{"url_path":"/sec/frgt/10-k/2026/item-5","section_key":"item-5","section_title":"Item 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-14","source_url":"https://www.sec.gov/Archives/edgar/data/1687542/0001493152-26-023206-index.html","accession_number":"0001493152-26-023206","cik":"0001687542","ticker":"FRGT","issuer_name":"Freight Technologies, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1687542/0001493152-26-023206-index.html","primary_entity_key":"0001687542","primary_entity_name":"Freight Technologies, Inc."},"word_count":6639,"has_tables":true,"body_markdown":"**ITEM\n5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS**\n\n \n\n*You\nshould read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated\nfinancial statements and the related notes included elsewhere in this Annual Report.*\n\n* *\n\n*This\ndiscussion may contain forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking\nstatements because of various factors, including those set forth under Item 3.D.* “*Risk Factors*,” *or in other\nparts of this Annual Report. See also “Cautionary Note Regarding Forward-Looking Statements”*.\n\n \n\n5.A.\nOperating Results\n\n \n\n**Select\nFinancial Data and Principal Factors Affecting Our Financial Performance**\n\n** **\n\nThe\nfollowing table presents the selected consolidated financial information for our Company. All numbers are presented in United States\nDollars. The selected consolidated statements of comprehensive loss data for the years ended December 31, 2025, 2024 and 2023 and the\nconsolidated balance sheets data as of December 31, 2025, and 2024, have been derived from our audited consolidated financial statements,\nwhich are included in this annual report beginning on page 80 and are consistent with numbers reported in our prior annual filings.\n\n \n\nOur\nhistorical results do not necessarily indicate results expected for any future periods. The selected consolidated financial data should\nbe read in conjunction with, and are qualified in their entirety by reference to, our audited consolidated financial statements and related\nnotes and “Item 5. Operating and Financial Review and Prospects” below. Our audited consolidated financial statements are\nprepared and presented in accordance with U.S. GAAP.\n\n \n\n  \nYear\nEnded  \nYear\nEnded  \nYear\nEnded \n\n(US$) \nDecember\n31, 2025  \nDecember\n31, 2024  \nDecember\n31, 2023 \n\n  \n   \n   \n  \n\nRevenue \n$13,062,534  \n$13,728,922  \n$17,060,753 \n\n  \n    \n    \n   \n\nCost and expenses \n    \n    \n   \n\nCost of revenue (exclusive of depreciation\nand amortization shown separately below) \n 11,460,769  \n 12,389,520  \n 15,709,673 \n\nCompensation and employee benefits \n 4,482,151  \n 5,349,764  \n 5,963,713 \n\nGeneral and administrative \n 2,445,918  \n 1,983,901  \n 3,163,639 \n\nSales and marketing \n 118,392  \n 65,574  \n 80,328 \n\nDepreciation and amortization \n 449,369  \n 430,414  \n 404,598 \n\nTotal Cost and expenses \n 18,956,599  \n 20,219,173  \n 25,321,951 \n\n  \n    \n    \n   \n\nOperating Loss \n (5,894,065) \n (6,490,251) \n (8,261,198) \n\n  \n    \n    \n   \n\nOther income and (expenses) \n    \n    \n   \n\nInterest income \n -  \n 1,770  \n 8,880 \n\nInterest expense \n (762,399) \n (675,628) \n (816,819)\n\nOther income \n -  \n -  \n 342 \n\nOther expense \n -  \n    \n (499,259) \n\nUnrealized gain (loss) in fair value of cryptocurrency \n (16,666) \n -  \n - \n\nRealized gain (loss) in value of sold cryptocurrency \n (1,650,339) \n -  \n - \n\nGain from extinguishment of debt \n -  \n 1,607,766  \n   \n\nChange in the fair value of derivative liability \n 512,138  \n    \n   \n\nChange in fair value of convertible note \n (38,069) \n 22,602  \n 345,396 \n\nTotal other expense \n (1,955,335) \n 956,510  \n (961,460) \n\n  \n    \n    \n   \n\nLoss before income taxes \n (7,849,400) \n (5,533,741) \n (9,222,658)\n\n  \n    \n    \n   \n\nIncome tax expense \n 52,377  \n 67,486  \n 104,948 \n\n  \n    \n    \n   \n\nNet loss \n (7,901,777) \n (5,601,227) \n (9,327,606) \n\n  \n    \n    \n   \n\nForeign currency translation \n 480,258  \n (1,740,552) \n 452,917 \n\nComprehensive loss \n (7,421,519) \n (7,341,779) \n (8,874,689)\n\nWeighted average number of shares, basic and\ndiluted* \n 566,330  \n 45,642  \n 2,393 \n\nLoss per share, basic and\ndiluted \n$(13.95) \n$(122.72) \n (3,897.32)\n\n \n\n*\n- The number of shares outstanding was adjusted retroactively for all periods presented to reflect the Reverse\nSplits.\n\n \n\n41\n\n \n\n \n\nWarrants\nto purchase ordinary shares are not included in the diluted loss per share calculations when their effect is antidilutive.\n\n \n\n**BALANCE\nSHEET**\n\n** **\n\n  \n\n**Year\nEnded**\n\n**December\n31, 2025**\n  \n\n**Year\nEnded**\n\n**December\n31, 2024**\n \n\nCurrent assets \n$6,332,384  \n$5,049,546 \n\nTotal assets \n 12,589,636  \n 5,690,245 \n\nCurrent liabilities \n 6,301,006  \n 6,345,005 \n\nLong term liabilities \n 962,095  \n - \n\nShare capital \n 2,227  \n 308 \n\nTotal stockholders’\nequity (deficit) \n$5,326,535  \n$(654,760)\n\n \n\n**Revenues**\n\n \n\nFr8Tech’s\nrevenues decreased to $13.1 million for the year ended December 31, 2025 from $13.7 million for the year ended December 31, 2024, a reduction\nof $0.6 million and 4.9% on year-over-year basis. The year-over-year decrease was primarily driven by reduced dedicated service due to\ncustomer specific circumstances and our continued efforts to focus on higher margin customers and lanes in the spot market, which limited\nvolume growth across the platform. Our Fr8Fleet revenue declined 33% to $3.4 million in 2025, partially offset by an 8% increase in our\nFr8App spot market revenue to $9.6 million, by increased revenue from Waavely, our ocean container brokerage platform, and by initial\nrevenue from software sales of Fleet Rocket, our TMS launched in 2025, which were $17.7 thousand.