TLSS 10-Q
Transportation & Logistics Systems, Inc. (TLSS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
or
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) |
(IRS Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
(Registrant’s former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||
| N/A | N/A | N/A |
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $ 0.001 Par Value
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. Yes ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registration
was required to submit such files). Yes ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” 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 any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of August 18, 2026, the registrant had outstanding shares of common stock.
TRANSPORTATION AND LOGISTICS SYSTEMS, INC.
FORM 10-Q
JUNE 30, 2026
TABLE OF CONTENTS
| i |
For purposes of this Quarterly Report on Form 10-Q (this “Quarterly Report”), unless otherwise indicated or the context otherwise requires, all references herein to “Transportation and Logistics Systems, Inc.”, the “Company”, “we”, “us”, “TLSS” and “our”, refer to Transportation and Logistics Systems, Inc., a Nevada corporation, and its wholly-owned subsidiaries: TLSS Acquisition, Inc. (“TLSSA”), TLSS Operations Holding Company, Inc. (“TLSS Ops”), Shyp CX, Inc. (“Shyp CX”); those entities wholly-owned by TLSS Ops, TLSS-CE, Inc. (“TLSS-CE”) and TLSS-STI, Inc. (“TLSS-STI”); JFK Cartage Co., Inc. (JFK Cartage”), a wholly-owned subsidiary of Cougar Express; Severance Trucking Co., Inc. (“Severance Trucking”), a wholly-owned subsidiary of TLSS-STI and Severance Warehousing, Inc. (“Severance Warehousing”) and McGrath Trailer Leasing, Inc. (“McGrath”), both wholly-owned subsidiaries of Severance Trucking, (Severance Trucking, Severance Warehousing, and McGrath collectively, (“Severance”).
TLSSA, TLSS Ops, Shyp CX, TLSS-CE, TLSS-STI, Cougar Express, JFK Cartage, and Severance, are hereinafter referred to as the “Subsidiaries”. Other than the Company, the results of operations and all accounts of the Subsidiaries for the three and six months ended June 30, 2026 and 2025 are included as part of discontinued operations on the unaudited consolidated financial statements.
Forward-Looking Statements
Statements made in this Quarterly Report that are not historical facts are forward-looking statements and are subject to risks and uncertainties that could cause actual future events or results to differ materially from such statements. Any such forward-looking statements, including, but not limited to, financial guidance, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that do not directly or exclusively relate to historical facts. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “intend,” “plan,” “goal,” “seek,” “strategy,” “future,” “likely,” “believes,” “estimates,” “projects,” “forecasts,” “predicts,” “potential,” or the negative of those terms, and similar expressions and comparable terminology. These include, but are not limited to, statements relating to future events or our future financial and operating results, plans, objectives, expectations, and intentions. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these expectations may not be achieved. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they represent our intentions, plans, expectations, assumptions, and beliefs about future events and are subject to known and unknown risks, uncertainties, and other factors outside of our control that could cause our actual results, performance, or achievement to differ materially from those expressed or implied by these forward-looking statements. In addition to the risks described above and the risks set forth in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 (our “2025 Annual Report”), these risks and uncertainties include: our ability to meet our annual and quarterly periodic reporting obligations under Securities Exchange Act of 1934, as amended (“34 Act”), including obtaining sufficient financing to fund the necessary costs related to the preparation and filing of one or more of our future periodic reports; our ability to restructure our remaining existing debts and obligations and replace our discontinued businesses and/or enter into new line(s) of business, whether by acquisition or otherwise; our ability to attract and retain key personnel and skilled labor to meet the requirements of being a public company; our history of losses, deficiency in working capital and a stockholders’ deficit and inability to achieve sustained profitability; our need to procure substantial additional financing to fund ongoing losses and the growth of our business; our ability to successfully execute our business strategies, including integration of acquisitions and the future acquisition of other businesses to grow our company; adverse or unanticipated events in the litigation to which we are currently a party (or as to which we may become a party in the future); our ability to pay expenses and liabilities as they become due; adverse or unanticipated decisions by courts construing third-party liability insurance policies to which the Company and/or its subsidiaries is a party; a failure to obtain adequate liability insurance coverage in the future; material weaknesses in our internal control over financial reporting and our ability to maintain effective controls over financial reporting in the future; financial condition and results of operations and our ability to meet our payment obligations; the impact of new or changed laws, regulations or other industry standards that could adversely affect our ability to conduct our business; and changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural or man-made disasters.
These forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report and, except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this letter. Given these uncertainties, you should not place undue reliance on these forward-looking statements and should consider various factors, including the risks described herein, and, among other places, in this Quarterly Report, as well as any amendments hereto or thereto, or other documents filed with the Securities and Exchange Commission (the “SEC”).
| ii |
PART I .- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Notes payable | $ | $ | ||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Deferred compensation and related benefits | ||||||||
| Liabilities of discontinued operations | ||||||||
| Total Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Series J convertible preferred stock, par value $
per share; shares designated; shares issued and outstanding at June 30, 2026 and December 31, 2025 ($ | ||||||||
| Commitments and Contingencies (See Note 6) | ||||||||
| SHAREHOLDERS’ DEFICIT: | ||||||||
| Preferred stock, par value $; authorized shares: | ||||||||
| Series B convertible preferred
stock, par value $ per share; shares designated; shares issued and outstanding at June 30, 2026 and December 31,
2025 ( | ||||||||
| Series D convertible preferred
stock, par value $ per share; shares designated; shares issued and outstanding at June 30, 2026 and December 31,
2025 ( | ||||||||
| Series E convertible preferred
stock, par value $ per share; shares designated; shares issued and outstanding at June 30, 2026 and December 31,
2025 ( | ||||||||
| Series G convertible preferred
stock, par value $ per share; shares designated; shares issued and outstanding at June 30, 2026 and December 31,
2025 ( | ||||||||
| Series H convertible preferred
stock, par value $ per share; shares designated; shares issued and outstanding at June 30, 2026 and December 31,
2025 ( | ||||||||
| Common stock, par value $ per share; shares authorized; shares issued and outstanding at June 30, 2026 and December 31, 2025 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Shareholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Shareholders’ Deficit | $ | $ | ||||||
See accompanying notes to unaudited consolidated financial statements.
| 1 |
TRANSPORTATION AND LOGISTICS SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| REVENUES | $ | $ | $ | $ | ||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Compensation and related benefits | ||||||||||||||||
| Legal and professional fees | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME (EXPENSES): | ||||||||||||||||
| Gain on debt extinguishment | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense - related parties | ( | ) | ( | ) | ||||||||||||
| Total Other Income (Expenses), net | ( | ) | ( | ) | ||||||||||||
| (LOSS) INCOME BEFORE INCOME TAXES | ( | ) | ( | ) | ||||||||||||
| Provision for income taxes | ||||||||||||||||
| (LOSS) INCOME FROM CONTINUING OPERATIONS | ( | ) | ( | ) | ||||||||||||
| DISCONTINUED OPERATIONS: | ||||||||||||||||
| Loss from discontinued operations, net of tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| LOSS FROM DISCONTINUED OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET (LOSS) INCOME | ( | ) | ( | ) | ||||||||||||
| Deemed contribution on exchange of equity instruments | ||||||||||||||||
| Accrued dividends | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET (LOSS) INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| NET (LOSS) INCOME PER COMMON SHARE - BASIC AND DILUTED | ||||||||||||||||
| Net (loss) income per share from continuing operations -basic and diluted | $ | ) | $ | $ | ) | $ | ||||||||||
| Net loss per share from discontinued operations – basic and diluted | ) | ) | ) | ) | ||||||||||||
| Net (loss) income per share - basic and diluted | $ | ) | $ | $ | ) | $ | ||||||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
See accompanying notes to unaudited consolidated financial statements.
| 2 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
| Preferred Stock Series E | Preferred Stock Series G | Preferred Stock Series H | Common Stock | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||||||||
| Balance, December 31, 2025 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Dividends accrued | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2026 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Dividends accrued | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2026 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Preferred Stock Series E | Preferred Stock Series G | Preferred Stock Series H | Common Stock | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Dividends accrued | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2025 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Conversion of Series E and Series G preferred shares and accrued dividends and cancellation of warrants into Series J preferred shares | ( | ) | ( | ) | ( | ) | ( | ) | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Series J redemption premium recorded | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Gain on extinguishment of notes payable and accrued interest converted to Series J preferred shares | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Gain on extinguishment of accounts payable and accrued expenses converted to Series J preferred shares | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Gain on extinguishment of accrued dividends converted to Series J preferred shares | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Dividends accrued | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net income | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
See accompanying notes to unaudited consolidated financial statements.
| 3 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||
| Gain on debt extinguishment | ( | ) | ||||||
| Change in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Accrued expenses - related parties | ||||||||
| Deferred compensation and related benefits | ||||||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from notes payable | ||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET (DECREASE) INCREASE IN CASH | ( | ) | ||||||
| CASH, beginning of period | ||||||||
| CASH, end of period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Conversion of Series E and Series G preferred stock and accrued dividends to Series J preferred stock | $ | $ | ||||||
| Conversion of notes payable and notes payable - related parties and accrued interest to Series J preferred stock | $ | $ | ||||||
| Conversion of accounts payable and accrued expenses to Series J preferred stock | $ | $ | ||||||
| Increase in Series J redemption premium applied against additional paid-in capital | $ | $ | ||||||
| Accrual of preferred stock dividends | $ | $ | ||||||
See accompanying notes to unaudited consolidated financial statements.
| 4 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS
Transportation and Logistics Systems, Inc. (“TLSS” or the “Company”) is a publicly-traded holding company incorporated under the laws of the State of Nevada on July 25, 2008. Prior to mid-February 2024, when the Company ceased all remaining operations, its subsidiaries, provided a full suite of logistics and transportation services, specializing in ecommerce fulfillment, last mile deliveries, two-person home delivery, mid-mile, and long-haul services. The Company and its subsidiaries also operated several warehouse locations in New York, New Jersey, Connecticut, and Massachusetts. The subsidiaries of the Company during the six months ended June 30, 2026 and 2025 include: JFK Cartage, Inc. (“JFK Cartage”); Severance Trucking Co., Inc. (“Severance Trucking”); Severance Warehousing, Inc. (“Severance Warehouse”); McGrath Trailer Leasing, Inc. (“McGrath”, and together with Severance Trucking and Severance Warehouse, hereinafter, “Severance”); TLSS Acquisition, Inc. (“TLSSA”); TLSS Operations Holding Company, Inc. (“TLSS Ops”); Shyp CX, Inc. (“Shyp CX”); Shyp FX, Inc. (“Shyp FX”); TLSS-CE, Inc. (“TLSS-CE”); and TLSS-STI, Inc. (“TLSS-STI”).
Prior to ceasing operations, the Company’s historical business growth was primarily through a growth by acquisition strategy, as described below.
On November 13, 2020, the Company formed a wholly-owned subsidiary, Shyp FX under the laws of the State of New Jersey. On January 15, 2021, through Shyp FX, the Company executed an agreement to acquire substantially all of the assets and certain liabilities of Double D Trucking, Inc., a northern New Jersey-based logistics provider specializing in servicing Federal Express over the past 25 years (“DDTI”), including last-mile delivery services using vans and box trucks. On April 28, 2022, the Company entered into an agreement with an unrelated third party to sell substantially all of Shyp FX’s assets and specific liabilities in all-cash transactions that closed in June 2022. Shyp FX is inactive.
On November 16, 2020, the Company formed a wholly-owned subsidiary, TLSSA under the laws of the State of Delaware. On March 24, 2021, TLSSA acquired all of the issued and outstanding shares of capital stock of Cougar Express, a New York-based full-service logistics provider specializing in pickup, warehousing, and delivery services in the tri-state area. On February 27, 2024, Cougar Express filed a Chapter 7 bankruptcy petition in the State of New York under the United States Bankruptcy Code (the “Cougar Bankruptcy”), assigning all of the Cougar Express assets to Mr. Andrew M. Thaler, Esq., as Trustee (the “Cougar Express Trustee”) for liquidation and unwinding of the business. The Cougar Express Trustee has been charged with liquidating the assets for the benefit of the Cougar Express creditors pursuant to the relevant provisions of the United States Bankruptcy Code. As a result of the Cougar Bankruptcy, the Cougar Express Trustee assumed all authority to manage Cougar Express. Additionally, as of February 27, 2024, Cougar Express no longer conducted any business and is not permitted by the Cougar Express Trustee to conduct any business. For these reasons, effective February 27, 2024, the Company relinquished control of Cougar Express. Therefore, the Company deconsolidated Cougar Express effective with the filing of the Cougar Bankruptcy on February 27, 2024.
On February 21, 2021, the Company formed a wholly-owned subsidiary, Shyp CX under the laws of the State of New York. Shyp CX does not engage in any revenue-generating operations and is inactive.
On
August 4, 2022, Cougar Express closed on its acquisition of all outstanding stock of JFK Cartage, a New York-based full-service
logistics provider. The effective date of the acquisition was July 31, 2022. In February 2024, due to lack of working capital to
conduct its business, JFK Cartage ceased its operations and no longer conducts any business, and all of its assets of the Company
were voluntarily conveyed to the Cougar Express Trustee. During the three and six months ended June 30, 2026 and 2025, all
activities and balances of JFK Cartage are included as part of discontinued operations on the unaudited consolidated financial
statements. As of the date of these unaudited consolidated financial statements, neither TLSS-CE, which owns
Effective February 3, 2023, the Company’s wholly-owned subsidiary, TLSS-STI, closed on an acquisition of all outstanding stock of each of Severance Trucking, Severance Warehouse and McGrath, which together, offered less-than-truckload (LTL) trucking services throughout New England, with an effective date as of the close of business on January 31, 2023. The sellers of the stock of each entity were Kathryn Boyd, Clyde Severance, and Robert Severance, all individuals (the “Severance Sellers”). None of the Severance Sellers were affiliated with the Company or its affiliates. In February 2024, due to lack of working capital to conduct its business, Severance ceased its operations and no longer conducts any business, and all fixed assets of Severance were voluntarily surrendered to the Severance Sellers. For the three and six months ended June 30, 2026, and 2025, all activities and balances of Severance are included as part of discontinued operations on the unaudited consolidated financial statements. As of the date of these unaudited consolidated financial statements, the Severance entities have not filed for bankruptcy.
