Titan Environmental Solutions Inc 10-Q for FY2025 Q1
Titan Environmental Solutions Inc. (TESI)
About this 10-Q
Titan Environmental Solutions Inc filed this 10-Q on May 20, 2025, covering the quarter ended March 31, 2025 (FY2025 Q1).
Headline figures
Quarter ended March 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.75M
- up 47.4% from $1.19M a year earlier
- Net loss
- $5.34M
- compared with a net loss of $2.26M a year earlier
- Diluted EPS
- -$0.02
- compared with -$0.01 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
| TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________ to _____________
Commission
File Number:
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
| (Address of Principal Executive Office) | (Zip Code) |
(Registrant’s Telephone Number, Including Area Code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Exchange Act:
(Title of class)
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. ☒
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non- accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, “non-accelerated filer”, “smaller reporting company” and “emerging growth” in Rule 12b-2 of the Exchange Act.
| Large Accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes
The number of shares of the Registrant’s common stock, $ par value per share, outstanding as of May 20, 2025, was .
| Documents incorporated by reference: | None |
TITAN ENVIRONMENTAL SOLUTIONS INC.
TABLE OF CONTENTS
| Page | ||
| PART I – Financial Information | ||
| Item 1. | Financial Statements | 5 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 39 |
| Item 3 | Quantitative and Qualitative Disclosures about Market Risk | 49 |
| Item 4 | Controls and Procedures | 49 |
| PART I – Financial Information | ||
| Item 1. | Legal Procedures | 50 |
| Item 1A. | Risk Factors | 50 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 50 |
| Item 3. | Defaults Upon Senior Securities | 50 |
| Item 4. | Mine Safety Disclosures | 50 |
| Item 5. | Other Information | 50 |
| Item 6. | Exhibits | 51 |
| SIGNATURES | 52 | |
As used in this Quarterly Report on Form 10-Q, the terms “we”, “us”, “our” and the “Company” mean Titan Environmental Solutions Inc. and its wholly owned subsidiaries, taken as a whole (unless the context indicates a different meaning).
| 2 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Except for any historical information contained herein, the matters discussed in this quarterly report on Form 10-Q contain certain “forward-looking statements” within the meaning of the federal securities laws. This includes statements regarding our future financial position, economic performance, results of operations, business strategy, budgets, projected costs, plans and objectives of management for future operations, and the information referred to under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
These forward-looking statements generally can be identified by the use of forward-looking terminology, such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “continue” or similar terminology, although not all forward-looking statements contain these words. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, you are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Although we believe that the expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may prove to have been materially different from the results expressed or implied by such forward-looking statements. Important factors that may cause actual results to differ from projections include, for example:
| ● | our prospects, including our future business, revenues, expenses, net income, earnings per share, gross margins, profitability, cash flows, cash position, liquidity, financial condition and results of operations, our targeted growth rate, our goals for future revenues and earnings, and our expectations about realizing the revenues in our backlog and in our sales pipeline; | |
| ● | our ability to successfully pursue strategic acquisitions and integrate acquired businesses; | |
| ● | our ability to hire additional personnel and to manage the growth of our business; | |
| ● | our ability to continue as a going concern; | |
| ● | environmental and other regulations, including developments related to emerging contaminants, gas emissions, renewable energy and environmental, social and governance (“ESG”) performance and disclosure; | |
| ● | significant environmental, safety or other incidents resulting in liabilities or brand damage; | |
| ● | failure to obtain and maintain necessary permits due to land scarcity, public opposition or otherwise; | |
| ● | diminishing landfill capacity, resulting in increased costs and the need for disposal alternatives; | |
| ● | failure to attract, hire and retain key team members and a high quality workforce; | |
| ● | increases in labor costs due to union organizing activities or changes in wage and labor related regulations; | |
| ● | disruption and costs resulting from extreme weather and destructive climate events; | |
| ● | public health risk, increased costs and disruption due to a future resurgence of pandemic conditions and restrictions; | |
| ● | macroeconomic conditions, geopolitical conflict and market disruption resulting in labor, supply chain and transportation constraints, inflationary cost pressures and fluctuations in commodity prices, fuel and other energy costs; | |
| ● | increased competition; | |
| ● | pricing actions; |
| 3 |
| ● | competitive disposal alternatives, diversion of waste from landfills and declining waste volumes; | |
| ● | weakness in general economic conditions and capital markets, including potential for an economic recession; instability of financial institutions; | |
| ● | adoption of new tax legislation; | |
| ● | shortages of fuel and/or other energy resources; | |
| ● | the risks associated with the legislative, judicial, accounting, regulatory, political and economic risks and conditions; | |
| ● | claims, demands and lawsuits to which we are, and may in the future, be subject and the risk that our insurance or indemnities coverage may not be sufficient; | |
| ● | our ability to operate, update or implement our IT systems; | |
| ● | our ability to implement additional finance and accounting systems, procedures and controls in order to satisfy public company reporting requirements; | |
| ● | our ability to obtain additional financing when and as needed; | |
| ● | the potential liquidity and trading of our securities; and | |
| ● | the future trading prices of our common stock and the impact of securities analysts’ reports on these prices. |
Unless otherwise required by law, we also disclaim any obligation to update our view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made in this quarterly report on Form 10-Q.
When considering these forward-looking statements, you should keep in mind the cautionary statements in this quarterly report on Form 10-Q and in our other filings with the Securities and Exchange Commission (the “SEC”). We cannot assure you that the forward-looking statements in this quarterly report on Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may prove to be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time-frame, or at all.
| 4 |
Item 1. Financial Statements
| 5 |
TITAN ENVIRONMENTAL SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2025 (UNAUDITED) AND DECMBER 31, 2024
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net of allowance for expected credit losses of $ | ||||||||
| Note receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Right-of-use assets, net | ||||||||
| Total non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES, MEZZANINE EQUITY, AND STOCKHOLDERS’ DEFICIT | ||||||||
| LIABILITIES | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Accrued interest | ||||||||
| Customer deposits | ||||||||
| Accrued payroll and related taxes | ||||||||
| Convertible notes payable | ||||||||
| Convertible notes payable - related parties | ||||||||
| Convertible notes payable | ||||||||
| Notes payable | ||||||||
| Notes payable - related parties | ||||||||
| Notes payable | ||||||||
| Financing liability, current | ||||||||
| Finance lease liability, current | ||||||||
| Operating lease liability, current | ||||||||
| Shares to be issued | ||||||||
| Total current liabilities | ||||||||
| Notes payable, net of current portion | ||||||||
| Convertible notes payable, net of current portion | ||||||||
| Convertible notes payable, net of current portion - related parties | ||||||||
| Convertible notes payable, net of current portion | ||||||||
| Financing liability, net of current portion | ||||||||
| Finance lease liability, non-current | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Total non-current liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies (Note 17) | ||||||||
| MEZZANINE EQUITY | ||||||||
| Series B Redeemable Convertible Preferred Stock, par value $, and shares outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Preferred stock, shares authorized: | ||||||||
| Series A Convertible Preferred Stock, par value $, and shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| Series C Convertible Preferred Stock, par value $, and shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| Preferred Stock Value | ||||||||
| Common stock, par value $, shares authorized, and shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES, MEZZANINE EQUITY, AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 6 |
TITAN ENVIRONMENTAL SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024 (UNAUDITED)
| For the Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| REVENUE | $ | $ | ||||||
| COST OF REVENUES | ||||||||
| GROSS LOSS | ( | ) | ( | ) | ||||
| OPERATING EXPENSES | ||||||||
| Salaries and salary related costs | ||||||||
| Stock based compensation | ||||||||
| Professional fees | ||||||||
| Amortization expense | ||||||||
| General and administrative expenses | ||||||||
| Total Operating Expenses | ||||||||
| OPERATING LOSS | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Change in fair value of derivative liability | ||||||||
| Interest expense, net of interest income | ( | ) | ( | ) | ||||
| Gain on refinancing | ||||||||
| Gain on settlement of accounts payable | ||||||||
| Other income (expense) | ( | ) | ||||||
| Loss on sale of equipment | ( | ) | ||||||
| Loss on troubled debt restructuring | ( | ) | ||||||
| Total other income (expense) | ( | ) | ( | ) | ||||
| LOSS FROM CONTINUING OPERATIONS, BEFORE PROVISION FOR INCOME TAXES | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| NET LOSS FROM CONTINUING OPERATIONS | ( | ) | ( | ) | ||||
| NET INCOME FROM DISCONTINUED OPERATIONS, AFTER TAXES | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Deemed dividend related to issuance of warrants |
| ( | ) | |||||
| Deemed dividend attributable to accretion of Series B Preferred Stock to redemption value | ( | ) | ||||||
| Net loss attributable to common stockholders | ( | ) | ( | ) | ||||
| Loss from continuing operations per share, basic and diluted | $ | ) | $ | ) | ||||
| Loss from discontinued operations per share, basic and diluted | ||||||||
| Total loss per share, basic and diluted | $ | ) | $ | ) | ||||
| Weighted average common shares outstanding - basic and diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 7 |
TITAN ENVIRONMENTAL SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY)
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024 (UNAUDITED)
| (1) | ||||||||||||||||||||||||||||||||||||||||||||
| Redeemable | ||||||||||||||||||||||||||||||||||||||||||||
| Series B Preferred Stock | Series A Preferred Stock (1) | Series C Preferred Stock | Common Stock | Additional Paid-In | Accumulated | |||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | deficit | Total | ||||||||||||||||||||||||||||||||||
| Balance - January 1, 2025 | 578,245 | $ | | 1,397,900 | $ | 140 | - | $ | - | 28,211,953 | $ | 2,821 | $ | 167,769,108 | $ | (172,485,643 | ) | $ | (4,713,574 | ) | ||||||||||||||||||||||||
| Balance - January 1, 2025 | $ | | 1,397,900 | $ | 140 | - | $ | - | 28,211,953 | $ | 2,821 | $ | 167,769,108 | $ | (172,485,643 | ) | $ | (4,713,574 | ) | |||||||||||||||||||||||||
| Balance - January 1, 2025 | $ | | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||
| Series C preferred stock offering | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Remeasurement of Series B Preferred Stock to redemption value | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Issuance and exchange of warrants | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||
| Cashless exercise of warrants | - | - | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Issuance of common stock due to settlement agreement | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock due to exercise of share rights | - | - | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Balance - March 31, 2025 | 578,245 | $ | 1,397,900 | $ | 140 | 500,000 | $ | 500 | 39,543,674 | $ | 3,955 | $ | 169,125,061 | $ | (177,181,970 | ) | $ | (8,052,314 | ) | |||||||||||||||||||||||||
| Balance - March 31, 2025 | $ | 1,397,900 | $ | 140 | 500,000 | $ | 500 | 39,543,674 | $ | 3,955 | $ | 169,125,061 | $ | (177,181,970 | ) | $ | (8,052,314 | ) | ||||||||||||||||||||||||||
| Balance - March 31, 2025 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Redeemable | ||||||||||||||||||||||||||||||||||||||||||||
| Series B Preferred Stock | Series A Preferred Stock (1) | Series C Preferred Stock | Common Stock | Additional Paid-In | Accumulated | |||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | deficit | Total | ||||||||||||||||||||||||||||||||||
| Balance - January 1, 2024 | $ | | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||
| Balance | $ | | $ | $ | $ | $ | $ | ( | ) | |||||||||||||||||||||||||||||||||||
| Issuance of warrants | - | - | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| Issuance of share rights (prefunded warrants) | - | - | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Balance - March 31, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
| (1) |
The accompanying notes are an integral part of these consolidated financial statements.
| 8 |
TITAN ENVIRONMENTAL SOLTUIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
| For the Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net income from discontinued operations | ||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Provision for credit losses | ( | ) | ||||||
| Loss on sale of equipment | ||||||||
| Gain on refinancing | ( | ) | ||||||
| Loss on troubled debt restructuring | ||||||||
| Impairment of property and equipment | ||||||||
| Gain on settlement of accounts payable | ( | ) | ||||||
| Loss on exchange of warrants | ||||||||
| Convertible note payable default penalty | ||||||||
| Depreciation and amortization | ||||||||
| Stock based compensation | ||||||||
| Change in fair value of derivative liability | ( | ) | ||||||
| Amortization of discounts on debt | ||||||||
| Changes in assets and liabilities | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Other assets | ( | ) | ||||||
| Right-of-use asset | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Accrued interest | ||||||||
| Customer deposits | ( | ) | ||||||
| Accrued payroll and payroll taxes | ( | ) | ||||||
| Finance lease liability | ( | ) | ||||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Proceeds from note receivable | ||||||||
| Acquisition of property and equipment | ( | ) | ||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from Series C Preferred Stock | ||||||||
| Proceeds from financing liability | ||||||||
| Transaction costs from financing liability | ( | ) | ||||||
| Repayment of financing liability | ( | ) | ||||||
| Proceeds from issuance of warrants | ||||||||
| Proceeds from convertible notes payable | ||||||||
| Proceeds from convertible note payables - related parties | ||||||||
| Proceeds from notes payable | ||||||||
| Repayments of notes payable | ( | ) | ( | ) | ||||
| Proceeds from note payables - related parties | ||||||||
| Repayment of notes payable - related parties | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| CASH FLOWS FROM DISCONTINUED OPERATIONS | ||||||||
| Cash provided by operations - discontinued operations | ||||||||
| Net cash provided by discontinued operations | ||||||||
| NET INCREASE (DECREASE) IN CASH | ( | ) | ||||||
| CASH FROM CONTINUING OPERATIONS - BEGINNING OF PERIOD | ||||||||
| CASH FROM DISCOUNTINUED OPERATIONS - BEGINNING OF PERIOD | ||||||||
| CASH - BEGINNING OF PERIOD | ||||||||
| CASH FROM CONTINUING OPERATIONS - END OF PERIOD | ||||||||
| CASH FROM DISCOUNTINUED OPERATIONS - END OF PERIOD | ||||||||
| CASH - END OF PERIOD | $ | $ | ||||||
| CASH PAID DURING THE PERIOD FOR: | ||||||||
| Interest expense | $ | $ | ||||||
| Income taxes | ||||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Cashless exercise of warrants | $ | $ | ||||||
| Exercise of Share rights into common stock | $ | $ | ||||||
| Remeasurement of Series B Preferred Shares to redemption value | $ | $ | ||||||
| Paid in kind repayment of accounts payable | $ | $ | ||||||
| Remeasurement period adjustment to accounts payables | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 9 |
TITAN ENVIRONEMENTAL SOLUTIONS INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS
Titan Environmental Solutions Inc. (“Titan” or along with its wholly-owned subsidiaries, referred to herein as the “Company”), is based out of Bloomfield Hills, Michigan and is an integrated provider of non-hazardous solid waste and recycling collection, transportation and disposal services. The Company conducts its business primarily through its principal operating subsidiary, Standard Waste Services, LLC (“Standard”), which provides waste and recycling collection and disposal services to industrial generators and commercial contractors located in Michigan.
