Borealis Foods'; CEO Reza Soltanzadeh Issues Letter to Shareholders; Outlines Recent Product Mix Improvement and Investments in Growth

Rhea-AI Summary

Borealis Foods CEO Reza Soltanzadeh issued a letter highlighting key company developments and growth initiatives. The company has refined its product mix, leading to improved gross margins and profits for the past two quarters. Investments in R&D and marketing, including influencer partnerships, are driving sales growth. Borealis is ramping up sales to schools with its 'Woodles' product, expecting significant sales impact in the fall. Additionally, the company is exploring other institutional sales opportunities and has partnered with FSF to address global food security. Borealis's involvement in the Feeding America 'Fight Hunger. Spark Change.' program has expanded retail endpoints. The company aims to resolve its going concern issue by the end of 2024, following recent share redemptions and accumulated debts.

Positive

• Refinement of product mix improved gross margins and achieved profits for the past two quarters.
• Strategic investments in R&D and marketing, including influencer partnerships, are driving sales growth.
• Anticipation of significant sales impact from the 'Woodles' product in schools starting in Fall 2024.
• Exploration of additional institutional sales opportunities with positive business prospects.
• Partnership with FSF to address global food security challenges, enhancing brand reputation.
• Inclusion in the Feeding America 'Fight Hunger. Spark Change.' program, expanding retail endpoints in 600 Sam's Clubs across the U.S.

Negative

• Mention of a 'going concern' issue due to near-total share redemption and accumulated debts from a recent business combination transaction.
• Accumulated debts requiring substantial part resolution by shareholder debt.
• The going concern issue was highlighted in multiple financial statements, including FY 2023 Form 10-K and Q1 2024 Form 10-Q.

Insights

Financial Analyst

Borealis Foods' letter from CEO Reza Soltanzadeh provides key insights into the company's financial and operational strategies, offering valuable information for investors. The emphasis on refining the product mix to include higher-margin items has resulted in gross profit for the last two quarters. For a company navigating post-business combination, this focus on profitability at the product level is critical. It suggests a clear path towards sustainable bottom-line growth as the company scales up, which is particularly important given the company's past financial challenges. While this is a positive shift, investors should watch if these margins sustain as sales volumes increase, balancing out the operational overheads.

Additionally, the company's investments in R&D and marketing underscore a strong commitment to growth through innovation and brand positioning. However, these investments also come with increased costs, which could impact short-term profitability. The mention of celebrity endorsements and influencer-driven marketing campaigns is interesting, but the actual return on these investments should be closely monitored, considering the high costs typically associated with such strategies. The expected ramp-up in sales from institutional clients, including schools and military, presents a significant opportunity, but execution risks remain. Investors should track the onboarding and performance of these new sales channels to gauge actual impact on revenue growth.

The reference to the company's past going concern issues highlights the financial challenges faced post-business combination. The resolution of these concerns, albeit addressed partly through shareholder debt, is important for long-term stability. The company's strategy to mitigate these risks through strategic investments and partnerships, like the one with Feeding America, is commendable, but actual financial outcomes will be the true test. Investors should keep an eye on quarterly reports for signs of sustained financial health.

Market Research Analyst

The strategic initiatives outlined by Borealis Foods to enhance their product mix and expand market reach reflect a well-thought-out approach to capturing a larger share of the food tech market. The consistent introduction of new flavors and products aligns with current consumer trends favoring variety and innovation in food choices. Moreover, leveraging a high-profile brand ambassador like Gordon Ramsay can significantly boost brand recognition and consumer engagement, especially in a crowded market. However, this approach needs to translate into measurable sales growth and market penetration. Investors should look at market share data and sales performance in upcoming quarters to evaluate the effectiveness of these strategies.

Furthermore, the company's focus on institutional sales presents a substantial growth avenue. Products tailored for specific needs, such as the 'Woodles™' for schools, highlight Borealis' adaptability and innovation in meeting niche market demands. This strategy is smart, as it taps into stable, long-term revenue streams. However, the company's ability to deliver on these large-scale contracts and maintain quality and consistency will be crucial. The involvement in programs like 'Fight Hunger. Spark Change.' also aligns well with social responsibility trends, potentially enhancing brand loyalty and attracting conscientious consumers.