On May 31, 2023, the Company formed TLSS Ops and TLSS-CE, companies organized under the laws of Delaware. Simultaneous with the formation of these entities, Cougar Express became a wholly-owned subsidiary of TLSS-CE; Severance Warehousing and McGrath became wholly-owned subsidiaries of Severance Trucking; Severance Trucking became a wholly-owned subsidiary of TLSS-STI; and each of TLSS-CE, TLSS-STI and TLSS-FC became wholly-owned subsidiaries of TLSS Ops. Other than the TLSS parent company, all entities are included as part of discontinued operations on the unaudited consolidated financial statements for the three and six months ended June 30, 2026, and 2025. As of the date of these unaudited consolidated financial statements, TLSS Ops has not filed for bankruptcy.
On February 16, 2024, Severance Trucking, along with Cougar Express and JFK Cartage, ceased all operations and, as a result, all remaining employees of Cougar Express and Severance Trucking were laid off as of February 16, 2024. On February 29, 2024, all remaining support staff, employed by TLSS Ops, were laid off.
Subsequent to the cessation of all of the Company’s revenue generating operations in February 2024 and through the date of the issuance of these unaudited consolidated financial statements, the Company continues to remain insolvent. The Company has obtained additional financing to fund the necessary costs related to the preparation and filing of one or more of the additional periodic reports due with respect to the 2026 calendar year, however, additional funding will be required (See Note 4).
In addition, the Company has restructured certain of its debt and obligations and is continuing to negotiate the restructuring of its remaining existing debts and obligations, as well as assessing the possibility of replacing its discontinued businesses and/or entering into new line(s) of business, whether by acquisition or otherwise. However, there can be no assurance that the Company will, in fact, be able to replace the Company’s former business and/or enter into new line(s) of business, or to do so profitably.
| 5 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
On
April 1, 2026, the Company, TLSS Acquisition, Inc., (the “Acquisition Sub”), and TLSS Reverse PGS, LLC, a Texas limited liability
company and a wholly-owned subsidiary of the Acquisition Sub (“TLSS Reverse”), entered into a Member Interest and Asset Exchange
Agreement (the “Agreement”) with Badcer Ops, Inc., a Nevada corporation (the “Seller”), Jeff Badders and Mercer
Street Global Opportunity Fund, LLC, a Delaware limited liability company (“Mercer”), as the shareholders of the Seller (the
“Seller Shareholders”), Patriot Glass Solutions, LLC, a Texas limited liability company (“PGS”), and Michael
Wanke (“Wanke”), the sole Manager and twenty percent (
The Seller is Badcer Ops, Inc., a Nevada corporation, whose shareholders are Mercer and Mr. Jeff Badders, an individual (together, the “Seller Shareholders”). Mercer is an existing preferred stockholder of the Company.
The
Agreement provides for merger consideration (the “Merger Consideration”) equal to $
The closing of the transaction is expected to occur no later than August 19, 2026, following the Notice of Extension dated July 31, 2026, pursuant to which the TLSS Parties exercised their existing right under Section 1.2 of the Agreement to extend the Closing Date from August 4, 2026 for a period of up to fifteen (15) days. The closing remains subject to the satisfaction or waiver of certain closing conditions, including, among others: (i) the completion of satisfactory due diligence by the Company; (ii) the accuracy of the representations and warranties of the parties; (iii) the procurement of acceptable landlord consent to the assignment of and amendments to PGS’s lease for its operating facilities; (iv) delivery of certain financial statements; and (v) other customary closing conditions as set forth in the Agreement. The Notice of Extension does not amend or modify any other term of the Agreement, and the Agreement remains in full force and effect.
The remaining 20% membership interest in PGS is currently held by and will be retained by Mr. Michael Wanke, the sole Manager of PGS. It is a condition of closing that Mr. Wanke will enter into an employment agreement with PGS, the terms of which are to be agreed upon prior to the expiration of the due diligence period.
The Company’s primary go-forward strategy is to become a leader in the safety and security technology industry. The Company expects to accomplish this goal, in part, by pursuing strategic acquisitions as a means of securing technologies and adding new markets in the United States, expanding its safety and security service offerings, adding talented management and operational employees, expanding and upgrading its technology platform and developing operational best practices. Moreover, one factor in assessing acquisition opportunities is the potential for subsequent organic growth post-acquisition.
PGS provides quality window tint solutions for auto, home, and business owners across Texas, specializing in automotive window tinting, residential window film, and commercial window film that stop harmful UV rays from passing through its window films for reduced glare, comfortable temperatures, and lower energy bills. PGS protects personal, school, government and commercial/business property across the United States using PGS’s proprietary glass strengthening technology to protect property from looting, rioting, break-ins, and gunfire, including its PGS BRS a ballistic-resistant film system; and PGS multi-purpose glass strengthening primer and window film mounting solution that deters forced entry products with through a growing nationwide network of more than 50 dealers.
The Patents relate to the proprietary nanotechnology applications and processes to enhance properties of strength, functionality, and sustainability of brittle material systems used by PGS.
As such, the Company believes that the acquisition of PGS is an excellent fit with its current business given its demographic location, services offered, and diversified customer base, and given that it would provide the Company with a long-standing, well-run profitable operation.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Basis of presentation and principles of consolidation
The unaudited consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all the information and disclosures necessary for comprehensive presentation of financial position, results of operations or cash flow. However, these unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these unaudited interim consolidated financial statements be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2025 and notes thereto included in the Company’s annual report on SEC Form 10-K, filed on March 30, 2026. The Company follows the same accounting policies in the preparation of its annual and interim reports. The results of operations for the interim periods are not necessarily an indication of operating results to be expected for the full year.
The summary of significant account policies of the Company is presented to assist in understanding the Company’s consolidated financial statements. The unaudited consolidated financial statements and the notes are the representation of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to U.S. generally accepted accounting principles (“US GAAP”) and have been consistently applied in the preparation of the unaudited consolidated financial statements.
The consolidated financial statements of the Company include the accounts of TLSS and its wholly-owned subsidiaries, TLSSA, TLSS Ops, Shyp FX, Shyp CX, TLSS-CE, JFK Cartage since its acquisition on July 31, 2022, TLSS-STI, and Severance since its acquisition on January 31, 2023. All intercompany accounts and transactions have been eliminated in consolidation. References below to a “Company liability” may be to a liability which is owed solely by a subsidiary and not by TLSS.
| 6 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
Discontinued Operations
The Company has classified the related assets and liabilities associated with its logistics and transportation services business as discontinued operations in its consolidated balance sheets and the results of its logistics and transportation services business has been presented as discontinued operations in its consolidated statements of operations for all periods presented as the discontinuation of its business had a major effect on its operations and financial results. Unless otherwise noted, discussion in the notes to consolidated financial statements refers to the Company’s continuing operations. See Note 8 — Discontinued Operations for additional information.
Going concern
These
unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets
and the settlement of liabilities and commitments in the normal course of business. As reflected in these unaudited consolidated financial
statements, the Company had a net loss of $
Risks and uncertainties
The
Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. On June 30,
2026, the Company had
Use of estimates
The preparation of the consolidated financial statements, in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure 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. Significant estimates included in the accompanying unaudited consolidated financial statements and footnotes include the valuation of assets and liabilities of discontinued operations, estimates of current and deferred income taxes and deferred tax valuation allowances, the fair value of non-cash equity transactions, estimates of valuation of preferred stock, and the value of claims against the Company.
Fair value of financial instruments
The Financial Accounting Standards Board (“FASB”) issued ASC 820 — Fair Value Measurements and Disclosures, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 requires disclosures about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of financial instruments are based on pertinent information available to the Company on June 30, 2026. Accordingly, the estimates presented in these unaudited consolidated financial statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments. ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).
The three levels of the fair value hierarchy are as follows:
| ● | Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. | |
| ● | Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. | |
| ● | Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information. |
| 7 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
The Company measures certain financial instruments at fair value on a recurring basis. As of June 30, 2026 and December 31, 2025, the Company had no assets and liabilities measured at fair value on a recurring basis.
ASC 825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.
The carrying amounts reported in the consolidated balance sheets for cash, prepaid expenses and other current assets, assets of discontinued operations, accounts payable, accrued expenses, liabilities of discontinued operations, and other payables approximate their fair values based on the short-term maturity of these instruments. The carrying amount of the Company’s promissory note obligations approximate fair value, as the terms of these instruments are consistent with terms available in the market for instruments with similar risks.
Cash and cash equivalents
For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents. On June 30, 2026 and December 31, 2025, the Company did not have any cash equivalents.
Accounts receivable
Accounts receivable was presented net of an allowance for credit losses. The Company maintains allowances for credit losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances along with general reserves for current accounts receivable that are projected to become uncollectable. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, a customer’s historical payment history, its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection.
Property and equipment
Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.
Leases
The Company uses Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). The guidance requires lessees to recognize lease assets and lease liabilities for most operating leases. In addition, the guidance requires that lessors separate lease and non-lease components in a contract in accordance with the new revenue guidance in ASC 606. The Company applied the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases and (ii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the inception of a contract the Company assessed whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether it obtains the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. The Company will allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less.
Operating lease ROU assets represented the right to use the leased asset for the lease term and operating lease liabilities were recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company used an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments was amortized on a straight-line basis over the lease term. In connection with the discontinuation of the Company’s logistic and transportation business, all ROU assets were either impaired or deconsolidated, and any such impairment was previously included in discontinued operations (see Note 8). Currently, all leased premises have been abandoned.
Impairment of long-lived assets
In accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value.
Segment reporting
The Company uses ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires entities to report incremental information about significant segment expenses included in a segment’s profit or loss measure as well as the title and position of the chief operating decision maker (“CODM”). The standard also requires interim disclosures related to reportable segment profit or loss and assets that had previously only been disclosed annually.
Operating segments are defined as components of a business for which separate discrete financial information is available for evaluation by the chief operating decision maker in deciding how to allocate resources and assess performance. The Company operates as a single operating and reporting segment, reflecting our sole focus of seeking new business opportunities. Our Chief Executive Officer serves as the Chief Operating Decision Maker (CODM), responsible for assessing the Company’s performance and making resource allocation decisions. The CODM evaluates financial information on a consolidated basis, focusing on key metrics such as general and administrative expenses, and other income/expenses. The CODM allocates resources based on the Company’s available cash resources, forecasted cash flow, and expenditures on a consolidated basis, as well as an assessment of the probability of success of its business activities. Resource allocation decisions are informed by budgeted and forecasted expense information, along with actual expenses incurred to date. The measure of segment assets is reported on the balance sheet as total assets. Disaggregated profit or loss information at the program or functional level is not regularly provided to or relied upon by the CODM, as our integrated operating model emphasizes shared resources and centralized decision-making.
| 8 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
The Company accounts for its Series J Senior Convertible Preferred Stock (“Series J Preferred”) subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Conditionally redeemable Series J Preferred stock that feature 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 is classified as temporary equity. The Company’s Series J Preferred stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, Series J preferred stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ deficit section of the Company’s consolidated balance sheets.
Revenue recognition and cost of revenue
The Company adopted Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers. This ASC is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASC also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer service orders, including significant judgments.
No revenue was generated during the six months ended June 30, 2026 and 2025.
Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation – Stock Compensation”, which requires recognition in the financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange for an award based on the grant-date fair value of the award. The Company has elected to recognize forfeitures as they occur as permitted under ASU 2016-09 Improvements to Employee Share-Based Payment.
Pursuant to ASC 260-10-45, basic (loss) income per common share is computed by dividing net (loss) income attributable to common stockholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted (loss) income per share is computed by dividing net (loss) income attributable to common stockholders by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially dilutive shares of common stock consist of common stock issuable for stock warrants (using the treasury stock method) and shares issuable for Series E Convertible Preferred Stock (the “Series E Preferred”), Series G Convertible Preferred Stock (the “Series G Preferred”), Series H Convertible Preferred Stock (the “Series H Preferred”) and Series J Senior Convertible Preferred Stock (the “Series J Preferred”) (using the as-if converted method). Effective as of June 1, 2025, all of our outstanding shares of Series E Preferred and Series G Preferred were exchanged for shares of our Series J Preferred. Common stock equivalents may be dilutive in the future.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net (loss) income per common share - basic: | ||||||||||||||||
| Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Add: deemed contribution on exchange of equity instruments | ||||||||||||||||
| Less: accrued dividends | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net (loss) income attributable to common stockholders | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Weighted average common shares outstanding – basic | ||||||||||||||||
| Net (loss) income per common share – basic | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Net (loss) income per common share - diluted: | ||||||||||||||||
| Net (loss) income attributable to common shareholders – basic | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Add: adjustments to net (loss) income | ||||||||||||||||
| Numerator for (loss) income per common share – diluted | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Weighted average common shares outstanding – basic | ||||||||||||||||
| Add: dilutive shares related to: | ||||||||||||||||
| Stock warrants | ||||||||||||||||
| Convertible preferred shares | ||||||||||||||||
| Weighted average common shares outstanding – diluted | ||||||||||||||||
| Net (loss) income per common share – diluted | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| 9 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
| June 30, 2026 | ||||
| Stock warrants | ||||
| Series H convertible preferred stock | ||||
| Series J convertible preferred stock | ||||
Income taxes
Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceed the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Applicable interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the unaudited consolidated statements of operations.
Recent accounting pronouncements
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires entities to provide more detailed disaggregation of expenses in the income statement, focusing on the nature of the expenses rather than their function. The new disclosures will require entities to separately present expenses for significant line items, including but not limited to, depreciation, amortization, and employee compensation. Entities will also be required to provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, disclose the total amount of selling expenses and, in annual reporting periods, provide a definition of what constitutes selling expenses. This pronouncement is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company does not expect the adoption of this new guidance to have a material impact on the unaudited consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270), Narrow-Scope Improvements, to provide clarity about the current requirements, rather than evaluate whether to expand or reduce interim disclosure requirements. The amendments in ASU 2025-11 result in a comprehensive list of interim disclosures that are required by GAAP. The amendments in ASU 2025-11 also include a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The amendments in ASU 2025-11 are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027 and early adoption is permitted. The amendments in ASU 2025-11 can be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the disclosure impact that ASU 2025-11 may have on its consolidated financial statement presentation and disclosures.