On May 31, 2024, the Company completed its acquisition of Standard through its subsidiary, Titan Trucking, LLC (Titan Trucking”). In accordance with ASC 805, the transaction was treated as a business combination (Note 3 – Business Combinations). On May 19, 2023, the Company completed its acquisition (the “Titan Merger”) of Titan Trucking and Titan Trucking’s wholly owned subsidiary, Senior Trucking, LLC (“Senior”).
Effective January 10, 2024, the Company redomiciled from a California corporation into a Nevada corporation (the “redomicile”). As a result of the redomicile, the Company’s name was changed from TraQiQ, Inc. (“TraQiQ”) to Titan Environmental Solutions Inc.
On
October 31, 2024, the Company sold all of the capital stock of its subsidiary Recoup Technologies, Inc. (“Recoup”) for a
purchase price equal to $
Change in Equity Instruments and Share Authorizations Due to Redomicile
As a result of the redomicile, each share of TraQiQ’s’s common stock issued and outstanding immediately prior to the redomicile was exchanged for one share of Titan’s common stock. Additionally, each share of the TraQiQ Series C Convertible Preferred Stock issued and outstanding immediately prior to the effective time of the redomicile was exchanged for one share of Series A Convertible Preferred Stock of the Nevada corporation (the “Series A Preferred Stock”), which has substantially the same rights and preferences as the TraQiQ Series C Preferred Stock. Each of TraQiQ’s Series A Rights to Receive Common Stock issued and outstanding immediately prior to the redomicile was exchanged for one Series A Right to Receive Common Stock of Titan, which has substantially the same rights and preferences as the TraQiQ Series A Rights to Acquire Common Stock. Each of the TraQiQ Series B Rights to Receive Common Stock issued and outstanding immediately prior to the redomicile was exchanged for one Series B Right to Receive Common Stock of Titan, which has substantially the same rights and preferences as the TraQiQ Series B Rights to Acquire Common Stock.
| 10 |
As
a result of the redomicile, all of TraQiQ’s outstanding warrants were assumed by Titan and now represent warrants to acquire shares
of Titan’s common stock. The redomicile increased the Company’s authorized capital stock to
Going Concern
The Company’s consolidated financial statements as of March 31, 2025 and December 31, 2024 are prepared using accounting principles generally accepted in the United States of America (“GAAP”), which contemplates continuation of the Company as a going concern. This contemplates the realization of assets and liquidation of liabilities in the ordinary course of business.
For
the three months ended March 31, 2025, the Company had a net loss of $
The
Company’s continuation as a going concern is contingent upon its ability to obtain additional financing and to generate revenue
and cash flow to meet its obligations on a timely basis. The Company will continue to seek to raise additional funding through debt or
equity financing during the next twelve months from the date of issuance of these consolidated financial statements. Management believes
that actions presently being taken to obtain additional funding provide the opportunity for the Company to continue as a going concern.
There is no guarantee the Company will be successful in achieving these objectives. The Company has been successful in attracting substantial
capital from investors interested in the current public status of the Company that has been used to support the Company’s ongoing
cash outlays. This includes raising proceeds of approximately $
NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Rule 8-03 of Regulation S-X. Accordingly, they do not include all the information and notes for complete financial statements. In the opinion of management, all adjustments (consistent of normal recurring accruals and adjustments) considered necessary for a fair presentation of the consolidated financial statements have been included. Results for the interim periods should not be considered indicative of results to be expected for a full year. Reference should be made to the consolidated financial statements and related notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
Principles of Consolidation and Basis of Accounting
The consolidated financial statements include the accounts of Titan Environmental Solutions Inc. and its wholly-owned subsidiaries. All material inter-company accounts and transactions have been eliminated. The Company’s policy is to prepare its consolidated financial statements on the accrual basis of accounting, whereby revenue is recognized when earned and expenses are recognized when incurred.
| 11 |
Accounting Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Business Combinations
Under the guidance enumerated in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not considered a business and is accounted for as an asset acquisition at which point, the acquirer measures the assets acquired based on their cost, which is allocated on a relative fair value basis.
Business combinations are accounted for utilizing the fair value of consideration determined by the Company’s management and external specialists. The Company recognizes estimated fair values of the tangible and intangible assets acquired and liabilities assumed as of the acquisition date. Goodwill is recognized as any excess in fair value over the net value of assets acquired and liabilities assumed.
Cash
The
Company considers all highly-liquid money market funds and certificates of deposit with original maturities of less than three months
to be cash equivalents. The Company maintains its cash balances with various banks. The balances are insured by the Federal Deposit Insurance
Corporation (“FDIC”) up to $
Accounts Receivable, net
Accounts receivables are recorded at the amount the Company expects to collect on the balance outstanding at year-end. Management closely monitors outstanding balances during the year and allocates an allowance account if appropriate. The Company estimates and records a provision for its expected credit losses related to its financial instruments, including its trade receivables and contract assets. The Company considers historical collection rates, the current financial status of its customers, macroeconomic factors, and other industry-specific factors when evaluating for current expected credit losses. Forward-looking information is also considered in the evaluation of current expected credit losses. However, because of the short time to the expected receipt of accounts receivable, the Company believes that the carrying value, net of expected losses, approximates fair value and therefore, relies more on historical and current analysis of such financial instruments.
As
of March 31, 2025 and December 31, 2024, the Company allocated $
| 12 |
Property and Equipment, net
Property and equipment is stated at cost. Depreciation is computed primarily using the straight-line method over the estimated useful lives of the assets. Expenditures for repairs and maintenance are charged to expense as incurred. For assets sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any related gain or loss is reflected in the condensed consolidated statement of operations or the period in which the disposal occurred. The Company computes depreciation utilizing estimated useful lives, as stated below:
SCHEDULE OF PROPERTY AND EQUIPMENT ESTIMATED USEFUL LIFE
| Property and Equipment, net Categories | Estimated Useful Life | |
| Tractors and trailers | ||
| Containers | ||
| Equipment | ||
| Leasehold improvements |
Management regularly reviews property and equipment for possible impairment. This review occurs annually or more frequently if events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Based on management’s assessment, there were no indicators of impairment of the Company’s property and equipment as of March 31, 2025 and December 31, 2024, respectively.
Finite Long-lived Intangible Assets, Net
Finite long-lived intangible assets are recorded at their estimated fair value at the date of acquisition. Finite long-lived intangible assets are amortized on a straight-line basis over their estimated useful lives. Management annually evaluates the estimated remaining useful lives of the finite intangible assets to determine whether events or changes in circumstances warrant a revision to the remaining period of amortization.
Finite
long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may
not be fully recoverable. An impairment loss is recognized if the sum of the expected long-term undiscounted cash flows the asset is
expected to generate is less than its carrying amount. Any write-downs are treated as permanent reductions in the carrying amount of
the respective asset. Management assessed and concluded that no impairment write-down would be necessary for finite long-lived intangible
assets as of December 31, 2024. In January of 2025, the Company fully impaired a truck asset due to a vehicle fire. As a result,
the Company recorded an impairment expense of $
The Company amortizes these intangible assets on a straight-line basis over their estimated useful lives, as stated below:
SCHEDULE OF FINITE LONG-LIVED INTANGIBLE ASSETS ESTIMATED USEFUL LIFE
| Finite Long-lived Intangible Assets Categories | Estimated Useful Life | |
| Customer Lists |
Goodwill
Goodwill represents the excess of the acquisition price of a business over the fair value of identified net assets of that business. Goodwill has an indefinite lifespan and is not amortized. The Company evaluates goodwill for impairment at least annually and records an impairment charge when the carrying amount of a reporting unit with goodwill exceeds the fair value of the reporting unit. As of March 31, 2025 and December 31, 2024, the Company’s sole reporting unit within continuing operations was its Trucking unit. Prior to the Company’s sale of Recoup (Note 4 – Discontinued Operations), the Company had a second reporting unit: the Digester unit.
The Company assesses qualitative factors to determine if it is necessary to conduct a quantitative goodwill impairment test. If deemed necessary, a quantitative assessment of the reporting unit’s fair value is conducted and compared to its carrying value in order to determine the impairment charge (Note 7 - Goodwill).
| 13 |
Leases
The Company assesses whether a contract is or contains a lease at inception of the contract and recognizes right-of-use assets (“ROU”) and corresponding lease liabilities at the lease commencement date. The lease term is used to calculate the lease liability, which includes options to extend or terminate the lease when it is reasonably certain that the option will be exercised. As the leases the Company currently holds do not have implicit borrowing rates, the Company utilizes its incremental borrowing rate to measure the ROU assets and liabilities. Operating lease expense is generally recognized on a straight-line basis over the lease term. All leases that have lease terms of one year or less are considered short-term leases, and therefore are not recorded through a ROU asset or liability.
Loan Origination Fees
Loan
origination fees represent loan fees, inclusive of original issue discounts, relating to the financing liability, and convertible note
payables and note payables granted to the Company. The Company amortizes loan origination fees over the life of the related debt obligation
(Note 9 – Notes Payable, Note 10 – Convertible Notes Payable, and Note 11 – Financing Liability). Amortization expense
of loan issuance fees for the three months ended March 31, 2025 and 2024 was $
Fair Value Measurements
FASB ASC 820 “Fair Value Measurements” (“ASC 820”) defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosure about fair value measurements.
The following provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which fair value is observable:
Level 1- fair value measurements are those derived from quoted prices (unadjusted in active markets for identical assets or liabilities);
Level 2- fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3- fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Financial instruments classified as Level 1 quoted prices in active markets include cash.
These consolidated financial instruments are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment to estimation. Valuations based on unobservable inputs are highly subjective and require significant judgments. Changes in such judgments could have a material impact on fair value estimates.
In addition, since estimates are as of a specific point in time, they are susceptible to material near-term changes. Changes in economic conditions may also dramatically affect the estimated fair values.
| 14 |
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management for the respective periods. The respective carrying value of certain financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash, short-term notes payable, accounts payable and accrued expenses. The carrying value of long-term debt approximates fair value, as the variable interest rates approximate current market rates. The Company measured its derivative liabilities, mezzanine equity and common stock at fair value on a recurring basis using level 3 inputs.
Convertible Instruments
The Company evaluates its convertible instruments, such as warrants and convertible notes, to determine if those contracts or embedded components of those contracts qualify as equity instruments, derivative liabilities, or liabilities, to be separately accounted for in accordance with FASB ASC 815 “Derivatives and Hedging” (“ASC 815”) and FASB ASC 480 “Distinguishing Liabilities from Equity” (“ASC 480”). The assessment considers whether the convertible instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the convertible instruments meet all of the requirements for equity classification under ASC 815, including whether the convertible instruments are indexed to the Company’s own ordinary shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of the instrument’s issuance, and as of each subsequent balance sheet date while the instruments are outstanding. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.
Embedded conversion options and any related freestanding instruments are recorded as a discount to the host instrument. The Company allocates proceeds based on the relative fair values of the debt and equity components. The accounting treatment of derivative financial instruments requires that the Company record embedded conversion options and any related freestanding instruments at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded in earnings each period as non-operating, non-cash income or expense.
Common Stock
Beginning on December 31, 2024, due to the lack of an active market for the Company’s common stock, management was required to estimated the fair value of the Company’s common stock at the time of each grant of the common stock. The Company utilized various Level 3 valuation methodologies to estimate the fair value of its common stock. Each valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include a number of objective and subjective factors in determining the value of the Company’s common stock at each grant date, including the following factors:
| - | prices paid for the Company’s capital stock, which the Company has sold to outside investors in arm’s-length transactions, considering the rights and privileges of the securities sold relative to the common stock; | |
| - | valuations performed by an independent valuation specialist; | |
| - | the Company’s stage of development and revenue growth; | |
| - | the market performance of comparable publicly traded companies; | |
| - | the likelihood of achieving a liquidity event for the common stock underlying the stock-based awards, such as uplisting to a more liquid stock exchange; | |
| - | adjustments necessary to recognize a lack of marketability for the common stock |
Prior to December 31, 2024, the Company valued its common stock price using the trading price of its publicly listed common stock. The Company intends to return to this valuation methodology upon the establishment of an active market for the Company’s common stock. Under FASB ASC 250-10-45-17, the Company is applying the change in the accounting estimate prospectively. The Company believes the change in estimate is preferable because it allows the Company to record a more accurate measurement of the fair value of the Company’s common stock.
Redeemable Series B Preferred Stock
The Company applies the guidance enumerated in FASB ASC 480, when determining the classification and measurement of preferred stock. Preferred stock subject to mandatory redemption, if any, is classified as a liability and is measured at fair value. The Company classifies conditionally redeemable preferred stock, which includes preferred stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, as mezzanine equity. At all other times, the Company classifies its preferred stock in stockholders’ equity. The Company subsequently measures mezzanine equity based on whether the instrument is currently redeemable or whether or not it is probable the instrument will become redeemable. Given the assessed probability that the instrument will become redeemable, the Company has elected to adjust the value of the Series B Preferred shares to its maximum redemption amount at each reporting date, including amounts representing dividends not currently declared or paid, but which will be payable under the redemption feature.
Stock-Based Compensation
The Company accounts for stock awards to employees and non-employees in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation” by measuring the cost of services received in exchange for the award of equity instruments based upon the fair value of the award on the date of grant. The fair value of that award is then ratably recognized as expense over the period during which the recipient is required to provide services in exchange for that award.
Revenue Recognition
The Company records revenue based on a five-step model in accordance with FASB ASC 606, Revenue from Contracts with Customers, which requires the following:
1. Identify the contract with a customer.
2. Identify the performance obligations in the contract.
3. Determine the transaction price of the contract.
4. Allocate the transaction price to the performance obligations in the contract.
5. Recognize revenue when the performance obligations are met or delivered.
The Company’s operating revenues are generated from fees charged for the collection and disposal of waste by its Trucking Segment. Revenues are recognized at a point in time immediately after completion of disposal of waste at a landfill or transfer station. Revenues from collection operations are influenced by factors such as collection frequency, type of collection furnished, type and volume or weight of the waste collected, distance to the disposal facility or material recovery facility and disposal costs. Fees charged at transfer stations are generally based on the weight or volume of waste deposited, including the cost of loading, transporting, and disposing of the solid waste at a disposal site. The fees charged for services generally include environmental, fuel charge and regulatory recovery fees, which are intended to pass through to customers direct and indirect costs incurred. For waste collection and disposal services the Company invoices its customers with standard 30-day payment terms without any significant financing terms.
| 15 |
Concentration Risk
A major customer is defined as a customer that represents 10% or greater of total revenues. The Company does not believe that the risk associated with these customers or vendors will have an adverse effect on the business. The Company’s concentration of revenue was as follows:
SCHEDULE OF CONCENTRATION RISK
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Customer A | * | % | ||||||
| * Represents amounts less than 10% | ||||||||
As of March 31, 2025 and December 31, 2024, the Company did not have any customers that represented 10% or more of accounts receivable, net. The Company maintains positive customer relationships and continually expands its customer base, mitigating the impact of any potential concentration risks that exist.
Basic net (loss) income per common share is computed by dividing net (loss) income by the weighted average number of vested common shares outstanding during the period. Diluted net income per common share is computed by dividing net income by the weighted average number of vested common shares, plus the net impact of common shares (computed using the treasury stock method), if dilutive, resulting from the exercise of dilutive securities. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. As of March 31, 2025 and 2024, the Company excluded the common stock equivalents summarized below, which entitle the holders thereof to ultimately acquire shares of common stock, from its calculation of earnings per share, as their effect would have been anti-dilutive.
