Transportation & Logistics Systems, Inc 10-Q for FY2025 Q3
Transportation & Logistics Systems, Inc. (TLSSD)
About this 10-Q
Transportation & Logistics Systems, Inc filed this 10-Q on November 13, 2025, covering the quarter ended September 30, 2025 (FY2025 Q3).
Headline figures
Quarter ended September 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $7585
- compared with a net loss of $608.91K a year earlier
- Diluted EPS
- $0.00
- compared with $0.00 a year earlier
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 ☐ No
As of November 14, 2025, the registrant had outstanding shares of common stock
TRANSPORTATION AND LOGISTICS SYSTEMS, INC.
FORM 10-Q
SEPTEMBER 30, 2025
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 FX, Inc. (“Shyp FX”), 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”); and, the deconsolidated former subsidiary, Cougar Express, Inc. (“Cougar Express”), a wholly-owned subsidiary of TLSS-CE.
Hereinafter, TLSSA, TLSS Ops, Shyp FX, Shyp CX, TLSS-CE, TLSS-STI, Cougar Express, JFK Cartage, and Severance, are hereinafter, the “Subsidiaries”. Other than the Company, the results of operations and all accounts of the Subsidiaries for the three and nine months ended September 30, 2025 and 2024 are included as part of discontinued operations on the 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, 2024 (our “2024 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 shareholders’ 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
| September 30, 2025 | December 31, 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Assets of discontinued operations | ||||||||
| Total Current Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Notes payable | $ | $ | ||||||
| Notes payable - related parties | ||||||||
| Notes payable | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Accrued expenses - related parties | ||||||||
| Accrued expenses | ||||||||
| Accrued compensation and related benefits | ||||||||
| Liabilities of discontinued operations | ||||||||
| Total Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Series J convertible preferred stock, par value $ per share;
shares designated; and shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively($ | ||||||||
| 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 September 30, 2025 and December 31, 2024 ( | ||||||||
| Series D convertible preferred stock, par value $ per share; shares designated;
shares issued and outstanding at September 30, 2025 and December 31, 2024 ($ | ||||||||
| Series E convertible preferred stock, par value $ per share; shares designated; and
shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively ($ | ||||||||
| Series G convertible preferred stock, par value $ per share; shares designated; and
shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively ($ | ||||||||
| Series H convertible preferred stock, par value $ per share; shares designated; shares issued and outstanding
at September 30, 2025 and December 31, 2024 ( | ||||||||
| Preferred stock, value | ||||||||
| Common stock, par value $ per share; shares authorized; and shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Shareholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Shareholders’ Deficit | $ | $ | ||||||
See accompanying notes to unaudited consolidated financial statements.
| 3 |
TRANSPORTATION AND LOGISTICS SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| 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 of debt extinguishment | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense - related parties | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Total Other Income (Expenses), net | ( | ) | ( | ) | ||||||||||||
| INCOME (LOSS) BEFORE INCOME TAXES | ( | ) | ( | ) | ||||||||||||
| Provision for income taxes | ||||||||||||||||
| INCOME (LOSS) FROM CONTINUING OPERATIONS | ( | ) | ( | ) | ||||||||||||
| DISCONTINUED OPERATIONS: | ||||||||||||||||
| Loss from discontinued operations, net of tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| LOSS FROM DISCONTINUED OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET INCOME (LOSS) | ( | ) | ( | ) | ( | ) | ||||||||||
| Deemed contribution on exchange of equity instruments | ||||||||||||||||
| Accrued dividends | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| NET INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED | ||||||||||||||||
| Net income (loss) per share from continuing operations -basic and diluted | $ | ) | $ | ) | $ | $ | ) | |||||||||
| Net loss per share from discontinued operations – basic and diluted | ) | ) | ) | ) | ||||||||||||
| Net income (loss) per share - basic and diluted | $ | ) | $ | ) | $ | $ | ) | |||||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
See accompanying notes to unaudited consolidated financial statements.
| 4 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||||||||
| 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 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Conversion of 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 | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Issuance if Series J preferred shares for compensation and professional fees | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Dividends accrued | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2025 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| 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, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Accretion of stock-based compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series G preferred shares | - | ( | ) | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Dividends accrued | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Accretion of stock-based compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series G preferred shares | - | ( | ) | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Dividends accrued | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Balance | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Accretion of stock-based compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series G preferred shares | - | ( | ) | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Dividends accrued | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
See accompanying notes to unaudited consolidated financial statements.
| 5 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| 2025 | 2024 | |||||||
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2025 | 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation and amortization expense - discontinued operations | ||||||||
| Stock-based compensation | ||||||||
| Stock-based professional fees | ||||||||
| Impairment loss - discontinued operations | ||||||||
| Gain on deconsolidation of subsidiary - discontinued operations | ( | ) | ||||||
| Allowance for (recovery from) credit losses - discontinued operations | ( | ) | ||||||
| Gain on debt extinguishment | ( | ) | ||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Security deposit | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Accrued expenses - related parties | ||||||||
| Accrued compensation and related benefits | ||||||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from notes payable | ||||||||
| Proceeds from notes payable - related parties | ||||||||
| Proceeds from notes payable - related parties - discontinued operations | ||||||||
| Repayment of notes payable | ( | ) | ||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET DECREASE 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 G preferred stock and accrued dividends to common stock | $ | $ | ||||||
| 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.
| 6 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(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 located in New York, New Jersey, Connecticut, and Massachusetts. The subsidiaries of the Company during the nine months ended September 30, 2025 and 2024 include: Cougar Express, Inc. (“Cougar Express”) through date of deconsolidation of February 27, 2024; 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 conducts 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 specializing in pickup, warehousing, and delivery services in the tri-state area. Joan Ton, the sole shareholder of JFK Cartage,
from whom the shares were acquired, is an unrelated party. The effective date of the acquisition was
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 the Company were voluntarily surrendered to the Severance Sellers. For the three and nine months ended September 30, 2025, and 2024, all activities and balances of Severance are included as part of discontinued operations on the 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 nine months ended September 30, 2025, and 2024.
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 and as a result, was unable to timely meet its annual and quarterly periodic reporting obligations under the Securities Exchange Act of 1934, as amended (the “34 Act”), for 2024. The Company obtained financing to enable it to complete the preparation and review these interim financial statements and timely file this Quarterly Report on Form 10-Q for the quarter ended September 30, 2025 (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 2025 calendar year.
| 7 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
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.
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, 2024 and notes thereto included in the Company’s annual report on SEC Form 10-K, filed on April 15, 2025. 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 unaudited 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, Cougar Express through its deconsolidation on February 27, 2024, 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.
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.
Deconsolidation of subsidiaries
The Company accounts for a gain or loss on deconsolidation of subsidiaries or derecognition of a group of assets in accordance with ASC 810-10-40-5. The Company measures the gain or loss as the difference between (a) the aggregate of fair value of any consideration received, the fair value of any retained noncontrolling investment and the carrying amount of any noncontrolling interest in the former subsidiary at the date the subsidiary is deconsolidated and (b) the carrying amount of the former subsidiary’s assets and liabilities or the carrying amount of the group of assets.