\n\n \n\n  \nYear Ended  \n   \n  \n\n  \nDecember\n31,  \n   \n  \n\nRevenue \n2025  \n2024  \nChange  \n%\nChange \n\nFreight Transportation Brokerage \n$9,625,003  \n$8,635,201  \n$989,802  \n 11.5%\n\nDedicated Capacity \n 3,419,801  \n 5,093,721  \n$(1,673,920) \n -32.9%\n\nSoftware \n 17,730  \n -  \n 17,730  \n - \n\nTotal \n$13,062,534  \n$13,728,922  \n$(666,388) \n -4.9%\n\n \n\n  \nYear Ended  \n   \n  \n\n  \nDecember\n31,  \n   \n  \n\nVolume \n2025  \n2024  \nChange  \n%\nChange \n\nBrokerage Shipments \n 5,931  \n 4,780  \n 1,151  \n 24.1%\n\nDedicated Capacity Truck Days \n 7,215  \n 15,139  \n (7,924) \n -52.3%\n\n \n\nThe\nFreight Transportation Brokerage service line experienced a 24.1% increase in the number of shipments; 30.1% increase in US domestic,\n59.4% increase in Mexico domestic, and a 17.6% decrease in cross-border shipments.\n\n \n\n42\n\n \n\n \n\nThe\nDedicated Capacity service line experienced a 52.3% decrease in the number of truck days made available to our Fr8Fleet customers. One\ntruck day means a standard 53’ dry-van trailer and truck being available to serve the customer for one full working day. The decrease\nin truck days exceeded the decrease in revenue, primarily due to the Company providing more local, short-haul capacity in 2025 for its\nprimary Fr8Fleet customer, KCM, which is provided at a lower daily rate than longer haul capacity.\n\n \n\nFr8Tech’s\nrevenues decreased to $13.7 million for the year ended December 31, 2024 from $17.1 million for the year ended December 31, 2023, a reduction\nof $3.4 million and 19.5% on year-over-year basis. The year-over-year decrease was primarily driven by: (1) our continued efforts to\nfocus on higher margin customers and lanes in the spot market which impacted overall volume across the platform; (2) reduced spot market\nand dedicated service activity in the third quarter 2023 due to customer specific circumstances; and, (3) an approximate 3.5% decline\nin the Mexican peso relative to the US dollar year-over-year, which reduced the US dollar amount of Mexican peso based revenue on a comparative\nbasis. Our spot market revenue declined 36% to $8.6 million in 2024, partially offset by a 42% increase in our Fr8Fleet revenue to $5.1\nmillion and to a lesser extent the launch of Waavely, our ocean container freight brokerage service.\n\n \n\n**Costs\nof Revenue**\n\n \n\nThe\nCompany’s cost of revenue for both freight brokerage and dedicated services is entirely comprised of the costs our carriers incur\nand invoice us to perform the service. In the case of freight brokerage services, this reflects their total costs for hauling the customers\nfreight from origin to destination. In the case of dedicated capacity services, this reflects having the trucks available to haul freight\nfor the customer and costs related to any freight movements. For both services, these costs include any accessorial charges carriers\nmay incur such as loading or unloading, drayage, stoppage, fuel surcharges, border-crossing, packing materials, etc.\n\n \n\nFr8Tech’s\ncost of revenue decreased to $11.5 million for the year ended December 31, 2025 from $12.4 million for the year ended December 31, 2024,\na reduction of $0.9 million and 8% on a year-over-year basis. Year-over-year cost of revenue decreased primarily due to the decline in\nrevenue. The improved contribution from lower cost of revenue was primarily due to change in product mix, variation in specific customer\nand carrier rates on certain lanes and in the traffic mix itself over the year. The Fr8Fleet business improved its contribution primarily\nthrough better carrier cost management and collections from receivables that were written off in 2024.\n\n \n\nFr8Tech’s\ncost of revenue decreased to $12.4 million for the year ended December 31, 2024 from $15.7 million for the year ended December 31, 2023,\na reduction of $3.3 million and 21% on a year-over-year basis. Year-over-year cost of revenue decreased primarily due to the decline\nin revenue. The improved contribution from lower cost of revenue was primarily due to change in product mix, variation in specific customer\nand carrier rates on certain lanes and in the traffic mix itself over the year. The Fr8Fleet business, which grew 42% in 2024, improved\nits contribution primarily due to providing additional capacity for KCM and expanding service to several additional large enterprise\nend-customers.\n\n \n\n**Compensation\nand Employee Benefits**\n\n \n\nFr8Tech’s\ncompensation and employee benefits expenses were $4.5 million for the year ended December 31, 2025 compared to $5.3 million for the year\nended December 31, 2024, which was a $0.8 million or 16% decrease on a year-over-year basis. The decrease was primarily due to lower\nheadcount in 2025 following the elimination of approximately 35 positions across most functions in an effort to streamline operations\nand reduce costs.\n\n \n\nIn\n2025, the Company undertook a cost cutting initiative to optimize resources for operational performance and shifting sales focus to emphasize\nsales of the Company’s TMS software offering, Fleet Rocket, and to lower ongoing operating expenses. The Company reduced its workforce\nby approximately 34%. As a result of these measures, the Company anticipates that its compensation and employee benefit expenses will\nbe lower in 2026 than in 2025. Total employees and FTE contractors, who are included in our compensation costs, at December 31, 2025,\n2024 and 2023 were 66, 100 and 78, respectively.