10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to             

Borealis Foods Inc.

(Exact name of registrant as specified in its charter)

Ontario	001-40778	98-1638988
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification Number)

1540 Cornwall Rd. #104 Oakville, Ontario	L6J 7W5
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (905) 278-2200

Not Applicable

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class:	Trading Symbol:	Name of Each Exchange on Which Registered:
Common Shares	BRLS	Nasdaq Capital Market
Warrants	BRLSW	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 17, 2024, 21,378,852 Common Shares of the registrant, no par value, were issued and outstanding.

Table of Contents

		PAGE
PART I. FINANCIAL INFORMATION		1
Item 1.	Condensed Consolidated Financial Statements (unaudited)	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	30
PART II. OTHER INFORMATION		31
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	39
SIGNATURES		40

i

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) filed by Borealis Foods Inc. contains statements that are forward-looking and as such are not historical facts. This includes, without limitation, statements regarding the financial position, business strategy and the plans and objectives of management for future operations. These statements constitute projections, forecasts, and forward-looking statements, and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this Quarterly Report, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strive,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. When we discuss our strategies or plans, we are making projections, forecasts, or forward-looking statements. Such statements are based on the beliefs of, as well as assumptions made by and information currently available to, Borealis’ management.

Forward-looking statements may include, for example, statements about:

● our limited operating history makes it difficult to evaluate our business and prospects;

● we may be unable to execute our business plan or maintain our competitive position and high-level customer satisfaction if we fail to maintain adequate operational and financial resources, particularly if we continue to grow rapidly;

● a significant portion of our revenue is concentrated with a limited number of customers;

● adverse climate conditions may have an adverse effect on our business. We may take various actions to mitigate our business risks associated with climate change, which may require us to incur substantial costs and may not be successful, due to, among other things, the uncertainty associated with the longer-term projections associated with managing climate risks;

● our dependence on suppliers may materially adversely affect our operating results and financial position;

● manufacturing and production forecasts are based on multiple assumptions. We must adequately estimate our manufacturing capacity and inventory supply. If we overestimate our demand and overbuild our capacity or inventory, we may have significantly underutilized assets. Underutilization of our manufacturing facilities can adversely affect our gross margin and other operating results;

● we may experience volatility in costs for ingredients and packaging due to conditions that are difficult to predict;

● our future success will depend, in part, on our ability to maintain our technological leadership, enhance our current food products, develop new food products that meet changing customer needs and preferences, advertise and market our food products, and influence and respond to emerging industry standards and other technological changes on a timely and cost-effective basis;

● our business depends on our use of proprietary technology relying heavily on laws to protect such technology;

● our management team has limited experience managing a public company;

● we will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives; and

● other factors detailed in Part II. Item 1A. “Risk Factors” in this Quarterly Report.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report.

These forward-looking statements are based on information available as of the date of this Quarterly Report and current expectations, forecasts, and assumptions, and involve a number of judgments, risks, and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws. We intend the forward-looking statements contained in this Quarterly Report to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the “Securities Act”, and Section 21E of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”.

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements.

ii

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Borealis Foods, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

	March 31, 2024			December 31,
	(Unaudited)			2023
Assets
Current assets:
Cash	$	8,211,050		$	7,615,630
Accounts receivable, net of allowance for credit losses of $530,433 and $224,433 as of March 31, 2024 and December 31, 2023, respectively		4,770,512			1,775,756
Inventories, net		6,803,482			6,945,028
Prepaid expenses		2,397,475			845,878
Total current assets		22,182,519			17,182,292
Property, plant and equipment, net		45,965,322			46,408,540
Right-of-use asset, net		98,083			108,469
Goodwill		1,917,356			1,917,356
Other non-current assets		169,685			169,685
Total assets	$	70,332,965		$	65,786,342
Liabilities and Stockholders’ equity (deficit)
Current liabilities:
Accounts payable and accrued expenses	$	7,240,197		$	10,887,730
Due to related parties		7,825,790			7,825,790
Convertible notes payable, current portion		-			47,300,000
Notes payable, current portion, net of unamortized loan costs		13,118,707			681,121
Operating lease liability, current portion		53,338			43,794
Finance leases payable, current portion		575,426			565,353
Total current liabilities		28,813,458			67,303,788
Line of credit		5,000,000			-
Convertible note payable		3,000,000			3,000,000
Notes payable, net of current portion		14,184,293			13,509,189
Operating lease liability, net of current portion		43,794			71,119
Finance leases payable, net of current portion		1,525,497			1,683,308
Deferred tax liability		1,566,233			1,566,233
Total liabilities		54,133,275			87,133,637
Stockholders’ equity (deficit):
Common stock		--			--
Additional paid-in capital		90,096,688			44,118,081
Accumulated deficit		(73,896,998	)		(65,465,376	)
Total stockholders’ equity (deficit)		16,199,690			(21,347,295	)
Total liabilities and stockholders’ equity (deficit)	$	70,332,965		$	65,786,342

See accompanying notes.

1

Borealis Foods, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

	Three Months Ended March 31,
	2024			2023
Gross Revenues	$	8,484,021		$	8,778,540
Discounts and allowances		(588,588	)		(423,767	)
Revenues, net		7,895,433			8,354,773
Cost of goods sold:
Raw materials		4,770,469			5,658,101
Labor and overhead		1,877,803			2,079,203
Depreciation		1,004,588			961,956
Total Cost of goods sold		7,652,860			8,699,260
Gross profit (loss)		242,573			(344,487	)
Selling, general and administrative expenses		7,215,588			4,219,631
Loss from operations		(6,973,015	)		(4,564,118	)
Other income (expense):
South Carolina grant revenue		--			158,995
Interest expense, net		(1,458,607	)		(1,530,581	)
Total other income (expense)		(1,458,607	)		(1,371,586	)
Net loss before income taxes		(8,431,622	)		(5,935,704	)
Income tax benefit		--			124
Net loss	$	(8,431,622	)	$	(5,935,580	)
Earnings per share from net loss
Basic	$	(0.49	)	$	(0.55	)
Diluted	$	(0.49	)	$	(0.55	)
Weighted average shares outstanding
Basic		17,079,576			10,731,583
Diluted		17,079,576			10,731,583

See accompanying notes.

2

Borealis Foods, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (Unaudited)

Three Months Ended March 31, 2024 and 2023

	Class A Common Stock					Class B Common Stock					Class C Common Stock					Class D Common Stock				Additional
	Number of Shares			Common Stock		Number of Shares			Common Stock		Number of Shares			Common Stock		Number of Shares		Common Stock		Paid-In Capital			Accumulated Deficit			Total
Balance at January 1, 2023		100,000,000			--		56,008,749			--		6,345,000			--		--		--		42,625,786			(37,986,129	)		4,639,657
Expense related to stock options (Note 8)		--			--		--			--		--			--		--		--		193,554			--			193,554
Net loss		--			--		--			--		--			--		--		--		--			(5,935,580	)		(5,935,580	)
Balance at March 31, 2023		100,000,000			--		56,008,749			--		6,345,000			--		--		--		42,819,340			(43,921,709	)		(1,102,369	)
Balance at January 1, 2024		100,000,000			--		56,008,749			--		6,345,000			--		--		--		44,118,081			(65,465,376	)		(21,347,295	)
Expense related to stock options (Note 8)		--			--		--			--		--			--		--		--		1,273,053			--			1,273,053
Convertible debt converted to equity from reverse recapitalization		--			--		--			--		--			--		--		--		54,991,472			--			54,991,472
Assumption of debt from reverse recapitalization		--			--		--			--		--			--		--		--		(10,285,918	)		--			(10,285,918	)
Conversion to Newco shares from reverse recapitalization		(78,621,110	)		--		(56,008,749	)		--		(6,345,000	)		--		--		--		--			--			--
Net loss		--			--		--			--		--			--		--		--		--			(8,431,622	)		(8,431,622	)
Balance at March 31, 2024		21,378,890		$	--		--		$	--		--		$	--		--	$	--	$	90,096,688		$	(73,896,998	)	$	16,199,690

See accompanying notes.

3

Borealis Foods, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

	Three Months Ended March 31,
	2024			2023
Cash flows from operating activities
Net loss	$	(8,431,622	)	$	(5,935,580	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash compensation expense related to stock options		1,273,053			193,554
Depreciation and amortization		994,202			961,956
Amortization of loan costs		77,316			--
Provision for credit losses		306,000			--
Provision for inventory reserve		42,449			--
Changes in operating assets and liabilities:
Accounts receivable		(3,300,756	)		(450,618	)
Inventories		99,097			(726,369	)
Prepaid expenses and other		(1,551,597	)		251,260
Operating lease		(7,395	)		--
Accounts payable and accrued expenses		3,729,820			(208,807	)
Net cash used in operating activities		(6,769,433	)		(5,914,604	)
Cash flows from investing activities
Proceeds from reverse capitalization		63,575			--
Purchases of property, plant and equipment, net		(550,984	)		(922,041	)
Net cash used in investing activities		(487,409	)		(922,041	)
Cash flows from financing activities
Net payments to related parties		--			(500,000	)
Proceeds from convertible notes payable		3,000,000			15,000,000
Payments on finance leases payable		(147,738	)		(128,708	)
Borrowings on line of credit		5,000,000			--
Net cash provided by financing activities		7,852,262			14,371,292
Net change in cash		595,420			7,534,647
Cash, beginning of period		7,615,630			5,146,616
Cash, end of period	$	8,211,050		$	12,681,263
Supplemental cash flow data
Cash paid during the period for:
Interest	$	651,208		$	623,447
Non-cash investing and financing activities
Conversion of notes payable into Class A shares (Note 4)		(54,991,472	)		-
Note payable supplier finance (Note 4)		10,349,494			-

See accompanying notes.

4

Borealis Foods, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

1. Description of Business and Summary of Significant Accounting Policies

Overview

These unaudited condensed consolidated financial statements include the financial statements of Borealis Foods, Inc. (“Borealis”), and its subsidiaries: Palmetto Gourmet Foods Inc. (“PGF”), Palmetto Gourmet Foods Real Estate I, Inc. (“PGF RE I”), and Palmetto Gourmet Foods Real Estate II, Inc. (“PGF RE II”) (collectively the “Company”).

Borealis is a food technology company that has developed a high-quality, affordable, sustainable, and nutritious range of plant-based, ready-to-eat meals, which are sold in the U.S., Canada, and Europe. Borealis has a mission to address global food security challenges by developing highly nutritious and functional food products that are both affordable and sustainable. Borealis’ focus on affordability and sustainability reflects its commitment to making a positive impact on both human life and the planet.

Borealis, a Canadian corporation, is a food technology integrator that focuses on the development and commercialization of functional foods.

PGF is an early growth stage food manufacturing company and has spent significant time and resources developing its recipes and fabricating production equipment to meet its product specifications. PGF is the first American producer of sustainable, nutritious, and affordable ramen noodles.

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

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) 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

5

Borealis Foods, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

1. Description of Business and Summary of Significant Accounting Policies (continued)

Reverse Recapitalization Transaction (continued)

Corporations Act (Ontario)), with Borealis surviving the Borealis Amalgamation. Borealis will continue under the name “Borealis Foods Inc.”

Accounting Impact of the Reverse Recapitalization

The Reverse Recapitalization was accounted for as a reverse recapitalization. Oxus Acquisition Corp. 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 acquiror 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 accounted for as a reduction in Additional Paid-In Capital.

Going Concern

The unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company suffered recurring losses from operations through March 31, 2024 that raise substantial doubt about its ability to continue as a going concern.

The Company was in a net loss position and had negative cash flows from operations for the periods ended March 31, 2024 and 2023.

The Company expects lower operating costs for the remainder of 2024 as the Company incurred approximately $1,506,000 of transaction expenses, and $1,273,000 of employee stock compensation expenses related to the Reverse Recapitalization.

As a result, substantial doubt continues to exist about the ability of the Company to continue as a going concern within one year from May 20, 2024, the date that the condensed consolidated financial statements were available to be issued.

6

Borealis Foods, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

1. Description of Business and Summary of Significant Accounting Policies (continued)

Basis of Presentation

The accompanying unaudited condensed 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 US Dollar.

We have condensed certain categories of information in our consolidated financial statements to enhance the readability and understanding of those statements by making them more succinct. As a result, certain footnote disclosures we normally include in our annual consolidated financial statements have been omitted but remain prepared in accordance with US GAAP and the rules and regulations of the Securities and Exchange Commission. In management’s opinion, we have made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present our unaudited condensed consolidated balance sheet and unaudited condensed consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows. Our interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2023 contained in Form 8-K/A filed by Borealis April 15, 2024. Certain prior period amounts have been reclassified to conform to current period presentation.

Estimates

The preparation of the unaudited condensed 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 unaudited condensed 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 were no cash equivalents as of March 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 or net realizable value. The cost of finished goods is measured at weighted average cost.

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.

7

Borealis Foods, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

1. Description of Business and Summary of Significant Accounting Policies (continued)

Prepaid Expenses

Prepaid expenses include approximately $2,397,000 and $846,000 composed primarily of prepaid insurance, deposits on inventory purchases and property, plant and equipment purchases as of March 31, 2024 and December 31, 2023, respectively.

Property, Plant and Equipment, net

Property, plant and equipment are stated at cost. For financial statement purposes, depreciation is calculated using the straight-line method over the estimated useful lives of the assets.

Buildings and improvements	10-30 years
Furniture, fixtures and equipment	3-12 years

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.

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 three-month period ended March 31, 2024 or for the year ended December 31, 2023.

Amounts Due to Related Parties

Amounts due to related parties (Company stockholders and entities controlled by Company stockholders) at March 31, 2024 and December 31, 2023 totaling $7,325,790, respectively, are due on demand and bear interest at 10% annually. In addition, a note payable to a stockholder totaled $500,000 at March 31, 2024 and December 31, 2023, respectively, bearing interest at 10% annually due December 31, 2024.

8

Borealis Foods, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

1. Description of Business and Summary of Significant Accounting Policies (continued)

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 for the three months ended March 31, 2024 and 2023 were approximately $8,484,000 and $8,779,000, respectively.

Total payment discounts and promotions were approximately $589,000 and $424,000 resulting in net revenues of approximately $7,895,000 and $8,355,000 for the three month periods ended March 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.

9

Borealis Foods, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

1. Description of Business and Summary of Significant Accounting Policies (continued)

Revenue and Cost Recognition and Accounts Receivable (continued)

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 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 three-month periods ended March 31, 2024 and 2023, totaling approximately $482,000 and $780,000, respectively, due to PGF adding production capabilities during both periods. These costs are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations as it was 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 three-month periods ended March 31, 2024 and 2023 were approximately $1,526,000 and $39,000, respectively.

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 their 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. Prepayments made under the agreement are included in prepaid expenses. No sales subject to the royalty agreement were made for the three months ended March 31, 2024. 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.

10

Borealis Foods, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

1. Description of Business and Summary of Significant Accounting Policies (continued)

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 three months ended March 31, 2024 and 2023 were approximately $37,000 and $200,000, respectively, and are included in selling, general, and administrative expenses in the accompanying condensed consolidated statement 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 three month periods ended March 31, 2024 and 2023 were approximately $759,000 and $199,000, respectively, and are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

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 incurred transaction costs of approximately $1,506,000 and $1,455,000 for the three months ended March 31, 2024 and 2023 respectively. Transaction costs have been expensed as incurred and are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

11

Borealis Foods, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

1. Description of Business and Summary of Significant Accounting Policies (continued)

Concentration of Risk

The Company maintains cash balances at financial institutions in excess of federally insured limits as of March 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 2% 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 58% and sales to three customers accounted for approximately 73% of net revenues for the three month periods ended March 31, 2024 and 2023, respectively. Accounts receivable from two customers amounted to approximately 74% and 70% of total accounts receivable as of March 31, 2024 and 2023, respectively. Substantially all of the Company’s sales for the three month periods ended March 31, 2024 and 2023 occurred in the United States and Canada.

Purchases from 10 vendors accounted for approximately 57% and 61% of purchases during the three month periods ended March 31, 2024 and 2023, respectively. Accounts payable to these vendors totaled approximately $1,880,000 and $1,802,000 as of March 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.

12

Borealis Foods, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

1. Description of Business and Summary of Significant Accounting Policies (continued)

Fair Value Measurements (continued)

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 asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

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 cash, 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, including due to related parties, 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 March 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 unaudited condensed consolidated financial statements and current estimates of fair value may differ significantly from the amounts presented herein.

13

Borealis Foods, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

1. Description of Business and Summary of Significant Accounting Policies (continued)

Stock Based Compensation

The Company accounts for its stock-compensation arrangements at fair value in accordance with ASC 718 – Compensation – Stock Compensation. Compensation cost relating to share-based payment transactions is recognized in the Company’s condensed 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 time 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 quarterly period end date while the warrants are outstanding. It was determined with 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.

Recent Accounting Pronouncements

Management does not expect the adoption of recently issued accounting standards to have a significant impact on the Company’s reported financial position, results of operations, or cash flows.

14

Borealis Foods, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

2. Inventories, net

Inventories were as follows:

	March 31, 2024			December 31, 2023
Raw materials	$	5,263,143		$	5,190,811
Finished goods		1,771,421			1,942,850
Reserve for obsolete inventory		(231,082	)		(188,633	)
	$	6,803,482		$	6,945,028

3. Property, Plant and Equipment, net

Property, plant and equipment were as follows:

	March 31, 2024			December 31, 2023
Building and improvements	$	10,108,916		$	10,108,917
Furniture, fixtures and equipment		42,595,867			42,594,605
Construction in progress		5,627,827			5,078,103
		58,332,610			57,781,625
Less: accumulated depreciation		(12,367,288	)		(11,373,085	)
	$	45,965,322		$	46,408,540

Depreciation expense recorded in the three month periods ended March 31, 2024 and 2023 was approximately $994,000 and $962,000, respectively, which is included as a component of cost of goods sold.

4. Debt

In 2022, the Company issued $20,000,000 of convertible notes payable that, after an extension was negotiated, mature in February 2024 (unless converted) and bear 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 may be converted, at the option of the holder, into common shares of the Company. The number of shares of common stock received in the conversion will equal the quotient of (i) the outstanding principal and interest as of the date immediately before the completion of the qualified financing event, divided by (ii) an amount equal to the “valuation cap” divided by the “fully diluted basis” (terms as defined in the agreements) and discounted by five (5%) percent. The notes and accrued interest were converted into 2,189,977 shares of common stock with the consummation of the Reverse Recapitalization with Oxus.

15

Borealis Foods, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

4. Debt (continued)

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 bear 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 may be converted, at the option of the holder, into the same equity as issued upon the Company’s issuance of preferred or common stock of at least $10,000,000 (“qualified financing event”), either as a single round or a lead round, at 80% of the per share price paid during the qualified financing event. The notes and accrued interest were converted into 40,544 shares of common stock 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 matures in 2024 (unless converted) and bear 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 may be converted, at the option of the holder, into common shares of the Company. The number of shares of common stock received in the conversion will equal the quotient of (i) the outstanding principal and interest as of the date immediately before the completion of the qualified financing event, divided by (ii) an amount equal to the “valuation cap” divided by the “fully diluted basis” (terms as defined in the agreements) and discounted by five (5%) percent. The notes and accrued interest were converted into 3,787,585 shares of common stock with the consummation of the Reverse Recapitalization with Oxus.

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 stock of at least $10,000,000 (“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 matures in 2024 (unless converted) and bears interest at 10% annually. Accrued interest is payable upon maturity, or converted into equity. The convertible note may be converted into securities, at the option of the holder, based upon a formula considering the outstanding principal and interest and the Company’s value, including a valuation cap. The note and accrued interest was converted into 375,925 shares of common stock 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 the existing line of credit. In March 2024, the company entered into an amendment to extend the maturity date of the term facility to March 2028. Under the amendment, principal only payments of $83,000 are due monthly beginning in March 2025 with a lump sum payment of $12,167,000 due at maturity. Interest accrues at the prime rate plus an applicable margin of 4.75% per annum and is payable monthly.

16

Borealis Foods, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

4. Debt (continued)

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

Amortization expense of approximately $77,000 was recorded on the fees for the three month period ended March 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 March 31, 2024 and December 31 2023, the line of credit had $5,000,000 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 A – Incurred by Borealis. The related expenses were recognized as incurred by Borealis and the trade payable was subsequently reclassified to notes payable. Note A was issued for $2,138,838. The note matures in February 2025, and bears interest at 10% per annum.

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

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

Note D – Incurred by Oxus. The related expenses were recognized by Oxus and resulted in a reduction of contributed equity at the Reverse Recapitalization. Note D was issued for $7,601,661. The note matures in February 2025, and is non-interest bearing.

Debt balances outstanding as of March 31, 2024 are due as follows: $13,868,000 in 2025; $9,000,000 in 2026; $1,000,000 in 2027; and $12,167,000 in 2028.

17

Borealis Foods, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

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%.

The total income tax provision (benefit) expense recorded for the three month periods ended March 31, 2024 and 2023 was $0 and ($100), respectively, on consolidated pre-tax book loss of approximately $8,432,000 and $5,936,000 in the three-month periods ended March 31, 2024 and 2023, respectively.

The Company’s tax provision is based on a projected effective rate based on annualized amounts applied to actual income to date. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of capital loss and net operating loss (“NOL”) carryforwards is dependent upon the generation of future capital gains and taxable income in periods prior to their expiration. The Company currently provides a valuation allowance against the full amount of the NOLs since the Company is uncertain as to the realization of the full-amount of benefits in the future. The Company will continue to assess the need for, and the amount of, the valuation allowance at each reporting period.

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 condensed consolidated financial statements or related disclosures. As a result, at March 31, 2024, the Company did not have a liability for unrecognized tax benefits, interest or penalties under United States or Canadian tax law. The Company paid no penalties during the three-month period ending March 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.

18

Borealis Foods, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

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. Warrants

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

Description	Issue Date	Classification	Exercise Price		Expiration Date	Outstanding Shares		Exercisable Shares
Private Placement Warrants	9/13/2021	Equity	$	11.50	2/7/2029		9,300,000		9,300,000
Public Warrants	9/13/2021	Equity	$	11.50	2/7/2029		17,250,000		17,250,000
							26,550,000		26,550,000

Following the closing, New 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 New Borealis 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 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 be transferrable, assignable or salable until 30 days after the completion of the Reverse Recapitalization.

8. 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 stock. 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 three-month period ended March 31, 2024, the Company granted options to purchase 333,574 shares of the Company’s common stock 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:

Risk-free interest rate	3.81%
Expected term (years)	5 -10
Expected volatility	80.00%
Dividend yield	0.00%

19

Borealis Foods, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

8. Stock Option Plan (continued)

For the three-month periods ended March 31, 2024 and 2023, the Company recorded approximately $1,273,000 and $194,000, 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.

Stock option activity for the three-month periods ended March 31, 2024 and 2023 is summarized as follows:

	Shares			Weighted Average Exercise Price		Weighted Remaining Contractual Life (Years)
Options outstanding at December 31, 2022		3,468,760			0.0001		6.65
Granted		227,666			0.0001		6.65
Exercised		--			--		--
Expired or forfeited		--			--		--
Options outstanding at March 31, 2023		3,696,426			0.0001		--
Options outstanding at December 31, 2023		3,666,426			0.0001		8.10
Granted		333,574			0.0001		8.10
Exercised		(4,000,000	)		0.0001		--
Expired or forfeited		--			--		--
Options outstanding at March 31, 2024		--			--		--

9. Earnings per share

Basic earnings or loss per share is based on the weighted average of 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.

20

Borealis Foods, Inc. and Subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

9. Earnings per share (continued)

	Three Months Ended March 31,
	2024			2023
Basic earnings (loss) per share calculation Net income (loss) available to common stockholders	$	(8,431,622	)	$	(5,935,580	)
Weighted average common shares outstanding (basic)		17,079,576			10,731,583
Basic earnings (loss) per share from net income	$	(0.49	)	$	(0.55	)
Diluted earnings (loss) per share calculation Net income (loss) available to common stockholders	$	(8,431,622	)	$	(5,935,580	)
Weighted average common shares outstanding (basic)		17,079,576			10,731,583
Warrants		26,550,000
Weighted average common shares outstanding (diluted)		17,079,576			10,731,583
Diluted earnings (loss) per share from net income*	$	(0.49	)	$	(0.55	)

* 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.

10. Subsequent Events

The Company evaluated events and transactions after March 31, 2024 through May 20, 2024, the date the unaudited condensed consolidated financial statements were available to be issued, for subsequent events requiring disclosure in these condensed consolidated financial statements. The Company did not identify any subsequent events that required disclosure.

21

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

Overview

Borealis is a food technology company that has developed a high-quality, affordable, sustainable, and nutritious range of plant-based, ready-to-eat meals, which are sold in the U.S., Canada, and Europe. Borealis has a mission to address global food security challenges by developing highly nutritious and functional food products that are both affordable and sustainable. Borealis’ focus on affordability and sustainability reflects its commitment to making a positive impact on both human life and the planet. With its unique approach, Borealis has a significant opportunity to create a meaningful and profound impact on the world.

Borealis has developed and launched mass-produced plant-based ramen meals with 20 grams of complete protein per serving. This achievement in the plant-based protein industry underscores Borealis’ commitment to developing cutting-edge solutions to tackle global food challenges.

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) 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 will continue under the name “Borealis Foods Inc.”

22

Accounting Impact of the Reverse Recapitalization

The Reverse Recapitalization transaction was accounted for as a reverse recapitalization. Oxus Acquisition Corp. 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 acquiror 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’ condensed consolidated financial statements were prepared in accordance with U.S. GAAP. See Note 1 to our condensed consolidated financial statements for a full description of our basis of presentation.

Results of Operations

Comparison of the Three Months Ended March 31, 2024 and 2023

The following sets forth a summary of our results of operations for the presented months (in $ thousands):

	For the Three Months Ended March 31,
	2024 (Unaudited)						2023 (Unaudited)						2024 vs. 2023 Variance
	$			% of Revenues, net			$			% of Revenues, net			$			% of Prior Year
Revenues		8,484						8,779						(295	)
Sales Allowances		589			(7	)%		424			(5	)%		(165	)		(2	)%
Revenues, net		7,895						8,355						(460	)
Cost of Goods Sold		7,652			97	%		8,699			104	%		(1,047	)		(7	)%
Gross profit (loss)		243			3	%		(344	)		(4	)%		587			7	%
Total Sales & Marketing		2,418			31	%		724			9	%		1,694			22	%
Total Training		482			6	%		980			12	%		(498	)		(6	)%
Total General & Administrative Expenses		4,316			55	%		2,516			30	%		1,800			25	%
		7,216			91	%		4,220			51	%		2,996			40	%
Loss from Operations		(6,973	)		(88	)%		(4,564	)		(55	)%		(2,409	)		(33	)%
Total other income (expense)		(1,459	)		(18	)%		(1,372	)		(16	)%		(87	)		(2	)%
Loss before income taxes		(8,432	)		(107	)%		(5,936	)		(71	)%		(2,496	)		(36	)%
Income Tax Expense		0			0	%		0			0	%		0			0	%
Net (loss)	$	(8,432	)		(107	)%	$	(5,936	)		(71	)%	$	(2,496	)		(36	)%

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

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

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

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

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

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

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

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Depreciation Expense. Depreciation expense increased by less than $0.01 million in the three months ended March 31, 2024, although as a percentage of sales, it decreased by less than 1%, compared to the three months ended March 31, 2023. The increase in depreciation expense related to the in-service date of the two new production lines implemented at the end of the first quarter 2023.

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

Liquidity and Capital Resources

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

Following the initial public offering and the private placement, a total of $175.95 million was placed in the Trust Account (at $10.20 per Unit). Oxus incurred $4.15 million in transaction costs, including $3.45 million of underwriting fees and $0.70 million of other offering costs in connection with the initial public offering and the private placement.

On August 10, 2023, Legacy Borealis entered into a $25,000,000 financing agreement with a maturity date in July 2026. Under this agreement, Borealis (as successor-in-interest to Legacy Borealis) has a $15,000,000 term facility which was used to pay off amounts outstanding under, and to terminate, a then existing line of credit. In addition to the term facility, Legacy Borealis entered into a $10,000,000 revolving line of credit. The term facility and the revolving line of credit are secured by liens on substantially all of the assets of Borealis and its subsidiaries. Interest is payable under the term facility and the revolving line of credit at the annual rate of Prime + 4.75 % and Prime + 4.5%, respectively. As of March 31, 2024, $15 million principal amount was outstanding under the term facility and $5 million principal amount was outstanding under the revolving line of credit.

In February 2024, Borealis completed its Reverse Recapitalization, resulting in approximately $50.3 million of convertible debt converting into equity. At the completion of the Reverse Recapitalization, Borealis had marketable securities in the Trust Account of $0.6 million. The reduction in Trust Account holdings resulted principally from shareholder redemptions. Borealis expects lower operating expenses in 2024 with the completion of the Reverse Recapitalization.

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

Going Concern

The unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. In connection with Borealis’ assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern”, management has determined that recurring losses and cash used in operations in both 2023 and continuing into 2024 raises substantial doubt about Borealis’ ability to continue as a going concern. See Item 1A “Risk Factors” in this Form 10-Q.

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Cash Flows

The following table sets forth our cash flows for the periods indicated (in thousands):

	Three Months Ended March 31,
	2024			2023
Net cash (used in) provided by:
Operating Activities	$	(6,769	)	$	(5,915	)
Investing Activities		(487	)		(922	)
Financing Activities		7,852			14,371

Cash Flows Used in Operating Activities

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

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

Cash Flows Used in Investing Activities

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

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

Cash Flows Provided by Financing Activities

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

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

Contractual Obligations and Commitments

The following table summarizes our non-cancellable contractual obligations and other commitments as of March 31, 2024, 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		1 – 3  years		4 – 5  years		More than 5 years
Contractual obligations and other commitments(1)	$	53.0M	$	28.7M	$	11.2M	$	13.1M		--

⁽¹⁾ 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.

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Off-Balance Sheet Arrangements

As of March 31, 2024 and December 31, 2023, we did not engage in any off-balance sheet arrangements, including the use of structured finance, special purpose entities, or variable interest entities.

Emerging Growth Company Status

Section 102(b)(1) of 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 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’ 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.

Borealis will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of common stock that is held by non-affiliates equals or exceeds $700 million as of the end of that year’s second fiscal quarter, (ii) the last day of the fiscal year in which Borealis has total annual gross revenue of $1.235 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which Borealis has issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) December 31, 2026, which is the last day of the fiscal year following the fifth anniversary of Oxus’ initial public offering.

Implications of being a Smaller Reporting Company

Additionally, Borealis is a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. Borealis will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of common stock held by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter, or (ii) Borealis’ annual revenues exceeded $100 million during such completed fiscal year and the market value of common stock held by non-affiliates equals or exceeds $700 million as of the end of that year’s second fiscal quarter. To the extent Borealis takes advantage of such reduced disclosure obligations, it may also make comparison of its financial statements with other public companies difficult or impossible.

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.

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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 taxes, (2) interest expense, of $1.5 million, (3) depreciation and amortization, net, of $1.0 million (4) other non-operating items, net, of $0.1 million, (5) Training, of $0.5 million, (6) M&A due diligence costs, of $1.3 million, (7) new product launch of $0.8 million, (8) one-time formulation and product development costs, of $0.5 million all for the three months ended March 31, 2024. “Adjusted EBITDA,” a non-GAAP measure, is defined as net income attributable to us before (1) income taxes, (2) interest expense, of $1.6 million, (3) depreciation and amortization, net, of $1.0 million (4) other non-operating items, net, of $0.1 million, (5) Training, of $0.8 million, (6) M&A due diligence costs, of $1.5 million, (7) new product launch, of $0.2 million, (8) one-time formulation and product development costs, of $0.1 million all for the three months ended March 31, 2023. Management and our Board of Directors use this non-GAAP measure for purposes of evaluating our performance. Furthermore, the Leadership Development and Compensation Committee of our Board of Directors uses such measure to evaluate management’s performance. We, therefore, believe that the use of this non-GAAP measure provides useful information to investors and other stakeholders by allowing them to view our business through the eyes of management and our Board of Directors, facilitating comparisons of results across historical periods and focus on the underlying ongoing operating performance of our business. As noted above, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.

Recent Accounting Pronouncements

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

Item 3. 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.

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Concentration Risk

We extend unsecured credit to our customers in the ordinary course of business. Payment terms are generally net 30 days with discounts amounting to 2%. Accounts receivable are written off when they are determined to be uncollectible based on the financial stability of our customers and existing economic conditions. Sales to two customers accounted for approximately 58% of net revenues during the three months ended March 31, 2024 and three customers accounted for approximately 73% of net revenues during the three months ended March 31, 2023. Accounts receivable from two customers amounted to approximately 74% and 70% of total accounts receivable during the three months ended March 31, 2024 and 2023, respectively. Substantially all of our sales during the three months ended March 31, 2024 and 2023 occurred in the United States and Canada. Purchases from 10 vendors accounted for approximately 57% and 61% of purchases during the three months ended March 31, 2024 and 2023, respectively. Accounts payable to these vendors totaled approximately $1.9 million and $1.8 million as of March 31, 2024 and 2023, respectively.

Foreign Currency Risk

Our customers are primarily located in the United States, Japan, Germany, and Canada; therefore, foreign exchange risk exposures arise from transactions denominated in currencies other than our functional and reporting currency (United States dollars). To date, a majority of our sales have been denominated in United States 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 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, 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, to 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 will capture a larger share of consumers. Monetization of future opportunities created by the above investment will be realized in future quarters.

Utilizing the straight-line method of depreciation expense causes a disproportionate burden upon gross margin due to the current plant operating at less than 20% capacity.

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Item 4. Controls and Procedures.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Evaluation of Disclosure Controls and Procedures

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our condensed consolidated financial statements for external purposes in accordance with US GAAP.

Internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error or overriding of controls. Because of the inherent limitations, only reasonable assurance with respect to financial statement preparation and presentation can be provided and misstatements may not be prevented or detected. Management evaluated the design and effectiveness of the Company’s internal control over financial reporting as of March 31, 2024 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control Integrated Framework 2013. Based on its evaluation, management concluded that our internal control over financial reporting was not effective as of March 31, 2024 due to material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.

Consistent with December 31, 2023, the Company did not effectively design, implement and operate effective process-level control activities related to inventory management and analysis of complex technical accounting matters.

As a result of these deficiencies, material misstatements were identified and corrected in the consolidated financial statements as of and for the year ended December 31, 2023. Because there is a reasonable possibility that material misstatements of the consolidated financial statements will not be prevented or detected on a timely basis, we concluded the deficiencies represent material weaknesses in our internal control over financial reporting and our internal control over financial reporting was not effective as of March 31, 2024.

Our Chief Executive Officer and Chief Financial Officer have taken additional steps to support that the condensed consolidated financial statements as of and for the three-month period ended March 31, 2024 are presented fairly in accordance with US GAAP.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Exchange Act Rule 13a–15(f) and 15d-15(f)) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Remediation Plan

Subsequent to the year ended December 31, 2023, and under the direction of our Chief Executive Officer and Chief Financial Officer, we have been developing a comprehensive plan to remediate the identified material weaknesses. We began implementing certain measures as part of the remediation plan including: (i) development of a detailed remediation plan addressing the material weaknesses related to the control environment, risk assessment and monitoring, (ii) institution of policies and processes to support the functioning of internal controls over financial reporting, (iii) design of a comprehensive risk assessment process, (iv) installation of new ERP system (v) hiring/outsourcing of individuals with appropriate skills and experience.

The material weaknesses being addressed by the above-mentioned remediation plan will not be considered remediated until the applicable controls operate for a sufficient period of time, and management concludes, through testing, that these controls are operating effectively. This has not occurred to date.

Although we have commenced the remediation process and intend to complete it as promptly as possible, we cannot estimate how long it will take to remediate these material weaknesses. In addition, new material weaknesses may be discovered that require additional time and resources to remediate. Until the remediation is complete, we plan to continue to perform additional analyses and other procedures to ensure that our consolidated financial statements are prepared in accordance with US GAAP.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

We are not currently a party to any litigation or claims that, if determined adversely against us, would have a material adverse effect on our business operating results, financial condition, or cash flows. We may, from time to time, be party to litigation and subject to claims in the ordinary course of business. Regardless of the outcome, litigation can have an adverse impact on us because of the defense and settlement costs, diversion of management resources, and other factors.

Item 1A. Risk Factors.

You should consider carefully the risks and uncertainties described below, together with all of the other information contained in this Quarterly Report. If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business or results of operations.

We have a limited operating history which makes it difficult to evaluate our business and prospects.

We have a limited operating history, which makes it difficult to evaluate our business and prospects to forecast our future results. We were founded in 2019. Although we have experienced substantial revenue growth on an annual basis, we have incurred losses since inception. As of March 31, 2024, we had an approximate accumulated deficit of $73.9 million USD. There can be no assurance that revenue growth will continue in the future. In addition, we may experience substantial fluctuations in operating results in the future caused by various factors, including:

● general economic conditions;

● specific economic conditions in the food and agriculture industry;

● the impact of inflation and rising interest rates across the economy, including higher food, grocery, raw materials, transportation, energy, labor and fuel costs;

● increases in the price of raw materials, labor, wages or other inputs that our suppliers use in manufacturing and supplying products, along with logistics, transportation, shipping and other related costs, may lead to higher production and shipping costs for our products. Any increase in the cost of inputs to our production could lead to higher costs for products in retail channels and could negatively impact our operating results and future profitability;

● the introduction of new products by us or our competitors; and

● the mix of products sold and the mix of channels through which those products are sold.

As a strategic response to a changing competitive environment, we may elect from time to time to make, among other things, certain pricing, product, or marketing decisions, and any such decisions could have a material adverse effect on our periodic results of operations, including revenue and profits from quarter to quarter.

The war in Ukraine, and the sanctions in place, could adversely affect global energy and financial markets thus potentially affecting our business and customers.

The outbreak of war in Ukraine has already affected global economic markets, including a dramatic increase in the price of oil and gas, and the uncertain resolution of this conflict could result in protracted and/or severe damage to the global economy. Russia’s military interventions in Ukraine have led to, and may lead to, additional sanctions being levied by the United States, European Union, and other countries against Russia. Russia’s military incursion and the resulting sanctions could adversely affect global energy and financial markets and thus could affect the global markets, our customers’ businesses and potentially our business. At this time, we (i) do not have any direct business or contracts with any Russian or Ukraine entity as a supplier or customer, (ii) do not have any knowledge whether any of our customers or suppliers have any direct business or contracts with any Russian entity, (iii) do not believe that our business segments, products, lines of service, projects or operations are materially impacted by supply chain disruptions resulted from the war in Ukraine, and (iv) have not been materially financially affected by the war in Ukraine. The extent and duration of the military action, sanctions, and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions caused by Russian military action or resulting sanctions may magnify the impact of other risks described in this section.

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We cannot predict the progress or outcome of the situation in Ukraine, as the conflict and governmental reactions are rapidly developing and beyond their control. Prolonged unrest, intensified military activities, or more extensive sanctions impacting the region could have a material adverse effect on the global economy, and such effect could in turn have a material adverse effect on our business, financial condition, results of operations, and prospects.

We do not anticipate any new or heightened risk of potential cyberattacks by state actors or others since Russia’s invasion of Ukraine, and we have not taken any actions to mitigate such potential risks. Our management team will continue to monitor any potential risks that might arise due to the war in Ukraine which are specific to us, including but not limited to risks related to cybersecurity, sanctions, and supply chain, suppliers, or service providers in affected regions.

Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.

Our historical financial statements have been prepared under the assumption that it will continue as a going concern. Our registered public accounting firm has issued a report on our financial statements for the years ended December 31, 2023 and 2022, that includes an explanatory paragraph expressing substantial doubt in our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to obtain additional equity or debt financing. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. However, if adequate funds are not available to us when we need them, we could go into default on our outstanding indebtedness, which would, in turn, permit our creditors to enforce remedies against us and cause us to consider reducing, discontinuing, or selling operations or seeking protection from creditors, and further raise substantial doubt about our ability to continue as a going concern. The doubt regarding our potential ability to continue as a going concern may adversely affect our ability to obtain new financing on reasonable terms or at all. Additionally, if we are unable to continue as a going concern, our shareholders may lose some or all of their investment in Borealis Foods.

We face market competition, and if we are unable to compete effectively with our competitors, our business and operating results could be materially adversely affected.

The food and agriculture business is highly competitive, and faces increased competition as a result of consolidation, channel proliferation, and the growth of online food retailers and new market participants. Currently, the leading providers of food and agriculture products include large food and agriculture companies, as well as a number of smaller companies. Many of these companies possess financial resources significantly greater than those of ours, and accordingly, could initiate and support prolonged price competition to gain market share. In particular, the large food and agriculture companies could significantly undercut our pricing for our products. If significant price competition were to develop, we likely would be forced to lower our prices, possibly for a protracted period, which would have a material adverse effect on our financial results and could threaten our economic viability. In addition, many of these large competitors possess marketing, agricultural and food processing resources greater than those of ours. Smaller competitors, although often faced with financial barriers, typically compete on the basis of their ability to create niche markets by rapidly introducing products of interest to local customers and then expanding. The resulting price pressure and niche loyalties present substantial competitive challenges for us.

A significant portion of our revenue is concentrated with a limited number of customers.

