{"url_path":"/sec/rct/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":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/2027360/0001493152-26-023944-index.html","accession_number":"0001493152-26-023944","cik":"0002027360","ticker":"RCT","issuer_name":"RedCloud Holdings plc","edgar_url":"https://www.sec.gov/Archives/edgar/data/2027360/0001493152-26-023944-index.html","primary_entity_key":"0002027360","primary_entity_name":"RedCloud Holdings plc"},"word_count":6864,"has_tables":true,"body_markdown":"**ITEM\n5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS**\n\n \n\nThe\nfollowing discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited\nfinancial statements as of December 31, 2025 and 2024 and for the years ended December 31, 2025 and 2024 and the notes to those statements\nincluded elsewhere in this annual report. Some of the information contained in this discussion and analysis or set forth elsewhere in\nthis annual report, including information with respect to our plans and strategy for our business, includes forward-looking statements\nthat involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Cautionary Note Concerning\nForward-Looking Statements” and “Risk Factors” in Section D under Item 3 of this annual report, our actual results\ncould differ materially from the results described in or implied by the forward-looking statements contained in the following discussion\nand analysis.\n\n \n\n32\n\n \n\n** **\n\n**Overview**\n\n \n\nRedCloud\noffers an the RedAI infrastructure and associated products. We connect FMCG brands, distributors and retailers using a single infrastructure,\nproviding AI-powered insights, data, and trading networks to help these stakeholders make better selling and buying decisions, while\ntrading between each other.\n\n \n\nOur\nRedAI infrastructure and products are designed to solve the estimated $2Tn inventory gap within a $14.7Tn global FMCG market, where overstock\nand understock of inventory occurs due to lack of predictive capabilities relating to supply and demand of everyday consumer goods. Full\ncommercialization of the original platform commenced in the second quarter of 2022. Today, RedAI has a large and diverse group of FMCG\nmanufacturer brands and distributors offering goods in a wide range of FMCG categories. Current markets of operation are Nigeria, South\nAfrica, Argentina, and Brazil, with recent joint venture and infrastructure licensing arrangements entered into in Saudi Arabia and Türkiye\nas part of the Company’s broader international commercialization and expansion strategy. These initial markets were selected due\nto highly fragmented B2B supply chains, favorable demographics and existing regional infrastructure opportunities. In connection with\nthese arrangements, the Company intends to deploy elements of its RedAI infrastructure and AI-enabled trade and distribution technologies\nthrough local operating and infrastructure partners. The Company believes this strategy may support a more capital-efficient expansion\nmodel while enabling localized deployment, integration and commercialization of its enterprise trade technology infrastructure.\n\n \n\nBeing\nan AI infrastructure business, we view our business model as being efficient with regards to the deployment of capital. Specifically,\nwe do not engage in direct sales or compete with our sellers in any way. We do not handle or hold inventory, have no warehouses or fulfillment\ncenters, and do not own or operate delivery vehicles. Instead, we aggregate trading data across FMCG categories for the mutual benefit\nof brands, distributors and retailers, creating efficiencies and growth of B2B trade flows, reducing waste.\n\n \n\nSince\nwe commenced operations in the second quarter of 2022, our business has grown substantially. As our infrastructure, data foundation and\ntrading networks scale, we believe an increased numbers of brands and distributors will recognize the benefits and business value in\njoining our ecosystem to grow and compete in their markets.\n\n \n\nWe\ngenerate our revenue by applying both subscription and transactional based revenue to the TTV (as defined below). The transaction-based\nrevenue we apply is different for our distributors in different jurisdictions and ranges from 1% to 5% of the TTV. For the fiscal year\nended December 31, 2025, the blended transaction-based revenue equated to 1.5% of the TTV. The transaction-based revenue is paid solely\nby distributors. The retailers on the Platform do not pay us any fees on transactions. “TTV” means the total value of goods\nsold in a transaction on our Platform.\n\n \n\n**Key\nPerformance Indicators**\n\n \n\n**Distributors\n& Brands Count**\n\n \n\nWe\nbelieve the success of RedAI is driven by the breadth, supply and quality of the products offered, which depends largely on the\nnumber of quality and trustworthy distributors we can attract. To accomplish this goal, our sales acquisition team seeks\ndistributors and brands that sell fast-moving high-demand product categories. As of December 31, 2025, we had approximately 996\nsellers (distributors, wholesalers and brands) on our RedAI infrastructure. This includes 981 active distributors, which we define\nas distributors that have made sales on our RedAI infrastructure in the previous three months, up 40% from 701 distributors we had\non December 31, 2024, and 15 brands, down 75% from 59 brands we had on December 31, 2024. We expect the number of distributors to\ncontinue to increase as we expand RedAI in our key markets. The decrease in the number of brands directly selling through our trading networks reflects our strategic focus on the distributor-to-wholesaler-and-retailer leg of the FMCG supply chain, where secondary\nsales activity has historically been invisible to brand owners. By concentrating activity at this layer, we capture the\ntrade data that brands cannot otherwise access, which we believe is the more durable source of long-term value than mediating direct\nbrand-led transactions.