\n\n \n\nFr8Tech’s\ncompensation and employee benefits expenses were $5.3 million for the year ended December 31, 2024 compared to $6.0 million for the year\nended December 31, 2023, which was a $0.6 million or 10% decrease on a year-over-year basis. The decrease was primarily due to lower\nexecutive compensation and bonuses, lower stock based compensation, and a weaker Mexican peso relative to the US dollar, partially offset\nby some additional hiring. As noted above, the total number of employees and FTE contractors was 100 at December 31, 2024, at which time\nthe company was making several personnel changes, primarily within sales, technology and operations.\n\n** **\n\n43\n\n \n\n** **\n\n**General\nand Administrative**\n\n \n\nGeneral\nand administrative expenses were $2.4 million for the year ended December 31, 2025 compared to $2.0 million for the year ended December\n31, 2024, which was an increase of $0.4 million or 23%, primarily due to an unfavorable change in the exchange valuation of working capital\nbalances of $0.9 million, partially offset by lower spend on consulting, audit services, insurance and rent.\n\n \n\nGeneral\nand administrative expenses were $2.0 million for the year ended December 31, 2024 compared to $3.2 million for the year ended December\n31, 2023, which was a decrease of $1.2 million or 38%, primarily due to a favorable change in the exchange valuation of working capital\nbalances and to a lesser extent lower outside legal expenses and insurance costs, partially offset by higher spend on software, audit\nservices, and recruiting.\n\n \n\n**Sales\nand Marketing**\n\n \n\nSales\nand marketing expenses were $118 thousand for the year ended December 31, 2025 compared to $66 thousand for the year ended December 31,\n2024, which was an increase of $52 thousand or 80%. The increase in sales and marketing expenses in 2025 was primarily to develop branding\nfor our new software and AI-enabled offerings, and build awareness in the market through direct advertising and online industry media.\nWe continue to use direct and online advertising and social media platforms for promotion and attracting new Shippers and Carriers to\nour Platform. We expect these costs to increase modestly to support growth of our business across our brands and software and AI-enabled\nofferings.\n\n \n\nSales\nand marketing expenses were $66 thousand for the year ended December 31, 2024 compared to $80 thousand for the year ended December 31,\n2023, which was a decrease of $14 thousand or 17%. The decrease in marketing expenses in 2024 was primarily to lower direct advertising\nexpenses, which is focused on online industry media and platforms.\n\n \n\n**Depreciation\nand Amortization**\n\n \n\nDepreciation\nand amortization expenses represent the amortization of previously capitalized software development costs, as appropriate, and depreciation\nexpenses related to Fr8App’s fixed assets. This expense increased $19 thousand or 4% on a year-over-year basis to $449 thousand\nfor the year ended December 31, 2025, from $430 thousand for the year ended December 31, 2024. The increase was primarily due to additional\nsoftware development of the Fr8App Platform and Fleet Rocket in prior years.\n\n \n\nDepreciation\nand amortization increased to $430 thousand for the year ended December 31, 2024, from $405 thousand for the year ended December 31,\n2023, an increase of $25 thousand or 6% on a year-over-year basis, due to additional software development of Fr8Tech platform in 2023\nand 2024, as well as software development efforts in 2024 to build Fleet Rocket, our TMS software platform that was launched in February\n2025.\n\n \n\n**Other\nincome and expense**\n\n \n\nNet\ninterest expense for the year ended December 31, 2025 increased to $762 thousand from $674 thousand for the year ended December 31, 2024,\nor by $88 thousand primarily due to higher interest expense incurred on the company’s revolving credit facility and accrued interest\non its convertible note.\n\n \n\nDuring\nthe year ended December 31, 2025, other income and expense included a realized loss of $1.7 million on the sale of cryptocurrency and\nan unrealized loss of $17 thousand from the change in fair value of cryptocurrency. No comparable cryptocurrency-related gains or losses\nwere recorded in the year ended December 31, 2024. Other income and expenses changed from income of approximately $1.0 million for the\nyear ended December 31, 2024, which included a $1.6 million gain from the extinguishment of debt, to expense of approximately $2.0 million\nfor the year ended December 31, 2025, due to realized and unrealized losses on cryptocurrency and interest expense, partially offset\nby the net gain on the fair value of the derivative liability and convertible note.\n\n \n\nNet\ninterest expense for the year ended December 31, 2024 decreased to $674 thousand from $808 thousand for the year ended December 31, 2023\nprimarily due to lower interest incurred on the convertible note that was issued in 2023, partially offset by higher interest expense\nincurred on the company’s revolving credit facility and promissory notes issued in 2024.\n\n \n\n44\n\n \n\n \n\nDuring\nthe year ended December 31, 2024, other income and expense included a gain of $1.6 million from the extinguishment of the convertible\nnotes issued in 2023 and the promissory notes issued in 2024, as well as a gain of $22 thousand from a change in fair value of convertible\nnote. The convertible note issued during 2023 and warrants and related accounting treatment are more fully described in Notes 11 and\n16, respectively, of our consolidated financial statements.