A significant portion of our revenue is concentrated with a limited number of customers. Approximately 58% of our total revenue was derived from two customers during the three months ended March 31, 2024. A disruption in our relationship with any one of these customers could materially adversely affect our business, results of operations, cash flows, and financial position. We could experience fluctuations in our customer base or the mix of revenue by customers as markets and strategies evolve or are affected by changes in the general economy or the food industry among other things. Our customers’ demand for our products may fluctuate due to factors beyond our or any such customer’s control. For example, in 2023, our customer orders were not placed at the volume nor pace that was anticipated due to a number of factors that include, among others, the Ukraine conflict, increased transportation costs, warehouse availability at customer and retailer concerns about a potential shift in retail consumption patterns as the COVID-19 pandemic subsided, all of which negatively impacted our revenue growth. Even a meaningful change in a customers’ inventory strategy could impact the industries demand and growth for any our product. If these customers were to reduce their purchases, we would lose a material amount or most of our current revenue. This would result in lower margins and materially adversely impact our business, results of operations, cash flows, and financial position.

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We may not continue to grow or maintain our active customer base, may not be able to achieve or maintain profitability, and may not be aligned with customer trends and preferences.

There are a number of trends in consumer preferences which have an impact on us and the food industry as a whole. These include, among others, preferences for speed, convenience and ease of food preparation, natural, nutritious, and well-proportioned meals, products that are sustainably sourced and produced and are otherwise environmentally friendly, as well as a recent trend toward meat substitutes. Concerns as to the health impacts and nutritional value of certain foods may increasingly result in food producers being encouraged or required to produce products with reduced levels of salt, sugar, and fat and to eliminate trans-fatty acids and certain other ingredients. Consumer preferences are also shaped by concern over waste reduction and the environmental impact of products. Our success depends on both the continued appeal of our products and, given the varied backgrounds and tastes of our customer base, our ability to offer a sufficient range of products to satisfy a broad spectrum of preferences. Any shift in consumer preferences in the material markets in which we operate could have a material adverse effect on our business. Consumer tastes are also susceptible to change. In addition, the growing presence of alternative retail channels could negatively impact our sales if we fail to adapt. For example, consumers with increasingly busy lifestyles are choosing the online grocery channel as a more convenient and faster way of purchasing their food products, and are also increasingly using the internet for meal ideas. Our competitiveness, therefore, depends on our ability to predict and quickly adapt to consumer preferences and trends, exploiting profitable opportunities for product development without alienating our existing consumer base or focusing excessive resources or attention on unprofitable or short-lived trends. All of these efforts require significant research and development and marketing investments. If we are unable to respond on a timely and appropriate basis to changes in demand or consumer preferences and trends, our sales volumes and margins could be materially adversely affected.

We will need to grow the size of our organization, and we may experience difficulties in managing this growth.

We are currently experiencing rapid growth and expansion. This rapid growth has placed, and is expected to continue to place, a significant strain on our administrative, operational, and financial resources and increased demands on our systems and controls. While we believe that our operating and financial control systems and controls are adequate to address expansion plans for the next 12 months, there can be no assurance that such systems and controls will be adequate to maintain and effectively monitor future growth. Failure to continue to upgrade the operating and financial control systems or unexpected expansion difficulties could adversely affect our business, results of operations, and financial condition. We anticipate that our continued growth will require us to recruit and hire a substantial number of new managerial, agricultural and food processing, and sales and marketing personnel.

If we fail to maintain adequate operational and financial resources, particularly if we continue to grow rapidly, we may be unable to execute our business plan or maintain our competitive position and high-level customer satisfaction.

We must continue to expand in order to maintain our competitive position and continue to meet our customers’ increasing demands for product, variety, quality and availability, and price/performance targets. Our ability to grow depends, to a significant extent, on our ability to expand our food processing operations, which requires significant advance capital expenditures, as well as advance expenditures and commitments for facilities, personnel, and advertising. Timely access to capital markets is essential for us to achieve our business plan. We will need to raise additional capital from equity or debt sources in order to finance our growth and capital expenditures contemplated for future periods. There can be no assurance that we will be able to raise such capital on favorable terms or at all. In the event that we are unable to obtain such additional capital, we may be required to reduce the scope of our presently anticipated expansion. Our inability to achieve projected growth could have a material adverse effect on our results of operations and could adversely impact our ability to compete.

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We run the risk of crop failures largely dependent on factors outside of our control.

Our ability to ensure a continuing supply of ingredients at competitive prices depends on many factors beyond our control, such as the number and size of farms that grow certain crops such as wheat, the vagaries of these farming businesses (including poor harvests impacting the quality of the peas grown), changes in national and world economic conditions, including as a result of COVID-19 or the outbreak of hostilities or war, tariffs and our ability to forecast our ingredient requirements. The high-quality ingredients used in many of our products are vulnerable to adverse weather conditions and natural disasters, such as floods, droughts, frosts, earthquakes, hurricanes, and pestilence. Adverse weather conditions and natural disasters can lower crop yields and reduce crop size and quality, which in turn could reduce the available supply of, or increase the price of, quality ingredients. In addition, we purchase some ingredients and other materials offshore, and the price and availability of such ingredients and materials may be affected by political events or other conditions in these countries or tariffs, trade wars, or the outbreak of hostilities or war. We also compete with other food producers in the procurement of ingredients, and this competition may increase in the future if consumer demand for plant-based protein products increases. If supplies of quality ingredients are reduced or there is greater demand for such ingredients from us and others, we may not be able to obtain sufficient supply that meets our strict quality standards on favorable terms, or at all, which could materially adversely impact our ability to supply products and may materially adversely affect our business, results of operations, and financial condition.

Adverse climate conditions may have an adverse effect on our business. We may take various actions to mitigate our business risks associated with climate change, which may require us to incur substantial costs and may not be successful, due to, among other things, the uncertainty associated with the longer-term projections associated with managing climate risks.

Increasing concentrations of greenhouse gases in the atmosphere have generally been concluded to lead to increased ambient global temperatures, as well as changes in weather patterns and the frequency and severity of extreme weather and natural disasters. Adverse climate conditions, weather patterns, and the impact of such conditions and patterns such as drought, flood, wildfires, and rising ambient temperatures adversely impact product cultivation conditions for farmers and agricultural productivity, including by disrupting ecosystems and severely altering the growing conditions, nutrient levels, soil moisture, and water availability necessary for the growth and cultivation of crops, which would adversely affect the product quality, availability or cost of certain commodities that are necessary for our products, such as flour, paper, and edible oil. Due to climate change, we may also be subjected to decreased availability of water, deteriorated quality of water or less favorable pricing for water, which could adversely impact our manufacturing and distribution operations. These and other changes to the physical environment may adversely impact our operations or those of the suppliers on whom we rely. While we may take various actions to mitigate our business risks associated with climate change, this may require us to incur substantial costs and may not be successful, due to, among other things, the uncertainty associated with managing climate risks. Such climate risks may materially adversely affect our business, results of operations and financial condition.

The spread of contagious diseases, natural disasters, severe weather, actual or threatened hostilities or war, terrorist activity, political unrest, civil strife, and other geopolitical uncertainty may cause global economic disruption, and its impact on our business is uncertain.

The global economy can be negatively impacted by a variety of factors such as the spread or fear of spread of contagious diseases (such as the COVID-19 pandemic, other pandemics, epidemics, or other public health crises) in locations where our products are sold, man-made or natural disasters, severe weather, actual or threatened hostilities or war, terrorist activity, political unrest, civil strife, and other geopolitical uncertainty. Such adverse and uncertain economic conditions may impact distributor, retailer, foodservice, and consumer demand for our products and may lead to material and volatile increases in commodity pricing of raw materials used by us and in other costs incurred by us. For example, in connection with the war in Ukraine, governments in the U.S., U.K. and the EU have each imposed export controls on certain products and financial and economic sanctions on certain industry sectors and parties in Russia. The uncertainty resulting from the military conflict in Europe has given rise and may continue to give rise to increases in costs of goods and services, scarcity of certain ingredients, increased trade barriers or restrictions on global trade. Further escalation of geopolitical tensions could have a broader impact that expands into other markets where we do business, which could materially adversely affect our business and/or our supply chain, business partners or customers in the broader region, including potential destabilizing effects that such conflicts may pose for the European continent or the global oil and natural gas markets. In addition, our ability to manage normal commercial relationships with our suppliers, co-manufacturers, distributors, retailers, foodservice customers, consumers, and creditors may suffer.

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As global economic conditions and commodity pricing of raw materials used by us continue to be volatile or uncertain and recessionary or inflationary pressures exist, trends in consumer discretionary spending also remain unpredictable and subject to changes. We have seen consumers shift purchases to lower-priced or other perceived value offerings during economic downturns as a result of various factors, including job losses, inflation, higher taxes, reduced access to credit, change in federal economic policy and recent international trade disputes. In particular, consumers have reduced the amount of plant-based food products that they purchase where there are conventional animal-based protein offerings, which generally have lower retail prices. In addition, consumers may choose to purchase private label products, rather than branded products, because they are generally less expensive. Distributors, retailers and foodservice customers have become more conservative in response to these conditions and have sought to reduce their inventories. Our results of operations depend upon, among other things, our ability to maintain and increase sales volume with our existing distributors, retailer and foodservice customers, our ability to attract new consumers, the financial condition of our consumers and our ability to provide products that appeal to consumers at the right price. Decreases in demand for our products without a corresponding decrease in costs could put downward pressure on margins and may materially adversely impact our financial results and financial position. Prolonged unfavorable economic conditions or uncertainty would be expected to have an adverse effect on our sales and profitability, which could be material, and may result in consumers making long-lasting changes to their discretionary spending behavior on a more permanent basis.

The loss of key personnel, or failure to attract and retain other highly qualified personnel in the future, could harm our business.

Our success depends to a significant degree upon the continued contributions of our senior operating management, including our co-founders, Reza Soltanzadeh, Chief Executive Officer, and Barthelemy Helg, Non-Executive Chairman of the Board. The loss of the services of Mr. Soltanzadeh or Mr. Helg could have a material adverse effect on our business, results of operations, and financial condition. Our success and future growth also will depend on our ability to attract and retain qualified management, manufacturing, technical and sales and marketing personnel. Competition for such personnel in the industry is intense. There can be no assurance that we will be successful in attracting and retaining such personnel.

Our dependence on suppliers may materially adversely affect our operating results and financial position.

We have no long-term contracts with our suppliers. Although we attempt to maintain generally a minimum of two vendors for each required food ingredient, certain raw materials and products used by us in processing our products are currently acquired or available from only one source. We have from time-to-time experienced significant delays in the receipt of certain of these ingredients. For example, we have a preferred provider that we rely on for our pea protein, which is an ingredient in our ramen products. In the event of a disruption with our preferred provider, we would source our pea protein from one of our other providers. A failure by a supplier to deliver quality ingredients on a timely basis, or the inability to develop alternative sources if and as required, could result in delays which could materially adversely affect our operating results and financial position.

Manufacturing and production forecasts are based on multiple assumptions. We must adequately estimate our manufacturing capacity and inventory supply. If we overestimate our demand and overbuild our capacity or inventory, we may have significantly underutilized assets. Underutilization of our manufacturing facilities can adversely affect our gross margin and other operating results.

We must accurately forecast demand for each of our products and inventory needs in order to ensure we have adequate available manufacturing capacity for each such product and to ensure we are effectively managing our inventory. Our forecasts are based on multiple assumptions which may cause our estimates to be inaccurate and affect our ability to obtain adequate manufacturing capacity and adequate inventory supply in order to meet the demand for our products, which could prevent us from meeting increased customer demand and harm our brand and our business and, in some cases, may result in fines or indemnification obligations we must pay customers or distributors if we are unable to fulfill orders placed by them in a timely manner or at all. If we overestimate our demand and overbuild our capacity or inventory, we may have significantly underutilized assets. Underutilization of our manufacturing facilities can adversely affect our gross margin and other operating results. If demand for our products experiences a prolonged decrease, we may be required to terminate or make penalty-type payments under certain supply chain arrangements, close or idle facilities and write down our long-lived assets or shorten the useful lives of underutilized assets and accelerate depreciation, which would increase expenses.

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If demand does not materialize at the rate forecasted, we may not be able to scale back our manufacturing expenses or overhead costs quickly enough to correspond to the lower than expected demand. Approximately 74% of our revenue was derived from three customers. If those customers reduce their purchases or cancel their contracts, we would lose most of our current revenue. This could result in lower margins and adversely impact our business, results of operations, and financial position. Additionally, if product demand decreases or we fail to forecast demand accurately, our results may be adversely impacted due to higher costs resulting from lower manufacturing utilization, causing higher fixed costs per unit produced. Further, we may be required to recognize excess or obsolete inventory write-off charges, or excess capacity charges, which would have a material negative impact on our results of operations and financial position.

We may experience volatility in costs for ingredients and packaging due to conditions that are difficult to predict.

We purchase large quantities of food ingredients. In addition, we purchase and use significant quantities of paper and film to package our products. Costs of food ingredients and packaging are volatile and can fluctuate due to conditions that are difficult to predict, including global competition for resources, weather conditions, consumer demand, and changes in governmental trade and agricultural programs. Volatility in the prices of ingredients and other supplies we purchase could increase our cost of sales and reduce our profitability. Moreover, we may not be able to implement price increases for our products to cover any increased costs, and any price increases we do implement may result in lower sales volumes. If we are not successful in managing our ingredient and packaging costs, if we are unable to increase our prices to cover increased costs or if such price increases reduce our sales volumes, then such increases in costs may materially adversely affect our business, results of operations and financial condition.

Our future success will depend, in part, on our ability to maintain our technological leadership, enhance our current food products, develop new food products that meet changing customer needs and preferences, advertise and market our food products, and influence and respond to emerging industry standards and other technological changes on a timely and cost-effective basis.

The market for processing our food products is characterized by rapidly changing technology, evolving industry standards, changes in customer needs and preferences and frequent new product introductions. Our future success will depend, in part, on our ability to maintain our technological leadership, enhance our current food products, develop new food products that meet changing customer needs and preferences, advertise and market our food products, and influence and respond to emerging industry standards and other technological changes on a timely and cost-effective basis. There can be no assurance that we will be successful in developing new food products or enhancing our existing food products on a timely basis, or that such new food products or enhancements will achieve market acceptance. In addition, there can be no assurance that food products or technologies developed by others will not render our food products or technology uncompetitive or obsolete.

Our business depends on our use of proprietary technology relying heavily on laws to protect.

Our success and ability to compete is dependent in part upon our technology, although we believe that our success is more dependent upon our development and distribution expertise than our proprietary rights. We rely on a combination of patent, copyright, trademark and trade secret laws, and contractual restrictions to establish and protect our technology. There can be no assurance that the steps taken by us will be adequate to prevent misappropriation of our technology or that our competitors will not independently develop technologies that are substantially equivalent or superior to our technology.

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Inadequate technical and legal intellectual property (IP) protections could prevent us from defending or securing our proprietary technology and IP.

Our commercial success depends in part on our ability to protect our intellectual property and proprietary technologies. We rely on a combination of patent protection, where appropriate and available, copyrights, trade secrets and trademark laws, as well as confidentiality and other contractual restrictions to protect our proprietary technology. However, these legal means afford only limited protection and may not adequately protect our proprietary technology or permit us to gain or keep a competitive advantage. Our intellectual property consists principally of patents, trademarks, and trade secrets.

There can be no assurance about which, if any, patents will issue from these applications, the breadth of any such patents, or whether any issued patents will be found invalid and unenforceable or will be threatened by third parties. Any successful opposition to these patents or any other patents owned by or, if applicable in the future, licensed to us could deprive us of rights necessary for the successful commercialization of products that we may develop. Since patent applications in most countries are confidential for a period of time after filing (in most cases 18 months after the filing of the priority application), we cannot be certain that we were the first to file on the technologies covered in several of the patent applications related to our technologies or products.

Patent law can be highly uncertain and involve complex legal and factual questions for which important principles remain unresolved. In the United States, and in many international jurisdictions, policy regarding the breadth of claims allowed in patents can be inconsistent or unclear. The U.S. Supreme Court and the Court of Appeals for the Federal Circuit have made, and will likely continue to make, changes in how the patent laws of the United States are interpreted. Similarly, international courts and governments have made, and will continue to make, changes in how the patent laws in their respective countries are interpreted. We cannot predict future changes in the interpretation of patent laws by judicial bodies or changes to patent laws that might be enacted into law by legislative bodies.

Any cybersecurity-related attack, significant data breach, or disruption of the information technology systems, infrastructure, network, third-party processors, or platforms on which we rely could damage our reputation and materially adversely affect our business, and financial results.

Our operations rely on information technology systems for the use, storage, and transmission of sensitive and confidential information with respect to our customers, our employees, and other third parties. A malicious cybersecurity-related attack, intrusion, or disruption by either an internal or external source or other breach of the systems on which our platform and products operate, and on which our employees conduct business, could lead to unauthorized access to, use of, loss of, or unauthorized disclosure of sensitive and confidential information, disruption of our services, viruses, worms, spyware, or other malware being served from our platform, networks, or systems; and resulting regulatory enforcement actions, litigation, indemnity obligations, and other possible liabilities, as well as negative publicity, which could damage our reputation, impair sales, and harm our business. Cyberattacks and other malicious internet-based activity continue to increase, and cloud-based platform providers of products and services have been and are expected to continue to be targeted. In addition to traditional computer “hackers,” malicious code (such as viruses and worms), phishing, employee theft, or misuse and denial-of-service attacks, sophisticated nation-state and nation-state supported actors now engage in attacks (including advanced persistent threat intrusions). Cyberattacks may also gain publishing access to our customers’ accounts on our platform, using that access to publish content without authorization. Despite efforts to create security barriers to such threats, it is not feasible, as a practical matter, for us to entirely mitigate these risks. If our security measures are compromised as a result of third-party action, employee, customer, or user error, malfeasance, stolen, or fraudulently obtained log-in credentials or otherwise, our reputation would be damaged, our data, information or intellectual property, or those of our customers may be destroyed, stolen, or otherwise compromised, our business may be harmed and we could incur significant liability. We have not always been in the past and may be unable to in the future to anticipate or prevent techniques used to obtain unauthorized access to or compromise of our systems because they change frequently and are generally not detected until after an incident has occurred. We cannot be certain that we will be able to prevent vulnerabilities in our software or address vulnerabilities that we may become aware of in the future. In the past, we have experienced a cybersecurity-related incident. While it is believed that no information of ours or our customers was compromised as a result of the incident, we cannot be certain that will be the case in the future.

Further, as we rely on third-party cloud infrastructure, we depend in part on third-party security measures to protect against unauthorized access, cyberattacks, and the mishandling of data and information. If these third parties fail to adhere to adequate data security procedures, or in the event of a breach of their networks, our own, and our customers’ data may be improperly accessed, used, or disclosed. Any cybersecurity event, including any vulnerability in our software, cyberattack, intrusion, or disruption or any failure or breach unrelated to our own action or inaction, could result in significant increases in costs, including costs for remediating the effects of such an event; lost revenue due to network downtime, a decrease in customer and user trust; increases in insurance premiums due to cybersecurity incidents; increased exposure to a risk of litigation and possible liability; increased costs to address cybersecurity issues and attempts to prevent future incidents; and harm to our business, or financial results, and our reputation because of any such incident.

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Our existing general liability insurance coverage and coverage for cyber liability or errors or omissions may not continue to be available on acceptable terms or may not be available in sufficient amounts to cover one or more large claims and our insurer may deny coverage with respect to future claims. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, would harm our business. Many governments have enacted laws requiring companies to provide notice of data security incidents involving certain types of personal data.

We are subject to government regulation and industry policy risks that may change and cause us to no longer comply.

Our operations are subject to extensive regulation by the U.S. Food and Drug Administration, the U.S. Department of Agriculture and other national, state, and local authorities. Specifically, we are subject to the Food, Drug and Cosmetic Act and regulations promulgated thereunder by the FDA. This comprehensive regulatory program governs, among other things, the manufacturing, composition and ingredients, packaging, and safety of food. Under this program the FDA regulates manufacturing practices for foods through its current good manufacturing practices (“cGMPs”) regulations and specifies the recipes for certain foods. Our processing facilities and products are subject to periodic inspection by federal, state, and local authorities. We seek to comply with applicable regulations through a combination of employing internal personnel to ensure quality-assurance compliance (for example, assuring that food packages contain only ingredients as specified on the package labeling) and contracting with third-party laboratories that conduct analyses of products for the nutritional-labeling requirements.

Our failure to comply with applicable laws and regulations or maintain permits and licenses relating to our operations could subject us to civil remedies, including fines, injunctions, recalls, or seizures, as well as potential criminal sanctions, which could result in increased operating costs resulting in a material adverse effect on our results of operations and financial condition.

We may be subject to changes in laws or regulations that can change on any given day.

The manufacture and marketing of food products is highly regulated. We are subject to a variety of laws and regulations, which apply to many aspects of our business, including the sourcing of raw materials, manufacturing, packaging, labeling, distribution, advertising, sale, quality, and safety of our products. Laws and regulations are subject to change or to the adoption of new laws and regulations. Since the food industry is rapidly changing due to technological and other developments, there is a material likelihood that the laws and regulations applicable to us and our business will change or be newly adopted, particularly since we expect to be a developer or early adopter of technological and other developments in the food industry.

For example, the FDA and the U.S. Department of Agriculture, other state regulators in the United States, and other similar international regulatory authorities could take action to further impact our ability to use or refer to certain terms to describe or advertise our products. In addition, a food may be deemed misbranded if our labeling is false or misleading in any particular way, and the FDA, CFIA, EU member state authorities or other regulators could interpret the use of a term to describe our plant-based products as false or misleading or likely to create an erroneous impression regarding their composition.

Should regulatory authorities take action with respect to the use of a specific term, such that we are unable to use those terms with respect to our plant-based products, we could be subject to enforcement action or could be required to recall our products marketed using these terms. Thus, we may be required to modify our marketing strategy, and our business, financial condition, and results of operations could be adversely affected.

Changes in or the adoption of laws and regulations could have a material effect on us, our business, results of operations and financial condition.

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We are subject to multinational requirements beyond our control.

A key component of our strategy is our planned expansion into international markets. There can be no assurance as to our ability to obtain the capital we require to finance our expansion into these markets. In addition, there can be no assurance as to our ability to obtain the permits and operating licenses required for us to operate or to hire and train employees or market, sell, and deliver high quality food products in these markets. In addition to the uncertainty as to our ability to expand our international presence, there are certain risks inherent to doing business on an international level, such as unexpected changes in regulatory requirements, tariffs and other trade barriers, difficulties in staffing and managing foreign operations, longer payment cycles, problems in collecting accounts receivable, political instability, fluctuations in currency exchange rates, seasonal reductions in business activity during the summer months in Europe and certain other parts of the world and potentially adverse tax consequences, which could adversely impact the success of, our international operations. There can be no assurance that such factors will not have a material adverse effect on our future international operations and, consequently, on our business, results of operations and financial condition.

Shareholders may experience dilution of their ownership interests if we issue additional capital stock or make investments.

We expect to issue additional capital stock in connection with potential future financings, acquisitions, investments, our stock incentive plans, or otherwise. Such issuances will result in dilution to all other shareholders. We expect to grant equity awards to employees, directors, and consultants under our stock incentive plans. We also may raise capital through equity financings in the future. As part of our business strategy, we may acquire or make investments in complementary companies, products, or technologies and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital stock may cause shareholders to experience significant dilution of their ownership interests and the per share value of our common stock to decline.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Except as previously reported by Borealis in its Current Report on Form 8-K/A filed with the SEC on April 15, 2024, we did not sell any securities during the period covered by this Quarterly Report that were not registered under the Securities Act.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit Number	Description
3.1	Articles of Continuance, dated February 6, 2024.
3.2	By-Laws of Borealis Foods Inc.
3.3	Articles of Amalgamation by Arrangement and Plan of Arrangement, dated February 7, 2024.
3.4	Equity Incentive Plan of Borealis Foods Inc.
31.1	Certification of Principal Executive Officer Pursuant to Rules 13A-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer Pursuant to Rules 13A-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document.
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	BOREALIS FOODS INC.
Date: May 20, 2024
	By:	/s/ Reza Soltanzadeh
		Reza Soltanzadeh
		Chief Executive Officer & Director

Date: May 20, 2024	-and-
	By:	/s/ Stephen Wegrzyn
		Stephen Wegrzyn
		Chief Financial Officer

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EX-3.1

Exhibit 3.1

	Ministry of Public and
	Business Service Delivery
	Ministère des Services au public et
	aux entreprises

Certificate of Continuance	Certificat de maintien
Business Corporations Act	Loi sur les sociétés par actions

OXUS ACQUISITION CORP.

Corporation Name / Dénomination sociale

1000789352

Ontario Corporation Number / Numéro de société de l’Ontario

This is to certify that these articles are effective on La présente vise à attester que ces statuts entreront en vigueur le

February 06, 2024 / 06 février 2024

Director / Directeur

Business Corporations Act / Loi sur les sociétés par actions

The Certificate of Continuance is not complete without the Articles of Continuance		Le certificat de maintien n’est pas complet s’il ne contient pas les statuts de maintien
Certified a true copy of the record of the Ministry of Public and Business Service Delivery.		Copie certifiée conforme du dossier du ministère des Services au public et aux entreprises.
Director/Registrar		Directeur ou registrateur

BCA - Articles of Continuance - OXUS ACQUISITION CORP. - OCN:1000789352 - February 06, 2024

Ministry of Public and Business Service Delivery

Articles of Continuance

Business Corporations Act

1. Corporation Name

OXUS ACQUISITION CORP.

2. Date of Incorporation/Amalgamation

February 03, 2021

3. Name of jurisdiction the corporation is leaving

Cayman Islands

4. The continuance was authorized by home jurisdiction on

January 31, 2024

5. The corporation is continued in Ontario under the name

OXUS ACQUISITION CORP.

6. Registered Office Address

79 Wellington Street West, 3000, Toronto, Ontario, Canada, M5K 1N2

7. Number of Directors

Minimum/Maximum Min 3 / Max 10

The endorsed Articles of Continuance are not complete without the Certificate of Continuance.

Certified a true copy of the record of the Ministry of Public and Business Service Delivery.

,

Director/Registrar, Ministry of Public and Business Service Delivery

Page 1 of 6

BCA - Articles of Continuance - OXUS ACQUISITION CORP. - OCN:1000789352 - February 06, 2024

8. The director(s) is/are:

Full Name	CHRISTOPHE CHARLIER
	79 Wellington Street West, 3000, Toronto, Ontario, Canada, M5K
Address for Service	1N2
Full Name	SHIV VIKRAM KHEMKA
	79 Wellington Street West, 3000, Toronto, Ontario, Canada, M5K
Address for Service	1N2
Full Name	KANAT MYNZHANOV
	79 Wellington Street West, 3000, Toronto, Ontario, Canada, M5K
Address for Service	1N2
Full Name	KENGES RAKISHEV
	79 Wellington Street West, 3000, Toronto, Ontario, Canada, M5K
Address for Service	1N2
Full Name	KARIM ZAHMOUL
	79 Wellington Street West, 3000, Toronto, Ontario, Canada, M5K
Address for Service	1N2

9. Restrictions, if any, on business the corporation may carry on or on powers the corporation may exercise. If none, enter “None”:

None

10. The classes and any maximum number of shares that the corporation is authorized to issue:

The Corporation is authorized to issue First Preferred Shares, issuable in series, to be limited in number to an amount equal to not more than 20% of the number of issued and outstanding Common Shares at the time of issuance of any First Preferred Shares, and an unlimited number of Common Shares.

11. Rights, privileges, restrictions and conditions (if any) attaching to each class of shares and directors’ authority with respect to any class of shares which may be issued in series. If there is only one class of shares, enter “Not Applicable”:

COMMON SHARES

The rights, privileges, restrictions and conditions attaching to the Common Shares shall be as follows:

1. Voting

The endorsed Articles of Continuance are not complete without the Certificate of Continuance.

Certified a true copy of the record of the Ministry of Public and Business Service Delivery.

,

Director/Registrar, Ministry of Public and Business Service Delivery

Page 2 of 6

BCA - Articles of Continuance - OXUS ACQUISITION CORP. - OCN:1000789352 - February 06, 2024

The holders of the Common Shares shall be entitled to receive notice of and to attend any meeting of the shareholders of the Corporation, except meetings at which only holders of a different class or series of shares of the Corporation are entitled to vote, and shall be entitled to one vote for each Common Share.

2. Dividends

Subject to the prior rights and privileges attached to any other class or series of shares of the Corporation, the holders of the Common Shares shall be entitled to receive dividends at such times and in such amounts as the directors of the Corporation may in their discretion from time to time declare.

3. Liquidation

Subject to the prior rights and privileges attached to any other class or series of shares of the Corporation, upon the voluntary or involuntary liquidation, dissolution or winding-up of the Corporation or any other distribution of its assets among its share-holders for the purpose of winding up its affairs (such event referred to herein as a “Distribution”), each holder of Common Shares shall have the right to receive, in cash or other assets, for each Common Share held, from out of (but only to the extent of) the remaining property of the Corporation legally available for distribution to shareholders, its pro rata share of such remain-ing property based on the number of Common Shares held thereby, and shall rank equally with all holders of Common Shares with respect to such Distribution.

FIRST PREFERRED SHARES

The rights, privileges, restrictions and conditions attaching to the First Preferred Shares, as a class, shall be as follows:

1. Issuance in Series

(a)  Subject to the filing of Articles of Amendment in accordance with the Business Corporations Act (Ontario) (the “Act”), the Board of Directors may at any time and from time to time issue the First Preferred Shares in one or more series, each series to consist of such number of shares as may, before the issuance thereof, be determined by the Board of Directors.

(b)  Subject to the filing of Articles of Amendment in accordance with the Act and the provisions, the Board of Directors may from time to time fix, before issuance, the designation, rights, privileges, restrictions and conditions attaching to each series of First Preferred Shares including, without limiting the generality of the foregoing, the amount, if any, specified as being payable prefer-entially to such series on a Distribution; the extent, if any, of further participation on a Distribution; voting rights, if any; and di-vidend rights (including whether such dividends be preferential, or cumulative or non_cumulative), if any.

2. Dividends

The holders of each series of First Preferred Shares shall be entitled, in priority to holders of Common Shares and any other shares of the Corporation ranking junior to the First Preferred Shares from time to time with respect to the payment of di-vidends, to be paid rateably with holders of each other series of First Preferred Shares, the amount of accumulated dividends, if any, specified as being payable preferentially to the holders of such series.

3. Liquidation

In the event of a Distribution, holders of each series of First Preferred Shares shall be entitled, in priority to holders of Common Shares and any other shares of the Corporation ranking junior to the First Preferred Shares from time to time with respect to payment on a Distribution, to be paid rateably with holders of each other series of First Preferred Shares the amount, if any, spe-cified as being payable preferentially to the holders of such series on a Distribution.

12.  The issue, transfer or ownership of shares is/is not restricted and the restrictions (if any) are as follows. If none, enter “None”:

None

The endorsed Articles of Continuance are not complete without the Certificate of Continuance.

Certified a true copy of the record of the Ministry of Public and Business Service Delivery.

,

Director/Registrar, Ministry of Public and Business Service Delivery

Page 3 of 6

BCA - Articles of Continuance - OXUS ACQUISITION CORP. - OCN:1000789352 - February 06, 2024

13. Other provisions

None

14.  The corporation is to be continued under the Business Corporations Act to the same extent as if it had been incorporated under this Act.

15. The corporation has complied with subsection 180(3) of the Business Corporations Act.

The articles have been properly executed by the required person(s).

The endorsed Articles of Continuance are not complete without the Certificate of Continuance.

Certified a true copy of the record of the Ministry of Public and Business Service Delivery.

,

Director/Registrar, Ministry of Public and Business Service Delivery

Page 4 of 6

BCA - Articles of Continuance - OXUS ACQUISITION CORP. - OCN:1000789352 - February 06, 2024

Supporting Document -Constating Document from Governing Jurisdiction

The endorsed Articles of Continuance are not complete without the Certificate of Continuance.

Certified a true copy of the record of the Ministry of Public and Business Service Delivery.

,

Director/Registrar, Ministry of Public and Business Service Delivery

Page 5 of 6

BCA - Articles of Continuance - OXUS ACQUISITION CORP. - OCN:1000789352 - February 06, 2024

Supporting Information - Nuans Report Information

Nuans Report Reference #	122060772
Nuans Report Date	November 13, 2023

The endorsed Articles of Continuance are not complete without the Certificate of Continuance.

Certified a true copy of the record of the Ministry of Public and Business Service Delivery.

,

Director/Registrar, Ministry of Public and Business Service Delivery

Page 6 of 6

EX-3.2

Exhibit 3.2

BOREALIS FOODS INC.

BY-LAW NO. 1

Table of Contents

		Page
Section 1 DEFINITIONS		1
Section 2 REGISTERED OFFICE		2
Section 3 SEAL		3
Section 4 DIRECTORS		3
4.1	Number	3
4.2	Vacancies	3
4.3	Powers	3
4.4	Duties	3
4.5	Qualification	3
4.6	Term of Office	4
4.7	Election	4
4.8	Consent to Election	4
4.9	Removal	4
4.10	Vacation of Office	4
4.11	Validity of Acts	5
Section 5 MEETINGS OF DIRECTORS		5
5.1	Place of Meeting	5
5.2	Notice	5
5.3	Waiver of Notice	5
5.4	Omission of Notice	6
5.5	Electronic, Telephone Participation Etc.	6
5.6	Adjournment	6
5.7	Quorum and Voting	6
5.8	Resolution in Lieu of Meeting	6
Section 6 COMMITTEES OF DIRECTORS		7
6.1	General	7
6.2	Audit Committee	8
Section 7 REMUNERATION OF DIRECTORS, OFFICERS AND EMPLOYEES		8
Section 8 SUBMISSION OF CONTRACTS OR TRANSACTIONS TO SHAREHOLDERS FOR APPROVAL		9
Section 9 CONFLICT OF INTEREST		9
Section 10 FOR THE PROTECTION OF DIRECTORS AND OFFICERS		10
Section 11 INDEMNITIES TO DIRECTORS AND OTHERS		10
Section 12 OFFICERS		11
12.1	Appointment of Officers	11
12.2	Removal of Officers and Vacation of Office	11
12.3	Vacancies	11
12.4	Chair of the Board	11
12.5	President	12
12.6	Vice-President	12
12.7	Secretary	12
12.8	Treasurer	12
12.9	Assistant Secretary and Assistant Treasurer	12
12.10	Managing Director	13
12.11	Duties of Officers may be Delegated	13
12.12	Agents and Attorneys	13

i

Table of Contents

(continued)

		Page
Section 13 SHAREHOLDERS’ MEETINGS		13
13.1	Annual Meeting	13
13.2	Special Meetings	13
13.3	Meeting on Requisition of Shareholders	13
13.4	Meetings held by Electronic Means and Electronic Voting	14
13.5	Notice	14
13.6	Waiver of Notice	14
13.7	Omission of Notice	14
13.8	Record Dates	14
13.9	Chair of the Meeting	15
13.10	Votes	15
13.11	Right to Vote	15
13.12	Proxies	16
13.13	Adjournment	17
13.14	Quorum	17
13.15	Persons Entitled to be Present	17
13.16	Resolution in Lieu of Meeting	17
13.17	Advance Notice Advance Notice of Shareholder Nominations and Proposals	18
Section 14 SHARES AND TRANSFERS		20
14.1	Issuance	20
14.2	Security Certificates	20
14.3	Agent	21
14.4	Dealings with Registered Holder	21
14.5	Defaced, Destroyed, Stolen or Lost Security Certificates	21
14.6	Enforcement of Lien for Indebtedness	21
14.7	Electronic, Book-Based or Other Non-Certificated Registered Positions	22
Section 15 DIVIDENDS		22
15.1	Dividends	22
15.2	Joint Shareholders	22
15.3	Dividend Payments	23
Section 16 VOTING SECURITIES IN OTHER BODIES CORPORATE		23
Section 17 NOTICES, ETC.		23
17.1	Service	23
17.2	Failure to Locate Shareholder	24
17.3	Shares Registered in More than one Name	24
17.4	Persons Becoming Entitled by Operation of Law	24
17.5	Signatures upon Notices	24
17.6	Computation of Time	24
17.7	Proof of Service	24
Section 18 CUSTODY OF SECURITIES		25
Section 19 EXECUTION OF CONTRACTS, ETC.		25
Section 20 FISCAL PERIOD		25
Section 21 REPEAL OF PREVIOUS BY-LAWS		25

ii

BY-LAW NO. 1

A by-law relating generally to the conduct of the business and affairs of BOREALIS FOODS INC., a corporation amalgamated under the Business Corporations Act (Ontario) (hereinafter called the “Corporation”) is made as follows:

Section 1
DEFINITIONS

In this by-law and all other by-laws of the Corporation, unless the context otherwise specifies or requires:

(a) “Act” means the Business Corporations Act (Ontario) and the regulations made thereunder, as from time to time amended, and in the case of such amendment any reference in the by-laws shall be read as referring to the amended provisions thereof;

(b) “Affiliate” has the meaning given to it in the Act;

(c) “Applicable Securities Laws” means the applicable securities legislation of each relevant province and territory of Canada, as amended from time to time, the written rules, regulations and forms made or promulgated under any such legislation and the published national instruments, multilateral instruments, policies, bulletins and notices of the securities commissions and similar regulatory authorities of each province or territory of Canada;

(d) “Associate” has the meaning given to it in the Act;

(e) “articles” means the original or restated articles of incorporation, or articles of amendment, amalgamation or continuance of the Corporation, as applicable;

(f) “Beneficial Ownership” has the meaning given to it in the Act, and “beneficially owns” and “beneficially owned” have corresponding meanings;

(g) “Board” or “board” means the board of directors of the Corporation;

(h) “by-laws” or “By-laws” means this by-law and all other by-laws of the Corporation from time to time in force and effect;

(i) “Close of Business” means 5:00 p.m. (Toronto time) on a business day in that city;

(j) “Chair of the Board” means the chairperson of the Board appointed from time to time;

(k) “Designated Stock Exchange” means any United States national securities exchange on which the securities of the Corporation are listed for trading, including the Nasdaq Capital Market.

(l) “Director Nomination” means the nomination of one or more individuals for the election of directors to the Board made (a) by or at the direction of the Board in a notice of meeting or any supplement thereto; (b) before the meeting by or at the direction of the Board; or (c) by a shareholder of the Corporation in accordance with Section ‎13.17;

(m) “Meeting” means an annual meeting, an annual and special meeting or a special meeting (which is not an annual and special meeting) called for the purpose of electing directors by the Corporation’s shareholders entitled to vote on such matters;

(n) “Meeting Notice Date” means the date on which the first notice to the shareholders or first Public Announcement of the date of the meeting was issued by the Corporation;

(o) “NI 51-102” means National Instrument 51-102 Continuous Disclosure Obligations of the Canadian Securities Administrators;

(p) “Nominating Shareholder” has the meaning given to it in Section ‎13.17(b);

(q) “Nomination Notice” has the meaning given to it in Section ‎13.17(b);

(r) “person” has the meaning given to it in the Act;

(s) “Public Announcement” means disclosure in a (a) press release reported in a national news service in Canada or (b) a document publicly filed by the Corporation or its transfer agent and registrar under the Corporation’s profile on SEDAR;

(t) “SEDAR” means the System for Electronic Document Analysis and Retrieval at www.sedar.com;

(u) “STA” means the Securities Transfer Act (Ontario) and the regulations made thereunder, as from time to time amended, and in the case of such amendment any reference in the by-laws shall be read as referring to the amended provisions thereof;

(v) all terms used in the by-laws that are defined in the Act and are not otherwise defined in the by-laws shall have the meanings given to such terms in the Act;

(w) words importing the singular number only shall include the plural and vice versa; words importing the masculine gender shall include the feminine and neuter genders;

(x) the headings used in the by-laws are inserted for reference purposes only and are not to be considered or taken into account in construing the terms or provisions thereof or to be deemed in any way to clarify, modify or explain the effect of any such terms or provisions;

(y) the term “including”, “includes” and “include” means “including (or includes or include) without limitation”; and

(z) any reference to “Section” is to a section, sub-section or paragraph of these by-laws, unless otherwise indicated.

Section 2
REGISTERED OFFICE

The Corporation shall at all times have a registered office in Ontario. The initial registered office of the Corporation shall be 1540 Cornwall Road, Suite 104, Oakville, Ontario L6J 7W5. The Corporation may at any time by special resolution of its directors change the location of its registered office within Ontario.

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Section 3
SEAL

The directors may by resolution from time to time adopt and change a corporate seal of the Corporation.

Section 4
DIRECTORS

4.1 Number

The number of directors shall be the number fixed by the articles, or where the articles specify a variable number, the number shall not be less than the minimum and not more than the maximum number so specified, and in either case shall not be fewer than three individuals so long as the Corporation remains an “offering corporation” as defined in the Act. Where a minimum and maximum number of directors of the Corporation is provided for in its articles, the number of directors of the Corporation and the number of directors to be elected at the annual meeting of the shareholders shall be such number as shall be determined from time to time by special resolution or, if the special resolution empowers the directors to determine the number, by resolution of the directors. So long as the Corporation remains an “offering corporation”, at least one third of the directors shall not be officers or employees of the Corporation or any of its affiliates.

4.2 Vacancies

Subject to section 124 of the Act, a quorum of directors may fill a vacancy among the directors. If there is not a quorum of directors, or if there has been a failure to elect the number of directors required by the articles or the Act, the directors then in office shall forthwith call a special meeting of shareholders to fill the vacancy and, if they fail to call a meeting or if there are no directors then in office, the meeting may be called by any shareholder. A director appointed or elected to fill a vacancy holds office for the unexpired term of his or her predecessor.

4.3 Powers

The directors shall manage or supervise the management of the business and affairs of the Corporation and may exercise all such powers and do all such acts and things as may be exercised or done by the Corporation and are not expressly directed or required to be done in some other manner by the Act, the articles, the by-laws, any special resolution of the shareholders of the Corporation, or by statute.