\n\n \n\n**Retailers\nCount**\n\n \n\nWe\nbelieve our success is also a function of the number of active retailers, which we define as retailers that have made purchases on\nRed101 in the previous three months, and the amount that they spend on products on the app. We attract new distributors by\nillustrating to them the large number of potential new retailers our Platform offers because our revenue is generated from the\ntransaction-based revenue we charge distributors. As of December 31, 2025, we had 65,512 active retailers, which we define as\nretailers that have recorded sales on Red101 in the previous three months, up by 94% from 33,786 retailers we had as of December 31,\n2024. We also expect this number to continue to increase as we expand our infrastructure in our key markets.\n\n \n\n**Stock\nKeeping Unit (“SKU”) Count**\n\n \n\nRedAI\nallows our distributors to list their products on our trading networks to encourage range sales and give our retailers maximum\nchoice. We believe a key driver of our success is our ability to provide our retailers with choices, both in the number and variety\nof distributors, and availability of a wide array of products and brands such as canned products, powdered milk, biscuits, cooking\noil, juices, pastas, and noodles. Specifically, among other brands, we sell major brands such as Diageo (alcoholic beverages), Dano\n(dairy), Yale & Pure Bliss (biscuits), Golden Penny and Grand (cooking oil) & Chivita (juices). In some cases, we have also\nintegrated with the ERPs (Enterprise Resource Planning systems) of our distributors and brands to replicate their product database\ninto our master.\n\n \n\n33\n\n \n\n \n\nAs\nof December 31, 2025, there were 210,414 SKUs available on our Platform. Of the over 210,000 SKUs that were available, 42,572 SKUs were\ntraded on the Platform in the year ended December 31, 2025, up 39% from 30,686 SKUs traded on the Platform in the year ended December\n31, 2024. These 42,572 traded SKUs were from 2,401 different brands. We believe that the number of SKUs available will continue to increase\nand expect that to correlate to an increase in the number of SKUs traded on the Platform. We also intend to be more proactive going forward\nas to flagging and managing dormant products and categories and removing them from our Platform to enhance our customer experience. Dormant\nproducts and categories have not had a material impact on our results of operations.\n\n \n\n**Total\nTransaction Value (“TTV”)**\n\n \n\nWe\ndefine TTV as the total value of goods sold in a transaction on our Platform. Our aggregate TTV increased from $2,470,223,763 in the\nyear ended December 31, 2024 to $3,238,797,613 in the year ended December 31, 2025. We believe the increase can be attributed to the\nrapid increase in the number of products offered on the Platform during 2025, the introduction of a tier-based model of marketing promotions\nand increasing trust in the Platform with repeat usage.\n\n \n\n**Average\nTransaction Value**\n\n \n\nAccompanying\nthe increased number of distributors and retailers on our Platform was a decrease in Average Transaction Value (as defined below) per\norder, from $6,182 in the year ended December 31, 2024 to $3,915 in the year ended December 31, 2025. This decrease was a direct and\nanticipated result of our deliberate strategic expansion into Nigeria’s open market retail segment—one of the most structurally\nunderserved layers of the consumer goods supply chain in Sub-Saharan Africa. Over the same period, the number of active retailers on\nthe Platform increased by 94%, reflecting a substantial shift in the composition of our retail network toward a larger base of smaller-format\nretailers whose individual purchasing capacity is structurally lower than that of wholesalers and larger retail partners. This expansion\nis consistent with our strategic focus on the distributor-to-retailer leg of the FMCG supply chain, where secondary sales activity has\nhistorically not been captured by brand owners.\n\n \n\n**Number\nof Orders**\n\n \n\nOrders\nplaced on our Platform go through a cycle of *pending* to *completed* with options for the distributor to fulfil, partially\nfulfil, or cancel an order based on factors such as inventory availability. We only apply our transaction-based revenue to orders that\nare delivered and accepted by retailers, which is when we consider the order completed. Since we are a business that solely connects\nB2B retailers and distributors, we do not play any role in the delivery and acceptance process. In the scenario that there is a return\non an order, it is managed between the distributor and the retailer directly, with RedCloud processing any invoice adjustment as required.\nThe fulfilment rate (order placed, shipped, invoice, completed) on orders on the Platform was 99% in 2025.\n\n \n\nOrders\non our Platform increased significantly in the year ended December 31, 2025. Specifically, the number of orders completed was 827,323\nin the year ended December 31, 2025, up over 107% compared to 399,710 in the year ended December 31, 2024.\n\n \n\n34\n\n \n\n** **\n\n**Results\nof Operations**\n\n \n\n*Comparison\nof the year ended December 31, 2025 versus December 31, 2024*\n\n \n\nComparison\nof the year ended December 31, 2025 to the year ended December 31, 2024 in dollar terms and as a percentage of total revenue for each\nperiod.\n\n \n\n(U.S.