\n\n \n\n**Net\nLoss**\n\n \n\nFr8Tech’s\nnet loss for the year ended December 31, 2025 increased to $7.9 million from $5.6 million for the year ended December 31, 2024 or by\n$2.3 million or 41% on a year-over-year basis, as a result of the items described above.\n\n \n\nFr8Tech’s\nnet loss for the year ended December 31, 2024 decreased to $5.6 million from $9.3 million for the year ended December 31, 2023 or by\n$3.7 million or 40% on a year-over-year basis, as a result of the items described above.\n\n** **\n\n**Recent\nDevelopments**\n\n** **\n\nOn\nJanuary 31, 2025, we entered into a securities purchase agreement by and among the Company with certain accredited investors in connection\nwith the issuance of 1,540,832 Series A4 preferred shares of the Company, par value $0.0001 per share (the “Series A4 Preferred\nShares”), for aggregate gross proceeds of $3,000,000.\n\n \n\nOn\nMarch 31, 2025, we entered into a securities purchase agreement with an accredited investor, which was later amended on June 26, 2025,\n(the “March 2025 SPA”) in connection with the issuance of 2,311,248 Series A4 Preferred Shares, for a total purchase price\nof approximately $5,200,000, payable in 11,300,000 FET Tokens (as defined in the March 2025 SPA).\n\n \n\nOn\nApril 29, 2025, we entered into a securities purchase agreement with certain accredited investors (the “April 2025 SPA”)\nin connection with the sale of senior convertible notes and warrants to purchase the senior convertible notes for a total purchase price\nof approximately $20,000,000.\n\n \n\nIn\nconnection with the April 2025 SPA, the Company entered into an amendment and exchange agreement (the “Amendment and Exchange Agreement”)\nwith one of the holders of the senior convertible notes on May 27, 2025, pursuant to which the Company agreed to exchange certain senior\nconvertible notes previously issued to that holder for Series A4 Preferred Shares.\n\n \n\nOn\nAugust 6, 2025, we entered into a securities purchase agreement dated with an accredited investor in connection with the issuance of\n(i) 12,540,000 Series B preferred shares of the Company, par value $0.0001 per share, and (ii) 126,005 Series A4 Preferred Shares, for\naggregate gross proceeds of $500,000.\n\n \n\nOn\nOctober 28, 2025, the Company entered into an equity purchase facility agreement (the “ELOC”), with a certain\ninstitutional investor (the “ELOC Investor”), pursuant to which the Company has the right, but not the obligation, to\ndirect the Investor to purchase up to $1.0 billion in newly issued Ordinary Shares, subject to the terms and conditions contained in\nthe ELOC (the “Advance Shares”). The Company also entered into a registration rights agreement with respect to the\nresale of any Advance Shares, under which the Company will be required to file a registration statement with the SEC registering the\nresale of the Ordinary Shares and any securities issued or issuable to the Investor from time to time by May 29, 2026, as per a\nlimited waiver agreement executed on March 23, 2026. The Company must also file one or more additional registration statements for\nthe resale of the Registrable Securities, if necessary.\n\n \n\nIn\nconnection with the ELOC, the Company entered into a placement agency agreement (the “Placement Agency Agreement”), with\nR. F. Lafferty & Co., Inc. (“Lafferty”), to serve as the exclusive placement agent. The Company will pay Lafferty a cash\nfee equal to (i) two percent (2.0%) of the aggregate gross proceeds raised from placements of Ordinary Shares until the one (1) year\nanniversary of the date of the Placement Agency Agreement, and then (ii) one percent (1.0%) of the aggregate gross proceeds raised from\nplacements subsequent to the one (1) year anniversary of the date of the Placement Agency Agreement until its termination.\n\n \n\nOn\nNovember 19, 2025, we entered into a securities purchase agreement with an accredited investor, pursuant to which the Company agreed\nto sell to the investor senior convertible promissory notes in the aggregate original principal amount of $1,000,000, for an aggregate\npurchase price of $900,000 subject to the terms and conditions set forth therein.\n\n \n\n45\n\n \n\n \n\nIn\nconnection with the March SPA, we entered into a transfer and cancellation agreement (the “Cancellation Agreement”) on November\n19, 2025 with the accredited investor to terminate the March SPA and cancel Series A4 Preferred Shares issued to the investor by having\nthe investor convert 22,104 Series A4 Preferred Shares into 113,253 ordinary shares and transfer the remaining 2,289,144 Series A4 Preferred\nShares to the Company. In exchange, the Company returned 11,300,000 FET tokens and made a payment of $880,000 to the accredited investor,\nsubject to the terms and conditions set forth in the Cancellation Agreement. In addition, the Company entered into a pre-paid services\nagreement with the same investor, pursuant to which the Company issued a pre-funded warrant to purchase ordinary shares, which is exercisable\nimmediately with a nominal exercise price and remains outstanding under a five-year term until exercised in full, in exchange for AI-related\nservices.\n\n \n\nOn December 9, 2025, we entered into a share purchase\nagreement (the “Share Purchase Agreement”) with DIP SPV I, L.P., a limited partnership organized under the laws of the British\nVirgin Islands (“DIP SPV I, L.P” or the “Seller”). Pursuant to the Share Purchase Agreement, the Company agreed\nto acquire from the Seller all of the issued and outstanding shares of JAK Solar Loans 1 Limited, a company limited by shares organized\nunder the laws of the British Virgin Islands and a wholly owned subsidiary of the Seller, in exchange for the issuance to the Seller of\n5,500,000 Series C preferred shares, par value $0.0001 per share of the Company (the “Series C Preferred Shares”) having an\naggregate stated value of $5,500,000. On May 13, 2026, we entered into a side letter with IP SPV I, L.P. (the “Side Letter with\nF IP SPV I, L.P.”), pursuant to which, DIP SPV I, L.P. agreed that it will not convert the Series C Preferred Shares into ordinary\nshares at a price below $0.336, subject to certain terms and conditions set forth in the Side Letter with F IP SPV I, L.P.