There are currently no other accounting standards that have been issued but not yet adopted that we believe will have a significant impact on our consolidated financial position, results of operations or cash flows upon adoption.
NOTE 3 – NOTES PAYABLE – RELATED PARTIES
On
April 14, 2023, the Company’s Board of Directors (“Board”) approved a credit facility (the “Credit Facility”)
under which the Company would obtain unsecured senior debt financing of up to $
| 10 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
On
October 3, 2023, and November 28, 2023, the Company issued unsecured promissory notes to Mr. Mercadante and from an individual, who is
affiliated to Mr. Mercadante in the principal amount of $
On
February 6, 2024, and February 15, 2024, the Company issued unsecured promissory notes to Mr. Mercadante, a Director of the Company,
in the principal amounts of $
On
February 21, 2024, and February 23, 2024, the Company issued unsecured promissory notes to Norman Newton (“Mr. Newton”) and
Charles Benton (“Mr. Benton”), both members of the Company’s Board of Directors, in the principal amounts of $
On
May 30, 2025, the Company entered into settlement agreements (the “Series J Settlement Agreements”) with certain holders
of the Company’s liabilities (the “2025 Creditors”), including certain related party note holders (the “Related
Party Creditors”). Pursuant to the Series J Settlement Agreements, the Related Party Creditors settled an aggregate of $
As
of June 30, 2026 and December 31, 2025, aggregate notes payable to related parties in the principal amounts of $ were outstanding. As
of June 30, 2026 and December 31, 2025, the aggregate accrued interest payable to related parties amounted to $. For the three months
ended June 30, 2026 and 2025, interest expense – related parties amounted to $ and $
NOTE 4 – NOTE PAYABLE
On
August 12, 2024, the Company issued two (2) promissory notes (the “August 2024 Notes”) in the aggregate principal amount
of $
On
October 9, 2024, the Company issued two (2) unsecured non-convertible promissory notes (the “October 2024 Notes”) in the
aggregate principal amount of $
| 11 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
On
November 22, 2024, Company issued an unsecured non-convertible promissory note (the “November 2024 Note”) in the aggregate
principal amount of $
On
January 21, 2025, the Company issued an unsecured non-convertible promissory note (the “January 2025 Note”) in the aggregate
principal amount of $
On
March 10, 2025, the Company issued an unsecured non-convertible promissory note in the principal amount of $
Concurrently with the issuance of the March 2025 Notes, the Company also entered into letter agreements of even date (the “March Letter Agreements”) with the 2025 Lender setting forth, among other items, the intended use of proceeds of the March 2025 Notes as described above. The March 2025 Notes and the March Letter Agreements are on the same form as those entered in on August 12, 2024, October 9, 2024, and November 22, 2024, January 21, 2025.
On
April 9, 2025, the Company entered into amendment agreements with the 2024 Lenders, pursuant to which the maturity date of the October
2024 Notes was amended from
On
May 5, 2025, the Company entered into an amendment agreement with the 2024 Lender pursuant to which the maturity date of the November
2024 Note was amended from
On
May 1, 2025, the Company issued an unsecured non-convertible promissory note in the principal amount of $
On
August 27, 2025, the Company issued an unsecured non-convertible promissory note in the principal amount of $
Between
May 30, 2025 and December 31, 2025, the Company entered into Series J Settlement Agreements with the 2024 and 2025 Creditors, pursuant
to which, the 2024 and 2025 Creditors, not including Related Party Creditors, settled an aggregate of $
On
January 9, 2026, the Company entered into an unsecured non-convertible promissory note (the “January 2026 Note”) in the principal
amount of $
| 12 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
On
April 24, 2026, the Company entered into an unsecured non-convertible promissory note (the “April 2026 Note”) in the principal
amount of $
The
April 2026 Note may be prepaid in whole or in part at any time and from time to time upon three (3) prior business days’ written
notice, without penalty. The Company may also repay the April 2026 Note upon maturity or at such time as the Company and the 2025 Lender
may agree to effect repayment. The April 2026 Note also contains customary events of default, which include, without limitation, failure
to pay principal, interest or other charges in respect of the April 2026 Note when due at maturity or otherwise, failure to satisfy any
covenant in the April 2026 Note or other agreements between the Company and the 2025 Lender or any other creditor, breach of representations
and warranties set forth in the April 2026 Note or any transaction document executed contemporaneously with the April 2026 Note, and
certain judgment defaults, events of bankruptcy or insolvency of the Company. Upon the occurrence of such an event of default under the
April 2026 Note, the 2025 Lender has the right to demand repayment of the April 2026 Note in full upon five (5) business days’
notice to the Company. In the event that full payment is not made upon the expiry of a thirty (30) day period, a default penalty equal
to
As
of June 30, 2026 and December 31, 2025, aggregate notes payable in the aggregate principal amounts of $
NOTE 5– STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred stock
The Company has authorized shares of preferred stock, $ par value per share. The Company’s Amended and Restated Articles of Incorporation explicitly authorize the Board to issue any or all of such shares of preferred stock in one (1) or more classes or series and to fix the designations, powers, preferences and rights, the qualifications, limitations or restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any class or series, without further vote or action by the stockholders.
Series B preferred stock
On
August 16, 2019, the Company filed the Certificate of Designation, Preferences, and Rights of Series B Convertible Preferred Shares with
the Secretary of State of the State of Nevada (the “Series B Preferred COD”) designating shares of Series B Convertible
Preferred Stock with a par value of $ and a stated value of $ (the “Series B Preferred”). The Series B Preferred
have no voting rights and are not redeemable.
As of June 30, 2026 and December 31, 2025, there were Series B preferred stock issued or outstanding.
Series D preferred stock
On July 20, 2020, the Board filed the Certificate of Designation of Preferences (“COD”), Rights and Limitations of Series D Preferred Stock (the “Series D COD”) with the Secretary of State of the State of Nevada designating shares of preferred stock as Series D. The Series D preferred stock (“Series D Preferred”) does not have the right to vote. The Series D Preferred has a stated value of $ per share (the “Series D Stated Value”). Subject only to the liquidation rights of the holders of Series B Preferred that is currently issued and outstanding, upon the liquidation, dissolution or winding up of the business of the Company, whether voluntary or involuntary, the Series D Preferred holders are entitled to receive an amount per share equal to the Series D Stated Value and then receive a pro-rata portion of the remaining assets available for distribution to the holders of common stock on an as-converted to common stock basis.
| 13 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
Approval of at least a majority of the outstanding Series D Preferred is required to: (a) amend or repeal any provision of, or add any provision to, the Company’s Articles of Incorporation or bylaws, or file any Certificate of Designation (however such document is named) or articles of amendment to create any class or any series of preferred stock, if such action would adversely alter or change in any respect the preferences, rights, privileges or powers, or restrictions provided for the benefit, of the Series D Preferred, regardless of whether any such action shall be by means of amendment to the Articles of Incorporation or bylaws or by merger, consolidation or otherwise or filing any Certificate of Designation, it being understood that the creation of a new security having rights, preferences or privileges senior to or on parity with the Series D Preferred in a future financing will not constitute an amendment, addition, alteration, filing, waiver or repeal for these purposes; (b) increase or decrease (other than by conversion) the authorized number of Series D Preferred; (c) issue any Series D Preferred, other than to the Investors; or (d) without limiting any provision hereunder, whether or not prohibited by the terms of the Series D Preferred, circumvent a right of the Series D Preferred.
As of June 30, 2026 and December 31, 2025, shares of Series D Preferred were outstanding.
Series E preferred stock
On October 6, 2020, the Board filed the Certificate of Designation of Preferences, Rights and Limitations of Series E Convertible Preferred Stock (the “Series E COD”) with the Secretary of State of the State of Nevada designating shares of preferred stock as Series E Preferred.
On December 28, 2020, the Board filed an Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series E Convertible Preferred Stock (the “Amended Series E COD”) with the Secretary of State of the State of Nevada. The Series E Preferred has a stated value of $ per share (the “Series E Stated Value”). Pursuant with the Amended Series E COD:
| ● | Each holder of Series E Preferred has the right to cast the number of votes equal to the number of whole shares of common stock into which the shares of Series E Preferred held by such holder are convertible as of the applicable record date. | |
| ● | Unless
prohibited by Nevada law governing distributions to stockholders, for a period of one-year beginning with the Original Issuance Date,
as defined, the Corporation shall have the right but not the obligation to redeem all outstanding Series E Preferred (and not any
part of the Series E Preferred) at a price equal to |
Subject
to a beneficial ownership limitation of 4.99% or 9.99%, at any time during the period commencing on the date of the occurrence of a Triggering
Event and ending on the date of the cure of such Triggering Event (the “Triggering Event Period”), a holder may, at such
holder’s option, by delivery of a conversion notice to the Company to convert all, or any number of Series E Preferred (such conversion
amount of the Series E Preferred to be converted pursuant to this Section 6(b) (the “Triggering Event Conversion Amount”),
into shares of common stock at the Triggering Event Conversion Price. The “Triggering Event Conversion Amount” means
If and whenever on or after the initial issuance date but not after two years from the original issuance date, the Company issues or sells, or is deemed to have issued or sold, additional shares of common stock, options, warrants of convertible instruments, other than an exempt issuance, for a consideration per share (the “Base Share Price”) less than a price equal to the conversion price in effect immediately prior to such issuance or sale or deemed issuance or sale (such conversion price then in effect is reflected to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the conversion price then in effect shall be reduced to an amount equal to the base share price.
From
and after the Original Issuance Date, cumulative dividends on each share of Series E Preferred shall accrue, whether or not declared
by the Board and whether or not there are funds legally available for the payment of dividends, on a daily basis in arrears at the rate
of
On a pari passu basis with the holders of Series D Preferred that was issued and outstanding, upon the liquidation, dissolution or winding up of the business of the Company, whether voluntary or involuntary, the Series E Preferred is entitled to receive an amount per share equal to the Series E Stated Value and then receive a pro-rata portion of the remaining assets available for distribution to the holders of common stock on an as-converted to common stock basis. Until the date that such Series E Preferred holder no longer owns at least 50% of the Series E Preferred, the holders of Series E Preferred have the right to participate, pro rata, in each subsequent financing in an amount up to 25% of the total proceeds of such financing on the same terms, conditions and price otherwise available in such subsequent financing.
| 14 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
Approval of at least a majority of the outstanding Series E Preferred is required to: (a) amend or repeal any provision of, or add any provision to, the Company’s Articles of Incorporation or bylaws, or file any Certificate of Designation (however such document is named) or articles of amendment to create any class or any series of preferred stock, if such action would adversely alter or change in any respect the preferences, rights, privileges or powers, or restrictions provided for the benefit, of the Series E Preferred, regardless of whether any such action shall be by means of amendment to the Articles of Incorporation or bylaws or by merger, consolidation or otherwise or filing any Certificate of Designation, but the creation of a new security having rights, preferences or privileges senior to or on parity with the Series E Preferred in a future financing will not constitute an amendment, addition, alteration, filing, waiver or repeal for these purposes; (b) increase or decrease (other than by conversion) the authorized number of Series E Preferred; (c) issue any Series D Preferred, (d) issue any Series E Preferred in excess of or (e) without limiting any provision under the Series E COD, whether or not prohibited by the terms of the Series E Preferred, circumvent a right of the Series E Preferred.
These
Series E Preferred issuances with redemption provisions that permit the issuer to settle in either cash or common stock, at the option
of the issuer, were evaluated to determine whether temporary or permanent equity classification on the consolidated balance sheet was
appropriate. As per the terms of the Amended Series E COD, the Company shall have the right but not the obligation to redeem all outstanding
Series E Preferred (and not any part of the Series E Preferred) at a price equal to
The Company concluded that the Series E Preferred represented an equity host and, therefore, the redemption feature of the Series E Preferred was considered to be clearly and closely related to the associated equity host instrument. The redemption features did not meet the net settlement criteria of a derivative and, therefore, were not considered embedded derivatives that required bifurcation. The Company also concluded that the conversion rights under the Series E Preferred were clearly and closely related to the equity host instrument. Accordingly, the conversion rights feature on the Series E Preferred were not considered an embedded derivative that required bifurcation.
On
June 17, 2025 and in July 2025, the Company entered into exchange agreements with holders of the Company’s securities (the “Exchange
Agreements”), including holders of shares of Series E Preferred (the “Series E Preferred Shareholders”) pursuant to
which, the Series E Preferred Shareholders converted Series E Preferred Shares and accrued dividends payable of $
As
of June 30, 2026 and December 31, 2025, the Company has accrued dividends payable of $
As of June 30, 2026 and December 31, 2025, shares of Series E Preferred were issued and outstanding.
