Borealis Foods Inc.BRLS

Borealis Foods Inc. Stock Compensation Disclosure

10-KFiled Apr 15, 20252 min read
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 shares. 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 years ended December 31, 2024 and 2023 the Company granted options to purchase 333,574 and 227,666 shares, respectively, of the Company’s common shares 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 rate3.81 %
Expected term (years)
5-10
Expected volatility80.00 %
Dividend yield0.00 %

For the years ended December 31, 2024 and 2023, the Company recorded approximately $1,273,000 and $492,000, 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. This stock option plan was closed upon the business combination and a new equity incentive plan was approved and implemented as of February 7, 2024.
9. Stock Option Plan (continued)

Stock option activity for the years ended December 31, 2024 and 2023 is summarized as follows:
SharesWeighted Average Exercise PriceWeighted Remaining Contractual Life(Years)
Options outstanding at December 31, 20223,468,760$0.0001 9.03
Granted227,6660.0001 — 
Exercised—— — 
Expired or forfeited(30,000)— — 

Options outstanding at December 31, 20233,666,426$0.0001 8.10

Options outstanding at December 31, 20233,666,426 $0.0001 8.10
Granted
333,574 0.0001 8.10
Exercised
(4,000,000)0.0001 — 
Expired or forfeited
— — — 

Options outstanding at December 31, 2024— — — 

About Stock Compensation Disclosures

Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.

Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.

Other Available Disclosures

Income TaxesRevenueEarnings Per ShareFair ValuePP&ELeasesSegmentsDebtCommitmentsNew StandardsPay vs Performance