\n\n \n\nOn March 12, 2026, we entered into a securities\npurchase agreement with Freight Opportunities LLC, an accredited investor, pursuant to which the Company agreed to sell to Freight Opportunities\nLLC, 1,000,000 Series C Preferred Shares for an aggregate purchase price of $1,000,000. On May 13, 2026, we entered into a side letter\nwith Freight Opportunities LLC (the “Side Letter with Freight Opportunities LLC”), pursuant to which, Freight Opportunities\nLLC agreed that it will not convert the Series C Preferred Shares into ordinary shares at a price below $0.336, subject to certain terms\nand conditions set forth in the Side Letter with Freight Opportunities LLC.\n\n \n\n**Strategic\nTransition and Brokerage Review**\n\n** **\n\nDuring\n2025 and into 2026, management has continued to execute on the Company’s strategic transition from an over-the-road online freight\nbroker to a software-first, AI-native logistics technology company. This transition reflects management’s determination that the\nhighest-value path forward for the Company is one in which its capital, talent and technology are concentrated on the development and\ncommercialization of proprietary SaaS and AI platform products, including Fleet Rocket, Zayren, Zayren Pro and Fr8Radar, which are designed\nto address structural inefficiencies in the USMCA cross-border freight market at scale.\n\n \n\nThe\nCompany’s brokerage operations served as the proving ground for the AI-enabled automation technologies that underpin the current\nproduct portfolio. The brokerage infrastructure provided the operational data, carrier relationships and logistics domain expertise that\ninform the Company’s proprietary AI model and agent framework. As those software platforms have matured and gained commercial traction\nduring 2025, management concluded that the brokerage operations are no longer the primary vehicle through which the Company will pursue\nits growth strategy.\n\n \n\nAccordingly,\non April 2, 2026, the Company announced that its Board of Directors is overseeing an evaluation of strategic alternatives for the online\nbrokerage operations, including a potential sale. The exploration of strategic alternatives is preliminary and exploratory in nature,\nand there can be no assurance that this process will result in any transaction. The Company does not intend to provide further updates\non this process unless and until a definitive agreement is reached or disclosure is otherwise required. See Item 3.D Risk Factors for\na discussion of risks associated with the strategic review process, and Item 4.B Business Overview — Recent Developments for a\ndescription of this announcement.\n\n \n\nManagement\nbelieves the Company’s enterprise customer relationships, technology infrastructure and AI development pipeline are unaffected\nby the strategic review process. The Company’s full product portfolio — Fr8App, Fr8Fleet, Fr8Now, Waavely, Fleet Rocket,\nZayren, Zayren Pro and Fr8Radar — remains fully operational and commercially available.\n\n \n\n*Impact\non Revenue Composition and Comparability*\n\n* *\n\nInvestors\nshould be aware that if the brokerage operations are sold or otherwise disposed of, the Company’s revenue profile, cost structure\nand operating metrics would change materially from the historical figures presented in this Annual Report. The brokerage operations have\nhistorically generated the substantial majority of the Company’s consolidated revenues. Following any such transaction, the Company’s\nrevenues would consist primarily of SaaS subscription fees and usage-based fees from Fleet Rocket, Zayren and Zayren Pro, which at the\ntime of this filing are in an earlier stage of commercial development. Accordingly, historical financial results presented in this Annual\nReport may not be indicative of the Company’s future results following any disposition of the brokerage operations. Management\ncautions against placing undue reliance on historical revenue, gross margin and operating expense trends in evaluating the Company’s\nfuture performance.\n\n \n\n46\n\n \n\n \n\n5.B.\nLiquidity and Capital Resources\n\n \n\nFr8Tech\nhas historically met its cash needs through a combination of cash flows from operating activities, term loans, promissory notes, bonds,\nconvertible notes, private placement offerings and sales of equity. Fr8Tech’s cash requirements are generally for operating activities\nand debt repayments. Fr8Tech funded its early operations with a combination of debt and equity and we continue to work to position the\nCompany to operate on a go-forward basis with a minimal amount of long-term debt and other borrowings. On January 3, 2023, Fr8Tech closed\non a $6.6 million convertible note facility with a private investor, which was increased to $9.9 million in April 2023. The convertible\nnote was mostly converted to equity during 2023. The balance of the convertible note of $219 thousand as of June 30, 2024, was extinguished\nin September 2024. The Company entered into a $750 thousand 1-year term note purchase agreement with Freight Opportunities, LLC on March\n11, 2024, and an additional term note for $125 thousand with Freight Opportunities, LLC on June 4, 2024. Both promissory notes were also\nextinguished in September 2024.