Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the Company’s consolidated financial condition and results of operations should be read in conjunction with the audited financial statements and the notes thereto contained elsewhere in this Annual Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, those set forth under Item 1.A., “Risk Factors,” included in Part I of this Annual Report on Form 10-K.
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and our functional currency is the U.S. Dollar. The consolidated financial statements include the accounts of Borealis Foods Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. A summary of the significant accounting policies followed in the preparation of the consolidated financial statements is included in Note 1 to the consolidated financial statements included elsewhere in this Annual Report.
Our historical financial statements have been prepared under the assumption that we will continue as a going concern. Our registered public accounting firms has issued a report on our consolidated financial statements for the years ended December 31, 2025 and 2024, that includes an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. As of December 31, 2025, we had cash and cash equivalents of approximately $0.06 million, a working capital deficit of approximately $61.8 million, and an accumulated deficit of approximately $109.8 million. We have experienced recurring losses from operations and negative cash flows from operating activities. Our ability to continue as a going concern is dependent on our ability to generate sufficient cash flows from operations, manage our debt service obligations, and obtain additional equity or debt financing. Subsequent to December 31, 2025, we completed the refinancing of our former credit facility with FrontWell Capital Partners Inc. through a new Credit Agreement with Oxus Capital PTE Ltd., a related party and a major shareholder. While the Oxus Credit Agreement eliminated the near-term maturity risk associated with the FrontWell facility, we continue to have substantial indebtedness, recurring losses, and limited liquidity. In addition, if the Required Equity Financing under the Conversion Agreement is not completed by July 1, 2026, approximately $33.3 million of shareholder debt will automatically convert into Common Shares, which would reduce our debt burden but result in substantial dilution to existing shareholders. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. If adequate funds are not available to us when we need them, we could be unable to fund our ongoing business, which, in turn, could cause our customers or suppliers to decrease the amount of business they do with us or terminate their relationship with us, or we could go into default on our outstanding indebtedness, which, in turn, would permit our creditors to enforce remedies against us and cause us to consider reducing, discontinuing, or selling operations or seeking protection from creditors. The substantial doubt regarding our ability to continue as a going concern may adversely affect our ability to obtain new financing on reasonable terms or at all. If we are unable to continue as a going concern, our shareholders may lose some or all of their investment in our Company. Any one or more of such events would have a material adverse effect on our business, financial condition, results of operations and cash flow
Overview
Borealis Foods is a pioneering, integrated food science and manufacturing company that is redefining affordable nutrition. Known for popular ramen noodle brands like the high protein Chef Woo, Chef Ramsay, Ramen Express, and Woodles, Borealis Foods brings innovative fusion flavors from diverse culinary traditions, creating delicious and nutritious meal options for consumers. With U.S.-based production facilities, the company’s portfolio reflects a commitment to quality, innovation, and sustainability.
The Company continued to execute its strategic repositioning and channel diversification in 2025, with emphasis on institutional and food service growth, gross margin expansion, and structural cost reduction. Net revenue grew 8.7% year-over-year to $30.08 million, gross profit improved 60% to $3.51 million, and total SG&A declined 35.6% from the prior year. The net loss of $18.98 million for fiscal 2025 reflects the lingering burden of a capital structure shaped by the 2024 Reverse Recapitalization, not operational underperformance. Management is actively engaged in refinancing discussions and financing initiatives designed to resolve this mismatch and fully unlock the earnings power of our improving operations.
Oxus Capital Term Loan: Subsequent to December 31, 2025, the Company completed the refinancing of the FrontWell credit facility. In April 2026, Palmetto Gourmet Foods, Inc. and its affiliated entities entered into a $17.0 million term loan credit agreement with Oxus Capital Pte. Ltd., a major related party shareholder, which was used to repay and fully discharge the FrontWell credit facility. The Oxus Term Loan bears interest at 12% per annum, is interest-only during Year 1 (with Oxus Capital having the option to convert Year 1 accrued interest into common equity of Borealis Foods Inc.), amortizes on a straight-line basis over 48 months commencing May 2027, and matures in April 2031.