4.4 Duties

Every director and officer of the Corporation in exercising his or her powers and discharging his or her duties to the Corporation shall:

(a) act honestly and in good faith with a view to the best interests of the Corporation; and

(b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

4.5 Qualification

The following persons are disqualified from being a director of the Corporation:

(a) a person who is less than 18 years of age;

- 3 -

(b) a person who has been found under the Substitute Decisions Act, 1992 or under the Mental Health Act to be incapable of managing property or who has been found to be incapable by a court in Canada or elsewhere;

(c) a person who is not an individual; and

(d) a person who has the status of bankrupt.

Unless the articles otherwise provide, a director of the Corporation is not required to hold shares issued by the Corporation.

4.6 Term of Office

A director’s term of office (subject to any applicable provisions of the Corporation’s articles and subject to the election of such director for an expressly stated term) shall be from the date such director is elected or appointed until the close of the first annual meeting of shareholders following such director’s election or appointment or until a successor to such director is elected or appointed.

4.7 Election

Subject to sections 119, 120 and 124 of the Act, the shareholders of the Corporation shall, at the first meeting of shareholders and at each succeeding annual meeting at which an election of directors is required, elect directors to hold office for a term expiring not later than the close of the third annual meeting of shareholders following the election. A director not elected for an expressly stated term ceases to hold office at the close of the first annual meeting of shareholders following his or her election but, if qualified, is eligible for re-election. Notwithstanding the foregoing, if directors are not elected at a meeting of shareholders, the incumbent directors continue in office until their successors are elected.

If a meeting of shareholders fails to elect the number or the minimum number of directors required by the articles or by section 125 of the Act by reason of the disqualification, incapacity or death of any candidates, the directors elected at that meeting if they constitute a quorum, may exercise all the powers of the directors, pending the holding of a meeting of shareholders in accordance with subsection 124(3) of the Act.

4.8 Consent to Election

Subject to section 119 of the Act, the election or appointment of a director is not effective unless the person elected or appointed consents in writing before or within 10 days after the election or appointment.

4.9 Removal

Subject to sections 120 and 122 of the Act, the shareholders of the Corporation may by ordinary resolution at an annual or special meeting remove any director or directors from office before the expiration of his or her term of office and may, subject to section 124 of the Act, elect any person in his or her stead for the remainder of the director’s term.

4.10 Vacation of Office

A director of the Corporation ceases to hold office when:

(a) the director dies or, subject to subsection 119(2) of the Act, resigns;

(b) the director is removed from office in accordance with section 122 of the Act; or

(c) the director becomes disqualified under subsection 118(1) of the Act.

- 4 -

A resignation of a director becomes effective at the time a written resignation is received by the Corporation, or at the time specified in the resignation, whichever is later.

4.11 Validity of Acts

An act done by a director or by an officer is not invalid by reason only of any defect that is thereafter discovered in his or her appointment, election or qualification.

Section 5
MEETINGS OF DIRECTORS

5.1 Place of Meeting

Unless the articles otherwise provide, meetings of directors and of any committee of directors may be held at any place within or outside Ontario except where the Corporation is a non-resident Corporation, and in any financial year of the Corporation, a majority of the meetings of the board of directors need not be held at a place within Canada. A meeting of directors may be convened by the Chair of the Board (if any), the President (if any) or any director at any time and the Secretary (if any) or any other officer or any director shall, as soon as reasonably practicable following receipt of a direction from any of the foregoing, send a notice of the applicable meeting to the directors. A quorum of the directors may, at any time, call a meeting of the directors for the transaction of any business the general nature of which is specified in the notice calling the meeting.

5.2 Notice

Notice of the time and place for the holding of any meeting of directors or of any committee of directors shall be sent to each director, or each director who is a member of such committee, as the case may be, not less than 48 hours before the time of the meeting; provided that a meeting of directors, or of any committee of directors, may be held at any time without notice if all the directors or members of such committee are present (except where a director attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called) or if all the absent directors waive notice of the meeting.

For the first meeting of directors to be held following the election of directors at an annual or special meeting of the shareholders or for a meeting of directors at which a director is appointed to fill a vacancy in the board, no notice of such meeting need be given to the newly elected or appointed director or directors in order for the meeting to be duly constituted, provided a quorum of the directors is present.

5.3 Waiver of Notice

Notice of any meeting of directors or of any committee of directors or the time for the giving of any such notice or any irregularity in any meeting or in the notice thereof may be waived by any director in writing or by facsimile or electronic mail addressed to the Corporation or in any other manner, and any such waiver may be validly given either before or after the meeting to which such waiver relates. Attendance of a director at any meeting of directors or of any committee of directors is a waiver of notice of such meeting, except when a director attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.

- 5 -

5.4 Omission of Notice

The accidental omission to give notice of any meeting of directors or of any committee of directors or the non-receipt of any notice by any person shall not invalidate any resolution passed or any proceeding taken at such meeting.

5.5 Electronic, Telephone Participation Etc.

If all of the directors of the Corporation consent, a director may participate in a meeting of directors or of any committee of directors by means of a telephonic, electronic or other communication facility that permits all persons participating in the meeting to communicate with each other simultaneously and instantaneously. A director’s consent shall be effective whether given before or after the meeting to which it relates and may be given with respect to all meetings of the board or a committee thereof held while the director holds office. A director participating in such a meeting by such means is deemed for the purposes of the Act and this by-law to be present at that meeting.

5.6 Adjournment

Any meeting of directors or of any committee of directors may be adjourned from time to time by the chair of the meeting, with the consent of the meeting, to a fixed time and place. Notice of an adjourned meeting of directors or committee of directors is not required to be given if the time and place of the adjourned meeting is announced at the original meeting. Any adjourned meeting shall be duly constituted if held in accordance with the terms of the adjournment and a quorum is present thereat. The directors who formed a quorum at the original meeting are not required to form the quorum at the adjourned meeting. If there is no quorum present at the adjourned meeting, the original meeting shall be deemed to have terminated forthwith after its adjournment. Any business may be brought before or dealt with at the adjourned meeting that might have been brought before or dealt with at the original meeting in accordance with the notice calling the same.

5.7 Quorum and Voting

Subject to the articles, a majority of the number of directors or minimum number of directors required by the articles constitutes a quorum at any meeting of directors and, notwithstanding any vacancy among the directors, a quorum of directors may exercise all the powers of the directors, but in no case shall a quorum be less than two-fifths of the number of directors. If the Corporation has fewer than three directors, all of the directors must be present at any meeting of directors to constitute a quorum. Subject to subsection 124(1) of the Act, directors shall not transact business at a meeting of directors unless a quorum is present. Questions arising at any meeting of directors shall be decided by a majority of votes. In the case of an equality of votes, the chair of the meeting in addition to his or her original vote shall not have a second or casting vote.

5.8 Resolution in Lieu of Meeting

A resolution in writing, signed by all the directors entitled to vote on that resolution at a meeting of directors or a committee of directors, is as valid as if it had been passed at a meeting of directors or a committee of directors. A resolution in writing dealing with all matters required by the Act or this by-law to be dealt with at a meeting of directors, and signed by all the directors entitled to vote at that meeting, satisfies all the requirements of the Act and this by-law relating to meetings of directors.

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Section 6
COMMITTEES OF DIRECTORS

6.1 General

The directors may from time to time appoint from their number a managing director, or a committee of directors, and may delegate to such managing director or such committee any of the powers of the directors, except that (unless the Act otherwise permits) no managing director or committee shall have the authority to:

(a) submit to the shareholders any question or matter requiring the approval of the shareholders;

(b) fill a vacancy among the directors or appoint or remove any of the chief executive officers, however designated, the chief financial officer, however designated, the chair or the president of the Corporation;

(c) subject to section 184 of the Act, issue securities except in the manner and on the terms authorized by the directors;

(d) declare dividends;

(e) purchase, redeem or otherwise acquire shares issued by the Corporation;

(f) pay a commission referred to in section 37 of the Act;

(g) approve a management information circular referred to in Part VIII of the Act;

(h) approve a take-over bid circular, directors’ circular or issuer bid circular referred to in Part XX of the Securities Act (Ontario);

(i) approve any financial statements referred to in clause 154(1)(b) of the Act and Part XVIII of the Securities Act (Ontario);

(j) approve an amalgamation under section 177 of the Act or an amendment to the articles under subsection 168(2) or (4) of the Act;

(k) adopt, amend or repeal by-laws of the Corporation; or

(l) exercise any other power which under the Act a committee of directors has no authority to exercise.

Notwithstanding the foregoing and subject to the articles, the directors may, by resolution, delegate to a director, a committee of directors, or an officer the power to:

(a) borrow money upon the credit of the Corporation;

(b) issue, reissue, sell or pledge debt obligations of the Corporation;

(c) give a guarantee on behalf of the Corporation to secure performance of an obligation of any person; and

(d) mortgage, hypothecate, pledge or otherwise create a security interest in all or any property of the Corporation, owned or subsequently acquired, to secure any obligation of the Corporation.

- 7 -

6.2 Audit Committee

Subject to subsection 158(1.1) of the Act, so long as the Corporation remains an “offering corporation”, as defined in the Act, the board shall appoint from among their number an audit committee to be composed of not fewer than three directors to hold office until the next annual meeting of the shareholders. At any time when the Corporation is not an offering corporation, the directors may (but shall not be required to) appoint from among their number an audit committee to be composed of such number of directors as may be determined by the board from time to time in accordance with the Act. The Audit Committee shall meet the “Audit Committee Requirements” of Designated Stock Exchange and the independence and experience requirements of Section 10A(m)(3) of the Securities Exchange Act of 1934 (“Exchange Act”) and the rules and regulations of the Securities and Exchange Commission.

Each member of the audit committee shall serve at the pleasure of the board and, in any event, only so long as such member shall be a director. The directors may fill vacancies in the audit committee by election from among their number.

The audit committee shall have power to fix its quorum at not less than a majority of its members and to determine its own rules of procedure subject to any requirements imposed by the board from time to time.

The auditor of the Corporation is entitled to receive notice of every meeting of the audit committee and, at the expense of the Corporation, to attend and be heard thereat, and, if so requested by a member of the audit committee, shall attend every meeting of the committee held during the term of office of the auditor. The auditor of the Corporation or any member of the audit committee may call a meeting of the audit committee.

The audit committee shall review the financial statements of the Corporation referred to in section 154 of the Act, and shall report thereon to the board before such financial statements are approved under section 159 of the Act, and shall have such other powers and duties as may from time to time by resolution be assigned to it by the board, including those required by the Designated Stock Exchange.

Section 7
REMUNERATION OF DIRECTORS, OFFICERS AND EMPLOYEES

Subject to the articles, the rules and regulations of the Securities and Exchange Commission and the Designated Stock Exchange, the directors of the Corporation may fix the remuneration of the directors, officers and employees of the Corporation. Any remuneration paid to a director of the Corporation shall be in addition to the salary paid to such director in his or her capacity as an officer or employee of the Corporation. The directors may also by resolution award special remuneration to any director in undertaking any special services on the Corporation’s behalf other than the routine work ordinarily required of a director of the Corporation. The confirmation of any such resolution by the shareholders shall not be required. The directors, officers and employees shall also be entitled to be paid their travelling and other expenses properly incurred by them in connection with the affairs of the Corporation.

- 8 -

Section 8
SUBMISSION OF CONTRACTS OR TRANSACTIONS TO SHAREHOLDERS FOR APPROVAL

The directors in their discretion may submit any contract, act or transaction for approval, ratification or confirmation at any annual meeting of the shareholders or at any special meeting of the shareholders called for the purpose of considering the same and subject to the Act, any contract, act or transaction that shall be approved, ratified or confirmed by resolution passed by a majority of the votes cast at any such meeting (unless any different or additional requirement is imposed by the Act or other applicable law or by the Corporation’s articles or any other by-law) shall be as valid and as binding upon the Corporation and upon all the shareholders as though it had been approved, ratified and/or confirmed by every shareholder of the Corporation.

Section 9
CONFLICT OF INTEREST

A director or officer of the Corporation who is a party to a material contract or transaction or proposed material contract or proposed transaction with the Corporation, or who is a director or an officer of, or has a material interest in, any person who is a party to a material contract or transaction or proposed material contract or proposed transaction with the Corporation, shall disclose, in writing to the Corporation or by requesting to have entered in the minutes of meetings of directors, the nature and extent of his or her interest at the time and in the manner provided in the Act. Except as provided in the Act, no such director of the Corporation shall attend any part of a meeting of directors during which the contract or transaction is discussed, and no such director shall vote on any resolution to approve such contract or transaction. If a material contract is made or a material transaction is entered into between the Corporation and one or more of its directors or officers, or between the Corporation and another person of which a director or officer of the Corporation is a director or officer or in which he or she has a material interest, the director or officer is not accountable to the Corporation or its shareholders for any profit or gain realized from the contract or transaction, and the contract is neither void nor voidable, by reason only of that relationship or by reason only that a director is present at or is counted to determine the presence of a quorum at the meeting of directors that authorized the contract or transaction, if the director or officer disclosed his or her interest in accordance with the Act, and the contract or transaction was reasonable and fair to the Corporation at the time it was approved.

Even if these conditions are not met, a director or officer, acting honestly and in good faith, shall not be not accountable to the Corporation or to its shareholders for any profit or gain realized from any such contract or transaction, by reason only of his or her holding the office of director or officer, and the contract or transaction, if it was reasonable and fair to the Corporation at the time it was approved, is not by reason only of the director’s or officer’s interest therein void or voidable, where the contract or transaction is confirmed or approved by special resolution at a meeting of the shareholders duly called for that purpose, and the nature and extent of the director’s or officer’s interest in the contract or transaction are disclosed in reasonable detail in the notice calling the meeting or in the information circular.

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Section 10
FOR THE PROTECTION OF DIRECTORS AND OFFICERS

No director or officer of the Corporation shall be liable to the Corporation for the acts, receipts, neglects or defaults of any other director or officer or employee or for joining in any receipt or act for conformity or for any loss, damage or expense happening to the Corporation through the insufficiency or deficiency of title to any property acquired by the Corporation or for or on behalf of the Corporation or for the insufficiency or deficiency of any security in or upon which any of the monies of or belonging to the Corporation shall be placed out or invested or for any loss or damage arising from the bankruptcy, insolvency or tortious act of any person, firm or corporation including any person, firm or corporation with whom or which any monies, securities or effects shall be lodged or deposited or for any loss, conversion, misapplication or misappropriation of or any damage resulting from any dealings with any monies, securities or other assets belonging to the Corporation or for any other loss, damage or misfortune whatever that may happen in the execution of the duties of such director’s or officer’s respective office of trust or in relation thereto, unless the same shall happen by or through the director’s or officer’s failure to exercise the powers and to discharge the duties of office honestly, in good faith with a view to the best interests of the Corporation, and in connection therewith to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances, provided that nothing herein contained shall relieve a director or officer from the duty to act in accordance with the Act or relieve such director or officer from liability under the Act. If any director or officer of the Corporation shall be employed by or shall perform services for the Corporation otherwise than as a director or officer or shall be a member of a firm or a shareholder, director or officer of a body corporate which is employed by or performs services for the Corporation, the fact that the director or officer is a shareholder, director or officer of the Corporation or body corporate or member of the firm shall not disentitle such director or officer or such firm or body corporate, as the case may be, from receiving proper remuneration for such services.

Section 11
INDEMNITIES TO DIRECTORS AND OTHERS

(1) The Corporation shall indemnify a director or officer of the Corporation, a former director or officer of the Corporation or another individual who acts or acted at the Corporation’s request as a director or officer, or an individual acting in a similar capacity, of another entity, or any other individual permitted by the Act to be so indemnified in the manner and to the fullest extent permitted by the Act. Without limiting the generality of the foregoing, subject to section 136 of the Act, the Corporation shall indemnify a director or officer of the Corporation, a former director or officer of the Corporation or another individual who acts or acted at the Corporation’s request as a director or officer, or an individual acting in a similar capacity, of another entity, against all costs, charges and expenses, including costs reasonably incurred in the defence of an action or proceeding and an amount paid to settle an action or satisfy a judgment, reasonably incurred by the individual in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of that association with the Corporation or other entity.

(2) The Corporation shall advance moneys to a director, officer or other individual for the costs, charges and expenses of a proceeding referred to in ‎Section 11(1). The individual shall repay the money if the individual does not fulfill the conditions of ‎Section 11(3).

(3) The Corporation shall not indemnify an individual under ‎Section 11(1) unless the individual:

(i) acted honestly and in good faith with a view to the best interests of the Corporation, or, as the case may be, to the best interests of the other entity for which the individual acted as a director or officer or in a similar capacity at the Corporation’s request; and

(ii) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the individual had reasonable grounds for believing that the individual’s conduct was lawful.

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(4) The Corporation shall, subject to the Act, with the approval of a court, indemnify an individual referred to in ‎Section 11(1), or advance moneys under ‎Section 11(2), in respect of an action by or on behalf of the Corporation or other entity to obtain a judgment in its favour, to which the individual is made a party because of the individual’s association with the Corporation or other entity as described in ‎Section 11(1), against all costs, charges and expenses reasonably incurred by the individual in connection with such action, if the individual fulfils the conditions set out in ‎Section 11(3).

(5) The Corporation may purchase and maintain insurance for the benefit of an individual referred to in ‎Section 11(1) against any liability incurred by that individual to the extent permitted by the Act.

Section 12
OFFICERS

12.1 Appointment of Officers

Subject to the articles, the directors annually or as often as may be required may appoint from among themselves a Chair of the Board (either on a full-time or part-time basis) and may appoint a President, one or more Vice- Presidents (to which title may be added words indicating seniority or function), a Secretary, a Treasurer and one or more assistants to any of the officers so appointed. None of such officers except the Chair of the Board needs to be a director of the Corporation although a director may be appointed to any office of the Corporation. Two or more offices of the Corporation may be held by the same person. The directors may from time to time appoint such other officers, employees and agents as they shall deem necessary who shall have such authority and shall perform such functions and duties as may from time to time be prescribed by resolution of the directors. The directors may from time to time and subject to the provisions of the Act, vary, add to or limit the duties and powers of any officer, employee or agent.

12.2 Removal of Officers and Vacation of Office

Subject to the articles, all officers, employees and agents shall be subject to removal by resolution of the directors at any time, with or without cause.

An officer of the Corporation ceases to hold office when such officer dies, resigns or is removed from office. A resignation of an officer becomes effective at the time a written resignation is sent to the Corporation, or at the time specified in the resignation, whichever is later.

12.3 Vacancies

If the office of Chair of the Board, President, Vice-President, Secretary, Treasurer, or any other office created by the directors pursuant to Section ‎12.1 hereof shall be or become vacant by reason of death, resignation, removal from office or in any other manner whatsoever, the directors may appoint an individual to fill such vacancy.

12.4 Chair of the Board

The Chair of the Board (if any) shall, if present, preside as chair at all meetings of the board and at all meetings of the shareholders of the Corporation. The Chair of the Board shall have such other powers and shall perform such other duties as may from time to time be assigned to him or her by resolution of the directors.

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12.5 President

The President (if any) shall, unless otherwise determined by resolution of the board, be the chief executive officer of the Corporation and shall, subject to the direction of the board, exercise general supervision and control over the business and affairs of the Corporation. In the absence of the Chair of the Board (if any), and if the President is also a director of the Corporation, the President shall, when present, preside as chair at all meetings of directors and the shareholders of the Corporation. The President shall have such other powers and shall perform such other duties as may from time to time be assigned to him or her by resolution of the directors or as are incident to his or her office.

12.6 Vice-President

The Vice-President (if any) or, if more than one, the Vice-Presidents in order of seniority, shall be vested with all the powers and shall perform all the duties of the President in the absence or inability or refusal to act of the President, provided, however, that a Vice-President who is not a director shall not preside as chair at any meeting of directors or shareholders. The Vice-President or, if more than one, the Vice-Presidents shall have such other powers and shall perform such other duties as may from time to time be assigned to him, her or them by resolution of the directors.

12.7 Secretary

Unless another officer has been appointed for that purpose, the Secretary (if any) shall give or cause to be given notices for all meetings of directors, any committee of directors and shareholders when directed to do so and shall, subject to the provisions of the Act, maintain the records referred to in section 140 of the Act. The Secretary shall have such other powers and shall perform such other duties as may from time to time be assigned to the Secretary by resolution of the directors or as are incident to the office of the Secretary.

12.8 Treasurer

Subject to the provisions of any resolution of the directors, the Treasurer (if any) or such other officer who has been appointed for that purpose shall have the care and custody of all the funds and securities of the Corporation and shall deposit the same in the name of the Corporation in such bank or banks or with such other depositary or depositaries as the directors may by resolution direct; provided that the Treasurer may from time to time arrange for the temporary deposit of moneys of the Corporation in banks, trust companies or other financial institutions within or outside Canada not so directed by the board for the purpose of facilitating transfer thereof to the credit of the Corporation in a bank, trust company or other financial institution so directed. Unless another officer has been appointed for that purpose, the Treasurer shall prepare and maintain adequate accounting records. The Treasurer shall have such other powers and shall perform such other duties as may from time to time be assigned to such person by resolution of the directors or as are incident to the office of the Treasurer. The Treasurer may be required to give such bond for the faithful performance of his or her duties as the directors in their sole discretion may require and no director shall be liable for failure to require any such bond or for the insufficiency of any such bond or for any loss by reason of the failure of the Corporation to receive any indemnity thereby provided.

12.9 Assistant Secretary and Assistant Treasurer

The Assistant Secretary (if any) or, if more than one, the Assistant Secretaries in order of seniority, and the Assistant Treasurer (if any) or, if more than one, the Assistant Treasurers in order of seniority, shall assist the Secretary and Treasurer, respectively, in the performance of his or her duties and shall be vested with all the powers and shall perform all the duties of the Secretary and Treasurer, respectively, in the absence or inability or refusal to act of the Secretary or Treasurer as the case may be. The Assistant Secretary or, if more than one, the Assistant Secretaries and the Assistant Treasurer or, if more than one, the Assistant Treasurers shall sign such contracts, documents or instruments in writing as require his, her or their signatures, respectively, and shall have such other powers and shall perform such other duties as may from time to time be assigned to him, her or them by resolution of the directors.

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12.10 Managing Director

The Managing Director (if any) shall conform to all lawful orders given to him or her by the directors and shall at all reasonable times give to the directors or any of them all information they may require regarding the affairs of the Corporation.

12.11 Duties of Officers may be Delegated

In case of the absence or inability or refusal to act of any officer of the Corporation or for any other reason that the directors may deem sufficient, the directors may delegate all or any of the powers of such officer to any other officer or to any director for the time being.

12.12 Agents and Attorneys

The Corporation shall have power from time to time to appoint agents or attorneys for the Corporation in or outside Canada with such powers (including the power to subdelegate) of management, administration or otherwise as may be thought fit.

Section 13
SHAREHOLDERS’ MEETINGS

13.1 Annual Meeting

Subject to the articles, the annual meeting of the shareholders of the Corporation shall be held at such place in or outside Ontario as the directors determine or, in the absence of such a determination, at the place where the registered office of the Corporation is located.

13.2 Special Meetings

The directors of the Corporation may at any time call a special meeting of shareholders to be held at such place in or outside Ontario as the directors may determine.

13.3 Meeting on Requisition of Shareholders

The holders of not less than 5% of the issued shares of the Corporation that carry the right to vote at a meeting sought to be held may requisition the directors to call a meeting of shareholders for the purposes stated in the requisition. The requisition shall state the business to be transacted at the meeting and shall be sent to each director and to the registered office of the Corporation. Subject to subsection 105(3) of the Act, upon receipt of the requisition, the directors shall call a meeting of shareholders to transact the business stated in the requisition. If the directors are obligated to call a meeting and do not do so within 21 days after receiving the requisition call a meeting, any shareholder who signed the requisition may call the meeting.

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13.4 Meetings held by Electronic Means and Electronic Voting

Subject to the articles, a meeting of the shareholders of the Corporation may be held by telephonic or electronic means (as defined in the Act) and a shareholder who, through those means, votes at the meeting or establishes a communications link to the meeting shall be deemed, for purposes of the Act and this by-law, to be present at the meeting.

13.5 Notice

A notice in writing of a meeting of shareholders, stating the day, hour and place of the meeting and if special business is to be transacted thereat, stating (i) the nature of that business in sufficient detail to permit the shareholder to form a reasoned judgment on that business and (ii) the text of any special resolution or by-law to be submitted to the meeting, shall be sent to each shareholder entitled to vote at the meeting, who on the record date for notice is registered on the records of the Corporation or its transfer agent as a shareholder, to each director of the Corporation and to the auditor of the Corporation not less than 21 days so long as the Corporation remains an “offering corporation” (as defined in the Act), or in the case of a non-offering corporation not less than 10 days, but in either case not more than 50 days before the meeting.

13.6 Waiver of Notice

Notice of any meeting of shareholders or the time for the giving of any such notice or any irregularity in any meeting or in the notice thereof may be waived by any shareholder, the duly appointed proxy of any shareholder, any director or the auditor of the Corporation in writing or by facsimile or other form of recorded electronic transmission addressed to the Corporation or in any other manner and any such waiver may be validly given either before or after the meeting to which such waiver relates. Attendance of a shareholder or any other person entitled to attend at a meeting of shareholders is a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.

13.7 Omission of Notice

The accidental omission to give notice of any meeting of shareholders to or the non-receipt of any notice by any person shall not invalidate any resolution passed or any proceeding taken at any such meeting.

13.8 Record Dates

Subject to subsection 95(4) of the Act, the directors may fix in advance a date as the record date for the determination of shareholders (i) entitled to receive payment of a dividend, (ii) entitled to participate in a liquidation or distribution or (iii) for any other purpose except the right to receive notice of or to vote at a meeting of shareholders, but such record date shall not precede by more than 50 days the particular action to be taken.

Subject to subsection 95(4) of the Act, the directors may also fix in advance a date as the record date for the determination of shareholders entitled to receive notice of a meeting of shareholders, but such record date shall not precede by more than 60 days or by less than 30 days the date on which the meeting is to be held.

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If no record date is fixed,

(a) the record date for the determination of shareholders entitled to receive notice of a meeting of shareholders shall be,

(i) at the close of business on the last business day preceding the day on which the notice is given, or

(ii) if no notice is given, the day on which the meeting is held; and

(b) the record date for the determination of shareholders for any purpose other than to establish a shareholder’s right to receive notice of a meeting or to vote shall be at the close of business on the day on which the directors pass the resolution relating to that purpose.

13.9 Chair of the Meeting

In the absence of the Chair of the Board (if any), the President (if any) and any Vice-President (who is a director), the shareholders present and entitled to vote shall elect a director of the Corporation as chair of the meeting and if no director is present or if all the directors present decline to take the chair then the shareholders present shall elect one of their number to be chair.

13.10 Votes

Votes at meetings of shareholders may be cast either personally or by proxy. Subject to the Act and Section ‎13.11, every question submitted to any meeting of shareholders shall be decided on a show of hands, except when a ballot is required by the chair of the meeting or is demanded by a shareholder or proxyholder entitled to vote at the meeting or is otherwise required by the Act. A shareholder or proxyholder may demand a ballot either before or after any vote by a show of hands. At every meeting at which shareholders are entitled to vote, each shareholder present on his or her own behalf and every proxyholder present shall have one vote. Upon any ballot at which shareholders are entitled to vote, each shareholder present on his or her own behalf or by proxy shall (subject to the provisions, if any, of the articles) have one vote for every share registered in the name of such shareholder. In the case of an equality of votes under this Section, the chair of the meeting shall not have a second or casting vote in addition to the vote or votes to which he or she may be entitled as a shareholder or proxyholder.

At any meeting of shareholders, unless a ballot is demanded, an entry in the minutes of a meeting of shareholders, following a vote on the applicable motion by a show of hands, to the effect that the chair of the meeting declared a motion to be carried is admissible in evidence as proof of the fact, in the absence of evidence to the contrary, without proof of the number or proportion of the votes recorded in favour of or against the motion, although the chair may direct that a record be kept of the number or proportion of votes in favour of or against the motion for any purpose the chair of the meeting considers appropriate.

If at any meeting a ballot is demanded on the election of a chair for the meeting or on the question of adjournment or termination, the ballot shall be taken forthwith without adjournment. If a ballot is demanded on any other question or as to the election of directors, the ballot shall be taken in such manner and either at once or later at the meeting or after adjournment as the chair of the meeting directs. The result of a ballot shall be deemed to be the resolution of the meeting at which the ballot was demanded. A demand for a ballot may be withdrawn.

13.11 Right to Vote

Unless the articles otherwise provide, each share of the Corporation entitles the holder thereof to one vote at a meeting of shareholders.

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Where a body corporate or a trust, association or other unincorporated organization is a shareholder of the Corporation, any individual authorized by a resolution of the directors of the body corporate or the directors, trustees or other governing body of the association, trust or unincorporated organization, to represent it at meetings of shareholders of the Corporation shall be recognized as the person entitled to vote at all such meetings of shareholders in respect of the shares held by such body corporate or by such trust, association or other unincorporated organization and the chair of the meeting may establish or adopt rules or procedures in relation to the recognition of a person to vote shares held by such body corporate or by such trust, association or other unincorporated organization.

Where a person holds shares as a personal representative, such person or his or her proxy is the person entitled to vote at all meetings of shareholders in respect of the shares so held by him or her, and the chair of the meeting may establish or adopt rules or procedures in relation to the recognition of such person to vote the shares in respect of which such person has been appointed as a personal representative.

Where a person mortgages, pledges or hypothecates his or her shares, such person or such person’s proxy is the person entitled to vote at all meetings of shareholders in respect of such shares so long as such person remains the registered owner of such shares unless, in the instrument creating the mortgage, pledge or hypothec, the person has expressly empowered the person holding the mortgage, pledge or hypothec to vote in respect of such shares, in which case, subject to the articles, such holder or such holder’s proxy is the person entitled to vote in respect of the shares and the chair of the meeting may establish or adopt rules or procedures in relation to the recognition of the person holding the mortgage, pledge or hypothec as the person entitled to vote in respect of the applicable shares.

Where two or more persons hold shares jointly, one of those holders present at a meeting of shareholders may in the absence of the others vote the shares, but if two or more of those persons are present on their own behalf or by proxy, vote, they shall vote as one on the shares jointly held by them and the chair of the meeting may establish or adopt rules or procedures in that regard.

13.12 Proxies

Every shareholder, including a shareholder that is a body corporate or a trust, association or other unincorporated organization, entitled to vote at a meeting of shareholders may by means of a proxy appoint a proxyholder or one or more alternate proxyholders, who are not required to be shareholders, to attend and act at the meeting in the manner and to the extent authorized by the proxy and with the authority conferred by the proxy.

An instrument appointing a proxyholder shall be in written or printed form or a format generated by telephonic or electronic means and shall be completed and executed, in writing or electronic signature, by the shareholder or by his or her duly authorized attorney and shall conform with the requirements of the Act and is valid only at the meeting in respect of which it is given or any adjournment of that meeting. So long as the Corporation remains an “offering corporation”, as defined in the Act, a proxy appointing a proxyholder to attend and act at a meeting or meetings of shareholders ceases to be valid one year from its date.

The directors may, by resolution, fix a time and specify in a notice calling a meeting of shareholders the time not exceeding 48 hours, excluding Saturdays and holidays, preceding the meeting of shareholders or an adjournment of the meeting of shareholders before which time proxies to be used at that meeting must be deposited with the Corporation or its agent.

The chair shall conduct the proceedings at the meeting and the chair’s decision in any matter or thing, including, without limitation, any question regarding the validity or invalidity of any instruments of proxy and any question as to the admission or rejection of a vote, shall be conclusive and binding upon the shareholders.

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13.13 Adjournment

Subject to the Act or the articles, the chair of the meeting may, with the consent of the meeting and subject to such conditions as the meeting decides, adjourn the meeting of shareholders from time to time and from place to place. If the meeting of shareholders is adjourned by one or more adjournments for an aggregate of less than 30 days, it is not necessary to give notice of the adjourned meeting other than by announcement at the earliest meeting that is adjourned. If the meeting of shareholders is adjourned by one or more adjournments for an aggregate of 30 days or more, notice of the adjourned meeting shall be given as for an original meeting but, unless the meeting is adjourned by one or more adjournments for an aggregate of more than 90 days, section 111 of the Act does not apply.

Any adjourned meeting shall be duly constituted if held in accordance with the terms of the adjournment and a quorum is present thereat. The persons who formed a quorum at the original meeting are not required to form the quorum at the adjourned meeting. If there is no quorum present at the adjourned meeting, the original meeting shall be deemed to have terminated forthwith after its adjournment. Any business may be brought before or dealt with at any adjourned meeting that might have been brought before or dealt with at the original meeting in accordance with the notice calling the same.

13.14 Quorum

At all meetings of shareholders, except where otherwise provided by statute or by the articles, or by these By-laws, the presence, in person, or by proxy duly authorized, of the holders of thirty three and one third percent (33 1/3 percent) in voting power of the outstanding shares entitled to vote shall constitute a quorum for the transaction of business. If a quorum is present at the opening of a meeting of shareholders, the shareholders present may proceed with the business of the meeting until adjournment, notwithstanding that a quorum is not present throughout the meeting. If a quorum is not present at the time appointed for a meeting of shareholders, or within such reasonable time thereafter as the shareholders present may determine, the shareholders present may adjourn the meeting to a fixed time and place but may not transact any other business. Where a separate vote by a class or classes or series is required, except where otherwise provided by the statute or by the articles or these By-laws, thirty three and one third percent (33 1/3 percent) in voting power of the outstanding shares of such class or classes or series, present in person, or represented by proxy duly authorized, shall constitute a quorum entitled to take action with respect to that vote on that matter. Except where otherwise provided by statute or by the articles or these By-laws, the affirmative vote of the majority (plurality, in the case of the election of directors) of shares of such class or classes or series present in person, or represented by proxy at the meeting shall be the act of such class or classes or series.

13.15 Persons Entitled to be Present

The only persons entitled to be present at a meeting of shareholders shall be those entitled to vote thereat, the directors and auditor of the Corporation and others who, although not entitled to vote, are entitled or required under any provision of the Act or the articles or the by-laws to be present at the meeting. Any other person may be admitted only on the invitation of the chair of the meeting or with the consent of the meeting.

13.16 Resolution in Lieu of Meeting

A resolution in writing signed by all the shareholders or their attorney authorized in writing entitled to vote on that resolution at a meeting of shareholders is as valid as if it had been passed at a meeting of the shareholders, except where a written statement is submitted by a director under subsection 123(2) of the Act, or where representations in writing are submitted by an auditor under subsection 149(6) of the Act.

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13.17 Advance Notice of Shareholder Nominations and Proposals

(a) Nomination Requirements. Subject to the Act, Applicable Securities Laws and the articles of the Corporation, only those individuals named in the Director Nominations will be eligible for the election of directors to the board.

(b) Timely Notice. A shareholder (the “Nominating Shareholder”) must give written notice of its Director Nominations, the contents of such notice are set out in Section ‎13.17(d) (such notice, a “Nomination Notice”), to the secretary of the Corporation even if such matter is already the subject of a notice to the shareholders or a Public Announcement. The Nomination Notice must be received by the Corporation:

(i) in the case of an annual meeting (or an annual and special meeting), not less than 30 days nor more than 65 days before the date of such meeting (except that, if the meeting is to be held on a date that is less than 50 days after the Meeting Notice Date, notice by the Nominating Shareholder shall be made not less than the Close of Business on the 10th day after the Meeting Notice Date); and

(ii) in the case of a special meeting (which is not an annual and special meeting) called for the purpose of electing directors (whether or not also called for the purpose of conducting other business) not later than the Close of Business on the 15th day after the Meeting Notice Date.

(c) Delivery of Notice. Notwithstanding any other provision of this by-law, a Nominating Shareholder shall deliver the Nomination Notice to the Corporation’s registered office. A Nomination Notice shall be delivered by personal delivery, nationally recognized overnight courier (with all fees prepaid), facsimile or e-mail of a PDF document (with confirmation of transmission) or certified or registered mail (in each case, return receipt requested, postage prepaid).

(d) Shareholder Nominations. A Nomination Notice must include the following information respecting each of the Nominating Shareholder’s nominees:

(i) each nominee’s name, age, business address and residential address;

(ii) a statement indicating whether each nominee is a “resident Canadian” as defined in the Act and the regulations made under the Act;

(iii) each nominee’s present principal occupation, business or employment;

(iv) each nominee’s principal occupation, business or employment for the five years preceding the notice;

(v) the number of securities of each class or series of shares of the Corporation (or any of its subsidiaries) beneficially owned, or controlled or directed, directly or indirectly, by each nominee, as of the record date for the meeting (provided that such date shall have then have been made publicly available and shall have occurred) and as of the date of such Nomination Notice;

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(vi) a description of any relationship, agreement, arrangement or understanding (including financial, compensation or indemnity related or otherwise) between the proposed nominee and the Nominating Shareholder, or any affiliates or associates of, or any person or entity acting jointly or in concert with, the proposed nominee or the Nominating Shareholder, in connection with the proposed nominee’s nomination and election as a director;

(vii) such other information concerning each nominee as would be required to be disclosed in an information circular soliciting proxies for the election of each nominee as a director in an election contest (even if an election contest is not involved) or that is otherwise required to be disclosed, under the regulations under the Act, NI 51-102 or Form 51-102F5 Information Circular;

(viii) the consent of each nominee to being named in the information circular to serve as a director if elected; and

(ix) any such other information as the Corporation may reasonably require to determine the eligibility of each nominee to serve as an independent director of the Corporation or that could be material to a reasonable shareholder’s understanding of the independence, or lack thereof, of each nominee.

(e) Additional Nomination Notice Information. A Nomination Notice must include the following information respecting the Nominating Shareholder:

(i) the name, business address and residential address of the Nominating Shareholder;

(ii) the number of securities of each class and series of the Corporation (or any of its subsidiaries) beneficially owned, or controlled or directed, directly or indirectly, by the Nominating Shareholder or any other person with whom such Nominating Shareholder is acting jointly or in concert with respect to the Corporation or any of its securities, as of the record date for the meeting (provided that such date shall have been made publicly available and shall have occurred) and as of the date of the Nomination Notice;

(iii) a description of any agreement, arrangement or understanding with respect to between or among the Nominating Shareholder and any of its affiliates or associates, and any others (including their names) acting in concert with any of the foregoing relating to the Nominating Shareholder’s Director Nominations;

(iv) full particulars of any direct or indirect interest of the Nominating Shareholder in any contract or transaction (existing or proposed) with the Corporation or any affiliate thereof;

(v) a description of any agreement, arrangement or understanding (including any derivative or short positions, options, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the Nomination Notice by, or on behalf of, the Nominating Shareholder or any of its affiliates or associates, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of the Nominating Shareholder or any of its affiliates or associates with respect to shares of the Corporation;

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(vi) any other information relating to the Nominating Shareholder that would be required to be made in a dissident’s information circular in connection with solicitations of proxies for election of directors under the Act or any Applicable Securities Laws;

(vii) a representation that the Nominating Shareholder is a registered or beneficial shareholder of the Corporation entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to nominate the individual or individuals specified in the Nomination Notice; and

(viii) a representation whether the Nominating Shareholder intends to deliver an information circular or form of proxy to holders of the Corporation’s outstanding shares or otherwise to solicit proxies from shareholders in support of its Director Nominations.

(f) Effect of Non-Compliance. Notwithstanding anything in this by-law to the contrary: (i) no Director Nominations shall be made at any meeting except in accordance with the procedures set forth in this Section ‎13.17. The requirements of this Section ‎13.17 shall apply to any Director Nominations to be brought before a meeting by a shareholder whether such Director Nominations are to be included in the Corporation’s management information circular under the Act and NI 51-102 or presented to shareholders by means of an independently financed proxy solicitation. The requirements of this Section ‎13.17 are included to provide the Corporation notice of a shareholder’s intention to bring one or more Director Nominations before a meeting and shall in no event be construed as imposing upon any shareholder the requirement to seek approval from the Corporation as a condition precedent to make such Director Nominations before a meeting.

(g) Waiver. The board may, in its sole discretion, waive any requirement in this Section ‎13.17.

Section 14
SHARES AND TRANSFERS

14.1 Issuance

Subject to the articles and to section 26 of the Act, shares in the Corporation may be issued at the times and to the persons and for the consideration that the directors determine; provided that a share shall not be issued until the consideration for the share is fully paid in money or in property or past service that is not less in value than the fair equivalent of the money that the Corporation would have received if the share had been issued for money.

14.2 Security Certificates

Security certificates (if any) shall (subject to compliance with section 56 of the Act) be in such form as the directors may from time to time by resolution approve and such certificates shall be signed manually, or the signature shall be printed or otherwise mechanically reproduced on the certificate, by at least one director or officer of the Corporation or by a registrar, transfer agent or branch transfer agent of the Corporation or an individual on their behalf, or by a trustee who certifies it in accordance with a trust indenture, and any additional signatures required on a security certificate may be printed or otherwise mechanically reproduced thereon. If a security certificate contains a printed or mechanically reproduced signature of a person, the Corporation may issue the security certificate, notwithstanding that the person has ceased to be a director or an officer of the Corporation, and the security certificate is as valid as if he or she were a director or an officer at the date of its issue.

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14.3 Agent

For each class of securities and warrants issued by the Corporation, the directors may from time to time by resolution appoint or remove,

(a) a trustee, transfer agent or other agent to keep the securities register and the register of transfer and one or more persons or agents to keep branch registers; and

(b) a registrar, trustee or agent to maintain a record of issued certificates and warrants,

and, subject to section 48 of the Act, one person may be appointed for the purposes of both clauses (a) and (b) in respect of all securities and warrants of the Corporation or any class or classes thereof.