\ndollars) \n**12/31/2025**  \n12/31/2024  \n**12/31/2025\nvs 12/31/2024** \n\nRevenue \n$48,539,353  \n 100.0% \n$46,499,285  \n 100.0% \n$2,040,068.0  \n 100.0%\n\n  \n    \n    \n    \n    \n    \n   \n\nOperating\nexpenses: \n    \n    \n    \n    \n    \n   \n\nGeneral\nand administrative \n 10,474,040  \n 21.6% \n 3,922,348  \n 8.4% \n 6,551,692.0  \n 321.2%\n\nSalaries,\nbenefits, contractor costs \n 21,761,699  \n 44.8% \n 19,256,255  \n 41.4% \n 2,505,444.0  \n 122.8%\n\nMarketing\nand commissions \n 49,124,526  \n 101.2% \n 52,918,949  \n 113.8% \n (3,794,423.0) \n (186.0)%\n\nTravel \n 988,075  \n 2.0% \n 1,930,599  \n 4.2% \n (942,524.0) \n (46.2)%\n\nProfessional\nfees \n 2,691,821  \n 5.5% \n 2,112,047  \n 4.5% \n 579,774.0  \n 28.4%\n\nProduct\nand technology development \n 4,386,105  \n 9.0% \n 3,126,087  \n 6.7% \n 1,260,018.0  \n 61.8%\n\nDepreciation\nand amortization \n 2,717,640  \n 5.6% \n 1,881,323  \n 4.0% \n 836,317.0  \n 41.0%\n\nTotal\noperating expenses \n 92,143,906  \n 187.6% \n 85,147,608  \n 183.1% \n 6,996,298  \n 342.9%\n\nNet\nloss from operations \n (43,604,553) \n (88.8)% \n (38,648,323) \n (83.1)% \n (4,956,230) \n (242.9)%\n\n  \n    \n    \n    \n    \n    \n   \n\nOther\n(expense) income: \n    \n    \n    \n    \n    \n   \n\nInterest\nexpense \n 2,189,963  \n 4.5% \n 3,120,054  \n 6.7% \n (930,091.0) \n (45.6)%\n\nLoss\nfrom change in fair-value of convertible shareholder loans \n -  \n -  \n 5,951,087  \n 12.8% \n (5,951,087.0) \n (291.7)\n\nLoss\non Debt Extinguishment \n -  \n -% \n 4,377,051  \n 9.4% \n (4,377,051.0) \n (214.6)%\n\nStock\nbased Compensation \n -  \n -  \n -  \n -  \n -  \n - \n\nForeign\ncurrency (loss) gain \n 1,607,877  \n 3.3% \n 470,219  \n 1.0% \n 1,137,658.0  \n 55.8%\n\nOther\nIncome \n (1,165,544) \n (2.4)% \n -  \n -% \n (1,165,544.0) \n (57.1)%\n\nNet\nloss before income taxes \n (46,236,849) \n (94.1)% \n (52,566,734) \n (113.0)% \n 6,329,885.0  \n 310.3%\n\n  \n    \n    \n    \n    \n    \n   \n\nIncome\ntax benefit \n -  \n -% \n (1,851,038) \n (4.0)% \n 1,851,038.0  \n 90.7%\n\nNet\nloss \n (46,236,849) \n (94.1)% \n (50,715,696) \n (109.1)% \n 4,478,847  \n 219.5%\n\n \n\n**Revenue**\n\n \n\nRevenue\nfor the year ended December 31, 2025 was $48,539,353, an increase of $2,040,067, or approximately 4.4%, from $46,499,286 for the year\nended December 31, 2024. For the year ended December 31, 2025, revenue in Nigeria increased approximately $15.6 million, or 68%, to $38.5\nmillion, compared to $22.9 million for the year ended December 31, 2024, primarily driven by increased acquisition of distributors &\nretailers, higher order volumes from existing customers, and deeper engagement with distributors on RedAI. Revenue in South Africa\nincreased approximately $5.6 million, or 136%, from $4.1 million for the year ended December 31, 2024 to $9.7 million for the year ended\nDecember 31, 2025, driven primarily by deeper engagement with established distributors and retailers in a more formalized retail environment\nthan our Nigerian market. Revenue from Argentina decreased approximately $18.7 million, or 99%, from $18.8 million for the year ended\nDecember 31, 2024 to $0.1 million for the year ended December 31, 2025, reflecting our strategic decision to reallocate capital to higher\nreturn opportunities, including our joint venture and licensing model, while the operations remain active in the market. The Company’s\noperational prioritization during the period also reflected increasing focus on international expansion initiatives associated with joint\nventure and infrastructure licensing opportunities, including recently initiated arrangements in Saudi Arabia and Türkiye as part\nof the Company’s evolving RedAI commercialization strategy.\n\n \n\nNigeria\nremained our largest revenue-generating market in 2025, followed by South Africa. Brazil and Peru contributed immaterial revenue during\nthe year, while the Company continued to wind down operations in Peru.\n\n \n\nRevenue\nfor the year ended December 31, 2025 was generated from an aggregate TTV of approximately $3.24 billion, compared to $2.47 billion for\nthe year ended December 31, 2024. with an average transaction-based revenue of approximately 1.5% in the year ended December 31, 2025\n(versus an average transaction-based revenue of approximately 1.9% in for the year ended December 31, 2024). The change in aggregate\nTTV and transaction-based revenue relates to the upward trend in our aggregate TTV and transaction-based revenue seen in 2025 and will\ncontinue in 2024 due to our anticipated consistent sales in our key markets. The average transaction-based revenue for the year ended\nDecember 31, 2025 in our four main markets were: Nigeria 1.5%, South Africa 1.5%, Argentina 2.8% and Brazil 1.6%. We also believe that\nas we add retailers, we will be able to charge a higher transaction-based revenue because we will be able to show them that they have\nmore opportunities to sell.\n\n \n\n35\n\n \n\n** **\n\n**Operating\nExpenses**\n\n \n\nOperating\nexpenses for the year ended December 31, 2025 were $92,143,906, representing an increase of $6,996,298, or approximately\n8.2%, from $85,147,608 for the year ended December 31, 2024. The increase primarily reflects continued investment in personnel,\ntechnology and public company infrastructure to support the Company’s growth, partially offset by reduced marketing and travel\nexpenditures, but not limited to the following:\n\n \n\n \n●\nGeneral\nand administrative expenses increased $6,551,692, or approximately 167.1%, to $10,474,040 in the year ended December 31, 2025, compared\nto $3,922,348 in the year ended December 31, 2024. The increase was primarily driven by higher corporate, compliance, banking, insurance\nand administrative costs associated with operating as a public company.\n\n \n \n \n\n \n●\nSalaries,\nbenefits and contractor costs increased $2,505,444, or approximately 13.0%, to $21,761,699 in the year ended December 31, 2025,\ncompared to $19,256,255 in the year ended December 31, 2024, reflecting increased headcount and contractor usage across\ninfrastructure operations, technology and commercial functions. During the year, we undertook a targeted restructuring to reduce\nheadcount costs in areas not directly impacting current or future revenue generation, while prioritizing investment in skills and\npersonnel expected to enhance productivity in the near term and support development in emerging technical areas. Despite these\nskills being in high demand and associated with higher cost, this approach resulted in only a marginal overall increase in\nheadcount-related costs.