Additional Financing: We are pursuing equity offerings, convertible debt, strategic partnerships, and other financing alternatives to provide the working capital required to scale production and normalize vendor payment terms. Any completed financing transaction will be disclosed promptly in our SEC filings.
The Reverse Recapitalization
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 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. ”.
Unless otherwise indicated, references to the “Company,” “our,” “us” or “we” in this Item 7 refer to Oxus Acquisition Corp., or Oxus, before the consummation of the Transaction. References to our “management” or our “management team” refer to our officers and directors, and references to the “sponsor” refer to Oxus Capital Pte. Ltd. The term “New Borealis” refers to Borealis Foods Inc. after the consummation of the Business Combination.
Accounting Impact of the Reverse Recapitalization
The Reverse Recapitalization transaction was accounted for as a reverse recapitalization. Oxus was deemed the accounting predecessor and Borealis is the successor 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 reverse 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.
Basis of Presentation
Borealis Foods’ consolidated financial statements were prepared in accordance with U.S. GAAP. See Note 1 to our consolidated financial statements for a full description of our basis of presentation.
Results of Operations
The following sets forth a summary of our results of operations for the presented periods ($ in thousands):
Comparison of the Years Ended December 31, 2025 and 2024
For the Years Ended December 31,
($ in thousands)
2025 (Unaudited)
2024 (Unaudited)
2025 vs 2024 Variance
% of Revenues, net
% of Revenues, net
% of Prior Period
Revenues
Gross sales
Sales discounts & allowances
Revenue, net
Cost of goods sold
Depreciation
Total cost of goods sold
Gross profit (loss)
Advertising
Business development
Training
General & administrative expenses
Total sales, general & administrative expenses
Loss from operations
Other income (expense):
Impairment loss
Gain (loss) on foreign exchange rates
Interest expense
Total other expense
Loss before income taxes
Income tax benefit
Net loss
Other financial Data:
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial metric. See “Reconciliation of EBITDA and Adjusted EBITDA” below for a reconciliation of net income to EBITDA and Adjusted EBITDA for each applicable period.
Revenue
Net revenues increased $2.4 million, or 8.7%, to $30.1 million for the year ended December 31, 2025, compared to $27.7 million for the year ended December 31, 2024. Gross sales increased $2.4 million, or 8.2%, to $31.5 million for the year ended December 31, 2025. This growth was driven by continued expansion of our institutional food service channel, increasing volumes from key partners and the ongoing ramp-up of our higher-margin Chef Woo branded products.
We have deliberately and successfully executed a channel diversification strategy. Our largest customer represented approximately 57% of revenues in 2023, approximately 22% of revenues in 2024 and approximately 23% of revenues in 2025. Our revenue mix reflects a substantially broader and higher-quality customer base across institutional food service, specialty retail, and select mass channel partners. This diversification strengthens our revenue resilience and supports margin improvement. In 2024, approximately 33% of our total revenues were derived from two customers. In 2025, our two largest customers in the aggregate represented approximately 35% of net revenues, with no single customer representing more than 23% of net revenues. Our revenue mix continues to broaden across institutional food service, specialty retail, and select mass channel partners.
Cost of Goods Sold and Gross Profit
Chef Woo, High Protein Ramen, our flagship brand, continued its strong growth trajectory in 2025, contributing to meaningful gross margin expansion. Combined with the growing contribution of Woodles to school meal programs and the ramp of our food service product lines, the mix shift toward higher-margin branded and institutional products is the primary driver of our gross margin improvement.
Product Mix: Continued shift toward Chef Woo branded and institutional products, which carry higher average margins than our legacy Ramen Express retail business.
Customer Mix: Deliberate reduction in reliance on low-margin mass retail volume and expansion into institutional accounts with more favorable margin structures.