14.4 Dealings with Registered Holder

Subject to the Act, the STA and this by-law, the Corporation may treat the registered holder of a security as the person exclusively entitled to vote, to receive notices, to receive any interest, dividend or other payments in respect of the security, and otherwise to exercise all the rights and powers of a holder of the security.

14.5 Defaced, Destroyed, Stolen or Lost Security Certificates

In the event of the defacement, destruction, theft or loss of a security certificate, the fact of such defacement, destruction, theft or loss shall be reported by the owner to the Corporation or to an agent of the Corporation (if any), on behalf of the Corporation, with a statement verified by oath or statutory declaration as to the defacement, destruction, theft or loss and the circumstances concerning the same and with a request for the issuance of a new security certificate to replace the one so defaced (together with the surrender of the defaced security certificate), destroyed, stolen or lost. Upon the giving to the Corporation (or if there be an agent, hereinafter in this Section ‎14.5 referred to as the “Corporation’s agent”, then to the Corporation and the Corporation’s agent) of an indemnity bond (or other security approved by the directors) in such form as is approved by the directors or by any officer of the Corporation, indemnifying the Corporation (and the Corporation’s agent if any) against all loss, damage or expense, which the Corporation and/or the Corporation’s agent may suffer or be liable for by reason of the issuance of a new security certificate to such owner, and subject to the STA, a new security certificate shall be issued in replacement of the one defaced, destroyed, stolen or lost, and such issuance may be ordered and authorized by any officer of the Corporation or by the directors.

14.6 Enforcement of Lien for Indebtedness

Subject to subsection 40(2) of the Act and section 66 of the STA, if the articles of the Corporation provide that the Corporation has a lien on the shares registered in the name of a shareholder or the shareholder’s legal representative for a debt of that shareholder to the Corporation, such lien may be enforced by the sale of the shares thereby affected or by any other action, suit, remedy or proceeding authorized or permitted by law or by equity and, pending such enforcement, the Corporation may refuse to register a transfer of the whole or any part of such shares. No sale shall be made until such time as the debt ought to be paid and until a demand and notice in writing stating the amount due and demanding payment and giving notice of intention to sell on default shall have been served on the holder or such shareholder’s legal representative of the shares subject to the lien and default shall have been made in payment of such debt for seven days after service of such notice. Upon any such sale, the proceeds shall be applied, firstly, in payment of all costs of such sale, and, secondly, in satisfaction of such debt and the residue (if any) shall be paid to the shareholder or as such shareholder shall direct. Upon any such sale, the directors may enter or cause to be entered the purchaser’s name in the securities register of the Corporation as holder of the shares, and the purchaser shall not be bound to see to the regularity or validity of, or be affected by, any irregularity or invalidity in the proceedings, or be bound to see to the application of the purchase money, and after the purchaser’s name or the name of the purchaser’s legal representative has been entered in the securities register, the validity of the sale shall not be impeached by any person.

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14.7 Electronic, Book-Based or Other Non-Certificated Registered Positions

For greater certainty, but subject to section 54 of the Act and the STA, a registered securityholder may have his or her holdings of securities of the Corporation evidenced by an electronic, book-based, direct registration service or other non-certificated entry or position on the register of securityholders to be kept by the Corporation in place of a physical security certificate pursuant to a registration system that may be adopted by the Corporation, in conjunction with its transfer agent (if any). This by-law shall be read such that a registered holder of securities of the Corporation pursuant to any such electronic, book-based, direct registration service or other non-certificated entry or position shall be entitled to all of the same benefits, rights, entitlements and shall incur the same duties and obligations as a registered holder of securities evidenced by a physical security certificate. The Corporation and its transfer agent (if any) may adopt such policies and procedures and require such documents and evidence as they may determine necessary or desirable in order to facilitate the adoption and maintenance of a security registration system by electronic, book- based, direct registration system or other non-certificated means.

Section 15
DIVIDENDS

15.1 Dividends

Subject to the articles, the directors may from time to time by resolution declare and the Corporation may pay dividends on its issued shares.

The directors shall not declare and the Corporation shall not pay a dividend if there are reasonable grounds for believing that:

(a) the Corporation is, or would after the payment be, unable to pay its liabilities as they become due; or

(b) the realizable value of the Corporation’s assets would thereby be less than the aggregate of its liabilities and its stated capital of all classes.

The Corporation may pay a dividend by issuing fully paid shares of the Corporation and, subject to section 38 of the Act, the Corporation may pay a dividend in money or property.

15.2 Joint Shareholders

In case several persons are registered as the joint holders of any securities of the Corporation, any one of such persons may give effectual receipts for all dividends and payments on account of dividends, principal, interest and/or redemption payments in respect of such securities.

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15.3 Dividend Payments

A dividend payable in money shall be paid by cheque to the order of each registered holder of shares of the class or series in respect of which it has been declared and mailed by prepaid ordinary mail to such registered holder at the recorded address of such registered holder, or, paid by electronic funds transfer to the bank account designated by the registered holder, unless such holder otherwise directs. In the case of joint holders, the cheque or payment shall, unless such joint holders otherwise direct, be made payable to the order of all such joint holders and, if more than one address is recorded in the Corporation’s security register in respect of such joint holding, the cheque shall be mailed to the first address so appearing. The mailing of such cheque as aforesaid, unless the same is not paid on due presentation, or the electronic funds transfer as aforesaid, shall satisfy and discharge the liability for the dividend to the extent of the sum represented thereby plus the amount of any tax which the Corporation is required to and does withhold. In the event of non-receipt of any dividend cheque or payment by the person to whom it is sent as aforesaid, the Corporation shall issue to such person a replacement cheque or payment for a like amount on such terms as to indemnity, reimbursement of expenses and evidence of non-receipt and of title as any officer or the directors may from time to time prescribe, whether generally or in any particular case.

Section 16
VOTING SECURITIES IN OTHER BODIES CORPORATE

All securities of or other interests in (i) any other body corporate or (ii) any trust, association or other unincorporated organization carrying voting rights and held from time to time by the Corporation may be voted at all meetings of shareholders, unitholders, bondholders, debenture holders or holders of such securities or other interests, as the case may be, of such other (i) body corporate or (ii) trust, association or other unincorporated organization, and in such manner and by such person or persons as the directors of the Corporation shall from time to time determine and authorize by resolution. Any officer of the Corporation may also from time to time execute and deliver for and on behalf of the Corporation proxies and arrange for the issuance of voting certificates or other evidence of the right to vote in such names as such officer may determine, without the necessity of a resolution or other action by the directors.

Section 17
NOTICES, ETC.

17.1 Service

Any notice or document required by the Act, the articles, the by-laws or otherwise to be sent to any shareholder or director of the Corporation may be delivered personally to, or sent by pre-paid mail addressed to:

(a) the shareholder at the shareholder’s latest address as shown in the records of the Corporation or its transfer agent; and

(b) the director at the director’s latest address as shown in the records of the Corporation or in the most recent notice filed under the Corporations Information Act, whichever is the more current.

A notice or document sent by mail to a shareholder or director of the Corporation is deemed to be received by the addressee on the fifth day after mailing.

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Notwithstanding the foregoing, a notice or document required or permitted to be sent under sections 262 and 263 of the Act may be sent by electronic means in accordance with the Electronic Commerce Act, 2000.

17.2 Failure to Locate Shareholder

If the Corporation sends a notice or document to a shareholder and the notice or document is returned on three consecutive occasions because the shareholder cannot be found, the Corporation is not required to send any further notices or documents to the shareholder until the shareholder informs the Corporation in writing of the shareholder’s new address.

17.3 Shares Registered in More than one Name

All notices or documents shall, with respect to any shares in the capital of the Corporation registered in more than one name, be sent to whichever of such persons is named first in the records of the Corporation and any notice or document so sent shall be sufficient notice of delivery of such document to all the holders of such shares.

17.4 Persons Becoming Entitled by Operation of Law

Every person who by operation of law, transfer or by any other means whatsoever shall become entitled to any shares in the capital of the Corporation shall be bound by every notice or document in respect of such shares which prior to his or her name and address being entered on the records of the Corporation in respect of such shares shall have been duly sent to the person or persons from whom such person derives his or her title to such shares.

17.5 Signatures upon Notices

The signature of any director or officer of the Corporation upon any notice need not be a manual signature.

17.6 Computation of Time

Where a given number of days’ notice or notice extending over any period is required to be given under any provisions of the articles or by-laws of the Corporation, the day the notice is sent shall, unless it is otherwise provided by applicable law, be counted in such number of days or other period.

17.7 Proof of Service

A certificate of any officer of the Corporation in office at the time of the making of the certificate or of an agent of the Corporation as to facts in relation to the mailing or delivery or sending of any notice or document to any shareholder, director, officer or auditor of the Corporation or any other person or publication of any notice or document shall be conclusive evidence thereof and shall be binding on every shareholder, director, officer or auditor of the Corporation or other person, as the case may be.

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Section 18
CUSTODY OF SECURITIES

All securities (including warrants) owned by the Corporation may be lodged (in the name of the Corporation) with a chartered bank or a trust company or in a safety deposit box or with such other depositaries or in such other manner as may be determined from time to time by any officer or director.

All securities (including warrants) belonging to the Corporation may be issued and held in the name of a nominee or nominees of the Corporation (and if issued or held in the names of more than one nominee shall be held in the names of the nominees jointly with right of survivorship) and shall be endorsed in blank with endorsement guaranteed in order to enable transfer thereof to be completed and registration thereof to be effected.

Section 19
EXECUTION OF CONTRACTS, ETC.

Contracts, documents or instruments requiring the signature of the Corporation may be signed by any director or officer alone or any person or persons authorized by resolution of the directors and all contracts, documents or instruments so signed shall be binding upon the Corporation without any further authorization or formality. The directors are authorized from time to time by resolution to appoint any officer or officers or any other person or persons on behalf of the Corporation either to sign contracts, documents or instruments generally or to sign specific contracts, documents or instruments.

The corporate seal (if any) of the Corporation may be affixed by any director or officer to contracts, documents or instruments signed by such director or officer as aforesaid or by an officer or officers, person or persons appointed as aforesaid by resolution of the directors.

The term “contracts, documents or instruments” as used in this by-law shall include notices, deeds, mortgages, hypothecs, charges, cheques, drafts, orders for the payment of money, notes, acceptances, bills of exchange, conveyances, transfers and assignments of property, real or personal, immovable or movable, agreements, releases, receipts and discharges for the payment of money or other obligations, conveyances, transfers and assignments of securities and all paper writings.

The signature or signatures of any director or officer or any other person or persons appointed as aforesaid by resolution of the directors may be printed, engraved, lithographed or otherwise mechanically or electronically reproduced upon all contracts, documents or instruments executed or issued by or on behalf of the Corporation and all contracts, documents or instruments on which the signature or signatures of any of the foregoing persons shall be so reproduced, shall be as valid to all intents and purposes as if they had been signed manually and notwithstanding that the persons whose signature or signatures is or are so reproduced may have ceased to hold office at the date of the delivery or issue of such contracts, documents or instruments. The delivery of an executed copy of any and all by-laws, minutes of meetings, resolutions, consents, instruments or like documents required by the Act to be kept with the records of the Corporation in counterparts, by facsimile or by electronic transmission shall be deemed to be the equivalent of the delivery of an original executed copy thereof and the counterparts together shall constitute one and the same document.

Section 20
FISCAL PERIOD

The fiscal period of the Corporation shall terminate on such day in each year as the board may from time to time by resolution determine.

Section 21
REPEAL OF PREVIOUS BY-LAWS

The Corporation’s former By-Law No. 1 (the “Former By-Law No. 1”) is repealed as of the coming into force of this new By-Law No. 1 (the “New By-Law No. 1”). The repeal shall not affect the previous operation of the Former By- Law so repealed or affect the validity of any act done or right, privilege, obligation or liability acquired or incurred under, or the validity of any contract or agreement made pursuant to, the repealed Former By-Law before its repeal.

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EX-3.3

Exhibit 3.3

  Ministry of Public and Business Service Delivery
Ministère des Services au public et aux entreprises

Certificate of Amalgamation by Arrangement Certificat de fusion par arrangement

Business Corporations Act Loi sur les sociétés par actions

BOREALIS FOODS INC.

Corporation Name / Dénomination sociale

1000799708

Ontario Corporation Number / Numéro de société de l’Ontario

This is to certify that these articles are effective on La présente vise à attester que ces statuts entreront en vigueur le

February 07, 2024 / 07 février 2024

Director / Directeur

Business Corporations Act / Loi sur les sociétés par actions

This Certificate of Amalgamation pertains to an Arrangement under OCN 1000397116   The Certificate of Amalgamation by Arrangement is not complete without the Articles of Amalgamation   Certified a true copy of the record of the Ministry of Public and Business Service Delivery.   Le présent certificat de fusion concerne l’arrangement en vertu du NMO 1000397116   Le certificat de fusion par arrangement n’est pas complet sans les statuts de fusion   Copie certifiée conforme du dossier du ministère des Services au public et aux entreprises.

Director/Registrar	Directeur ou registrateur

BCA - Articles of Amalgamation by Arrangement - BOREALIS FOODS INC. - OCN:1000799708 - February 07, 2024

  Ministry of Public and Business Service Delivery

Articles of Amalgamation by Arrangement

Business Corporations Act

1. Amalgamated Corporation Name

BOREALIS FOODS INC.

2. Registered Office Address

1540 Cornwall Road, 104, Oakville, Ontario, Canada, L6J 7W5

3. Number of Directors
Minimum/Maximum	Min 3 / Max 13
4. The director(s) is/are:
Full Name	ERTHARIN COUSIN
Resident Canadian	No
Address for Service	1540 Cornwall Road, 104, Oakville, Ontario, Canada, L6J7W5
Full Name	BARTHELEMY HELG
Resident Canadian	No
Address for Service	1540 Cornwall Road, 104, Oakville, Ontario, Canada, L6J7W5
Full Name	SHUKHRAT IBRAGIMOV
Resident Canadian	No
Address for Service	1540 Cornwall Road, 104, Oakville, Ontario, Canada, L6J7W5
Full Name	SHIV VIKRAM KHEMKA
Resident Canadian	No
Address for Service	1540 Cornwall Road, 104, Oakville, Ontario, Canada, L6J7W5

The endorsed Articles of Amalgamation are not complete without the Certificate of Amalgamation.

Certified a true copy of the record of the Ministry of Public and Business Service Delivery.

Director/Registrar, Ministry of Public and Business Service Delivery

Page 1 of 5

BCA - Articles of Amalgamation by Arrangement - BOREALIS FOODS INC. - OCN:1000799708 - February 07, 2024

Full Name	KANAT MYNZHANOV
Resident Canadian	No
Address for Service	1540 Cornwall Road, 104, Oakville, Ontario, Canada, L6J7W5
Full Name	STEVEN OYER
Resident Canadian	No
Address for Service	1540 Cornwall Road, 104, Oakville, Ontario, Canada, L6J7W5
Full Name	REZA SOLTANZADEH
Resident Canadian	No
Address for Service	1540 Cornwall Road, 104, Oakville, Ontario, Canada, L6J7W5

5. Method of Amalgamation

A. Amalgamation Approval

The amalgamation has been duly adopted by the shareholders under subsection 182 (3) of the Business Corporations Act – see Plan of Arrangement

The endorsed Articles of Amalgamation are not complete without the Certificate of Amalgamation.

Certified a true copy of the record of the Ministry of Public and Business Service Delivery.

Director/Registrar, Ministry of Public and Business Service Delivery

Page 2 of 5

BCA - Articles of Amalgamation by Arrangement - BOREALIS FOODS INC. - OCN:1000799708 - February 07, 2024

The Name, OCN, and Date of Adoption/Approval for each amalgamating corporation are as follows:

Corporation Name	OCN	Date of Adoption/Approval
BOREALIS FOODS INC.	1000799591	January 30, 2024
OXUS ACQUISITION CORP.	1000789352	January 30, 2024

6. Restrictions, if any, on business the corporation may carry on or on powers the corporation may exercise. If none, enter “None”:

SEE PLAN OF ARRANGEMENT

7. The classes and any maximum number of shares that the corporation is authorized to issue:

SEE PLAN OF ARRANGEMENT

8. Rights, privileges, restrictions and conditions (if any) attaching to each class of shares and directors’ authority with respect to any class of shares which may be issued in series. If there is only one class of shares, enter “Not Applicable”:

SEE PLAN OF ARRANGEMENT

9. The issue, transfer or ownership of shares is/is not restricted and the restrictions (if any) are as follows. If none, enter “None”:

SEE PLAN OF ARRANGEMENT

10. Other provisions:

SEE PLAN OF ARRANGEMENT

The articles have been properly executed by the required person(s).

The endorsed Articles of Amalgamation are not complete without the Certificate of Amalgamation.

Certified a true copy of the record of the Ministry of Public and Business Service Delivery.

Director/Registrar, Ministry of Public and Business Service Delivery

Page 3 of 5

BCA - Articles of Amalgamation by Arrangement - BOREALIS FOODS INC. - OCN:1000799708 - February 07, 2024

Supporting Document – Exhibit “A” – Copy of the Plan of Arrangement

The endorsed Articles of Amalgamation are not complete without the Certificate of Amalgamation.

Certified a true copy of the record of the Ministry of Public and Business Service Delivery.

Director/Registrar, Ministry of Public and Business Service Delivery

Page 4 of 5

BCA - Articles of Amalgamation by Arrangement - BOREALIS FOODS INC. - OCN:1000799708 - February 07, 2024

Supporting Document – Exhibit “B” – Certified copy of the Order of the court

The endorsed Articles of Amalgamation are not complete without the Certificate of Amalgamation.

Certified a true copy of the record of the Ministry of Public and Business Service Delivery.

Director/Registrar, Ministry of Public and Business Service Delivery

Page 5 of 5

EXHIBIT A

PLAN OF ARRANGEMENT

PLAN OF ARRANGEMENT
UNDER SECTION 192 OF THE

CANADA BUSINESS CORPORATIONS ACT AND
SECTION 182 OF THE BUSINESS CORPORATIONS ACT (ONTARIO)

ARTICLE 1

INTERPRETATION

Section 1.1 Definitions

Unless indicated otherwise, any capitalized term used herein but not defined shall have the meaning ascribed thereto in the Business Combination Agreement and the following terms shall have the respective meanings set out below (and grammatical variations of such terms shall have corresponding meanings):

“Affiliate” of a specified Person means a Person who, directly or indirectly through one or more intermediaries, Controls, is controlled by, or is under common control with, such specified person.

“Aggregate Transaction Consideration” means a number of New SPAC Shares equal to the quotient of (a) the Company Value divided by (b) Ten United States dollars (USD$10.00).

“Amalco” means the corporation to be formed on the Company Amalgamation.

“Arrangement” means an arrangement of the Company (i) in respect of the steps described in Section 2.3(a) and (b), under Section 192 of the CBCA, and (ii) in respect of the steps described in Section 2.3(c) through (e), under Section 182 of the OBCA, in each case on the terms and subject to the conditions set out in this Plan of Arrangement, subject to any amendments or variations hereto made in accordance with the terms of the Business Combination Agreement or Section 4.1 or made at the direction of the Court in the Final Order with the prior written consent of the Parties, acting reasonably.

“Arrangement Effective Date” means the date shown on each of the CBCA Certificate of Arrangement and the OBCA Certificate of Arrangement giving effect to the Arrangement.

“Arrangement Effective Time” means 5:01 p.m. (Toronto time) on the Arrangement Effective Date, or such other time as the Parties agree to in writing before the Arrangement Effective Date.

“Belphar Note Purchase Agreement” means the note purchase agreement dated February 8, 2023 between the Company and Belphar Ltd. providing for the issuance by the Company of convertible promissory notes in the aggregate amount of USD$20,000,000, as amended, restated, supplemented or otherwise modified from time to time.

1

“Business Combination Agreement” means the business combination agreement made as of February 23, 2023 by and between SPAC, Newco and the Company (including the Exhibits thereto) as it may be amended, restated, modified or supplemented from time to time in accordance with its terms.

“Business Day” means any day on which the principal offices of the SEC in Washington, D.C. are open to accept filings or, in the case of determining a date when any payment is due, any day on which banks are not required or authorized to close in New York, New York, Toronto, Ontario or the Cayman Islands.

“CBCA” means the Canada Business Corporations Act.

“CBCA Articles of Arrangement” means the articles of arrangement of the Company in respect of the Arrangement required to be filed with the Director pursuant to Section 192(6) of the CBCA after the Final Order is made, which shall include this Plan of Arrangement and otherwise be in form and substance satisfactory to the Parties, acting reasonably.

“CBCA Certificate of Arrangement” means the certificate of arrangement to be issued by the Director pursuant to Subsection 192(7) of the CBCA in respect of the CBCA Articles of Arrangement.

“Code” has the meaning ascribed to such term in Section 3.3.

“Company” means Borealis Foods Inc., a corporation incorporated under the CBCA.

“Company Amalgamation” means the amalgamation of Newco and the Company, as described in Section 2.3(c).

“Company Amalgamation Effective Time” means the time at which the step described in Section 2.3(c) becomes effective hereunder.

“Company Arrangement Resolution” means the special resolution of the Company Shareholders approving this Plan of Arrangement to be considered and, if thought fit, passed by the requisite majority of the Company Shareholders, either at the Company Shareholders Meeting or unanimously in writing, in accordance with applicable Law and the terms of the Interim Order.

“Company Convertible Instruments” means the convertible financing instruments of the Company, including the Sponsor Convertible Notes, that are being converted into Company Shares immediately prior to the Company Amalgamation under this Plan of Arrangement as set forth in Section 1.01 of the Company Disclosure Schedule.

“Company Fully-Diluted Number” means, without duplication, the aggregate number of Company Shares issued and outstanding immediately prior to the Company Amalgamation Effective Time, which, for greater certainty, will include the Company Shares issued pursuant to Section 2.3(a) and Section 2.3(b).

2

“Company Incentive Plan” means the Employee Stock Option Plan of the Company, dated January 6, 2022.

“Company Optionholder” means a holder of Company Options.

“Company Options” means the options granted by the Company to certain employees, personnel or service providers to purchase Company Shares, whether or not exercisable and whether or not vested, immediately prior to the Closing under the Company Incentive Plan.

“Company Securityholders” means, collectively, the Company Shareholders, the Company Optionholders and the holders of Company Convertible Instruments.

“Company Shareholders” means, collectively, the holders of the Company Shares.

“Company Shareholders Meeting” means the meeting of the Company Shareholders, including any adjournment or postponement thereof in accordance with the terms of the Business Combination Agreement, that is to be convened as provided by the Interim Order and applicable Law to consider, and if deemed advisable, to approve the Company Arrangement Resolution.

“Company Shares” means, collectively, all of the issued and outstanding Class A, Class B, Class C and Class D common shares of the Company.

“Control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, or as trustee or executor, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise.

“Conversion Agreements” means, as applicable, all agreements, if any, executed and delivered by the Company, SPAC and certain holders of Company Convertible Instruments prior to Closing, pursuant to which the applicable parties thereto have agreed, among other things, that all or a portion of the outstanding principal and accrued interest under such Company Convertible Instruments shall, on the terms and subject to the conditions of the Business Combination Agreement, this Plan of Arrangement and the applicable Conversion Agreement (including, for the avoidance of doubt, the Sponsor Support Agreement), convert, in whole or in part, into Company Shares, immediately prior to the Company Amalgamation under this Plan of Arrangement.

“Court” means the Ontario Superior Court of Justice (Commercial List), or other court as applicable.

“Director” means the Director appointed pursuant to Section 260 of the CBCA or Section 278 of the OBCA, as the context requires.

“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

3

“Final Order” means the final order of the Court pursuant to Subsection 192(4) of the CBCA and Subsection 182(5) of the OBCA in a form acceptable to the Parties, each acting reasonably, approving the Arrangement, as such order may be amended, modified, supplemented or varied by the Court (with the consent of the Parties, each acting reasonably) at any time prior to the Arrangement Effective Date or, if appealed, then, unless such appeal is withdrawn, abandoned or denied, as affirmed or as amended (provided that any such amendment is acceptable to the Parties, each acting reasonably) on appeal.

“Governmental Authority” means: (a) any court, tribunal, judicial body or arbitral body or arbitrator; (b) any domestic or foreign government or supranational body or authority whether multinational, national, federal, provincial, territorial, state, municipal or local and any governmental agency, governmental authority, governmental body, governmental bureau, governmental department, governmental tribunal or governmental commission of any kind whatsoever; (c) any subdivision or authority of any of the foregoing; (d) any quasi-governmental or private body or public body exercising any regulatory, administrative, expropriation or taxing authority under or for the account of the foregoing; (e) any stock or securities exchange; and (f) any public utility authority.

“Interim Order” means the interim order of the Court pursuant to Subsection 192(4) of the CBCA and Subsection 182(5) of the OBCA in a form acceptable to the Parties, each acting reasonably, providing for, among other things, the calling and holding of the Company Shareholders Meeting, as such order may be amended, modified, supplemented or varied by the Court with the consent of the Parties, each acting reasonably.

“Lien” means any lien, security interest, mortgage, pledge, adverse claim or other encumbrance of any kind that secures the payment or performance of an obligation (other than those created under applicable securities Laws).

“New Investor Convertible Notes” means, collectively, the convertible promissory notes issued by the Company (i) to Belphar Ltd. pursuant to the Belphar Note Purchase Agreement and (ii) to any other New Investors during the period from the date of the Business Combination Agreement until the Closing pursuant to the New Investor Note Purchase Agreement.

“New Investor Note Purchase Agreement” means, collectively, note purchase, subscription or other similar agreements providing for the issuance by the Company of convertible notes to other New Investors on terms and conditions substantially similar to the terms and conditions of the Sponsor Note Purchase Agreement.

“New SPAC” means SPAC as the entity that domesticates and continues from the Cayman Islands as a corporation existing under the Laws of the Province of Ontario, Canada after giving effect to the Continuance.

“New SPAC Amalco” has the meaning ascribed to such term in Section 2.3(d).

“New SPAC Amalgamation” means the amalgamation of New SPAC and Amalco, as described in Section 2.3(d).

“New SPAC Amalgamation Effective Time” means the time at which the step described in Section 2.3(d) becomes effective hereunder.

4

“New SPAC Shares” means common shares of New SPAC, after giving effect to the Continuance.

“Newco” means 1000397116 Ontario Inc., a corporation incorporated under the OBCA.

“OBCA” means the Business Corporations Act (Ontario).

“OBCA Articles of Arrangement” means the articles of arrangement of the Company in respect of the Arrangement required to be filed with the Director pursuant to Section 183(1) of the OBCA after the Final Order is made, which shall include this Plan of Arrangement and otherwise be in form and substance satisfactory to the Parties, acting reasonably.

“OBCA Certificate of Arrangement” means the certificate of arrangement to be issued by the Director pursuant to Subsection 183(2) of the OBCA in respect of the OBCA Articles of Arrangement.

“Option Exercise Price” means $0.0001.

“Parties” means, collectively, the Company and SPAC, and “Party” means either of them.

“Per Share Exchange Ratio” means the number obtained by dividing the Aggregate Transaction Consideration by the Company Fully-Diluted Number.

“Person” means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including, without limitation, a “person” as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government.

“Plan of Arrangement” means this plan of arrangement, subject to any amendments or variations made in accordance with the Business Combination Agreement or Section 4.1 or made at the direction of the Court in the Final Order with the prior written consent of the Parties, each acting reasonably.

“Remaining Company Convertible Instruments” means the convertible instruments, set forth in Section 1.01 of the Company Disclosure Schedule, under which the specified portion of principal and accrued interest will remain outstanding following the completion of the Arrangement in accordance with the Business Combination Agreement.

“SEC” means the United States Securities and Exchange Commission.

“SPAC” means Oxus Acquisition Corp., an exempted company limited by shares incorporated under the Laws of the Cayman Islands.

“SPAC Warrant Agreement” means that certain warrant agreement dated September 2, 2021, by and between SPAC and Continental Stock Transfer and Trust Company.

“Sponsor” means Oxus Capital PTE. Ltd.

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“Sponsor Convertible Notes” means the convertible notes issued by the Company to Sponsor pursuant to the Sponsor Note Purchase Agreement.

“Sponsor Note Purchase Agreement” means, collectively, the Note Purchase Agreement between the Company and Sponsor dated as of October 21, 2022 and the Note Purchase Agreement between the Company and Sponsor dated as of November 14, 2022, in each case, as amended, restated, supplemented or otherwise modified from time to time.

“Subsidiary” of the Company, SPAC, Newco or any other Person means an Affiliate Controlled by such person, directly or indirectly, through one or more intermediaries, and “Subsidiaries” means more than one Subsidiary.

“Tax” means all federal, state, provincial, local and non-U.S. income, profits, franchise, receipts, environmental, shares, severances, stamp, payroll, sales, employment, unemployment, disability, use, property, withholding, excise, production, value added, escheat, unclaimed property, occupancy and other taxes, duties or assessments of any nature whatsoever, together with all interest, penalties and additions imposed with respect to such amounts and any interest in respect of such penalties and additions.

“Transfer Agent” means Continental Stock Transfer & Trust Company.

Section 1.2 Certain Rules of Interpretation

In this Plan of Arrangement, unless otherwise specified:

(1) Headings, etc. The division of this Plan of Arrangement into Articles and Sections and the insertion of headings are for convenient reference only and do not affect the construction or interpretation of this Plan of Arrangement.

(2) Currency. All references to “dollars” or to “$” are references to Canadian dollars, unless specified otherwise. In the event that any amounts are required to be converted from a foreign currency to Canadian dollars or vice versa, such amounts shall be converted using the most recent closing exchange rate of The Bank of Canada available before the relevant calculation date.

(3) Gender and Number. Any reference to gender includes all genders. Words importing the singular number only include the plural and vice versa.

(4) Certain Phrases, etc. The words (a) “including”, “includes” and “include” mean “including (or includes or include) without limitation”, (b) “or” is not exclusive, (c) “day” means “calendar day”, (d) “hereof”, “herein”, “hereunder” and words of similar import, shall refer to this Plan of Arrangement as a whole and not to any particular provision of this Plan of Arrangement, (e) “the aggregate of”, “the total of”, “the sum of”, or a phrase of similar meaning means “the aggregate (or total or sum), without duplication, of”, (f) “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends and such phrase shall not mean simply “if”, and (g) unless stated otherwise, “Article” or “Section” followed by a number or letter mean and refer to the specified Article or Section of this Plan of Arrangement.

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(5) Statutes and Rules. Any reference to a statute or to a rule of a self-regulatory organization, including any stock exchange, refers to such statute or rule and all rules, resolutions and regulations, administrative policy statements, instruments, blanket orders, notices, directions and rulings issued or adopted under it, as it or they may have been or may from time to time be amended or re-enacted, unless stated otherwise.

(6) Date for Any Action. If the date on which any action is required to be taken hereunder is not a Business Day, such action shall be required to be taken on the next succeeding day which is a Business Day. Any reference to a number of days shall refer to calendar days unless Business Days are specified.

(7) Time. Time shall be of the essence in every matter or action contemplated hereunder. All times expressed herein are local time in Toronto, Ontario unless otherwise stipulated herein.

ARTICLE 2

THE ARRANGEMENT

Section 2.1 Business Combination Agreement

This Plan of Arrangement is made pursuant to the Business Combination Agreement. If there is any inconsistency or conflict between the provisions of this Plan of Arrangement and the provisions of the Business Combination Agreement, the provisions of this Plan of Arrangement shall govern.

Section 2.2 Binding Effect

This Plan of Arrangement and the Arrangement shall become effective at the Arrangement Effective Time, and shall be binding on SPAC, Newco, the Company, all Company Shareholders, all Company Optionholders, all holders of Company Convertible Instruments, all holders of Remaining Company Convertible Instruments, all holders of New SPAC Shares, the registrar and transfer agent of the Company, the Transfer Agent and all other Persons at and after the Arrangement Effective Time, without any further act or formality required on the part of any Person.

Section 2.3 Arrangement

Commencing at the Arrangement Effective Time, each of the following events shall occur sequentially in the order set out below without any further authorization, act or formality, in each case, unless stated otherwise, effective as at five-minute intervals starting at the Arrangement Effective Time:

(a) pursuant to Section 192 of the CBCA, all applicable Company Convertible Instruments outstanding immediately prior to the Arrangement Effective Time (excluding, for greater certainty, the Remaining Company Convertible Instruments and the New Investor Convertible Notes) shall, without further action by or on behalf of a holder of Company Convertible Instruments, be converted into Company Shares pursuant to their terms and the terms of any Conversion Agreements;

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(b) pursuant to Section 192 of the CBCA, all Company Options outstanding immediately prior to the Arrangement Effective Time (whether vested or unvested), notwithstanding the terms of the Company Incentive Plan or any applicable award agreements in relation thereto, shall be deemed to be unconditionally vested and exercisable, and each Company Optionholder shall, without any further action by or on behalf of such Company Optionholder, be deemed to have exercised such Company Optionholder’s Company Options in exchange for such number of Company Shares (rounded down to the nearest whole Company Share) having an aggregate fair market value equal to (A) the aggregate fair market value of the Company Shares underlying such Company Optionholder’s Company Options, minus (B) the aggregate Option Exercise Price in respect of such Company Optionholder’s Company Options, and none of the Company or SPAC shall be obligated to pay such Company Optionholder any amount in respect of such Company Option; and, with respect to each Company Option that is exercised pursuant to this Section 2.3(b), as of the effective time of such exercise: (i) the holder thereof shall cease to be the holder of such Company Option, (ii) the holder thereof shall cease to have any rights as a holder in respect of such Company Option or under the Company Incentive Plan, as applicable, other than the right to receive the consideration to which such holder is entitled pursuant to this Section 2.3(b), (iii) such holder’s name shall be removed from the applicable register, and (iv) all agreements, grants and similar instruments relating thereto shall be cancelled;

(c) Newco and the Company shall be amalgamated pursuant to Subsection 182(1)(d) of the OBCA to form Amalco in such a manner that, upon the Company Amalgamation becoming effective:

(i) Name: the name of Amalco shall be “Borealis Foods Inc.”;

(ii) Registered Office: the registered office of Amalco shall be 1540 Cornwall Road, Suite 104, Oakville, Ontario L6J 7W5;

(iii) Number of Directors: the number of directors of Amalco shall consist of a minimum number of three (3) directors and a maximum number of ten (10) directors. Until changed by the shareholders of Amalco, or by directors of Amalco if authorized to do so, the number of directors of Amalco shall be seven (7);

(iv) Initial Directors: the initial directors of Amalco shall be Reza Soltanzadeh, Barthelemy Helg, Kanat Mynzhanov, Shiv Vikram Khemka, Shukhrat Ibragimov, Steven Oyer and Ertharin Cousin and such Persons shall hold office until the next annual meeting of shareholders of Amalco or until their successors are appointed or elected;

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(v) Restrictions on Business and Powers: there shall be no restrictions on the business Amalco may carry on or the powers it may exercise;

(vi) Authorized Capital and Rights, Privileges, Restrictions and Conditions: Amalco’s share capital will be comprised of common shares having the same terms and conditions as the common shares of Newco;

(vii) Restrictions on the Issue, Transfer or Ownership of Shares: there shall be no restrictions on the issue, transfer or ownership of shares of Amalco;

(viii) By-laws: the by-laws of Amalco shall be the by-laws of Newco, mutatis mutandis;

(ix) Effect of Amalgamation:

(A) Newco and the Company shall cease to exist as entities separate from Amalco;

(B) Amalco shall assume all the property, rights, privileges and franchises and become subject to all liabilities, including civil, criminal and quasi-criminal, and all contracts, disabilities and debts of each of the predecessor corporations, including the Company’s obligations under the Remaining Company Convertible Instruments and the New Investor Convertible Notes;

(C) a conviction against, or ruling, order or judgment in favour of or against Newco or the Company may be enforced by or against Amalco; and

(D) Amalco shall be deemed to be the party plaintiff or the party defendant, as the case may be, in any civil action commenced by or against Newco and the Company before the amalgamation has become effective;

(x) Articles: the articles of incorporation of Newco shall be deemed to continue to be the articles of amalgamation of Amalco;

(xi) Exchange of Shares:

(A) without any action on the part of New SPAC, Newco, the Company or the Company Shareholders, each Company Share shall be exchanged for, in accordance with the terms of the Business Combination Agreement, this Plan of Arrangement and the Exchange Spreadsheet, the number of New SPAC Shares equal to the Per Share Exchange Ratio; and

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(B) each common share of Newco held by New SPAC shall be exchanged for a common share of Amalco on a one-for-one basis;

(xii) Stated Capital: the aggregate stated capital of the common shares of Amalco will be an amount equal to $1.00;

(d) New SPAC and Amalco shall amalgamate to form one corporate entity pursuant to Subsection 182(1)(c) of the OBCA, including that (x) notwithstanding the continuation of any corporate identification number, the requirement for a new financial year-end or the administrative implementation of the step described in this Section 2.3(d), the legal existence of New SPAC shall continue, (y) the separate legal existence of Amalco shall cease without Amalco being liquidated or wound up, and (z) New SPAC shall survive the amalgamation (New SPAC, as such surviving entity, “New SPAC Amalco”) (and for the avoidance of doubt, the New SPAC Amalgamation shall qualify as an amalgamation as defined in subsection 87(1) of the ITA). Without limiting the foregoing, upon the New SPAC Amalgamation becoming effective, the New SPAC Amalgamation will, as elaborated below, be effected in such a manner that by virtue or because of the New SPAC Amalgamation (1) all of the property of each of New SPAC and Amalco (other than amounts receivable from New SPAC or Amalco, as applicable, or shares in the capital stock of New SPAC) immediately prior to the New SPAC Amalgamation shall be held by New SPAC Amalco immediately following the New SPAC Amalgamation, as elaborated below, (2) all of the obligations and the liabilities of each of New SPAC and Amalco (other than amounts payable to New SPAC or Amalco) immediately before the New SPAC Amalgamation shall be the obligations and the liabilities of New SPAC Amalco immediately following the New SPAC Amalgamation, as elaborated below, and (3) any obligation of New SPAC or Amalco to pay an amount to the other party will be settled and extinguished as a result of the New SPAC Amalgamation. Subject to the foregoing, at and after the New SPAC Amalgamation becoming effective:

(i) Name: the name of New SPAC Amalco shall be “Borealis Foods Inc.”;

(ii) Registered Office: the registered office of New SPAC Amalco shall be 1540 Cornwall Road, Suite 104, Oakville, Ontario L6J 7W5;

(iii) Number of Directors: the number of directors of New SPAC Amalco shall consist of a minimum number of three (3) directors and a maximum number of thirteen (13) directors. Until changed by the shareholders of New SPAC Amalco, or by directors of New SPAC Amalco if authorized to do so, the number of directors of New SPAC Amalco shall be seven (7);

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(iv) Initial Directors: the initial directors of New SPAC Amalco shall be Reza Soltanzadeh, Barthelemy Helg, Kanat Mynzhanov, Shiv Vikram Khemka, Shukhrat Ibragimov, Steven Oyer and Ertharin Cousin and such Persons shall hold office until the next annual meeting of shareholders of New SPAC Amalco or until their successors are appointed or elected;

(v) Restrictions on Business and Powers: there shall be no restrictions on the business New SPAC Amalco may carry on or the powers it may exercise;

(vi) Authorized Capital and Rights, Privileges, Restrictions and Conditions: New SPAC Amalco’s share capital will be comprised of common shares and preferred shares having the terms and conditions attached as Schedule “A” hereto;

(vii) Restrictions on the Issue, Transfer or Ownership of Shares: there shall be no restrictions on the issue, transfer or ownership of shares of New SPAC Amalco;

(viii) By-laws: the by-laws of New SPAC Amalco shall be the by-laws of New SPAC, mutatis mutandis;

(ix) Effect of Amalgamation:

(A) New SPAC Amalco shall continue to own and hold all of the property of New SPAC and shall become the owner and holder of all of the property of Amalco, and, without limiting the provisions hereof, all rights of creditors or others will be unimpaired by the New SPAC Amalgamation and all obligations of the Parties, whether arising by contract or otherwise, may be enforced against New SPAC Amalco to the same extent as if such obligations had been incurred or contracted by New SPAC Amalco;

(B) New SPAC Amalco shall continue to be liable for the obligations of New SPAC and shall become liable for the obligations of Amalco, including Amalco’s obligations under the Remaining Company Convertible Instruments and the New Investor Convertible Notes, other than any obligations that are settled and extinguished in accordance with Section 2.3(d)(3);

(C) for greater certainty, and except as otherwise provided for herein in relation to Amalco, the New SPAC Amalgamation shall not constitute a transfer or assignment of the rights or obligations of any Party under any contracts, permits and interests of the Parties;

(D) a conviction against, or ruling, order or judgment in favour of or against New SPAC or Amalco may be enforced by or against New SPAC Amalco; and

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(E) New SPAC Amalco shall be deemed to be the party plaintiff or the party defendant, as the case may be, in any civil action commenced by or against New SPAC and Amalco before the amalgamation has become effective;

(x) Articles: the articles of continuance of New SPAC shall be deemed to continue to be the articles of amalgamation of New SPAC Amalco;

(xi) Cancellation and Continuation of Shares:

(A) each issued and outstanding share in the capital of Amalco immediately prior to the amalgamation will be cancelled without any repayment of capital in respect thereof;

(B) no securities will be issued and no assets will be distributed by New SPAC Amalco in connection with the amalgamation; and

(C) the issued and outstanding common shares of New SPAC immediately prior to the amalgamation will survive and continue to be common shares of New SPAC Amalco without amendment;

(xii) Stated Capital: the stated capital of the common shares of New SPAC Amalco will be an amount equal to the stated capital of the common shares of New SPAC immediately before the amalgamation;

(e) the New Investor Convertible Notes shall convert into common shares of New SPAC Amalco pursuant to the terms of the Belphar Note Purchase Agreement or the New Investor Note Purchase Agreement, as applicable;

provided that none of the foregoing shall occur unless all of the foregoing occur.

