Borealis Exploration Limited Half Year Management Report - Part II

Significant changes to key financial information

The significant changes to the Group’s consolidated financial data and operating results during or subsequent to the period covered by the audited Consolidated Financial Statements are:

For the six months ended 30 September 2014

Borealis spent US$977,005 on its operations for the six months ended 30 September 2014 and US$1,468,089 for the same period in 2013. This amounts approximately to a US$492,000 decrease in operating expenditure in the six months ended 30 September 2014 versus the same period in 2013.

For the six months ended 30 September 2014, Borealis incurred administrative expenses of US$589,051, US$42,312 in corporate fees, US$48,511 in legal fees, US$147,368 in rent and US$117,898 in travel compared to administrative expenses of US$948,917, US$29,880 in corporate fees, US$34,961 in legal fees, US$151,248 in rent and US$108,819 in travel in the same period in 2013. The changes in the foregoing expenses in the six months ended 30 September 2014 over the same period in 2013 are attributable to a different focus in the various activities in the business of the Borealis family of companies.. The decrease in administrative expenses and increase in corporate and legal fees is primarily attributable to billing cycle differences and the previously mentioned focus in activities. Travel expenses increased in the six months ended on 30 September 2014, as Borealis in line with higher travel costs.

In the six months ended 30 September 2014, Borealis spent US$902,550 on compensation to directors and officers versus US$909,150 in the same period in 2013.

In the six months ended 30 September 2014, Borealis incurred and capitalised development expenses amounting to US$582,148 relating to the Chorus Motors/WheelTug technology compared to US$573,015 in the same period in 2013.

For the six months ended 30 September 2014, the accumulated loss carried forward for Borealis was US$27,436,998 compared to US$30,505,092 for the same period in 2013. The decrease in accumulated loss carried forward in the six months ended 30 September 2014 versus the same period in 2013 is attributable to profits on sale of shares of the subsidiaries exceeding the operating costs of the family of companies.

In the six months ended 30 September 2014, the Borealis family of companies sold US$122,458 in marketable securities of the Borealis family of companys to third-parties versus US$70,541 in the same period in 2013. The six-months on six-months increase in 2014 versus 2013 in the amount realized from the disposal of marketable securities is attributable to better market conditions in the six months ended 30 September 2014 versus the same period in 2013.

For the six months ended on 30 September 2014, intangible assets increased to US$11,901,903 from US$10,538,299 for the same period in 2013. Intangible assets consist of (i) patents and (ii) the capitalization of Chorus Motors and WheelTug research and development expenses. The increase in the six months ended 30 September 2014 was attributable to more development work on the Chorus/Wheeltug project, and the registration of additional patents..

Expected Future Development of Borealis’s Business and Economic Results

Borealis intends to continue an 80% focus of its management time and 90% focus of its financial resources on commercializing the Chorus Motors and WheelTug technologies with the balance of its time and financial resources focused primarily on its other technology companies, including Avto Metals plc, Power Chips plc, Cool Chips plc, and, to a lesser extent, on certain of its other companies. Each of these technologies has successfully undergone tests in the six months ended 30 September 2014 and, subject to receipt of additional funds, will undergo further testing and development the last quarter of fiscal 2015 with a view toward commercialization in fiscal 2016.

Segment Reporting

The projects of the Borealis family of companies are all in development stage and, as such, no segment, division, subsidiary or other component has earned any revenue whatsoever.

Related Party Transactions

For the period ended 30 September 2014, there were no related party transactions that substantially influenced the economic results of Borealis or the Borealis family of companies. Nor were there any changes in related party transactions, which were mentioned in the consolidated annual report of Borealis for the year ended 31 March 2014 that could significantly affect the economic results of Borealis and its consolidated group in the six months ended 30 September 2014.

Borealis Statement

According to my best knowledge, the consolidated financial statements for the six months ended 30 September 2014 provides a true and fair view of the financial situation, business activities and the economic results of Borealis and of its consolidated group for the past six months and about the prospects of the future development of the financial situation, business activities and the economic results of Borealis and of its consolidated group.

Borealis Exploration Limited

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By: Dr. Rodney T. Cox

Title: Chief Executive Officer and Chairman of the Board