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Series A preferred stock | ||||||||
| Series C preferred stock | ||||||||
| Warrants | ||||||||
| Stock options | ||||||||
| Total common stock equivalents | ||||||||
The Company has assessed the Series A Right to Receive Common Stock (“Series A Rights”) and the Series B Rights to Receive Common Stock (“Series B Rights”) for appropriate balance sheet classification and concluded that the Series A Rights and Series B Rights are freestanding equity-linked financial instruments that meet the criteria for equity classification under FASB ASC 480 and FASB ASC 815. In accordance with ASC 260 Earnings per Share the Company determined that the Series A Rights and Series B Rights should be included in the determination of basic and diluted earnings per share.
Income Taxes and Uncertain Tax Positions
The Company and its U.S. subsidiaries file a consolidated federal income tax return and is taxed as a C-Corporation, whereby it is subject to federal and state income taxes. The Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes, established for all the entities a minimum threshold for financial statement recognition of the benefit of tax positions, and requires certain expanded disclosures. The provision for income taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of taxable income. Deferred income taxes represent the tax effects of differences between the financial reporting and tax basis of the Company’s assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected to reverse. The Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than not that some portion or all the deferred tax assets will not be realized. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In management’s opinion, adequate provisions for income taxes have been made. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary. The Company’s taxes are subject to examination by taxation authorities for a period of three years.
| 16 |
Advertising and Marketing Costs
Costs
associated with advertising are charged to expense as occurred. For the three months ended March 31, 2025 and 2024, the advertising and
marketing costs were $
Recently Issued Accounting Standards
The Company has reviewed the recent accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”), including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC, and determined that these pronouncements do not have a material impact on the Company’s current or anticipated consolidated financial statement presentation or disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid. The amendment in the ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. The ASU’s amendments are effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact that adoption of ASU 2023-09 will have on its financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires disclosure about the types of costs and expenses included in certain expense captions presented on the income statement. The new disclosure requirements are effective for the Company’s annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this pronouncement on our related disclosures.
In November 2024, the FASB issued ASU No. 2024-04, Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments (“ASU 2024-04”), which clarifies the requirements for determining whether to account for certain early settlements of convertible debt instruments as induced conversions or extinguishments. ASU 2024-04 is effective for fiscal years beginning after December 15, 2025 with early adoption permitted for entities that have adopted ASU 2020-06. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
| 17 |
NOTE 3 – BUSINESS COMBINATIONS
Standard Waste Services, LLC Business Combination
On
May 31, 2024 (the “Standard acquisition date”), the Company completed a transaction to acquire Standard. The total purchase
consideration in connection with the acquisition was approximately $
Standard is a provider of contracted commercial roll-off and front-load waste services, including dumpster compactor rentals, to customers principally in Southeast Michigan. Standard provides services to both commercial and industrial customers.
The transaction was accounted for under the acquisition method of accounting and accordingly, the results of Standard’s operations are included within the Trucking Segment for the year ended December 31, 2024 related to the activity subsequent to the acquisition date.
The purchase price was preliminarily allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values as of the date of acquisition on a provisional basis. The purchase price exceeded the estimated fair value of the net identifiable tangible and intangible assets acquired and, as such, the excess was allocated to goodwill.
The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date.
SCHEDULE OF THE PRELIMINARY FAIR VALUES OF THE ASSETS ACQUIRED AND LIABILITIES ASSUMED
| Estimated | ||||
| Description | Fair Value | |||
| Assets: | ||||
| Cash | $ | |||
| Accounts receivable | ||||
| Property and equipment | ||||
| Prepaid expenses and other current assets | ||||
| Other receivables | ||||
| Right-of-use-asset | ||||
| Intangible assets and goodwill | ||||
| Assets acquired total | $ | |||
| Liabilities: | ||||
| Accounts payable and accrued expenses | $ | ( | ) | |
| Accrued payroll and related taxes | ( | ) | ||
| Operating lease liability, current | ( | ) | ||
| Finance lease liability, current | ( | ) | ||
| Notes payable | ( | ) | ||
| Operating lease liability, noncurrent | ( | ) | ||
| Finance lease liability, noncurrent | ( | ) | ||
| Liabilities acquired total | ( | ) | ||
| Net fair value of assets (liabilities) acquired | $ | |||
During
the three months ended March 31, 2025 the Company recorded an acquisition measurement period adjustment of $
Certain estimated fair values for the acquisition, including goodwill, anticipated intangible assets, property and equipment, and promissory notes, are not yet finalized. The anticipated intangible assets consist of contractual backlog, customer relationships, and tradenames. The purchase price was preliminarily allocated based on information available at the acquisition date and is subject to change as the Company completes its analysis of the fair values at the date of the acquisition during the measurement period not to exceed one year, as permitted under ASC 805. Any adjustments to the preliminary fair value of the assets acquired and liabilities assumed will adjust the preliminary goodwill recognized during the measurement period. The Company expects to record amortization expense during the second quarter of the year ended December 31, 2025 for allocated finite lived intangible assets.
| 18 |
As
a result of the acquisition, the Company recognized a total of $
Standard’s results of operations are included in the consolidated financial statements from the date of the transaction within the Trucking segment. It is impracticable for the Company to determine the approximate revenue and gross profit for Standard from May 31, 2024 through December 31, 2024, as the operations of Standard and Titan Trucking are closely related and discrete financial information is not available for Standard on a stand-alone basis. The following are the supplemental consolidated financial results of the Company on an unaudited pro forma basis, as if the acquisition of Standard had been consummated on the beginning of the year ended December 31, 2023:
SCHEDULE OF SUPPLEMENTAL PRO-FORMA FINANCIAL INFORMATION
| Three Months Ended | ||||
| March 31, | ||||
| 2024 | ||||
| Total revenue | $ | |||
| Net loss | $ | ( | ) | |
| Pro forma loss per common share | $ | ) | ||
| Pro forma weighted average number of common shares basic and diluted | ||||
The pro forma combined results of operations are not necessarily indicative of the results of operations that actually would have occurred, nor are they necessarily indicative of future consolidated results.
NOTE 4 – DISCONTINUED OPERATIONS
On
October 31, 2024 the Company completed the sale of its subsidiary Recoup (the “Recoup Sale) in exchange for consideration of $
The
note receivable has a principal amount of $
Recoup’s financial results are presented within income from discontinued operations, after tax in the consolidated statement of operations. The following table presents the amounts that have been reclassified from continuing operations and included in income from discontinued operations within the Company’s consolidated statement of operations for the three months ended March 31, 2024:
SCHEDULE OF DISCONTINUED OPERATIONS WITHIN THE COMPANY’S CONSOLIDATED STATEMENT OF OPERATIONS AND BALANCE SHEET
| Three Months Ended | ||||
| March 31, | ||||
| 2024 | ||||
| REVENUE | $ | |||
| COST OF REVENUES | ||||
| GROSS PROFIT | ||||
| OPERATING EXPENSES | ||||
| Salaries and salary related costs | ||||
| Professional fees | ||||
| Depreciation and amortization expense | ||||
| General and administrative expenses | ||||
| Total operating expenses | ||||
| OPERATING INCOME | ||||
| OTHER INCOME (EXPENSE) | ||||
| Other income | ||||
| Net income from discontinued operations before income taxes | ||||
| Provision for income taxes | ||||
| Net income from discontinued operations after income taxes | $ | |||
NOTE 5 – PROPERTY AND EQUIPMENT, NET
Property and equipment consisted of the following as of March 31, 2025 and December 31, 2024:
SCHEDULE OF PROPERTY AND EQUIPMENT, NET
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Containers | $ | $ | ||||||
| Trucks and tractors | ||||||||
| Trailers | ||||||||
| Shop equipment | ||||||||
| Furniture | ||||||||
| Leasehold improvements | ||||||||
| Property and equipment, gross | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Net book value | $ | $ | ||||||
Depreciation
expenses for the three months ended March 31, 2025 and 2024 were $
| 19 |
In
January 2025, the Company repaid $
NOTE 6 – INTANGIBLES, NET
Intangible assets consisted of the following as of March 31, 2025 and December 31, 2024:
SCHEDULE OF INTANGIBLE ASSETS
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Customer Lists | $ | $ | ||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Net book value | $ | $ | ||||||
| Intangible assets, net | $ | $ | ||||||
Amortization
expense from intangible assets was $
Future amortization expense from existing intangible assets as of March 31, 2025 are as follows:
SCHEDULE OF FUTURE AMORTIZATION EXPENSE
| For the Years Ended, | ||||
| December 31, | ||||
| Remainder of 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total remaining amortization expense | $ | |||
NOTE 7 – GOODWILL
The
Company has one reporting unit, the Trucking unit. As of March 31, 2025 and December 31, 2024, the goodwill for the reporting unit was
$
During
the three months ended March 31, 2025 the Company recorded an acquisition measurement period adjustment of $
The changes in the carrying value of goodwill by reportable segment for the three months ended March 31, 2025 are as follows:
SCHEDULE OF CARRYING VALUE OF GOODWILL
| Trucking | ||||
| Gross Goodwill: | $ | |||
| Balance as of December 31, 2024 | ||||
| Balance | ||||
| Goodwill recognized | ||||
| Acquisition measurement period adjustment | ( | ) | ||
| Balance as of March 31, 2025 | ||||
| Accumulated Impairment: | ||||
| Balance as of December 1, 2024 | ||||
| Balance | ||||
| Impairment | ||||
| Balance as of March 31, 2025 | ||||
| Balance | ||||
| Net carrying value, as of December 31, 2024 | $ | |||
| Balance | $ | |||
| 20 |
NOTE 8 – LEASES
Operating Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use assets (“ROU”), operating lease liabilities, and operating lease liabilities, non-current. Lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. None of the leases entered into have an implicit rate, the Company uses its incremental borrowing rate based on the information available at lease commencement date in determining the present value of future payments. Incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. The ROU assets also include any prepaid lease payments made and initial direct costs incurred and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease, which is recognized when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company has operating leases for real estate in both Bloomfield Hills and Detroit, Michigan.
On
April 1, 2023, Titan Trucking entered into a
Average lease terms and discount rates are as follows:
SCHEDULE OF OPERATING LEASE WEIGHTED AVERAGE REMAINING LEASE TERMS AND DISCOUNT RATES
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Weighted average remaining lease term (in years) | ||||||||
| Weighted average discount rate | % | % | ||||||
Future minimum lease payments required under operating leases on an undiscounted cash flow basis as of March 31, 2025, were as follows:
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS UNDER OPERATING LEASES
| For the Years Ended, | ||||
| December 31, | ||||
| Remainder of 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| Total minimum lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Present value of future minimum lease payments | ||||
| Current operating lease liabilities | ||||
| Non-current operating lease liabilities | $ | |||
The
Company had operating lease expenses of $
Financing Leases
As
of December 31, 2024,
SCHEDULE OF FINANCING LEASE WEIGHTED AVERAGE REMAINING LEASE TERMS AND DISCOUNT RATES
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Weighted average remaining lease term (in years) | ||||||||
| Weighted average discount rate | N/A | % | ||||||
The
Company’s finance lease costs consisted of $
| 21 |
NOTE 9 – NOTES PAYABLE
The Company borrows funds from various creditors to finance its equipment, operations and acquisitions. The Company’s collateralized loans are secured by interest in the financed equipment. The Company’s notes payables balance as of March 31, 2025 and December 31, 2024, consisted of the following:
SCHEDULE OF LONG-TERM DEBT
| March 31, | December 31, | ||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||
| Current | Non-current | Current | Non-current | ||||||||||||||||
| Collateralized Loans: | (a) | $ | $ | $ | $ | ||||||||||||||
| Note Payables: | |||||||||||||||||||
| Keystone | (b) | ||||||||||||||||||
| Michaelson | (c) | ||||||||||||||||||
| Third Party Lender – Formerly Michaelson | (d) | ||||||||||||||||||
| Loanbuilder | (e) | ||||||||||||||||||
| Individual | (f) | ||||||||||||||||||
| February 2025 Note | (g) | ||||||||||||||||||
| Related Parties: | |||||||||||||||||||
| Standard Waste Promissory Note #1 | (h) | ||||||||||||||||||
| Titan Holdings 2 | (i) | ||||||||||||||||||
| Titan Holdings 5 | (j) | ||||||||||||||||||
| Miller | (k) | ||||||||||||||||||
| J. Rizzo | (l) | ||||||||||||||||||
| Celli – Formerly Michaelson | (m) | ||||||||||||||||||
| Total outstanding principal | |||||||||||||||||||
| Less: discounts | ( | ) | ( | ) | ( | ) | |||||||||||||
| Total notes payable | |||||||||||||||||||
| Less: Notes payable – related parties | |||||||||||||||||||
| Notes payable | $ | $ | $ | $ | |||||||||||||||
Guarantee of Debt
On
May 31, 2024, the Company entered into a Guaranty Fee Agreement pursuant to which certain outstanding indebtedness owed by the
Company to the sellers of Standard is guaranteed. Pursuant to the Guaranty Fee Agreement, Charles B. Rizzo personally guaranteed the
obligations of Standard and the Company. In exchange for providing the guarantees, the Company agreed to provide compensation
consisting of a deposit fee, a guarantee fee, and an annual fee. The guarantee fee consisted of
shares of common stock or the equivalent shares of Series A Preferred Stock, and the deposit fee consisted of
shares of common stock or the equivalent shares of Series A Preferred Stock. The annual fee consists of
Collateralized
| (a) | |
| On
January 6, 2025, the Company’s subsidiaries signed a Master Lease Agreement with a third-party buyer from which such subsidiaries received
proceeds of approximately $ |
| 22 |
Notes Payables:
| (b) |
| (c) |
In October 2023, the Company and Michaelson agreed to forbear the principal payments owed to Michaelson during the three months ended September 30, 2023 until October 30, 2023. On December 28, 2023, the Company and Michaelson signed a Forbearance Agreement (the “December Michaelson Amendment”) that was accounted for as a debt modification in accordance with FASB ASC 470 – Debt (“ASC 470”). |
The
December Michaelson Amendment established a period ending on March 31, 2024 during which Michaelson agreed to forbear from exercising
its rights against the Company with respect to a default. Additionally, it set the following repayment terms: (1) on or before December
31, 2023, the Company was to make a $
In
April 2024, the Company and Michaelson agreed to extend the term of the Michaelson Note until June 30, 2024, and forbear all other
terms until May 1, 2024. In exchange for such extension and forbearance, the Company agreed: (1) to pay $
On
July 31, 2024, the Company and Michaelson agreed to a Forbearance Agreement that amended the Michaelson Note Payable (the “July
Michaelson Amendment”). As a result, the interest rate of the Michaelson Note increased to
In
February 2025, the Company and Michaelson agreed to amend the Michaelson Note (the “February Michaelson Amendment”).