ARTICLE 3

EXCHANGE OF SHARES

Section 3.1 Payment of Aggregate Transaction Consideration

(1) On the Arrangement Effective Date, SPAC shall direct the Transfer Agent pursuant to irrevocable instructions to issue the number of New SPAC Shares sufficient to deliver the Aggregate Transaction Consideration to the Company Shareholders in accordance with Section 2.3(c)(xi)(A).

(2) The Company is in possession of certificates representing all of the Company Shares outstanding on the Arrangement Effective Date. Upon the step described in Section 2.3(c) becoming effective, (i) the Company shall take all necessary steps to cancel each certificate, agreement or other instrument (as applicable) which, immediately prior thereto, represented outstanding Company Shares; and (ii) the Transfer Agent shall deliver book-entry only entries representing the New SPAC Shares that such Company Shareholder is entitled to receive under the Arrangement, less any amounts required to be withheld pursuant to Section 3.3.

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(3) At all times after the Arrangement Effective Time, each certificate, agreement or other instrument (as applicable) which, immediately prior thereto, represented outstanding Company Shares shall cease to represent a claim by or interest of any former holder thereof of any kind or nature against or in the Company or SPAC other than the right to receive the New SPAC Shares which such holder is entitled to receive pursuant to this Plan of Arrangement.

(4) No Company Securityholder shall be entitled to receive any consideration with respect to the Company Shares or the Company Convertible Instruments, as applicable, other than the consideration to which such holder is entitled to receive under the Arrangement and, for greater certainty, no such holder will be entitled to receive any interest, dividend, premium or other payment in connection therewith.

Section 3.2 No Fractional Shares

In no event shall a Company Securityholder be entitled to a fractional New SPAC Share. Where the aggregate number of New SPAC Shares to be issued to a Company Securityholder pursuant to the Business Combination Agreement, this Plan of Arrangement and the Exchange Spreadsheet would result in a fraction of a New SPAC Share being issuable, the number of New SPAC Shares to be received by such Company Securityholder shall be rounded up or down to the nearest whole New SPAC Share, with a fraction of 0.5 rounded up. No cash settlements shall be made with respect to fractional shares eliminated by rounding.

Section 3.3 Withholding Rights

Each of the Company, SPAC and New SPAC, as applicable, shall be entitled to deduct or withhold from the consideration otherwise payable pursuant to this Plan of Arrangement to any Person such amounts as it is required to deduct or withhold with respect to the making of such payment under the United States Internal Revenue Code of 1986, as amended (the “Code”), the ITA and other applicable Canadian Law, or other provision of U.S. state, local or non-U.S. Tax Law; provided, however, except with respect to the payment or issuance of consideration as compensation for services, SPAC and New SPAC, as applicable, shall reasonably cooperate with Company Shareholders to establish any available reduction in or exemption from such intended deduction or withholding, and SPAC and New SPAC, as applicable, shall use commercially reasonable efforts to provide such Party notice three (3) days prior to any withholding so that such person can provide any documents necessary; provided further, and notwithstanding the foregoing, SPAC and New SPAC, as applicable, shall withhold such amounts as may be required to be withheld pursuant to Section 1445 of the Code and shall reasonably cooperate with the Company to reduce or eliminate any such withholding in accordance with applicable Law. The Company, SPAC or New SPAC, as the case may be, is hereby authorized to dispose of such portion of any share or other security payable, issuable or transferable pursuant to this Plan of Arrangement as is necessary to provide sufficient funds to the Company, SPAC or New SPAC, as the case may be, to enable it to comply with such deduction and withholding requirement and the Company, SPAC or New SPAC, as the case may be, shall use commercially reasonable efforts to notify the other Person of such disposition and remit the applicable portion of the net proceeds of such sale to the appropriate Governmental Authority and, if applicable, any portion of such net proceeds that is not required to be so remitted shall be paid to the Person entitled to receive such consideration. To the extent that amounts are so deducted or withheld by the Company, SPAC or New SPAC, as the case may be, such deducted or withheld amounts shall be treated for all purposes of this Plan of Arrangement as having been paid to the holder of the Company Shares, Company Convertible Instruments and/or Company Options (or intended recipients of compensatory payments) in respect of which such deduction and withholding was made by the Company or New SPAC, as the case may be.

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Section 3.4 No Liens

Any exchange or transfer of securities pursuant to this Plan of Arrangement shall be free and clear of any Liens or other claims of third parties of any kind.

Section 3.5 Paramountcy

From and after the Arrangement Effective Time: (a) this Plan of Arrangement shall take precedence and priority over any and all Company Shares, Company Options and Company Convertible Instruments issued or outstanding prior to the Arrangement Effective Time; and (b) the rights and obligations of the Company Shareholders, the Company Optionholders, the holders of Company Convertible Instruments, the Company and its Subsidiaries, SPAC and its Affiliates, the Transfer Agent and any transfer agent or other depositary therefor in relation to this Plan of Arrangement shall be solely as provided for in this Plan of Arrangement.

ARTICLE 4

AMENDMENTS

Section 4.1 Amendments to Plan of Arrangement

(1) The Parties may amend, modify and/or supplement this Plan of Arrangement at any time and from time to time prior to the Arrangement Effective Time; provided that each such amendment, modification and/or supplement must be (a) set out in writing, (b) approved by the Parties, each acting reasonably, (c) filed with the Court and, if made following the Company Shareholders Meeting, approved by the Court, and (d) communicated to the Company Securityholders if and as required by the Court.

(2) Any amendment, modification or supplement to this Plan of Arrangement may be proposed by either of the Parties at any time prior to the Company Shareholders Meeting or the SPAC Shareholders’ Meeting (provided that the other Party has consented thereto) with or without any other prior notice or communication, and if so proposed and accepted by the Persons voting at the Company Shareholders Meeting or the SPAC Shareholders’ Meeting, as applicable (other than as may be required under the Interim Order), shall become part of this Plan of Arrangement for all purposes.

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(3) Any amendment, modification or supplement to this Plan of Arrangement that is approved or directed by the Court following the Company Shareholders Meeting and the SPAC Shareholders’ Meeting shall be effective only if (a) it is consented to in writing by each of the Parties (in each case, acting reasonably), and (b) if required by the Court, it is consented to by some or all of the Company Securityholders or the SPAC Shareholders voting in the manner directed by the Court.

(4) Any amendment, modification or supplement to this Plan of Arrangement may be made following the granting of the Final Order without filing such amendment, modification or supplement with the Court or seeking Court approval; provided that (i) it concerns a matter which, in the reasonable opinion of the Parties, is of an administrative nature required to better give effect to the implementation of this Plan of Arrangement and is not adverse to the interest of any Company Securityholder or (ii) is an amendment contemplated in Section 4.1(5).

(5) Any amendment, modification or supplement to this Plan of Arrangement may be made following the Arrangement Effective Date unilaterally by New SPAC; provided that it concerns a matter which, in the reasonable opinion of New SPAC, is of an administrative nature required to better give effect to the implementation of this Plan of Arrangement and is not adverse to the economic interest of any former Company Securityholder.

(6) This Plan of Arrangement may be withdrawn prior to the Arrangement Effective Time in accordance with the terms of the Business Combination Agreement.

ARTICLE 5

FURTHER ASSURANCES

Section 5.1 Further Assurances

Notwithstanding that the transactions and events set out in this Plan of Arrangement shall occur and shall be deemed to occur in the order set out in this Plan of Arrangement without any further act or formality, following the Arrangement Effective Time, each of the Parties shall make, do and execute, or cause to be made, done and executed, all such further acts, deeds, agreements, transfers, assurances, instruments or documents as may reasonably be required or advisable by either of them in order to further document or evidence any of the transactions or events set out in this Plan of Arrangement.

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SCHEDULE “A”

TERMS AND CONDITIONS OF COMMON SHARES AND PREFERRED

SHARES OF NEW SPAC AMALCO

(See attached.)

A-1

SCHEDULE OF SHARE CAPITAL

The authorized capital of the Corporation shall consist of:

(a) one class of shares, to be designated as “Common Shares”, in an unlimited number; and

(b) one class of shares, to be designated as “First Preferred Shares”, issuable in series, to be limited in number to an amount equal to not more than 20% of the number of issued and outstanding Common Shares at the time of issuance of any First Preferred Shares,

such shares having attached thereto the following rights, privileges, restrictions and conditions.

COMMON SHARES

The rights, privileges, restrictions and conditions attaching to the Common Shares shall be as follows:

1. Voting

The holders of the Common Shares shall be entitled to receive notice of and to attend any meeting of the shareholders of the Corporation, except meetings at which only holders of a different class or series of shares of the Corporation are entitled to vote, and shall be entitled to one vote for each Common Share.

2. Dividends

Subject to the prior rights and privileges attached to any other class or series of shares of the Corporation, the holders of the Common Shares shall be entitled to receive dividends at such times and in such amounts as the directors of the Corporation may in their discretion from time to time declare.

3. Liquidation

Subject to the prior rights and privileges attached to any other class or series of shares of the Corporation, upon the voluntary or involuntary liquidation, dissolution or winding-up of the Corporation or any other distribution of its assets among its shareholders for the purpose of winding up its affairs (such event referred to herein as a “Distribution”), each holder of Common Shares shall have the right to receive, in cash or other assets, for each Common Share held, from out of (but only to the extent of) the remaining property of the Corporation legally available for distribution to shareholders, its pro rata share of such remaining property based on the number of Common Shares held thereby, and shall rank equally with all holders of Common Shares with respect to such Distribution.

FIRST PREFERRED SHARES

The rights, privileges, restrictions and conditions attaching to the First Preferred Shares, as a class, shall be as follows:

1. Issuance in Series

(a) Subject to the filing of Articles of Amendment in accordance with the Business Corporations Act (Ontario) (the “Act”), the Board of Directors may at any time and from time to time issue the First Preferred Shares in one or more series, each series to consist of such number of shares as may, before the issuance thereof, be determined by the Board of Directors.

A-2

(b) Subject to the filing of Articles of Amendment in accordance with the Act and the provisions, the Board of Directors may from time to time fix, before issuance, the designation, rights, privileges, restrictions and conditions attaching to each series of First Preferred Shares including, without limiting the generality of the foregoing, the amount, if any, specified as being payable preferentially to such series on a Distribution; the extent, if any, of further participation on a Distribution; voting rights, if any; and dividend rights (including whether such dividends be preferential, or cumulative or non-cumulative), if any.

2. Dividends

The holders of each series of First Preferred Shares shall be entitled, in priority to holders of Common Shares and any other shares of the Corporation ranking junior to the First Preferred Shares from time to time with respect to the payment of dividends, to be paid rateably with holders of each other series of First Preferred Shares, the amount of accumulated dividends, if any, specified as being payable preferentially to the holders of such series.

3. Liquidation

In the event of a Distribution, holders of each series of First Preferred Shares shall be entitled, in priority to holders of Common Shares and any other shares of the Corporation ranking junior to the First Preferred Shares from time to time with respect to payment on a Distribution, to be paid rateably with holders of each other series of First Preferred Shares the amount, if any, specified as being payable preferentially to the holders of such series on a Distribution.

A-3

Electronically issued / Délivré par voie électronique : 12-Feb-2024 Toronto Superior Court of Justice / Cour supérieure de justice	Court File No./N° du dossier du greffe : CV-24-00712327-00CL
	Court File No. CV-24-00712327-00CL

ONTARIO

SUPERIOR COURT OF JUSTICE

COMMERCIAL LIST

THE HONOURABLE	)	TUESDAY, THE 30th
	)
JUSTICE STEELE	)	DAY OF JANUARY, 2024

IN THE MATTER OF an application under section 192 of the Canada Business Corporations Act, R.S.C. 1985, c. C-44, as amended and section 182 of the Business Corporations Act, R.S.O. 1990, c. B.16, as amended

AND IN THE MATTER OF an application under rules 14.05(2) and 14.05(3) of the Rules of Civil Procedure, R.R.O 1990, Reg. 194, as amended

AND IN THE MATTER OF a proposed arrangement of Borealis Foods Inc. involving Oxus Acquisition Corp. and 1000397116 Ontario Inc.

BOREALIS FOODS INC.

Applicant

FINAL ORDER

THIS APPLICATION made by the Applicant, Borealis Foods Inc. (“Borealis”), pursuant to section 192 of the Canada Business Corporations Act, R.S.C. 1985, c. C-44, as amended (the “CBCA”) and by 1000397116 Ontario Inc. under section 182 of the Business Corporations Act, R.S.O. 1990, c. B.16, as amended (the “OBCA”), was heard this day by videoconference.

ON READING the Notice of Application issued on January 4, 2024, the affidavit of Reza Soltanzadeh sworn January 15, 2024, the affidavit of Pouneh Rahimi sworn January 29, 2024, together with the exhibits thereto, and the Interim Order of Justice Osborne dated January 17, 2024, and

 

Electronically issued / Délivré par voie électronique : 12-Feb-2024
Toronto Superior Court of Justice / Cour supérieure de justice Court File No./N° du dossier du greffe : CV-24-00712327-00CL

ON BEING ADVISED that Borealis intends to rely upon the final order in this Application as a basis of a claim to an exemption from the registration requirements of the United States Securities Act of 1933, as amended, pursuant to section 3(a)(10) thereof, with respect to the securities to be exchanged and/or distributed pursuant to the terms of the Plan of Arrangement, and

ON HEARING the submissions of counsel for Borealis and counsel for Oxus Acquisition Corp. and 1000397116 Ontario Inc. and on being advised that the Director appointed under the CBCA and the Director appointed under the OBCA do not consider it necessary to appear on this application, no-one appearing for any other person, including any securityholder of Borealis, and having determined that the Arrangement, as described in the Plan of Arrangement attached as Schedule “A” to this order is an arrangement for the purposes of section 192 of the CBCA and section 182 of the OBCA and is procedurally and substantively fair and reasonable in accordance with the requirements of those sections,

1. THIS COURT ORDERS that the Arrangement, as described in the Plan of Arrangement attached as Schedule “A” to this order, shall be and is hereby approved.

2.THIS COURT ORDERS that Borealis shall be entitled to seek leave to vary this order upon such terms upon giving such notice as this court may direct, to seek the advice and directions of this court as to the implementation of this order, and to apply for such further order or orders as may be appropriate.

	Digitally signed by Jana Steele Date: 2024.02.12 10:24:14 -05‘00’
The Honourable Justice Steele

Electronically issued / Délivré par voie électronique : 12-Feb-2024
Toronto Superior Court of Justice / Cour supérieure de justice Court File No./N° du dossier du greffe : CV-24-00712327-00CL

SCHEDULE “A”

PLAN OF ARRANGEMENT

PLAN OF ARRANGEMENT
UNDER SECTION 192 OF THE

CANADA BUSINESS CORPORATIONS ACT AND
SECTION 182 OF THE BUSINESS CORPORATIONS ACT (ONTARIO)

ARTICLE 1
INTERPRETATION

Section 1.1 Definitions

Unless indicated otherwise, any capitalized term used herein but not defined shall have the meaning ascribed thereto in the Business Combination Agreement and the following terms shall have the respective meanings set out below (and grammatical variations of such terms shall have corresponding meanings):

“Affiliate” of a specified Person means a Person who, directly or indirectly through one or more intermediaries, Controls, is controlled by, or is under common control with, such specified person.

“Aggregate Transaction Consideration” means a number of New SPAC Shares equal to the quotient of (a) the Company Value divided by (b) Ten United States dollars (USD$10.00).

“Amalco” means the corporation to be formed on the Company Amalgamation.

“Arrangement” means an arrangement of the Company (i) in respect of the steps described in Section 2.3(a) and (b), under Section 192 of the CBCA, and (ii) in respect of the steps described in Section 2.3(c) through (e), under Section 182 of the OBCA, in each case on the terms and subject to the conditions set out in this Plan of Arrangement, subject to any amendments or variations hereto made in accordance with the terms of the Business Combination Agreement or Section 4.1 or made at the direction of the Court in the Final Order with the prior written consent of the Parties, acting reasonably.

“Arrangement Effective Date” means the date shown on each of the CBCA Certificate of Arrangement and the OBCA Certificate of Arrangement giving effect to the Arrangement.

“Arrangement Effective Time” means 5:01 p.m. (Toronto time) on the Arrangement Effective Date, or such other time as the Parties agree to in writing before the Arrangement Effective Date.

“Belphar Note Purchase Agreement” means the note purchase agreement dated February 8, 2023 between the Company and Belphar Ltd. providing for the issuance by the Company of convertible promissory notes in the aggregate amount of USD$20,000,000, as amended, restated, supplemented or otherwise modified from time to time.

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“Business Combination Agreement” means the business combination agreement made as of February 23, 2023 by and between SPAC, Newco and the Company (including the Exhibits thereto) as it may be amended, restated, modified or supplemented from time to time in accordance with its terms.

“Business Day” means any day on which the principal offices of the SEC in Washington, D.C. are open to accept filings or, in the case of determining a date when any payment is due, any day on which banks are not required or authorized to close in New York, New York, Toronto, Ontario or the Cayman Islands.

“CBCA” means the Canada Business Corporations Act.

“CBCA Articles of Arrangement” means the articles of arrangement of the Company in respect of the Arrangement required to be filed with the Director pursuant to Section 192(6) of the CBCA after the Final Order is made, which shall include this Plan of Arrangement and otherwise be in form and substance satisfactory to the Parties, acting reasonably.

“CBCA Certificate of Arrangement” means the certificate of arrangement to be issued by the Director pursuant to Subsection 192(7) of the CBCA in respect of the CBCA Articles of Arrangement.

“Code” has the meaning ascribed to such term in Section 3.3.

“Company” means Borealis Foods Inc., a corporation incorporated under the CBCA.

“Company Amalgamation” means the amalgamation of Newco and the Company, as described in Section 2.3(c).

“Company Amalgamation Effective Time” means the time at which the step described in Section 2.3(c) becomes effective hereunder.

“Company Arrangement Resolution” means the special resolution of the Company Shareholders approving this Plan of Arrangement to be considered and, if thought fit, passed by the requisite majority of the Company Shareholders, either at the Company Shareholders Meeting or unanimously in writing, in accordance with applicable Law and the terms of the Interim Order.

“Company Convertible Instruments” means the convertible financing instruments of the Company, including the Sponsor Convertible Notes, that are being converted into Company Shares immediately prior to the Company Amalgamation under this Plan of Arrangement as set forth in Section 1.01 of the Company Disclosure Schedule.

“Company Fully-Diluted Number” means, without duplication, the aggregate number of Company Shares issued and outstanding immediately prior to the Company Amalgamation Effective Time, which, for greater certainty, will include the Company Shares issued pursuant to Section 2.3(a) and Section 2.3(b).

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“Company Incentive Plan” means the Employee Stock Option Plan of the Company, dated January 6, 2022.

“Company Optionholder” means a holder of Company Options.

“Company Options” means the options granted by the Company to certain employees, personnel or service providers to purchase Company Shares, whether or not exercisable and whether or not vested, immediately prior to the Closing under the Company Incentive Plan.

“Company Securityholders” means, collectively, the Company Shareholders, the Company Optionholders and the holders of Company Convertible Instruments.

“Company Shareholders” means, collectively, the holders of the Company Shares.

“Company Shareholders Meeting” means the meeting of the Company Shareholders, including any adjournment or postponement thereof in accordance with the terms of the Business Combination Agreement, that is to be convened as provided by the Interim Order and applicable Law to consider, and if deemed advisable, to approve the Company Arrangement Resolution.

“Company Shares” means, collectively, all of the issued and outstanding Class A, Class B, Class C and Class D common shares of the Company.

“Control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, or as trustee or executor, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise.

“Conversion Agreements” means, as applicable, all agreements, if any, executed and delivered by the Company, SPAC and certain holders of Company Convertible Instruments prior to Closing, pursuant to which the applicable parties thereto have agreed, among other things, that all or a portion of the outstanding principal and accrued interest under such Company Convertible Instruments shall, on the terms and subject to the conditions of the Business Combination Agreement, this Plan of Arrangement and the applicable Conversion Agreement (including, for the avoidance of doubt, the Sponsor Support Agreement), convert, in whole or in part, into Company Shares, immediately prior to the Company Amalgamation under this Plan of Arrangement.

“Court” means the Ontario Superior Court of Justice (Commercial List), or other court as applicable.

“Director” means the Director appointed pursuant to Section 260 of the CBCA or Section 278 of the OBCA, as the context requires.

“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

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“Final Order” means the final order of the Court pursuant to Subsection 192(4) of the CBCA and Subsection 182(5) of the OBCA in a form acceptable to the Parties, each acting reasonably, approving the Arrangement, as such order may be amended, modified, supplemented or varied by the Court (with the consent of the Parties, each acting reasonably) at any time prior to the Arrangement Effective Date or, if appealed, then, unless such appeal is withdrawn, abandoned or denied, as affirmed or as amended (provided that any such amendment is acceptable to the Parties, each acting reasonably) on appeal.

“Governmental Authority” means: (a) any court, tribunal, judicial body or arbitral body or arbitrator; (b) any domestic or foreign government or supranational body or authority whether multinational, national, federal, provincial, territorial, state, municipal or local and any governmental agency, governmental authority, governmental body, governmental bureau, governmental department, governmental tribunal or governmental commission of any kind whatsoever; (c) any subdivision or authority of any of the foregoing; (d) any quasi-governmental or private body or public body exercising any regulatory, administrative, expropriation or taxing authority under or for the account of the foregoing; (e) any stock or securities exchange; and (f) any public utility authority.

“Interim Order” means the interim order of the Court pursuant to Subsection 192(4) of the CBCA and Subsection 182(5) of the OBCA in a form acceptable to the Parties, each acting reasonably, providing for, among other things, the calling and holding of the Company Shareholders Meeting, as such order may be amended, modified, supplemented or varied by the Court with the consent of the Parties, each acting reasonably.

“Lien” means any lien, security interest, mortgage, pledge, adverse claim or other encumbrance of any kind that secures the payment or performance of an obligation (other than those created under applicable securities Laws).

“New Investor Convertible Notes” means, collectively, the convertible promissory notes issued by the Company (i) to Belphar Ltd. pursuant to the Belphar Note Purchase Agreement and (ii) to any other New Investors during the period from the date of the Business Combination Agreement until the Closing pursuant to the New Investor Note Purchase Agreement.

“New Investor Note Purchase Agreement” means, collectively, note purchase, subscription or other similar agreements providing for the issuance by the Company of convertible notes to other New Investors on terms and conditions substantially similar to the terms and conditions of the Sponsor Note Purchase Agreement.

“New SPAC” means SPAC as the entity that domesticates and continues from the Cayman Islands as a corporation existing under the Laws of the Province of Ontario, Canada after giving effect to the Continuance.

“New SPAC Amalco” has the meaning ascribed to such term in Section 2.3(d).

“New SPAC Amalgamation” means the amalgamation of New SPAC and Amalco, as described in Section 2.3(d).

“New SPAC Amalgamation Effective Time” means the time at which the step described in Section 2.3(d) becomes effective hereunder.

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“New SPAC Shares” means common shares of New SPAC, after giving effect to the Continuance.

“Newco” means 1000397116 Ontario Inc., a corporation incorporated under the OBCA.

“OBCA” means the Business Corporations Act (Ontario).

“OBCA Articles of Arrangement” means the articles of arrangement of the Company in respect of the Arrangement required to be filed with the Director pursuant to Section 183(1) of the OBCA after the Final Order is made, which shall include this Plan of Arrangement and otherwise be in form and substance satisfactory to the Parties, acting reasonably.

“OBCA Certificate of Arrangement” means the certificate of arrangement to be issued by the Director pursuant to Subsection 183(2) of the OBCA in respect of the OBCA Articles of Arrangement.

“Option Exercise Price” means $0.0001.

“Parties” means, collectively, the Company and SPAC, and “Party” means either of them.

“Per Share Exchange Ratio” means the number obtained by dividing the Aggregate Transaction Consideration by the Company Fully-Diluted Number.

“Person” means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including, without limitation, a “person” as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government.

“Plan of Arrangement” means this plan of arrangement, subject to any amendments or variations made in accordance with the Business Combination Agreement or Section 4.1 or made at the direction of the Court in the Final Order with the prior written consent of the Parties, each acting reasonably.

“Remaining Company Convertible Instruments” means the convertible instruments, set forth in Section 1.01 of the Company Disclosure Schedule, under which the specified portion of principal and accrued interest will remain outstanding following the completion of the Arrangement in accordance with the Business Combination Agreement.

“SEC” means the United States Securities and Exchange Commission.

“SPAC” means Oxus Acquisition Corp., an exempted company limited by shares incorporated under the Laws of the Cayman Islands.

“SPAC Warrant Agreement” means that certain warrant agreement dated September 2, 2021, by and between SPAC and Continental Stock Transfer and Trust Company.

“Sponsor” means Oxus Capital PTE. Ltd.

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“Sponsor Convertible Notes” means the convertible notes issued by the Company to Sponsor pursuant to the Sponsor Note Purchase Agreement.

“Sponsor Note Purchase Agreement” means, collectively, the Note Purchase Agreement between the Company and Sponsor dated as of October 21, 2022 and the Note Purchase Agreement between the Company and Sponsor dated as of November 14, 2022, in each case, as amended, restated, supplemented or otherwise modified from time to time.

“Subsidiary” of the Company, SPAC, Newco or any other Person means an Affiliate Controlled by such person, directly or indirectly, through one or more intermediaries, and “Subsidiaries” means more than one Subsidiary.

“Tax” means all federal, state, provincial, local and non-U.S. income, profits, franchise, receipts, environmental, shares, severances, stamp, payroll, sales, employment, unemployment, disability, use, property, withholding, excise, production, value added, escheat, unclaimed property, occupancy and other taxes, duties or assessments of any nature whatsoever, together with all interest, penalties and additions imposed with respect to such amounts and any interest in respect of such penalties and additions.

“Transfer Agent” means Continental Stock Transfer & Trust Company.

Section 1.2 Certain Rules of Interpretation

In this Plan of Arrangement, unless otherwise specified:

(1) Headings, etc. The division of this Plan of Arrangement into Articles and Sections and the insertion of headings are for convenient reference only and do not affect the construction or interpretation of this Plan of Arrangement.

(2) Currency. All references to “dollars” or to “$” are references to Canadian dollars, unless specified otherwise. In the event that any amounts are required to be converted from a foreign currency to Canadian dollars or vice versa, such amounts shall be converted using the most recent closing exchange rate of The Bank of Canada available before the relevant calculation date.

(3) Gender and Number. Any reference to gender includes all genders. Words importing the singular number only include the plural and vice versa.

(4) Certain Phrases, etc. The words (a) “including”, “includes” and “include” mean “including (or includes or include) without limitation”, (b) “or” is not exclusive, (c) “day” means “calendar day”, (d) “hereof’’, “herein”, “hereunder” and words of similar import, shall refer to this Plan of Arrangement as a whole and not to any particular provision of this Plan of Arrangement, (e) “the aggregate of’’, “the total of’’, “the sum of’’, or a phrase of similar meaning means “the aggregate (or total or sum), without duplication, of’, (f) “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends and such phrase shall not mean simply “if’, and (g) unless stated otherwise, “Article” or “Section” followed by a number or letter mean and refer to the specified Article or Section of this Plan of Arrangement.

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(5) Statutes and Rules. Any reference to a statute or to a rule of a self-regulatory organization, including any stock exchange, refers to such statute or rule and all rules, resolutions and regulations, administrative policy statements, instruments, blanket orders, notices, directions and rulings issued or adopted under it, as it or they may have been or may from time to time be amended or re-enacted, unless stated otherwise.

(6) Date for Any Action. If the date on which any action is required to be taken hereunder is not a Business Day, such action shall be required to be taken on the next succeeding day which is a Business Day. Any reference to a number of days shall refer to calendar days unless Business Days are specified.

(7) Time. Time shall be of the essence in every matter or action contemplated hereunder. All times expressed herein are local time in Toronto, Ontario unless otherwise stipulated herein.

ARTICLE 2

THE ARRANGEMENT

Section 2.1 Business Combination Agreement

This Plan of Arrangement is made pursuant to the Business Combination Agreement. If there is any inconsistency or conflict between the provisions of this Plan of Arrangement and the provisions of the Business Combination Agreement, the provisions of this Plan of Arrangement shall govern.

Section 2.2 Binding Effect

This Plan of Arrangement and the Arrangement shall become effective at the Arrangement Effective Time, and shall be binding on SPAC, Newco, the Company, all Company Shareholders, all Company Optionholders, all holders of Company Convertible Instruments, all holders of Remaining Company Convertible Instruments, all holders of New SPAC Shares, the registrar and transfer agent of the Company, the Transfer Agent and all other Persons at and after the Arrangement Effective Time, without any further act or formality required on the part of any Person.

Section 2.3 Arrangement

Commencing at the Arrangement Effective Time, each of the following events shall occur sequentially in the order set out below without any further authorization, act or formality, in each case, unless stated otherwise, effective as at five-minute intervals starting at the Arrangement Effective Time:

(a) pursuant to Section 192 of the CBCA, all applicable Company Convertible Instruments outstanding immediately prior to the Arrangement Effective Time (excluding, for greater certainty, the Remaining Company Convertible Instruments and the New Investor Convertible Notes) shall, without further action by or on behalf of a holder of Company Convertible Instruments, be converted into Company Shares pursuant to their terms and the terms of any Conversion Agreements;

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(b) pursuant to Section 192 of the CBCA, all Company Options outstanding immediately prior to the Arrangement Effective Time (whether vested or unvested), notwithstanding the terms of the Company Incentive Plan or any applicable award agreements in relation thereto, shall be deemed to be unconditionally vested and exercisable, and each Company Optionholder shall, without any further action by or on behalf of such Company Optionholder, be deemed to have exercised such Company Optionholder’s Company Options in exchange for such number of Company Shares (rounded down to the nearest whole Company Share) having an aggregate fair market value equal to (A) the aggregate fair market value of the Company Shares underlying such Company Optionholder’s Company Options, minus (B) the aggregate Option Exercise Price in respect of such Company Optionholder’s Company Options, and none of the Company or SPAC shall be obligated to pay such Company Optionholder any amount in respect of such Company Option; and, with respect to each Company Option that is exercised pursuant to this Section 2.3(b), as of the effective time of such exercise: (i) the holder thereof shall cease to be the holder of such Company Option, (ii) the holder thereof shall cease to have any rights as a holder in respect of such Company Option or under the Company Incentive Plan, as applicable, other than the right to receive the consideration to which such holder is entitled pursuant to this Section 2.3(b), (iii) such holder’s name shall be removed from the applicable register, and (iv) all agreements, grants and similar instruments relating thereto shall be cancelled;

(c) Newco and the Company shall be amalgamated pursuant to Subsection 182(1)(d) of the OBCA to form Amalco in such a manner that, upon the Company Amalgamation becoming effective:

(i) Name: the name of Amalco shall be “Borealis Foods Inc.”;

(ii) Registered Office: the registered office of Amalco shall be 1540 Cornwall Road, Suite 104, Oakville, Ontario L6J 7W5;

(iii) Number of Directors: the number of directors of Amalco shall consist of a minimum number of three (3) directors and a maximum number of ten (10) directors. Until changed by the shareholders of Amalco, or by directors of Amalco if authorized to do so, the number of directors of Amalco shall be seven (7);

(iv) Initial Directors: the initial directors of Amalco shall be Reza Soltanzadeh, Barthelemy Helg, Kanat Mynzhanov, Shiv Vikram Khemka, Shukhrat Ibragimov, Steven Oyer and Ertharin Cousin and such Persons shall hold office until the next annual meeting of shareholders of Amalco or until their successors are appointed or elected;

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(v) Restrictions on Business and Powers: there shall be no restrictions on the business Amalco may carry on or the powers it may exercise;

(vi) Authorized Capital and Rights, Privileges, Restrictions and Conditions: Amalco’s share capital will be comprised of common shares having the same terms and conditions as the common shares of Newco;

(vii) Restrictions on the Issue, Transfer or Ownership of Shares: there shall be no restrictions on the issue, transfer or ownership of shares of Amalco;

(viii) By-laws: the by-laws of Amalco shall be the by-laws of Newco, mutatis mutandis;

(ix) Effect of Amalgamation:

(A) Newco and the Company shall cease to exist as entities separate from Amalco;

(B) Amalco shall assume all the property, rights, privileges and franchises and become subject to all liabilities, including civil, criminal and quasi-criminal, and all contracts, disabilities and debts of each of the predecessor corporations, including the Company’s obligations under the Remaining Company Convertible Instruments and the New Investor Convertible Notes;

(C) a conviction against, or ruling, order or judgment in favour of or against Newco or the Company may be enforced by or against Amalco; and

(D) Amalco shall be deemed to be the party plaintiff or the party defendant, as the case may be, in any civil action commenced by or against Newco and the Company before the amalgamation has become effective;

(x) Articles: the articles of incorporation of Newco shall be deemed to continue to be the articles of amalgamation of Amalco;

(xi) Exchange of Shares:

(A) without any action on the part of New SPAC, Newco, the Company or the Company Shareholders, each Company Share shall be exchanged for, in accordance with the terms of the Business Combination Agreement, this Plan of Arrangement and the Exchange Spreadsheet, the number of New SPAC Shares equal to the Per Share Exchange Ratio; and

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(B) each common share of Newco held by New SPAC shall be exchanged for a common share of Amalco on a one-for-one basis;

(xii) Stated Capital: the aggregate stated capital of the common shares of Amalco will be an amount equal to $1.00;

(d) New SPAC and Amalco shall amalgamate to form one corporate entity pursuant to Subsection 182(1)(c) of the OBCA, including that (x) notwithstanding the continuation of any corporate identification number, the requirement for a new financial year-end or the administrative implementation of the step described in this Section 2.3(d), the legal existence of New SPAC shall continue, (y) the separate legal existence of Amalco shall cease without Amalco being liquidated or wound up, and (z) New SPAC shall survive the amalgamation (New SPAC, as such surviving entity, “New SPAC Amalco”) (and for the avoidance of doubt, the New SPAC Amalgamation shall qualify as an amalgamation as defined in subsection 87(1) of the ITA). Without limiting the foregoing, upon the New SPAC Amalgamation becoming effective, the New SPAC Amalgamation will, as elaborated below, be effected in such a manner that by virtue or because of the New SPAC Amalgamation (1) all of the property of each of New SPAC and Amalco (other than amounts receivable from New SPAC or Amalco, as applicable, or shares in the capital stock of New SPAC) immediately prior to the New SPAC Amalgamation shall be held by New SPAC Amalco immediately following the New SPAC Amalgamation, as elaborated below, (2) all of the obligations and the liabilities of each of New SPAC and Amalco (other than amounts payable to New SPAC or Amalco) immediately before the New SPAC Amalgamation shall be the obligations and the liabilities of New SPAC Amalco immediately following the New SPAC Amalgamation, as elaborated below, and (3) any obligation of New SPAC or Amalco to pay an amount to the other party will be settled and extinguished as a result of the New SPAC Amalgamation. Subject to the foregoing, at and after the New SPAC Amalgamation becoming effective:

(i) Name: the name of New SPAC Amalco shall be “Borealis Foods Inc.”;

(ii) Registered Office: the registered office of New SPAC Amalco shall be 1540 Cornwall Road, Suite 104, Oakville, Ontario L6J 7W5;

(iii) Number of Directors: the number of directors of New SPAC Amalco shall consist of a minimum number of three (3) directors and a maximum number of thirteen (13) directors. Until changed by the shareholders of New SPAC Amalco, or by directors of New SPAC Amalco if authorized to do so, the number of directors of New SPAC Amalco shall be seven (7);

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(iv) Initial Directors: the initial directors of New SPAC Amalco shall be Reza Soltanzadeh, Barthelemy Helg, Kanat Mynzhanov, Shiv Vikram Khemka, Shukhrat Ibragimov, Steven Oyer and Ertharin Cousin and such Persons shall hold office until the next annual meeting of shareholders of New SPAC Amalco or until their successors are appointed or elected;

(v) Restrictions on Business and Powers: there shall be no restrictions on the business New SPAC Amalco may carry on or the powers it may exercise;

(vi) Authorized Capital and Rights, Privileges, Restrictions and Conditions: New SPAC Amalco’s share capital will be comprised of common shares and preferred shares having the terms and conditions attached as Schedule “A” hereto;

(vii) Restrictions on the Issue, Transfer or Ownership of Shares: there shall be no restrictions on the issue, transfer or ownership of shares of New SPAC Amalco;

(viii) By-laws: the by-laws of New SPAC Amalco shall be the by-laws of New SPAC, mutatis mutandis;

(ix) Effect of Amalgamation:

(A) New SPAC Amalco shall continue to own and hold all of the property of New SPAC and shall become the owner and holder of all of the property of Amalco, and, without limiting the provisions hereof, all rights of creditors or others will be unimpaired by the New SPAC Amalgamation and all obligations of the Parties, whether arising by contract or otherwise, may be enforced against New SPAC Amalco to the same extent as if such obligations had been incurred or contracted by New SPAC Amalco;

(B) New SPAC Amalco shall continue to be liable for the obligations of New SPAC and shall become liable for the obligations of Amalco, including Amalco’s obligations under the Remaining Company Convertible Instruments and the New Investor Convertible Notes, other than any obligations that are settled and extinguished in accordance with Section 2.3(d)(3);

(C) for greater certainty, and except as otherwise provided for herein in relation to Amalco, the New SPAC Amalgamation shall not constitute a transfer or assignment of the rights or obligations of any Party under any contracts, permits and interests of the Parties;

(D) a conviction against, or ruling, order or judgment in favour of or against New SPAC or Amalco may be enforced by or against New SPAC Amalco; and

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(E) New SPAC Amalco shall be deemed to be the party plaintiff or the party defendant, as the case may be, in any civil action commenced by or against New SPAC and Amalco before the amalgamation has become effective;

(x) Articles: the articles of continuance of New SPAC shall be deemed to continue to be the articles of amalgamation of New SPAC Amalco;

(xi) Cancellation and Continuation of Shares:

(A) each issued and outstanding share in the capital of Amalco immediately prior to the amalgamation will be cancelled without any repayment of capital in respect thereof;

(B) no securities will be issued and no assets will be distributed by New SPAC Amalco in connection with the amalgamation; and

(C) the issued and outstanding common shares of New SPAC immediately prior to the amalgamation will survive and continue to be common shares of New SPAC Amalco without amendment;

(xii) Stated Capital: the stated capital of the common shares of New SPAC Amalco will be an amount equal to the stated capital of the common shares of New SPAC immediately before the amalgamation;

(e) the New Investor Convertible Notes shall convert into New SPAC Shares pursuant to the terms of the Belphar Note Purchase Agreement or the New Investor Note Purchase Agreement, as applicable;

provided that none of the foregoing shall occur unless all of the foregoing occur.

ARTICLE 3

EXCHANGE OF SHARES

Section 3.1 Payment of Aggregate Transaction Consideration

(1) On the Arrangement Effective Date, SPAC shall direct the Transfer Agent pursuant to irrevocable instructions to issue the number of New SPAC Shares sufficient to deliver the Aggregate Transaction Consideration to the Company Shareholders in accordance with Section 2.3(c)(xi)(A).

(2) The Company is in possession of certificates representing all of the Company Shares outstanding on the Arrangement Effective Date. Upon the step described in Section 2.3(c) becoming effective, (i) the Company shall take all necessary steps to cancel each certificate, agreement or other instrument (as applicable) which, immediately prior thereto, represented outstanding Company Shares; and (ii) the Transfer Agent shall deliver book-entry only entries representing the New SPAC Shares that such Company Shareholder is entitled to receive under the Arrangement, less any amounts required to be withheld pursuant to Section 3.3.

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(3) At all times after the Arrangement Effective Time, each certificate, agreement or other instrument (as applicable) which, immediately prior thereto, represented outstanding Company Shares shall cease to represent a claim by or interest of any former holder thereof of any kind or nature against or in the Company or SPAC other than the right to receive the New SPAC Shares which such holder is entitled to receive pursuant to this Plan of Arrangement.

(4) No Company Securityholder shall be entitled to receive any consideration with respect to the Company Shares or the Company Convertible Instruments, as applicable, other than the consideration to which such holder is entitled to receive under the Arrangement and, for greater certainty, no such holder will be entitled to receive any interest, dividend, premium or other payment in connection therewith.

Section 3.2 No Fractional Shares

In no event shall a Company Securityholder be entitled to a fractional New SPAC Share. Where the aggregate number of New SPAC Shares to be issued to a Company Securityholder pursuant to the Business Combination Agreement, this Plan of Arrangement and the Exchange Spreadsheet would result in a fraction of a New SPAC Share being issuable, the number of New SPAC Shares to be received by such Company Securityholder shall be rounded up or down to the nearest whole New SPAC Share, with a fraction of 0.5 rounded up. No cash settlements shall be made with respect to fractional shares eliminated by rounding.

