{"url_path":"/sec/brls/10-q/2026/item-1a","section_key":"item-1a","section_title":"Item 1A Risk Factors","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-06-30","source_url":"https://www.sec.gov/Archives/edgar/data/1852973/0001213900-26-073767-index.html","accession_number":"0001213900-26-073767","cik":"0001852973","ticker":"BRLS","issuer_name":"Borealis Foods Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1852973/0001213900-26-073767-index.html","primary_entity_key":"0001852973","primary_entity_name":"Borealis Foods Inc."},"word_count":1565,"has_tables":true,"body_markdown":"Item 1A. Risk Factors\n\n \n\nOur risk factors are disclosed in Part I, Item\n1A of our Annual Report on Form 10-K, filed with the SEC on June 2, 2026.\n\n \n\nThe risk factors set forth below update and supplement\nthe risk factors disclosed in the Annual Report. Except as set forth below, there have been no material changes from the risk factors\ndisclosed in the Annual Report. The risk factors disclosed in the Annual Report, together with the updated and supplemental risk factors\nset forth below, should be carefully considered, together with the other information in this Quarterly Report and our other filings with\nthe SEC, in evaluating the Company and our Common Shares and Warrants. The risks described in the Annual Report and below are not the\nonly risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially\nand adversely affect our business, financial condition, or results of operations.\n\n \n\nApproximately $33.3 million of related-party indebtedness\nis subject to contractual automatic conversion into Common Shares on or after July 1, 2026, and any such conversion will result in substantial\ndilution to existing shareholders.\n\n \n\nOn April 27, 2026, in connection with the Oxus Credit\nAgreement, we entered into a Conversion Agreement with Oxus Capital PTE Ltd. (“Oxus Capital”), our Chief Executive Officer\nReza Soltanzadeh, and our Non-Executive Chairman Barthelemy Helg (together, the “Shareholders”), and a Subscription Agreement\nwith Oxus Capital. Pursuant to the Subscription Agreement, we are obligated to use commercially reasonable efforts to consummate one or\nmore equity financings resulting in aggregate gross proceeds of at least $70.0 million at a price of not less than $9.00 per share on\nor before July 1, 2026 (the “Equity Financing Condition”). If the Equity Financing Condition is not satisfied, the Conversion\nAgreement provides for the automatic conversion of approximately $29.1 million of indebtedness previously advanced by the Shareholders\nto the Company, plus approximately $4.3 million of accrued interest (calculated through June 30, 2026), into Common Shares.\n\n \n\nWe do not currently have any commitments for the\nequity financing contemplated by the Subscription Agreement, and the $9.00 per share threshold is substantially above recent trading prices\nof our Common Shares. As a result, we expect that the Equity Financing Condition will not be satisfied by July 1, 2026, and that the conversion\ncontemplated by the Conversion Agreement will be triggered. The number of Common Shares issuable upon conversion will depend on the conversion\nprice determined under the Conversion Agreement, and the conversion price is expected to be substantially below the $9.00 per share threshold\ncontemplated by the Subscription Agreement. Accordingly, if and when the conversion is effected, the conversion will result in substantial\ndilution to our existing shareholders and a significant further increase in the beneficial ownership and voting power of Oxus Capital\nand its affiliates, who are already our controlling shareholder group.\n\n \n\nAs described in the following risk factor, the\nissuance of Common Shares upon the conversion contemplated by the Conversion Agreement is expected to require shareholder approval under\nNasdaq Listing Rules 5635(b) and potentially 5635(d). The Conversion Agreement contains a “Required Approvals” provision that\ndefers the conversion and correspondingly extends the maturity of the related indebtedness until such shareholder approvals are obtained.\nThe interaction between the July 1, 2026 contractual conversion trigger and the Nasdaq-driven deferral creates a continuing overhang on\nour Common Shares, the duration and ultimate resolution of which depends on factors outside our control, including the timing of any shareholder\nmeeting we are able to convene and the outcome of the shareholder vote.\n\n \n\nIssuances of Common Shares upon conversion of\nrelated-party indebtedness require shareholder approval under Nasdaq Listing Rules 5635(b) and 5635(d), which approval has not been obtained\nand was not sought at our June 29, 2026 annual meeting of shareholders.\n\n \n\nThe issuance of Common Shares upon (i) the conversion\nof approximately $29.1 million of related-party indebtedness (plus approximately $4.3 million of accrued interest as of June 30, 2026)\nunder the Conversion Agreement and (ii) the conversion of the $3.0 million convertible promissory note issued to Oxus Capital on May 29,\n2026 described in Note 11 (collectively, the “Required Issuances”) is expected to require the prior approval of our shareholders\nunder Nasdaq Listing Rule 5635(b) (change of control) and potentially Nasdaq Listing Rule 5635(d) (issuance of 20% or more of the outstanding\nCommon Shares at a price less than the Nasdaq minimum price).