As a result, Michaelson agreed to waive all events of default until April 15, 2025. Additionally, Michaelson sold $
As
of March 31, 2025, and December 31, 2024, the outstanding principal balance was $ |
| (d) | |
| (e) |
| 23 |
| (f) | |
| (g) |
Related Parties:
| (h) | |
According to the terms of the promissory note agreement, failure to repay the principal by the maturity date shall
result in a fifteen day cure period in which the principal must repaid or else result in a default on the promissory note. As of April
15, 2025 the cure period had elapsed and the Company was in default with respect to the promissory note. Upon expiration of the cure period,
a default penalty of either 1) $ |
| (i) |
Titan
had an informal agreement with Titan Holdings 2 to continually borrow from Titan Holdings 2 as working capital needs arise. These
additional funds are to be repaid as funding becomes available. As of March 31, 2025 and December 31, 2024, the Company had informally
borrowed an additional $
In
July of 2024, the Company sold two customer contracts in exchange for total proceeds of $ | |
| (j) |
On
May 30, 2024, the Company and the stockholder agreed to a promissory note for a principal amount of $ |
| 24 |
| (k) |
On
February 23, 2024, the Company and Miller agreed to a promissory note for a principal amount of $
On
May 30, 2024, the Company and Miller agreed to a promissory note for a principal amount of $ |
| (l) |
| The
Company has an informal agreement with Rizzo to continually borrow from Rizzo as working capital needs arise. These additional funds
are to be repaid as funding becomes available. As of March 31, 2025 and December 31, 2024, Titan had borrowed $ | |
| (m) |
Interest
expense on notes payable for the three months ended March 31, 2025 and 2024 was $
| 25 |
Principal maturities for the next five years and thereafter for the years ended December 31, are as follows:
SCHEDULE OF PRINCIPAL MATURITIES OF NOTES PAYABLE
| Remainder of 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total principal payments | ||||
| Less: debt discounts | ( | ) | ||
| Total notes payable | $ |
NOTE 10 – CONVERTIBLE NOTES PAYABLE
The Company’s convertible notes as of March 31, 2025 and December 31, 2024 were as follows:
SCHEDULE OF CONVERTIBLE NOTES PAYABLES
| March 31, | December 31, | |||||||||||||||||
| 2025 | 2024 | |||||||||||||||||
| Current | Non-current | Current | Non-current | |||||||||||||||
| Convertible Notes Payable: | ||||||||||||||||||
| 2023 Bridge Notes | (a) | $ | $ | $ | $ | |||||||||||||
| 2023 Automatic Exchange Bridge Notes | (b) | |||||||||||||||||
| 2024 Bridge Notes | (c) | |||||||||||||||||
| 2024 Automatic Exchange Bridge Note | (d) | |||||||||||||||||
| 2024 Convertible Notes | (e) | |||||||||||||||||
| Related Parties: | ||||||||||||||||||
| Miller Bridge Notes | (f) | |||||||||||||||||
| Titan 5 Bridge Note | (g) | |||||||||||||||||
| Celli Automatic Exchange Note | (h) | |||||||||||||||||
| FC Advisory Automatic Exchange Note | (i) | |||||||||||||||||
| Standard Waste Promissory Note #2 | (j) | |||||||||||||||||
| Total outstanding principal | ||||||||||||||||||
| Less: discounts | ( |
) | ( |
) | ( |
) | ||||||||||||
| Total convertible notes payable | ||||||||||||||||||
| Convertible notes payable – related parties | ||||||||||||||||||
| Convertible notes payable | $ | $ | $ | $ | ||||||||||||||
| 26 |
Convertible Notes Payable:
| |
| (a) |
Effective
July 29, 2024 and through December 31, 2024, the Company and the investors agreed to waive all events of default and all claims to related
default interest, with the exception of any default interest that accrued prior to July 29, 2024. On December 31, 2024 the investors
and the Company agreed to amend all of the 2023 Bridge Notes except for one $600,000 note. The amended notes had their maturity date
extended to |
| (b) |
Effective
July 29, 2024 and through December 31, 2024, the Company and the investors agreed to waive all events of default and all claims to related
default interest, with the exception of any default interest that accrued prior to July 29, 2024. Additionally, effective July 29, 2024,
$
On
March 4, 2025 the Company and the investors agreed to certain Exchange Agreements that extended the maturity dates of the 2023 Automatic
Exchange Bridge Notes to May 31, 2025 and also amended the terms of the 2023 Automatic Exchange Bridge Notes such that immediately prior
to the closing of an underwritten public offering of the Company’s common stock in connection with the commencement of the Company’s
common stock trading on certain national stock exchanges, the notes shall automatically be exchanged for shares of the Company’s
common stock and Series C Preferred Stock. |
| (c) | |
| (d) | |
| 27 |
| On March 4, 2025 the Company
and the investor agreed to an Exchange Agreement that extended the maturity dates of the 2024 Automatic Exchange Bridge Note to May
31, 2025 and also amended the terms of the 2024 Automatic Exchange Bridge Note such that immediately prior to the closing of an underwritten
public offering of the Company’s common stock in connection with the commencement of the Company’s common stock trading
on certain national stock exchanges, the note shall automatically be exchanged for shares of the Company’s common stock and
Series C Preferred Stock. | |
| (e) |
| Related Parties: |
| (f) |
Effective
July 29, 2024 and through December 31, 2024, the Company and Miller agreed to waive all events of default and all claims to related
default interest, with the exception of any default interest that accrued prior to July 29, 2024. On December 31, 2024 the Miller
Bridge Notes were amended and the maturity date was extended to March 31, 2025. As of March 31, 2025, the Company had not repaid the Miller Bridge Notes and as a result the Company accrued $ |
| (g) |
Effective
July 29, 2024 and through December 31, 2024, the Company and Titan 5 agreed to waive all events of default and all claims to related
default interest, with the exception of any default interest that accrued prior to July 29, 2024. On December 31, 2024 the Titan
5 Bridge Note was amended and the maturity date was extended to March 31, 2025. As of March 31, 2025, the Company had not repaid the Titan 5 Bridge Notes and as a result the Company accrued $ |
| 28 |
| (h) | |
| The Celli Automatic Exchange
Notes contain a “rollover rights” conversion feature that enables the holder to convert all or part of the Celli Automatic
Exchange Note’s principal and accrued interest in the event of a public offering or private placement of the Company’s
equity, equity linked, or debt securities into purchase consideration for said public or private offering. In the event of default,
the Celli Automatic Exchange Notes accrue interest at a rate of | |
| On March 4, 2025 the Company
and Celli agreed to an Exchange Agreement that extended the maturity date of the first promissory note held by Celli to May 31, 2025
and also amended the terms of the Celli Automatic Exchange Notes such that immediately prior to the closing of an underwritten public
offering of the Company’s common stock in connection with the commencement of the Company’s common stock trading on certain
national stock exchanges, the notes shall automatically be exchanged for shares of the Company’s common stock and Series C
Preferred Stock. | |
| (i) | |
| On March 4, 2025 the Company
and FC Advisory agreed to an Exchange Agreement that extended the maturity date of the FC Advisory Automatic Exchange Note to May
31, 2025 and also amended the terms of the FC Advisory Automatic Exchange Note such that immediately prior to the closing of an underwritten
public offering of the Company’s common stock in connection with the commencement of the Company’s common stock trading
on certain national stock exchanges, the notes shall automatically be exchanged for shares of the Company’s common stock and
Series C Preferred Stock. |
| 29 |
| (j) |
On
December 31, 2024 the Company and Dominic and Sharon Campo agreed to amend the Standard Waste Promissory Note #2. As a result $ |
Interest
expense due to convertible note payables for the three months ended March 31, 2025 and 2024 was $
Convertible note payables principal maturities for the next two years ended December 31, are as follows:
SCHEDULE OF PRINCIPAL MATURITIES OF CONVERTIBLE NOTES PAYABLE
| Remainder of 2025 | $ | |||
| 2026 | ||||
| Less: debt discounts | ( | ) | ||
| Total convertible notes payable | $ |
NOTE 11 – FINANCING LIABILITY
On
January 6, 2025, the Company signed an agreement to sell certain equipment to a third-party buyer for $
The Company determined that the buyer met the definition of a buyer-lessor and that the agreement met the definition of a lease. Additionally, the Company determined that control of the equipment did not transfer to the buyer at the time of the sale, that the Company retained the ability to prevent others from using the equipment, and that the Company will continue to receive all the economic benefits of the equipment. Therefor the sale-leaseback does not qualify as a sale and is deemed a “failed sale-leaseback” which must be accounted for as a financing arrangement. As a result, the Company is viewed as having received the sales proceeds from the buyer in the form of a hypothetical loan collateralized by the leased equipment. The hypothetical loan is payable as principal and interest in the form of “lease payments” to the buyer. As such, the Company will not derecognize the equipment from its books for accounting purposes until the end of the lease. The financing arrangement is recognized on the consolidated balance sheets as a “financing liability”.
The
$
SCHEDULE OF FINANCING LIABILITY
| Remainder of 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Total | ||||
| Less: imputed interest and debt discounts | ( | ) | ||
| Total financing liability | $ |
NOTE 12 – DERIVATIVE LIABILITIES
On
February 12, 2021, the Company granted warrants (the “Platinum Point Warrants”) that have a term of
The fair value of the Platinum Point Warrants derivative liability is estimated using a Black-Scholes valuation model with a stock price of $. Changes to the inputs used in the model could produce a significantly higher or lower fair value.
Activity related to the derivative liabilities for the three months ended March 31, 2024 were as follows:
SCHEDULE OF ACTIVITY RELATED TO DERIVATIVE LIABILITIES
| Beginning balance as of December 31, 2023 | $ | |||
| Change in fair value of warrant - derivative liability | ( | ) | ||
| Ending balance as of March 31, 2024 | $ |
| 30 |
Michaelson Forbearance Agreement
On
December 28, 2023, the Company and Michaelson signed a Forbearance Agreement (the “December Michaelson Amendment”) which
amended the Michaelson Note and was accounted for as a debt modification in accordance with FASB ASC 470 – Debt. The December
Michaelson Amendment states that following the payment of its other obligations owed to Michaelson, the Company shall issue Michaelson
$
In
April 2024, the Company and Michaelson agreed to extend the term of the Michaelson Note until June 30, 2024, and forbear all other
terms until May 1, 2024. Among other terms, the Company agreed to pay a $
Standard Waste Promissory Notes Extension and Subordination Agreement
On
December 31, 2024, the Company and the holders of Standard Waste Promissory Note #1 and Standard Waste Promissory Note #2 agreed to
amend both notes and to sign a subordination agreement with a third party buyer (Note 11 – Financing Liability). In exchange
for signing the subordination agreement, the Company agreed to issue
shares of common stock to the note holders. Additionally, $
As of December 31, 2024, and March 31, 2025, the common stock from these transactions had not been issued and the obligation was recorded to shares to be issued on the consolidated balance sheets in the amount of $. As of the issuance date of these financial statements the common stock had not been issued and the obligation was outstanding.
NOTE 14 – BENEFIT PLAN
Titan
Trucking offers a 401(k) plan. Employees are eligible to participate in the plan on the first day of the month following the date of
hire. Employees may defer up to $
Employer
contributions for the three months ended March 31, 2025 and 2024 were $
NOTE 15 – MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
As
of December 31, 2023, the Company was authorized to issue a total of shares of its Preferred Stock in one or more series,
and authorized to issue shares of common stock. As a result of the redomicile and effective January 10, 2024, the authorized
capital stock of the Company was amended to
On March 6, 2025, the Company’s board of directors designated a series of Preferred Stock (“Series C Preferred Stock”) consisting of shares that were designated Series C Convertible Preferred Stock.
| 31 |
Series A Preferred Stock
As a result of the redomicile and effective January 10, 2024, each share of the Company’s Series C Convertible Preferred Stock issued and outstanding immediately prior to the effective time of the redomicile was exchanged for one share of Series A Convertible Preferred Stock of Titan (the “Series A Preferred Stock”), which has substantially the same rights and preferences as the Series C Preferred Stock.
Each
outstanding share of Series A Convertible Preferred Stock has a par value of $ and is convertible into shares of the Company’s
common stock at any time commencing after the issuance date. The Series A Convertible Stock has voting rights equivalent to the voting
rights of the common stock the holder would receive upon conversion. Upon any liquidation, dissolution, or winding-up of the Company,
whether voluntary or involuntary (a “Liquidation”), the Series A Holders shall be entitled to receive, on a pro-rata basis,
the first $
Series B Preferred Stock Offering
On
April 5, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) dated March 29, 2024 with an
accredited investor, pursuant to which, on such date and at later closings of the transactions contemplated by the SPA, such
investor and the additional investors who signed the SPA agreed to purchase shares of the Company’s Series B Convertible
Preferred Stock. In addition, in connection with the issuance of the Series B Preferred Stock, the purchasers received
On
May 30, 2024, the Company issued 422,200 shares of Series B Preferred Stock and warrants to purchase an aggregate of shares
of common stock for an aggregate purchase price of $
In connection with the issuance, the Company entered into a Registration Rights Agreement whereby the Company agreed to file a registration statement registering the resale of the shares of common stock issuable upon conversion of the Series B Preferred Stock and upon exercise of the warrants within 20 calendar days of the earlier of (i) the date of the consummation of the listing of the Common Stock on any of the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, or their respective successors and (ii) the six-month anniversary of the Registration Rights Agreement (the “Trigger Date”). The Company agreed to use its best efforts to have the registration statement declared “effective” within 60 calendar days from the Trigger Date.
The
Company determined the Series B Preferred Stock is classified as temporary mezzanine equity because redemption could be required at (1)
a fixed or determinable date, (2) at the option of the holder, and (3) upon occurrence of a contingent event. The Company valued the
redemption feature based on the present value of future cash flows using the following assumptions, (1) term of years, (2) dividend
rate of % and (3) effective interest rate of %. For the three months ended March 31, 2025 the Series B Preferred Stock related
to the Offering was accreted $
Additional Series B Preferred Stock Issuances
On
April 12, 2024, the Company issued shares of Series B Preferred Stock to extend the term of the Michaelson Note until June 30,
2024 (Note 9 – Note Payables). The redemption feature is recorded at fair value and will be accreted to redemption value when it
is deemed probable to be exercised. The Company valued the redemption feature at fair value based on the present value of future cash
flows using the following assumptions, (1) term, (2) dividend rate, (2) effective interest rate, (3) and redemption value of $
On
June 25, 2024, the Company issued shares of Series B Preferred Stock to investors in exchange for equity interests for proceeds
received in prior periods. The redemption feature is recorded at fair value and will be accreted to redemption value when it is deemed
probable to be exercised. The Company valued the redemption feature at fair value based on the present value of future cash flows using
the following assumptions, (1) term, (2) dividend rate, (2) effective interest rate, (3) and redemption value of $
On
July 2, 2024, the Company signed four Exchange Subscription Agreements with four of the Company’s lenders (Note 9 –
Notes Payable). In accordance with the terms of the Exchange Subscription Agreements, an aggregate of $
SCHEDULE OF SERIES B PREFERRED STOCK
| Balance as of December 31, 2024 | $ | |||
| Balance | $ | |||
| Accretion of Series B Preferred Stock due to Offering | ||||
| Accretion of Series B issuances | ||||
| Accretion of Series B issuances | ||||
| Accretion of Series B issuances | ||||
| Balance as of March 31, 2025 | $ | |||
| Balance | $ |
| 32 |
Series C Preferred Stock
On March 6, 2025, the Company’s board of directors designated a series of Preferred Stock (“Series C Preferred Stock”) consisting of shares that were designated Series C Convertible Preferred Stock. As of March 31, 2025 there were shares of Series C Preferred Stock authorized. As of March 31, 2025 the Company had shares of Series C Stock issued and outstanding.