Overall, while the company's efforts are promising, the actual impact on revenues and market position will depend on effective execution and market acceptance. Monitoring market trends and competitive positioning will be key for investors to gauge the long-term potential of these initiatives.

TORONTO, May 23, 2024 /PRNewswire/ - Borealis Foods Inc. ("Borealis" or the "Company") (Nasdaq: BRLS), a pioneering food tech company dedicated to crafting premium-quality, nutritious food solutions accessible to all, today announced that CEO Reza Soltanzadeh has issued a letter to shareholders highlighting the Company's recent developments and growth initiatives.

Dear Fellow Shareholders:

I'm thrilled to share with you the exciting progress Borealis has made, setting the stage for even greater achievements ahead. Our dedicated team has been hard at work, and the fruits of our labor are becoming increasingly evident as we move toward the second half of the year.

Here are some key highlights that fill me with optimism:

1. Continued refinement of product mix is positively impacting gross margin – By strategically refining our product mix to include higher-margin items, we've not only achieved gross profit for the past two quarters (with reference to the pre-business combination entity as to Q4 2023), but we believe we have also laid a solid foundation for future bottom-line growth as we scale our operations. The path to delivering net income for our shareholders starts with earning a profit on the products we sell and then, as we scale and cover our overhead, we expect bottom-line profits to follow. 
   
   
2. Investments in R&D and marketing setting the stage for sales expansion – At our core, Borealis is a food tech company with research and development central to our strategy. Consistent introduction of new, exciting flavors is at the heart of our identity and it is equally important to support those efforts with an aggressive marketing program to stimulate consumer demand for Chef Woo ramen from their local retailers. Today's consumers are also highly motivated by influencers and we have invested heavily in that marketing channel, led by our brand ambassador and investor Gordon Ramsay. As Gordon continues to create enticing recipes with our ramen, we are confident that our investments in marketing support and distribution of his content will continue to drive sales growth.
   
   
3. Sales to schools poised for significant sales ramp – In my last letter I talked about "Woodles^™", an innovative product awarded the "Best Foodservice Initiative" at the 2023 World Plant-based Innovation Awards. We created this product to be the first whole-grain high-protein noodles served in U.S. schools. In recent months we have been very busy preparing for the back-to-school season coming up in August and September. We expect school systems to start serving Woodles to their students this coming fall and as we begin ramping up shipments of this product in the third quarter, we expect to see a significant, positive impact on our sales. 
   
   
4. Additional institutional sales opportunities – Our team is also pursuing several other institutional opportunities and we expect to see similar positive effects on our business. We are very encouraged by the discussions we are having with major food distributors, the military, correctional facilities, and humanitarian food programs. In this regard, we are leveraging our partnership with FSF (Food Systems for the Future), a non-profit organization envisioning a malnutrition-free world, headed by Borealis Board member Ambassador Ertharin Cousin, to address global food security challenges in collaboration with leading humanitarian food programs.
   
   
5. Inclusion in the Feeding America^® "Fight Hunger. Spark Change." Program – Our involvement in this exciting program bears repeating, thanks to its alignment with our mission and ability to contribute to sales growth. The partnership made our Chef Woo ramen available in approximately 600 Sam's Clubs^® across the U.S., representing a valuable new set of retail endpoints where consumers can find our great-tasting Chef Woo ramen.

In summary, while our first quarter achievements are certainly commendable, they only scratch the surface of what's to come. The groundwork we've laid and the investments we're making are poised to yield even greater results in the quarters and years ahead. As we remain steadfast in our mission to make a tangible difference in the fight against malnutrition, I have full confidence that our long-term success is not only achievable, but inevitable. Needless to say, with the execution of our business development, investments, industry partnerships and other strategic plans, we expect that by the end of 2024 we will resolve the going concern issue that was contained in reference to the financial statements in our April 15, 2024 Form 8-K/A, our FY 2023 Form 10-K, and our Q1 2024 Form 10-Q. We believe that the going concern issue emerged following the near total redemption of shares in connection with our recent business combination transaction, causing, among other things, accumulated debts to the professionals involved in facilitating the transaction, which, with the support of our majority shareholders, has been addressed in substantial part by shareholder debt. I look forward to reporting on Borealis Foods' continued development and resolution of this issue as we execute on our strategy.