\n\n \n\nThe Required Issuances were not submitted to a\nvote of our shareholders at our June 29, 2026 annual meeting of shareholders. The Conversion Agreement and the Note each defer the applicable\nconversion and extend the applicable maturity until the required shareholder approvals are obtained. We intend to convene a special meeting\nof shareholders, or to include the required proposals at our next annual meeting of shareholders, to seek the required approvals.\n\n \n\n29 \n\n \n\n \n\nWe cannot assure you that we will obtain the required\nshareholder approvals on a timely basis or at all. Under Nasdaq’s voting requirements applicable to issuances under Listing Rule\n5635, the shares to be issued in the transactions, and shares held by Oxus Capital and its affiliates as interested parties, may be subject\nto limitations on voting on the related proposals. If we fail to obtain the required shareholder approvals, the conversion contemplated\nby the Conversion Agreement will continue to be deferred, the related indebtedness will remain outstanding (subject to the corresponding\nmaturity extensions and continuing accrual of interest at the contractual rates), and the overhang created by the Conversion Agreement\nwill continue to weigh on the trading price of our Common Shares. In addition, if we are required to restructure or amend the Conversion\nAgreement or the Oxus Credit Agreement in order to address the deferral or to obtain shareholder approval, any such restructuring or amendment\ncould be on terms less favorable to us and our non-affiliated shareholders than the existing terms. Failure to obtain the required approvals\ncould also adversely affect our continued listing on the Nasdaq Capital Market.\n\n \n\nSubstantial doubt about our ability to continue\nas a going concern has not been alleviated.\n\n \n\nAs disclosed in the Annual Report, our independent\nregistered public accounting firm has expressed substantial doubt about our ability to continue as a going concern. Notwithstanding the\nrefinancing of the FrontWell Capital Partners credit facility through the April 27, 2026 Oxus Credit Agreement and the additional $3.0\nmillion provided under the May 29, 2026 amendment thereto, management has concluded under ASC 205-40 that substantial doubt has not been\nalleviated, because management’s plans cannot be assessed as probable of being effectively implemented. Material conditions continue\nto exist, including our need to consummate at least $70.0 million of equity financing at $9.00 per share on or before July 1, 2026 (for\nwhich we have no commitments), the conversion overhang and Nasdaq shareholder-approval requirements described above, our continued reliance\non demand and past-due obligations to related parties, and the fact that our total liabilities continue to exceed our total assets. See\nNote 1 to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.\n\n \n\nOxus Capital and its controlling shareholder exercise\nsignificant influence over our Company and may increase that influence further upon conversion of related-party indebtedness.\n\n \n\nOxus Capital, our former SPAC sponsor, beneficially\nowns, through its controlling shareholder Kenges Rakishev, approximately 39.09% of our outstanding Common Shares. Oxus Capital is also\nour senior secured lender under the Oxus Credit Agreement (as amended), holds a portion of the related-party indebtedness subject to the\nConversion Agreement, and is entitled to appoint two members of our Board of Directors, one of whom (Pavel Mynzhanov) was appointed in\nMay 2026. As a result, Oxus Capital and Mr. Rakishev have significant influence over our business, strategy, financing, and governance,\nincluding the ability to influence or determine the outcome of most matters submitted to our shareholders for approval. If the conversion\ncontemplated by the Conversion Agreement is effected following receipt of the required shareholder approvals, the beneficial ownership\nand voting power of Oxus Capital and its affiliates will increase further, potentially to a level that constitutes majority ownership\nand control of the Company. The interests of Oxus Capital and Mr. Rakishev may differ from those of our other shareholders, and conflicts\nof interest may arise in connection with related-party transactions, financings, and other matters in which Oxus Capital has a direct\nor indirect interest.\n\n \n\nWe are not yet confirmed as compliant with Nasdaq\nListing Rule 5620(a).\n\n \n\nOn January 12, 2026, we received a notice from the Nasdaq Listing Qualifications\nDepartment that we were not in compliance with Nasdaq Listing Rule 5620(a), which requires listed companies to hold an annual meeting\nof shareholders within twelve months of the end of each fiscal year. Nasdaq granted us an extension until June 29, 2026 to regain compliance.\nWe held our annual meeting of shareholders on June 29, 2026. We expect to receive confirmation from Nasdaq that we have regained compliance\nwith Listing Rule 5620(a); however, we have not received such confirmation as of the date of this Quarterly Report. If, contrary to our\nexpectations, Nasdaq determines that we have not regained compliance, our Common Shares and Warrants could become subject to delisting\nfrom the Nasdaq Capital Market, which would materially and adversely affect the liquidity and trading price of our securities, our ability\nto raise additional capital, and our relationships with customers, suppliers, and other counterparties."}