\n\n \n\nOn\nFebruary 3, 2025, the Company raised $3.0 million through the issuance of Series A4 preferred shares. On May 27, 2025, $1.5 million of\nconvertible notes issued under a $20 million facility, which was established on April 29, 2025, exclusively for the purchase of Official\nTrump tokens, were converted into 387,305 Series A4 preferred shares. On August 6, 2025, the Company entered into a securities purchase\nagreement with an accredited wherein the Company issued series B preferred and series A4 preferred shares for a total purchase price\nof $0.5 million.\n\n \n\nOur\ncombined accounts receivable and unbilled receivable balance of $3.9 million at December 31, 2025, declined by $0.1 million or 2.9% from\n$4.1 million at December 31, 2024, primarily due to lower revenue and collections to reduce our outstanding AR balance over the year.\n\n \n\nFr8Tech’s\naccounts payable, short-term borrowings and accrued expenses decreased by $91 thousand or 1.5% on a year-over-year comparative basis\nto $6.0 million, due mostly to lower short-term borrowings. At December 31, 2025, Fr8Tech had net working capital of $31 thousand.\n\n \n\nIn\nMarch 2019, the Company secured a revolving line of credit to assist with working capital needs. The maximum principal amount that may\nbe drawn under the line of credit was increased since then to $5 million, which remains in place. As of December 31, 2025 and 2024 the\namount drawn under this facility was $2.9 million and $3.3 million, respectively. We continue to incur short-term debt with this facility,\nwhich is collateralized by our accounts receivable, and we expect to maintain this debt facility to support ongoing operations.\n\n \n\nAs\nshown in the accompanying consolidated financial statements as of December 31, 2025, we had an accumulated deficit of approximately $52.8\nmillion, short-term debt of $2.9 million, unrestricted cash of approximately $0.3 million and a working capital of approximately $31\nthousand. In addition, for the years ended December 31, 2025 and 2024, we reported operating losses and negative cash flows from operations.\n\n \n\nMost\ncash resources of the Company fund operating activities. Through December 31, 2025, we have financed our operations primarily with the\nproceeds from the sale and issuance of our ordinary and preferred shares, convertible promissory notes, promissory notes and debt.\n\n \n\nIf\nwe are unable to raise additional capital moving forward, our ability to operate in the normal course and continue to invest in our business\nmay be materially and adversely impacted and we may be forced to scale back operations or divest some or all of our assets.\n\n \n\nAs\na result of the above, in connection with our assessment of going concern considerations in accordance with FASB Accounting Standards\nUpdate (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,”\nmanagement has determined that our liquidity condition raises substantial doubt about our ability to continue as a going concern through\ntwelve months from the date these consolidated financial statements are available to be issued. These consolidated financial statements\ndo not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be\nnecessary should we be unable to continue as a going concern.\n\n \n\n47\n\n \n\n \n\n**Cash\nflows**\n\n \n\nComparison\nof the Years ended December 31, 2025, December 31, 2024 and December 31, 2023\n\n \n\nThe\nfollowing table summarizes our sources and uses of cash for the years ended December 31, 2025, December 31, 2024 and December 31, 2023.\n\n \n\n(US$) \nYear Ended\nDecember 31,\n2025  \nYear Ended\nDecember 31,\n2024  \n\n**Year Ended**\n\n**December 31,**\n\n**2023**\n \n\nNet cash used in operating activities \n (4,531,361) \n (4,206,168) \n (5,790,684)\n\nNet cash used in investing activities \n (302,311) \n (345,723) \n (363,369)\n\nNet cash provided by financing activities \n 4,810,897  \n 4,242,023  \n 6,800,722 \n\nNet effect of exchange rates on cash \n 165,461  \n (1,046,205) \n (99,564)\n\nNet increase / (decrease) in cash and cash equivalents \n (22,775) \n (309,868) \n 646,669 \n\n \n\n**Cash\nflows used in Operating Activities**\n\n \n\nNet\ncash used in operating activities represent the cash receipts and disbursements related to our activities other than investing and financing\nactivities. We expect cash provided by operating activities to be our primary use of funds for the foreseeable future as the Company\ncontinues to fund its growing operations\n\n \n\nNet\ncash flows used in operating activities is derived by adjusting our net loss for:\n\n \n\n \n●\nnon-cash\noperating items such as depreciation and amortization, stock-based compensation and other non-cash income or expenses;\n\n \n●\nchanges\nin operating assets and liabilities reflect timing differences between the receipt and payment of cash associated with transactions\nand when they are recognized in results of operations as well as any gains from extinguishment of debt or changes in value of preferred\nstock.\n\n \n\nFor\nthe year ended December 31, 2025, net cash used in operating activities was $4.5 million which consisted of a net loss of $7.9 million\nadjusted for non-cash charges of $2.4 million and net positive changes in our net operating assets and liabilities of $0.9 million. The\nnon-cash charges primarily consisted of change in the fair value of cryptocurrency of $1.5 million, share-based compensation costs of\n$0.9 million, depreciation and amortization of $0.4 million, accrued interest on a note payable of $59 thousand, and amortization of\nthe convertible note derivative liability of $56 thousand, partially offset by a net gain on the fair value of the derivative liability\nof $0.5 million. The change in our net operating assets and liabilities was primarily due to net decreases in accounts receivable and\nunbilled receivables of $0.6 million, decreases in prepaid assets and deposits of $0.4 million, and net increases in accounts payable\nand accrued expenses of $24 thousand, partially offset by changes in our income and VAT tax balances of $63 thousand. The changes in\nour accounts receivable and accounts payable balances are primarily the result of the overall decrease in business activities and higher\ncollections relative to the prior year.