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 net income (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 September
30, 2025, 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 accounts receivable, the valuation of right of use assets and related liabilities, assumptions used in assessing impairment of long-lived assets, 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.
| 8 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
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 September 30, 2025. 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. |
The Company measures certain financial instruments at fair value on a recurring basis. As of September 30, 2025, and December 31, 2024, 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 unaudited 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 September 30, 2025, and December 31, 2024, 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 of
| 9 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
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 is included in discontinued operations as of September 30, 2025, and December 31, 2024. Currently, all leased premises have been abandoned (see Note 8).
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
In November 2023, the FASB issued 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 new standard also requires interim disclosures related to reportable segment profit or loss and assets that had previously only been disclosed annually. The Company adopted ASU 2023-07 effective December 31, 2024, on a retrospective basis.
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.
The Company accounts for its Series J preferred stock 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 unaudited 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.
The Company recognized revenues and the related direct costs of such revenue which generally include compensation and related benefits, gas costs, insurance, parking and tolls, truck rental fees, and maintenance fees, as of the date the freight is delivered which is when the performance obligation is satisfied. In accordance with ASC Topic 606, the Company recognized revenue on a gross basis. Our payment terms were generally net 30 days from acceptance of delivery. The Company did not incur incremental costs obtaining service orders from its customers, however, if the Company did, because all the Company’s customer contracts were less than a year in duration, any contract costs incurred were expensed rather than capitalized. The revenue that the Company recognized arose from deliveries of freight on behalf of the Company’s customers. Primarily, the Company’s performance obligations under these service orders corresponded to each delivery of freight that the Company made under the service agreements. Control of the freight transfers to the recipient upon delivery. Once this occurred, the Company satisfied its performance obligation, and the Company recognized revenue.
| 10 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
The Company’s revenues were primarily derived from the transportation services it provided through the delivery of goods over the duration of a shipment. The bill of lading is a legally enforceable agreement between two parties, and where collectability was probable this document serves as the contract as its basis to recognized revenue under ASC 606- Revenue Recognition. The Company elected to expense initial direct costs as incurred because the average shipment cycle is less than five days. The Company recognized revenue and substantially all the purchased transportation expenses on a gross basis. Direct costs of such revenue generally included compensation and related benefits, gas costs, insurance, parking and tolls, truck rental fees, and maintenance fees. The Company directed the use of the transportation service provided and remained responsible for the complete and proper shipment. The Company recognized revenue for its performance obligations under its customer contracts over time, as its customers receive the benefits of the services in accordance with ASC 606- Revenue Recognition.
Revenue generated from warehousing services was generally recognized as the service is performed, based upon a monthly or weekly rate.
Inherent within the Company’s revenue recognition practices were estimates for revenue associated with shipments in transit. For shipments in transit, the Company recorded revenue based on the percentage of service completed as of the period end and recognizes delivery costs as incurred. The percentage of service completed for each shipment was based on how far along in the shipment cycle each shipment was in relation to standard transit days. The estimated portion of revenue for all shipments in transit was accumulated at period end and recognized as revenue within discontinued operations. The significance of in-transit shipments to the consolidated financial statements was limited due to the short duration, generally less than five days, of the average shipment cycle.
For the three and nine months ended September 30, 2024, all revenues and cost of revenues are included in discontinued operations. No revenue was generated during the three and nine months ended September 30, 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 per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted loss per share is computed by dividing net loss 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 options and 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. These common stock equivalents may be dilutive in the future.
SCHEDULE OF RECONCILIATION OF BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net income (loss) per common share - basic: | ||||||||||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Add: deemed contribution on exchange of equity instruments | ||||||||||||||||
| Less: accrued dividends | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) attributable to common stockholders | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Weighted average common shares outstanding – basic | ||||||||||||||||
| Net income (loss) per common share – basic | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Net income (loss) per common share - diluted: | ||||||||||||||||
| Net income (loss) attributable to common shareholders – basic | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Add: adjustments to net income (loss) | ||||||||||||||||
| Numerator for income (loss) 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 income (loss) per common share – diluted | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| 11 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
SCHEDULE OF POTENTIALLY DILUTIVE SHARES EXCLUDED FROM COMPUTING OF DILUTED SHARES OUTSTANDING
| September 30, 2025 | September 30, 2024 | |||||||
| Stock warrants | ||||||||
| Series E convertible preferred stock | ||||||||
| Series G convertible preferred stock | ||||||||
| Series H convertible preferred stock | ||||||||
| Series J convertible preferred stock | ||||||||
| Antidilutive securities excluded from computation of earnings per share | ||||||||
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 consolidated financial statements.
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 $
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 $
| 12 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
As
of September 30, 2025, and December 31, 2024, aggregate notes payable to related parties in the principal amounts of $ 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 $
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 $
| 13 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
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, we entered into an amendment agreement with the 2024 Lenders, pursuant to which the maturity date of the October 2024
Notes were amended from
On
May 5, 2025, we 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 September 30, 2025, the Company entered into Series J Settlement Agreements with the 2025 Creditors, pursuant to which,
the 2025 Creditors, not including Related Party Creditors, settled an aggregate of $
As
of September 30, 2025, and December 31, 2024, 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.
| 14 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
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 September 30, 2025 and December 31, 2024, 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.
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 September 30, 2025, and December 31, 2024, 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 |
| 15 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
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.
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 September 30, 2025, and December 31, 2024, the Company has accrued dividends payable of $
As of September 30, 2025, and December 31, 2024, and shares of Series E Preferred were issued and outstanding, respectively.
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
| 16 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
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.
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 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 three months ended September 30, 2024, the Company issued shares of its common stock in connection with the conversion
of shares of Series G Preferred and accrued dividends payable of $
During
the nine months ended September 30, 2024, the Company issued shares of its common stock in connection with the conversion
of shares of Series G Preferred and accrued dividends payable of $
During the three and nine months ended September 30, 2025, there were no conversions of Series G Preferred into common stock.
| 17 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
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 September 30, 2025, and December 31, 2024, the Company had accrued dividends payable of $
As of September 30, 2025 and December 31, 2024, and shares of Series G Preferred were issued and outstanding, respectively.
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 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 September 30, 2025, and December 31, 2024, shares of Series H Preferred were outstanding.
Series J 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 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.
| 18 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
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.
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 $
| 19 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
Common stock
Shares issued in connection with conversion of Series G preferred shares
During
the three months ended September 30, 2025 and 2024, the Company issued and shares of its common stock in connection with
the conversion of and shares of Series G Preferred and accrued dividends payable of $
During
the nine months ended September 30, 2025 and 2024, the Company issued and shares of its common stock in connection with
the conversion of and shares of Series G Preferred and accrued dividends payable of $
Shares issued for compensation
During the nine months ended September 30, 2025, and 2024, aggregate accretion of stock-based compensation expense, which is net of the reversal of previously recognized stock-based expense due to forfeiture, amounted to $ and $, respectively. Total unrecognized compensation expense related to these vested shares of common stock on September 30, 2025, amounted to $.