Section 3.3 Withholding Rights

Each of the Company, SPAC and New SPAC, as applicable, shall be entitled to deduct or withhold from the consideration otherwise payable pursuant to this Plan of Arrangement to any Person such amounts as it is required to deduct or withhold with respect to the making of such payment under the United States Internal Revenue Code of 1986, as amended (the “Code”), the ITA and other applicable Canadian Law, or other provision of U.S. state, local or non-U.S. Tax Law; provided, however, except with respect to the payment or issuance of consideration as compensation for services, SPAC and New SPAC, as applicable, shall reasonably cooperate with Company Shareholders to establish any available reduction in or exemption from such intended deduction or withholding, and SPAC and New SPAC, as applicable, shall use commercially reasonable efforts to provide such Party notice three (3) days prior to any withholding so that such person can provide any documents necessary; provided further, and notwithstanding the foregoing, SPAC and New SPAC, as applicable, shall withhold such amounts as may be required to be withheld pursuant to Section 1445 of the Code and shall reasonably cooperate with the Company to reduce or eliminate any such withholding in accordance with applicable Law. The Company, SPAC or New SPAC, as the case may be, is hereby authorized to dispose of such portion of any share or other security payable, issuable or transferable pursuant to this Plan of Arrangement as is necessary to provide sufficient funds to the Company, SPAC or New SPAC, as the case may be, to enable it to comply with such deduction and withholding requirement and the Company, SPAC or New SPAC, as the case may be, shall use commercially reasonable efforts to notify the other Person of such disposition and remit the applicable portion of the net proceeds of such sale to the appropriate Governmental Authority and, if applicable, any portion of such net proceeds that is not required to be so remitted shall be paid to the Person entitled to receive such consideration. To the extent that amounts are so deducted or withheld by the Company, SPAC or New SPAC, as the case may be, such deducted or withheld amounts shall be treated for all purposes of this Plan of Arrangement as having been paid to the holder of the Company Shares, Company Convertible Instruments and/or Company Options (or intended recipients of compensatory payments) in respect of which such deduction and withholding was made by the Company or New SPAC, as the case may be.

13

Electronically issued / Délivré par voie électronique : 12-Feb-2024
Toronto Superior Court of Justice / Cour supérieure de justice Court File No./N° du dossier du greffe : CV-24-00712327-00CL

Section 3.4 No Liens

Any exchange or transfer of securities pursuant to this Plan of Arrangement shall be free and clear of any Liens or other claims of third parties of any kind.

Section 3.5 Paramountcy

From and after the Arrangement Effective Time: (a) this Plan of Arrangement shall take precedence and priority over any and all Company Shares, Company Options and Company Convertible Instruments issued or outstanding prior to the Arrangement Effective Time; and (b) the rights and obligations of the Company Shareholders, the Company Optionholders, the holders of Company Convertible Instruments, the Company and its Subsidiaries, SPAC and its Affiliates, the Transfer Agent and any transfer agent or other depositary therefor in relation to this Plan of Arrangement shall be solely as provided for in this Plan of Arrangement.

ARTICLE 4

AMENDMENTS

Section 4.1 Amendments to Plan of Arrangement

(1) The Parties may amend, modify and/or supplement this Plan of Arrangement at any time and from time to time prior to the Arrangement Effective Time; provided that each such amendment, modification and/or supplement must be (a) set out in writing, (b) approved by the Parties, each acting reasonably, (c) filed with the Court and, if made following the Company Shareholders Meeting, approved by the Court, and (d) communicated to the Company Securityholders if and as required by the Court.

(2) Any amendment, modification or supplement to this Plan of Arrangement may be proposed by either of the Parties at any time prior to the Company Shareholders Meeting or the SPAC Shareholders’ Meeting (provided that the other Party has consented thereto) with or without any other prior notice or communication, and if so proposed and accepted by the Persons voting at the Company Shareholders Meeting or the SPAC Shareholders’ Meeting, as applicable (other than as may be required under the Interim Order), shall become part of this Plan of Arrangement for all purposes.

14

Electronically issued / Délivré par voie électronique : 12-Feb-2024
Toronto Superior Court of Justice / Cour supérieure de justice Court File No./N° du dossier du greffe : CV-24-00712327-00CL

(3) Any amendment, modification or supplement to this Plan of Arrangement that is approved or directed by the Court following the Company Shareholders Meeting and the SPAC Shareholders’ Meeting shall be effective only if (a) it is consented to in writing by each of the Parties (in each case, acting reasonably), and (b) if required by the Court, it is consented to by some or all of the Company Securityholders or the SPAC Shareholders voting in the manner directed by the Court.

(4) Any amendment, modification or supplement to this Plan of Arrangement may be made following the granting of the Final Order without filing such amendment, modification or supplement with the Court or seeking Court approval; provided that (i) it concerns a matter which, in the reasonable opinion of the Parties, is of an administrative nature required to better give effect to the implementation of this Plan of Arrangement and is not adverse to the interest of any Company Securityholder or (ii) is an amendment contemplated in Section 4.1(5).

(5) Any amendment, modification or supplement to this Plan of Arrangement may be made following the Arrangement Effective Date unilaterally by New SPAC; provided that it concerns a matter which, in the reasonable opinion of New SPAC, is of an administrative nature required to better give effect to the implementation of this Plan of Arrangement and is not adverse to the economic interest of any former Company Securityholder.

(6) This Plan of Arrangement may be withdrawn prior to the Arrangement Effective Time in accordance with the terms of the Business Combination Agreement.

ARTICLE 5

FURTHER ASSURANCES

Section 5.1 Further Assurances

Notwithstanding that the transactions and events set out in this Plan of Arrangement shall occur and shall be deemed to occur in the order set out in this Plan of Arrangement without any further act or formality, following the Arrangement Effective Time, each of the Parties shall make, do and execute, or cause to be made, done and executed, all such further acts, deeds, agreements, transfers, assurances, instruments or documents as may reasonably be required or advisable by either of them in order to further document or evidence any of the transactions or events set out in this Plan of Arrangement.

15

Electronically issued / Délivré par voie électronique : 12-Feb-2024
Toronto Superior Court of Justice / Cour supérieure de justice Court File No./N° du dossier du greffe : CV-24-00712327-00CL

SCHEDULE “A”

TERMS AND CONDITIONS OF COMMON SHARES AND PREFERRED

SHARES OF NEW SPAC AMALCO

(See attached.)

A-1

Electronically issued / Délivré par voie électronique : 12-Feb-2024
Toronto Superior Court of Justice / Cour supérieure de justice Court File No./N° du dossier du greffe : CV-24-00712327-00CL

SCHEDULE OF SHARE CAPITAL

The authorized capital of the Corporation shall consist of:

(a) one class of shares, to be designated as “Common Shares”, in an unlimited number; and

(b) one class of shares, to be designated as “First Preferred Shares”, issuable in series, to be limited in number to an amount equal to not more than 20% of the number of issued and outstanding Common Shares at the time of issuance of any First Preferred Shares,

such shares having attached thereto the following rights, privileges, restrictions and conditions.

COMMON SHARES

The rights, privileges, restrictions and conditions attaching to the Common Shares shall be as follows:

1. Voting

The holders of the Common Shares shall be entitled to receive notice of and to attend any meeting of the shareholders of the Corporation, except meetings at which only holders of a different class or series of shares of the Corporation are entitled to vote, and shall be entitled to one vote for each Common Share.

2. Dividends

Subject to the prior rights and privileges attached to any other class or series of shares of the Corporation, the holders of the Common Shares shall be entitled to receive dividends at such times and in such amounts as the directors of the Corporation may in their discretion from time to time declare.

3. Liquidation

Subject to the prior rights and privileges attached to any other class or series of shares of the Corporation, upon the voluntary or involuntary liquidation, dissolution or winding-up of the Corporation or any other distribution of its assets among its shareholders for the purpose of winding up its affairs (such event referred to herein as a “Distribution”), each holder of Common Shares shall have the right to receive, in cash or other assets, for each Common Share held, from out of (but only to the extent of) the remaining property of the Corporation legally available for distribution to shareholders, its pro rata share of such remaining property based on the number of Common Shares held thereby, and shall rank equally with all holders of Common Shares with respect to such Distribution.

FIRST PREFERRED SHARES

The rights, privileges, restrictions and conditions attaching to the First Preferred Shares, as a class, shall be as follows:

1. Issuance in Series

(a) Subject to the filing of Articles of Amendment in accordance with the Business Corporations Act (Ontario) (the “Act”), the Board of Directors may at any time and from time to time issue the First Preferred Shares in one or more series, each series to consist of such number of shares as may, before the issuance thereof, be determined by the Board of Directors.

A-2

Electronically issued / Délivré par voie électronique : 12-Feb-2024
Toronto Superior Court of Justice / Cour supérieure de justice Court File No./N° du dossier du greffe : CV-24-00712327-00CL

(b) Subject to the filing of Articles of Amendment in accordance with the Act and the provisions, the Board of Directors may from time to time fix, before issuance, the designation, rights, privileges, restrictions and conditions attaching to each series of First Preferred Shares including, without limiting the generality of the foregoing, the amount, if any, specified as being payable preferentially to such series on a Distribution; the extent, if any, of further participation on a Distribution; voting rights, if any; and dividend rights (including whether such dividends be preferential, or cumulative or non-cumulative), if any.

2. Dividends

The holders of each series of First Preferred Shares shall be entitled, in priority to holders of Common Shares and any other shares of the Corporation ranking junior to the First Preferred Shares from time to time with respect to the payment of dividends, to be paid rateably with holders of each other series of First Preferred Shares, the amount of accumulated dividends, if any, specified as being payable preferentially to the holders of such series.

3. Liquidation

In the event of a Distribution, holders of each series of First Preferred Shares shall be entitled, in priority to holders of Common Shares and any other shares of the Corporation ranking junior to the First Preferred Shares from time to time with respect to payment on a Distribution, to be paid rateably with holders of each other series of First Preferred Shares the amount, if any, specified as being payable preferentially to the holders of such series on a Distribution.

A-3

 

EX-3.4

Exhibit 3.4

BOREALIS FOODS INC.

EQUITY INCENTIVE PLAN

February 7, 2024

Table of Contents

		page
Article 1 DEFINITIONS		1
1.1	Definitions	1
Article 2 PURPOSE AND ADMINISTRATION OF THE PLAN; GRANTING OF AWARDS		6
2.1	Purpose of the Plan	6
2.2	Implementation and Administration of the Plan	6
2.3	Eligible Participants	7
2.4	Shares Subject to the Plan	7
2.5	Participation Limits	8
2.6	Performance Criteria	8
Article 3 OPTIONS		9
3.1	Nature of Options	9
3.2	Option Awards	9
3.3	Exercise Price	9
3.4	Expiry Date; Blackout Period	10
3.5	Option Agreement	10
3.6	Exercise of Options	10
3.7	Method of Exercise and Payment of Purchase Price	10
3.8	Termination of Employment or Service	12
3.9	Incentive Stock Options	12
Article 4 STOCK APPRECIATION RIGHTS		13
4.1	Nature of SARs	13
4.2	SAR Awards	13
4.3	Exercise of SARs	13
Article 5 DEFERRED SHARE UNITS		14
5.1	Nature of DSUs	14
5.2	DSUs	14
5.3	Redemption of DSUs	14
Article 6 SHARE UNITS		15
6.1	Nature of Share Units	15
6.2	Share Unit Awards	15
6.3	Performance Criteria and Performance Period Applicable to PSU Awards	16
Article 7 GENERAL CONDITIONS		16
7.1	General Conditions applicable to Awards	16
7.2	Dividend Share Units	17
7.3	Unfunded Plan	18
Article 8 ADJUSTMENTS AND AMENDMENTS		18
8.1	Adjustment to Shares Subject to Outstanding Awards	18
8.2	Amendment or Discontinuance of the Plan	18
8.3	Change of Control	20

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Table of Contents

(continued)

		page
Article 9 MISCELLANEOUS		21
9.1	Currency	21
9.2	Compliance and Award Restrictions	21
9.3	Use of an Administrative Agent and Trustee	22
9.4	Withholding Tax	22
9.5	Reorganization of the Corporation	22
9.6	Governing Laws	23
9.7	Successors and Assigns	23
9.8	Severability	23
9.9	No liability	23
9.10	Clawback of Benefits	23
9.11	Effective Date of the Plan	23
ADDENDUM FOR U.S. PARTICIPANTS Borealis Foods Inc. EQUITY INCENTIVE PLAN		24

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BOREALIS FOODS INC.
EQUITY INCENTIVE PLAN

Borealis Foods Inc. (the “Corporation”) hereby establishes an Equity Incentive Plan for certain qualified officers, employees and Consultants (as defined herein) and non-employee directors, providing ongoing services to the Corporation and/or its Subsidiaries (as defined herein) that can have a significant impact on the Corporation’s long-term results.

Article 1
DEFINITIONS

1.1 Definitions

Where used herein or in any amendments hereto or in any communication required or permitted to be given hereunder, the following terms shall have the following meanings, respectively, unless the context otherwise requires:

“Affiliate” means any corporation, partnership or other entity which the Corporation, directly or indirectly, controls, or is under common control with. The Corporation shall be deemed to “control” any such entity if the Corporation possesses, directly or indirectly, the power to direct or cause the direction of the management of such entity, whether through the ownership of voting securities, by contract or otherwise;

“Award Agreement” means, individually or collectively, the Option Agreement, DSU Agreement, PSU Agreement, RSU Agreement, SAR Agreement, and/or the Employment Agreement or Consulting Agreement pursuant to which an Award is granted, as the context requires;

“Awards” means Options, DSUs, PSUs, RSUs and/or SARs granted to a Participant pursuant to the terms of the Plan;

“Black-Out Period” means the period of time when, pursuant to any policies or determinations of the Corporation, securities of the Corporation may not be traded by Insiders or other specified Persons;

“Board” means the board of directors of the Corporation as constituted from time to time;

“Broker” has the meaning ascribed thereto in Section ‎3.7(2);

“Business Day” means a day other than a Saturday, Sunday or statutory holiday, when banks are generally open for business in both New York, New York and Toronto, Ontario for the transaction of banking business;

“Cash Equivalent” means:

(a) in the case of Share Units, the amount of money equal to the Market Value multiplied by the number of vested Share Units (including for certainty any Dividend Share Units) then recorded in the Participant’s Account, net of any applicable taxes in accordance with Section ‎9.4 upon settlement; and

(b) in the case of DSUs, the amount of money equal to the Market Value multiplied by the whole number of DSUs (including for certainty any Dividend Share Units) then recorded in the Participant’s Account which the Participant redeems pursuant to the DSU Redemption Notice, net of any applicable taxes in accordance with Section ‎9.4 upon settlement;

“Change of Control” means, unless the Board determines otherwise, the happening, in a single transaction or in a series of related transactions, of any of the following events:

(a) any Person, or any Persons acting jointly or in concert (as such term is defined in National Instrument 62-104 – Take-Over Bids and Issuer Bids), is or becomes the beneficial owner, directly or indirectly of, securities of the Corporation representing more than 50% of the combined voting power of the Corporation’s then outstanding securities entitled to vote in the election of the directors of the Corporation;

(b) the Corporation shall have disposed of all or substantially all of its assets, such that shareholder approval was required to be obtained or should have been required under the Business Corporations Act (Ontario); or

(c) pursuant to a single election or appointment or a series of elections or appointments over any period from and after the Effective Date: (i) those individuals who at the Effective Date constituted the Board, together with; (ii) any new or additional director or directors whose nomination for election by the Corporation’s shareholders, or whose appointment to the Board by the Board, has been approved by at least 75% of the votes cast by all of the directors then still in office, who either were directors at the Effective Date or whose appointment or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board;

provided, however, that to the extent needed for an Award to be compliant with Section 409A of the Code, the event must also constitute a change in ownership or effective control of the Corporation or a change in the ownership of a substantial portion of the assets of the Corporation within the meaning of Section 409A;

“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time and the Treasury Regulations promulgated thereunder;

“Compensation Committee” means the Compensation Committee of the Board, which shall be comprised of individuals who shall satisfy the independence or other requirements of the Exchange and, to the extent necessary in order to permit officers and directors of the Company to be exempt from the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended (the “1934 Act”) with respect to transactions related to Awards under the Plan, be comprised entirely of “Non-Employee Directors” within the meaning of Rule 16b-3 promulgated by the Securities and Exchange Commission under the 1934 Act;

“Consultant” means any Person, other than an employee, officer or director, acting as a consultant or advisor who provides services to the Corporation or any Affiliate, so long as:

(a) such Person renders bona fide services that are not in connection with the offer and sale of the Corporation’s or any Affiliate’s securities in a capital-raising transaction;

(b) such Person provides the services under a written contract between the Corporation or an Affiliate and the Person;

(c) in the reasonable opinion of the Corporation, such Person spends or will spend a significant amount of time and attention on the affairs and business of the Corporation or an Affiliate;

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(d) such Person does not directly or indirectly promote or maintain a market for the Corporation’s securities; and

(e) the identity of such Person would not preclude the Corporation from offering or selling securities to such Person pursuant to the Plan in reliance on either the exemption from registration provided by Rule 701 under the Securities Act of 1933 or, if the Corporation is required to file reports pursuant to Section 13 or 15(d) of the Exchange Act, registration on a Form S-8 Registration Statement under the Securities Act of 1933;

“Consulting Agreement” means, with respect to any Participant, any written consulting agreement between the Corporation or a Subsidiary and such Participant;

“Corporation” means Borealis Foods Inc., a corporation amalgamated under the Business Corporations Act (Ontario);

“Dividend Share Units” has the meaning ascribed thereto in Section ‎7.2;

“DSU” means a deferred share unit, which is a bookkeeping entry equivalent in value to a Share credited to a Participant’s Account in accordance with ‎Article 5;

“DSU Agreement” means a written agreement between the Corporation and a Participant evidencing the grant of DSUs and the terms and conditions thereof, substantially in the form as the Compensation Committee may approve from time to time;

“DSU Redemption Notice” has the meaning ascribed thereto in Section ‎5.3(1);

“DSU Termination Event” means the time at which a Participant ceases to hold all positions with the Corporation or a Related Entity as a result of the Participant’s death or retirement or resignation from, or loss of, an office or employment for purposes of paragraph 6801(d) of the regulations under the Tax Act, which, if the Participant is an employee and the Participant’s employment is governed by the employment standards legislation of a Canadian province or territory, and the Participant’s employment is terminated by the Corporation or a Related Entity, the Participant’s loss of employment will be deemed to coincide with, as applicable, the end of the notice of termination period that is minimally required to be provided by such employment standards legislation, and shall not be extended by any greater common law, civil law or contractual notice period;

“Effective Date” has the meaning ascribed thereto in Section ‎9.11;

“Eligible Participants” has the meaning ascribed thereto in Section ‎2.3(1);

“Employment Agreement” means, with respect to any Participant, any written employment agreement between the Corporation or a Subsidiary and such Participant;

“Exchange” shall mean the NASDAQ Stock Market or, if the Shares are not listed on NASDAQ Stock Market, such other stock exchange on which the Shares are listed, or if the Shares are not listed on any stock exchange, then on the over-the-counter market;

“Exercise Notice” means a notice in writing signed by a Participant and stating the Participant’s intention to exercise or settle a particular Award, if applicable;

“Exercise Price” has the meaning ascribed thereto in Section ‎3.3;

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“Expiry Date” has the meaning ascribed thereto in Section ‎3.4;

“Grant Date” has the meaning ascribed thereto in Section ‎3.4;

“Incentive Stock Option” means an Option that is designated by the Compensation Committee as an incentive stock option as described in Section 422 of the Code and otherwise meets the requirements set forth in the Plan;

“Insider” means an insider as defined in the Securities Act (Ontario);

“ISO Entity” has the meaning ascribed thereto in Section ‎2.3(1);

“Market Value” means, with respect to any particular date, the most recent preceding closing price of a Share on the Exchange, provided that, if the Shares are not then listed and posted for trading on any Exchange, then Market Value shall mean the fair market value of a Share as determined by the Compensation Committee using any other appropriate method selected by the Compensation Committee, acting reasonably and in good faith based on the reasonable application of a reasonable valuation method not inconsistent with Section 409A of the Code and the Tax Act;

“Nonqualified Stock Option” means an Option that is not designated by the Compensation Committee as an Incentive Stock Option;

“Option” means an option granted by the Corporation to a Participant entitling such Participant to acquire a designated number of Shares from treasury at the Exercise Price, subject to the provisions hereof;

“Option Agreement” means a written agreement between the Corporation and a Participant evidencing the grant of Options and the terms and conditions thereof, substantially in the form as the Compensation Committee may approve from time to time;

“Participant” means an Eligible Participant that is granted an Award under the Plan;

“Participant’s Account” means an account maintained to reflect each Participant’s participation in DSUs and/or Share Units under the Plan;

“Performance Criteria” means performance criteria established by the Compensation Committee pursuant to Section ‎2.6 that may be used to determine the vesting of the Awards, when applicable;

“Performance Period” has the meaning ascribed thereto in Section ‎6.3;

“Person” means an individual, corporation, company, cooperative, partnership, limited partnership, limited liability partnership, joint venture, venture capital fund, limited liability company, unlimited liability company, trust, trustee, executor, administrator, legal personal representative, estate, unincorporated association or organization, entity with juridical personality or governmental authority or body, or other entity, whether or not having legal status however designated or constituted, and pronouns which refer to a Person shall have a similarly extended meaning;

“Plan” means this Borealis Foods Inc. Equity Incentive Plan, as amended and restated from time to time;

“PSU” means a performance share unit awarded to a Participant to receive a payment in the form of cash or Shares as provided in ‎Article 6 and subject to the terms and conditions of the Plan;

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“PSU Agreement” means a written agreement between the Corporation and a Participant evidencing the grant of PSUs and the terms and conditions thereof, substantially in the form as the Compensation Committee may approve from time to time;

“Related Entity” means a corporation related to the Corporation within the meaning of the Tax Act;

“RSU” means a restricted share unit awarded to a Participant to receive a payment in the form of cash or Shares as provided in ‎Article 6 and subject to the terms and conditions of the Plan;

“RSU Agreement” means a written agreement between the Corporation and a Participant evidencing the grant of RSUs and the terms and conditions thereof, substantially in the form as the Compensation Committee may approve from time to time;

“SAR” means a stock appreciation right awarded to a Participant to be settled in cash or Shares as provided in ‎Article 4 and subject to the terms and conditions of the Plan;

“SAR Agreement” means a written agreement between the Corporation and a Participant evidencing the grant of SARs and the terms and conditions thereof, substantially in the form as the Compensation Committee may approve from time to time;

“Share Compensation Arrangement” means a stock option, stock option plan, employee stock purchase plan, long-term incentive plan or any other compensation or incentive mechanism involving the issuance or potential issuance of Shares to one or more directors, officers, employees or Consultants of the Corporation or a Subsidiary. For greater certainty, a “Share Compensation Arrangement” does not include a security based compensation arrangement used as an inducement to Person(s) not previously employed by and not previously an Insider of the Corporation who become(s) an officer of the Corporation;

“Share Limit” has the meaning ascribed thereto in Section ‎2.4(1);

“Share Unit” means a RSU or PSU, as the context requires;

“Shareholders” means holders of Shares;

“Shares” means the common shares in the capital of the Corporation;

“Subsidiary” means a corporation, limited liability company, partnership or other body corporate that is controlled, directly or indirectly, by the Corporation;

“Surrender” has the meaning ascribed thereto in Section ‎3.7(3);

“Surrender Notice” has the meaning ascribed thereto in Section ‎3.7(3);

“Tax Act” means the Income Tax Act (Canada) and its regulations thereunder, as amended from time to time;

“Termination Date” means, unless otherwise defined in the applicable Award Agreement:

(a) with respect to a Participant who is an employee or officer of the Corporation or a Subsidiary, such Participant’s last day of active employment, which, except as provided below or otherwise expressly required by applicable employment standards legislation, does not include any period of statutory, common law, civil law or contractual notice or any period of deemed employment or salary continuance; and

(b) with respect to a Participant who is a Consultant or non-employee director, the date such Consultant or non-employee director ceases to provide services to the Corporation or a Subsidiary.

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For purposes hereof, if the Participant’s employment is governed by the employment standards legislation of a Canadian province or territory, and the Participant’s employment is terminated by the Corporation or a Subsidiary with whom the Participant is employed, the Participant’s last day of active employment will be deemed to coincide with, as applicable, the end of the notice of termination period that is minimally required to be provided by such employment standards legislation, and shall not be extended by any greater common law, civil law or contractual notice period.

For greater certainty, a Participant’s absence from active work during a period of vacation, temporary illness, authorized leave of absence, maternity or parental leave or leave on account of disability shall not be considered to result in a Termination Date;

“transfer” includes any sale, exchange, assignment, gift, bequest, disposition, mortgage, lien, charge, pledge, encumbrance, grant of security interest or any arrangement by which possession, legal title or beneficial ownership passes from one Person to another, or to the same Person in a different capacity, whether or not voluntary and whether or not for value, and any agreement to effect any of the foregoing and “transferred”, “transferring” and similar variations have corresponding meanings; and

“U.S. Participant” means any Participant who is a United States citizen or United States resident alien as defined for purposes of Section 7701(b)(1)(A) of the Code or for whom an Award is otherwise subject to taxation under the Code.

Article 2
PURPOSE AND ADMINISTRATION OF THE PLAN; GRANTING OF AWARDS

2.1 Purpose of the Plan

The purpose of the Plan is to: (i) attract and retain employees, officers, Consultants and non-employee directors capable of assuring the future success of the Corporation; (ii) offer such Persons incentives to put forth maximum efforts; (iii) compensate such Persons through various share-based arrangements and provide them with opportunities for share ownership, thereby aligning the interests of such Persons and Shareholders and advancing the interests of the Corporation.

2.2 Implementation and Administration of the Plan

(1) The Compensation Committee shall implement, administer and interpret the Plan.

(2) Subject to the terms and conditions set forth in the Plan and the rules of the Exchange and applicable laws, the Compensation Committee, shall have the sole and absolute discretion to: (i) designate Participants; (ii) determine the type, size, and terms, and conditions of Awards to be granted; (iii) determine the method by which an Award may be settled, exercised, canceled, forfeited, or suspended; (iv) determine the circumstances under which the delivery of cash, property, or other amounts payable with respect to an Award may be deferred either automatically or at the Participant’s or the Compensation Committee’s election; (v) interpret and administer, reconcile any inconsistency in, correct any defect in, and supply any omission in the Plan and any Award granted under, the Plan; (vi) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Compensation Committee shall deem appropriate for the proper administration of the Plan; (vii) accelerate the vesting, delivery, or exercisability of, or payment for or lapse of restrictions on, or waive any condition in respect of, Awards; and (viii) make any other determination and take any other action that the Compensation Committee deems necessary or desirable for the administration of the Plan, to preserve the tax treatment of the Awards, preserve the economic equivalent value of the Awards or to comply with any applicable law.

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(3) No member of the Board or the Compensation Committee and no officer or employee acting for and on behalf of the Board or the Compensation Committee will be liable for any action or determination taken or made in good faith in the administration, interpretation, construction or application of the Plan, any Award Agreement or other document or any Awards granted pursuant to the Plan.

(4) The day-to-day administration of the Plan may be delegated to such officers and employees of the Corporation as the Compensation Committee determines, including without limitation to grant Awards under the Plan (other than to Insiders).

(5) Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions regarding the Plan or any Award or any documents evidencing any Award granted pursuant to the Plan shall be within the sole discretion of the Compensation Committee, may be made at any time, and shall be final, conclusive, and binding upon all Persons, including, without limitation, the Corporation, any Subsidiary, the Board, any Participant, any holder or beneficiary of any Award, and any Shareholder.

2.3 Eligible Participants

(1) The Persons who shall be eligible to receive Nonqualified Stock Options, SARs, RSUs, DSUs and PSUs shall be the directors, officers, employees or Consultants of or to the Corporation or a Subsidiary, providing ongoing services to the Corporation and/or its Subsidiaries (collectively, “Eligible Participants”). Incentive Stock Options shall be granted only to Eligible Participants who are employees of the Corporation or any of the Corporation’s present or future “subsidiary” or “parent” of the Corporation as defined under Code Section 424(e) or (f) of the Code, or other affiliates the employees of which are eligible to receive Incentive Stock Options under the Code (each an “ISO Entity”).

(2) Participation in the Plan shall be entirely voluntary and may be declined.

(3) Notwithstanding any express or implied term of the Plan to the contrary, the granting of an Award pursuant to the Plan shall in no way be construed as a guarantee of employment or appointment by the Corporation or a Subsidiary.

2.4 Shares Subject to the Plan

(1) Subject to adjustment pursuant to provisions of ‎Article 8, the total number of Shares issuable pursuant to Awards granted under the Plan shall not exceed 1,125,869 (the “Share Limit”), the precise number to be determined following completion of the de-SPAC merger. Subject to applicable law, the requirements of the Exchange and any shareholder or other approval which may be required, the Compensation Committee may in its discretion amend the Plan to increase such limit without notice to any Participants.

(2) Notwithstanding anything in this Section 2.4(1) to the contrary but subject to adjustment as provided in Article 8, the maximum aggregate number of Shares that may be delivered under the Plan as a result of the exercise of the Incentive Stock Options shall be 1,125,869 Shares. In no event shall any Incentive Stock Options be granted under the Plan after the tenth anniversary of the date on which the Board adopts the Plan.

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(3) For greater certainty, any issuance from treasury by the Corporation either: (i) under any other proposed or established Share Compensation Arrangement; or (ii) that is or was issued in reliance upon an exemption under applicable stock exchange rules applicable to security based compensation arrangements used as an inducement to Person(s) not previously employed by and not previously an Insider of the Corporation who become(s) an officer of the Corporation, shall not be included in determining the Share Limit.

(4) Shares in respect of which an Award is granted under the Plan (or any other Share Compensation Arrangement) but not exercised prior to the termination of such Award, not vested or settled prior to the termination of such Award due to the expiration, termination, cancellation or lapse of such Award, or settled in cash in lieu of settlement in Shares, shall, in each case, be available for Awards to be granted thereafter pursuant to the provisions of the Plan; provided, however, that in the case of an Incentive Stock Option, the forgoing shall be subject to any limitations under the Code. All Shares issued from treasury pursuant to the exercise or the vesting of Awards granted under the Plan shall be so issued as fully paid and non-assessable Shares.

2.5 Participation Limits

(1) The number of Shares subject to Awards granted to any one Participant shall be determined by the Compensation Committee, but no one Participant shall be granted Awards which exceed, in aggregate, the maximum number permitted by the Exchange, if applicable.

(2) Subject to adjustment pursuant to provisions of ‎Article 8 hereof, the aggregate number of Shares issued to Insiders under the Plan or any other proposed or established Share Compensation Arrangement within any one-year period shall not exceed ten percent (10%) of the total issued and outstanding Shares subject to the Plan from time to time. Any Awards granted pursuant to a Share Compensation Arrangement or the Plan, prior to the Participant becoming an Insider, shall be excluded for the purposes of the limits set out in this Section ‎2.5(2).

(3) Notwithstanding anything in Section 2.4 to the contrary, but subject to adjustment as provided in Article 8, in any fiscal year of the Corporation during any part of which the Plan is in effect, no Participant who is a non-employee director may be granted any Awards that have a “fair value” as of the date of grant, as determined in accordance with FASB ASC Topic 718 (or any other applicable accounting guidance), that exceeds $300,000 in the aggregate.

2.6 Performance Criteria

The Performance Criteria may consist of, but are not limited to, the following, (determined for the Corporation, on a consolidated basis, and/or for Related Entities, or for business or geographical units of the Corporation and/or a Related Entity): (i) earnings per share; (ii) revenues or margins; (iii) cash flow (including operating cash flow, free cash flow, discounted return on investment, and cash flow in excess of cost of capital); (iv) operating margin; (v) return on net assets, investment, capital, or equity; (vi) economic value added; (vii) direct contribution; (viii) net income; pretax earnings; earnings before all or some of the following items: interest, taxes, depreciation, amortization, stock-based compensation, ASC 718 expense, or any extraordinary or special items; earnings after interest expense and before extraordinary or special items; operating income or income from operations; income before interest income or expense, unusual items and income taxes, local, state or federal and excluding budgeted and actual bonuses which might be paid under any ongoing bonus plans of the Corporation; (ix) working capital; (x) management of fixed costs or variable costs; (xi) identification or consummation of investment opportunities or completion of specified projects in accordance with corporate business plans, including strategic mergers, acquisitions or divestitures; (xii) total stockholder return; (xiii) debt reduction; (xiv) market share; (xv) entry into new markets, either geographically or by business unit; (xvi) customer retention and satisfaction; (xvii) strategic plan development and implementation, including turnaround plans; and/or (xviii) the Fair Market Value of a Share. Any of the foregoing criteria may but need not be determined on an absolute or relative basis or as compared to the performance of a published or special index deemed applicable by the Compensation Committee including, but not limited to, the Standard & Poor’s 500 Stock Index, the Nasdaq Composite Index, the Russell 2000 Index, or another group of companies that are comparable to the Corporation.

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Article 3
OPTIONS

3.1 Nature of Options

An Option is a right granted by the Corporation to a Participant entitling such Participant to acquire a designated number of Shares from treasury at the Exercise Price, subject to the provisions hereof. Eligible Participants may be eligible to receive Nonqualified Stock Options and/or Incentive Stock Options as outlined in this ‎Article 3. All Options granted under the Plan shall be Nonqualified Stock Options unless the applicable Award Agreement expressly states that the Option is intended to be an Incentive Stock Option.

3.2 Option Awards

(1) The Compensation Committee shall, from time to time, in its sole discretion: (i) designate the Eligible Participants who may receive Options under the Plan; (ii) determine the number of Options, if any, to be granted to each Eligible Participant, the number of Shares under each such Option, and the date or dates on which such Options shall be granted; (iii) determine the price per Share to be payable upon the exercise of each such Option (the “Exercise Price”); (iv) determine the relevant vesting provisions (including Performance Criteria, if applicable); and (v) determine the Expiry Date, in each case subject to the terms and conditions prescribed in the Plan, in any Award Agreement and any applicable rules of the Exchange. Other than pursuant to adjustments set forth in Article 8, the Compensation Committee shall not be permitted to (a) lower the Exercise Price per Share of an Option after it is granted, (b) cancel an Option when the Exercise Price per Share exceeds the Market Value of the underlying Shares in exchange for cash or another Award, (c) cancel an outstanding Option in exchange for an Option with an Exercise Price that is less than the Exercise Price of the original Options or (d) take any other action with respect to an Option that may be treated as a repricing pursuant to the applicable rules of the Exchange, without approval of the Corporation’s Shareholders.

(2) All Options granted herein shall vest in accordance with the terms of the Award Agreement entered into in respect of such Options.

3.3 Exercise Price

The Exercise Price for Shares that are the subject of any Option shall be fixed by the Compensation Committee when such Option is granted, but shall not be less than the Market Value of such Shares at the time of the grant. Notwithstanding the foregoing, in the case of an Incentive Stock Option granted to an employee who, at the time of the grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Corporation, the Exercise Price per share shall be no less than one hundred ten percent (110%) of the Market Value on the Grant Date.

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3.4 Expiry Date; Blackout Period

Subject to Section ‎8.1(1), each Option must be exercised no later than ten (10) years after the date the Option is granted (the “Grant Date”) or such shorter period as set out in the Participant’s Award Agreement, at which time such Option will expire (the “Expiry Date”). Notwithstanding any other provision of the Plan, each Option that would expire during or within ten (10) Business Days immediately following a Black-Out Period shall expire on the date that is ten (10) Business Days immediately following the expiration of the Black-Out Period. Where an Option will expire on a date that falls immediately after a Black-Out Period, and for greater certainty, not later than ten (10) Business Days after the Black-Out Period, then the date such Option will expire will be automatically extended by such number of days equal to ten (10) Business Days less the number of Business Days after the Black-Out Period that the Option expires. Notwithstanding the foregoing, in no event shall the Expiry Date exceed five (5) years from the Grant Date in the case of an Incentive Stock Option granted to an employee who on the Grant Date owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Corporation or an ISO Entity.

3.5 Option Agreement

Each Option must be confirmed by an Award Agreement. The Award Agreement shall contain such terms that the Corporation deems necessary and appropriate and to comply with applicable law.

3.6 Exercise of Options

(1) Subject to the provisions of the Plan, a Participant shall be entitled to exercise an Option granted to such Participant, subject to vesting limitations which may be imposed by the Compensation Committee at the time such Option is granted and set out in the Award Agreement.

(2) Prior to its expiration or earlier termination in accordance with the Plan, each Option shall be exercisable as to all or such number of the optioned Shares and at such time or times and/or pursuant to the achievement of such Performance Criteria and/or other vesting conditions as the Compensation Committee may determine in its sole discretion.

(3) No fractional Shares will be issued upon the exercise of Options granted under the Plan and, accordingly, if a Participant would become entitled to a fractional Share upon the exercise of an Option, or from an adjustment pursuant to Section ‎8.1, such Participant will only have the right to acquire the next lowest whole number of Shares.

3.7 Method of Exercise and Payment of Purchase Price

(1) Subject to the provisions of the Plan and the alternative exercise procedures set out herein, an Option granted under the Plan may be exercisable (from time to time as provided in Section ‎3.6) by the Participant (or by the liquidator, executor or administrator, as the case may be, of the estate of the Participant) by delivering an Exercise Notice substantially in the form to be attached as a schedule to the Award Agreement to the Corporation in the form and manner determined by the Compensation Committee from time to time, together with a bank draft, certified cheque or other form of payment acceptable to the Corporation in an amount equal to the aggregate Exercise Price of the Shares to be purchased pursuant to the exercise of the Options and any applicable withholding tax.

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(2) Pursuant to the Exercise Notice and subject to the approval of the Compensation Committee and subject to applicable law, a Participant may choose to undertake a “cashless exercise” with the assistance of a broker (the “Broker”) in order to facilitate the exercise of such Participant’s Options. The “cashless exercise” procedure may include a sale of such number of Shares as is necessary to raise an amount equal to the aggregate Exercise Price for all Options being exercised by that Participant under an Exercise Notice and any applicable withholding tax. Pursuant to the Exercise Notice, the Participant may authorize the Broker to sell Shares on the open market by means of a short sale and forward the proceeds of such short sale to the Corporation to satisfy the Exercise Price and any applicable withholding tax, promptly following which the Corporation shall issue the Shares underlying the number of Options as provided for in the Exercise Notice.

(3) In addition, to the extent specifically provided in an Option Agreement and subject to applicable law, in lieu of exercising any vested Option in the manner described in this Section ‎3.7(1) or Section ‎3.7(2), and pursuant to the terms of this Section ‎3.7(3), a Participant may, by surrendering an Option (“Surrender”) with a properly endorsed notice of Surrender to the Corporate Secretary of the Corporation, substantially in the form to be attached as a schedule to the Award Agreement (a “Surrender Notice”), elect to receive that number of Shares calculated using the following formula, subject to acceptance of such Surrender Notice by the Compensation Committee and provided that arrangements satisfactory to the Corporation have been made to pay any applicable withholding taxes:

X = (Y * (A-B)) / A

Where:

X = the number of Shares to be issued to the Participant upon exercising such Options; provided that if the foregoing calculation results in a negative number, then no Shares shall be issued

Y = the number of Shares underlying the Options to be Surrendered

A = the Market Value of the Shares as at the date of the Surrender

B = the Exercise Price of such Options

(4) No share certificates shall be issued and no Person shall be registered in the share register of the Corporation as the holder of Shares until actual receipt by the Corporation of an Exercise Notice, payment for the Shares to be purchased and satisfaction of any withholding tax requirements.

(5) Subject to Section ‎3.7(4), upon the exercise of an Option pursuant to Section ‎3.7(1) or Section ‎3.7(2), or a Surrender pursuant to Section ‎3.7(3), the Corporation shall, as soon as practicable after such exercise or Surrender, cause the transfer agent and registrar of the Shares to deliver to the Participant (or as the Participant may otherwise direct) such number of Shares as the Participant shall have then paid for and as are specified in such Exercise Notice or to which the Participant is then entitled in connection with the Surrender.

(6) In the case of an Incentive Stock Option, the available method(s) of exercise shall be specified in the Award Agreement at the time of grant.

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3.8 Termination of Employment or Service

(1) Subject to the provisions of the Plan, a Participant’s Options shall be subject to the terms and conditions of the Participant’s Award Agreement, as the case may be, in respect of such Participant’s ceasing to be an Eligible Participant.

(2) For the avoidance of doubt, subject to applicable laws, no period of notice, if any, or payment instead of notice that is given or that ought to have been given under applicable law, whether by statute, contract, imposed by a court or otherwise, in respect of such termination of employment that follows or is in respect of a period after the Participant’s Termination Date will be considered as extending the Participant’s period of employment for the purposes of determining his or her entitlement under the Plan.

(3) The Participant shall have no entitlement to damages or other compensation arising from or related to not receiving any awards that would have settled or vested or accrued to the Participant, or from the loss of the opportunity to exercise Options which the Participant would have been entitled to exercise during any period of notice of termination of employment under common law, contract or otherwise that is or should have been provided, if the Termination Date had not occurred.

3.9 Incentive Stock Options

(1) No Option shall be treated as an Incentive Stock Option unless the Plan has been approved by the Shareholders in a manner intended to comply with the shareholder approval requirements of Section 422(b)(1) of the Code; provided, however, that any Option intended to be an Incentive Stock Option shall not fail to be effective solely on account of a failure to obtain such approval, but rather such Option shall be treated as a Nonqualified Stock Option unless and until such approval is obtained. In the case of an Incentive Stock Option, the terms and conditions of such grant shall be subject to and comply with such rules as may be prescribed by Section 422 of the Code. If for any reason an Option intended to be an Incentive Stock Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option or portion thereof shall be regarded as a Nonqualified Stock Option appropriately granted under the Plan.

