.

As of December 31, 2024 the weighted average remaining lease term and weighted average discount rate for finance leases was 2.64 years and 18.89%, respectively.

As of December 31, 2023 the weighted average remaining lease term and weighted average discount rate for finance leases was 3.14 years and 18.53%, respectively.

8. Warrants

The following represents a summary of warrants outstanding and exercisable on December 31, 2024:

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

8. Warrants (continued)

period commencing once the warrants become exercisable and ending on the third trading day prior to the date on which New Borealis gives proper notice of such redemption and provided certain other conditions are met.

The public warrants are identical to the 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.

9. Stock Option Plan

During 2022, the Company created a stock option plan (the “Plan”) that provides for the granting of options to certain employees for the purchase of the Company’s class D common shares. The Plan provides for the grant of stock options for eligible employees as determined by the Board of Directors and does not guarantee employment rights. During the years ended December 31, 2024 and 2023 the Company granted options to purchase 333,574 and 227,666 shares, respectively, of the Company’s common shares at an exercise price of $0.0001 per share. The weighted-average grant date fair values of options granted was $0.60 per share. The fair values of the stock-based awards granted were calculated with the following assumptions:

For the years ended December 31, 2024 and 2023, the Company recorded approximately $1,273,000 and $492,000, respectively, of stock-based compensation expense. On February 7, 2024, as a result of the Reverse Recapitalization (Note 1),4,000,000 stock options were exercised and converted at an exchange ratio of 0.0661 into 264,400 shares of Newco Class A common stock. This stock option plan was closed upon the business combination and a new equity incentive plan was approved and implemented as of February 7, 2024.

9. Stock Option Plan (continued)

Stock option activity for the years ended December 31, 2024 and 2023 is summarized as follows:

10. Earnings per share

Basic earnings or loss per share is based on the weighted average number of common shares outstanding for the period. For the purposes of calculating diluted earnings per share, the number of shares outstanding has been adjusted for the dilutive effects of warrants.

*In periods where the Company has incurred a net loss, diluted earnings per share is based on the number of common shares issued and outstanding as including the effects of warrants would be anti-dilutive.

11. Segment Reporting

The Company has a single reportable segment focused around sale of similar products. This reportable segment derives revenues from the manufacture and sale of high quality, affordable and nutritious ready to eat meals.

The Company’s chief operating decision-maker (the “CODM”), who is the chief executive officer, assesses performance for the reportable segment and decides how to allocate resources using net income (loss) as the primary measure of profitability. The CODM is not regularly provided with specific segment expenses, but focuses on revenue, gross profit, and net income. Expense information, including cost of sales can be easily computed from the provided information. These segment (and consolidated) measures of profitability are shown in the consolidated statements of operations. The measure of segment assets is reported on the consolidated balance sheets as total assets.

12. Subsequent Events

The Company evaluated events and transactions after December 31, 2024 through April 15, 2025, the date the consolidated financial statements were available to be issued, for subsequent events requiring disclosure in these financial statements.

12. Subsequent Events (continued)

Mr. Kanat Mynzhanov’s tenure as SPAC nominee was set to expire on February 7, 2025, the one-year anniversary of the SPAC transaction between Oxus Acquisition Corp. and Borealis Foods Inc. On January 3, 2025, Mr. Mynzhanov provided notice of his decision to resign from the Board of Directors (the “Board”) of Borealis Foods to focus on his ongoing responsibilities as CEO of Tavia Acquisition Corp. Mr. Mynzhanov’s resignation was effective as of February 1, 2025 and did not result from any disagreement with the Company

concerning any matter relating to the Company’s operations, policies or practices. The Company is actively seeking an industry veteran to replace Mr. Mynzhanov on the Board.

Subsequent to year-end, the Chairman and Chief Executive Officer advanced funds to the Company in the amounts of $500,000 and $300,000, respectively. In addition, the Chief Executive Officer deferred approximately $125,000 in compensation during the first quarter of 2025, respectively.