\n\n \n \n \n\n \n●\nMarketing\nand commissions expenses for the year ended December 31, 2025 were $49,124,526, a $3,794,423 or 7.2% decrease from $52,918,949 for\nthe year ended December 31, 2024. The decrease was primarily due to lower spend on point-of-check-out vouchers, funded discounts\nand rebates as we focused on improving marketing efficiency and optimizing promotional spend. As in prior periods, voucher-based\nincentives continued to represent the majority of this expense, with the remainder relating to digital marketing campaigns, including\nGoogle and Facebook, and promotional materials. Our voucher-based marketing strategy continues to be designed to drive repeat purchasing\nbehavior and increase customer lifetime value. Vouchers are generally targeted at existing retailers based on purchasing patterns\nand are typically applied to subsequent orders rather than initial transactions, reinforcing engagement and encouraging\nhigher transaction volumes. As a result, marketing and commissions expenses are closely linked to revenue generation and tend to\nvary with transaction activity on our infrastructure. We expect that these expenses may increase in absolute terms as revenue grows and\nas we continue to invest in customer acquisition, retention and market expansion, particularly in newer markets. However, we are\nfocused on improving the effectiveness of these expenditures and expect marketing and commissions to decline as a percentage of revenue\nover time. Given our current gross margin profile, managing the level and efficiency of marketing and commissions spend is a key\npriority. We are actively refining our promotional approach, including reducing reliance on heavily subsidized incentives and focusing\non more targeted, data-driven campaigns. While such expenditures remain necessary in the near term to support growth and infrastructure\nscale, our objective is to improve gross margins over time through a combination of better marketing efficiency, increased scale\nand higher contribution from more profitable revenue streams.\n\n \n \n \n\n \n●\nTravel\nexpenses decreased to $988,075 in 2025 from $1,930,599 in 2024, a decrease of $942,524, or approximately 48.8%, due primarily to\nreduced international and executive travel following the completion of the IPO.\n\n \n \n \n\n \n●\nProfessional\nfees increased to $2,691,821 in 2025 from $2,112,047 in 2024, an increase of $579,774, or approximately 27.4%, driven by higher audit,\nlegal and regulatory costs associated with public company requirements.\n\n \n \n \n\n \n●\nProduct\nand technology development expenses increased to $4,386,105 in 2025 from $3,126,087 in 2024, an increase of $1,260,018, or\napproximately 40.3%. The increase was primarily driven by higher personnel-related costs, including the expansion of our engineering\nand product teams, as well as increased investment in infrastructure development activities. These included enhancements to core functionality, development of new products and features, and scaling of our technology infrastructure to support increased\ntransaction volumes and geographic expansion. Additional costs were incurred in relation to cloud hosting, data infrastructure and\nsoftware tools required to support the growth and reliability of our products.\n\n \n \n \n\n \n●\nDepreciation\nand amortization expense increased to $2,717,640 for the year ended December 31, 2025, compared to $1,881,323 for the year ended\nDecember 31, 2024, representing an increase of $836,317, or approximately 44.5%. The increase was driven primarily by higher amortization\nof capitalized software development costs and increased depreciation of technology and office equipment resulting from prior-year\ninvestments.\n\n \n \n \n\n \n●\nAs\na result, net loss from operations was $43,604,554 for the year ended December 31, 2025, compared to $38,648,323 for\nthe year ended December 31, 2024.\n\n \n \n \n\n \n●\nInterest\nexpense decreased to $2,189,963 in the year ended December 31, 2025 from $3,120,054 in the year ended December 31, 2024 due to lower\noutstanding debt balances following the conversion of shareholder and convertible loans into equity in connection with the IPO.\n\n \n \n \n\n \n●\nForeign\ncurrency loss was $1,607,877 in the year ended December 31, 2025 compared to $470,219 in the year ended December 31, 2024, reflecting\ncurrency volatility and the remeasurement of intercompany monetary balances.\n\n \n \n \n\n \n●\nOther\nincome was $1,165,544 for the year ended December 31, 2025, relating primarily to qualifying UK R&D incentives for the year ended\nDecember 31, 2025.\n\n \n \n \n\n \n●\nThere\nwere no gains or losses from changes in fair value of convertible shareholder loans and no gains or losses on debt extinguishment\nrecognized in 2025. \n\n \n\n36\n\n \n\n** **\n\n**Liquidity\nand Capital Resources**\n\n \n\nAs\nof December 31, 2025, and as of the date of this annual report, our liquidity position remains severely constrained, reflecting our history\nof operating losses, negative cash flows and limited available cash resources. These conditions raise substantial doubt about our ability\nto continue as a going concern for at least twelve months from the date of issuance of these financial statements. Our ability to continue\noperations is dependent on our ability to improve operating performance, including achieving revenue growth and improved gross margins,\nand obtaining sufficient additional financing to satisfy our liquidity needs and contractual obligations.\n\n \n\nSubsequent\nto December 31, 2025, we have raised approximately $7.5 million in gross proceeds through a combination of financing activities.\n\n \n\nThese\nincluded:\n\n \n\n \n●\napproximately\n$4.0 million from the issuance of senior convertible notes in February 2026;\n\n \n●\napproximately\n$1.4 million from drawdowns under our Equity Line of Credit (“ELOC”) during April and May 2026;\n\n \n●\napproximately\n$0.9 million from the exercise of previously issued warrants; and\n\n \n●\napproximately\n$1.3 million shareholder loans.