(2) No Incentive Stock Option may be granted more than ten (10) years from the date the Plan is adopted, or the date the Plan is approved by the Shareholders, whichever is earlier.

(3) To the extent to the extent that the aggregate Market Value of the Shares subject to a Participant’s Incentive Stock Options (and other incentive stock options granted by the Corporation or any “subsidiary” or “parent” of the Corporation as defined under Code Section 424(e)), which become exercisable for the first time during any calendar year exceeds $100,000, such excess Options or other options shall be treated as Nonqualified Stock Option. For purposes of this paragraph, Incentive Stock Options shall be taken into account in the order in which they were granted, and the Market Value of the Shares shall be determined as of the time of grant

(4) Each Participant awarded an Incentive Stock Option under the Plan shall as a condition of participation hereunder notify the Corporation in writing immediately after the date he or she makes a disqualifying disposition of any Shares acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including, without limitation, any sale) of such Shares before the later of: (i) two (2) years after the Grant Date of the Incentive Stock Option; or (ii) one (1) year after the date of exercise of the Incentive Stock Option. The Corporation may, if determined by the Compensation Committee and in accordance with procedures established by the Compensation Committee, retain possession, as agent for the applicable Participant, of any Shares acquired pursuant to the exercise of an Incentive Stock Option until the end of the period described in the preceding sentence, subject to complying with any instructions from such Participant as to the sale of such Shares.

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(5) To the extent that a Participant has received Incentive Stock Options and that any of the more general language in this ‎Article 3 conflicts with the language in this Section ‎3.9, the language of Section ‎3.9 shall be controlling.

Article 4
STOCK APPRECIATION RIGHTS

4.1 Nature of SARs

A SAR is a stock appreciation right granted to a Participant representing the right to receive, subject to restrictions and conditions as the Compensation Committee may determine at the time of grant, a cash payment or Shares in lieu of cash having an aggregate value equal to the product of: (i) the excess of (a) the Market Value on the exercise date of one Share over (b) the base price per Share specified in the Award Agreement, multiplied by (ii) the number of Shares specified by the SAR, or the portion thereof, that is exercised. The base price per Share specified in the Award Agreement shall not be less than the Market Value on the date of grant. Other than pursuant to adjustments set forth in Article 8, the Compensation Committee shall not be permitted to (a) lower the base price per Share of a SAR after it is granted, (b) cancel a SAR when the base price per Share exceeds the Market Value of the underlying Shares in exchange for cash or another Award, (c) cancel an outstanding SAR in exchange for a SAR with base price per Share that is less than the base price per Share of the original SARs or (d) take any other action with respect to a SAR that may be treated as a repricing pursuant to the applicable rules of the Exchange, without approval of the Corporation’s Shareholders.

4.2 SAR Awards

Each SAR must be confirmed by an Award Agreement that sets forth the terms, conditions and limitations for each SAR and may include, without limitation, whether the SAR is settled in cash or Shares, the vesting, expiry and base price per Share of the SAR and the provisions applicable if employment or service terminates, and shall contain such terms that may be considered necessary in order that the SAR will comply with any provisions respecting SARs in the income tax or other laws in force in any country or jurisdiction of which the Participant may from time to time be a resident or citizen or in which the Participant may perform services for the Corporation or a Subsidiary or the rules of any regulatory body having jurisdiction over the Corporation. If, upon the exercise of a SAR, a Participant is to receive a portion of such payment in Shares, the number of Shares shall be determined by dividing such portion by the Market Value on the exercise date. No fractional Shares will be issued upon the exercise of a SAR granted under the Plan and, accordingly, if a Participant would become entitled to a fractional Share upon the exercise of a SAR, or from an adjustment pursuant to Section ‎8.1, such Participant will only have the right to acquire the next lowest whole number of Shares and will receive a cash payment in lieu of such fractional Shares.

4.3 Exercise of SARs

SARs shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Compensation Committee as set out in the Participant’s Award Agreement; provided, however, that SARs granted under the Plan may not have a term in excess of ten (10) years’ duration unless required otherwise by applicable law.

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Article 5
DEFERRED SHARE UNITS

5.1 Nature of DSUs

A DSU is a unit granted to a Participant representing the right to receive a Share or the Cash Equivalent, subject to restrictions and conditions as the Compensation Committee may determine at the time of grant and the rules of the Exchange. Conditions may be based on continuing service of the Participant and/or achievement of Performance Criteria. Notwithstanding any other provision of the Plan, a DSU may not be granted to a Participant who is a U.S. Participant.

5.2 DSUs

(1) Subject to the provisions herein set forth and any shareholder or regulatory approval which may be required, the Compensation Committee shall, from time to time, in its sole discretion: (i) designate the Eligible Participants who may receive DSUs under the Plan; (ii) fix the number of DSUs, if any, to be granted to each Eligible Participant and the date or dates on which such DSUs shall be granted; and (iii) determine the relevant conditions and vesting provisions (including, any applicable Performance Periods and Performance Criteria), in each case subject to the terms and conditions prescribed in the Plan and in any Award Agreement, as applicable.

(2) Each DSU must be confirmed by an Award Agreement that sets forth the terms, conditions and limitations for each DSU and may include, without limitation, the vesting and terms of the DSUs and the provisions applicable if employment or service terminates, and shall contain such terms that may be considered necessary in order that the DSU will comply with any provisions respecting DSUs in the income tax or other laws in force in any country or jurisdiction of which the Participant may from time to time be a resident or citizen or in which the Participant may perform services for the Corporation or a Subsidiary or the rules of any regulatory body having jurisdiction over the Corporation.

(3) Any DSUs that are awarded to a Participant who is a resident of Canada or employed in Canada (each for purposes of the Tax Act) shall be structured so as to be considered to be an agreement described in section 7 of the Tax Act or to meet requirements of paragraph 6801(d) of the Income Tax Regulations adopted under the Tax Act (or any successor to such provisions).

(4) Subject to vesting and other conditions and provisions set forth herein and in the Award Agreement, the Compensation Committee shall determine whether each DSU awarded to a Participant shall entitle the Participant: (i) to receive one Share issued from treasury; (ii) to receive the Cash Equivalent of one Share; or (iii) to elect to receive either one Share from treasury, the Cash Equivalent of one Share or a combination of cash and Shares.

5.3 Redemption of DSUs

(1) Subject to Section ‎5.3(2), each Participant that has been awarded DSUs shall be entitled to redeem his or her DSUs during the period commencing on the Business Day immediately following a DSU Termination Event and ending on the date that is not later than December 15 of the year following the year that includes such DSU Termination Event, or a shorter such redemption period set out in the relevant Award Agreement, by providing a written notice of redemption to the Corporation setting out the number of DSUs to be settled and the particulars regarding the registration of the Shares issuable upon settlement, if applicable (the “DSU Redemption Notice”). In the event of the death of a Participant, the DSU Redemption Notice shall be filed by the administrator or liquidator of the estate of the Participant.

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(2) If a DSU Redemption Notice is not received by the Corporation on or before the 90^th day following a DSU Termination Event, the Participant shall be deemed to have delivered a DSU Redemption Notice on the 90^th day following such DSU Termination Event, such deemed notice to be effective on December 15 of the then current year, and the Compensation Committee shall determine the number of DSUs to be settled by way of Shares, the Cash Equivalent or a combination of Shares and the Cash Equivalent and delivered to the Participant, administrator or liquidator of the estate of the Participant, as applicable.

(3) Subject to Section ‎9.4 and the Award Agreement, settlement of DSUs shall take place promptly following the Corporation’s receipt or deemed receipt of the DSU Redemption Notice through:

(a) in the case of settlement DSUs for their Cash Equivalent, delivery of bank draft, certified cheque, electronic funds transfer or other form of payment to the Participant representing the Cash Equivalent;

(b) in the case of settlement of DSUs for Shares, delivery of a Share to the Participant; or

(c) in the case of settlement of DSUs for a combination of Shares and the Cash Equivalent, a combination of (a) and (b) above.

Article 6
SHARE UNITS

6.1 Nature of Share Units

A Share Unit is an award that is either a PSU or a RSU entitling the recipient to acquire Shares, at such purchase price as determined by the Compensation Committee, subject to such restrictions and conditions as the Compensation Committee may determine at the time of grant and the rules of the Exchange. Conditions may be based on continuing employment (or other service relationship) and/or achievement of pre-established performance goals and objectives.

6.2 Share Unit Awards

(1) Subject to the provisions herein set forth and any shareholder or regulatory approval which may be required, the Compensation Committee shall, from time to time, in its sole discretion: (i) designate the Eligible Participants who may receive RSUs and/or PSUs under the Plan; (ii) fix the number of RSUs and/or PSUs, if any, to be granted to each Eligible Participant and the date or dates on which such RSUs and/or PSUs shall be granted; and (iii) determine the relevant conditions and vesting provisions (including, in the case of PSUs, the applicable Performance Period and Performance Criteria, if any) of such RSUs and/or PSUs, in each case subject to the terms and conditions prescribed in the Plan and in any Award Agreement.

(2) Each RSU must be confirmed by an Award Agreement that sets forth the terms, conditions and limitations for each RSU and may include, without limitation, the vesting and terms of the RSUs and the provisions applicable if employment or service terminates, and shall contain such terms that may be considered necessary in order that the RSUs will comply with any provisions respecting RSUs in the income tax or other laws in force in any country or jurisdiction of which the Participant may from time to time be a resident or citizen or in which the Participant may perform services for the Corporation or a Subsidiary or the rules of any regulatory body having jurisdiction over the Corporation.

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(3) Each PSU must be confirmed by an Award Agreement that sets forth the terms, conditions and limitations for each PSU and may include, without limitation, the applicable Performance Period and Performance Criteria, vesting and terms of the PSUs and the provisions applicable if employment or service terminates, and shall contain such terms that may be considered necessary in order that the PSUs will comply with any provisions respecting PSUs in the income tax or other laws in force in any country or jurisdiction of which the Participant may from time to time be a resident or citizen or in which the Participant may perform services for the Corporation or a Subsidiary or the rules of any regulatory body having jurisdiction over the Corporation.

(4) Any Share Units that are awarded to an Eligible Participant who is a resident of Canada or employed in Canada (each for purposes of the Tax Act) shall be structured so as to be considered to be an agreement described in Section 7 of the Tax Act or in such other manner to ensure that such award is not a “salary deferral arrangement” as defined in the Tax Act (or any successor to such provisions).

(5) Subject to the vesting and other conditions and provisions set forth herein and in the Award Agreement, the Compensation Committee shall determine whether each Share Unit awarded to a Participant shall entitle the Participant: (i) to receive one Share issued from treasury; (ii) to receive the Cash Equivalent of one Share; or (iii) to elect to receive either one Share from treasury, the Cash Equivalent of one Share or a combination of cash and Shares.

6.3 Performance Criteria and Performance Period Applicable to PSU Awards

(1) For each award of PSUs, the Compensation Committee shall establish the period in which any Performance Criteria and other vesting conditions must be met in order for a Participant to be entitled to receive Shares in exchange for all or a portion of the PSUs held by such Participant (the “Performance Period”).

(2) For each award of PSUs, the Compensation Committee shall establish any Performance Criteria and other vesting conditions in order for a Participant to be entitled to receive Shares in exchange for his or her PSUs.

Article 7
GENERAL CONDITIONS

7.1 General Conditions applicable to Awards

Each Award, as applicable, shall be subject to the following conditions:

(1) Employment or Service – The granting of an Award to a Participant shall not impose upon the Corporation or a Subsidiary any obligation to retain the Participant in its employ or consultancy in any capacity. For greater certainty, the granting of Awards to a Participant shall not impose any obligation on the Corporation to grant any awards in the future nor shall it entitle the Participant to receive future grants.

(2) Rights as a Shareholder – Neither the Participant nor such Participant’s legal representatives shall have any rights whatsoever as Shareholder in respect of any Shares covered by such Participant’s Awards until the date of issuance of Shares to such Participant (or to the liquidator, executor or administrator, as the case may be, of the estate of the Participant). Without in any way limiting the generality of the foregoing, no adjustment shall be made for dividends or other rights for which the record date is prior to the date such share certificate is issued or entry of such Person’s name on the share register for the Shares.

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(3) Other Forfeitures – Notwithstanding any other provision of the Plan or any Award Agreement, to the extent not prohibited by applicable law, all unvested Awards held by a Participant shall be forfeited and shall be of no further value whatsoever if such Participant fails to comply with the terms of any confidentiality, non-competition, non-disclosure, non-disparagement or non-solicitation restriction relating to the Corporation or its Affiliates, as the case may be, contained in any agreement entered into between such Participant and the Corporation and/or any Affiliate (including, without limitation, any Award Agreement), whether or not such restriction is deemed enforceable or unenforceable.

(4) Conformity to Plan – If an Award is granted or an Award Agreement is executed which does not conform in all particulars with the provisions of the Plan or applicable law, or purports to grant Awards on terms different from those set out in the Plan, the Award or the grant of such Award shall not be in any way void or invalidated, but the Award so granted will be adjusted to become, in all respects, in conformity with the Plan and applicable law.

(5) Non-Transferability – Except as set forth herein or as authorized by the Compensation Committee, Awards are not transferable and may be exercised only by:

(a) the Participant to whom the Awards were granted;

(b) upon the Participant’s death, by the legal representative of the Participant’s estate; or

(c) upon the Participant’s incapacity, the legal representative having authority to deal with the property of the Participant;

provided that any such legal representative shall first deliver evidence satisfactory to the Corporation of entitlement to exercise any Award. A Person exercising an Award may subscribe for Shares only in the Person’s own name or in the Person’s capacity as a legal representative. Under no circumstances may Incentive Stock Option awards be transferred by a Participant, other than by will or the laws of descent and distribution.

7.2 Dividend Share Units

When dividends (other than stock dividends) are paid on Shares, Participants holding DSUs, RSUs and/or PSUs may, subject to the terms and conditions set out in a Participant’s Award Agreement, receive additional DSUs, RSUs and/or PSUs, as applicable (“Dividend Share Units”) as of the dividend payment date. The number of Dividend Share Units to be granted to the Participant, if any shall be determined by multiplying the aggregate number of DSUs, RSUs and/or PSUs, as applicable, held by the Participant on the relevant record date by the amount of the dividend paid by the Corporation on each Share, and dividing the result by the Market Value on the dividend payment date, which Dividend Share Units shall be in the form of DSUs, RSUs and/or PSUs, as applicable. Dividend Share Units granted to a Participant in accordance with this Section ‎7.2 shall be subject to the same vesting conditions applicable to the related DSUs, RSUs and/or PSUs in accordance with the respective Award Agreement. All Dividend Share Units shall settle in the same form as the related DSUs, RSUs and/or PSUs. If and to the extent that the Dividend Share Units are settled in Shares, such Dividend Share Units shall be counted towards the Share Limit.

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7.3 Unfunded Plan

Unless otherwise determined by the Compensation Committee, the Plan shall be unfunded. To the extent any Participant or his or her estate holds any rights by virtue of a grant of Awards under the Plan, such rights (unless otherwise determined by the Compensation Committee) shall be no greater than the rights of an unsecured creditor of the Corporation.

Article 8
ADJUSTMENTS AND AMENDMENTS

8.1 Adjustment to Shares Subject to Outstanding Awards

(1) In the event of any stock dividend, stock split, combination or exchange of Shares, merger, consolidation, spin-off or other distribution (other than normal cash dividends) of the Corporation’s assets to Shareholders or any other change affecting the Shares, the Compensation Committee will make such proportionate adjustments, if any, as the Compensation Committee, in its discretion, subject to applicable law and Exchange approval, may deem appropriate to reflect such change (for the purpose of preserving the value of the Awards at the time of the change affecting the Shares), with respect to: (i) the number or kind of Shares or other securities reserved for issuance pursuant to the Plan; and (ii) the number or kind of Shares or other securities subject to unexercised Awards previously granted and the exercise price, if any, of those Awards provided, however, that no substitution or adjustment will obligate the Corporation to issue or sell fractional Shares. The existence of any Awards does not affect in any way the right or power of the Corporation or an Affiliate or any of their respective shareholders to make, authorize or determine any adjustment, recapitalization, reorganization or any other change in the capital structure or the business of, or any amalgamation, merger or consolidation involving, to create or issue any bonds, debentures, shares or other securities of, or to determine the rights and conditions attaching thereto, to effect the dissolution or liquidation of or any sale or transfer of all or any part of the assets or the business of, or to effect any other corporate act or proceeding relating to, whether of a similar character or otherwise, the Corporation or such Affiliate, whether or not any such action would have an adverse effect on the Plan or any Award granted hereunder. Awards issued in connection with the assumption of, or in substitution for, outstanding options intended to qualify as “incentive stock options” within the meaning of Section 422 of the Code shall be counted against the aggregate number of shares of Shares available for Awards of Incentive Stock Options under the Plan. Any adjustment in Incentive Stock Options under this ‎Article 7 (other than any cancellation of Incentive Stock Options) shall be made only to the extent not constituting a “modification” within the meaning of Section 424(h)(3) of the Code. All adjustments under this Article 8 shall be made in good-faith compliance with paragraph 7(1.4)(c) of the Tax Act, as applicable.

8.2 Amendment or Discontinuance of the Plan

(1) The Board may, in its sole discretion, suspend or terminate the Plan at any time or from time to time and/or amend or revise the terms of the Plan or of any Award granted under the Plan and any agreement relating thereto, provided that such suspension, termination, amendment, or revision shall:

(a) not adversely alter or impair any Award previously granted except as permitted by the terms of the Plan or upon the consent of the applicable Participant(s); and

(b) be in compliance with applicable law, applicable Exchange policies and with the prior approval, if required, of the Shareholders.

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(2) If the Plan is terminated, the provisions of the Plan and any administrative guidelines and other rules and regulations adopted by the Board and in force on the date of termination will continue in effect as long as any Award or any rights awarded or granted under the Plan remain outstanding and, notwithstanding the termination of the Plan, the Board will have the ability to make such amendments to the Plan or the Awards as they would have been entitled to make if the Plan were still in effect.

(3) The Compensation Committee may from time to time, in its discretion and without the approval of Shareholders, to the extent permitted by applicable law make changes to the Plan or any Award without the approval of Participants or Shareholders under Section ‎8.2(1) which may include but are not limited to:

(a) a change to the vesting provisions of any Award granted under the Plan;

(b) a change to the provisions governing the effect of termination of a Participant’s employment, contract or office;

(c) a change to accelerate the date on which any Award may be exercised under the Plan;

(d) an amendment of the Plan or an Award as necessary to comply with applicable law, Exchange requirements or any other regulatory body having authority over the Corporation, the Plan, the Participants or the Shareholders;

(e) any amendment of a “housekeeping” nature, including without limitation those made to clarify the meaning of an existing provision of the Plan or any agreement governing Awards, correct or supplement any provision of the Plan that is inconsistent with any other provision of the Plan or any agreement governing Awards, correct any grammatical or typographical errors or amend the definitions in the Plan regarding administration of the Plan; or

(f) any amendment regarding the administration of the Plan.

(4) Notwithstanding the foregoing or any other provision of the Plan, shareholder approval is required for the following amendments to the Plan:

(a) any increase in the maximum number of Shares that may be issuable under the Plan pursuant to Awards, other than an adjustment pursuant to Section ‎8.1;

(b) any increase in the maximum number of Shares that may be issuable upon exercise of Incentive Stock Options under the Plan, other than an adjustment pursuant to Section ‎8.1;

(c) any reduction in the Exercise Price or base price per Share of an Award, except in the case of an adjustment pursuant to Section ‎8.1;

(d) any extension of the Expiry Date of an Award benefitting an Insider, except in case of an extension due to a Black-Out Period;

(e) any extension of the Expiry Date of an Award where the Exercise Price or base price per Share is lower than the Market Value;

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(f) any amendment to remove or to exceed the Insider participation limit set out in Section ‎2.5(1); and

(g) any amendment to Section ‎8.2(3) or Section ‎8.2(4) of the Plan, as amended by the Addendum for U.S. Participants.

8.3 Change of Control

(1) Despite any other provision of the Plan, in the event of a Change of Control, all Awards then outstanding may, as determined by the Compensation Committee, be assumed, substituted by or replaced with awards of the surviving corporation (or any Affiliate thereof) or the potential successor (or any Affiliate thereto) (the “continuing entity”) on the same terms and conditions as the original Awards, subject to appropriate adjustments that do not materially diminish the value of the original Awards and consistent with applicable requirements of the Code.

(2) No fractional Shares or other security will be issued upon the exercise of any Award and accordingly, if as a result of a Change of Control, a Participant would become entitled to a fractional Share or other security, such Participant will have the right to acquire only the next lowest whole number of Shares or other security and no payment or other adjustment will be made with respect to the fractional interest so disregarded.

(3) In the event of a Change of Control, the vesting terms of Awards shall be subject to the Participant’s Award Agreement. Notwithstanding the foregoing, despite anything else to the contrary in the Plan, in the event of a potential Change of Control the Compensation Committee will have the power, in its sole discretion, and on such terms as it may determine: (i) to modify the terms of the Plan and/or the Awards to assist the Participants in tendering to a take-over bid or other transaction leading to a Change of Control; (ii) to accelerate the vesting of an Award to the extent that such Award is not being assumed or substituted in the potential Change of Control; and/or (iii) to permit Participants to conditionally exercise or surrender their Awards, such conditional exercise or surrender to be conditional upon the take-up by such offeror of the Shares or other securities tendered to such take-over bid in accordance with the terms of the take-over bid or the effectiveness of such other transaction leading to a Change of Control.

(4) If the Compensation Committee has, pursuant to the provisions of Section ‎8.3(3) permitted the conditional exercise of Awards in connection with a potential Change of Control, then the Compensation Committee will have the power, in its sole discretion, to terminate, immediately following actual completion of such Change of Control and on such terms as it sees fit, any Awards not exercised (including all vested and unvested Awards).

(5) Alternatively, in the event of a Change of Control, the Compensation Committee may provide for either: (i) termination of the Award, whether or not vested, in exchange for an amount of cash and/or other property, if any, equal to the amount that would have been attained upon the exercise of the vested portion of the Award or realization of the Participant’s vested rights (and, for the avoidance of doubt, if, as of the date of the occurrence of the Change of Control the Compensation Committee determines in good faith that no amount would have been attained upon the exercise of the Award or realization of the Participant’s rights, then the Award may be terminated by Corporation without any payment); or (ii) the replacement of the Award with other rights or property selected by the Compensation Committee, in its sole discretion.

(6) The Compensation Committee may treat Awards differently in connection with the Change of Control and need not treat all Awards or Participants in a uniform manner.

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Article 9
MISCELLANEOUS

9.1 Currency

Unless otherwise specifically provided, all references to dollars in the Plan are references to U.S. dollars.

9.2 Compliance and Award Restrictions

(1) The Corporation’s obligation to issue and deliver Shares under any Award is subject to: (i) the completion of such registration or other qualification of such Shares or obtaining approval of such regulatory authority as the Corporation shall determine to be necessary or advisable in connection with the authorization, issuance or sale thereof; (ii) the admission of such Shares to listing on the Exchange; and (iii) the receipt from the Participant of such representations, agreements and undertakings as to future dealings in such Shares as the Corporation determines to be necessary or advisable in order to safeguard against the violation of applicable securities laws. The Corporation shall take all commercially reasonable steps to obtain such approvals, registrations and qualifications as may be necessary for the issuance of such Shares in compliance with applicable securities laws and for the listing of such Shares on the Exchange.

(2) Each Participant agrees to fully cooperate with the Corporation in doing all such things, including executing and delivering all such agreements, undertakings or other documents or furnishing all such information as is reasonably necessary to facilitate compliance by the Corporation with such laws, rule and requirements, including all withholding tax and remittance obligations. All Shares issued pursuant to the Plan may be issued subject to such restrictions as may be appropriate for compliance with applicable securities laws, rules and regulations, and any certificates representing such Shares may contain such legends as may be appropriate for such compliance.

(3) No Awards will be granted where such grant is restricted pursuant to the terms of any trading policies or other restrictions imposed by the Corporation.

(4) The Corporation is not obliged by any provision of the Plan or the grant of any Award under the Plan to issue or sell Shares if, in the opinion of the Compensation Committee, such action would constitute a violation by the Corporation or a Participant of any applicable law or Exchange requirements.

(5) If Shares cannot be issued to a Participant upon the exercise or settlement of an Award due to applicable law or Exchange requirements, the obligation of the Corporation to issue such Shares will terminate and, if applicable, any funds paid to the Corporation in connection with the exercise of any Options will be returned to the applicable Participant as soon as practicable.

(6) At the time a Participant ceases to hold Awards which are or may become exercisable, or be settled as provided herein, the Participant ceases to be a Participant.

(7) Nothing contained herein will prevent the Corporation from adopting other or additional compensation arrangements for the benefit of any Participant or any other Person, subject to any required regulatory, shareholder or other approval.

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9.3 Use of an Administrative Agent and Trustee

The Compensation Committee may in its sole discretion appoint from time to time one or more entities to act as administrative agent to administer the Awards granted under the Plan and to act as trustee to hold and administer the assets that may be held in respect of Awards granted under the Plan, in each case in accordance with the terms and conditions determined by the Compensation Committee in its sole discretion. The Corporation and any administrative agent will maintain records showing the number of Awards granted to each Participant under the Plan.

9.4 Withholding Tax

(1) It is the responsibility of the Participant to complete and file any tax returns which may be required under Canadian, U.S. or other applicable jurisdiction’s tax laws within the periods specified in those laws as a result of the Participant’s participation in the Plan. Notwithstanding any other provision of the Plan, all distributions, delivery of Shares or payments to a Participant (or to the liquidator, executor or administrator, as the case may be, of the estate of the Participant) under the Plan shall be made net of applicable taxes and other source deductions. If the event giving rise to the withholding obligation involves an issuance or delivery of Shares, then with the Compensation Committee’s approval and subject to applicable law, the withholding obligation may be satisfied by: (i) having the Participant elect to have the appropriate number of such Shares sold by the Corporation, the Corporation’s transfer agent and registrar or any agent, broker or trustee appointed by the Corporation, in each case, on behalf of and as agent for the Participant as soon as permissible and practicable, with the proceeds of such sale being delivered to the Corporation, which will in turn remit such amounts to the appropriate governmental authorities; or (ii) any other mechanism as may be required or appropriate to conform with local tax and other rules. Notwithstanding any other provision of the Plan, the Corporation shall not be required to issue any Shares or make payments under the Plan until arrangements satisfactory to the Corporation have been made for payment of all applicable withholding obligations.

(2) The sale of Shares by the Corporation, or by a Broker, under Section ‎9.4(1) or under any other provision of the Plan will be made on the Exchange or any other recognized exchange on which the Shares are traded. The Participant consents to such sale and grants to the Corporation an irrevocable power of attorney to effect the sale of such Shares on his behalf and acknowledges and agrees that: (i) the number of Shares sold will be, at a minimum, sufficient to fund the withholding obligations net of all selling costs, which costs are the responsibility of the Participant and which the Participant hereby authorizes to be deducted from the proceeds of such sale; (ii) in effecting the sale of any such Shares, the Corporation or the Broker will exercise its sole judgment as to the timing and the manner of sale and will not be obligated to seek or obtain a minimum price; and (iii) neither the Corporation nor the Broker will be liable for any loss arising out of such sale of the Shares including any loss relating to the pricing, manner or timing of the sales or any delay in transferring any Shares to a Participant or otherwise.

(3) The Participant further acknowledges that the sale price of the Shares will fluctuate with the market price of the Shares and no assurance can be given that any particular price will be received upon any sale. The Corporation makes no representation or warranty as to the future market value of the Shares or with respect to any income tax matters affecting the Participant resulting from the grant or exercise of an Awards and/or transactions in the Shares. Neither the Corporation, nor any of its directors, officers, employees, shareholders or agents will be liable for anything done or omitted to be done by such Person or any other Person with respect to the price, time, quantity or other conditions and circumstances of the issuance of Shares under the Plan, with respect to any fluctuations in the market price of Shares or in any other manner related to the Plan.

(4) Notwithstanding the first paragraph of this Section ‎9.4, the applicable withholding tax may be waived where the Participant directs in writing that a payment be made directly to the Participant’s registered retirement savings plan in circumstances to which regulation 100(3) of the regulations of the Tax Act apply.

9.5 Reorganization of the Corporation

The existence of any Awards shall not affect in any way the right or power of the Corporation or the Shareholders to make or authorize any adjustment, recapitalization, reorganization or other change in the Corporation’s capital structure or its business, or any amalgamation, combination, merger or consolidation involving the Corporation or to create or issue any bonds, debentures, shares or other securities of the Corporation or the rights and conditions attaching thereto or to affect the dissolution or liquidation of the Corporation or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar nature or otherwise.

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9.6 Governing Laws

The Plan and all matters to which reference is made herein shall be governed by and interpreted in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.

9.7 Successors and Assigns

The Plan shall be binding on all successors and assigns of the Corporation and a Participant, including without limitation, the personal legal representatives of a Participant, or any receiver or trustee in bankruptcy or representative of the Corporation’s or Participant’s creditors.

9.8 Severability

The invalidity or unenforceability of any provision of the Plan shall not affect the validity or enforceability of any other provision and any invalid or unenforceable provision shall be severed from the Plan.

9.9 No liability

No member of the Compensation Committee, Board or officer of the Corporation shall be liable for any action or determination taken or made in good faith in the administration, interpretation, construction or application of the Plan or any Award granted hereunder.

9.10 Clawback of Benefits

(1) The Corporation may (A) cause the cancellation of any Award, (B) require reimbursement of any Award by a Participant or beneficiary, and (C) effect any other right of recoupment of equity or other compensation provided under this Plan or otherwise in accordance with any of the Corporation’s policies that currently exist or that may from time to time be adopted or modified in the future by the Corporation and/or applicable law (each, a “Clawback Policy”). In addition, a Participant may be required to repay to the Corporation certain previously paid compensation, whether provided under this Plan or an Award Agreement or otherwise, in accordance with any Clawback Policy. By accepting an Award, a Participant is also agreeing to be bound by any existing or future Clawback Policy adopted by the Corporation, or any amendments that may from time to time be made to the Clawback Policy in the future by the Corporation in its discretion (including, without limitation, any Clawback Policy adopted or amended to comply with applicable laws or stock exchange requirements) and is further agreeing that all of the Participant’s Award Agreements may be unilaterally amended by the Corporation, without the Participant’s consent, to the extent that the Corporation in its discretion determines to be necessary or appropriate to comply with any Clawback Policy.

(2) If the Participant, without the consent of the Corporation, while employed by or providing services to the Corporation or any Related Entity or after termination of such employment or service, fails to comply with the terms of any confidentiality, non-competition, non-disclosure, non-disparagement or non-solicitation restriction relating to the Corporation or its Affiliates, as the case may be, contained in any agreement entered into between such Participant and the Corporation and/or any Affiliate (including, without limitation, any Award Agreement), whether or not such restriction is deemed enforceable or unenforceable or otherwise engages in activity that is in conflict with or adverse to the interest of the Corporation or any Related Entity, as determined by the Board in its sole discretion, then (i) any outstanding, vested or unvested, earned or unearned portion of the Award may, at the Board’s discretion, be canceled and (ii) the Board, in its discretion, may require the Participant or other person to whom any payment has been made or Shares or other property have been transferred in connection with the Award to forfeit and pay over to the Corporation, on demand, all or any portion of the gain (whether or not taxable) realized upon the exercise of any Option or SAR and the value realized (whether or not taxable) on the vesting or payment of any other Award during the time period specified in the Award Agreement or otherwise specified by the Board.

9.11 Effective Date of the Plan

The Plan was approved by the Board for and on behalf of the Board and shall take effect on [●], 2023 (the “Effective Date”).

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ADDENDUM FOR U.S. PARTICIPANTS
Borealis Foods Inc.
EQUITY INCENTIVE PLAN

The provisions of this Addendum apply to Awards held by a U.S. Participant. All capitalized terms used in this Addendum but not defined in Section ‎1 below have the meanings attributed to them in the Plan. The Section references set forth below match the Section references in the Plan. This Addendum shall have no other effect on any other terms and provisions of the Plan except as set forth below.

1. Definitions

“Separation from Service” means, with respect to a U.S. Participant, any event that may qualify as a separation from service under Treasury Regulation Section 1.409A-1(h). A U.S. Participant shall be deemed to have separated from service if he or she dies, retires, or otherwise has a termination of employment as defined under Treasury Regulation Section 1.409A-1(h). To the extent a U.S. Participant’s employment is governed by the employment standards legislation of a Canadian province or territory, any termination of employment of such U.S. Participant by the Corporation or Affiliate with whom the U.S. Participant is employed will be deemed to coincide with, as applicable, the end of the notice of termination period that is minimally required to be provided by such employment standards legislation, and shall not be extended by any common law, civil law or contractual notice period.

“Specified Employee” has the meaning set forth in Treasury Regulation Section 1.409A-1(i).

“Termination Date” has the meaning in Section ‎1.1 of the Plan, provided that if the Termination Date triggers payment of any Award which is or would be “deferred compensation” under Code Section 409A, the Termination Date shall be the date of the Separation from Service.

2. Section ‎3.4 is deleted in its entirety and replaced with the following:

“Subject to Section ‎8.1(1), each Option must be exercised no later than ten (10) years after the date the Option is granted or such shorter period as set out in the Participant’s Option Agreement, at which time such Option will expire (the “Expiry Date”). Notwithstanding any other provision of the Plan and provided that any such extension be structured in a manner that is expected to comply with Code Section 409A (to the extent applicable), each Option that would expire during or within ten (10) Business Days immediately following a Black-Out Period shall expire on the date that is ten (10) Business Days immediately following the expiration of the Black-Out Period; provided, that in all circumstances, each Incentive Stock Option must be exercised no later than ten (10) years after the date the Option is granted. Notwithstanding the foregoing, in no event shall the Expiry Date exceed five (5) years from the Grant Date in the case of an Incentive Stock Option granted to an employee who on the Grant Date owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Corporation or an ISO Entity.”

3. Section ‎5.2 is amended by adding the following new (5):

With respect to any DSUs awarded to a U.S. Participant, the Compensation Committee shall structure the DSU so as to comply with, or be exempt from, Code Section 409A.

4. Section ‎6.2 is amended by adding the following new (5):

With respect to any Share Units awarded to a U.S. Participant, the Compensation Commitee shall structure the Share Units so as to comply with, or be exempt from, Code Section 409A.

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5. A new Section 6.4 is added as follows:

Notwithstanding the foregoing provisions of Article 6, if the U.S. Participant vests in his or her Share Units pursuant to the Plan in connection with his or her Separation from Service, within 30 days following such U.S. Participant’s Separation from Service and subject to Section ‎9.4, the Corporation shall: (i) issue from treasury the number of Shares that is equal to the number of vested Share Units held by the U.S. Participant as at the U.S. Participant’s Separation from Service (rounded down to the nearest whole number), as fully paid and non-assessable Shares; (ii) deliver to the U.S. Participant an amount in cash (net of the applicable withholding tax) equal to the number of vested Share Units held by the U.S. Participant as at the U.S. Participant’s Separation from Service multiplied by the Market Value as at such date; or (iii) a combination of (i) and (ii). Upon settlement of such Share Units, the corresponding number of Share Units shall be cancelled and the U.S. Participant shall have no further rights, title or interest with respect thereto.

6. Section ‎8.2(4) is amended by deleting clause (d) thereof in its entirety and replacing it with the following:

(d) any extension of the Expiry Date of an Award benefitting a U.S. Participant, except in case of an extension due to a Black-Out Period; provided that any such extension be structured in a manner that is expected to comply with Code Section 409A (to the extent applicable);

7. No Acceleration

With respect to any Award held by a U.S. Participant that is subject to Code Section 409A, the acceleration of the time or schedule of any payment except as provided under the Plan (including this addendum) is prohibited, except as provided in or permitted by regulations and administrative guidance promulgated under Code Section 409A.

8. Code Section 409A

Any Award granted under the Plan to a U.S. Participant that the Compensation Committee reasonably determines to constitute a “nonqualified deferred compensation plan” under Code Section 409A (a “Section 409A Award”) shall be construed in a manner consistent with the applicable requirements of Code Section 409A. If any Award constitutes, or but for any of the following requirements would constitute a Section 409A Award, then the Award shall be subject to the following additional requirements, if and to the extent required to comply with (or be exempt from) Section 409A of the Code:

(a) payments under the Section 409A Award may be made only upon (i) the Participant’s Separation From Service, (ii) the date the Participant becomes “disabled” (as defined in Code Section 409A), (iii) the Participant’s death, (iv) a “specified time (or pursuant to a fixed schedule)” specified in the Award Agreement at the date of the deferral of such compensation, (v) a Change in Control, or (vi) the occurrence of an “unforeseeble emergency” (as defined in Code Section 409A); and

(b) if, on the date of the U.S. Participant’s Separation from Service, the Shares (or shares of any other corporation that is required to be aggregated with the Corporation in accordance with the requirements of Code Section 409A) are publicly traded on an established securities market or otherwise and the U.S. Participant is a Specified Employee, then the benefits payable to the Participant under the Plan that are payable due to the U.S. Participant’s Separation from Service shall not be made before the date which is six months after the date of the U.S. Participant’s Separation from Service. The postponed amount shall be paid to the U.S. Participant in a lump sum within 30 days after the date that is six months after the U.S. Participant’s Separation from Service. If the U.S. Participant dies during such six month period and prior to the payment of the postponed amounts hereunder, the amounts delayed on account of Code Section 409A shall be paid to the U.S. Participant’s estate within 60 days following the U.S. Participant’s death.

If any provision of the Plan or an Award Agreement contravenes Code Section 409A or could cause the U.S. Participant to incur any tax, interest or penalties under Code Section 409A, the Compensation Committee may, in its sole discretion and without the U.S. Participant’s consent, modify such provision to: (i) comply with, or avoid being subject to, Code Section 409A, or to avoid incurring taxes, interest and penalties under Code Section 409A; and/or (ii) maintain, to the maximum extent practicable, the original intent and economic benefit to the U.S. Participant of the applicable provision without materially increasing the cost to the Corporation or contravening Code Section 409A. However, the Corporation shall have no obligation to modify the Plan or any Award and does not guarantee that any Award will not be subject to taxes, interest and penalties under Code Section 409A. U.S. Participants are solely responsible for any taxes, interest and/or penalties they may incur under Code Section 409A and notwithstanding any other provisions of the Plan neither the Corporation or any Subsidiary, nor any of their respective officers, employees or agents shall have any obligation to U.S. Participants for such taxes, interest or penalties.

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EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Reza Soltanzadeh, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the year ended March 31, 2024 of Borealis Foods Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 20, 2024	/s/ Reza Soltanzadeh
	Reza Soltanzadeh
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Stephen Wegrzyn, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the year ended March 31, 2024 of Borealis Foods Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 20, 2024	/s/ Stephen Wegrzyn
	Stephen Wegrzyn
	Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Borealis Foods Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 20, 2024	/s/ Reza Soltanzadeh
	Reza Soltanzadeh
	Chief Executive Officer
	(Principal Executive Officer)

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. §1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Borealis Foods Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 

Date: May 20, 2024	/s/ Stephen Wegrzyn
	Stephen Wegrzyn
	Chief Financial Officer
	(Principal Financial Officer)

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. §1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

XML

Cover - shares	3 Months Ended
	Mar. 31, 2024	May 17, 2024
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Entity Interactive Data Current	Yes
Amendment Flag	false
Document Period End Date	Mar. 31, 2024
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q1
Entity Information [Line Items]
Entity Registrant Name	Borealis Foods Inc.
Entity Central Index Key	0001852973
Entity File Number	001-40778
Entity Tax Identification Number	98-1638988
Entity Incorporation, State or Country Code	A6
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Contact Personnel [Line Items]
Entity Address, Address Line One	1540 Cornwall Rd
Entity Address, Address Line Two	#104
Entity Address, City or Town	Oakville
Entity Address, State or Province	ON
Entity Address, Postal Zip Code	L6J 7W5
Entity Phone Fax Numbers [Line Items]
City Area Code	(905)
Local Phone Number	278-2200
Entity Listings [Line Items]
Entity Common Stock, Shares Outstanding		21,378,852
Common Shares
Entity Listings [Line Items]
Title of 12(b) Security	Common Shares
Trading Symbol	BRLS
Security Exchange Name	NASDAQ
Warrants
Entity Listings [Line Items]
Title of 12(b) Security	Warrants
Trading Symbol	BRLSW
Security Exchange Name	NASDAQ

XML

Condensed Consolidated Balance Sheets - USD ($)	Mar. 31, 2024	Dec. 31, 2023
Current assets:
Cash	$ 8,211,050	$ 7,615,630
Accounts receivable, net of allowance for credit losses of $530,433 and $224,433 as of March 31, 2024 and December 31, 2023, respectively	4,770,512	1,775,756
Inventories, net	6,803,482	6,945,028
Prepaid expenses	2,397,475	845,878
Total current assets	22,182,519	17,182,292
Property, plant and equipment, net	45,965,322	46,408,540
Right-of-use asset, net	98,083	108,469
Goodwill	1,917,356	1,917,356
Other non-current assets	169,685	169,685
Total assets	70,332,965	65,786,342
Current liabilities:
Accounts payable and accrued expenses	7,240,197	10,887,730
Convertible notes payable, current portion		47,300,000
Notes payable, current portion, net of unamortized loan costs	13,118,707	681,121
Operating lease liability, current portion	53,338	43,794
Finance leases payable, current portion	575,426	565,353
Total current liabilities	28,813,458	67,303,788
Line of credit	5,000,000
Convertible note payable	3,000,000	3,000,000
Notes payable, net of current portion	14,184,293	13,509,189
Operating lease liability, net of current portion	43,794	71,119
Finance leases payable, net of current portion	1,525,497	1,683,308
Deferred tax liability	1,566,233	1,566,233
Total liabilities	54,133,275	87,133,637
Stockholders’ equity (deficit):
Common stock
Additional paid-in capital	90,096,688	44,118,081
Accumulated deficit	(73,896,998)	(65,465,376)
Total stockholders’ equity (deficit)	16,199,690	(21,347,295)
Total liabilities and stockholders’ equity (deficit)	70,332,965	65,786,342
Related Party
Current liabilities:
Due to related parties	$ 7,825,790	$ 7,825,790

XML

Condensed Consolidated Balance Sheets (Parentheticals) - USD ($)	Mar. 31, 2024	Dec. 31, 2023
Statement of Financial Position [Abstract]
Accounts receivable, net of allowance for credit losses	$ 530,433	$ 224,433

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)		3 Months Ended
		Mar. 31, 2024	Mar. 31, 2023
Gross Revenues		$ 8,484,021	$ 8,778,540
Discounts and allowances		(588,588)	(423,767)
Revenues, net		7,895,433	8,354,773
Cost of goods sold:
Total Cost of goods sold		7,652,860	8,699,260
Gross profit (loss)		242,573	(344,487)
Selling, general and administrative expenses		7,215,588	4,219,631
Loss from operations		(6,973,015)	(4,564,118)
Other income (expense):
South Carolina grant revenue			158,995
Interest expense, net		(1,458,607)	(1,530,581)
Total other income (expense)		(1,458,607)	(1,371,586)
Net loss before income taxes		(8,431,622)	(5,935,704)
Income tax benefit			124
Net loss		$ (8,431,622)	$ (5,935,580)
Earnings per share from net loss
Basic (in Dollars per share)		$ (0.49)	$ (0.55)
Diluted (in Dollars per share)	[1]	$ (0.49)	$ (0.55)
Weighted average shares outstanding
Basic (in Shares)		17,079,576	10,731,583
Diluted (in Shares)		17,079,576	10,731,583
Raw materials
Cost of goods sold:
Total Cost of goods sold		$ 4,770,469	$ 5,658,101
Labor and overhead
Cost of goods sold:
Total Cost of goods sold		1,877,803	2,079,203
Depreciation
Cost of goods sold:
Total Cost of goods sold		$ 1,004,588	$ 961,956

[1] 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.