Series G preferred stock
On
December 31, 2021, we entered into securities purchase agreements with investors pursuant to which the Company issued an aggregate of
(i) shares of a newly created series of preferred stock called the Series G Preferred and (ii) common stock purchase warrants
to purchase up to
Pursuant to the Series G COD,
| ● | Each holder of Series G Preferred has the right to cast the number of votes equal to the number of whole shares of common stock into which the shares of Series G Preferred held by such holder are convertible as of the applicable record date. | |
| ● | Unless
prohibited by Nevada law governing distributions to stockholders, for a period of one-year beginning with the original issuance date,
as defined, the Company shall have the right but not the obligation to redeem all outstanding Series G Preferred (and not any part
of the Series G Preferred) at a price equal to |
If and whenever on or after the initial issuance date but not after two years from the original issuance date, the Company issues or sells, or is deemed to have issued or sold, additional shares of common stock, options, warrants of convertible instruments, subject to certain exceptions, for a consideration per share (the “Base Share Price”) less than a price equal to the applicable conversion price in effect immediately prior to such issuance or sale or deemed issuance or sale (such conversion price then in effect is reflected to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the conversion price then in effect shall be reduced to an amount equal to the Base Share Price.
| 15 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
From
and after the original issuance date, cumulative dividends on each share of Series G Preferred shall accrue, whether or not declared
by the Board and whether or not there are funds legally available for the payment of dividends, on a daily basis in arrears at the rate
of
On
a pari passu basis with the holders of Series E Preferred, upon the liquidation, dissolution or winding up of the business of the Company,
whether voluntary or involuntary, the Series G Preferred is entitled to receive an amount per share equal to the Series G Stated Value
and then receive a pro-rata portion of the remaining assets available for distribution to the holders of common stock on an as-converted
to common stock basis. The holders of Series G Preferred have the right to participate, pro rata, in each subsequent financing in an
amount up to
Approval of at least two-thirds of the outstanding Series G Preferred is required to: (a) amend or repeal any provision of, or add any provision to, the Company’s Articles of Incorporation or bylaws, or file any Certificate of Designation (however such document is named) or articles of amendment to create any class or any series of preferred stock, if such action would adversely alter or change in any respect the preferences, rights, privileges or powers, or restrictions provided for the benefit, of the Series G Preferred, regardless of whether any such action shall be by means of amendment to the Articles of Incorporation or bylaws or by merger, consolidation or otherwise or filing any Certificate of Designation, but the creation of a new security having rights, preferences or privileges senior to or on parity with the Series G Preferred in a future financing will not constitute an amendment, addition, alteration, filing, waiver or repeal for these purposes; (b) increase or decrease (other than by conversion) the authorized number of Series G Preferred; (c) issue any Series E Preferred or Series D Preferred, (d) issue any Series G Preferred in excess of shares or (e) without limiting any provision under the Series G COD, whether or not prohibited by the terms of the Series G Preferred, circumvent a right of the Series G Preferred.
Under
the terms of the Series G Preferred, if the Company issues or sells (or is deemed to have issued or sold) additional shares of common
stock for a price-per-share that is less than the price equal to the conversion price of the Series G Preferred held by the holders of
the Series G Preferred immediately prior to such issuance, then the conversion price of the Series G Preferred will be reduced to the
price per share of such dilutive issuance. As a result of the issuance of common stock on the exercise of certain Eligible Warrants at
an exercise price of $
The
Series G Preferred share issuances with redemption provisions that permit the issuer to settle in either cash or common stock, at the
option of the issuer, were evaluated to determine whether temporary or permanent equity classification on the consolidated balance sheet
was appropriate. As per the terms of the Series G preferred stock agreements, the Company shall have the right but not the obligation
to redeem all outstanding Series G Preferred (and not any part of the Series E Preferred) at a price equal to
The Company concluded that the Series G Preferred represented an equity host and, therefore, the redemption feature of the Series G Preferred was considered to be clearly and closely related to the associated equity host instrument. The redemption features did not meet the net settlement criteria of a derivative and, therefore, were not considered embedded derivatives that required bifurcation. The Company also concluded that the conversion rights under the Series G Preferred were clearly and closely related to the equity host instrument. Accordingly, the conversion rights feature on the Series G Preferred were not considered an embedded derivative that required bifurcation.
During the year ended December 31, 2025, there were no conversions of Series G Preferred into common stock.
Effective
June 1, 2025, the Company entered into the Exchange Agreements with holders of the Company’s securities, including holders of shares
of Series G Preferred (the “Series G Preferred Shareholders”), pursuant to which, the Series G Preferred Shareholders agreed
to convert shares of Series G Preferred and accrued dividends of $
As
of June 30, 2026 and December 31, 2025, the Company had accrued dividends payable of $
As of June 30, 2026 and December 31, 2025, shares of Series G Preferred were issued and outstanding.
Series H preferred stock
On September 20, 2022, the Company filed the Certificate of Designation of Preferences, Rights and Limitations of Series H Convertible Preferred Stock (the “Series H COD”) with the Secretary of State of the State of Nevada designating shares of preferred stock as Series H (“Series H Preferred”). The Series H Preferred has no stated value and pursuant to the Series H COD:
| ● | Each share of Series H Preferred shall have no voting rights. | |
| ● | ||
| ● | Upon the liquidation, dissolution or winding up of the business of the Company, whether voluntary or involuntary, each holder of Series H Preferred stock shall be entitled to receive out of assets of the Company legally available therefor the same amount that a holder of the Company’s common stock would receive on an as-converted basis (without regard to the beneficial ownership limitation or any other conversion limitations hereunder). The right of a Series H Holder to receive such payment shall be preferential to the right of holders of common stock but shall be subordinate to the rights of the holder of any other series of preferred stock of the Company. |
As of both June 30, 2026 and December 31, 2025, shares of Series H Preferred were outstanding.
| 16 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
Series J convertible preferred stock
On
May 5, 2025, we filed with the Secretary of State of the State of Nevada (the “Nevada Secretary of State”) the Certificate
of Designation of Preferences, Rights, and Limitations of Series J Senior Convertible Preferred Stock (“Series J Preferred”)
to designate shares of the Company’s authorized and unissued preferred stock as Series J Preferred (the “Series
J Certificate”). The Series J Certificate became effective upon its filing with the Nevada Secretary of State. On September 5,
2025, the Company filed an Amendment (the “Series J Certificate Amendment”) to the Series J Certificate with the Secretary
of State of the State of Nevada. Each share of Series J Preferred has a stated value of $. Beginning on June 1, 2025, and on each
successive six-month anniversary, holders of the shares of the Series J Preferred are entitled to receive dividends, in either cash or
stock at the option of the Company, equal to
Holders of the Series J Preferred are entitled to vote on matters in which the holders of shares of the Company’s common stock are entitled to vote on an as-converted basis, which assumes each holder of Series J Preferred have converted their shares of Series J Preferred into shares of common stock. In addition, so long as any shares of Series J Preferred are outstanding, the Company cannot, without the affirmative vote of the holders of a majority of the then-outstanding shares of Series J Preferred, which vote as a separate class, (a) alter or change adversely the powers, preferences or rights given to the Series J Preferred or alter or amend the Series J Certificate of Designation, (b) amend the articles of incorporation of the Company or any other charter documents of the Company in any manner that adversely affects any rights of the Series J Preferred or (c) enter into any agreement with respect to any of the foregoing.
The
Series J Preferred, with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and
winding up of the Company, are senior in rank to all shares of capital stock of the Company that are outstanding on the date that shares
of Series J Preferred are issued. At any time from and after the date of issuance of any Series J Preferred, a holder of Series J Preferred
may convert all, or any part, of the outstanding Series J Preferred, at any time at such holder’s option, into shares of common
stock at an initial conversion price of $
During such time as any Series J Preferred are outstanding, if the Company declares or makes any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of common stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction), other than dividends or issuances of rights pursuant to the Company’s existing rights agreement to holders of common stock, at any time after the issuance of the Series J Preferred, then, in each such case, the holder will be entitled to participate in such distribution to the same extent that the holder would have participated therein if the holder had held the number of shares of common stock acquirable upon complete conversion of the Series J Preferred (without regard to any limitations on conversion hereof, including without limitation, the beneficial ownership limitation) immediately before the date of which a record is taken for such distribution, or, if no such record is taken, the date as of which the record holders of shares of common stock are to be determined for the participation in such distribution.
The
shares of Series J Preferred are redeemable upon the occurrence of certain triggering events, excluding events, facts or circumstances
that occurred prior to or were in existence as of the date of the Series J Certificate. Upon such triggering events, holders of Series
J Preferred have the option to cause the Company to redeem all or part of such holder’s shares of Series J Preferred at a price
per share equal to
On September 5, 2025, the Company filed an Amendment (the “Series J Certificate Amendment”) to the Series J Certificate with the Secretary of State of the State of Nevada to, among other things, amend what constitutes a triggering event to exclude events, facts or circumstances that occurred prior to or were in existence as of the date of the Series J Certificate.
| 17 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
Between
June 17, 2025 and June 30, 2025, the Company entered into Exchange Agreements with the holders of the Company’s securities, pursuant
to which (i) an aggregate of shares of Series E Preferred and accrued dividends of $
Between
May 30, 2025 and September 30, 2025, the Company entered into Series J Settlement Agreements with the 2025 Creditors. Pursuant to the
Series J Settlement Agreements, the 2025 Creditors, not including the Related Party Creditors, settled an aggregate of $
On
May 30, 2025, the Company entered into Series J Settlement Agreements with the Related Party Creditors. Pursuant to the Series J Settlement
Agreements, the Related Party Creditors settled an aggregate of $
Between
May 30, 2025 and July 21, 2025, the Company entered into Series J Settlement Agreements with certain vendors of the Company (the “Vendors”),
pursuant to which the Vendors settled an aggregate of $
On
August 28, 2025, the Company issued aggregate of shares of Series J Preferred to the Company’s chief executive officer and
certain consultants as compensation for services rendered to the Company. The Series J Preferred was valued at the as if converted fair
value of $
On
October 15, 2025, the Company entered into settlement agreements (the “Board Settlement Agreements”) with certain
directors of the Company pursuant to which the directors settled an aggregate of $
On
November 12, 2025, the Company entered into exchange agreements (the “November Exchange Agreements”) with certain holders
(the “November Exchange Holders”) of outstanding warrants to purchase up to an aggregate of
On
December 15, 2025, the Company entered into a settlement agreement (the “CEO Settlement Agreement”) with Sebastian
Giordano, with respect to certain outstanding liabilities (the “Outstanding Liabilities”). Pursuant to the CEO Settlement
Agreement, Mr. Giordano agreed to settle an aggregate of $
As of both June 30, 2026 and December 31, 2025, shares of Series J Preferred were outstanding.
| 18 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
Warrants
Warrant activities for the six months ended June 30, 2026 are summarized as follows:
| Number
of Shares Issuable Upon Exercise of Warrants | Weighted
Average Exercise Price | Weighted
Average Remaining Contractual Term (Years) | Aggregate
Intrinsic Value | |||||||||||||
| Balance Outstanding December 31, 2025 | $ | $ | ||||||||||||||
| Expired | ( | ) | - | - | ||||||||||||
| Balance Outstanding June 30, 2026 | $ | $ | ||||||||||||||
| Exercisable, June 30, 2026 | $ | $ | ||||||||||||||
NOTE 6 – COMMITMENTS AND CONTINGENCIES
Legal matters
From time to time, we may be involved in litigation or receive claims arising out of our operations in the normal course of business. Other than discussed below, we are not currently a party to any other legal proceeding or are aware of claims that we believe would, if decided adversely, have a material adverse effect on our business, financial condition, or operating results. We also disclose any recent settlements and accruals taken in connection therewith, as of June 30, 2026.
SCS, LLC v. TLSS
On November 17, 2020, a former financial consultant to the Company, SCS, LLC, filed an action against the Company in the Circuit Court of the 15th Judicial Circuit, Palm Beach County, Florida, captioned SCS, LLC v. Transportation and Logistics Systems, Inc. The case was assigned Case No. 50-2020-CA-012684.
In
this action, SCS alleges that it entered into a renewable six-month consulting agreement with the Company dated September 5, 2019, and
that the Company failed to make certain monthly payments due thereunder for the months of October 2019 through March 2020, summing to
$
In
February 2025, the parties agreed to settle all claims in this matter and thereafter executed a Confidential Settlement Agreement and
Mutual Release effective on February 13, 2025. On July 18, 2025, the court entered an Order which determined that the settlement of $
Shareholder Derivative Action
On June 25, 2020, the Company was served with a putative stockholder derivative action filed in the Circuit Court of the 15th Judicial Circuit in and for Palm Beach County, Florida (the “Court”) captioned SCS, LLC, derivatively on behalf of Transportation and Logistics Systems, Inc. v. John Mercadante, Jr., Douglas Cerny, Sebastian Giordano, Ascentaur LLC and Transportation and Logistics Systems, Inc. The action has been assigned Case No. 2020-CA-006581.
The plaintiff in this action, SCS, alleges it is a limited liability company formed by a former chief executive officer and director of the Company, Lawrence Sands. The complaint alleges that between April 2019 and June 2020, the immediately prior chairman and chief executive officer of the Company, Mercadante, the former chief development officer of the Company, Cerny, and, since February 2020, the Company’s then restructuring consultant who is now chairman and chief executive officer of the Company, Giordano, breached fiduciary duties owed to the Company. Prior to becoming CEO, Giordano rendered his services to the Company through the final named defendant in the action, Ascentaur LLC.
The complaint alleges that Mercadante breached duties to the Company by, among other things, requesting, in mid-2019, that certain preferred equity holders, including SCS, convert their preferred shares into Company common stock in order to facilitate an equity offering by the Company and then not consummating that offering. The complaint also alleges that Mercadante and Cerny caused the Company to engage in purportedly wasteful and unnecessary transactions such as taking merchant cash advances (MCA) on disadvantageous terms. The complaint further alleges that Mercadante and Cerny “issued themselves over million shares of common stock without consideration.” The complaint seeks unspecified compensatory and punitive damages on behalf of the Company for breach of fiduciary duty, negligent breach of fiduciary duty, constructive fraud, civil conspiracy and the appointment of a receiver or custodian for the Company.
Company
management tendered the complaint to the Company’s directors’ and officers’ liability carrier for defense and indemnity
purposes, which coverage is subject to a $
By order dated September 15, 2022, the Circuit Judge assigned to this case dismissed the original Complaint in the matter, finding (a) that SCS had failed to adequately allege it has standing and (b) that the complaint fails to adequately allege a cognizable claim. The dismissal was without prejudice, meaning SCS could attempt to replead its claims.
| 19 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
On October 5, 2022, SCS filed an Amended Complaint in this action. By order dated December 19, 2022, the Circuit Judge assigned to this case once again dismissed the case, finding (a) that SCS still failed to adequately allege it has standing and (b) that the complaint still fails to adequately allege a cognizable claim. Once again, however, the dismissal was without prejudice.