Each
share of Series C Preferred Stock has a stated value of $ and is convertible into a number of shares of Common Stock equal to
Holders of Series C Preferred Stock are entitled to receive dividends on shares of Series C Preferred Stock equal (on an as-if-converted-to-Common-Stock basis disregarding for such purpose any conversion limitations) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock. Upon the liquidation or dissolution of the Company, the holders of Series C Preferred Stock will be entitled to receive out of the assets of the Company, whether capital or surplus, the same amount that a holder of Common Stock would receive if the Series C Preferred Stock were fully converted (disregarding for such purposes any conversion limitations) to Common Stock, which such amounts following will be paid pari passu with all holders of Common Stock.
On
February 10, 2025, the Company and certain investors agreed to subscriptions agreements pursuant to which the Company issued the investors
shares of Series C Preferred Stock in exchange for proceeds of $
Common Stock
As of March 31, 2025 and December 31, 2024, the Company had and shares of common stock issued and outstanding, respectively.
Under the terms of the Company’s articles of incorporation, holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders, including the election of directors, and do not have cumulative voting rights. The holders of outstanding shares of common stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends at such times and in such amounts as the Company’s board of directors from time to time may determine. The common stock is not entitled to pre-emptive rights and is not subject to conversion or redemption. Upon liquidation, dissolution or winding up of the Company, the assets legally available for distribution to stockholders are distributable ratably among the holders of common stock after payment of liquidation preferences, if any, on any outstanding shares of preferred stock and the payment of other claims of creditors. The rights, preferences and privileges of holders of common stock are subject to and may be adversely affected by the rights of the holders of shares of outstanding preferred stock and any series of preferred stock the Company may designate and issue in the future.
During the three months ended March 31, 2025 and 2024, the Company issued and shares of common stock due to exercises of share rights from common stock rights, respectively.
On
February 10, 2025 the Company and a consultant effected a settlement agreement and release related to the March 2023 Agreement. As a
result, the Company agreed to settle all amounts owed due to the March 2023 Agreement in exchange for a payment of $
| 33 |
Warrants
As a result of the redomicile and effective January 10, 2024, all the Company’s outstanding warrants were assumed by Titan and now represent warrants to acquire shares of Titan’s common stock. The following schedule summarizes the changes in the Company’s common stock warrants during the three months ended March 31, 2025 and 2024:
SCHEDULE OF CHANGES IN COMMON STOCK WARRANTS
| Weighted | Weighted | |||||||||||||||||||
| Warrants Outstanding | Average | Average | ||||||||||||||||||
| Number | Exercise | Remaining | Aggregate | Exercise | ||||||||||||||||
| Of | Price | Contractual | Intrinsic | Price | ||||||||||||||||
| Shares | Per Share | Life | Value | Per Share | ||||||||||||||||
| Balance at December 31, 2024 | $ | – | $ | $ | ||||||||||||||||
| Warrants granted | $ | – | $ | $ | ||||||||||||||||
| Warrants exercised | ( |
) | $ | - | $ | - | $ | - | ||||||||||||
| Warrants expired/cancelled | ( |
) | $ | - | $ | - | $ | - | ||||||||||||
| Balance at March 31, 2025 | $ | – | $ | $ | ||||||||||||||||
| Exercisable at March 31, 2025 | $ | – | $ | $ | ||||||||||||||||
| Balance at December 31, 2023 | $ | – | $ | $ | ||||||||||||||||
| Warrants granted | $ | $ | $ | |||||||||||||||||
| Warrants exercised | $ | - | - | $ | - | $ | - | |||||||||||||
| Warrants expired/cancelled | ( |
) | $ | – | - | $ | - | $ | - | |||||||||||
| Balance at March 31, 2024 | $ | – | $ | $ | ||||||||||||||||
| Exercisable at March 31, 2024 | $ | – | $ | $ | ||||||||||||||||
| 34 |
On
January 5, 2024, the Company issued
On
May 30, 2024, the Company issued shares of Series B Preferred Stock and
On
July 2, 2024, the Company signed four Exchange Subscription Agreements with four of the Company’s lenders (Note 9 – Notes
Payable). In accordance with the terms of the Exchange Subscription Agreements, an aggregate of $
On
August 12, 2024, the Company issued Calvary Fund I
Between
October 15, 2024 and December 26, 2024 the Company issued the 2024 Convertible Notes along with
On
January 3, 2025 the Company issued common stock warrants as compensation for services provided in connection with the Series
B Offering. The warrants mature on
On March 19, 2025 the holder of warrants exercised their warrants in a cashless exercise. As a result, the holder received shares of common stock. On April 3, 2025, the holder of common stock warrants exercised their warrants in a cashless exercise. As a result, the holder received shares of common stock (Note 19 – Subsequent Events).
Right to Receive Common Shares
The Company’s Series A Rights obligate the Company to issue common stock (“Series A Right Shares”) to the holder without any additional consideration. The number of Series A Right Shares is fixed, and is only subject to customary non-price based ratable adjustments, such as stock splits, and stock combinations. The Series A Rights are exercisable immediately and expire five years after the issuance date. The Series A Rights require the Company to hold in reserve the total number of shares of common stock that would need to be exercised in order meet the obligations of the Series A Rights.
The Company’s Series B Rights obligate the Company to issue common stock (“Series B Right Shares”) to the holder without any additional consideration. The number of Series B Right Shares is fixed and is only subject to customary non-price based ratable adjustments, such as stock splits, and stock combinations. The Company’s Series B Rights are currently exercisable and expire five years after the issuance date. The Series B Rights require the Company to hold in reserve the total number of shares of common stock that would need to be exercised in order meet the obligations of the Series B Rights.
The Company assessed the Series A Rights and Series B Rights for appropriate balance sheet classification and concluded that the Series A Rights and Series B Rights are freestanding equity-linked financial instruments that meet the criteria for equity classification under ASC 480 and ASC 815. Accordingly, they are classified as equity and accounted for as a component of additional paid-in capital at the time of issuance. The Company also determined that the Series A Rights and Series B Rights should be included in the determination of basic and diluted earnings per share in accordance with FASB ASC 260, Earnings per Share.
As a result of the redomicile and effective January 10, 2024, each of the Company’s Series A Right to Receive Common Stock issued and outstanding immediately prior to the redomicile was exchanged for one Series A Right to Receive Common Stock of Titan, which has substantially the same rights and preferences as the Company’s original Series A Rights to Acquire Common Stock. Also, each of the Company’s Series B Right to Receive Common Stock issued and outstanding immediately prior to the redomicile was exchanged for one Series B Right to Receive Common Stock of Titan, which has substantially the same rights and preferences as the Company’s original Series B Rights to Acquire Common Stock. At December 31, 2024, there were Series A Rights outstanding and Series B Rights outstanding. At March 31, 2025, there were Series A Rights outstanding and Series B Rights outstanding.
| 35 |
Effective January 10, 2024, the Company adopted the Titan Environmental Solutions Inc. 2023 Equity Incentive Plan (the “2023 Plan”). The 2023 Plan limits the shares of common stock authorized to be awarded as stock awards to shares. The 2023 Plan terminates upon the earlier of 1) the earliest date at which all shares awarded under the plan have been satisfied in full or terminated and there remain no new shares authorized to be issued under the plan, or 2) the tenth anniversary of the plan’s effective date.
On
January 3, 2025, the Company issued
Stock Options
SCHEDULE OF STOCK OPTION ACTIVITY
| Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Life (Years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding as of December 31, 2024 | $ | |||||||||||||||
| Granted | - | - | ||||||||||||||
| Cancelled or forfeited | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Outstanding as of March 31, 2025 | ||||||||||||||||
| Exercisable as of March 31, 2025 | $ | |||||||||||||||
On December 31, 2024, the Company issued stock options to management and members of the Board of Directors. The stock options vested immediately upon issuance, expire after a term of , and have an exercise price of $ per share. As of March 31, 2025 and December 31, 2024, there was unrecognized stock-compensation related to unvested stock options.
The Company recognizes stock-based compensation expense from stock options using the grant date fair-value. The fair value of options awarded is measured on the grant date using the Black-Scholes option-pricing model. There was not any stock-based compensation recognized from stock options during the three months ended March 31, 2025 and 2024.
NOTE 17 – COMMITMENTS AND CONTINGENCIES
Commitments
On
March 21, 2023, Titan Trucking entered into a consulting agreement (the “March 2023 Agreement”) with a consultant for
consulting services related to the consolidated waste industry.
On
February 10, 2025 the Company and the consultant effected a settlement agreement and release terminating the March 2023 Agreement. As
a result, the Company agreed to settle all amounts owed due to the March 2023 Agreement in exchange for a payment of $
Related Party Commitments
On
April 1, 2023, Titan Trucking entered into a
As
of March 31, 2025 and December 31, 2024, the Company owed a related party vendor $
On
May 20, 2023, the Company entered into a management consulting agreement (the “May 2023 Agreement”) with a related party
consultant. The consultant agreed to assist the Company identify acquisition and merger targets, as well provide other merger and acquisition
related services, such as due diligence services, and services related the integration of acquisition targets. The May 2023 Agreement
has a term of two years, and its term shall automatically be extended by additional one-year term extensions unless the agreement is
terminated by either party prior to the end of the current term.
In
conjunction with the acquisition of Standard (Note 3 – Business Combinations), the Company engaged the Sellers for consulting
services in the period following the Standard Acquisition. Dominic Campo and Sharon Campo each signed a consulting agreement (the
“Standard Consulting Agreements”) with the Company.
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Contingencies
From time to time, the Company is involved in routine litigation that arises in the ordinary course of business. Currently, there is no litigation pending against the Company that could materially affect the Company other than as follows:
On May 31, 2024 (the “Standard acquisition date”), the Company completed a transaction to acquire Standard. Titan agreed to issue shares of Series A as consideration and an additional shares of Series A because Closing did not occur prior to February 2, 2024, for a total of shares of Series A Preferred. The other shares have not been issued to the Sellers yet because they are being held back to satisfy any indemnification claims made by Titan, which is in accordance with the terms of the agreement. These will be released on the 12th month anniversary of the Closing, provided there are no valid claims.
In
February 2025, a complaint was filed against the Company, the Company’s operating subsidiaries and Jeffrey Rizzo, the former Chief
Operating Officer of the Company (“Rizzo”), in the Supreme Court of the State of New York, Niagara County. The complaint
arises out of a sale of future receipts agreement entered into by the plaintiff and the defendants in January 2025 whereby the plaintiff
alleges that it agreed to purchase $
On or about April 3, 2025, a Demand for Arbitration was filed with the American Arbitration Association (the “AAA”) in Michigan against Titan Trucking, LLC (“Titan Trucking”), a wholly-owned subsidiary of the Company, by O’Keefe & Associates Consulting, L.L.C. (“O’Keefe”). In its Demand for Arbitration, O’Keefe alleges that on or about June 27, 2022, Titan Trucking entered into an agreement with O’Keefe pursuant to which Titan Trucking engaged O’Keefe to be its “exclusive financial advisor” relating to one or more “Transactions” and that Titan Trucking subsequently breached that agreement. O’Keefe also asserts claims against Titan Trucking for breach of the covenant of good faith and fair dealing, and for unjust enrichment, all based on the same underlying facts.
Titan Trucking declined to submit an answer by the May 13, 2025 deadline for a response to the Demand for Arbitration, thereby denying all allegations asserted by O’Keefe therein. As of the filing date of the consolidated financial statements, the parties are in the process of selecting an arbitrator, and are working with the AAA to define the issues to be addressed and the timetable for proceeding.
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NOTE 18 – SEGMENT REPORTING
Operating segments are components of an enterprise about which separate financial information is available and is evaluated regularly by management, namely the Chief Operating Decision Maker (“CODM”) of an organization, in order to determine operating and resource allocation decisions. By this definition, the Company has identified its Chief Executive Officer (“CEO”) as the CODM. The Company’s CODM makes decisions regarding resource allocation and performance assessment using net loss from continuing operations as presented within the consolidated statements of operations.
Significant expenses within net loss from continuing operations include revenue, cost of revenues, salaries and salary related costs, stock based compensation, professional fees, amortization expense, and general and administrative expenses, which are each separately presented on the Company’s consolidated statements of operations. Other segment items within net loss from continuing operations include interest expense, net of interest income, and other expense. The Company’s long-lived assets consist primarily of property and equipment, net and intangibles assets, net arising from the acquisition of Standard.
Prior to the sale of Recoup, the Company operated in two segments: Trucking and Digester. Following the sale of Recoup (Note 4 – Discontinued Operations), the Company manages its business activities on a consolidated basis and operates and reports as a single operating segment: Trucking Segment.
Trucking Segment: The Trucking Segment generates service revenues and incurs expenses by transporting environmental and other waste for customers
(Former) Digester Segment: The Digester Segment primarily generated revenues and incurred expenses through the production and sale of ‘digester’ equipment to customers. The segment also generated revenue through related services such as digester maintenance and software services.
The Company believes that, prior to the sale of Recoup, this structure reflected its then-current operational and financial management, and that it provided the best structure for the Company to focus on growth opportunities while maintaining financial discipline. The factors used to identify the operating segments were the segment’s revenue streams and customer base, the reporting structure for operational and performance information within the Company, and management’s decision to organize the Company around the segment’s revenue generating activities.
NOTE 19 – SUBSEQUENT EVENTS
Subsequent events were evaluated through the issuance date of these financial statements. There were no subsequent events other than those described below:
Exercise of Warrants
On April 3, 2025, the holder of common stock warrants exercised their warrants in a cashless exercise. As a result they received shares of common stock (Note 15 – Mezzanine Equity and Stockholders’ Equity).
Issuance of Notes Payables
On
April 15, 2025 Standard issued Senior Notes (the “April 2025 Note Payables”) to certain investors in exchange for proceeds
of $
On
May 6, 2025, Standard issued Senior Notes (the “May 2025 Note Payables”) to certain investors in exchange for proceeds of
$
Settlement Agreement
In July 2023, a complaint was
filed against us and Ajay Sikka, a director of our company and our former chief executive officer, in the Circuit Court of the Nineteenth
Judicial Circuit, Lake County, Illinois titled Alta Waterford, LLC v. TraQiQ, Inc. and Ajay Sikka (Case No. 23LA00000476)
for breach of contract. In the complaint, the plaintiff alleges that we breached contracts for the payment of compensation for investor
relations and web development and copyright services allegedly provided by the plaintiff, which payment obligation was personally guaranteed
by Mr. Sikka. The complaint seeks damages in the amount of $
On April 29, 2025, we entered
into a settlement and release agreement with the plaintiff to settle all claims made by the plaintiff in this litigation. Pursuant to
such agreement, we issued to the plaintiff
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| ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
As used in this “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” except where the context otherwise requires, the term “we,” “us,” “our,” or “the Company,” refers to the business of Titan Environmental Solutions Inc.