Warrants
Warrant activities for the nine months ended September 30, 2025 are summarized as follows:
SUMMARY OF WARRANT ACTIVITIES
| 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, 2024 | $ | $ | ||||||||||||||
| Cancelled | ( | ) | ( | ) | - | |||||||||||
| Expired | ( | ) | ( | ) | - | - | ||||||||||
| Balance Outstanding September 30, 2025 | $ | $ | ||||||||||||||
| Exercisable, September 30, 2025 | $ | $ | ||||||||||||||
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 September 30, 2025.
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.
| 20 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
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 $
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.
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.
Jose R. Mercedes-Mejia v. Shypdirect LLC, Prime EFS LLC et al.
On August 4, 2020, an action was filed against Shypdirect, Prime EFS and others in the Superior Court of New Jersey for Bergen County captioned Jose R. Mercedes-Mejia v. Shypdirect LLC, Prime EFS LLC et al. The case was assigned docket number BER-L-004534-20.
In
this action, the plaintiff seeks reimbursement of his medical expenses and damages for personal injuries following an accident with a
box truck leased by Shypdirect and subleased to Prime EFS and being driven by a Prime EFS employee, in which the plaintiff’s ankle
was injured. Plaintiff has thus far transmitted medical bills exceeding $
On November 9, 2020, Prime EFS and Shypdirect filed their answer to the complaint in this action and also filed a third-party action against the insurance company in an effort to obtain defense and indemnity for this action.
On May 21, 2021, Prime EFS and Shypdirect also filed an action in the Supreme Court, State of New York, Suffolk County (the “Suffolk County Action”), seeking defense and indemnity for this claim from the insurance brokerage, TCE/Acrisure LLC, which sold the County Hall insurance policy to Shypdirect.
On August 19, 2021, the Plaintiff filed a motion for leave to file a First Amended Complaint to name four (4) additional parties as defendants – TLSS, Shyp CX, Inc., Shyp FX, Inc. and Cougar Express, Inc. In the claim against TLSS, Plaintiff seeks to “pierce the corporate veil” and hold TLSS responsible for the alleged liabilities of Prime and/or Shypdirect as the supposed alter ego of these subsidiaries. In the claims against Shyp CX, Inc., Shyp FX, Inc. and Cougar Express, Inc., Plaintiff seeks to hold these entities responsible for the alleged liabilities of Prime and/or Shypdirect on a successor liability theory.
On September 16, 2021, each of these entities filed papers in opposition to this motion.
On September 24, 2021, the Court granted Plaintiff’s motion for leave to amend the complaint, thus adding TLSS, Shyp CX, Inc., Shyp FX, Inc. and Cougar Express, Inc. as Defendants.
On October 22, 2021, Acrisure stipulated to consolidate the Suffolk County Action into and with the Bergen County action.
On November 22, 2021, all Defendants filed their Answer to the First Amended Complaint. On November 3, 2021, Prime EFS and Shypdirect refiled their Third-Party Complaint against TCI/Acrisure in the Bergen County action. On December 23, 2021, Acrisure filed its Answer to the Third-Party Complaint, denying its material allegations.
| 21 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
On March 2, 2022, Plaintiff sought and was granted leave to file a Second Amended Complaint, bringing claims against Prime and Shypdirect’s vehicle liability carrier, County Hall (for discovery) as well as the producing broker, TCE/Acrisure. Plaintiff also asserted additional alter ego allegations against TLSS.
On February 15, 2023, Plaintiff filed a motion for leave to file a Third Amended Complaint in this action, seeking to assert claims against TLSS’s former CEO, John Mercadante, also on a “pierce the corporate veil” theory. On March 9, 2023, TLSS, Prime and Shypdirect opposed the motion for leave to add Mercadante, arguing that any claim against Mercadante would be both futile and time-barred. On March 31, 2023, the Court denied Plaintiff’s motion to add Mr. Mercadante as a party.
In January and February 2023, numerous depositions were taken in the case, including those of Messrs. Giordano and Mercadante.
On September 16, 2024, the court entered an order granting Plaintiff’s motion for final judgment by default on liability against Defendants Shypdirect, Prime EFS, Shyp CX, Shyp FX, and Cougar Express.
To date, to the best of the Company’s knowledge, information and belief, no discovery has been taken in this action which would permit the imposition of alter ego liability on TLSS for the subject accident.
To date, to the best of the Company’s knowledge, information and belief, no discovery has been taken in this action which would permit the imposition of successor liability on Shyp CX, Inc., Shyp FX, Inc. and/or Cougar Express, Inc. for the subject accident.
Under
a so-called MCS-90 reimbursement endorsement to the County Hall policy, TLSS believes that Prime and Shypdirect may have up to $
All discovery in this case was completed on or before August 31, 2024.
There were pending cross-motions for summary judgment filed by Plaintiff, Defendants/Third-Party Plaintiffs Jose A. Mercedes-Mejia, Prime EFS, Shypdirect, LLC, and TLSS, and Defendant/Third-Party Defendant County Hall Insurance. The insurance broker, Acrisure, had also filed a motion on the malpractice claim against it. On November 8, 2024, the court granted Defendant/Third-Party Plaintiff Ryder Truck Rental, Inc.’s motion for summary judgment. On December 6, 2024, the parties engaged in a mediation session. While a settlement was not reached on the day the mediation session was held, the parties continued to discuss a potential resolution.
On January 31, 2025, Plaintiff and TLSS, Shypdirect, and Prime EFS executed a binding term sheet which settled the matter with no liability on the part of TLSS, Shypdirect or Prime EFS and requires that a Stipulation of Dismissal will be filed with the court which dismisses all claims with prejudice. On February 10, 2025, the trial proceeding scheduled for February 10, 2025, was cancelled. On March 31, 2025, a Stipulation of Dismissal with Prejudice was filed with the Court in which it was stipulated and agreed that the Plaintiff’s Complaint and any and all other Crossclaims, Counterclaims, and/or Third-Party Claims are dismissed with prejudice and without costs by and between all parties.