\n\n \n\nNotwithstanding\nthe financing activities completed to date, our historical cash usage significantly exceeds our current liquidity resources. Based on\nour operating cash outflows of $34.9 million during the year ended December 31, 2025 and our current cost structure, the capital raised\nsubsequent to year end is not sufficient to fund operations for the full 2026 financial year. Based on our current operating plan, we expect to require substantial additional capital during 2026\nto fund ongoing operations, satisfy working capital requirements and meet our contractual obligations. The amount and timing of additional\ncapital required will depend on several factors, including the pace of revenue growth, improvements in gross margin, the level of discretionary\nexpenditures, particularly marketing and commission expenses, and our ability to reduce overall cash burn. We believe that our existing cash resources will be sufficient to fund our planned operations until June 2026. However,\nto date, our insiders have provided us with loans whenever we have required additional funds, and we expect that they will continue to\ndo so in the future if additional financing is needed to support our operations. In addition, we plan to seek additional capital through\nthe public markets and other financing sources as necessary to support our growth and operations, although there can be no assurance that\nsuch financing will be available on acceptable terms, or at all.\n\n \n\nManagement\nis actively implementing measures intended to improve liquidity and reduce operating expenses, including improving marketing\nefficiency and reducing reliance on subsidized incentives, optimizing working capital management and payment cycles, aligning the\ncost base with near-term revenue expectations, and focusing on higher-margin revenue streams and technology-driven efficiency.\nManagement is also pursuing additional financing opportunities, including equity financings, debt arrangements and shareholder\nsupport initiatives. However, there can be no assurance that these efforts will be successful or that additional funding will be\navailable on commercially reasonable terms, or at all.\n\n \n\nIf\nwe are unable to obtain sufficient additional financing in the near term or achieve meaningful improvements in our operating performance,\nwe may be forced to significantly curtail operations, substantially reduce our workforce and operating expenditures, dispose of assets,\npursue restructuring or insolvency-related proceedings, or otherwise seek protection under applicable bankruptcy or similar laws. Any\nsuch actions could materially and adversely affect our business, financial condition, results of operations and the value of our securities,\nand there is a substantial risk that holders of our securities could lose all or a significant portion of their investment.\n\n** **\n\n**Contractual\nObligations**\n\n \n\nAs\nof May 15, 2026, our contractual obligations for 2026 include approximately $3.58 million of principal and interest payments under our\nsenior convertible notes, approximately $3.78 million of repayment obligations under the Lienhardt & Partner Privatbank Zürich\nAG (“Lienhardt”) facility if demanded, approximately $10.0 million of shareholder loans (including accrued interest), which\nhave defined repayment terms, approximately $11.0 million of trade payables, and approximately $10.0 million of ongoing operating expenses\nnecessary to support our personnel and infrastructure. We intend to satisfy these obligations through a combination of existing\ncash balances, additional drawdowns under the ELOC, potential equity financings (including follow-on offerings and private placements),\nadditional debt financing arrangements, cash generated from operations to the extent achieved, and shareholder support arrangements.\nAs of March 31, 2026, we had approximately $3.8 million outstanding under the Lienhardt loan and overdraft facility, which represents\na short-term financing arrangement that may be callable or repayable in accordance with its contractual terms. In connection with this\nfacility, certain shareholders, Christina Byland and Dr. Nikolaus Senn, provided a written commitment that, if amounts up to $3.8 million\nbecome repayable prior to March 31, 2027, they will make available to the Company a term loan facility in an equivalent aggregate amount\nto enable the Company to satisfy such repayment obligations. This support commitment remains available through March 31, 2027.\n\n \n\nIn\naddition, on February 26, 2026, the Company entered into securities purchase agreements with certain institutional investors pursuant\nto which the Company issued senior convertible notes in an aggregate original principal amount of approximately $4.35 million, resulting\nin gross proceeds of approximately $4.0 million before fees and expenses. The notes were issued with an 8.0% original issue discount,\naccrue interest at 7.0% per annum, and mature on March 1, 2027, unless earlier converted, redeemed or extended in accordance with their\nterms. Beginning two months following the closing date, the Company is required to make monthly installment payments equal to the lesser\nof 10% of the original principal amount or the then-outstanding principal balance, together with accrued interest, late charges, if any,\nand any applicable make-whole amounts.\n\n** **\n\n37\n\n \n\n** **\n\n**Impairment\nExpense**\n\n \n\nIn\noccurrence with ASC 360-10-35, the capitalized costs will be evaluated for impairment. Specifically, as significant enhancements and\nupgrades are built out, management will ensure any prior capitalizable work is not impaired and needs to be written off. So far, management\nhas concluded no impairment exists based on the criteria in the above guidance.\n\n \n\n**Intangible\nAssets**\n\n \n\nIntangible\nassets consist primarily of capitalized software development costs related to the RED101 Platform. Intangible assets with a definite\nuseful life are amortized on a straight-line basis over their estimated useful life of five years, which management believes represents\nthe period over which the related economic benefits are expected to be realized.