The following discussion should be read in conjunction with the condensed consolidated financial statements as of and for the three months ended March 31, 2025 and 2024, including the notes to those statements, appearing elsewhere in this report, as well as management’s discussion and analysis and the consolidated financial statements included in our 2024 Annual Report on Form 10-K. This section and other parts of this quarterly report on Form 10-Q contain forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements.”
Overview of Our Company
We are an integrated provider of non-hazardous solid waste and recycling collection, transportation and disposal services. We conduct our business primarily through our principal operating subsidiary, Standard Waste Services, LLC (“SWS”), which provides waste and recycling collection and disposal services to industrial generators and commercial contractors located in Michigan and commenced operations in 2017. We acquired SWS in May 2024 through our Titan Trucking, LLC (“Titan Trucking”) subsidiary, a non-hazardous solid waste management company that commenced operations in May 2017 We operate in a highly recession resistant industry given the ongoing generation of waste and recyclable materials. Our goal is to provide our customers with safe and efficient options for the disposal and recycling of their waste streams. SWS has begun to create the infrastructure needed to expand its operations organically and through strategic acquisitions and market development opportunities across the Midwest, Northeast and Southeast regions of the United States.
Sale of Recoup Technologies, Inc. (“Recoup”)
On October 31, 2024, we completed the sale (the “Recoup Sale”) of our wholly-owned subsidiary, Recoup Technologies, Inc. (“Recoup”), which qualified for reporting as a discontinued operation. As a result, Recoup’s results, including the income on disposal, are presented in a single line item, income from discontinued operations, after tax in our consolidated statement of operations and excluded from continuing operations for all periods presented. Accordingly, any discussion of our historical financial information below reflects Recoup’s results as a discontinued operation and amounts and disclosures below pertain to our continuing operations for all periods presented, unless otherwise noted.
We received consideration with a total purchase price of $1,000,000 for the sale of Recoup. The consideration was composed of the forgiveness of $750,000 of accounts payables and the receipt of a $250,000 note receivable. We also agreed that, for a period of five years from the closing date, we will not engage in a business that competes with the business of Recoup. Recoup is in the business of marketing an aerobic digestion technology solution for the disposal of food waste at the point of generation. Please see Note 4 – Discontinued Operations, to the consolidated financial statements included in Part I, Item 1. Financial Statements, of this Quarterly Report on Form 10-Q for further details on the transaction.
Standard Waste Services, LLC Business Combination
On May 31, 2024 (the “SWS acquisition date”), we completed the acquisition of SWS. The total purchase consideration in connection with the acquisition was approximately $16.1 million. The purchase price consisted of $4,652,500 of cash (inclusive of a $652,500 cash deposit paid on January 8, 2024), the issuance of two promissory notes in the aggregate principal amount of $2,859,898, and the issuance of 612,000 shares of our Series A Preferred Stock valued at $8,568,000.
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SWS is a provider of contracted commercial roll-off and front-load waste services, including dumpster compactor rentals, to customers principally in Southeast Michigan. SWS provides services to both commercial and industrial customers.
The transaction was accounted for under the acquisition method of accounting, and accordingly, the results of SWS’s operations are included within the Trucking Segment for 2024.
The purchase price was preliminarily allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition on a provisional basis. The purchase price exceeded the estimated fair value of the net identifiable tangible and intangible assets acquired and, as such, the excess was allocated to goodwill.
The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date.
| Estimated | ||||
| Description | Fair Value | |||
| Assets: | ||||
| Cash | $ | 2,545 | ||
| Accounts receivable | 1,387,932 | |||
| Property and equipment | 6,995,080 | |||
| Prepaid expenses and other current assets | 12,900 | |||
| Other receivables | 1,600 | |||
| Right-of-use-asset | 294,431 | |||
| Intangibles and goodwill | 12,332,347 | |||
| $ | 21,026,835 | |||
| Liabilities: | ||||
| Accounts payable and accrued expenses | $ | (1,235,218 | ) | |
| Accrued payroll and related taxes | (46,189 | ) | ||
| Operating lease liability, current | (83,654 | ) | ||
| Finance lease liability, current | (29,230 | ) | ||
| Notes payable | (3,271,231 | ) | ||
| Operating lease liability, noncurrent | (210,778 | ) | ||
| Finance lease liability, noncurrent | (70,137 | ) | ||
| $ | (4,946,437 | ) | ||
| Net fair value of assets (liabilities) acquired | $ | 16,080,398 | ||
Certain estimated fair values for the acquisition, including goodwill, anticipated intangible assets, and property and equipment, are not yet finalized. The anticipated intangible assets consist of contractual backlog, customer relationships and tradenames. The purchase price was preliminarily allocated based on information available at the acquisition date and is subject to change as we complete our analysis of the fair values at the date of the acquisition during the measurement period not to exceed one year, as permitted under ASC 805 – Business Combinations. The fair value of the promissory notes issued as consideration are not yet finalized and any adjustments to the preliminary fair value will change the goodwill recognized.
As a result of the SWS acquisition, we recognized a total of $12.3 million of intangibles and goodwill. The goodwill represents the value expected to be created through new customer relationships for our company, access to new market opportunities, and expected growth opportunities. The goodwill resulting from the acquisition is susceptible to future impairment charges.
Reincorporation as Titan Environmental Solutions Inc.
Effective January 10, 2024, and pursuant to an Amended and Restated Agreement and Plan of Merger (the “Reincorporation Agreement”), we merged with and into (the “reincorporation”) our wholly-owned subsidiary, Titan Environmental Solutions Inc., a Nevada corporation, with the Nevada corporation as the surviving entity. As a result of the reincorporation, our jurisdiction of incorporation was changed from California to Nevada and our corporate name was changed from “TraQiQ, Inc.” to “Titan Environmental Solutions Inc.” The individuals serving as our executive officers and directors as of the effective time of the reincorporation continued to serve in such respective capacities with our company following the effective time of the reincorporation.
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Change in Equity Instruments and Share Authorizations
Pursuant to the Reincorporation Agreement, each share of our common stock issued and outstanding immediately prior to the reincorporation was converted into one share of the Nevada corporation’s common stock. Additionally, each share of our Series C Convertible Preferred Stock issued and outstanding immediately prior to the effective time of the reincorporation was converted into one share of Series A Convertible Preferred Stock of the Nevada corporation (the “Series A Preferred Stock”), which has substantially the same rights and preferences as the Series C Preferred Stock. Each of our Series A Rights to Receive Common Stock issued and outstanding immediately prior to the reincorporation was converted into one Series A Right to Receive Common Stock of the Nevada corporation, which has substantially the same rights and preferences as our original Series A Rights to Acquire Common Stock. Each of our Series B Rights to Receive Common Stock issued and outstanding immediately prior to the reincorporation was converted into one Series B Right to Receive Common Stock of the Nevada corporation, which has substantially the same rights and preferences as our original Series B Rights to Acquire Common Stock.
As a result of the reincorporation, all of our outstanding warrants were assumed by the Nevada corporation and now represent warrants to acquire shares of the Nevada corporation’s common stock. The reincorporation increased our authorized capital stock to 425,000,000 total shares, consisting of 400,000,000 shares of common stock, par value $0.0001 per share, and 25,000,000 shares of preferred stock, par value $0.0001 per share, of which 630,900 shares were designated “Series A Convertible Preferred Stock”. In connection with the reincorporation, we also adopted the Titan Environmental Solutions Inc. 2023 Equity Incentive Plan.
Change in Trading Symbol of Common Stock
Following the reincorporation and effective on January 16, 2024, the trading symbol of our common stock changed from “TRIQ” to “TESI”.
Authorization of Reverse Stock Split
On September 10, 2024, our board of directors was authorized to effect a reverse stock split (the “Reverse Stock Split”) on the basis of one share of our common stock for up to 100 shares of our common stock, at an exact ratio at the discretion of the board of directors, at any time prior to September 10, 2025. In connection with the Reverse Stock Split, if one is approved by our board of directors, our board of directors may also amend our articles of incorporation to reduce the number of authorized shares of common stock to a number of shares, as determined by the board of directors, that is not less than 110% of the number of outstanding shares of common stock on a fully-diluted basis after giving effect to the Reverse Stock Split.
Going Concern
For the three months ended March 31, 2025, we had a net loss of $5,335,697. We had a working capital deficit of $20,432,686 as of March 31, 2025 (deficit of $17,160,714 as of December 31, 2024). These conditions raise substantial doubt about our ability to continue as a going concern for a period of time within one year after the date on which our consolidated financial statements were issued.
Our continuation as a going concern is contingent upon our ability to obtain additional financing and to generate revenue and cash flow to meet our obligations on a timely basis. We will continue to seek to raise additional funding through debt or equity financing during the next twelve months from the date of issuance of these consolidated financial statements. Management believes that actions presently being taken to obtain additional funding provide the opportunity for us to continue as a going concern. There is no guarantee we will be successful in achieving these objectives. We have been successful in attracting substantial capital from investors interested in our current public status that has been used to support our ongoing cash outlays. This includes raising proceeds of approximately $1.0 million during the three months ended March 31, 2025 from the issuance of Series C Preferred Stock.
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Employee Benefit Plan
Titan Trucking offers a 401(k) plan. Employees are eligible to participate in the plan on the first day of the month following the date of hire. Employees may defer up to $23,500 for 2025 and $23,000 for 2024. Titan Trucking is required to contribute on behalf of each eligible participating employee. Titan Trucking will match 50% of the participants deferral not to exceed 3% of employee compensation. Employees will share in the matching contribution regardless of the amount of service completed during the plan year. Employees will become 100% vested in the employer matching contributions after one year of service.
Employer contributions for the three months ended March 31, 2025 and 2024 were $1,626 and $3,129, respectively.
Results of Operations and Financial Condition for the Three Months Ended March 31, 2025 as Compared to the Three Months Ended March 31, 2024
| Three Months Ended | ||||||||||||
| March 31, | March 31, | Percent | ||||||||||
| 2025 | 2024 | Change | ||||||||||
| Revenue | $ | 1,750,172 | $ | 1,187,582 | 47 | % | ||||||
| Cost of revenues | 1,938,767 | 1,466,469 | 32 | % | ||||||||
| Gross loss | (188,595 | ) | (278,887 | ) | -32 | % | ||||||
| Operating expenses | ||||||||||||
| Salaries and salary related costs | 422,057 | 429,513 | -2 | % | ||||||||
| Stock based compensation | 473,770 | - | 100 | % | ||||||||
| Professional fees | 682,005 | 832,746 | -18 | % | ||||||||
| Amortization expense | 17,187 | 17,188 | 0 | % | ||||||||
| General and administrative expenses | 211,998 | 342,250 | -38 | % | ||||||||
| Total operating expenses | 1,807,017 | 1,621,697 | 11 | % | ||||||||
| Operating loss | (1,995,612 | ) | (1,900,584 | ) | 5 | % | ||||||
| Other income (expense) | ||||||||||||
| Change in fair value of derivative liability | - | 17,500 | -100 | % | ||||||||
| Interest expense, net | (3,414,368 | ) | (510,454 | ) | 569 | % | ||||||
| Gain on refinancing | 140,442 | - | 100 | % | ||||||||
| Gain on settlement of accounts payable | 131,024 | - | 100 | % | ||||||||
| Other expense | (81,347 | ) | 42,635 | -291 | % | |||||||
| Loss on sale of equipment | (56,917 | ) | - | 100 | % | |||||||
| Loss on troubled debt restructuring | (58,919 | ) | - | 100 | % | |||||||
| Total other income (expense) | (3,340,085 | ) | (450,319 | ) | 642 | % | ||||||
| Provision for income taxes | - | - | 0 | % | ||||||||
| Net loss from continuing operations, after tax | (5,335,697 | ) | (2,350,903 | ) | 127 | % | ||||||
| NET INCOME FROM DISCONTINUED OPERATIONS, AFTER TAXES | - | 91,959 | -100 | % | ||||||||
| Net loss | $ | (5,335,697 | ) | $ | (2,258,944 | ) | 136 | % | ||||
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Revenue
For the three months ended March 31, 2025 compared to March 31, 2024, our revenues increased by $562,590, or 47%, from $1,187,582 to $1,750,172. The increase was primarily as a result of our acquisition of SWS on May 31, 2024, and the resulting revenue generated by the combined operations of our company and SWS. We also expanded our operations with the acquisition of new containers and other fixed assets which, as a result, increased the revenue generated during the period.
Cost of Revenue
For the three months ended March 31, 2025 compared to March 31, 2024, our cost of revenue increased by $472,298, or 32%, from $1,466,469 to $1,938,767. The increase was primarily a result of the acquisition of SWS on May 31, 2024, and the resulting increased revenue caused by the combined operations of our company and SWS. We also have continued to expand our operations with the acquisition of new containers and other fixed assets which also resulted in increased cost of revenues.
Operating Expenses
For the three months ended March 31, 2025 compared to March 31, 2024, our salary and salary-related costs decreased by $7,456 or 2%, from $429,513 to $422,057. There were no significant changes in our salary and salary-related costs.
For the three months ended March 31, 2025 compared to March 31, 2024, our stock-based compensation increased by $473,770, or 100%, from $0 to $473,770. The stock-based compensation incurred during the three months ended March 31, 2025 was due to warrants issued by the Company for advisory services received in connection with the Company’s Series B Preferred Stock Offering in 2024.
For the three months ended March 31, 2025 compared to March 31, 2024, our professional fees decreased by $150,741, or 18%, from $832,746 to $682,005. The decrease was attributed primarily to decreased consulting, accounting and legal fees incurred due to our decreased acquisition activities.
For the three months ended March 31, 2025 compared to March 31, 2024, our amortization expense decreased by $1, or 0%, from $17,188 to $17,187. There were no significant changes in our amortization expense.
For the three months ended March 31, 2025 compared to March 31, 2024, our general and administrative expenses decreased by $130,252, or 38%, from $342,250 to $211,998. The decrease was primarily due to decreased rent expense from our operating leases and decreased marketing and advertising expenses.
Interest Expense, net of Interest Income
For the three months ended March 31, 2025 compared to March 31, 2024, our interest expense, net of interest income increased by $2,501,114, or 569%, from $510,454 to $3,414,368. The increase was due to an increase in debt instruments accruing interest on our consolidated balance sheets as a result of the acquisition of SWS. As well as our issuance of new debt instruments subsequent to March 31, 2024. The increased number of debt instruments resulted in increased interest expense. Additionally, we used funds from our financing liability to repay a large number of collateralized notes payables early. This resulted in an accelerated payment of interest and an accelerated amortization of debt discounts during the first quarter of 2025.
Net Loss from Continuing Operations
For the three months ended March 31, 2025 compared to March 31, 2024, our net loss from continuing operations increased by $2,984,794, or 127%, from $2,350,903 to $5,335,697 due primarily to the increase in interest expense, net of interest income, the increase in cost of revenues, and the increase in stock-based compensation. The increase in net loss from continuing operations was primarily offset by a decrease in professional fees, a decrease in general and administrative expenses, and the increase in revenues.