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 $
| 22 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
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 $
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
January 4, 2022,
On March 1, 2024, the Board, appointed Sebastian Giordano, the Company’s Chairman and Chief Executive Officer, to the additional offices of Chief Financial Officer and Treasurer of the Company. Due to the Company’s financial condition, beginning on February 16, 2024, Mr. Giordano agreed to temporarily defer cash compensation and receipt of benefits until a date that was to be mutually agreed upon; however, such compensation and other benefits due to Mr. Giordano under the CEO Employment Agreement, continue to accrue. On May 15, 2024, the Company received a termination notice (the “Termination Notice”), for the nonpayment of compensation and other benefits due under such CEO Employment Agreement. Under the terms of the CEO Employment Agreement, the Company had until July 15, 2024, to cure such default or else Mr. Giordano’s termination pursuant to the Termination Notice would be effective on July 15, 2024. The Company was unable to cure such default; however, on July 15, 2024, the Company and Mr. Giordano agreed to extend the termination date until August 15, 2024. On August 15, 2024, the Company and Mr. Giordano further extended the termination date to November 15, 2024. On November 14, 2024, the parties further extended the termination date to February 15, 2025. On February 10, 2025, the parties further extended the termination date to May 31, 2025. and on May 5, 2025 the parties further extended the termination date to August 31, 2025. On August 26, 2025, the parties further extended the termination date to November 30, 2025. Through the extended termination date, all existing wage and benefit provisions of the CEO Employment Agreement shall continue to accrue; however, the claims under the Termination Notice remain in force, including that any granted, but unvested Restricted Stock Units, if any, have been deemed fully vested under the Termination Notice. In addition, the remaining of unvested Restricted Stock Units (“RSUs”) of the RSUs originally granted to Mr. Giordano in March 2022 were deemed fully vested as of the date the CEO Employment Agreement terminated.
| 23 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
As of September 30, 2025, and December 31, 2024, in connection with the extension of the term of the CEO Employment Agreement, the amount of compensation and benefit amounts due to Mr. Giordano amounts to the following, which is included in accrued compensation and related benefits on the accompanying consolidated balance sheet:
| September 30, 2025 | December 31, 2024 | |||||||
| (i) Unpaid base salary – since February 16, 2024 | $ | $ | ||||||
| (ii) Accrued vacation pay | ||||||||
| (iii) Health insurance premium – since February 16, 2024 | ||||||||
| (iv) Severance payment due (a) | ||||||||
| Total | $ | $ | ||||||
| (a) |
NOTE 7– RELATED PARTY TRANSACTIONS AND BALANCES
Notes payable – related parties
On
April 14, 2023, the Board approved the Credit Facility under which the Company would obtain unsecured senior debt financing of up to
$
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 amounts of $
On
February 6, 2024 and February 15, 2024, the Company issued unsecured promissory notes to Mr. Mercadante in the principal amounts of $
On
February 21, 2024, and February 23, 2024, the Company issued unsecured promissory notes to Mr. Newton and Mr. Benton, both members of
the Board, in the principal amounts of $
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 September 30, 2025, and December 31, 2024, aggregate notes payable to related parties in the principal amounts of $ and $
NOTE 8 – DISCONTINUED OPERATIONS
On
December 1, 2023, the Company ceased operations of its Freight Connections subsidiary and, in connection with the Freight Bankruptcy,
all of the TLSS-FC and Freight Connections assets were assigned to the Freight Trustee for the liquidation and unwinding of the business.
The Freight Trustee has been charged with liquidating the assets for the benefit of the TLSS-FC and Freight Connection’s creditors
pursuant to the relevant provisions of the United States Bankruptcy Code. As a result of the Freight Bankruptcy, the Freight Trustee
assumed all authority to manage TLSS-FC and Freight Connections. For these reasons, effective December 1, 2023, the Company relinquished
control of TLSS-FC and Freight Connections. Therefore, the Company deconsolidated TLSS-FC and Freight Connections effective with the
Freight Bankruptcy on December 3, 2023, and the Company recognized a loss on deconsolidation of $
| 24 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
The following table presents the major classes of assets and liabilities of the discontinued operations related to the Subsidiaries:
SCHEDULE OF ASSETS AND LIABILITIES OPERATIONS OF DISCONTINUED OPERATIONS
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Assets of discontinued operations: | ||||||||
| Accounts receivable, net | $ | $ | ||||||
| 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 | $ | $ | ||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues, excluding depreciation and amortization | ||||||||||||||||
| Gross profit (loss) | ( | ) | ( | ) | ||||||||||||
| Operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Impairment loss | ( | ) | ||||||||||||||
| Other (expenses) income, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from discontinued operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Accounts receivable
On September 30, 2025 and December 31, 2024, accounts receivable, net included in assets from discontinued operations consisted of the following:
SCHEDULE OF ACCOUNTS RECEIVABLE NET FROM DISCONTINUED OPERATIONS
| September 30, 2025 | December 31, 2024 | |||||||
| Accounts receivable | $ | $ | ||||||
| Allowance for credit estimated losses | ||||||||
| Accounts receivable, net | $ | $ | ||||||
Property and equipment, net
For
the three and nine months ended September 30, 2024, depreciation expense amounted to $
Due
to the Cougar Express Bankruptcy and the assignment of all of the Cougar Express assets to the Cougar Express Trustee for liquidation
and unwinding of the business, during the nine months ended September 30, 2024, the Company recognized a loss on deconsolidation of the
Cougar Express property and equipment, net of $
During
the nine months ended September 30, 2024, the Company wrote down property and equipment to net realizable value and recorded an impairment
loss of $
Notes Payable
On September 30, 2025, and December 31, 2024, notes payable included in liabilities of discontinued operations consisted of the following:
SCHEDULE OF NOTES PAYABLE INCLUDED IN LIABILITIES
| September 30, 2025 | December 31, 2024 | |||||||
| Principal amounts | $ | $ | ||||||
| Less: current portion of notes payable | ( | ) | ( | ) | ||||
| Notes payable – long-term | $ | $ | ||||||
| 25 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
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
September 30, 2025, and December 31, 2024, the principal amount related to the Amended Note was $
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 $
On
January 26, 2024, the Company received a: (i) Notice of Default and Demand Under Promissory Note and Security Agreement (“Payment
Default Notice”) in connection with the Company’s failure to timely pay in accordance with that certain loan agreement (the
“Severance Trucking Note”) entered into by and among the Severance Sellers, collectively as lender (“Severance Trucking
Lenders”) and TLSS-STI, Severance Trucking, Severance Warehouse and McGrath, collectively as promissors (each a “Severance
Trucking Debtor”, and collectively, the “Severance Trucking Debtors”) and (ii) Notice of Default and Demand Under Guaranty
(“Guaranty Default Notice” and together with the Payment Default Notice, the “Default Notices”), in connection
with an Absolute, Unconditional and Continuing Guaranty, dated February 1, 2023 between TLSS, as guarantor (the “Guarantor”),
and the Severance Trucking Lenders, which guaranty secured the Severance Trucking Note. The Severance Trucking Note became immediately
due and payable upon the Severance Trucking Debtors’ failure to make a payment in the amount of Fifty-Three Thousand Dollars ($
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 $
| 26 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(Unaudited)
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 and as of December 31, 2023, the Company wrote off its remaining right of use assets and related security deposits.
On September 30, 2025, and December 31, 2024, operating and financing lease liabilities related to the ROU assets are included in liabilities of discontinued operations and are summarized as follows:
SCHEDULE OF OPERATING LEASE LIABILITY TO ROU ASSET
| September 30, 2025 | December 31, 2024 | |||||||
| Lease liabilities related to office leases and revenue equipment right of use assets | $ | $ | ||||||
| Less: current portion of lease liabilities | ( | ) | ( | ) | ||||
| Lease liabilities – long-term | $ | $ | ||||||
Other liabilities of discontinued operations
On
April 1, 2024, a judgment was entered against Severance Trucking on behalf of Emerson in the amount of $
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
Exchange of Accounts Payable, Warrants and Accrued Expenses for Series J Preferred
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
| 27 |
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 contains 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 2024 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 February 26, 2025, our shares of common stock resumed trading on the OTC PINK, now called the OTCID.