In Good Health,
Reza
Reza Soltanzadeh
CEO
Borealis Foods Inc.

About Borealis

Borealis is an innovative food technology company with a mission to address global food security challenges through its research and development of tasty, highly nutritious and functional food products that are both affordable and sustainable. The Company's focus on affordability and sustainability reflects its commitment to making a positive impact on both human life and the planet. Through its wholly-owned subsidiary, Palmetto Gourmet Foods, Borealis has created meals that are made with organic noodles, and are vegan, vegetarian, Halal, Kosher, plant-based, egg and dairy free, non-GMO, free of added MSG and TBHQ free. Borealis distributes its food products throughout the United States, Canada, Mexico and recently began distributing its products in Europe.

Forward Looking Statements

Certain statements made in this release are "forward looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995, including statements regarding the and future financial condition and performance of Borealis, and the expected financial impacts of the Business Combination (including future revenue and pro forma enterprise value), markets, and expected future growth and market opportunities. Forward-looking statements generally relate to management's current expectations, hopes, beliefs, intentions, strategies, plans, objections or projections about future events or Borealis' future financial condition or operating performance. When used in this press release, the words "estimates," "projected," "expect," "anticipate," "forecasts," "plans," "intend," "believe," "seek," "may," "will," "should," "future," "propose" and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. 

These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside Company's control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. These risks, uncertainties, assumptions and other important factors are detailed in the Company's periodic and current reports filed with the Securities and Exchange Commission, including the disclosures under "Risk Factors" in the Company's Form 10-Q for the quarter ended March 31, 2024 and its Form 8-K/A filed with the Securities and Exchange Commission on April 15, 2024. As such, readers are cautioned not to place undue reliance on any forward-looking statements and readers should not rely on these forward-looking statements as predictions of future events.

Forward-looking statements are based upon estimates and assumptions that, while considered reasonable by management of Borealis, are inherently uncertain. Factors that may cause actual result to differ from current expectations include, but are not limited to: financial and operating performance; changes to existing applicable laws or regulations; the possibility that Borealis or the combined company may be adversely affected by economic, business, or competitive factors; Borealis' estimates of revenue, expenses, operating costs and profitability; the evolution of the markets in which Borealis competes and Borealis' ability to enter new markets effectively; and the ability of Borealis to implement its strategic initiatives and continue to innovate its existing services.

Forward-looking statements speak only as of the date they are made. Investors are cautioned not to put undue reliance on forward-looking statements and Borealis assumes no obligation and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by securities and other applicable laws.

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SOURCE Borealis Foods, Inc.

FAQ

What recent product mix improvements did Borealis Foods report?

Borealis Foods reported that refining its product mix has positively impacted gross margins and achieved profits for the past two quarters.

How is Borealis Foods driving sales growth?

Borealis Foods is driving sales growth through strategic investments in R&D and marketing, including influencer partnerships led by Gordon Ramsay.

What is the expected impact of Borealis Foods' 'Woodles' product?

Borealis Foods expects a significant sales impact from its 'Woodles' product in schools starting in Fall 2024.

What additional institutional sales opportunities is Borealis Foods pursuing?

Borealis Foods is exploring institutional sales opportunities with major food distributors, the military, correctional facilities, and humanitarian food programs.

What is Borealis Foods' involvement in the Feeding America 'Fight Hunger. Spark Change.' program?

Borealis Foods' involvement in the program has expanded retail endpoints, making Chef Woo ramen available in approximately 600 Sam's Clubs across the U.S.

What are Borealis Foods' plans for resolving its going concern issue?

Borealis Foods expects to resolve its going concern issue by the end of 2024, following the near-total redemption of shares and accumulated debts from a recent business combination transaction.