XML

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (Unaudited) - USD ($)	Common Stock Class A	Common Stock Class B	Common Stock Class C	Common Stock Class D	Additional Paid-In Capital	Accumulated Deficit	Total
Balance at Dec. 31, 2022					$ 42,625,786	$ (37,986,129)	$ 4,639,657
Balance (in Shares) at Dec. 31, 2022	100,000,000	56,008,749	6,345,000
Expense related to stock options (Note 8)					193,554		193,554
Net loss						(5,935,580)	(5,935,580)
Balance at Mar. 31, 2023					42,819,340	(43,921,709)	(1,102,369)
Balance (in Shares) at Mar. 31, 2023	100,000,000	56,008,749	6,345,000
Balance at Dec. 31, 2023					44,118,081	(65,465,376)	(21,347,295)
Balance (in Shares) at Dec. 31, 2023	100,000,000	56,008,749	6,345,000
Expense related to stock options (Note 8)					1,273,053		1,273,053
Convertible debt converted to equity from reverse recapitalization					54,991,472		54,991,472
Assumption of debt from reverse recapitalization					(10,285,918)		(10,285,918)
Conversion to Newco shares from reverse recapitalization
Conversion to Newco shares from reverse recapitalization (in Shares)	(78,621,110)	(56,008,749)	(6,345,000)
Net loss						(8,431,622)	(8,431,622)
Balance at Mar. 31, 2024					$ 90,096,688	$ (73,896,998)	$ 16,199,690
Balance (in Shares) at Mar. 31, 2024	21,378,890

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Cash flows from operating activities
Net loss	$ (8,431,622)	$ (5,935,580)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash compensation expense related to stock options	1,273,053	193,554
Depreciation and amortization	994,202	961,956
Amortization of loan costs	77,316
Provision for credit losses	306,000
Provision for inventory reserve	42,449
Changes in operating assets and liabilities:
Accounts receivable	(3,300,756)	(450,618)
Inventories	99,097	(726,369)
Prepaid expenses and other	(1,551,597)	251,260
Operating lease	(7,395)
Accounts payable and accrued expenses	3,729,820	(208,807)
Net cash used in operating activities	(6,769,433)	(5,914,604)
Cash flows from investing activities
Proceeds from reverse capitalization	63,575
Purchases of property, plant and equipment, net	(550,984)	(922,041)
Net cash used in investing activities	(487,409)	(922,041)
Cash flows from financing activities
Net payments to related parties		(500,000)
Proceeds from convertible notes payable	3,000,000	15,000,000
Payments on finance leases payable	(147,738)	(128,708)
Borrowings on line of credit	5,000,000
Net cash provided by financing activities	7,852,262	14,371,292
Net change in cash	595,420	7,534,647
Cash, beginning of period	7,615,630	5,146,616
Cash, end of period	8,211,050	12,681,263
Interest	651,208	623,447
Non-cash investing and financing activities
Conversion of notes payable into Class A shares (Note 4)	(54,991,472)
Note payable supplier finance (Note 4)	$ 10,349,494

XML

Description of Business and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2024

Description of Business and Summary of Significant Accounting Policies [Abstract]

Description of Business and Summary of Significant Accounting Policies

1. Description of Business and Summary of Significant Accounting Policies

Overview

These unaudited condensed consolidated financial statements include the financial statements of Borealis Foods, Inc. (“Borealis”), and its subsidiaries: Palmetto Gourmet Foods Inc. (“PGF”), Palmetto Gourmet Foods Real Estate I, Inc. (“PGF RE I”), and Palmetto Gourmet Foods Real Estate II, Inc. (“PGF RE II”) (collectively the “Company”).

Borealis is a food technology company that has developed a high-quality, affordable, sustainable, and nutritious range of plant-based, ready-to-eat meals, which are sold in the U.S., Canada, and Europe. Borealis has a mission to address global food security challenges by developing highly nutritious and functional food products that are both affordable and sustainable. Borealis’ focus on affordability and sustainability reflects its commitment to making a positive impact on both human life and the planet.

Borealis, a Canadian corporation, is a food technology integrator that focuses on the development and commercialization of functional foods.

PGF is an early growth stage food manufacturing company and has spent significant time and resources developing its recipes and fabricating production equipment to meet its product specifications. PGF is the first American producer of sustainable, nutritious, and affordable ramen noodles.

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

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) 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 will continue under the name “Borealis Foods Inc.”

Accounting Impact of the Reverse Recapitalization

The Reverse Recapitalization was accounted for as a reverse recapitalization. Oxus Acquisition Corp. 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 acquiror 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 accounted for as a reduction in Additional Paid-In Capital.

Going Concern

The unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company suffered recurring losses from operations through March 31, 2024 that raise substantial doubt about its ability to continue as a going concern.

The Company was in a net loss position and had negative cash flows from operations for the periods ended March 31, 2024 and 2023.

The Company expects lower operating costs for the remainder of 2024 as the Company incurred approximately $1,506,000 of transaction expenses, and $1,273,000 of employee stock compensation expenses related to the Reverse Recapitalization.

As a result, substantial doubt continues to exist about the ability of the Company to continue as a going concern within one year from May 20, 2024, the date that the condensed consolidated financial statements were available to be issued.

Basis of Presentation

The accompanying unaudited condensed 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 US Dollar.

We have condensed certain categories of information in our consolidated financial statements to enhance the readability and understanding of those statements by making them more succinct. As a result, certain footnote disclosures we normally include in our annual consolidated financial statements have been omitted but remain prepared in accordance with US GAAP and the rules and regulations of the Securities and Exchange Commission. In management’s opinion, we have made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present our unaudited condensed consolidated balance sheet and unaudited condensed consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows. Our interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2023 contained in Form 8-K/A filed by Borealis April 15, 2024. Certain prior period amounts have been reclassified to conform to current period presentation.

Estimates

The preparation of the unaudited condensed 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 unaudited condensed 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 were no cash equivalents as of March 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 or net realizable value. The cost of finished goods is measured at weighted average cost.

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 $2,397,000 and $846,000 composed primarily of prepaid insurance, deposits on inventory purchases and property, plant and equipment purchases as of March 31, 2024 and December 31, 2023, respectively.

Property, Plant and Equipment, net

Property, plant and equipment are stated at cost. For financial statement purposes, depreciation is calculated using the straight-line method over the estimated useful lives of the assets.

Buildings and improvements	10-30 years
Furniture, fixtures and equipment	3-12 years

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.

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 three-month period ended March 31, 2024 or for the year ended December 31, 2023.

Amounts Due to Related Parties

Amounts due to related parties (Company stockholders and entities controlled by Company stockholders) at March 31, 2024 and December 31, 2023 totaling $7,325,790, respectively, are due on demand and bear interest at 10% annually. In addition, a note payable to a stockholder totaled $500,000 at March 31, 2024 and December 31, 2023, respectively, bearing interest at 10% annually due December 31, 2024.

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 for the three months ended March 31, 2024 and 2023 were approximately $8,484,000 and $8,779,000, respectively.

Total payment discounts and promotions were approximately $589,000 and $424,000 resulting in net revenues of approximately $7,895,000 and $8,355,000 for the three month periods ended March 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 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 three-month periods ended March 31, 2024 and 2023, totaling approximately $482,000 and $780,000, respectively, due to PGF adding production capabilities during both periods. These costs are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations as it was 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 three-month periods ended March 31, 2024 and 2023 were approximately $1,526,000 and $39,000, respectively.

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 their 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. Prepayments made under the agreement are included in prepaid expenses. No sales subject to the royalty agreement were made for the three months ended March 31, 2024. 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.

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 three months ended March 31, 2024 and 2023 were approximately $37,000 and $200,000, respectively, and are included in selling, general, and administrative expenses in the accompanying condensed consolidated statement 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 three month periods ended March 31, 2024 and 2023 were approximately $759,000 and $199,000, respectively, and are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

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 incurred transaction costs of approximately $1,506,000 and $1,455,000 for the three months ended March 31, 2024 and 2023 respectively. Transaction costs have been expensed as incurred and are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

Concentration of Risk

The Company maintains cash balances at financial institutions in excess of federally insured limits as of March 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 2% 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 58% and sales to three customers accounted for approximately 73% of net revenues for the three month periods ended March 31, 2024 and 2023, respectively. Accounts receivable from two customers amounted to approximately 74% and 70% of total accounts receivable as of March 31, 2024 and 2023, respectively. Substantially all of the Company’s sales for the three month periods ended March 31, 2024 and 2023 occurred in the United States and Canada.

Purchases from 10 vendors accounted for approximately 57% and 61% of purchases during the three month periods ended March 31, 2024 and 2023, respectively. Accounts payable to these vendors totaled approximately $1,880,000 and $1,802,000 as of March 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 asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

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 cash, 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, including due to related parties, 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 March 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 unaudited condensed 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 ASC 718 – Compensation – Stock Compensation. Compensation cost relating to share-based payment transactions is recognized in the Company’s condensed 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 time 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 quarterly period end date while the warrants are outstanding. It was determined with 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.

Recent Accounting Pronouncements

Management does not expect the adoption of recently issued accounting standards to have a significant impact on the Company’s reported financial position, results of operations, or cash flows.

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Inventories, net

3 Months Ended

Mar. 31, 2024

Inventories, net [Abstract]

Inventories, net

2. Inventories, net

Inventories were as follows:

	March 31, 2024			December 31, 2023
Raw materials	$	5,263,143		$	5,190,811
Finished goods		1,771,421			1,942,850
Reserve for obsolete inventory		(231,082	)		(188,633	)
	$	6,803,482		$	6,945,028

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Property, Plant and Equipment, net

3 Months Ended

Mar. 31, 2024

Property, Plant and Equipment, net [Abstract]

Property, Plant and Equipment, net

3. Property, Plant and Equipment, net

Property, plant and equipment were as follows:

	March 31, 2024			December 31, 2023
Building and improvements	$	10,108,916		$	10,108,917
Furniture, fixtures and equipment		42,595,867			42,594,605
Construction in progress		5,627,827			5,078,103
		58,332,610			57,781,625
Less: accumulated depreciation		(12,367,288	)		(11,373,085	)
	$	45,965,322		$	46,408,540

Depreciation expense recorded in the three month periods ended March 31, 2024 and 2023 was approximately $994,000 and $962,000, respectively, which is included as a component of cost of goods sold.

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Debt

3 Months Ended

Mar. 31, 2024

Debt [Abstract]

Debt

4. Debt

In 2022, the Company issued $20,000,000 of convertible notes payable that, after an extension was negotiated, mature in February 2024 (unless converted) and bear 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 may be converted, at the option of the holder, into common shares of the Company. The number of shares of common stock received in the conversion will equal the quotient of (i) the outstanding principal and interest as of the date immediately before the completion of the qualified financing event, divided by (ii) an amount equal to the “valuation cap” divided by the “fully diluted basis” (terms as defined in the agreements) and discounted by five (5%) percent. The notes and accrued interest were converted into 2,189,977 shares of common stock 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 bear 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 may be converted, at the option of the holder, into the same equity as issued upon the Company’s issuance of preferred or common stock of at least $10,000,000 (“qualified financing event”), either as a single round or a lead round, at 80% of the per share price paid during the qualified financing event. The notes and accrued interest were converted into 40,544 shares of common stock 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 matures in 2024 (unless converted) and bear 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 may be converted, at the option of the holder, into common shares of the Company. The number of shares of common stock received in the conversion will equal the quotient of (i) the outstanding principal and interest as of the date immediately before the completion of the qualified financing event, divided by (ii) an amount equal to the “valuation cap” divided by the “fully diluted basis” (terms as defined in the agreements) and discounted by five (5%) percent. The notes and accrued interest were converted into 3,787,585 shares of common stock with the consummation of the Reverse Recapitalization with Oxus.

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 stock of at least $10,000,000 (“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 matures in 2024 (unless converted) and bears interest at 10% annually. Accrued interest is payable upon maturity, or converted into equity. The convertible note may be converted into securities, at the option of the holder, based upon a formula considering the outstanding principal and interest and the Company’s value, including a valuation cap. The note and accrued interest was converted into 375,925 shares of common stock 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 the existing line of credit. In March 2024, the company entered into an amendment to extend the maturity date of the term facility to March 2028. Under the amendment, principal only payments of $83,000 are due monthly beginning in March 2025 with a lump sum payment of $12,167,000 due at maturity. Interest accrues at the prime rate plus an applicable margin of 4.75% per annum and is payable monthly.

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

Amortization expense of approximately $77,000 was recorded on the fees for the three month period ended March 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 March 31, 2024 and December 31 2023, the line of credit had $5,000,000 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 A – Incurred by Borealis. The related expenses were recognized as incurred by Borealis and the trade payable was subsequently reclassified to notes payable. Note A was issued for $2,138,838. The note matures in February 2025, and bears interest at 10% per annum.

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

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

Note D – Incurred by Oxus. The related expenses were recognized by Oxus and resulted in a reduction of contributed equity at the Reverse Recapitalization. Note D was issued for $7,601,661. The note matures in February 2025, and is non-interest bearing.

Debt balances outstanding as of March 31, 2024 are due as follows: $13,868,000 in 2025; $9,000,000 in 2026; $1,000,000 in 2027; and $12,167,000 in 2028.

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Income Taxes

3 Months Ended

Mar. 31, 2024

Income Taxes [Abstract]

Income Taxes

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%.

The total income tax provision (benefit) expense recorded for the three month periods ended March 31, 2024 and 2023 was $0 and ($100), respectively, on consolidated pre-tax book loss of approximately $8,432,000 and $5,936,000 in the three-month periods ended March 31, 2024 and 2023, respectively.

The Company’s tax provision is based on a projected effective rate based on annualized amounts applied to actual income to date. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of capital loss and net operating loss (“NOL”) carryforwards is dependent upon the generation of future capital gains and taxable income in periods prior to their expiration. The Company currently provides a valuation allowance against the full amount of the NOLs since the Company is uncertain as to the realization of the full-amount of benefits in the future. The Company will continue to assess the need for, and the amount of, the valuation allowance at each reporting period.

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 condensed consolidated financial statements or related disclosures. As a result, at March 31, 2024, the Company did not have a liability for unrecognized tax benefits, interest or penalties under United States or Canadian tax law. The Company paid no penalties during the three-month period ending March 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.

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Contingencies

3 Months Ended

Mar. 31, 2024

Contingencies [Abstract]

Contingencies

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.

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Warrants

3 Months Ended

Mar. 31, 2024

Warrants [Abstract]

Warrants

7. Warrants

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

Description	Issue Date	Classification	Exercise Price		Expiration Date	Outstanding Shares		Exercisable Shares
Private Placement Warrants	9/13/2021	Equity	$	11.50	2/7/2029		9,300,000		9,300,000
Public Warrants	9/13/2021	Equity	$	11.50	2/7/2029		17,250,000		17,250,000
							26,550,000		26,550,000

Following the closing, New 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 New Borealis 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 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 be transferrable, assignable or salable until 30 days after the completion of the Reverse Recapitalization.

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Stock Option Plan

3 Months Ended

Mar. 31, 2024

Stock Option Plan [Abstract]

Stock Option Plan

8. 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 stock. 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 three-month period ended March 31, 2024, the Company granted options to purchase 333,574 shares of the Company’s common stock 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:

Risk-free interest rate	3.81%
Expected term (years)	5 -10
Expected volatility	80.00%
Dividend yield	0.00%

For the three-month periods ended March 31, 2024 and 2023, the Company recorded approximately $1,273,000 and $194,000, 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.

Stock option activity for the three-month periods ended March 31, 2024 and 2023 is summarized as follows:

	Shares			Weighted Average Exercise Price		Weighted Remaining Contractual Life (Years)
Options outstanding at December 31, 2022		3,468,760			0.0001		6.65
Granted		227,666			0.0001		6.65
Exercised		--			--		--
Expired or forfeited		--			--		--
Options outstanding at March 31, 2023		3,696,426			0.0001		--
Options outstanding at December 31, 2023		3,666,426			0.0001		8.10
Granted		333,574			0.0001		8.10
Exercised		(4,000,000	)		0.0001		--
Expired or forfeited		--			--		--
Options outstanding at March 31, 2024		--			--		--

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Earnings per share

3 Months Ended

Mar. 31, 2024

Earnings per share [Abstract]

Earnings per share

9. Earnings per share

Basic earnings or loss per share is based on the weighted average of 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.

	Three Months Ended March 31,
	2024			2023
Basic earnings (loss) per share calculation Net income (loss) available to common stockholders	$	(8,431,622	)	$	(5,935,580	)
Weighted average common shares outstanding (basic)		17,079,576			10,731,583
Basic earnings (loss) per share from net income	$	(0.49	)	$	(0.55	)
Diluted earnings (loss) per share calculation Net income (loss) available to common stockholders	$	(8,431,622	)	$	(5,935,580	)
Weighted average common shares outstanding (basic)		17,079,576			10,731,583
Warrants		26,550,000
Weighted average common shares outstanding (diluted)		17,079,576			10,731,583
Diluted earnings (loss) per share from net income*	$	(0.49	)	$	(0.55	)

* 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.

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Subsequent Events

3 Months Ended

Mar. 31, 2024

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

10. Subsequent Events

The Company evaluated events and transactions after March 31, 2024 through May 20, 2024, the date the unaudited condensed consolidated financial statements were available to be issued, for subsequent events requiring disclosure in these condensed consolidated financial statements. The Company did not identify any subsequent events that required disclosure.

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Pay vs Performance Disclosure - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Pay vs Performance Disclosure
Net Income (Loss)	$ (8,431,622)	$ (5,935,580)

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Insider Trading Arrangements	3 Months Ended
	Mar. 31, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

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Accounting Policies, by Policy (Policies)

3 Months Ended

Mar. 31, 2024

Accounting Policies [Abstract]

Reverse Recapitalization Transaction

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) 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 will continue under the name “Borealis Foods Inc.”

Accounting Impact of the Reverse Recapitalization

Accounting Impact of the Reverse Recapitalization

The Reverse Recapitalization was accounted for as a reverse recapitalization. Oxus Acquisition Corp. 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 acquiror 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 accounted for as a reduction in Additional Paid-In Capital.

Going Concern

Going Concern

The unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company suffered recurring losses from operations through March 31, 2024 that raise substantial doubt about its ability to continue as a going concern.

The Company was in a net loss position and had negative cash flows from operations for the periods ended March 31, 2024 and 2023.

The Company expects lower operating costs for the remainder of 2024 as the Company incurred approximately $1,506,000 of transaction expenses, and $1,273,000 of employee stock compensation expenses related to the Reverse Recapitalization.

As a result, substantial doubt continues to exist about the ability of the Company to continue as a going concern within one year from May 20, 2024, the date that the condensed consolidated financial statements were available to be issued.

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed 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 US Dollar.

We have condensed certain categories of information in our consolidated financial statements to enhance the readability and understanding of those statements by making them more succinct. As a result, certain footnote disclosures we normally include in our annual consolidated financial statements have been omitted but remain prepared in accordance with US GAAP and the rules and regulations of the Securities and Exchange Commission. In management’s opinion, we have made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present our unaudited condensed consolidated balance sheet and unaudited condensed consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows. Our interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These unaudited condensed consolidated financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2023 contained in Form 8-K/A filed by Borealis April 15, 2024. Certain prior period amounts have been reclassified to conform to current period presentation.

Estimates

Estimates

The preparation of the unaudited condensed 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 unaudited condensed consolidated financial statements and reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Cash Equivalents

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 were no cash equivalents as of March 31, 2024 and December 31, 2023.

Inventories, net

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 or net realizable value. The cost of finished goods is measured at weighted average cost.

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

Prepaid expenses include approximately $2,397,000 and $846,000 composed primarily of prepaid insurance, deposits on inventory purchases and property, plant and equipment purchases as of March 31, 2024 and December 31, 2023, respectively.

Property, Plant and Equipment, net

Property, Plant and Equipment, net

Property, plant and equipment are stated at cost. For financial statement purposes, depreciation is calculated using the straight-line method over the estimated useful lives of the assets.

Buildings and improvements	10-30 years
Furniture, fixtures and equipment	3-12 years

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.

Loan Costs

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

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 three-month period ended March 31, 2024 or for the year ended December 31, 2023.

Amounts Due to Related Parties

Amounts Due to Related Parties

Amounts due to related parties (Company stockholders and entities controlled by Company stockholders) at March 31, 2024 and December 31, 2023 totaling $7,325,790, respectively, are due on demand and bear interest at 10% annually. In addition, a note payable to a stockholder totaled $500,000 at March 31, 2024 and December 31, 2023, respectively, bearing interest at 10% annually due December 31, 2024.

Impairment of Long-Lived Assets

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

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 for the three months ended March 31, 2024 and 2023 were approximately $8,484,000 and $8,779,000, respectively.

Total payment discounts and promotions were approximately $589,000 and $424,000 resulting in net revenues of approximately $7,895,000 and $8,355,000 for the three month periods ended March 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 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 three-month periods ended March 31, 2024 and 2023, totaling approximately $482,000 and $780,000, respectively, due to PGF adding production capabilities during both periods. These costs are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations as it was 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

Advertising

Costs associated with advertising are expensed as incurred and are included in selling, general and administrative expenses. Advertising costs expensed for the three-month periods ended March 31, 2024 and 2023 were approximately $1,526,000 and $39,000, respectively.

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 their 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. Prepayments made under the agreement are included in prepaid expenses. No sales subject to the royalty agreement were made for the three months ended March 31, 2024. 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.

Research and Development Costs

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 three months ended March 31, 2024 and 2023 were approximately $37,000 and $200,000, respectively, and are included in selling, general, and administrative expenses in the accompanying condensed consolidated statement of operations.

Business Development Costs

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 three month periods ended March 31, 2024 and 2023 were approximately $759,000 and $199,000, respectively, and are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

Transaction Costs

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 incurred transaction costs of approximately $1,506,000 and $1,455,000 for the three months ended March 31, 2024 and 2023 respectively. Transaction costs have been expensed as incurred and are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

Concentration of Risk

Concentration of Risk

The Company maintains cash balances at financial institutions in excess of federally insured limits as of March 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 2% 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 58% and sales to three customers accounted for approximately 73% of net revenues for the three month periods ended March 31, 2024 and 2023, respectively. Accounts receivable from two customers amounted to approximately 74% and 70% of total accounts receivable as of March 31, 2024 and 2023, respectively. Substantially all of the Company’s sales for the three month periods ended March 31, 2024 and 2023 occurred in the United States and Canada.

Purchases from 10 vendors accounted for approximately 57% and 61% of purchases during the three month periods ended March 31, 2024 and 2023, respectively. Accounts payable to these vendors totaled approximately $1,880,000 and $1,802,000 as of March 31, 2024 and 2023, respectively.

Fair Value Measurements

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 asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

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 cash, 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, including due to related parties, 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 March 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 unaudited condensed consolidated financial statements and current estimates of fair value may differ significantly from the amounts presented herein.

Stock Based Compensation

Stock Based Compensation

The Company accounts for its stock-compensation arrangements at fair value in accordance with ASC 718 – Compensation – Stock Compensation. Compensation cost relating to share-based payment transactions is recognized in the Company’s condensed 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

Warrants

Outstanding warrants were assumed at the Reverse Recapitalization. The fair value of the warrants was determined using the Monte Carlo analysis at the time 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 quarterly period end date while the warrants are outstanding. It was determined with 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.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Management does not expect the adoption of recently issued accounting standards to have a significant impact on the Company’s reported financial position, results of operations, or cash flows.

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Description of Business and Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2024

Description of Business and Summary of Significant Accounting Policies [Abstract]

Schedule of Straight-line Method over the Estimated Useful Lives of the Assets

Property, plant and equipment are stated at cost. For financial statement purposes, depreciation is calculated using the straight-line method over the estimated useful lives of the assets.

Buildings and improvements	10-30 years
Furniture, fixtures and equipment	3-12 years

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Inventories, net (Tables)

3 Months Ended

Mar. 31, 2024

Inventories, net [Abstract]

Schedule of Inventories

Inventories were as follows:

	March 31, 2024			December 31, 2023
Raw materials	$	5,263,143		$	5,190,811
Finished goods		1,771,421			1,942,850
Reserve for obsolete inventory		(231,082	)		(188,633	)
	$	6,803,482		$	6,945,028

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Property, Plant and Equipment, net (Tables)

3 Months Ended

Mar. 31, 2024

Property, Plant and Equipment, net [Abstract]

Schedule of Property, Plant and Equipment

Property, plant and equipment were as follows:

	March 31, 2024			December 31, 2023
Building and improvements	$	10,108,916		$	10,108,917
Furniture, fixtures and equipment		42,595,867			42,594,605
Construction in progress		5,627,827			5,078,103
		58,332,610			57,781,625
Less: accumulated depreciation		(12,367,288	)		(11,373,085	)
	$	45,965,322		$	46,408,540

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Warrants (Tables)

3 Months Ended

Mar. 31, 2024

Warrants [Abstract]

Schedule of Warrants Outstanding and Exercisable

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

Description	Issue Date	Classification	Exercise Price		Expiration Date	Outstanding Shares		Exercisable Shares
Private Placement Warrants	9/13/2021	Equity	$	11.50	2/7/2029		9,300,000		9,300,000
Public Warrants	9/13/2021	Equity	$	11.50	2/7/2029		17,250,000		17,250,000
							26,550,000		26,550,000

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Stock Option Plan (Tables)

3 Months Ended

Mar. 31, 2024

Stock Option Plan [Abstract]

Schedule of Fair Values of the Stock-Based Awards Granted

The fair values of the stock-based awards granted were calculated with the following assumptions:

Risk-free interest rate	3.81%
Expected term (years)	5 -10
Expected volatility	80.00%
Dividend yield	0.00%

Schedule of Stock Option Activity

Stock option activity for the three-month periods ended March 31, 2024 and 2023 is summarized as follows:

	Shares			Weighted Average Exercise Price		Weighted Remaining Contractual Life (Years)
Options outstanding at December 31, 2022		3,468,760			0.0001		6.65
Granted		227,666			0.0001		6.65
Exercised		--			--		--
Expired or forfeited		--			--		--
Options outstanding at March 31, 2023		3,696,426			0.0001		--
Options outstanding at December 31, 2023		3,666,426			0.0001		8.10
Granted		333,574			0.0001		8.10
Exercised		(4,000,000	)		0.0001		--
Expired or forfeited		--			--		--
Options outstanding at March 31, 2024		--			--		--

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Earnings per share (Tables)

3 Months Ended

Mar. 31, 2024

Earnings per share [Abstract]

Schedule of Basic Earnings or Loss Per Share is Based on the Weighted Average of Number of Common Shares Outstanding

Basic earnings or loss per share is based on the weighted average of 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.

	Three Months Ended March 31,
	2024			2023
Basic earnings (loss) per share calculation Net income (loss) available to common stockholders	$	(8,431,622	)	$	(5,935,580	)
Weighted average common shares outstanding (basic)		17,079,576			10,731,583
Basic earnings (loss) per share from net income	$	(0.49	)	$	(0.55	)
Diluted earnings (loss) per share calculation Net income (loss) available to common stockholders	$	(8,431,622	)	$	(5,935,580	)
Weighted average common shares outstanding (basic)		17,079,576			10,731,583
Warrants		26,550,000
Weighted average common shares outstanding (diluted)		17,079,576			10,731,583
Diluted earnings (loss) per share from net income*	$	(0.49	)	$	(0.55	)

* 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.

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Description of Business and Summary of Significant Accounting Policies (Details) - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2023
Organization And Description Of Business Operations [Line Items]
Transaction expenses	$ 1,506,000
Employee stock compensation expenses	1,273,000
Prepaid expenses	$ 2,397,000			$ 846,000
Bear interest	10.00%
Note payable	$ 13,035,374
Gross revenues	8,484,000	$ 8,779,000
Total payment discounts and promotion	589,000	424,000
Net revenues	8,484,021	8,778,540
Training expenses	482,000	780,000
Advertising costs expensed	1,526,000	39,000
Research and development expenses	37,000	200,000
Business development expenses	759,000	199,000
Transaction costs	1,506,000	1,455,000
FDIC insures per depositor	250,000
Accounts payable	$ 1,880,000	1,802,000
Notes Payable [Member]
Organization And Description Of Business Operations [Line Items]
Bear interest	10.00%
Revenue [Member]
Organization And Description Of Business Operations [Line Items]
Net revenues	$ 7,895,000	$ 8,355,000
Related Party [Member]
Organization And Description Of Business Operations [Line Items]
Amounts due to related parties	7,825,790			7,825,790
Note payable	500,000			500,000
Related Party [Member] | Other Current Liabilities [Member]
Organization And Description Of Business Operations [Line Items]
Amounts due to related parties	$ 7,325,790			$ 7,325,790
Customers [Member] | Customer Concentration Risk [Member] | Revenue [Member]
Organization And Description Of Business Operations [Line Items]
Concentration risk percentage	2.00%
Two Customer [Member] | Customer Concentration Risk [Member] | Sales [Member]
Organization And Description Of Business Operations [Line Items]
Concentration risk percentage	58.00%
Two Customer [Member] | Customer Concentration Risk [Member] | Accounts Receivable [Member]
Organization And Description Of Business Operations [Line Items]
Concentration risk percentage	74.00%	70.00%
Three Customers [Member] | Customer Concentration Risk [Member] | Sales [Member]
Organization And Description Of Business Operations [Line Items]
Concentration risk percentage		73.00%
10 Vendors [Member] | Product Concentration Risk [Member] | Purchase [Member]
Organization And Description Of Business Operations [Line Items]
Concentration risk percentage	57.00%		61.00%

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Description of Business and Summary of Significant Accounting Policies (Details) - Schedule of Straight-line Method over the Estimated Useful Lives of the Assets	Mar. 31, 2024
Minimum [Member] | Buildings and improvements [Member]
Schedule of Straight-line Method over the Estimated Useful Lives of the Assets [Line Items]
Property, plant and equipment estimated useful lives	10 years
Minimum [Member] | Furniture, fixtures and equipment [Member]
Schedule of Straight-line Method over the Estimated Useful Lives of the Assets [Line Items]
Property, plant and equipment estimated useful lives	3 years
Maximum [Member] | Buildings and improvements [Member]
Schedule of Straight-line Method over the Estimated Useful Lives of the Assets [Line Items]
Property, plant and equipment estimated useful lives	30 years
Maximum [Member] | Furniture, fixtures and equipment [Member]
Schedule of Straight-line Method over the Estimated Useful Lives of the Assets [Line Items]
Property, plant and equipment estimated useful lives	12 years

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Inventories, net (Details) - Schedule of Inventories - USD ($)	Mar. 31, 2024	Dec. 31, 2023
Schedule of Inventories [Abstract]
Raw materials	$ 5,263,143	$ 5,190,811
Finished goods	1,771,421	1,942,850
Reserve for obsolete inventory	(231,082)	(188,633)
Inventories, net	$ 6,803,482	$ 6,945,028

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Property, Plant and Equipment, net (Details) - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Property, Plant and Equipment, net [Abstract]
Depreciation expense	$ 994,000	$ 962,000

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Property, Plant and Equipment, net (Details) - Schedule of Property, Plant and Equipment - USD ($)	Mar. 31, 2024	Dec. 31, 2023
Schedule of Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 58,332,610	$ 57,781,625
Less: accumulated depreciation	(12,367,288)	(11,373,085)
Property, plant and equipment, net	45,965,322	46,408,540
Building and improvements [Member]
Schedule of Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	10,108,916	10,108,917
Furniture, fixtures and equipment [Member]
Schedule of Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	42,595,867	42,594,605
Construction in progress [Member]
Schedule of Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 5,627,827	$ 5,078,103

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Debt (Details) - USD ($)		3 Months Ended	12 Months Ended
	Jan. 31, 2024	Mar. 31, 2024	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021	Mar. 31, 2028	Mar. 31, 2027	Mar. 31, 2026	Mar. 31, 2025
Debt [Line Items]
Convertible notes payable	$ 3,000,000		$ 27,000,000	$ 4,800,000
Percentage of interest	10.00%		10.00%	10.00%
Agreements discount percentage			5.00%	5.00%	3.00%
Converted shares (in Shares)	375,925
Remaining convertible notes payable			$ 300,000
Preferred stock issued			$ 10,000,000		$ 10,000,000
Financing event percentage			80.00%		85.00%
Convertible notes payable matures amount			$ 27,000,000
Financing agreement			25,000,000
Line of credit			15,000,000
Principal payments			83,000
Lump sum payment			$ 12,167,000
Applicable margin of percentage		4.50%	4.75%
Loan fees			$ 931,000
Amortization expense		$ 77,000
Fund working capital		10,000,000
Line of credit		5,000,000
Note payable		13,035,374
Note One [Member]
Debt [Line Items]
Note payable		$ 2,138,838
Maturity date		February 2025
Bears interest percentage		10.00%
Note Two [Member]
Debt [Line Items]
Note payable		$ 1,314,875
Maturity date		February 2025
Bears interest percentage		10.00%
Note Three [Member]
Debt [Line Items]
Note payable		$ 1,980,000
Maturity date		February 2025
Bears interest percentage		8.00%
Note Four [Member]
Debt [Line Items]
Note payable		$ 7,601,661
Maturity date		February 2025
Common Stock [Member]
Debt [Line Items]
Converted shares (in Shares)			3,787,585	2,189,977
Minimum [Member]
Debt [Line Items]
Line of credit line fee percentage		0.25%
Maximum [Member]
Debt [Line Items]
Lump sum payment		$ 0.5
February 2024 [Member]
Debt [Line Items]
Convertible notes payable				$ 20,000,000
2026 [Member]
Debt [Line Items]
Convertible notes payable					$ 3,000,000
Convertible Notes Payable [Member]
Debt [Line Items]
Convertible notes payable			$ 4,500,000
Percentage of interest			10.00%
Convertible Notes Payable [Member] | Common Stock [Member]
Debt [Line Items]
Converted shares (in Shares)			40,544
Forecast [Member]
Debt [Line Items]
Debt balances						$ 12,167,000	$ 1,000,000	$ 9,000,000	$ 13,868,000

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Income Taxes (Details) - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Income Taxes [Line Items]
Total income tax provision (benefit) expense	$ 0	$ 100
Consolidated pre-tax book loss	$ 8,432,000	$ 5,936,000
Canadian [Memebr]
Income Taxes [Line Items]
Laws tax rate	26.50%
United States Subsidiaries [Member]
Income Taxes [Line Items]
Statutory rate	21.00%

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Warrants (Details)	3 Months Ended
	Mar. 31, 2024 $ / shares
Warrants [Line Items]
Exercise price	$ 18
Trading day period commencing threshold	20 days
Trading day period commencing once ending day	30 days
Private Warrants[Member]
Warrants [Line Items]
Exercise price	$ 0.01

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Warrants (Details) - Schedule of Warrants Outstanding and Exercisable	3 Months Ended
	Mar. 31, 2024 $ / shares shares
Schedule of Warrants Outstanding and Exercisable [Line Items]
Exercise Price | $ / shares	$ 18
Outstanding Shares	26,550,000
Exercisable Shares	26,550,000
Private Placement Warrants [Member]
Schedule of Warrants Outstanding and Exercisable [Line Items]
Issue Date	Sep. 13, 2021
Classification	Equity
Exercise Price | $ / shares	$ 11.5
Expiration Date	Feb. 07, 2029
Outstanding Shares	9,300,000
Exercisable Shares	9,300,000
Public Warrants [Member]
Schedule of Warrants Outstanding and Exercisable [Line Items]
Issue Date	Sep. 13, 2021
Classification	Equity
Exercise Price | $ / shares	$ 11.5
Expiration Date	Feb. 07, 2029
Outstanding Shares	17,250,000
Exercisable Shares	17,250,000

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Stock Option Plan (Details)			3 Months Ended		12 Months Ended
	Feb. 07, 2024 shares	Jan. 31, 2024 shares	Mar. 31, 2024 USD ($) $ / shares shares	Mar. 31, 2023 USD ($)	Dec. 31, 2023 shares	Dec. 31, 2022 shares
Stock Option Plan [Line Items]
Granted options			333,574
Weighted-average grant date fair values of options granted, price per share (in Dollars per share) | $ / shares			$ 0.6
Stock-based compensation expense (in Dollars) | $			$ 1,273,000	$ 194,000
Stock option exercised	4,000,000
Exchange rate	0.0661
Converted shares		375,925
Common Stock [Member]
Stock Option Plan [Line Items]
Exercise price per share (in Dollars per share) | $ / shares			$ 0.0001
Converted shares					3,787,585	2,189,977
Common Class A [Member]
Stock Option Plan [Line Items]
Converted shares	264,400

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Stock Option Plan (Details) - Schedule of Fair Values of the Stock-Based Awards Granted	3 Months Ended
	Mar. 31, 2024
Stock Option Plan (Details) - Schedule of Fair Values of the Stock-Based Awards Granted [Line Items]
Risk-free interest rate	3.81%
Expected volatility	80.00%
Dividend yield	0.00%
Minimum [Member]
Stock Option Plan (Details) - Schedule of Fair Values of the Stock-Based Awards Granted [Line Items]
Expected term (years)	5 years
Maximum [Member]
Stock Option Plan (Details) - Schedule of Fair Values of the Stock-Based Awards Granted [Line Items]
Expected term (years)	10 years

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Stock Option Plan (Details) - Schedule of Stock Option Activity - Stock Option [Member] - $ / shares			3 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Mar. 31, 2024	Mar. 31, 2023
Schedule of Stock Option Activity [Line Items]
Options outstanding,Shares ending	3,666,426	3,468,760		3,696,426
Options outstanding, Weighted Average Exercise Price ending	$ 0.0001	$ 0.0001		$ 0.0001
Options outstanding, Weighted Remaining Contractual Life (Years)	8 years 1 month 6 days	6 years 7 months 24 days
Granted, Shares			333,574	227,666
Granted, Weighted Average Exercise Price			$ 0.0001	$ 0.0001
Granted, Weighted Remaining Contractual Life (Years)			8 years 1 month 6 days	6 years 7 months 24 days
Exercised, Shares			(4,000,000)
Exercised, Weighted Average Exercise Price			$ 0.0001
Exercised, Weighted Remaining Contractual Life (Years)
Expired or forfeited, Shares
Expired or forfeited, Weighted Average Exercise Price
Expired or forfeited, Weighted Remaining Contractual Life (Years)

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Earnings per share (Details) - Schedule of Basic Earnings or Loss Per Share is Based on the Weighted Average of Number of Common Shares Outstanding - USD ($)		3 Months Ended
		Mar. 31, 2024	Mar. 31, 2023
Schedule of Basic Earnings or Loss Per Share is Based on the Weighted Average of Number of Common Shares Outstanding [Abstract]
Basic earnings (loss) per share calculation Net income (loss) available to common stockholders (in Dollars)		$ (8,431,622)	$ (5,935,580)
Weighted average common shares outstanding (basic)		17,079,576	10,731,583
Warrants (in Dollars)		$ 26,550,000
Weighted average common shares outstanding (diluted)		17,079,576	10,731,583
Diluted earnings (loss) per share from net income (in Dollars per share)	[1]	$ (0.49)	$ (0.55)
Basic earnings (loss) per share from net income (in Dollars per share)		$ (0.49)	$ (0.55)
Diluted earnings (loss) per share calculation Net income (loss) available to common stockholders (in Dollars)		$ (8,431,622)	$ (5,935,580)

[1] 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.