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Segment Analysis
Operating segments are components of an enterprise about which separate financial information is available and is evaluated regularly by management, namely the Chief Operating Decision Maker (“CODM”) of an organization, in order to determine operating and resource allocation decisions. By this definition we have identified our Chief Executive Officer as the CODM. Our CODM makes decisions regarding resource allocation and performance assessment using net loss from continuing operations as presented within the consolidated statement of operations included in Part I, Item 1. Financial Statements, of this Quarterly Report on Form 10-Q.
Prior to the Recoup Sale, we operated in two segments: Trucking and Digester. Following the Recoup Sale, our continuing operations operate and report solely in the Trucking Segment.
Trucking Segment: The Trucking Segment generates service revenues and incurs expenses by transporting environmental and other waste for customers.
(Former) Digester Segment: The Digester Segment primarily generated revenues and incurred expenses through the production and sale of ‘digester’ equipment to customers. The segment also generated revenue through related services such as digester maintenance and software services.
We believed that this structure reflected our operational and financial management prior to the Recoup Sale, and that it provided the best structure for our company to focus on growth opportunities while maintaining financial discipline. The factors used to identify the operating segments were the segment’s revenue streams and customer base, the reporting structure for operational and performance information within our company, and our decision to organize our company around the segment’s revenue generating activities.
Adjusted EBITDA (Non-GAAP Financial Measure)
We have included in this report Adjusted EBITDA, a measure of financial performance that is not defined by GAAP. We believe that this measure provides useful information to investors and include this measure in other communications to investors.
For this non-GAAP financial measure, we are providing below a reconciliation of the differences between the non-U.S. GAAP measure and the most directly comparable GAAP measure, an explanation of why our management and board of directors believe the non-GAAP measure provides useful information to investors and any additional purposes for which our management and board of directors use the non-GAAP measures. This non-GAAP measure should be viewed in addition to, and not in lieu of, the comparable GAAP measures.
We define Adjusted EBITDA as net loss from continuing operations before interest expense (net of interest income), income taxes, depreciation and amortization, and certain non-recurring and non-cash transactions such as stock-based compensation, and the change in fair value of derivative liabilities. Our management believes that this presentation provides useful information to management and investors regarding our core trends by providing a more direct view of the underlying costs and performance. In addition, management uses this measure for reviewing our financial and operational results. Adjusted EBITDA is a non-GAAP measure and may not be comparable to similarly titled measures reported by other companies.
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We do not consider Adjusted EBITDA in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of Adjusted EBITDA is that it excludes certain expenses and income that are required by GAAP to be recorded in our consolidated financial statements. In addition, Adjusted EBITDA is subject to inherent limitations as this metric reflects the exercise of judgment by management about which expenses and income are excluded or included in determining Adjusted EBITDA. In order to compensate for these limitations, management presents Adjusted EBITDA in connection with GAAP results. A reconciliation of net loss to Adjusted EBITDA is as follows:
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net loss from continuing operations | $ | (5,335,697 | ) | $ | (2,350,903 | ) | ||
| Interest expense, net of interest income | 3,414,368 | 510,454 | ||||||
| Income taxes | - | - | ||||||
| Depreciation and amortization (a) | 334,392 | 129,264 | ||||||
| (1,586,937 | ) | (1,711,185 | ) | |||||
| Non-recurring, non-cash transactions: | ||||||||
| Change in fair value of derivative liability (b) | - | (17,500 | ) | |||||
| Stock-based compensation | 473,770 | - | ||||||
| Gain on refinancing (c) | (140,442 | ) | - | |||||
| Gain on settlement of accounts payable (d) | (131,024 | ) | - | |||||
| Loss on sale of equipment (e) | 56,917 | - | ||||||
| Loss on troubled debt restructuring (f) | 58,919 | - | ||||||
| Adjusted EBITDA | $ | (1,268,797 | ) | $ | (1,728,685 | ) | ||
| (a) | This amount includes $317,205 and $112,076 of depreciation expense included in cost of revenues in the consolidated statements of operations for the three months ended March 31, 2025 and 2024, respectively. |
| (b) | This amount reflects the change in fair value of our derivative liability during the three months ended March 31, 2024 (Note 12 – Derivative Liability in Part I, Item 1. Financial Statements). |
| (c) | On January 6, 2025, we signed an agreement to sell certain equipment to a third-party buyer for $7.5 million and simultaneously lease the equipment from the buyer (the “sale-leaseback”). The proceeds from the sale of the equipment were used by us to repay approximately $5.8 million of principal from collateralized note payables, approximately $83,000 of principal related to our finance lease liability, approximately $589,000 of interest from collateralized note payables and our finance lease liability, and $379,100 of transaction fees. As a result of the repayments, we recorded a gain on refinancing of $140,645 in the consolidated statements of operations (Note 11 – Financing Liability in Part I, Item 1. Financial Statements). |
| (d) | On February 10, 2025, we and a consultant effected a settlement agreement and release terminating a consulting agreement. As a result, we agreed to settle all amounts owed due to the agreement in exchange for a payment of $3,000, the issuance of a promissory note with a principal value of $70,000 and the issuance of 1,500,000 shares of our common stock. As a result of the settlement agreement, we recognized a gain on settlement of accounts payable of $131,024 (Note 17 – Commitments and Contingencies in Part I, Item 1. Financial Statements). |
| (e) | In January 2025, we repaid $136,200 of accounts payable owed to a related party through the sale of $193,118 of front-load containers. As a result, the Company recognized a loss on the sale of equipment of $56,917 (Note 5 – Property and Equipment, Net in Part I, Item 1. Financial Statements). |
| (f) | In February 2025, we and Michaelson agreed to amend the Michaelson Note (the “February Michaelson Amendment”). In accordance with ASC 470-60 “Troubled Debt Restructuring by Debtors” the February Michaelson Amendment qualified for treatment as a Troubled Debt Restructuring. As a result we recognized a loss from troubled debt restructuring of $58,919 in the statements of operations for the three months ended March 31, 2025 (Note 9 – Notes Payable in Part I, Item 1. Financial Statements). |
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Liquidity and Capital Resources
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. As of March 31, 2025, we had $74,980 in cash compared to $2,977 at December 31, 2024, an increase of $72,003, resulting primarily from the proceeds from issuing Series C Preferred Stock. As of March 31, 2025, we had approximately $1,172,000 in accounts receivable compared to approximately $1,212,000 at December 31, 2024.
As of March 31, 2025, we had total current assets of approximately $1.6 million and total current liabilities of approximately $22.0 million, or negative working capital of approximately $20.4 million, compared to total current assets of approximately $1.6 million and total current liabilities of approximately $18.8 million, or negative working capital of $17.2 million at December 31, 2024. This is a decrease in working capital of approximately $3.2 million over the working capital balance at the end of 2024 driven primarily by an increase in accrued interest, an increase in convertible notes payable and an increase in the our financing liability. The increase was offset by a decrease in notes payable and a decrease in accounts payable.
As of March 31, 2025, we had undiscounted obligations in the amount of approximately $15.5 million relating to the payment of indebtedness due within one year. We anticipate meeting our cash obligations on our current indebtedness as of March 31, 2025, primarily through the issuance of debt and equity securities.
Our future capital requirements for our operations will depend on many factors, including the profitability of our businesses, the number and cash requirements of other acquisition candidates that we pursue, and the costs of our operations. We plan to generate positive cash flow from SWS and Titan Trucking to address some of our liquidity needs. However, to execute our business plan, service our existing indebtedness, finance our proposed acquisitions and implement our business strategy, we anticipate that we may need to obtain additional financing from time to time and may choose to raise additional funds through public or private equity or debt financings, a bank line of credit, borrowings from affiliates or other arrangements. We cannot be sure that any additional funding, if needed, will be available on terms favorable to us or at all. Furthermore, any additional capital raised through the sale of equity or equity-linked securities may dilute our current stockholders’ ownership in us and could also result in a decrease in the market price of our common stock. The terms of those securities issued by us in future capital transactions may be more favorable to new investors and may include the issuance of warrants or other derivative securities, which may have a further dilutive effect. Furthermore, any debt financing, if available, may subject us to restrictive covenants and significant interest costs. There can be no assurance that we will be able to raise additional capital, when needed, to continue operations in their current form.
During the three months ended March 31, 2025 and 2024, our capital expenditures were $0 and approximately $735,000, respectively.
We expect our capital expenditures for next 12 months will grow as we continue to expand the SWS operational activities. These capital expenditures will be primarily utilized for equipment needed to generate revenue and for office equipment. We expect to fund such capital expenditures out of our working capital.
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Cash Flows
Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net cash used in operating activities – continuing operations | $ | (1,887,288 | ) | $ | (1,105,206 | ) | ||
| Net cash used in investing activities – continuing operations | 75,000 | (734,923 | ) | |||||
| Net cash provided by financing activities – continuing operations | 1,884,291 | 1,457,247 | ||||||
| Net cash used in operating activities – discontinued operations | - | 282,731 | ||||||
| Net increase (decrease) in cash and cash equivalents | $ | 72,003 | $ | (100,151 | ) | |||
Operating Activities. The net cash used in operating activities for the three months ended March 31, 2025 was primarily used to fund a net loss of approximately $5.3 million, adjusted for non-cash expenses in the aggregate amount of approximately $2.8 million. Non-cash expenses were primarily made up of approximately $1,688,000 of debt discount amortization, $474,000 of stock-based compensation, $342,000 of default fees on convertible notes payable, and $334,000 of depreciation and amortization expense. Approximately $612,000 of cash was generated from net changes in the levels of operating assets and liabilities, primarily related to an increase in accrued interest, and an increase in accounts payable. The cash generated was offset primarily by a decrease in the finance lease liability.
The net cash used by operating activities for the three months ended March 31, 2024 was primarily used to fund a net loss of approximately $2.3 million, adjusted for non-cash income in the aggregate amount of approximately $292,000. Approximately $862,000 was generated by net changes in the levels of operating assets and liabilities, primarily related to increases in accounts payable, increases to accrued interest, increases in accrued expenses and a decrease in the right-of use asset, which was offset in part by decreases in other assets and decreases in the operating lease liability.
Investing Activities. During the three months ended March 31, 2025, we received $75,000 under a note receivable that had been consideration for the sale of a business. During the three months ended March 31, 2024 we did not have any investing activities.
During the three months ended March 31, 2024, our cash used in investing activities was composed of approximately $735,000 used for the acquisition of property and equipment.
Financing Activities. There was approximately $1.9 million in cash generated from financing activities during the three months ended March 31, 2025. This was primarily due to proceeds from the financing liability of $7.6 million and proceeds from the issuance of Series C Preferred Stock of $1,000,000. The cash generated from financing activities was primarily offset by the repayment of notes payable of $6.1 million, transaction costs from the financing liability of $379,000, the repayment of the financing liability of approximately $295,000, and the repayment of related party notes payable of approximately $171,000.
There was approximately $1.5 million of cash generated from financing activities during the three months ended March 31, 2024. The cash provided by financing activities was due primarily to the proceeds from notes payable of approximately $675,000, proceeds from warrants of $650,000, and proceeds from related party note payables of $290,000, offset by the repayment of note payables of $328,000.
Non-Cash Investing and Financing Activities. We note that we had a paid-in kind repayment of accounts payable of $136,200 during the three months ended March 31, 2025. There was also non-cash activity of $142,581 due to the remeasurement of the Series B Preferred Stock to its redemption value, non-cash activity of $944 due to the exercise of share rights into common stock, and non-cash activity of $40 due to the cashless exercise of warrants. Lastly, there was non-cash activity of $108,575 from a measurement period adjustment to accounts payable.
Cash Payments for Interest and Income Taxes. We had approximately $961,000 and $172,000 of cash payments for interest expense for the three months ended March 31, 2025 and 2024, respectively. There were no cash payments for income taxes for the three months ended March 31, 2025 and 2024, respectively.
Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in the notes to our consolidated financial statements. Those material accounting estimates that we believe are the most critical to an investor’s understanding of our financial results and condition are discussed immediately below and are particularly important to the portrayal of our financial position and results of operations and require the application of significant judgment by our management to determine the appropriate assumptions to be used in the determination of certain estimates.
Business Combinations
Under the guidance enumerated in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not considered a business and is accounted for as an asset acquisition at which point, the acquirer measures the assets acquired based on their cost, which is allocated on a relative fair value basis.
Business combinations are accounted for utilizing the fair value of consideration determined by the our management and external specialists. We recognize estimated fair values of the tangible and intangible assets acquired and liabilities assumed as of the acquisition date. Goodwill is recognized as any excess in fair value over the net value of assets acquired and liabilities assumed.
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Goodwill
Goodwill represents the excess of the acquisition price of a business over the fair value of identified net assets of that business. Goodwill has an indefinite lifespan and is not amortized. We evaluate goodwill for impairment at least annually and record an impairment charge when the carrying amount of a reporting unit with goodwill exceeds the fair value of the reporting unit. We have one reporting unit, the trucking unit.
We assess qualitative factors to determine if it is necessary to conduct a quantitative goodwill impairment test. If deemed necessary, a quantitative assessment of the reporting unit’s fair value is conducted and compared to its carrying value in order to determine the impairment charge.
Convertible Instruments
We evaluate our convertible instruments, such as warrants and convertible notes, to determine if those contracts or embedded components of those contracts qualify as equity instruments, derivative liabilities, or liabilities, to be separately accounted for in accordance with FASB ASC 815 “Derivatives and Hedging” (“ASC 815”) and FASB ASC 480 “Distinguishing Liabilities from Equity” (“ASC 480”). The assessment considers whether the convertible instruments are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the convertible instruments meet all of the requirements for equity classification under ASC 815, including whether the convertible instruments are indexed to our own ordinary shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of our control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of the instrument’s issuance, and as of each subsequent balance sheet date while the instruments are outstanding. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.
Embedded conversion options and any related freestanding instruments are recorded as a discount to the host instrument. We allocate proceeds based on the relative fair values of the debt and equity components. The accounting treatment of derivative financial instruments requires that we record embedded conversion options and any related freestanding instruments at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded in earnings each period as non-operating, non-cash income or expense.
Valuations derived from various models are subject to ongoing internal and external verification and review. We determine the fair value of our convertible instruments and derivative liabilities using various valuation models, including the Black-Scholes pricing model. The inputs used in those valuation models involve our judgment and may impact net loss.
Stock-Based Compensation
We account for stock awards to employees and non-employees following FASB ASC Topic 718, Compensation – Stock Compensation by measuring the cost of services received in exchange for the award of equity instruments based upon the fair value of the award on the date of grant. The fair value of that award is then ratably recognized as expense over the period during which the recipient is required to provide services in exchange for that award.
Common Stock
Beginning on December 31, 2024, due to the lack of an active market for our common stock, we, together with our board of directors, were required to estimate the fair value of our common stock at the time of each grant of stock-based compensation. We utilize various valuation methodologies to estimate the fair value of our common stock. Each valuation methodology includes estimates and assumptions that require our judgment. These estimates and assumptions include a number of objective and subjective factors in determining the value of our common stock at each grant date, including the following factors:
| ● | prices paid for our capital stock that we have sold to outside investors in arm’s-length transactions, considering the rights and privileges of the securities sold relative to the common stock; | |
| ● | valuations performed by an independent valuation specialist; | |
| ● | our stage of development and revenue growth; | |
| ● | the market performance of comparable publicly traded companies; | |
| ● | the likelihood of achieving a liquidity event for the common stock underlying the stock-based awards, such as uplisting to a more liquid stock exchange; | |
| ● | adjustments necessary to recognize a lack of marketability for the common stock |
Prior to December 31, 2024, we valued our common stock using the trading price of our publicly-listed common stock. We intend to return to this valuation methodology upon the establishment of an active market for our common stock.