Operational Efficiencies: Tighter inventory management at PGF, with inventory spoilage charges of approximately $1.1 million concentrated in the first half of the year, declining materially in second half 2025 as we aligned inventory to contracted institutional demand
Gross profit improved $1.32 million, or 60.4%, to $3.51 million for the year ended December 31, 2025, compared to $2.19 million in 2024 as compared to the negative gross margins of 2022 and 2023. Gross margin reached 11.7% for the full year, with the fourth quarter averaging 15.0%, its highest quarterly level of the year, primarily related to product mix with management’s focus on higher margin products.
Operating Expenses and SG&A Trends
Total selling, general and administrative expenses (“SG&A”) declined 35.6% year-over-year to $14.55 million, or 48.4% of net revenue, compared to $22.59 million, or 81.7% of net revenue, in the prior year. This is structural cost reduction, not cosmetic, it reflects the normalization of our cost base following the Reverse Recapitalization and the maturation of our food service channel investment.
General and administrative expenses were $9.03 million for 2025, compared to $12.75 million in 2024. The decrease reflects primarily lower freight and distribution costs, lower professional fees and stock compensation expense, as one-time transaction costs did not recur in 2025. The prior year also included approximately $1.51 million in one-time SPAC transaction-related costs and approximately $1.27 million in non-recurring stock-based compensation, neither of which recurred.
Sales and marketing expenses of $5.73 million recorded in 2024, primarily associated with the national launch of Chef Woo and Gordon Ramsay products and the build-out of our food service business development pipeline did not recur at the same level in 2025. In 2025, these costs have been substantially normalized as our channel strategy has matured.
Training costs declined to $0.95 million in 2025 from $1.72 million in 2024, reflecting the maturation of our production team at PGF as manufacturing capabilities stabilized. These costs are recorded in SG&A as they are not directly to finished goods production.
A non-cash goodwill impairment charge of $1.92 million and a trademark impairment charge of $0.09 million were recorded in Q4 2025, reducing the goodwill and trademark balance to zero. The impairment was determined following our annual goodwill impairment assessment under ASC 350, reflecting current market conditions and the Company’s capital structure. This charge has no impact on our liquidity, cash flows, or operational capacity and should not be read as indicative of any deterioration in our underlying business.
Liquidity and Capital Resources
Our primary sources of liquidity are borrowings under the FrontWell credit facility and advances from related parties. While cash generated from operations has not yet been sufficient to fully fund our operating requirements at the current stage of development, we believe the trajectory of our operating results including 8.7% net revenue growth, 60.4% gross profit improvement, and 35.6% core SG&A reduction in 2025 demonstrates an operating business that is approaching the inflection point at which self-funded growth becomes achievable. Management is actively pursuing targeted refinancing and additional capital to bridge to that inflection point.
As of December 31, 2025, we had cash and cash equivalents of $0.06 million, compared to $0.65 million as of December 31, 2024. We have a working capital deficit of approximately $(61.76) million as of December 31, 2025 and a deficit of $(13.61) million as of December 31, 2024 The significant increase in the working capital deficit from the prior year is primarily attributable to the reclassification of the FrontWell term facility and certain related party advances to current liabilities as those obligations approach scheduled maturity. These reclassifications are accounting-driven; management is engaged in active discussions to refinance, extend, or restructure these obligations prior to their maturity dates.
Cash Flows
The following table sets forth our cash flows for the periods indicated ($ in thousands):
Years Ended December 31,
Net cash (used in) provided by:
Operating Activities
Investing Activities
Financing Activities
Operating Activities
Net cash used in operating activities for the year ended December 31, 2025, was $6.60 million, compared to $15.09 million for the year ended December 31, 2024, an improvement of $8.49 million. The improvement reflects lower operating losses driven by gross margin expansion and SG&A reduction, partially offset by changes in working capital including a reduction in accounts payable. Non-cash adjustments included depreciation and amortization of $1.84 million, non-cash compensation expense of $0.44 million, and the non-cash goodwill and trademark impairment of $2.0 million. We expect operating cash usage to continue to moderate as gross margins expand and revenue grows toward the volume levels at which fixed overhead is more fully leveraged.
