Borealis Foods Inc.

Borealis Foods Inc. operates as an integrated food science and manufacturing company focused on redefining affordable nutrition, primarily through its ramen noodle brands. The company's core business model involves developing and commercializing tasty, affordable, and sustainable functional foods, with an initial and currently sole vertical in instant noodle products. The global ramen market was estimated at $57.7 billion ⁴ in 2023 and is projected to grow at a compound annual growth rate (CAGR) of 6.12% ⁵ from 2024-2032, reaching approximately $98.3 billion ⁶ by 2032. Borealis Foods positions itself as a disruptor in this market by offering plant-based, high-protein ready-to-eat meals, appealing to mainstream consumers seeking healthier, sustainable, and affordable options. The company emphasizes its U.S.-based production facilities and strategic partnerships with national and international food producers, retailers, and distributors to expand its offerings and technological capabilities.

The company generates revenue primarily through the sale of its food products, which are transactional in nature. Its primary customer segments include mass merchandisers (e.g., Walmart, Costco, Sam's Club), limited assortment retailers (e.g., Aldi, Publix), traditional supermarkets (e.g., Albertson, Winn-Dixie, Save Mart), regional retailers, and e-commerce distributors (e.g., Amazon, Walmart.com, Instacart). Borealis Foods also targets the food services space, including educational and institutional customers. A significant portion of its revenue is concentrated, with two customers accounting for approximately 33% ⁷ of total revenue in 2024.

Borealis Foods' product portfolio includes several ramen noodle brands. "Chef Woo" is a super premium high-protein instant ramen, offering 20 grams ⁸ of plant-based complete protein, certified kosher, halal, vegan, and vegetarian, and free of egg, dairy, TBHQ, and added MSG. It comes in flavors such as Roasted Chicken, Braised Beef, Spicy Tequila Lime, Thai Lemongrass, Sweet Chili Togarashi, and Chili Chicken. "Chef Ramsay" is an ultra-premium brand developed in collaboration with Gordon Ramsay, also providing 20 grams ⁹ of complete protein per serving, targeting more refined consumers. "Ramen Express" is a premium ramen that is kosher, halal, vegan, vegetarian certified, egg and dairy-free, and TBHQ and added MSG free, available in various flavors including Chicken, Beef, Shrimp, Hotter & Spicier, Lime & Chili Shrimp, Hot & Spicy Chicken, Hot & Spicy Beef, Hot & Spicy Shrimp, and Soy Sauce. "Woodles" are whole grain-rich ramen noodles, made with at least 51% ¹⁰ whole wheat flour, specifically designed for school meal programs.

For the fiscal year ended December 31, 2024, Borealis Foods reported net revenue of $27,668,894 ¹¹, a decrease of 8% ¹² year-over-year from $29,984,968 ¹³ in 2023. Despite the revenue decline, gross profit turned positive to $2,189,511 ¹⁴ in 2024, compared to a gross loss of $(1,303,719) ¹⁵ in 2023. The gross margin, less depreciation, improved to 16% ¹⁶ in 2024 from 9% ¹⁷ in 2023. Loss from operations was $(20,404,975) ¹⁸ in 2024, compared to $(19,949,150) ¹⁹ in 2023. Net loss for the year was $(25,327,198) ²⁰, an improvement from $(27,479,247) ²¹ in 2023. Basic and diluted EPS were both $(1.25) ²² in 2024, compared to $(2.56) ²³ in 2023. As of December 31, 2024, the company had cash of $652,965 ²⁴, accounts receivable, net of $1,965,748 ²⁵, and total current liabilities of $25,406,490 ²⁶. Total debt, including convertible notes payable (current and non-current portions) and notes payable (current and non-current portions), amounted to $30,534,985 ²⁷ ($3,000,000 ²⁸ non-current convertible notes payable + $5,456,934 ²⁹ current notes payable + $14,478,051 ³⁰ non-current notes payable + $7,600,000 ³¹ line of credit). Net cash used in operating activities was $(15,089,543) ³² in 2024, an improvement from $(18,005,095) ³³ in 2023.

The year-over-year comparison highlights a strategic shift, with net revenue declining by $2,316,074 ³⁴ due to the rationalization of low-margin SKUs and reduced volume with mass retail partners. However, gross profit improved by $3,493,230 ³⁵, driven by improved pricing, a more favorable product mix, and a deliberate move away from low-margin partnerships. The contribution from the Chef Woo brand increased by 200% ³⁶ year-over-year, generating $10.4 million ³⁷ in revenue and representing 38% ³⁸ of total gross sales. The new Food Service product line generated $3.75 million ³⁹ in its first year. Sales, General, and Administrative (SG&A) expenses increased by $3,949,055 ⁴⁰ to $22,594,486 ⁴¹, or 82% ⁴² of net revenue, up from 62% ⁴³ in the prior year, reflecting investments in organizational development and brand building. Advertising costs specifically increased to $4.49 million ⁴⁴. Interest expense declined from $7,276,583 ⁴⁵ in 2023 to $5,060,678 ⁴⁶ in 2024, primarily due to the conversion of debt to equity and lower reliance on high-interest debt instruments.

Significant operational developments during the period include the consummation of a Reverse Recapitalization on February 7, 2024 ⁴⁷, where Legacy Borealis was deemed the accounting acquirer of Oxus Acquisition Corp. This transaction led to the conversion of convertible debt to equity, reducing current liabilities by 62% ⁴⁸ to $25.4 million ⁴⁹. The company also launched its Food Service product line and expanded distribution to pharmacies and drug stores (CVS and Rite Aid). Borealis Foods continues to enhance its manufacturing facility in Saluda, South Carolina, and is in the process of obtaining permits to convert to solar power with the goal of becoming Scope two carbon neutral.