Off-Balance Sheet Arrangements
We have no off-balance sheet financing arrangements.
Contractual Obligations
As a smaller reporting company we are not required to provide the information required by this Item.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
None.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on an evaluation as of the date of the end of the period covered by this report, our chief executive officer and our chief financial officer (collectively, our “Certifying Officers”) conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”) Rule 13a-15. Based on that evaluation, our Certifying Officers concluded that, because of the disclosed material weaknesses in our internal control over financial reporting, our disclosure controls and procedures were ineffective as of the end of the period covered by this report to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Certifying Officers, to allow timely decisions regarding required disclosure. Based upon the evaluation of the disclosure controls and procedures at the end of the period covered by this report, our Certifying Officers concluded that our disclosure controls and procedures were not effective as a result of continuing weaknesses in our internal control over financial reporting principally due to the following:
| - | We have not established adequate financial reporting processes or monitoring activities to ensure adequate financial reporting and to mitigate the risk of management override, specifically because there are few employees and only two officers with management functions and therefore there is lack of segregation of duties. | |
| - | An outside consultant assists in the preparation of the annual and quarterly financial statements and partners with us to ensure compliance with GAAP and SEC disclosure requirements. | |
| - | We did not maintain a sufficient complement of qualified accounting personnel and controls associated with segregation of duties over complex transactions. |
Changes in Internal Control over Financial Reporting
There have been no change in our internal control over financial reporting that occurred during the period ended March 31, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the registrant’s principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
| (a) | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant; |
| (b) | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and |
| (c) | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant’s assets that could have a material effect on the financial statements. |
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material developments in any of the legal proceedings discussed in Item 3 of our Annual Report on Form 10-K for the year ended December 31, 2024 or other legal proceedings commenced against us our or our subsidiaries, except as follows:
As reported in our Annual Report, in July 2023, a complaint was filed against us and Ajay Sikka, a director of our company and our former chief executive officer, in the Circuit Court of the Nineteenth Judicial Circuit, Lake County, Illinois titled Alta Waterford, LLC v. TraQiQ, Inc. and Ajay Sikka (Case No. 23LA00000476) for breach of contract. In the complaint, the plaintiff alleges that we breached contracts for the payment of compensation for investor relations and web development and copyright services allegedly provided by the plaintiff, which payment obligation was personally guaranteed by Mr. Sikka. The complaint seeks damages in the amount of $324,000, attorney fees and other unspecified litigation costs.
On April 29, 2025, we entered into a settlement and release agreement with the plaintiff to settle all claims made by the plaintiff in this litigation. Pursuant to such agreement, we issued to the plaintiff 181,819 shares of common stock and agreed to pay to the plaintiff $15,000 in cash on or before July 1, 2025.
On or about April 3, 2025, a Demand for Arbitration was filed with the American Arbitration Association (the “AAA”) in Michigan against Titan Trucking, LLC (“Titan Trucking”), a wholly-owned subsidiary of our company, by O’Keefe & Associates Consulting, L.L.C. (“O’Keefe”). In its Demand for Arbitration, O’Keefe alleges that on or about June 27, 2022, Titan Trucking entered into an agreement with O’Keefe pursuant to which Titan Trucking engaged O’Keefe to be its “exclusive financial advisor” relating to one or more “Transactions” and that Titan Trucking subsequently breached that agreement. O’Keefe also asserts claims against Titan Trucking for breach of the covenant of good faith and fair dealing, and for unjust enrichment, all based on the same underlying facts.
Titan Trucking declined to submit an answer by the May 13, 2025 deadline for a response to the Demand for Arbitration, thereby denying all allegations asserted by O’Keefe therein. At the present time, the parties are in the process of selecting an arbitrator, and are working with the AAA to define the issues to be addressed and the timetable for proceeding. Regardless of how these aforementioned issues are addressed, however, Titan Trucking disputes O’Keefe’s allegations and intends to vigorously defend the purported claims asserted.
As of March 31, 2025, no accruals for loss contingencies have been recorded as the outcomes of such litigations is neither probable nor reasonably estimable.
Item 1A. Risk Factors
Not required under Regulation S-K for smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There have been no sales of unregistered securities within the the reporting period covered by this report that would be required to be disclosed in this Report pursuant to Item 701 of Regulation S-K, except as follows.
Between March 5, 2025 and March 7, 2025, we sold to five accredited investors, including Frank Celli, one of our directors, an aggregate of 500,000 shares of our Series C Convertible Preferred Stock, par value $0.001 per share (the “Series C Preferred Stock”), for a purchase price of $2.00 per share, or an aggregate purchase price of $1,000,000. Pursuant to the terms of the subscription agreements for the Series C Preferred Stock, we will be required to issue to such purchasers additional shares of Series C Preferred Stock if we sell shares of common stock in our proposed offering of common stock for a purchase price of less than $5.00 per share. Such shares of Series C Preferred Stock were issued by us in reliance upon the exemption from registration available under Section 4(2) of the Securities Act and Regulation D promulgated thereunder.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
(a) Not applicable.
(b) During the quarter ended March 31, 2025, there have not been any material changes to the procedures by which security holders may recommend nominees to the Board of Directors.
(c)
During the three months ended March 31, 2025, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act)
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Item 6. Exhibits
* Schedules, exhibits and similar supporting attachments to this exhibit are omitted pursuant to Item 601(b)(2) of Regulation S-K. In addition, certain portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(a)(6) promulgated under the Exchange Act. The Company agrees to furnish a supplemental copy of any omitted schedule or similar attachment to the Securities and Exchange Commission upon request.
+ Certain portions of this exhibit have been redacted pursuant to Item 601(b)(2)(ii) of Regulation S-K. The omitted information is (i) not material and (ii) is treated as private and confidential by the Company. The Company agrees to furnish a supplemental copy of any omitted portions to the Securities and Exchange Commission upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Titan Environmental Solutions Inc. | ||
| Date: May 20, 2025 | By: | /s/ Glen Miller |
| Glen Miller | ||
| Chief Executive Officer (principal executive officer) | ||
| Date: May 20, 2025 | By: | /s/ Anna Skowron |
| Anna Skowron | ||
| Chief Financial Officer (principal financial and accounting officer) | ||
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Exhibit 2.3
CERTAIN INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS TREATED AS PRIVATE AND CONFIDENTIAL.
[***] INDICATES THAT INFORMATION HAS BEEN REDACTED
AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AGREEMENT
BY AND AMONG
DOMINIC CAMPO AND SHARON CAMPO, AS THE MEMBERS,
STANDARD WASTE SERVICES, LLC, AS THE COMPANY
AND
TITAN TRUCKING, LLC, AS BUYER
DATED FEBRUARY 21, 2024
AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AGREEMENT
THIS AMENDMENT TO MEMBERSHIP INTEREST PURCHASE AGREEMENT (the “Amendment”), dated as of February 21, 2024, is entered into by and among DOMINIC CAMPO and SHARON CAMPO (each a “Member” and “Seller” and collectively, the “Members” and “Sellers”), STANDARD WASTE SERVICES, LLC, a Michigan limited liability company (the “Company”), and TITAN TRUCKING, LLC, a Michigan limited liability company (“Buyer”).
RECITALS
WHEREAS, the Sellers and Buyer entered into a certain Membership Interest Purchase Agreement dated January 12, 2024 (the “Agreement”) for the sale and purchase all of the issued and outstanding membership interests of the Company (the “Membership Interests”);
WHEREAS, TraQiQ reincorporated by way of merger in the state of Nevada under the name Titan Environmental Solutions, Inc., (“TESI”) on January 10, 2024 which is the successor as referred to in definition of “TraQiQ” in the Agreement.
WHEREAS, the Investment Consideration stated in the Agreement included a per share price of $0.05 based on a planned offering of Class D Convertible Preferred Stock by TraQiQ to a group of investors;
WHEREAS, TraQiQ and Buyer have determined that the plan to issue the Class D Convertible Preferred Stock may not be the most viable option [***];
WHEREAS, in the event Buyer elects to move forward [***] is contingent upon the completion of the audit of the financial statements of the Company to be completed;
WHEREAS, [***]; and
WHEREAS, as a result of the forgoing, the Sellers and Buyer desire to amend the Agreement as provided in this Amendment to reset the Closing Date to accommodate the completion of the audit of the Company’s financial statements, adjust the terms of the Investment Shares and address other provisions in the Agreement.
NOW THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties agree as follows:
| 1. | The capitalized terms in this Amendment not defined herein shall be defined as provided in the Agreement. The following defined terms are amended or added as follows: |
“TESI Preferred Stock” means preferred stock of TESI designated as Series “C” Convertible Preferred Stock which shall be convertible into shares of TESI common stock on a 100 to 1 basis and have one vote per share.
“Investment Shares” means $2,610,000 worth of TESI Preferred Stock to be represented by 273,684.21 shares of the TESI Preferred Stock, and 60,000 shares of the TESI Preferred Stock for the Extension Consideration. The number of shares of the TESI Preferred Stock shall be subject to adjustment for stock splits, stock combinations, conversion ratios and the like. The parties agree that the additional Preferred Stock shall satisfy the Extension Consideration referenced in the Agreement. For avoidance of doubt, 273,684.21 shares of TESI Preferred Stock shall convert into 27,368,421 shares of TESI Common Stock and 60,000 shares of TESI Preferred Stock shall convert into 6,000,000 shares of TESI Common Stock.
References to the “Interim Balance Sheet” shall be amended to references to the “Balance Sheet” as defined in this Amendment.
| 2. | Section 3.1 is amended and restated in its entirety as follows: |
“The closing of the transactions contemplated hereby (the “Closing”) is to take place as soon as practical within reasonable commercial norms upon delivery of the required necessary audited financial statements of the Company for Securities and Exchange Commission filing purposes or waiver thereof by Buyer, and upon the satisfaction or waiver of the conditions to Closing set forth in Article 8 (the “Closing Date”) by exchange of appropriate documentation between the Parties (via overnight delivery, facsimile, electronic transmission or other similar means for exchanging documentation); provided that if the Closing occurs on or after January 6, 2024, Buyer shall pay to Sellers the Closing Deposit, which shall be nonrefundable; provided, further, that if the Closing occurs on or after February 2, 2024, the Purchase Price shall be increased by the Extension Consideration. All transactions contemplated herein to occur on and as of the Closing Date shall be deemed to have occurred simultaneously and to be effective as of the Reference Time.”
| 3. | Section 5.7(a) is amended and restated in its entirety as follows: |
“Attached to Section 5.7(a) of the Disclosure Schedules are correct and complete copies of the unaudited financial statements consisting of the balance sheet of the Company as at December 31 in each of the years 2020, 2021, 2022 and 2023, and the related statements of income and retained earnings, stockholders’ equity and cash flow for the years then ended (the “ Financial Statements”). The Financial Statements are correct and complete and consistent with the books and records of the Company (which are in turn correct and complete), have been prepared in accordance with GAAP consistently applied and the balance sheets included in the Financial Statements fairly present, in all material respects, the financial position of the Company as of the respective dates thereof, and the other related statements included in the Financial Statements fairly present, in all material respects, the results of the operations of the Company for the respective periods indicated therein, in each case in accordance with historical practices applied on a consistent basis, except for the absence of footnotes (which, if presented, would not, individually or in the aggregate, be material) and normal and recurring year-end adjustments (the effect of which will not, individually or in the aggregate, be material). For purposes hereof, the balance sheet of the Company as of December 31, 2023, is referred to herein as the “Balance Sheet”.
| 4. | Section 7.5 is amended by adding the following at the end of such section: |
“Notwithstanding the forgoing, this paragraph shall be altered by the requirements and restrictions of [***] any successor entity [***].”
| 5. | Section 7.6 is amended by adding the following to the end: |
“The Seller Parties agree to fully cooperate in and not withhold approval or consent to [***] irrespective of any statutory rights of the Seller Parties.”
| 6. | This Amendment and the Agreement (including the Disclosure Schedules and the Exhibits attached hereto which are deemed for all purposes to be part of this Agreement), the other document delivered pursuant to this Amendment, the Agreement, and the Confidentiality Agreement, contain all of the terms, conditions and representations and warranties agreed upon or made by the Parties relating to the subject matter of this Agreement and the businesses and operations of the Company and supersede all prior and contemporaneous agreements, negotiations, correspondence, undertakings and communications of the Parties or their respective Representatives, oral or written, respecting such subject matter. Upon the Closing, the Confidentiality Agreement shall hereby automatically terminate without any further action by the Parties and shall be of no further force or effect. | |
| 7. | This Amendment may be executed in counterparts, each of which will be deemed an original, but all of which together will be deemed to be one and the same agreement. Counterparts may be delivered via facsimile, electronic mail (including PDF or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method, and any counterpart so delivered will be deemed to have been duly and validly delivered and be valid and effective for all purposes. | |
| 8. | This Amendment and any claim or controversy hereunder shall be governed by and construed in accordance with the Laws of the State of Michigan without giving effect to the principles of conflict of laws thereof. | |
| 9. | The Parties have participated jointly in the negotiation and drafting of this Amendment. In the event of an ambiguity or question of intent or interpretation arises, this Amendment shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Amendment. |
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the Parties hereto have executed and delivered this Agreement as of the date first above written.
| COMPANY: | ||
| STANDARD WASTE SERVICES, LLC, a Michigan limited liability company | ||
| By: | /s/ Dominic Campo | |
| Name: | Dominic Campo | |
| Title: | Member | |
| And: | /s/ Sharon Campo | |
| Name: | Sharon Campo | |
| Title: | Member | |
| BUYER: | ||
| TITAN TRUCKING, LLC, a Michigan limited liability company | ||
| By: | /s/ Glen Miller | |
| Name: | Glen Miller | |
| Title: | Chief Executive Officer | |
Exhibit 31.1
CERTIFICATIONS
I, Glen Miller, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2025 of Titan Environmental Solutions Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: May 20, 2025 | |
| /s/ Glen Miller | |
| Glen Miller | |
| Chief Executive Officer | |
| (principal executive officer) |
Exhibit 31.2
CERTIFICATIONS
I, Anna Skowron, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2025 of Titan Environmental Solutions Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: May 20, 2025 | |
| /s/ Anna Skowron | |
| Annna Skowron | |
| Chief Financial Officer | |
| (principal financial officer) |
Exhibit 32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of TraQiQ, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Glen Miller, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: May 20, 2025 | /s/ Glen Miller |
| Glen Miller | |
| Chief Executive Officer | |
| (principal executive officer) |
Exhibit 32.2
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Titan Environmental Solutions Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anna Skowron, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: May 20, 2025 | /s/ Anna Skowron |
| Anna Skowron | |
| Chief Financial Officer | |
| (principal financial officer) |