Investing Activities
Net cash used in investing activities was $(0.06) million for the year ended December 31, 2025, compared to $(1.91) million for the year ended December 31, 2024. Capital expenditures were minimal in 2025, reflecting management’s deliberate decision to preserve liquidity. Our manufacturing infrastructure requires limited incremental capital investment to support the revenue growth contemplated in management’s plans, as our Saluda, South Carolina facility has significant installed capacity available to deploy with working capital and customer demand rather than new capital expenditure
Financing Activities
Net cash from financing activities reflects payment activity on finance leases, borrowings and repayments under credit facilities, and related party advance activity during the year. In 2025, financing activities provided $6.08 million, driven by the advancement of related party loans and year 2024 of $10.03 million, driven primarily by proceeds from the $7.60 million line of credit draw and convertible debt proceeds.
Balance Sheet and Contractual Obligations
Our cash position, though lower than prior periods, reflects its active investment in operational scale-up and the expansion of high-margin product lines. Borealis Foods’ contractual obligations, including operating leases, accounts payable, and convertible notes, remain in line with planned financial commitments and reflect our strategic focus on sustainable growth.
Future Capital Requirements and Liquidity
We need additional capital to meet our funding requirements through fiscal 2026 to scale production toward the utilization levels at which our operating economics become self-reinforcing. The August 2026 balloon maturity risk associated with the FrontWell term facility has been eliminated as a result of the Oxus Term Loan described above, which extends our primary debt maturity to April 2031. As of December 31, 2025, we had cash on hand of $0.06 million and a negative working capital of approximately $(61.76) million.
Convertible Notes Payable. We have outstanding convertible notes payable of $3.00 million as of December 31, 2025. These notes are convertible into common shares at the option of the holder on or before the earlier of the maturity date or a qualified financing event, as defined in the note agreements.
The completion of the Oxus Term Loan in April 2026 has resolved the most critical capital structure constraint identified at year-end 2025 and materially reduces the total external capital required to reach operational sustainability.
Going Concern
Management has identified recurring losses and negative cash flows from operations as factors raising substantial doubt about our ability to continue as a going concern. We are focused on executing our strategic initiatives to drive revenue growth, manage expenses, and secure additional financing to address these risks. The consolidated financial statements have been prepared under the assumption of ongoing operations, as we seek to navigate these challenges and achieve financial stability. Substantial doubt continues to exist about the ability of the Company to continue as a going concern within one year after the date these consolidated financial statements are issued.
Management believes the going concern condition is a capital structure challenge, not a reflection of the operating business. Our manufacturing facility, our institutional customer base, and our improving unit economics are intact and improving. Management has implemented the following strategic and operational initiatives to address the going concern conditions and provide a pathway to financial sustainability:
Revenue and Margin Growth: Continued expansion of our institutional food service channel with committed demand from several partners. Chef Woo, our flagship high-protein brand, continues to grow and carries our highest product margins. The food service channel launched in fiscal 2024 has grown into a meaningful revenue contributor and is expected to be a major driver of the Company’s future revenues and margin expansion. We have not generated a negative gross margin quarter since the second quarter of 2025.
Institutional Revenue Pipeline: We have contracted institutional relationships with leading global retailers, multinational food and beverage companies and other food service customers whose combined demand, if fulfilled, would bring our facility to and beyond the utilization levels needed for sustained profitability. These relationships represent real contracted revenue not aspirational projections and we believe they provide the most direct path to the volume levels that transform our fixed cost structure from a headwind into an advantage.
Refinancing Completed — Oxus Capital Term Loan: Subsequent to December 31, 2025, the Company completed the refinancing of the FrontWell credit facility. In April 2026, Palmetto Gourmet Foods, Inc. and its affiliated entities entered into a $17.0 million term loan credit agreement with Oxus Capital Pte. Ltd., which was used to repay and fully discharge the FrontWell credit facility. The Oxus Term Loan bears interest at 12% per annum, is interest-only during Year 1 (with Oxus Capital having the option to convert Year 1 accrued interest into common equity of Borealis Foods Inc.), amortizes on a straight-line basis over 48 months commencing May 2027, and matures in April 2031.