\n\n \n\nResearch\nexpenditures are expensed as incurred and recorded within product and technology development expenses. Development costs are capitalized\nonly when technical feasibility, commercial viability and financial feasibility have been established and the Company expects to derive\nfuture economic benefits from the asset.\n\n \n\nFor\nthe year ended December 31, 2025, amortization expense related to capitalized software development costs was $2,422,054, compared to\n$1,717,575 for the year ended December 31, 2024. The increase reflects continued capitalization of infrastructure and product\ndevelopment costs over prior periods, resulting in a higher average balance of intangible assets subject to amortization.\n\n** **\n\n**Income\nTaxes**\n\n \n\nThe\nCompany recognizes, if any, uncertainty in income taxes by applying the accounting prescribed by U.S. GAAP, for which a more likely than\nnot recognition threshold and measurement attribute for the financial statement recognition and measurement of an income tax position\ntaken or expected to be taken in a tax return should be considered. It also provides guidance on derecognition, classification of a liability\nfor unrecognized tax benefits, accounting for interest and penalties, accounting in interim periods and expanded income tax disclosures.\nThe Company classifies interest and penalties, if any, separately, in the statement of income.\n\n \n\nThe\nCompany operates in multiple tax jurisdictions and is subject to differing tax laws, regulations, and interpretations. Management evaluates\nits tax positions on an ongoing basis and, as of the reporting date, has concluded that there are no material uncertain tax positions\nrequiring recognition in the consolidated financial statements. This assessment is based on the technical merits of the positions taken\nand consideration of applicable tax laws and regulations. However, the Company’s tax positions may be subject to challenge by relevant\ntax authorities, and the outcome of such matters cannot be predicted with certainty.\n\n \n\nManagement\nhas evaluated its tax positions, including those subject to ongoing audit, and has concluded that no material uncertain tax positions\nrequire recognition in our financial statements. We believe that the income tax positions would be sustained on audit and do not anticipate\nany adjustments that would result in a material change to the financial position.\n\n \n\nThe\nCompany has incurred taxable losses since inception in multiple jurisdictions. Based on the weight of available evidence, including a\nhistory of cumulative losses and the expectation of continued losses in certain jurisdictions, the Company has recorded a full valuation\nallowance against its deferred tax assets as of the reporting date. Accordingly, no net deferred tax assets have been recognized in the\nconsolidated financial statements.\n\n \n\nThe\nCompany is subject to tax audits and examinations by tax authorities in the jurisdictions in which it operates. During the year ended\n2025, a tax audit was initiated by the Federal Inland Revenue Service in Nigeria covering the 2023–2024 financial years. The audit\nis ongoing as of the reporting date. While the Company believes that its tax positions are supportable, the ultimate outcome of such\nexaminations cannot be predicted with certainty and may result in adjustments to previously reported tax positions.\n\n \n\n**Share-Based\nCompensation**\n\n \n\nWe\naccount for share-based compensation to employees, directors and non-employees in accordance with FASB ASC Topic 718, Compensation—Stock\nCompensation, which requires compensation cost to be recognized in the consolidated financial statements based on the grant-date fair\nvalue of equity awards. Compensation expense is recognized on a straight-line basis over the applicable vesting period and is adjusted\nfor actual forfeitures as they occur.\n\n \n\nThe\nCompany primarily grants share options and other equity-based awards under its equity incentive plans. For share option awards, the Black-Scholes-Merton\noption pricing model is used to estimate the grant-date fair value of the awards. The Black-Scholes-Merton model incorporates assumptions\nthat require significant judgment, including the expected term of the award, expected share price volatility, risk-free interest rate\nand expected forfeiture rates.\n\n \n\n38\n\n \n\n \n\nThe\nexpected term of share options is estimated based on the simplified method permitted under ASC 718-10-55-76, which reflects the\nweighted-average period between vesting and contractual expiration, and is generally estimated to be approximately 10 years.\n\n \n\nFor\nawards granted prior to the Company’s initial public offering, including share options granted in December 2021, fair value\nestimates were determined with the assistance of external valuation specialists using the Black-Scholes-Merton model and, where appropriate,\nadjusted for lack of marketability due to the absence of a public market for the Company’s ordinary shares at the time of grant.\n\n \n\nThe\nexpected volatility assumption is determined based on historical volatility data observed over a period consistent with the expected\nterm of the award, using share price data from a peer group of publicly traded companies with operating and risk profiles similar to\nthe Company. The risk-free interest rate is based on yields for zero-coupon government securities with maturities commensurate with the\nexpected term of the awards, primarily using UK or U.S. government benchmark rates, depending on the currency and legal structure of\nthe award.\n\n \n\nDuring\nthe year ended December 31, 2025, share-based compensation expense increased significantly compared to the prior year, reflecting\nequity awards granted in connection with the Company’s initial public offering, long-term incentive arrangements for management,\nand employee retention and incentive programs implemented following the IPO. Share-based compensation expense includes only non-cash\ncharges and has no impact on the Company’s liquidity.