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 and as a result, was unable to timely meet its annual and quarterly periodic reporting obligations under the 34 Act, for 2024. The Company obtained financing to enable it to complete the preparation and review of the interim financial statements for the quarter ended September 30, 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 2025 calendar year.
Between May 2025 and September 30, 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 628,642,860 shares of Common Stock all in exchange for the issuance of an aggregate of 54,766 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.
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.
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.
| 28 |
Deconsolidation of subsidiaries
The Company accounts for a gain or loss on deconsolidation of subsidiaries or derecognition of a group of assets in accordance with ASC 810-10-40-5. The Company measures the gain or loss as the difference between (a) the aggregate of fair value of any consideration received, the fair value of any retained noncontrolling investment and the carrying amount of any noncontrolling interest in the former subsidiary at the date the subsidiary is deconsolidated and (b) the carrying amount of the former subsidiary’s assets and liabilities or the carrying amount of the group of assets.
RESULTS OF OPERATIONS
Our 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 nine months ended September 30, 2025, compared with the three and nine months ended September 30, 2024
The following table sets forth our revenues, expenses and net loss for the three and nine months ended September 30, 2025, and 2024.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenues | $ | - | $ | - | $ | - | $ | - | ||||||||
| Operating expenses | 395,368 | 411,697 | 1,117,014 | 1,479,030 | ||||||||||||
| Loss from operations | (395,368 | ) | (411,697 | ) | (1,117,014 | ) | (1,479,030 | ) | ||||||||
| Other income (expenses), net | 517,549 | (63,035 | ) | 1,874,427 | (165,070 | ) | ||||||||||
| Income (loss) from continuing operations | 122,181 | (474,732 | ) | 757,413 | (1,644,100 | ) | ||||||||||
| Loss from discontinued operations | (129,766 | ) | (134,180 | ) | (316,326 | ) | (1,603,306 | ) | ||||||||
| Net income (loss) | (7,585 | ) | (608,912 | ) | 4481,087 | (3,247,406 | ) | |||||||||
| Deemed contribution on exchange of equity instruments | - | - | 800,380 | - | ||||||||||||
| Deemed and accrued dividends | (253,880 | ) | (76,571 | ) | (471,566 | ) | (232,691 | ) | ||||||||
| Net income (loss) attributable to common shareholders | $ | (261,465 | ) | $ | (685,483 | ) | $ | 769,901 | $ | (3,480,097 | ) | |||||
Results of Operations
Revenue
For the three and nine months ended September 30, 2024, total revenue is reflected as $0 as all activities of the Subsidiaries were reclassified as discontinued operations on our consolidated financial statements. No revenue was recognized during the three and nine months ended September 30, 2025.
Operating Expenses
For the three months ended September 30, 2025, total operating expenses amounted to $395,368 as compared to $411,697 for the three months ended September 30, 2024, a decrease of $16,329, or 4.0%, as reflected in the accompanying chart and described more fully below. For the nine months ended September 30, 2025, total operating expenses amounted to $1,117,014 as compared to $1,479,030 for the nine months ended September 30, 2024, a decrease of $362,016, or 24.5%, as reflected in the accompanying chart and described more fully below.
For the three and nine months ended September 30, 2025, and 2024, operating expenses consisted of the following:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Compensation and related benefits | $ | 192,006 | $ | 206,964 | $ | 512,686 | $ | 992,346 | ||||||||
| Legal and professional Fees | 190,552 | 198,806 | 587,813 | 366,783 | ||||||||||||
| General and administrative expenses | 12,810 | 5,927 | 16,515 | 119,901 | ||||||||||||
| Total Operating Expenses | $ | 395,368 | $ | 411,697 | $ | 1,117,014 | $ | 1,479,030 | ||||||||
Compensation and related benefits
For the three months ended September 30, 2025, compensation and related benefits amounted to $192,006 as compared to $206,964 for the three months ended September 30, 2024, a decrease of $14,958, or 7.2%. During the three months ended September 30, 2025, the overall decrease in compensation and related benefits as compared to the three months ended September 30, 2024 was primarily attributable to a decrease in stock-based compensation of $15,975.
For the nine months ended September 30, 2025, compensation and related benefits amounted to $512,686 as compared to $992,346 for the nine months ended September 30, 2024, a decrease of $479,660, or 48.3%. During the nine months ended September 30, 2025, the overall decrease in compensation and related benefits as compared to the nine months ended September 30, 2024 was primarily attributable to a decrease in compensation paid to significant employees, a decrease in administrative staff due to the discontinuation of our trucking businesses in February 2024 of $7,711, and a decrease in stock-based compensation of $71,949. Additionally, during the nine months ended September 30, 2024, we recorded a $400,000 severance expense as compared to $0 during the nine months ended September 30, 2025.
Legal and professional fees
For the three months ended September 30, 2025, legal and professional fees were $190,552 as compared to $198,806 for the three months ended September 30, 2024, a decrease of $8,254, or 4.2%, which was primarily attributable to an increase in legal fees of $23,654 and a net increase in other professional fees of $15,952, offset by a decrease in accounting and auditing fees of $47,860. The increase in legal fees related to 2025 period debt settlement agreements and litigation settlements.
| 29 |
For the nine months ended September 30, 2025, legal and professional fees were $587,813 as compared to $366,783 for the nine months ended September 30, 2024, an increase of $221,030, or 60.3%, which was primarily attributable to an increase in accounting and auditing fees of $39,530, an increase in legal fees of $166,472, and a net increase in other professional fees of $15,028. The increase in legal fees related to 2025 period debt settlement agreements and litigation settlements.
General and administrative expenses
General and administrative expenses include insurance expense and other general and administrative expenses.
For the three months ended September 30, 2025, general and administrative expenses were $12,810 as compared to $5,927 for the three months ended September 30, 2024, an increase of $6,883, or 116.1%. This increase was primarily due to an increase in license and filing fees incurred. For the nine months ended September 30, 2025, general and administrative expenses were $16,515 as compared to $119,901 for the nine months ended September 30, 2024, a decrease of $103,386, or 86.2%. The overall decrease during the nine months ended September 30, 2025 as compared to the nine months ended September 30,2024 were primarily attributable to a decrease in operations due to the discontinuation of our trucking businesses in February 2024 and cost-cutting measures.
Loss from operations
For the three months ended September 30, 2025, loss from operations amounted to $395,368 as compared to $411,697 for the three months ended September 30, 2024, a decrease of $16,329, or 4.0%, primarily due to a decrease in legal and professional fees of $8,254, and a decrease in compensation and other benefits of $14,958, offset by an increase in general and administrative expenses of $6,883, as discussed above.