\n\n \n\nFor\nthe year ended December 31, 2024, net cash used in operating activities was $4.2 million which consisted of a net loss of $5.6 million,\nadjusted for non-cash charges of -$0.2 million and net changes in our net operating assets and liabilities amounting to $1.6 million.\nThe non-cash charges primarily consisted of gain on extinguishment of debt of -$1.6 million and a change in the fair value of convertible\nnote of $23 thousand, offset by share-based compensation costs of $1.0 million and depreciation and amortization of $0.4 million. The\nchange in our net operating assets and liabilities was primarily due to net decreases in accounts receivable and unbilled receivables\nof $1.5 million, prepaid assets and deposits of $0.4 million, and income and VAT tax balances $0.2 million, partially offset by a decrease\nof accounts payable and accrued expenses of $0.5 million. The changes in our accounts receivable and accounts payable balances are primarily\nthe result of the overall decrease in business activities and higher collections relative to the prior year.\n\n \n\n48\n\n \n\n \n\nFor\nthe year ended December 31, 2023, net cash used in operating activities was $5.8 million which consisted of a net loss of $9.3 million,\nadjusted for non-cash charges of $1.8 million and net changes in our net operating assets and liabilities amounting to $1.7 million.\nThe non-cash charges primarily consisted of share-based compensation costs of $1.2 million, interest accruals on convertible notes of\n$0.4 million, depreciation and amortization of $0.4 million, and conversion inducement expense of $0.1 million, partially offset by a\nchange in fair value of convertible note of $0.3 million. The change in our net operating assets and liabilities was primarily due to\nnet decreases in accounts receivable and unbilled receivables of $1.1 million, prepaid assets and deposits of $0.3 million, and accounts\npayable of $0.2 million, partially offset by an increase of accrued expenses and income tax payable of $0.5 million. The changes in our\naccounts payable and accounts receivable balances are primarily the result of the overall decrease in business activities relative to\nthe prior year.\n\n \n\n**Cash\nflows used in Investing Activities**\n\n \n\nFor\nthe year ended December 31, 2025, net cash used in investing activities was $302 thousand, mostly for software development efforts for\nadditional functionalities and capabilities of the Fr8App platform, Fleet Rocket, Zayren and internally used applications.\n\n \n\nFor\nthe year ended December 31, 2024, net cash used in investing activities was $346 thousand, mostly for software development efforts for\nadditional functionalities and capabilities of the Fr8App platform and related offerings.\n\n \n\nFor\nthe year ended December 31, 2023, net cash used in investing activities was $363 thousand, mostly for software development efforts for\nadditional functionalities and capabilities of the Fr8App platform and related offerings.\n\n \n\n**Cash\nflows provided by Financing Activities**\n\n \n\nFor\nthe year ended December 31, 2025, net cash provided by financing activities was $4.8 million. The cash inflows were from proceeds from\nthe issuance of preferred shares for $3.5 million and convertible notes of $2.9 million, partially offset by $0.9 million payment on\nthe cancelled agreement with Fetch Compute, net payments on our revolving credit facility of $0.5 million, and repayment of insurance\nfinancing for $0.2 million.\n\n \n\nFor\nthe year ended December 31, 2024, net cash provided by financing activities was $4.2 million. The cash flow provided was from proceeds\nfrom the issuance of ordinary equity through our ATM program for $3.1 million, promissory notes of $0.9 million, and net borrowing revolving\ncredit facility $0.5 million, partially offset by repayment of insurance financing for $0.2 million.\n\n \n\nFor\nthe year ended December 31, 2023, net cash provided by financing activities was $6.8 million. The cash flow provided was primarily from\nnet proceeds from the issuance of convertible note of $7.7 million, partially offset by a net repayment on borrowing facilities of $0.5\nmillion, and repayment of insurance financing of $0.3 million.\n\n \n\n5.C.\nResearch and Development\n\n** **\n\nThe\nfirst commercial version of Fr8Tech’s products was launched in 2017. Fr8Tech continued its product development efforts throughout\n2018, by adding initial business intelligence and analytics to supplement its basic products in 2019 and offered its revised products\npackage with active freight brokerage support and customer service by yearend 2019. The second generation of Fr8Tech products were brought\nto market during the second quarter of 2020 and consisted of the online portal, mobile application, TMS functionality, and Fr8App’s\nplatform supplemented with freight brokerage support and customer service integrations. In 2022, the Company began offering to the Mexican\ndomestic market dedicated capacity under the Fr8Fleet brand and in 2023 LTL services under the Fr8Now brand, both powered and managed\nby the Fr8App platform and bringing much of the same capabilities and intelligence to both services.