On January 18, 2023, SCS filed a Second Amended Complaint in this action. All defendants once again moved to dismiss the pleading or in the alternative for summary judgment on it in their favor. The Court heard argument on that motion on March 9, 2023. On May 15, 2023, the Court issued a summary order denying the defendants’ motion to dismiss. On June 1, 2023, all defendants moved for reconsideration of the May 15 order. On November 28, 2023, the Court denied the motion for reconsideration.
In February 2025, the parties agreed to settle all claims in this matter and thereafter executed a Confidential Settlement Agreement and Mutual Release effective on February 13, 2025. On February 20, 2025, pursuant to a Stipulation of Dismissal with Prejudice, the Court entered a final order of dismissal with prejudice and dismissed the action with prejudice.
Josh Perez v. Cougar Express, Inc.
An attorney for a former Cougar Express (CE) employee, Josh Perez (“Perez”), has advised CE that he has filed a charge of discrimination against CE with the U.S. Equal Employment Opportunity Commission (EEOC).
Perez allegedly is asserting claims against CE for: gender discrimination under Title VII and the New York State Human Rights Law (“NYSHRL”); pregnancy/childbirth discrimination under Title VII of the federal Civil Rights Act of 1964, as amended; retaliation under Title VII and NYSHRL; and familial status discrimination under NYSHRL.
However, CE has not received a copy, nor any notification, of the filing.
Perez was employed by CE as a dock worker beginning on March 8, 2022, and last worked September 27, 2022. He alleges that in or around July 2022, he informed CE that he was expecting a child. Perez has not provided any details regarding the individual(s) with CE he allegedly informed. On September 27, 2022, Perez requested that CE complete the employer section of his New York Paid Family Leave (“PFL”) paperwork, which CE did. Thereafter, Perez ceased communicating with CE. Further, CE did not receive any confirmation that Perez had in fact filed for PFL or that his PFL was approved.
Because CE did not hear from Perez or receive any confirmation concerning his application for or approval of PFL, CE concluded that Perez had resigned. Another worker was hired to fill Perez’s former position. Then, on or about December 27, 2022, Perez contacted CE attempting to return to work and was informed that there was no position for him.
CE categorically denies Perez’s allegations and any purported wrongdoing. Because this matter is apparently pending with the EEOC and CE has neither received a copy of the filing nor any notification of the filing, the Company cannot evaluate the likelihood of an adverse outcome or estimate the Company’s liability, if any, in connection with it.
Emerson Swan v. Severance Trucking Co., Inc.
On
April 1, 2024, a judgment was entered against Severance Trucking on behalf of Emerson Swan, Inc. (“Emerson”) in the amount
of $
Ryder Truck Rental, Inc. v. Severance Trucking Co., Inc.
On
April 30, 2024, Severance Trucking received a letter from Ryder Truck Rental, Inc. requesting payment in the amount of $
Akabas & Sproule v. Transportation and Logistics Systems, Inc.
On
March 19, 2025, the Company’s former law firm, Akabas & Sproule, filed a lawsuit against the Company in the Supreme Court of
the State of New York, New York County, alleging three causes of action: (i) breach of contract; (ii) account stated, and (iii) unjust
enrichment/quantum meruit. Akabas & Sproule seeks $
Diesel Direct, LLC v. Severance Trucking a/k/a Severance Trucking Co., Inc.
On
May 19, 2025, Diesel Direct. LLC filed a lawsuit against Severance Trucking in the Commonwealth of Massachusetts, Superior Court Department
of the Trial Court, for Severance Trucking’s alleged failure to pay for diesel fuel deliveries between October 23, 2023 and February
14, 2024. Diesel Direct alleges four counts against Severance Trucking for breach of contract, breach of implied covenant of good faith
and fair dealing, quantum meruit/unjust enrichment, and violation of M.G.L. c. 93A, and seeks judgment for monetary damages in the amount
of $
| 20 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
RX Benefits v. TLSS Ops
On
October 1, 2025, a former vendor of TLSS Ops filed a complaint against the Company in the Superior Court of New Jersey Law Division,
Bergen County, captioned RX Benefits v. TLSS Operations Holding Company, Inc. The case was assigned Case No. BER L-006620-25. In this
action, RX Benefits demands payment of contractual amounts due plus legal fees and interest aggregating $
Employment agreements
On
December 15, 2025 and as amended on April 23, 2026, we entered into a Retention Agreement (the “Retention Agreement”)
with Mr. Giordano, pursuant to which Mr. Giordano agreed to continue to act as the Chairman, Chief Executive Officer and Chief Financial
Officer of the Company and the Company agreed to pay Mr. Giordano up to $
In
connection with the entry into the Retention Agreement, on December 15, 2025, we entered into the CEO Settlement Agreement with Sebastian
Giordano, with respect to certain outstanding liabilities incurred through December 31, 2025 (the “Outstanding Liabilities”).
Pursuant to the CEO Settlement Agreement, Mr. Giordano agreed to settle an aggregate of $
On
April 23, 2026, the Company entered into a Deferred Compensation Agreement with Mr. Giordano, whereby the Company and Mr. Giordano desire
to defer payment of all such compensation earned from January 1, 2026 through the closing date of an Acquisition Closing (see Note 9).
In connection with the Deferred Compensation Agreement. Based upon estimated annual compensation of $
Deferred Amounts shall become payable to Mr. Giordano within thirty (30) days following the earliest to occur of the following (each, a “Triggering Event”):
(a) the Acquisition Closing;
(b) a Change in Control of the Company; “Change in Control” means (i) the consummation of a merger, consolidation, or reorganization of the Company with or into another entity in which the stockholders of the Company immediately prior to such transaction hold less than fifty percent (50%) of the voting power of the surviving entity immediately after such transaction, (ii) the sale or other disposition of all or substantially all of the Company’s assets, or (iii) any transaction or series of related transactions resulting in any person or group (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934) acquiring beneficial ownership of more than fifty percent (50%) of the Company’s outstanding voting securities. For purposes of this Agreement, the Acquisition Closing shall be deemed a Change in Control.
(c) a separation from service of Mr. Giordano by the Company without Cause (as defined in the Retention Agreement) or by Mr. Giordano for Good Reason (as defined in the December 2025 Retention Agreement);
(d) Executive’s death or Disability, which means Executive’s inability to perform the essential functions of his position, with or without reasonable accommodation, for a period of one hundred twenty (120) consecutive days or one hundred eighty (180) days in any twelve (12)-month period, as determined by a physician mutually agreed upon by the Company and Executive (or Executive’s legal representative); or
(e) any other event that constitutes a permissible payment event under Section 409A.
If Mr. Giordano’s employment is terminated by the Company for Cause or by Executive without Good Reason, the Deferred Amounts shall remain deferred and shall be paid upon the earliest to occur of the Triggering Events set forth in clauses (a), (b), (d), or (e) above.
On
April 23, 2026, the Company entered into the Director Deferred Compensation Agreements with the Company’s three directors, whereby
the Company and each director desire to defer payment of all such compensation earned from January 1, 2026 through the closing date of
an Acquisition Closing. Based upon Director’s current board fee, the estimated monthly deferral amount is $
| 21 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
Deferred Amounts shall become payable to Director within thirty (30) days following the earliest to occur of the following (each, a “Triggering Event”):
| (a) | the Acquisition Closing; | |
| (b) | a Change in Control of the Company; “Change in Control” means (i) the consummation of a merger, consolidation, or reorganization of the Company with or into another entity in which the stockholders of the Company immediately prior to such transaction hold less than fifty percent (50%) of the voting power of the surviving entity immediately after such transaction, (ii) the sale or other disposition of all or substantially all of the Company’s assets, or (iii) any transaction or series of related transactions resulting in any person or group (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934) acquiring beneficial ownership of more than fifty percent (50%) of the Company’s outstanding voting securities. For purposes of this Agreement, the Acquisition Closing shall be deemed a Change in Control;
| |
| (c) | a removal of Director from the Board by the Company without Cause; “Cause” means the occurrence of any of the following: (i) Director’s breach of fiduciary duty to the Company; (ii) Director’s fraud, dishonesty, or willful misconduct with respect to the business or affairs of the Company; (iii) Director’s conviction of, or plea of no contest to, any misdemeanor involving theft, fraud, dishonesty, or act of moral turpitude or to any felony; or (iv) Director’s material violation of the Company’s corporate governance policies or code of conduct; provided, that in the event of a breach or violation described in clauses (i) or (iv) that can be cured by Director, the Company shall provide Director with notice of the facts and circumstances which constitute such breach or violation and shall provide Director a ten (10)-day period in which to cure such breach or violation, and the Company shall not remove Director for Cause if Director cures such breach or violation within such ten (10)-day period; | |
| (d) | Director’s death or Disability; “Disability” means Director’s inability to perform the essential functions of his or her position as a member of the Board for a period of one hundred twenty (120) consecutive days or one hundred eighty (180) days in any twelve (12)-month period, as determined by a physician mutually agreed upon by the Company and Director (or Director’s legal representative); or | |
| (e) | any other event that constitutes a permissible payment event under Section 409A. |
If Director is removed from the Board for Cause or voluntarily resigns from the Board, the Deferred Amounts shall remain deferred and shall be paid upon the earliest to occur of the Triggering Events set forth in clauses (a), (b), (d), or (e) above.
On
April 23, 2026, we entered into an amended Retention Agreement (the “Amended Retention Agreement”) with Mr. Giordano,
pursuant to which the Company agreed to pay Mr. Giordano up to $
In
connection with the Deferred Compensation Agreement, during the six months ended June 30, 2026, the Company recorded deferred compensation
of $
As
of June 30, 2026 and December 31, 2025, in connection with the extension of the term of the CEO Employment Agreement, the amount of compensation
and benefit amounts due to Mr. Giordano amounted to $
In
connection with the Director Deferred Compensation Agreements, during the six months ended June 30, 2026, the Company recorded deferred
compensation of $
As of June 30, 2026 and December 31, 2025, deferred compensation and related benefits are summarized as follows:
| June 30, 2026 | December 31, 2025 | |||||||
| Unpaid and deferred base salary - CEO | $ | $ | ||||||
| Director deferred compensation | ||||||||
| Total | $ | $ | ||||||
NOTE 7– RELATED PARTY TRANSACTIONS AND BALANCES
Notes payable – related parties
On
May 31, 2025 and effective June 1, 2025, the Company entered into Series J Settlement Agreements with the Related Party Creditors. Pursuant
to the Series J Settlement Agreements, the Related Party Creditors agreed to settle an aggregate of $
As
of June 30, 2026 and December 31, 2025, aggregate notes payable to related parties in the principal amounts of $ were outstanding. As
of June 30, 2026 and December 31, 2025, the aggregate accrued interest payable to related parties amounted to $. For the three months
ended June 30, 2026, and 2025, interest expense – related parties amounted to $ and $
| 22 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
NOTE 8 – DISCONTINUED OPERATIONS
On February 27, 2024, the Cougar Bankruptcy occurred (see Note 1). The Company and its other subsidiaries ceased all remaining logistic and transportation service operations in mid-February 2024. As a result, accordingly, the Company has classified the related assets and liabilities associated with its logistics and transportation services business as discontinued operations in its consolidated balance sheets and the results of its logistics and transportation services business has been presented as discontinued operations in its consolidated statements of operations for all periods presented as the discontinuation of its business had a major effect on its operations and financial results. Unless otherwise noted, discussion in the other notes to unaudited consolidated financial statements refers to the Company’s continuing operations.
The following table presents the major classes of assets and liabilities of the discontinued operations related to the Subsidiaries:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Assets of discontinued operations: | ||||||||
| Cash | $ | $ | ||||||
| Assets of discontinued operations, current portion | ||||||||
| Total assets of discontinued operations | $ | $ | ||||||
| Liabilities of discontinued operations: | ||||||||
| Notes payable, current portion | $ | $ | ||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Lease liabilities, current portion | ||||||||
| Liabilities of discontinued operations, current portion | ||||||||
| Total liabilities of discontinued operations | $ | $ | ||||||
The following table summarizes the results of operations of discontinued operations:
| Three
Months Ended June 30, | Six
Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Operating expenses | ( | ) | ( | ) | ||||||||||||
| Other (expenses) income, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from discontinued operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Notes Payable
On June 30, 2026 and December 31, 2025, notes payable included in liabilities of discontinued operations consisted of the following:
| June 30, 2026 | December 31, 2025 | |||||||
| Principal amounts | $ | $ | ||||||
| Less: current portion of notes payable | ( | ) | ( | ) | ||||
| Notes payable – long-term | $ | $ | ||||||
JFK Cartage acquisition promissory note
On
July 31, 2022, in connection with the acquisition of JFK Cartage, JFK Cartage issued a promissory note in the amount of $
| (i) | An
interest payment in the amount of $ | |
| (ii) | 23
equal weekly payments of interest only, each in the amount of $ | |
| (iii) | $ |
| (iv) | $ | |
| (v) | $l |
On
June 30, 2026 and December 31, 2025, the principal amount related to the Amended Note was $
| 23 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
Severance Trucking acquisition promissory note
On
January 31, 2023, in connection with the acquisition of the Severance entities, Severance Trucking issued a promissory note in the amount
of $
The
Severance Trucking Lenders demanded that the Severance Trucking Debtors and the Guarantor make the immediate full payment of (i) the
entire principal balance due under the Severance Trucking Note, together with all interest accrued thereon, and (ii) a late charge of
five percent (
Equipment and auto notes payable
On
September 22, 2022, JFK Cartage entered into a promissory note for the purchase of a truck in the amount of $
In
connection with the acquisition of the Severance entities, on January 31, 2023, the Company assumed an equipment note payable due to
an entity amounting to $
On
April 1, 2023, Severance Trucking entered into a promissory note for the purchase of a yard truck in the amount of $
On
April 14, 2023, Severance Trucking entered into a promissory note for the purchase of a truck in the amount of $
On
July 13, 2023, Severance Trucking entered into a promissory note for the purchase of three trucks in the amount of $
On
September 8, 2023, Severance Trucking entered into a promissory note for the purchase of two trucks in the amount of $
Operating and Financing Lease Right-Of-Use (“Rou”) Assets and Operating and Financing Lease Liabilities
In February 2024, the Company abandoned all remaining leased premises.