Additional Financing: We are pursuing equity offerings, convertible debt, strategic partnerships, and other financing alternatives to provide the working capital required to scale production and normalize vendor payment terms. Any completed financing transaction will be disclosed promptly in our SEC filings.
The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management is confident that the combination of its operational progress, institutional demand pipeline, asset base, and ongoing financing initiatives provides a credible pathway to financial sustainability; however, there can be no assurance that management’s plans will be achieved within the timeframes required.
Contractual Obligations and Commitments.
The following table summarizes our non-cancellable contractual obligations and other commitments as of December 31, 2025, and the effects that such obligations are expected to have on our liquidity and cash flow for future periods (in thousands):
Payments due by period
Total
Less than 1
year
years
years
More than 5
years
Contractual obligations and other commitments *
Includes operating lease liabilities for certain of our offices and facilities, accounts payable, and accrued expenses including related party notes
The commitment amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts. The table does not include obligations under agreements that we can cancel without a significant penalty.
Off-Balance Sheet Arrangements
As of December 31, 2025 and December 31, 2024, we did not engage in any off-balance sheet arrangements, including the use of structured finance, special purpose entities, or variable interest entities.
Warrants
The following represents a summary of warrants outstanding and exercisable on December 31, 2025:
Description
Issue Date
Classification Exercise
Price
Expiration Date
Outstanding Shares
Exercisable Shares
Private Placement Warrants
Equity
Public Warrants
Equity
Private Placement Warrants
Equity
Private Placement Warrants
Equity
Following the closing of the Reverse Recapitalization, Borealis Foods 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 period commencing once the warrants become exercisable and ending on the third trading day prior to the date on which Borealis Foods gives proper notice of such redemption and provided certain other conditions are met.
The public warrants are identical to the 2021 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.
Emerging Growth Company Status
Section 102(b)(1) of the Jumpstart Our Business Startups Act (the “ JOBS Act ”) exempts “emerging growth companies” (as defined in Section 2(a) of the Securities Act) from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to not take advantage of the extended transition period is irrevocable. Oxus was an emerging growth company and elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. Following the consummation of the Reverse Recapitalization, Borealis Foods expects to continue taking advantage of the benefits of the extended transition period, although it may decide to early adopt new or revised accounting standards to the extent permitted by such standards and relevant laws and regulations. This may make it difficult or impossible to compare Borealis Foods’ financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.
We 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 Foods 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 Foods 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.
Implications of being a Smaller Reporting Company
Additionally, we are 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. We 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) our 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 we take advantage of such reduced disclosure obligations, we may also make comparison of our financial statements with other public companies difficult or impossible.
How We Evaluate Our Operations
Net Income/(Loss)
We measure performance based on our overall return to shareholders based on consolidated net income or net loss. We do not review a measure of operating result at a lower level than the consolidated company and we only have one reportable segment.
Adjusted EBITDA
Our adjustments to EBITDA are related to expenses and gains that we believe are not indicative of normal, ongoing operations. While these items may be recurring in nature and should not be disregarded in evaluation of our earnings performance, it is useful to exclude such items when analyzing current results and trends as these items can vary significantly from period to period depending on specific underlying transactions or events that may occur. Therefore, while we may incur or recognize these types of expenses and gains in the future, we believe that removing these items for purposes of calculating the Adjusted EBITDA financial measures provides a more focused presentation of our ongoing operating performance.
We view EBITDA as an important indicator of performance. We define EBITDA as net income/(loss) plus net interest expense, income taxes, depreciation, and amortization. We define Adjusted EBITDA as EBITDA further adjusted for any foreign exchange gains/(losses), share-based compensation expense and non-recurring items if identified. EBITDA and Adjusted EBITDA are supplemental measures utilized by our management and other users of our financial statements such as investors, research analysts and others, to assess the financial performance of our assets without regard to financing methods, capital structure or historical cost basis. Adjusted EBITDA is a key performance measure that our management uses to assess its operating performance. We facilitate internal comparisons of our operating performance on a more consistent basis. We use these performance measures for business planning purposes and forecasting. We believe that EBITDA and Adjusted EBITDA enhances an investor’s understanding of our financial performance as they are useful in assessing our operating performance from period-to-period by excluding certain items that we believe are not representative of our core business.