\n\n \n\nThe\nfollowing table summarizes our statement of cash flows for the twelve months ended December 31, 2025 and 2024.\n\n \n\n(U.S. dollars in thousands except share and per share data) \nFor the Twelve Months Ended \n\n  \nDecember 31, \n\n  \n2025  \n2024 \n\nNet cash used in operating activities \n (36,983) \n (34,679)\n\nNet cash used in investing activities \n (3,265) \n (3,892)\n\nNet cash provided by financing activities \n 39,878  \n 35,050 \n\nEffect of exchange rate changes on cash and cash equivalents \n 17  \n 3,767 \n\nIncrease (decrease) in cash and cash equivalents \n$(353) \n$246 \n\n \n\n**Net\nCash Used in Operating Activities**\n\n \n\nNet\ncash used in operating activities for the year ended December 31, 2025 was approximately $36,983,000 compared to\n$34,679,000 for the year ended December 31, 2024, representing an increase in cash outflows of $2,304,000, or\napproximately 6.6%. While the net loss improved year-over-year, cash outflows remained elevated due to the underlying cost structure\nrequired to support infrastructure and product growth.\n\n \n\nWorking\ncapital movements in 2025 were a net source of cash. This was primarily driven by a significant reduction in accounts receivable, reflecting\nimproved collections and lower period-end balances, as well as a decrease in prepayments as prior period upfront costs were utilized.\nIn addition, a reduction in income taxes receivable contributed to cash inflows during the year. These inflows were partially offset\nby decreases in accounts payable, vouchers payable and accrued expenses, reflecting the settlement of outstanding supplier obligations\nand operating expenses.\n\n \n\nLooking\nahead to 2026, we expect cash flows from operating activities to remain negative in the near term as we continue to invest in\nrevenue growth, technology development and market expansion. However, we are focused on improving operating cash flow through a\ncombination of initiatives, including tighter management of receivables and payables, reducing discretionary spend, particularly in\nmarketing and commissions, and improving gross margins as the business scales. The timing and extent of improvement in operating\ncash flows will depend on our ability to accelerate revenue growth, improve unit economics and manage working capital\nefficiently.\n\n** **\n\n**Net\nCash Used in Investing Activities**\n\n \n\nNet\ncash used in investing activities for the year ended December 31, 2025 was approximately $3,265,000 compared to $3,892,000\nfor the year ended December 31, 2024, representing a decrease in cash outflows of $627,000, or approximately 16.1%.\n\n \n\nThe\ndecrease in investing cash outflows was primarily attributable to lower capitalized software development expenditures and reduced\npurchases of property and equipment in 2025, reflecting a moderation in capital investment following significant product development\nand infrastructure build-out in prior periods.\n\n \n\n**Net\nCash Provided by Financing Activities**\n\n \n\nNet\ncash provided by financing activities for the year ended December 31, 2025 was approximately $39,878,000 compared to $35,050,000\nfor the year ended December 31, 2024, representing an increase of approximately $4,828,000 or 13.8%.\n\n \n\n39\n\n \n\n \n\nFinancing\ncash inflows in 2025 were primarily driven by proceeds from the issuance of ordinary shares in connection with the Company’s initial\npublic offering, partially offset by conversion of shareholder loans and short-term borrowings. In contrast, financing activities in\n2024 were driven primarily by shareholder loan financing rather than equity issuance.\n\n** **\n\n**Effect\nof Exchange Rate Changes on Cash and Cash Equivalents**\n\n \n\nThe\neffect of exchange-rate changes on cash and cash equivalents was a positive approximately $17,000 for the year ended December 31, 2025,\ncompared to a positive approximately $3,767,000 for the year ended December 31, 2024. The significantly lower impact in 2025\nreflects currency volatility and the remeasurement of cash balances held in foreign currencies against the U.S. dollar.\n\n** **\n\n**Change\nin Cash and Cash Equivalents**\n\n \n\nAs\na result of the foregoing, cash and cash equivalents decreased by approximately $353,000 during the year ended December 31, 2025,\ncompared to an increase of approximately $246,000 during the year ended December 31, 2024.\n\n** **\n\n**Macroeconomic\nCondition and Political Environment**\n\n \n\nOur\ncurrent countries of operation are located in Africa and South America. Our results of operations and financial condition are significantly\ninfluenced by political and economic developments in these countries and the effect that these factors may have on demand for goods and\nservices.\n\n \n\nIn\nthe medium to long-term, we believe that there will be a number of positive macroeconomic developments in the regions such as an expanding\ndemand for FMCG products and increasing disposable income.\n\n \n\nIn\nresponse to the recent and potential additional changes to U.S. tariff and import/export regulations, we have accelerated our development\nand technology investments to protect our revenue from the effects of tariffs on B2B supply chains.\n\n \n\nTariffs\nincrease the cost of imported raw materials and intermediate goods. Large FMCG manufacturers often react by restructuring their supply\nchains—opting for cheaper alternatives, automating production, or cutting non-essential procurement. Distributors will also forward\norder higher stock levels. In addition, tariffs add cost pressures throughout the FMCG ecosystem. Margin compression from raw material\ncosts increases, as well as delayed payments between suppliers, has forced us to accelerate third party services providers onto the Platform\nto enable faster trading.\n\n \n\nTariffs\nhave also imposed market access challenges. In some cases, tariffs lead larger FMCG companies to scale back operations in certain geographies\nor reduce the scope of their product lines. When this happens, local producers who rely on these companies for distribution or visibility\nlose access to markets they cannot reach on their own.