On June 30, 2026 and December 31, 2025, operating and financing lease liabilities related to the abandoned ROU assets are included in liabilities of discontinued operations and are summarized as follows:
| June 30, 2026 | December 31, 2025 | |||||||
| Lease liabilities related to office leases and revenue equipment right of use assets | $ | $ | ||||||
| Less: current portion of lease liabilities | ( | ) | ( | ) | ||||
| Lease liabilities – long-term | $ | $ | ||||||
| 24 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
Other liabilities of discontinued operations
On
April 30, 2024, Severance Trucking received a letter from Ryder Truck Rental, Inc. requesting payment in the amount of $
On
August 24, 2024, TLSS Ops received a Notice of Default and Demand for Payment from RxBenefits, Inc. (“RxBenefits”) due to
the Company’s failure to pay certain invoices, plus interest and late service charges due under the Administrative Services Agreement
by and between RxBenefits and TLSS Operations Holding, in the amount of $
NOTE 9 – SUBSEQUENT EVENTS
Acquisition
On
July 7, 2026, the Company, TLSS Acquisition (the “Acquisition Sub”), and TLSS Reverse PGS, LLC, a Texas limited liability
company and a wholly-owned subsidiary of the Acquisition Sub (“Reverse”), entered into a Second Amendment to Member Interest
and Asset Exchange Agreement (the “Second Amendment”) with Badcer Ops, Inc. (the “Seller”), Jeff Badders and
Mercer, as the shareholders of the Seller (the “Seller Shareholders”), Patriot Glass, and Michael Wanke (“Wanke”),
the sole Manager and twenty percent (
As
disclosed in Note 1, on April 1, 2026, the Company, the Acquisition Sub and Reverse entered into a Member Interest and Asset Exchange
Agreement with the Seller, the Seller Shareholders, PGS and Wanke, as amended by a First Amendment dated June 1, 2026 (as so amended,
the “Agreement”). The Agreement provides for a reverse triangular merger of Reverse with and into PGS, with PGS as the surviving
entity, pursuant to which the Seller’s eighty percent (
The Second Amendment amends the Agreement to, among other things, extend certain key transaction dates and add a closing statement provision. Under the Second Amendment: (i) the Schedule Delivery Date and the deadline for delivery of the applicable PGS financial statements are each no later than July 15, 2026; (ii) the deadline for the full access and deliverables provisions is July 24, 2026; (iii) the required unaudited PGS financials cover the first two (2) quarters of 2026; (iv) the outside closing date is August 4, 2026; and (v) a new Section 9.14 requires the Acquisition Sub to cause its counsel to prepare a closing statement in advance of the Closing Date, subject to review and revision by all parties. On July 31, 2026, pursuant to Section 1.2 of the Agreement, the TLSS Parties exercised their existing right to extend the Closing Date (as defined in the Agreement) and, by the Notice of Extension, extended the Closing Date from August 4, 2026 for a period of up to fifteen (15) days, to no later than August 19, 2026. The Notice of Extension does not amend or modify any other term of the Agreement, and the Agreement remains in full force and effect.
The Seller is Badcer Ops, Inc., a Nevada corporation, whose shareholders are Mercer and Mr. Jeff Badders, an individual (together, the “Seller Shareholders”). Mercer is an existing preferred stockholder of the Company.
The
Agreement provides for merger consideration (the “Merger Consideration”) equal to $
The closing of the transaction is expected to occur no later than August 19, 2026, following the delivery to TLSS of audited financials for PGS for year-end 2024 and year-end 2025 and unaudited financials for PGS for the first two (2) quarters of 2026, which financials are to be delivered no later than July 15, 2026, subject to the satisfaction or waiver of certain closing conditions, including, among others: (i) the completion of satisfactory due diligence by TLSS; (ii) the accuracy of the representations and warranties of the parties; (iii) the procurement of acceptable landlord consent to the assignment of and amendments to PGS’s lease for its operating facilities; (iv) delivery of certain financial statements; and (v) other customary closing conditions as set forth in the Agreement.
The
remaining
The Company’s primary go-forward strategy is to become a leader in the safety and security technology industry. The Company expects to accomplish this goal, in part, by pursuing strategic acquisitions as a means of securing technologies and adding new markets in the United States, expanding its safety and security service offerings, adding talented management and operational employees, expanding and upgrading its technology platform and developing operational best practices. Moreover, one factor in assessing acquisition opportunities is the potential for subsequent organic growth post-acquisition.
| 25 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
Note Payable
On
July 16, 2026, the Company entered into an amended and restated unsecured non-convertible promissory note (the “July 2026 Note”)
in the principal amount of $
Reverse Stock Split (Unaudited)
On
August 11, 2024, a majority of
| Historical per share data – (Pre- Split basis) | Six Months Ended June 30, 2026 | Six Months Ended June 30, 2025 | ||||||
| Net (loss) income available to Common Stockholders | $ | ( | ) | $ | ||||
| Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted net (loss) income per share | $ | ) | $ | |||||
The assumption inherent in the table below is a reverse split of 1:5,000.
| Historical per share data – (Post- Split basis) | Six Months Ended June 30, 2026 | Six Months Ended June 30, 2025 | ||||||
| Net (loss) income available to Common Stockholders | $ | ( | ) | $ | ||||
| Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted net (loss) income per share | $ | ) | $ | |||||
| 26 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and plan of operations together with unaudited consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report. In addition to historical information, this discussion and analysis contain forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in our 2025 Annual Report. All amounts in this report are in U.S. dollars, unless otherwise noted.
Overview
TLSS is a publicly-traded holding company whose common stock had been quoted on the OTC PINK since August 21, 2022, but was removed from the OTC PINK and listed on the OTC Expert Market on July 17, 2024. As of May 14, 2026, our shares of common stock are trading on the OTCID basic markets.
The Company ceased all remaining operations as of mid-February 2024. Prior to that, the Company and its Subsidiaries provided a full suite of asset-based logistics and transportation services, specializing in ecommerce fulfillment, last mile deliveries, two-person home delivery, mid-mile, and long-haul services. An asset-based delivery company, as compared to a non-asset-based delivery company, owns the majority of its transportation equipment, and employs the majority of its drivers. The Company and its Subsidiaries operated several warehouse locations located in New York, New Jersey, Connecticut, and Massachusetts.
On February 27, 2024, Cougar Express, filed a Chapter 7 bankruptcy petition in the State of New York under the United States Bankruptcy Code. The Company’s other subsidiaries have all ceased operations since mid-February 2024 and have not filed bankruptcy.
Subsequent to the cessation of all of the Company’s revenue generating operations in February 2024 and through the date of this Quarterly Report, the Company continues to remain insolvent. The Company obtained financing to enable it to complete the preparation and review of the annual and interim financial statements through December 31, 2025 and file this Quarterly Report; however, the Company will require additional financing to fund the necessary costs related to the preparation and filing of one or more of the additional periodic reports due with respect to the 2026 calendar year.
Between May 2025 and November 12, 2025, we entered into exchange agreements (the “Series J Exchange Agreements”) with certain then current and former holders (the “Exchange Holders”) of our Series E Convertible Preferred Stock (the “Series E Preferred”), Series G Convertible Preferred Stock (the “Series G Preferred”) and warrants to purchase shares of our Common Stock (the “Exchanged Warrants”). Pursuant to the Series J Exchange Agreements, (i) the Exchange Holders exchanged an aggregate of 21,418 shares of Series E Preferred and accrued dividends of $192,776, and exchanged an aggregate of 406,500 shares of Series G Preferred and accrued dividends of $925,047, and (ii) we cancelled warrants to purchase up to an aggregate of 864,357,146 shares of Common Stock all in exchange for the issuance of an aggregate of 54,975 shares of the Company’s Series J Senior Convertible Preferred Stock, par value $0.001 per share (the “Series J Preferred”).
Also, between May 2025 and September 30, 2025, we entered into settlement agreements (the “Series J Settlement Agreements”) with holders of our outstanding liabilities (the “2025 Creditors”), pursuant to which, the 2025 Creditors agreed to settle an aggregate of $3,688,149 in outstanding liabilities and accrued interest in exchange for an aggregate of 36,882 shares of Series J Preferred.
On October 15, 2025, we entered into settlement agreements (the “Board Settlement Agreements”) with certain directors of the Company pursuant to which the directors settled an aggregate of $374,491 in outstanding liabilities, in exchange for the issuance of an aggregate of 3,785 shares of Series J Preferred. $337,042, which was netted against additional paid-in capital and accordingly, no gain or loss was recognized on these settlements.
On December 15, 2025, we entered into a settlement agreement (the “CEO Settlement Agreement”) with Sebastian Giordano, with respect to certain outstanding liabilities (the “Outstanding Liabilities”). Pursuant to the CEO Settlement Agreement, Mr. Giordano agreed to settle an aggregate of $1,400,712 in Outstanding Liabilities in exchange for the issuance of an aggregate of 10,007 shares of the Company’s Series J Preferred Stock.
In addition, we are also negotiating possible further restructuring of our remaining existing debts and obligations, as well as assessing the possibility of replacing our discontinued businesses and/or entering into new line(s) of business, whether by acquisition or otherwise. However, there can be no assurance that we will, in fact, be able to replace our former business and/or enter into new line(s) of business, or to do so profitably. The following discussion highlights the results of our operations and the principal factors that have affected the Company’s consolidated financial condition as well as its liquidity and capital resources for the periods described and provides information that management believes is relevant for an assessment and understanding of the consolidated financial condition and results of operations presented herein. The following discussion and analysis are based on the unaudited consolidated financial statements contained in this Quarterly Report, which have been prepared in accordance with GAAP. You should read the discussion and analysis together with such unaudited consolidated financial statements and the related notes thereto.
Recent events
On April 1, 2026 and amended in July 2026, the Company, TLSS Acquisition, Inc., a wholly-owned subsidiary of the Company, (the “Acquisition Sub”), and TLSS Reverse PGS, LLC, a Texas limited liability company and a wholly-owned subsidiary of the Acquisition Sub (“TLSS Reverse”), entered into a Member Interest and Asset Exchange Agreement (the “Agreement”) with Badcer Ops, Inc., a Nevada corporation (the “Seller”), Jeff Badders and Mercer Street Global Opportunity Fund, LLC, a Delaware limited liability company (“Mercer”), as the shareholders of the Seller (the “Seller Shareholders”), Patriot Glass Solutions, LLC, a Texas limited liability company (“PGS”), and Michael Wanke (“Wanke”), the sole Manager and twenty percent (20%) owner of PGS. The Agreement provides for a reverse triangular merger of TLSS Reverse with and into PGS, with PGS as the surviving entity, pursuant to which the Seller’s eighty percent (80%) membership interest in PGS and four (4) nanotechnology patents (the “Patents”) will be exchanged, transferred and assigned to the Acquisition Sub in exchange for the Merger Consideration described below.
The Seller is Badcer Ops, Inc., a Nevada corporation, whose shareholders are Mercer and Mr. Jeff Badders, an individual (together, the “Seller Shareholders”). Mercer is an existing preferred stockholder of the Company.
The Agreement provides for merger consideration (the “Merger Consideration”) equal to $4,750,000, payable in 47,500 shares of TLSS Series J Senior Convertible Preferred Stock (the “TLSS Series J Preferred Shares”), with a stated value of $100 per share, to be issued to the Seller at the closing of the transaction.
| 27 |
The closing of the transaction is expected to occur ten (10) days after audited financials for PGS for year-end 2024 and year-end 2025 and unaudited financials for PGS for the six months ended June 30, 2026 are completed and provided to TLSS, subject to the satisfaction or waiver of certain closing conditions, including, among others: (i) the completion of satisfactory due diligence by TLSS; (ii) the accuracy of the representations and warranties of the parties; (iii) the procurement of acceptable landlord consent to the assignment of and amendments to PGS’s lease for its operating facilities; (iv) delivery of certain financial statements; and (v) other customary closing conditions as set forth in the Agreement.
The remaining 20% membership interest in PGS is currently held by and will be retained by Mr. Michael Wanke, the sole Manager of PGS. It is a condition of closing that Mr. Wanke will enter into an employment agreement with PGS, the terms of which are to be agreed upon prior to the expiration of the due diligence period.
The Company’s primary go-forward strategy is to become a leader in the safety and security technology industry. The Company expects to accomplish this goal, in part, by pursuing strategic acquisitions as a means of securing technologies and adding new markets in the United States, expanding its safety and security service offerings, adding talented management and operational employees, expanding and upgrading its technology platform and developing operational best practices. Moreover, one factor in assessing acquisition opportunities is the potential for subsequent organic growth post-acquisition.
PGS provides quality window tint solutions for auto, home, and business owners across Texas, specializing in automotive window tinting, residential window film, and commercial window film that stop harmful UV rays from passing through its window films for reduced glare, comfortable temperatures, and lower energy bills. PGS protects personal, school, government and commercial/business property across the United States using C-Bond’s proprietary glass strengthening technology to protect property from looting, rioting, break-ins, and gunfire, including our C-Bond BRS a ballistic-resistant film system; and C-Bond Secure a multi-purpose glass strengthening primer and window film mounting solution that deters forced entry products with through a growing nationwide network of more than 50 dealers.
The Patents relate to the proprietary C-Bond nanotechnology applications and processes to enhance properties of strength, functionality, and sustainability of brittle material systems used by PGS.
As such, the Company believes that the acquisition of PGS is an excellent fit with its current business given its demographic location, services offered, and diversified customer base, and given that it would provide the Company with a long-standing, well-run profitable operation.
Critical Accounting Policies and Estimates
The methods, estimates, and judgments that we use in applying our accounting policies have a significant impact on the results that we report in our consolidated financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. Significant estimates included in the accompanying consolidated financial statements and footnotes include the valuation of accounts receivable, the useful life of property and equipment, the valuation of intangible assets, the valuation of assets acquired and liabilities assumed in a business combination, the valuation of right of use assets and related liabilities, assumptions used in assessing impairment of long-lived assets, estimates of current and deferred income taxes and deferred tax valuation allowances, the fair value of non-cash equity transactions, the valuation of assets and liabilities of discontinued operations, and the value of claims against the Company. Of the above significant estimates, we do not consider any to be critical given the discontinued operations presentation.