“Adjusted EBITDA,” a non-GAAP measure, is defined as net income attributable to us before (1) income tax benefit, of $(0.07) million, (2) exchange rate, of $(0.01), (3) interest expense, of $5.99 million, (4) depreciation and amortization, of $1.84 million, (5) training, of $0.95 million, (6) business development, of $2.21 million, (7) deferred stock compensation $0.44 million, and (8) marketing $2.35 million, all for the fiscal year ended December 31, 2025. 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.
“Adjusted EBITDA,” a non-GAAP measure, is defined as net income attributable to us before (1) income tax benefit, of $(0.13) million, (2) interest expense, of $5.06 million, (3) depreciation and amortization, of $2.32 million, (4) training, of $1.72 million, (5) business transaction costs, of $3.17 million , (6) business development, of $2.40 million, (7) deferred stock compensation $1.27 million, and (8) marketing $5.73 million, all for the fiscal year ended December 31, 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 measures 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.
Recent Accounting Pronouncements
See Note 1 to Borealis Foods’ financial statements included elsewhere in this Annual Report for information about recent accounting pronouncements, the timing of their adoption, and Borealis Foods’ assessment, if any, of their potential impact on Borealis Foods’ financial condition and results of operations.
Item 7.A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risk in the ordinary course of our business. Market Risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in foreign currency exchange rates.
Concentration Risk
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 2.5% 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 35% and 33% of net revenues for the years ended December 31, 2025 and 2024, respectively. Accounts receivable from three customers amounted to approximately 51% and 37% of total accounts receivable as of December 31, 2025 and 2024, respectively. Substantially all of the Company’s sales for the years ended December 31, 2025 and 2024 occurred in the United States, Canada, Central America, South America, and Europe.
Purchases from 10 vendors accounted for approximately 54% and 47% of purchases during the fiscal years ended December 31, 2025 and 2024, respectively. Accounts payable to these vendors totaled approximately $2,764,000 and $3,217,000 as of December 31, 2025 and 2024, respectively
Foreign Currency Risk
Our customers are primarily located in the United States, Central America, South America, Germany, and Canada; therefore, foreign exchange risk exposures arise from transactions denominated in currencies other than our functional and reporting currency (U.S. dollars). To date, a majority of our sales have been denominated in U.S. dollars and a significant portion of our operating expenses are denominated in Canadian dollars. We also purchase certain of our key manufacturing inputs in Euros. As we expand our presence in international markets, our results of operations and cash flows may increasingly be subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign currency exchange rates. To date, we have not entered into any hedging arrangements to minimize the impact of these fluctuations in the exchange rates. We will periodically reassess our approach to manage our risk relating to fluctuations in currency rates.
We do not believe that foreign currency risk had a material effect on our business, financial condition, or results of operations during the periods presented.
Inflation Risk
We do not believe that inflation had a significant impact on our results of operations for any periods presented in our consolidated financial statements. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs with product price increases, and our inability or failure to do so could harm our business, financial condition, and results of operations.
Matching Revenues with Costs
Certain Selling, General and Administrative costs have been expensed in the period incurred. These costs, include business development costs, transaction costs and research and development costs, consist primarily of personnel and related expenses including salaries, benefits, share-based compensation, scale-up expenses, depreciation and amortization expenses, and facility lease costs. Scale-up expenses includes material waste costs, production personnel costs and various related expenses. These costs are focused on enhancements to our existing product formulations and production processes, as well as the scientific development of new products and economic verticals. We believe continued innovation and these new verticals are expected to capture a larger share of consumers. Monetization of future opportunities created by the above investment are expected to be realized in future quarters.