For the nine months ended September 30, 2025, loss from operations amounted to $1,117,014 as compared to $1,479,030 for the nine months ended September 30, 2024, a decrease of $362,016, or 24.5%, primarily due to: (i) a decrease in general and administrative expenses of $103,386; and (ii) a decrease in compensation and other benefits of $479,660, offset by an increase in legal and professional fees of $221,030, as discussed above.
Other income (expenses), net
Total other income (expenses), net include interest expenses and gains on debt extinguishment. For the three and nine months ended September 30, 2025, and 2024, other income (expenses), net consisted of the following:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Interest expense | $ | (14,548 | ) | $ | (2,355 | ) | $ | (32,849 | ) | $ | (4,823 | ) | ||||
| Interest expense – related parties | - | (60,680 | ) | (106,563 | ) | (160,247 | ) | |||||||||
| Gain on debt extinguishment | 532,097 | - | 2,013,839 | - | ||||||||||||
| Total Other Income (Expenses), net | $ | 517,549 | $ | (63,035 | ) | $ | 1,874,427 | $ | (165,070 | ) | ||||||
For the three months ended September 30, 2025 and 2024, aggregate interest expense was $14,548 and $63,035, respectively, a decrease of $48,487, or 0.8%. The decrease in interest expense was primarily attributable to a decrease in related party and third party notes payable. For the nine months ended September 30, 2025 and 2024, aggregate interest expense was $139,412 and $165,070, respectively, a decrease of $25,658, or 15.5%. The nine-month increase in interest expense was primarily attributable to a decrease in related party and third party notes payable. Effective June 1, 2025 and in September 2025, all obligations under the related party and third-party notes payable were converted to shares of Series J Preferred.
For the three and nine months ended September 30, 2025, in connection with the Series J Settlement Agreements and Series J Exchange Agreements, the Company recognized a gain on debt extinguishment of $532,097 and $1,998,839, respectively, Additionally, during the nine months ended September 30, 2025, we recognized a gain on other debt extinguishment of $15,000. We did not recognize any gain on debt extinguishment during the three and nine months ended September 30, 2024.
Loss from discontinued operations
In February 2024, we ceased operations of all remaining 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 nine months ended September 30, 2025 and 2024 related to discontinued operations.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenues | $ | - | $ | - | $ | - | $ | 1,371,993 | ||||||||
| Cost of revenues, excluding depreciation and amortization | - | 1,193 | - | 1,413,146 | ||||||||||||
| Gross loss | - | (1,193 | ) | - | (41,153 | ) | ||||||||||
| Operating expenses | (24,024 | ) | (43,246 | ) | (31,515 | ) | (759,714 | ) | ||||||||
| Impairment loss | - | - | - | (555,628 | ) | |||||||||||
| Other expenses, net | (105,742 | ) | (89,741 | ) | (284,811 | ) | (246,811 | ) | ||||||||
| Loss from discontinued operations | $ | (129,766 | ) | $ | (134,180 | ) | $ | (316,326 | ) | $ | (1,603,306 | ) | ||||
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During the nine months ended September 30, 2024, operating expenses of discontinued operations included an impairment loss of $555,628 from the write down of property and equipment.
Net income (loss)
Due to factors discussed above, for the three months ended September 30, 2025, and 2024, net loss amounted to $7,585 and $608,912, respectively. For the three months ended September 30, 2025, net loss attributable to common stockholders, which included dividends accrued on shares of Series E Preferred, Series G Preferred, and Series J Preferred of $253,880, amounted to $261,465, or $(0.00) per basic and diluted common share. For the three months ended September 30, 2024, net loss attributable to common stockholders, which included dividends accrued on the Series E Preferred and the Series G Preferred of $76,571, amounted to $685,483, or $(0.00) per basic and diluted common share.
Due to factors discussed above, for the nine months ended September 30, 2025, and 2024, net income (loss) amounted to $441,087 and $(3,247,406), respectively. For the nine months ended September 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 $471,566, and the recording of a deemed contribution on exchange of equity instruments of $800,380, amounted to $769,901, or $0.00 per basic and diluted common share. For the nine months ended September 30, 2024, net loss attributable to common stockholders, which included dividends accrued on shares of Series E Preferred and the Series G Preferred of $232,691, amounted to $(3,480,097), or $(0.00) per basic and diluted common share.
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 2025, and December 31, 2024, we had a cash balance of $43,683 and $177,257, respectively. Our working capital deficit was $9,067,613 and $11,892,017 on September 30, 2025, and December 31, 2024, respectively. We reported a net decrease in cash for the nine months ended September 30, 2025 of $133,574 primarily as a result of cash used in operations of $458,574, which were partially offset by net cash proceeds received from notes payable of $325,000.
As of November 12, 2025, the Company had $36,955 in cash, consisting of: (i) $36,574 remaining from the issuance of unsecured promissory notes and (ii) $381 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.
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 income (loss) of $441,087 and $(3,247,406) for the nine months ended September 30, 2025 and 2024, respectively. The net cash used in operations was $458,574 and $232,924 for the nine months ended September 30, 2025, and 2024, respectively. Additionally, we had an accumulated deficit and working capital deficit of $146,498,515 and $9,067,613 on September 30, 2025, respectively. These factors, in addition to the cessation of all operations, raises substantial doubt about our ability to continue as a going concern for a period of twelve months from the date of this Quarterly Report.
From August 12, 2024 through September 30, 2025, the Company issued various promissory notes in the aggregate principal amount of $675,000 (the “Former Notes”) to certain then-holders of shares of Series E Preferred and Series G Preferred (the “Former Lenders”).
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. As a result of the Series J Settlement Agreements, the Former Notes are no longer outstanding, and accounts payable and accrued expenses were reduced.
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 filing 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 nine months ended September 30, 2025, amounted to $458,574. During the nine months ended September 30, 2025, net cash used in operating activities was primarily attributable to net income of $441,087, adjusted for non-cash gains on debt extinguishment of $2,013,839 and stock-based compensation and professional fees of $47,750, and changes in operating assets and liabilities as a result of increases in accounts payable and accrued expenses of $601,750, accrued compensation and related benefits of $360,187, and accrued expenses – related parties of $106,562.
Net cash flows used in operating activities for the nine months ended September 30, 2024 amounted to $232,924. During the nine months ended September 30, 2024, net cash used in operating activities was primarily attributable to a net loss of $3,247,406, adjusted for the add back (reduction) of non-cash items such as depreciation and amortization expense of $39,018, non-cash impairment loss from discontinued operations of $555,628, non-cash gain from the deconsolidation of Cougar Express of $158,347, stock-based compensation of $111,949 and bad debt recovery of $3,937 and changes in operating assets and liabilities such as a decrease in accounts receivable of $636,839, a decrease in prepaid expenses and other current assets of $233,332, a decrease in security deposit of $6,155, an increase in accounts payable and accrued expenses of $723,284, an increase in accrued expenses – related parties of $162,301, and an increase in accrued compensation and related benefits of $708,260.