Management believes the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the consolidated financial statements.
Discontinued Operations
The Company has classified the related assets and liabilities associated with our logistics and transportation services business as discontinued operations in our consolidated balance sheets and the results of our logistics and transportation services business has been presented as discontinued operations in our consolidated statements of operations for all periods presented as the discontinuation of our business had a major effect on our operations and financial results.
RESULTS OF OPERATIONS
Our unaudited consolidated financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue our operation. Our results of operations reflect our continuing operations and reflect losses from discontinued operations related to the discontinuation of our logistics businesses. All financial information has been restated to reflect our discontinued operations for all periods presented.
For the three and six months ended June 30, 2026 compared with the three and six months ended June 30, 2025
The following table sets forth our revenues, expenses and net loss for the three and six months ended June 30, 2026 and 2025.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues | $ | - | $ | - | $ | - | $ | - | ||||||||
| Operating expenses | 227,501 | 389,375 | 460,958 | 721,646 | ||||||||||||
| Loss from operations | (227,501 | ) | (389,375 | ) | (460,958 | ) | (721,646 | ) | ||||||||
| Other income (expenses), net | (3,733 | ) | 1,428,568 | (5,418 | ) | 1,356,878 | ||||||||||
| Income (loss) from continuing operations | (231,234 | ) | 1,039,193 | (466,376 | ) | 635,232 | ||||||||||
| Loss from discontinued operations | (89,741 | ) | (92,251 | ) | (179,483 | ) | (186,560 | ) | ||||||||
| Net income (loss) | (320,975 | ) | 946,942 | (645,859 | ) | 448,672 | ||||||||||
| Deemed contribution on exchange of equity instruments | - | 800,380 | - | 800,380 | ||||||||||||
| Deemed and accrued dividends | (278,599 | ) | (140,696 | ) | (554,137 | ) | (217,686 | ) | ||||||||
| Net income (loss) attributable to common shareholders | $ | (599,574 | ) | $ | 1,606,626 | $ | (1,199,996 | ) | $ | 1,031,366 | ||||||
| 28 |
Results of Operations
Revenue
For the three and six months ended June 30, 2026 and 2025, we generated no revenues.
Operating Expenses
For the three months ended June 30, 2026, total operating expenses amounted to $227,501 compared to $389,375 for the three months ended June 30, 2025, a decrease of $161,874, or 41.6%, as reflected in the accompanying chart and described more fully below. For the six months ended June 30, 2026, total operating expenses amounted to $460,958 compared to $721,646 for the six months ended June 30, 2025, a decrease of $260,688, or 36.1%, as reflected in the accompanying chart and described more fully below.
For the three and six months ended June 30, 2026 and 2025, operating expenses consisted of the following:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Compensation and related benefits | $ | 144,999 | $ | 160,340 | $ | 289,998 | $ | 320,680 | ||||||||
| Legal and professional Fees | 81,919 | 226,301 | 169,003 | 397,261 | ||||||||||||
| General and administrative expenses | 583 | 2,734 | 1,957 | 3,705 | ||||||||||||
| Total Operating Expenses | $ | 227,501 | $ | 389,375 | $ | 460,958 | $ | 721,646 | ||||||||
Compensation and related benefits
For the three months ended June 30, 2026, compensation and related benefits amounted to $144,999 as compared to $160,340 for the three months ended June 30, 2025, a decrease of $15,341, or 9.6%. During the three months ended June 30, 2026, the overall decrease in compensation and related benefits as compared to the six months ended June 30, 2025 was primarily attributable to a decrease in compensation deferred to our chief executive officer.
For the six months ended June 30, 2026, compensation and related benefits amounted to $289,998 as compared to $320,680 for the six months ended June 30, 2025, a decrease of $30,682, or 9.6%. During the six months ended June 30, 2026, the overall decrease in compensation and related benefits as compared to the six months ended June 30, 2025 was primarily attributable to a decrease in compensation deferred to our chief executive officer.
Legal and professional fees
For the three months ended June 30, 2026, legal and professional fees were $81,919 as compared to $226,301 for the three months ended June 30, 2025, a decrease of $144,382, or 63.8%, which was primarily attributable to a decrease in legal fees of $132,331, a decrease in accounting and auditing fees of $11,344 and a net decrease in other professional fees of $707.
For the six months ended June 30, 2026, legal and professional fees were $169,003 as compared to $397,261 for the six months ended June 30, 2025, a decrease of $228,258, or 57.5%, which was primarily attributable to a decrease in legal fees of $167,561, a decrease in accounting and auditing fees of $56,049 and a net decrease in other professional fees of $4,648.
General and administrative expenses
General and administrative expenses include bank fees and other general and administrative expenses. For the three months ended June 30, 2026, general and administrative expenses were $583 as compared to $2,734 for the three months ended June 30, 2025, a decrease of $2,151, or 78.7%.
General and administrative expenses include bank fees and other general and administrative expenses. For the six months ended June 30, 2026, general and administrative expenses were $1,957 as compared to $3,705 for the six months ended June 30, 2025, a decrease of $1,748, or 47.2%.
Loss from operations
For the three months ended June 30, 2026, loss from operations amounted to $227,501 as compared to $389,375 for the three months ended June 30, 2025, a decrease of $161,874, or 41.6%, primarily due to: (i) decreases in compensation and other benefits of $15,341 and (ii) a decrease in legal and professional fees of $144,382, and a decrease in general and administrative expenses of $2,151, as discussed above.
For the six months ended June 30, 2026, loss from operations amounted to $460,958 as compared to $721,646 for the six months ended June 30, 2025, a decrease of $260,688, or 36.1%, primarily due to: (i) decreases in compensation and other benefits of $30,682 and (ii) a decrease in legal and professional fees of $228,258, and a decrease in general and administrative expenses of $1,748, as discussed above.
| 29 |
Other income (expenses), net
Total other income (expenses) include interest expense and gain on debt extinguishment. For the three and six months ended June 30, 2026 and 2025, other expenses, net consisted of the following:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Interest expense | $ | (3,733 | ) | $ | (9,198 | ) | $ | (5,418 | ) | $ | (18,301 | ) | ||||
| Interest expense – related parties | - | (43,976 | ) | - | (106,563 | ) | ||||||||||
| Gain on debt extinguishment | - | 1,481,742 | - | 1,481,742 | ||||||||||||
| Total Other Income (Expenses), net | $ | (3,733 | ) | $ | 1,428,568 | $ | (5,418 | ) | $ | 1,356,878 | ||||||
For the three months ended June 30, 2026 and 2025, aggregate interest expense was $3,733 and $53,174, respectively, a decrease of $49,441, or 93.0%. For the six months ended June 30, 2026 and 2025, aggregate interest expense was $5,418 and $124,864, respectively, a decrease of $119,446, or 95.7%. The decrease in interest expense was primarily attributable to an overall decrease in related party and third-party notes payable, as all 2024 and 2025 notes payable and related accrued interest were converted to Series J Preferred Stock.
For the three and six months ended June 30, 2025, in connection with the Series J Settlement Agreements and Series J Exchange Agreements, the Company recognized a gain on debt extinguishment of $1,466,728. Additionally, during the three and six months ended June 30, 2025, we recognized a gain on other debt extinguishment of $15,014. We did not recognize any gain on debt extinguishment during the three and six months ended June 30, 2026.
Loss from discontinued operations
In February 2024, we ceased operations of all logistic and transportation services subsidiaries, and on February 27, 2024, Cougar Express filed a Chapter 7 bankruptcy petition in the State of New York under the United States Bankruptcy Code. Accordingly, the financial position and results of operations of all our Subsidiaries are reflected as discontinued operations for all periods presented.
The following table sets forth our revenues, expenses and net loss for the three and six months ended June 30, 2026 and 2025 related to discontinued operations.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues | $ | - | $ | - | $ | - | $ | - | ||||||||
| Operating expenses | - | (2,510 | ) | - | (7,491 | ) | ||||||||||
| Other expenses, net | (89,741 | ) | (89,741 | ) | (179,483 | ) | (179,069 | ) | ||||||||
| Loss from discontinued operations | $ | (89,741 | ) | $ | (92,251 | ) | $ | (179,483 | ) | $ | (186,560 | ) | ||||
Net loss
Due to factors discussed above, for the three months ended June 30, 2026, and 2025, net (loss) income amounted to $(320,975) and $946,942, respectively. For the three months ended June 30, 2026, net loss attributable to common stockholders, which included dividends accrued on shares of the Company’s Series J Convertible Preferred Stock (the “Series J Preferred”) amounted to $(599,574), or $(0.00) per basic and diluted common share. For the three months ended June 30, 2025, net income attributable to common stockholders, which included dividends accrued on shares of Series E Preferred, Series G Preferred, and Series J Preferred of $140,696, and the recording of a deemed contribution on exchange of equity instruments of $800,380, amounted to $1,606,626, or $0.00 per basic and diluted common share.
Due to factors discussed above, for the six months ended June 30, 2026, and 2025, net (loss) income amounted to $(645,859) and $448,672, respectively. For the six months ended June 30, 2026, net loss attributable to common stockholders, which included dividends accrued on shares of the Company’s Series J Convertible Preferred Stock (the “Series J Preferred”) amounted to $(1,199,996), or $(0.00) per basic and diluted common share. For the six months ended June 30, 2025, net income attributable to common stockholders, which included dividends accrued on shares of Series E Preferred, Series G Preferred, and Series J Preferred of $217,686, and the recording of a deemed contribution on exchange of equity instruments of $800,380, amounted to $1,031,366, or $0.00 per basic and diluted common share.
LIQUIDITY AND CAPITAL RESOURCES
On June 30, 2026 and December 31, 2025, we had a cash balance of $29,082 and $15,835, respectively. Our working capital deficit was $9,134,091 and $7,934,095 on June 30, 2026 and December 31, 2025, respectively.
As of August 18, 2026, the Company had $61,464 in cash, consisting of: (i) $61,143 remaining from the issuance of unsecured promissory notes and (ii) $321 related to Severance Trucking.
Although we had historically raised capital from sales of shares of common stock, the sale of the Series E Preferred and the Series G Preferred, and from the issuance of convertible promissory notes and notes payable, the Company, in mid-February 2024, was unable to raise additional capital or secure additional lending to meet its debt and liability obligations and, as a result, the Company had to cease its remaining operations.
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Our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying unaudited consolidated financial statements, we had a net loss of $645,859 for the six months ended June 30, 2026. The net cash used in operations was $161,753 and $389,686 for the six months ended June 30, 2026 and 2025, respectively. Additionally, we had an accumulated deficit and working capital deficit of $148,365,105 and $9,134,091 on June 30, 2026, respectively. These factors, in addition to the cessation of all operations, raise substantial doubt about our ability to continue as a going concern for a period of twelve months from the date of this Quarterly Report.
Management cannot provide assurance that we will remain current in our SEC filings, successfully restructure our debts and liabilities, find a new business opportunity, achieve profitable operations, become cash flow positive or raise additional debt and/or equity capital. We are seeking to raise capital through additional debt and/or equity financing to fund the Company in the future and to pay our debt obligations. Although we have historically raised capital from sales of preferred shares, and from the issuance of promissory notes and convertible promissory notes, there is no assurance that it will be able to continue to do so. If the Company is unable to raise additional capital or secure additional lending in the near future, management expects that the Company would need to file bankruptcy. Our consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
Cash Flows
Operating activities
Net cash flows used in operating activities for the six months ended June 30, 2026, amounted to $161,753. During the six months ended June 30, 2026, net cash used in operating activities was primarily attributable to a net loss of $645,859, adjusted for changes in operating assets and liabilities as a result of an increase in accounts payable and accrued expenses of $194,108, and an increase in deferred compensation and related benefits of $289,998.
Net cash flows used in operating activities for the six months ended June 30, 2025, amounted to $389,686. During the six months ended June 30, 2025, net cash used in operating activities was primarily attributable to net income of $448,672, adjusted for non-cash gains on debt extinguishment of $1,481,742, and changes in operating assets and liabilities as a result of increases in accounts payable and accrued expenses of $291,382, accrued compensation and related benefits of $245,680, and accrued expenses – related parties of $106,562.
Investing activities
Net cash used in investing activities for the six months ended June 30, 2026 and 2025, amounted to $0.
Financing activities
For the six months ended June 30, 2026, net cash provided by financing activities totaled $175,000. During the six months ended June 30, 2026, we received cash proceeds of $175,000 from notes payable from unrelated third parties.
For the six months ended June 30, 2025, net cash provided by financing activities totaled $275,000. During the six months ended June 30, 2025, we received cash proceeds of $275,000 from notes payable from unrelated third parties.
Contractual Obligations
We have certain fixed contractual obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments.
Effects of Inflation
We do not believe that inflation has had a material impact on our business, revenues, or operating results during the periods presented.
Recently Enacted Accounting Standards
For a description of accounting changes and recent accounting standards, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see “Note 2: Recent Accounting Pronouncements” in the unaudited consolidated financial statements filed with this Quarterly Report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are not required to provide the information required by this Item as we are a “smaller reporting company,” as defined in Rule 12b-2 of the 34 Act.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as amended) our management, with the participation of our Chief Executive Officer who also serves as our Chief Financial Officer, has concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this Quarterly Report for the purpose of ensuring that the information required to be disclosed by us in this Quarterly Report is made known to them by others on a timely basis, and that the information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, in order to allow timely decisions regarding required disclosure, and that such information is recorded, processed, summarized, and reported by us within the time periods specified in the SEC’s rules and instructions for Form 10-Q.
The ineffectiveness of our internal control over financial reporting was due to the following material weaknesses which we identified in our internal control over financial reporting:
| ● | We lack segregation of duties within accounting functions duties as a result of our limited financial resources to support hiring of personnel; and. | |
| ● | We have not implemented adequate system and manual controls. |
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Management believes that these material weaknesses did not have an effect on our financial results. However, management believes that these material weaknesses resulted in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods. Management recognizes that its controls and procedures would be substantially improved if the Company had adequate staffing and an audit committee and as such is actively seeking to remediate this issue.
