BRLS

Business Context and Reporting Period

Company: Borealis Foods Inc. (formerly Oxus Acquisition Corp.)
Filing Date: February 7, 2024
Event: Consummation of a business combination (SPAC merger) between Oxus Acquisition Corp. and Borealis Foods Inc. via a statutory arrangement under Canadian law.
Post-Transaction Status: The combined entity, "New Borealis," continues as a public company listed on the Nasdaq Capital Market under the ticker symbols BRLS (Common Shares) and BRLSW (Warrants). Oxus ceased being a shell company upon closing.

Key Financial Metrics and Capital Structure

Transaction Consideration:

• Aggregate Consideration: $133,000,000 (calculated as $150,000,000 enterprise value less $17,000,000 Closing Net Indebtedness).
• Share Issuance: 13,300,000 New Borealis Common Shares issued to former Borealis shareholders.
• Exchange Ratio: 0.0661 New Borealis Common Shares for each pre-transaction Borealis Common Share.

• Total Outstanding Shares: 21,378,890 New Borealis Common Shares.
• Warrants Outstanding: 9,300,000 New Borealis Warrants.
• Convertible Notes Conversion: $30,000,000 in New Investor Convertible Notes (from Belphar Ltd., Saule Algaziyeva, Aman Murat Baikadamuly, and GSS Overseas LTD) converted into 4,163,510 New Borealis Common Shares.

• Closing Net Indebtedness: $17,000,000.
• Sponsor Note: A Third Amended and Restated Promissory Note with the Sponsor for up to $6,000,000 was executed, with maturity extended to February 7, 2025.
• Deferred Fees: A majority of Closing Transaction Fees were deferred to the first anniversary of the Closing Date.

The filing incorporates by reference audited financial statements for Borealis for years ended Dec 31, 2021 and 2022, and unaudited statements for the nine months ended Sept 30, 2023. Specific revenue, profit, or cash flow figures for these periods are not detailed in the text of this 8-K but are referenced in the Proxy Statement/Prospectus.

Material Changes vs. Prior Period

• Corporate Structure: Transition from a Cayman Islands exempted company (Oxus) to an Ontario corporation (New Borealis) via domestication and amalgamation.
• Ownership Concentration: Significant concentration of ownership among founders and key investors. Directors and executive officers as a group beneficially own approximately 49.87% of outstanding shares.
• Accounting Firm Change: New Borealis appointed Berkowitz Pollack Brant (BPB) as its independent auditor, dismissing Marcum LLP (Oxus's former auditor). Marcum's prior report included an explanatory paragraph regarding substantial doubt about Oxus's ability to continue as a going concern.
• Internal Controls: Oxus previously disclosed material weaknesses in internal controls over financial reporting as of September 30, 2023, related to accounting for complex financial instruments and prepaid expenses.

Guidance, Outlook, Risks, and Unusual Items

Management Commentary & Outlook:

Management expects to execute its business plan to maintain competitive position and customer satisfaction. The company faces risks associated with rapid growth, including the need for adequate operational and financial resources.

• Operating History: Limited operating history makes evaluation of business prospects difficult.
• Customer Concentration: A significant portion of revenue is concentrated with a limited number of customers.
• Supply Chain & Climate: Dependence on suppliers and potential adverse effects of climate conditions on the business.
• Cost Volatility: Potential volatility in costs for ingredients and packaging.
• Public Company Costs: Significant increased costs and compliance requirements associated with operating as a public company.

• Lock-Up Agreements: 50% of shares held by directors, officers, and 5%+ holders are locked up for 12 months or until the stock price exceeds $12.00 for 20 trading days within a 30-day period.
• Board Nomination: Belphar Ltd. has the right to designate one board nominee as long as it holds at least 8% of outstanding shares.

Investor Verification Checklist

• Financial Statements: Review the Proxy Statement/Prospectus (pages F-4 and F-19) for specific revenue, net income, and cash flow data for Borealis, as this 8-K only references them.
• Debt Obligations: Verify the terms of the $6,000,000 Sponsor Note and the $30,000,000 converted investor notes to understand future cash flow obligations.
• Internal Controls: Assess the remediation plan for the material weaknesses in internal controls previously identified by Oxus's former auditor.
• Ownership Structure: Confirm the impact of the 49.87% ownership by insiders and the lock-up provisions on share liquidity.
• Customer Concentration: Investigate the specific identity and contract terms of the "limited number of customers" driving a significant portion of revenue.