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Financing activities
For the nine months ended September 30, 2025, net cash provided by financing activities totaled $325,000. During the nine months ended September 30, 2025, we received cash proceeds of $325,000 from notes payable from unrelated third parties.
For the nine months ended September 30, 2024, net cash provided by financing activities totaled $195,804. During the nine months ended September 30, 2024, we received cash proceeds of $391,838 from notes payable from related parties, and proceeds from notes payable of $150,000, offset by the repayment of notes payable of $346,034.
Investing activities
Net cash used in investing activities for the nine months ended September 30, 2025 and 2024, amounted to $0.
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. |
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 are 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.
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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, which were issued in July 2025. 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.
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.
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.
Jose R. Mercedes-Mejia v. Shypdirect LLC, Prime EFS LLC et al.
On August 4, 2020, an action was filed against Shypdirect, Prime EFS and others in the Superior Court of New Jersey for Bergen County captioned Jose R. Mercedes-Mejia v. Shypdirect LLC, Prime EFS LLC et al. The case was assigned docket number BER-L-004534-20.
In this action, the plaintiff seeks reimbursement of his medical expenses and damages for personal injuries following an accident with a box truck leased by Shypdirect and subleased to Prime EFS and being driven by a Prime EFS employee, in which the plaintiff’s ankle was injured. Plaintiff has thus far transmitted medical bills exceeding $789,000. Prime EFS and Shypdirect demanded their vehicle liability carrier assume the defense of this action. To date, the carrier has not done so, allegedly because, among other reasons, the box truck was not on the list of insured vehicles at the time of the accident.
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On November 9, 2020, Prime EFS and Shypdirect filed their answer to the complaint in this action and also filed a third-party action against the insurance company in an effort to obtain defense and indemnity for this action.
On May 21, 2021, Prime EFS and Shypdirect also filed an action in the Supreme Court, State of New York, Suffolk County (the “Suffolk County Action”), seeking defense and indemnity for this claim from the insurance brokerage, TCE/Acrisure LLC, which sold the County Hall insurance policy to Shypdirect.
On August 19, 2021, the Plaintiff filed a motion for leave to file a First Amended Complaint to name four (4) additional parties as defendants – TLSS, Shyp CX, Inc., Shyp FX, Inc. and Cougar Express, Inc. In the claim against TLSS, Plaintiff seeks to “pierce the corporate veil” and hold TLSS responsible for the alleged liabilities of Prime and/or Shypdirect as the supposed alter ego of these subsidiaries. In the claims against Shyp CX, Inc., Shyp FX, Inc. and Cougar Express, Inc., Plaintiff seeks to hold these entities responsible for the alleged liabilities of Prime and/or Shypdirect on a successor liability theory.
On September 16, 2021, each of these entities filed papers in opposition to this motion.
On September 24, 2021, the Court granted Plaintiff’s motion for leave to amend the complaint, thus adding TLSS, Shyp CX, Inc., Shyp FX, Inc. and Cougar Express, Inc. as Defendants.
On October 22, 2021, Acrisure stipulated to consolidate the Suffolk County Action into and with the Bergen County action.
On November 22, 2021, all Defendants filed their Answer to the First Amended Complaint. On November 3, 2021, Prime EFS and Shypdirect refiled their Third-Party Complaint against TCI/Acrisure in the Bergen County action. On December 23, 2021, Acrisure filed its Answer to the Third-Party Complaint, denying its material allegations.
On March 2, 2022, Plaintiff sought and was granted leave to file a Second Amended Complaint, bringing claims against Prime and Shypdirect’s vehicle liability carrier, County Hall (for discovery) as well as the producing broker, TCE/Acrisure. Plaintiff also asserted additional alter ego allegations against TLSS.
On February 15, 2023, Plaintiff filed a motion for leave to file a Third Amended Complaint in this action, seeking to assert claims against TLSS’s former CEO, John Mercadante, also on a “pierce the corporate veil” theory. On March 9, 2023, TLSS, Prime and Shypdirect opposed the motion for leave to add Mercadante, arguing that any claim against Mercadante would be both futile and time-barred. On March 31, 2023, the Court denied Plaintiff’s motion to add Mr. Mercadante as a party.
In January and February, 2023, numerous depositions were taken in the case, including those of Messrs. Giordano and Mercadante.
On September 16, 2024, the court entered an order granting Plaintiff’s motion for final judgment by default on liability against Defendants Shypdirect, Prime EFS, Shyp CX, Shyp FX, and Cougar Express.
To date, to the best of the Company’s knowledge, information and belief, no discovery has been taken in this action which would permit the imposition of alter ego liability on TLSS for the subject accident.
To date, to the best of the Company’s knowledge, information and belief, no discovery has been taken in this action which would permit the imposition of successor liability on Shyp CX, Inc., Shyp FX, Inc. and/or Cougar Express, Inc. for the subject accident.
Under a so-called MCS-90 reimbursement endorsement to the County Hall policy, TLSS believes that Prime and Shypdirect may have up to $750,000 in coverage under a 1980 federal law under which County Hall is “require[d] to pay damages for certain claims or ‘suits’ that are not covered by the policy.” (See Endorsement CHI – 290 (02/19) to County Hall policy effective May 31, 2019.)
All discovery in this case was completed on or before August 31, 2024.
There were pending cross-motions for summary judgment filed by Plaintiff, Defendants/Third-Party Plaintiffs Jose A. Mercedes-Mejia, Prime EFS, Shypdirect, LLC, and TLSS, and Defendant/Third-Party Defendant County Hall Insurance. The insurance broker, Acrisure, had also filed a motion on the malpractice claim against it. On November 8, 2024, the court granted Defendant/Third-Party Plaintiff Ryder Truck Rental, Inc.’s motion for summary judgment. On December 6, 2024, the parties engaged in a mediation session. While a settlement was not reached on the day the mediation session was held, the parties continued to discuss a potential resolution.
On January 31, 2025, Plaintiff and TLSS, Shypdirect, and Prime EFS executed a binding term sheet which settled the matter with no liability on the part of TLSS, Shypdirect or Prime EFS and requires that a Stipulation of Dismissal will be filed with the court which dismisses all claims with prejudice. On February 10, 2025, the trial proceeding scheduled for February 10, 2025, was cancelled. On March 31, 2025, a Stipulation of Dismissal with Prejudice was filed with the Court in which it was stipulated and agreed that the Plaintiff’s Complaint and any and all other Crossclaims, Counterclaims, and/or Third-Party Claims are dismissed with prejudice and without costs by and between all parties.
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.
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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 September 30, 2025 and December 31, 20234 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 have been accrued as of September 30, 2025. Because the action was recently filed and no discovery has occurred in the case, it is not possible to evaluate the likelihood of a favorable or unfavorable outcome. 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, and the action will be dismissed with prejudice. The A&S Settlement Agreement was on substantially the same form as the Liability Settlement Agreements. 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 September 30, 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.