Borealis Foods Inc. expects operating costs to decrease in future periods, driven by the non-recurring nature of approximately $1.51 million ⁵⁰ in transaction expenses and $1.27 million ⁵¹ in employee stock compensation expenses incurred in 2024 due to the Reverse Recapitalization. Management anticipates improved operating efficiency moving forward.

The company's growth strategy is multi-pronged, focusing on expanding distribution across traditional retail, food services, and strategic partnerships. In traditional retail, Borealis Foods aims to increase its presence as the first plant-based high-protein offering on ramen shelves, building on its existing footprint of approximately 25,000 ⁵² stores in the U.S. and approximately 3,300 ⁵³ stores in Canada. Recent expansion into pharmacies and drug stores like CVS and Rite Aid is part of this strategy. The company also plans to grow sales within Canadian and U.S. retail by increasing sales at existing points of distribution and establishing new commercial relationships. The launch of products in food service to supply educational and other institutional customers is expected to be a major driver of future revenues, with the Food Service product line already generating $3.75 million ⁵⁴ in its first year. Strategic partnerships with prominent national and international food producers, retailers, and distributors are also key to expanding offerings and enhancing technological capabilities.

Operationally, Borealis Foods is committed to prioritizing investment in its infrastructure and capabilities. This includes continuous efforts to enhance its manufacturing facility in Saluda, South Carolina, which has already allowed for a significant increase in production capacity. The company is actively evaluating and improving its supply chain processes and partnerships to increase manufacturing efficiencies and quality while reducing costs. A notable operational goal is to convert the Saluda facility to operate on solar power, with the objective of becoming Scope two carbon neutral. The company also plans to strengthen its product offering by improving existing formulations and creating new product lines, such as snacks, through increased investment in research and development.

Regarding capital allocation, Borealis Foods will continue to invest in research and development, with expenses for the years ended December 31, 2024 and 2023 being approximately $197,000 ⁵⁵ and $460,000 ⁵⁶, respectively. The company needs additional capital to meet its funding requirements through fiscal 2025, particularly to support expansion in retail and digital channels. As of December 31, 2024, cash-on-hand was $0.65 million ⁵⁷ and negative working capital was $13.61 million ⁵⁸. Management is actively exploring additional financing options, including equity or debt issuances, to strengthen the balance sheet.

Management has identified recurring losses and negative cash flows from operations as factors raising substantial doubt about the company's ability to continue as a going concern within one year from April 15, 2025 ⁵⁹. The company's liquidity was strained by not receiving any proceeds from the SPAC trust due to 100% ⁶⁰ redemption and incurring substantial transaction-related costs. This limited the ability to pursue new customer relationships, fund promotions, and invest in broader marketing initiatives, also impacting raw material costs and gross margins. The company is subject to various risks, including volatility in costs for ingredients and packaging, which can fluctuate due to global competition, weather, consumer demand, and governmental programs. Dependence on a single source supplier, Puris Foods, for pea protein also presents a supply chain risk. Adverse climate conditions, geopolitical uncertainties, and changes in trade policies, including tariffs, could also negatively impact the business by affecting agricultural productivity, increasing costs, or limiting market access.

Borealis Foods faces several material risks, including substantial doubt about its ability to continue as a going concern due to recurring losses and negative cash flows from operations, as highlighted by its independent registered public accounting firm. The company will require significant future capital investment, and an inability to raise adequate capital could force it to curtail operations, sell assets, or seek bankruptcy protection. Restrictive covenants in its Credit Facility agreements may limit operational flexibility, and a default could accelerate debt maturity, which the company may not have sufficient cash to repay. A significant portion of revenue is concentrated with a limited number of customers, with two customers accounting for approximately 33% ⁶¹ of total revenue in 2024, making the company vulnerable to the loss or deterioration of these relationships. Dependence on a single source supplier, Puris Foods, for pea protein, a key ingredient, poses a supply chain risk if disruptions occur. The business is exposed to volatility in ingredient and packaging costs due to unpredictable conditions like global competition, weather, and trade policies, which could reduce profitability if price increases cannot offset higher costs. Adverse climate conditions, including extreme weather and natural disasters, could impact the quality, availability, or cost of essential commodities like flour, paper, and edible oil. Geopolitical uncertainties, such as the war in Ukraine, could cause global economic disruption, increase commodity prices, and affect consumer spending habits. The company operates in a highly competitive environment with many competitors possessing greater financial resources and market presence, potentially leading to prolonged price competition. Furthermore, the company's management team has limited experience managing a public company, and operating as a public entity incurs significant legal, accounting, and compliance costs. Cybersecurity attacks, data breaches, or disruptions to IT systems could damage reputation and financial results. Changes in government regulations, particularly concerning food manufacturing, labeling, and advertising, could lead to increased compliance costs, enforcement actions, or product recalls.

Management's message to shareholders conveys a tone of strategic repositioning and active pursuit of financial stability despite significant challenges. They explicitly acknowledge the independent registered public accounting firm's expression of "substantial doubt about our ability to continue as a going concern" ⁶² due to recurring losses and negative cash flows. Management emphasizes that they are "actively pursuing several strategic and operational initiatives to improve liquidity and profitability" ⁶³. Key strategic priorities include continued efforts to reduce selling, general, and administrative expenses for the year ended December 31, 2025 ⁶⁴, and the exploration of financing options, including equity or debt issuances, to strengthen the balance sheet. They anticipate improved operating efficiency moving forward, expecting operating costs to decrease in future periods due to the non-recurring nature of approximately $1.51 million ⁶⁵ in transaction expenses and $1.27 million ⁶⁶ in employee stock compensation expenses incurred in 2024. Management is focused on executing strategic initiatives to drive revenue growth, manage expenses, and secure additional financing to address the going concern risks.