\n\n \n\n**Critical\nAccounting Estimates**\n\n \n\nAn\naccounting estimate is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are\nuncertain and requires significant judgment at the time such estimate is made, and if different accounting estimates that reasonably\ncould have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact\nthe consolidated and combined financial statements.\n\n \n\nWe\nprepare our financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions. We continually\nevaluate these estimates and assumptions based on the most recently available information, our own historical experiences and various\nother assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the\nfinancial reporting process, actual results could differ from our expectations as a result of changes in our estimates. Our critical\naccounting estimates are:\n\n \n\n*Allowance\nfor credit losses*\n\n \n\nAccounts\nreceivables are recognized initially at fair value and subsequently measured at amortized cost, less any provisions. Provisions are estimated\nusing the allowance for current expected credit losses (“CECL”) where any expected future credit losses are provided for,\nirrespective of whether a loss event has occurred at the reporting date. Estimates of expected credit losses consider the Company’s\ncollection history by country and customer, deterioration of collection rates during the average credit period, as well as observable\nchanges in and forecasts of future economic conditions that affect default risk. The Company utilizes a provision matrix by country to\nestimate lifetime CECL’s for accounts receivables, supplemented by specific allowance based on customer-specific data**.**\n\n* *\n\n40\n\n \n\n* *\n\n*Useful\nlife of Intangible assets*\n\n \n\nIntangible\nassets consist of software development costs, which are valued at historical cost. Intangible assets with definite useful life are amortized\nover the period of estimated benefit to be generated by those assets and using the straight-line method; their estimated useful life\nis five years.\n\n \n\n*Impairment\nof long-lived assets*\n\n \n\nThe\nCompany reviews long-lived assets for impairments whenever events or changes in circumstances indicate that the carrying value of an\nasset may not be recoverable. The impairment evaluation is performed at the lowest level of identifiable cash flows independent of other\nassets. The recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to the undiscounted\nfuture net cash flows expected to be generated by the asset. If such asset is considered to be impaired on this basis, the impairment\nloss to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of such asset.\n\n \n\n*Share-based\npayments*\n\n \n\nShare-based\ncompensation to employees, contractors and the Company’s Board are measured at the fair value of the instruments issued and amortized\nover the vesting periods. Share based compensation to non-employees is measured at the fair value of goods or services received or the\nfair value of the equity instruments issued if it is determined the fair value of the goods or services cannot be reliably measured and\nare recorded at the date the goods or services are received. The Company operates an employee stock option plan. The corresponding amount\nis recorded to the additional paid-in capital caption within shareholders’ deficit, and the expense to the consolidated statements\nof operations and consolidated statements of comprehensive loss caption General and Administrative over the vesting period. The fair\nvalue of options is determined using the Black–Scholes pricing model which incorporates all market vesting conditions.\n\n \n\n*Convertible\nShareholder Loans at Fair Value*\n\n \n\nThe\nCompany elected to record the following convertible shareholder loans at fair value from their respective inception dates for the life\nof the loans. The loans are convertible into the most senior class of shares in issue due to an exit event, such as a Company initial\npublic offering or sale of the Company, at a 35% discount to the exit event share price. The fair value of these convertible shareholder\nloans are classified as Level 2 in the fair value hierarchy. The primary input to the valuation model includes observable market interest\nrates from companies with similar estimated credit ratings, and observable interest rates on the Company’s borrowings. The valuation\nassumptions include a discount rate of 10% and conversion date of August 31, 2024.\n\n \n\n*Internal\nControls and Procedures*\n\n \n\nWe\nare not currently required to comply with the SEC’s rules implementing Section 404 of Sarbanes Oxley, and are therefore not required\nto make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public\ncompany, we will be required to comply with the SEC’s rules Sections 302 and 404 of the Sarbanes-Oxley Act, which will require\nmanagement to certify financial and other information in certain of our reports and provide an annual management report on the effectiveness\nof controls over financial reporting. We will not be required to make our first annual assessment of our internal control over financial\nreporting pursuant to Section 404 until the year following our first annual report required to be filed with the SEC.\n\n \n\nFurther,\nour independent registered public accounting firm is not yet required to formally attest to the effectiveness of our internal controls\nover financial reporting, and will not be required to do so for as long as we are an “emerging growth company” pursuant to\nthe provisions of the JOBS Act. See “Status as an Emerging Growth Company.”\n\n \n\n*Off\nBalance Sheet Arrangements*\n\n \n\nWe\nhave no obligations, assets or liabilities which would be considered off-balance sheet arrangements. As such, we are not materially exposed\nto any financing, liquidity, market or credit risk that could arise if we had engaged in such financing arrangements."}