Our Chief Executive Officer who also serves as our Chief Financial Officer does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there is resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
Until such time as we expand our staff to include additional accounting personnel, it is likely we will continue to report material weaknesses in our internal control over financial reporting.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. Other than discussed below, we are not currently a party to any other legal proceeding that we believe would have a material adverse effect on our business, financial condition, or operating results.
SCS, LLC v. TLSS
On November 17, 2020, a former financial consultant to the Company, SCS, LLC, filed an action against the Company in the Circuit Court of the 15th Judicial Circuit, Palm Beach County, Florida, captioned SCS, LLC v. Transportation and Logistics Systems, Inc. The case was assigned Case No. 50-2020-CA-012684.
In this action, SCS alleges that it entered into a renewable six-month consulting agreement with the Company dated September 5, 2019, and that the Company failed to make certain monthly payments due thereunder for the months of October 2019 through March 2020, summing to $42,000. The complaint alleges claims for breach of contract, quantum meruit, unjust enrichment and account stated.
In February 2025, the parties agreed to settle all claims in this matter and thereafter executed a Confidential Settlement Agreement and Mutual Release effective on February 13, 2025. On July 18, 2025, the court entered an Order which determined that the settlement of $36,000 in money the Company owed to SCS claimed in exchange for the issuance of 360 shares of Series J Preferred Stock was fair to SCS. On July 21, 2025, the court entered a final order which dismissed the action with prejudice. In July 2025, the Company issued 360 shares of Series J Preferred to SCS, LLC pursuant to the settlement of this action, which reduced accounts payable by $36,000.
Shareholder Derivative Action
On June 25, 2020, the Company was served with a putative stockholder derivative action filed in the Circuit Court of the 15th Judicial Circuit in and for Palm Beach County, Florida (the “Court”) captioned SCS, LLC, derivatively on behalf of Transportation and Logistics Systems, Inc. v. John Mercadante, Jr., Douglas Cerny, Sebastian Giordano, Ascentaur LLC and Transportation and Logistics Systems, Inc. The action has been assigned Case No. 2020-CA-006581.
The plaintiff in this action, SCS, alleges it is a limited liability company formed by a former chief executive officer and director of the Company, Lawrence Sands. The complaint alleges that between April 2019 and June 2020, the immediately prior chairman and chief executive officer of the Company, Mercadante, the former chief development officer of the Company, Cerny, and, since February 2020, the Company’s then restructuring consultant who is now chairman and chief executive officer of the Company, Giordano, breached fiduciary duties owed to the Company. Prior to becoming CEO, Giordano rendered his services to the Company through the final named defendant in the action, Ascentaur LLC.
The complaint alleges that Mercadante breached duties to the Company by, among other things, requesting, in mid-2019, that certain preferred equity holders, including SCS, convert their preferred shares into Company common stock in order to facilitate an equity offering by the Company and then not consummating that offering. The complaint also alleges that Mercadante and Cerny caused the Company to engage in purportedly wasteful and unnecessary transactions such as taking merchant cash advances (MCA) on disadvantageous terms. The complaint further alleges that Mercadante and Cerny “issued themselves over two million shares of common stock without consideration.” The complaint seeks unspecified compensatory and punitive damages on behalf of the Company for breach of fiduciary duty, negligent breach of fiduciary duty, constructive fraud, civil conspiracy and the appointment of a receiver or custodian for the Company.
Company management tendered the complaint to the Company’s directors’ and officers’ liability carrier for defense and indemnity purposes, which coverage is subject to a $250,000 self-insured retention. Each of the individual defendants and Ascentaur LLC has advised that they vigorously deny each and every allegation of wrongdoing alleged in the complaint. Among other things, Mercadante asserts that he made every effort to consummate an equity offering in late 2019 and early 2020 and could not do so solely because of the Company’s precarious financial condition. Mercadante also asserts that he made clear to SCS and other preferred equity holders, before they converted their shares into common stock, that there was no guarantee the Company would be able to consummate an equity offering in late 2019 or early 2020. In addition, Mercadante and Cerny assert that they received equity in the Company on terms that were entirely fair to the Company and entered into MCA transactions solely because no other financing was available to the Company.
By order dated September 15, 2022, the Circuit Judge assigned to this case dismissed the original Complaint in the matter, finding (a) that SCS had failed to adequately allege it has standing and (b) that the complaint fails to adequately allege a cognizable claim. The dismissal was without prejudice, meaning SCS could attempt to replead its claims.
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On October 5, 2022, SCS filed an Amended Complaint in this action. By order dated December 19, 2022, the Circuit Judge assigned to this case once again dismissed the case, finding (a) that SCS still failed to adequately allege it has standing and (b) that the complaint still fails to adequately allege a cognizable claim. Once again, however, the dismissal was without prejudice.
On January 18, 2023, SCS filed a Second Amended Complaint in this action. All defendants once again moved to dismiss the pleading or in the alternative for summary judgment on it in their favor. The Court heard argument on that motion on March 9, 2023. On May 15, 2023, the Court issued a summary order denying the defendants’ motion to dismiss. On June 1, 2023, all defendants moved for reconsideration of the May 15 order. On November 28, 2023, the Court denied the motion for reconsideration.
In February 2025, the parties agreed to settle all claims in this matter and thereafter executed a Confidential Settlement Agreement and Mutual Release effective on February 13, 2025. On February 20, 2025, pursuant to a Stipulation of Dismissal with Prejudice, the Court entered a final order of dismissal with prejudice and dismissed the action with prejudice.
Josh Perez v. Cougar Express, Inc.
An attorney for a former Cougar Express (CE) employee, Josh Perez (“Perez”), has advised CE that he has filed a charge of discrimination against CE with the U.S. Equal Employment Opportunity Commission (EEOC).
Perez allegedly is asserting claims against CE for: gender discrimination under Title VII and the New York State Human Rights Law (“NYSHRL”); pregnancy/childbirth discrimination under Title VII of the federal Civil Rights Act of 1964, as amended; retaliation under Title VII and NYSHRL; and familial status discrimination under NYSHRL.
However, CE has not received a copy, nor any notification, of the filing.
Perez was employed by CE as a dock worker beginning on March 8, 2022, and last worked September 27, 2022. He alleges that in or around July 2022, he informed CE that he was expecting a child. Perez has not provided any details regarding the individual(s) with CE he allegedly informed. On September 27, 2022, Perez requested that CE complete the employer section of his New York Paid Family Leave (“PFL”) paperwork, which CE did. Thereafter, Perez ceased communicating with CE. Further, CE did not receive any confirmation that Perez had in fact filed for PFL or that his PFL was approved.
Because CE did not hear from Perez or receive any confirmation concerning his application for or approval of PFL, CE concluded that Perez had resigned. Another worker was hired to fill Perez’s former position. Then, on or about December 27, 2022, Perez contacted CE attempting to return to work and was informed that there was no position for him.
CE categorically denies Perez’s allegations and any purported wrongdoing. Because this matter is apparently pending with the EEOC and CE has neither received a copy of the filing nor any notification of the filing, the Company cannot evaluate the likelihood of an adverse outcome or estimate the Company’s liability, if any, in connection with it.
Emerson Swan v. Severance Trucking Co., Inc.
On April 1, 2024, a judgment was entered against Severance Trucking on behalf of Emerson Swan, Inc. (“Emerson”) in the amount of $96,226, including prejudgment interest, statutory costs and legal fees. Emerson, which was a customer of Severance Trucking, claimed that an employee of Severance Trucking stole $75,209 of Emerson’s products while under Severance Trucking’s control. We did not accrue this claim and believe it is not liable since the accusation was made prior to the Severance Trucking acquisition date in January 2023.
Ryder Truck Rental, Inc. v. Severance Trucking Co., Inc.
On April 30, 2024, Severance Trucking received a letter from Ryder Truck Rental, Inc. requesting payment in the amount of $581,507 comprised of outstanding unpaid Truck Lease and Service Agreement charges of $55,136 in open invoices, $399,177 in early termination charges and $134,194 in attorney’s fees. As of June 30, 2026 and December 31, 2025, such amounts are recorded as a liability of Severance Trucking and included in liabilities of discontinued operations.
Akabas & Sproule v. Transportation and Logistics Systems, Inc.
On March 19, 2025, the Company’s former law firm, Akabas & Sproule, filed a lawsuit against the Company in the Supreme Court of the State of New York, New York County, alleging three causes of action: (i) breach of contract; (ii) account stated, and (iii) unjust enrichment/quantum meruit. Akabas & Sproule seeks $86,571 in compensatory damages, $11,027 in interest through February 28, 2025, attorneys’ fees and costs, taxable costs of suit, and pre-judgment and post-judgment interest, all of which had been accrued as of September 30, 2025. On July 21, 2025, the Company entered into a Settlement Agreement and Mutual Release (the “A&S Settlement Agreement”) with Akabas & Sproule seeking $86,571 in compensatory damages, $14,274 in interest and not less than $24,155 in costs of collection, for a total of $125,000 (the “A&S Claim”) in which all claims were resolved by the issuance of 1,250 shares of Series J Preferred and upon the satisfaction of certain obligations and conditions, the action will be dismissed with prejudice. The A&S Settlement Agreement was on substantially the same form as the Liability Settlement Agreements (see Note 6). In August 2025, the Company issued 1,250 shares of Series J Preferred to Akabas & Sproule and, on August 18, 2025, a Stipulation of Discontinuance with Prejudice was agreed to and filed by the parties with the Court.
Diesel Direct, LLC v. Severance Trucking a/k/a Severance Trucking Co., Inc.
On May 19, 2025, Diesel Direct. LLC filed a lawsuit against Severance Trucking in the Commonwealth of Massachusetts, Superior Court Department of the Trial Court, for Severance Trucking’s alleged failure to pay for diesel fuel deliveries between October 23, 2023 and February 14, 2024. Diesel Direct alleges four counts against Severance Trucking for breach of contract, breach of implied covenant of good faith and fair dealing, quantum meruit/unjust enrichment, and violation of M.G.L. c. 93A, and seeks judgment for monetary damages in the amount of $58,020.30, plus interest, attorneys’ fees, and cost of collection, as well as an award of punitive, exemplary, and/or multiple damages to the extent permitted by law. On June 23, 2025, Diesel Direct filed a request for entry of default which was entered on June 26, 2025. On July 15, 2025, Diesel Direct filed a motion for default judgment. As of June 30, 2026 and December 31, 2025, the amount of $57,199 is recorded as a liability of Severance Trucking and included in liabilities of discontinued operations. On October 23, 2025, a damages assessment hearing was held by the Court via video conference, but no decision has been issued to date.
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RX Benefits v. TLSS Ops
On October 1, 2025, a former vendor of TLSS Ops filed a complaint against the Company in the Superior Court of New Jersey Law Division, Bergen County, captioned RX Benefits v. TLSS Operations Holding Company, Inc. The case was assigned Case No. BER L-006620-25. In this action, RX Benefits demands payment of contractual amounts due plus legal fees and interest aggregating $149,627. As of June 30, 2026 and December 31, 2025, the amounts due of $149,618 and $149,618, respectively, have been accrued and are included liabilities of discontinued operations on the accompany consolidated balance sheets.
Other than discussed above, as of the date of this Quarterly Report, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.
ITEM 1A. RISK FACTORS
Risk factors that affect our business and financial results are discussed in Part I, Item 1A “Risk Factors,” in our 2025 Annual Report. In addition to the risk factors below, you should carefully consider the risks described in our 2025 Annual Report, which could materially affect our business, financial condition or future results. The risks described below and in our 2025 Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.
Our stockholders will experience significant dilution as a result of the issuance of shares of our common stock upon conversion of shares of Series J Preferred.
Our outstanding shares of Series J Preferred are each initially convertible for 100,000 shares of Common Stock. Furthermore, the Series J Preferred accrues dividends on a daily basis at a rate of 10% per annum, which may be paid in cash or shares of common stock, thereby increasing the number of shares of common stock issuable upon conversion. The conversion of some or all of the Series J Preferred Stock will result in the issuance of a substantial number of shares of common stock and, as a result, the percentage ownership and voting power held by our existing stockholders will be significantly reduced and our stockholders will experience significant dilution. As of June 30, 2026, an aggregate of approximately 11 billion shares of common stock were issuable upon conversion of the then-outstanding Series J Preferred, not including all dividends accrued as of such date.
If the PGS acquisition is not consummated, TLSS may remain a shell company and may lack an operating business.
The Company currently has no operating business. The PGS transaction remains subject to closing conditions. If the transaction has not closed, is terminated or is otherwise delayed, TLSS may continue to meet the Rule 12b-2 definition of a shell company, may be unable to replace its discontinued operations, and may face additional difficulty raising capital, attracting acquisition partners, maintaining liquidity and complying with its reporting obligations. There can be no assurance that the PGS transaction will close or that any resulting business will generate revenue or become profitable.
Even if the PGS acquisition closes, TLSS may continue to be treated as a shell company or face uncertainty regarding its status.
Closing the PGS transaction may not, by itself, establish that TLSS is no longer a shell company. TLSS must evaluate its operations and assets as of the filing date and make the required disclosures, including any applicable information reflecting its status as a non-shell company. Until the Company can support a conclusion that it is no longer a shell company, uncertainty regarding its status may impair the marketability and liquidity of its securities, restrict resale and capital-raising activities, increase SEC review and compliance costs, and adversely affect stockholder value.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Arrangement
During
the three months ended June 30, 2026, no director or officer of the Company
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ITEM 6. EXHIBITS
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* Filed herewith.
+ Indicates a management contract or any compensatory plan, contract, or arrangement.
# Furnished herewith. The certifications attached as Exhibit 31.1 and Exhibit 32.1 that accompany this Quarterly Report are not deemed filed with the Securities and Exchange Commission and are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Transportation and Logistics Systems, Inc. under the Securities Act or the Exchange Act, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing.
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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.
| TRANSPORTATION AND LOGISTICS SYSTEMS, INC. | ||
| Dated: August 19, 2026 | By: | /s/ Sebastian Giordano |
| Name: | Sebastian Giordano | |
| Title: | Chief
Executive Officer and Chief Financial Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) | |
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