\n\n \n\nThe\nCompany has continued to bring additional functionality and enhancements to its core Fr8App platform over the past several years, as\nwell as launch new technology-based offerings, including Fr8Radar, Waavely, Fleet Rocket, and Zayren.\n\n \n\nFr8Tech’s\nprincipal assets consist of its software, in which it invests continuously through development work by employees and externally contracted\nparties. Fr8Tech invested more than $0.3 million per year in software during the years ended December 31, 2025, 2024 and 2023. Fr8Tech\nexpects to continue investing in its software in line with the expansion of its product offerings. Financing for investment in software\nhas historically been provided for by the company’s operations and capital raising events.\n\n** **\n\n****\n\n49\n\n \n\n** **\n\n5.D.\nTrend Information\n\n \n\nIn\n2023, the U.S. imported more goods from Mexico than China for the first time in more than 20 years, a trend that has continued through\n2025. This trend is a direct result of, and is only expected to continue as global enterprises evolve their supply chains to adjust to,\namong other things: (i) ongoing trade tensions between the US and China; (ii) lingering economic fallout from the disruptions caused\nby the COVID-19 pandemic, notably spikes in global logistics demand and costs; (iii) the enactment of the USMCA; and (iv) availability\nof skilled labor to perform critical functions. This evolution involves large manufacturers shifting their sources of supply and locations\nof production to be closer to end markets through on-shoring and near-shoring activities. To this end, manufacturers and suppliers are\nestablishing operations in Mexico to serve the US and other markets in the North America and Central America. OTR truck Carriers move\nthe vast majority of the goods and supplies necessary to enable this transition.\n\n \n\nAccording\nto the 36th Annual State of Logistics Report, produced for the Council of Supply Chain Management Professionals by Kearney and presented\nby Penske Logistics, the U.S. domestic truck freight transportation market was approximately $900 billion in 2024 and 2025, and it is\nexpected to experience low- to mid-single digit growth in 2026. Per Mordor Intelligence, the Mexican domestic freight and logistics market\nis estimated to be approximately $131 billion in 2026, and the North American cross-border freight transportation market is estimated\nat $248 billion and expected to exceed $308 billion by 2030. U.S. cross border road freight was estimated at $212 billion in 2025, growing\nto $271 billion by 2031. Additionally, Mexico’s overall trade with the U.S. grew by 3.9% in 2025 with exports to US totaling $535\nbillion. That growth continued in early 2026 with Mexican exports to the US growing 8.1% year-over-year in January 2026 and is expected\nto grow over the full year, despite tariffs and other protectionist measures announced in 2025. Fr8Tech expects the market to remain\nactive and continue to grow, even if tariffs do slow some cross-border trade.\n\n \n\nFr8Tech\nbelieves the COVID-19 pandemic changed the current nature of global commerce and shipping. Despite increased import tariffs and threats\nof other possible restrictive trade policies of the Trump administration in 2025, the near-shoring phenomenon continues to point towards\nmore freight crossing over the U.S. border with Mexico and a lesser extent, Canada, as manufacturers and producers not only seek to move\noperations closer to customers, but also build in redundancies, maintain multiple suppliers and ensure multiple pathways for securing\ncomponents, raw materials and other product inputs. Additionally, trucking capacity has recently and continues to not be consistently\navailable in the Mexican domestic and cross-border markets, primarily due to driver shortages and other capacity challenges. Fr8Tech\nbelieves that these conditions create a viable market opportunity for digital brokers to facilitate and improve the connections necessary\nto enable cross-border commerce.\n\n \n\nFr8Tech\nbelieves the recent supply chain volatility and trade policy uncertainty are driving an increase in demand for large and small freight\nbrokers to secure more abundant freight capacity, in real-time on the spot market, which is readily available on Fr8Tech’s freight-matching\nPlatform, Fr8App. Fr8Tech believes that the freight market dynamics, including a shortage of drivers, creates further demand for a more\ncomprehensive approach to logistics management to meet supply chain requirements while minimizing increases in the related freight costs.\nFr8Tech believes that the ability to secure available freight capacity on the Fr8App Platform offers customers an organized, efficient\nsolution to transporting goods domestically and internationally in favorable or unfavorable market environments. The Company believes\nit is well positioned to benefit from the increased levels of trade across both the U.S.-Mexico and the U.S.-Canada borders in recent\nyears as well as the increasing needs for reliable freight service within Mexico.\n\n \n\nFr8Tech\nbelieves there continues to be growing interest in digital freight matching platforms as traditional 3PL providers adapt to the sweeping\ntechnological shifts in the industry. Fr8Tech believes supply chain management will continue to evolve into increasingly digital forms\nand interactive marketplace platforms. As it does, Fr8Tech believes digital brokers, will play an increasingly integral role in easing\ncapacity constraints, opening up new lanes, and providing a benchmarking tool for Shippers.\n\n \n\n5.E.\nCritical Accounting Estimates\n\n \n\nNot\napplicable.\n\n** **\n\n****\n\n50"}