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 September 30, 2025 and December 31, 2024, the amounts due of $149,618 and $111,618, respectively, have been accrued and are included liabilities of discontinued operations on the accompany unaudited 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 2024 Annual Report. In addition to the risk factors below, you should carefully consider the risks described in our 2024 Annual Report, which could materially affect our business, financial condition or future results. The risks described below and in our 2024 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 September 30, 2025, an aggregate of 9,642,300,000 shares of common stock were issuable upon conversion of the then-outstanding Series J Preferred, not including all dividends accrued as of such date.
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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 September 30, 2025, no director or officer of the Company
Exchange of Accounts Payable, Warrants and Accrued Expenses for Series J Preferred
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 235,714,285 shares of common stock, pursuant to which the November Exchange Holders agreed to cancel, and we cancelled effective as of such date, their respective outstanding warrants in exchange for the issuance of an aggregate of 209 shares of Series J Preferred.
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-K, 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: November 13, 2025 | 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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Exhibit 10.8
FORM OF EXCHANGE AGREEMENT (WARRANTS ONLY)
This EXCHANGE AGREEMENT (this “Agreement”) is dated this [_] day of [_], 2025, by and between Transportation and Logistics Systems, Inc., a Nevada corporation (the “Company”), and the undersigned holder (the “Holder”) of warrants (the “Original Securities”) to purchase shares of the Company’s common stock, par value $0.001 per share (the “Common Stock), in the amounts as set forth on Exhibit A hereto.
WHEREAS, the Company and the Holder have come to an agreement to (a) exchange (the “Exchange”) the Original Securities for [_________] shares of a newly-created series of preferred stock of the Company known as the Series J Senior Convertible Preferred Stock, par value $0.001 per share (the “Exchange Securities”), as calculated as set forth on Exhibit A, the designation, powers, privileges, preferences and relative participating, optional or other rights, if any, and the qualifications, limitations or restrictions of which are set forth in the Certificate of Designation (the “Certificate of Designation”) filed with the Secretary of State of the State of Nevada on May 5, 2025, a copy of which is attached hereto as Exhibit B (together with the Summary of Terms for the Series J Senior Convertible Preferred Stock (the “Term Sheet”) attached hereto as Exhibit C, this Agreement, including all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder, the “Transaction Documents”), and the parties hereto are memorializing the Exchange on the terms and conditions set forth in this Agreement in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”), and (b) in connection with the Exchange, cancel the Original Securities; and
WHEREAS, upon the consummation of the transactions contemplated hereby, the Holder shall no longer hold any Original Securities, and the Company shall cancel and all documents evidencing the Original Securities.
NOW, THEREFORE, in consideration of the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Holder hereby agree as follows:
Section 1. Exchange and Cancellation. Subject to and upon the terms and conditions set forth in this Agreement, on the Closing Date, the Holder shall surrender to the Company the Original Securities and, in exchange therefor, the Company shall issue and deliver to the Holder the Exchange Securities.
1.1 Closing. On the Closing Date (as defined below), the Company shall issue and deliver (or cause to be issued and delivered) the Exchange Securities to the Holder, or in the name of a custodian or nominee of the Holder, or as otherwise requested by the Holder in writing and, subject to Section 4.1, and the Holder shall surrender and deliver (or cause to be surrendered and delivered) to the Company the Original Securities (including any rights associated with such Original Securities) for cancellation and the Original Securities shall be deemed to be surrendered, delivered and cancelled on the Company’s stock transfer books. The closing of the Exchange shall occur effective as of June 1, 2025, or as soon thereafter as the parties hereto may mutually agree in writing (the “Closing Date”), subject to the provisions of Section 4 and Section 5 herein; provided, however, that the Closing Date shall occur, and Company shall be obligated to issue and deliver (or cause to be issued and delivered) the Exchange Securities to the Holder as specified in this Section 1.1, no later than the standard settlement period on the Company’s primary Trading Market (as defined below).
1.2 Release of Prior Reserves. Immediately upon issuance and delivery of the Exchange Securities, the Holder hereby authorizes the release of any reserves of shares of the Company’s common stock, $0.001 par value per share (the “Common Stock”), in connection with the Original Securities.
1.3 [Reserved].
1.4 Section 3(a)(9). Assuming the accuracy of the representations and warranties of each of the Company and the Holder set forth in Sections 2 and 3 of this Agreement, the parties hereto acknowledge and agree that the purpose of such representations and warranties is, among other things, to ensure that the Exchange qualifies as an exchange of securities under Section 3(a)(9) of the Securities Act.
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Section 2. Representations and Warranties of the Company. The Company represents and warrants to the Holder that:
2.1 Organization and Qualification. The Company is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization. The Company is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of this Agreement or any other Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and, to the best of the Company’s knowledge, no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
2.2 Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the board of directors of the Company or the Company’s shareholders in connection herewith or therewith. This Agreement and each other Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
2.3 Issuance of Exchange Securities. The issuance the Exchange Securities by the Company has been duly authorized. The shares of Common Stock into which the Exchange Securities may be converted to from time to time (the “Exchange Shares”), have been duly authorized and when issued in accordance with the terms of the Exchange Securities, shall be validly issued, fully paid and nonassessable shares of Common Stock, and shall be free and clear of all liens, charges, taxes, security interests, encumbrances, rights of first refusal, preemptive or similar rights and other encumbrances, including without limitation under the Company’s articles of incorporation, as amended (the “Articles of Incorporation”), its bylaws (the “Bylaws”). The Exchange Securities shall not bear any restrictive legend and the Holder may sell the Exchange Shares pursuant to an applicable exemption from registration under the Securities Act or pursuant to an effective registration statement. Upon issuance and delivery in accordance herewith, the issuance by the Company of the Exchange Securities in exchange for the Original Securities is exempt from the registration requirements of the Securities Act under Section 3(a)(9) of the Securities Act.
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2.4 No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents and the consummation by it of the transactions contemplated hereby and thereby do not and will not: (i) conflict with or violate any provision of the Company’s or any of the Company’s subsidiary’s (each, a “Subsidiary”) articles or certificate of incorporation, bylaws or other organizational or charter documents; (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any options, contracts, agreements, liens, security interests, or other encumbrances (“Liens”) upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected; or (iii) conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.
2.5 Acknowledgment Regarding the Exchange. The Company acknowledges and agrees that the Holder is acting solely in the capacity of an arm’s length third party with respect to this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges the Holder is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby, and any advice given by the Holder or any of its representatives or agents in connection with this Agreement or any other Transaction Document is merely incidental to the Exchange.
2.6 No Commission; No Other Consideration. The Company has not paid or given, and has not agreed to pay or give, directly or indirectly, any commission or other remuneration for soliciting the Exchange. The Exchange Securities are being issued exclusively in exchange for the Original Securities and no other consideration has or will be paid for the Exchange Securities.
2.7 Section 3(a)(9) Representation. The Company has not, nor has any person acting on its behalf, directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would cause the Exchange and the issuance of the Exchange Securities pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of the Securities Act which would prevent the Company from delivering the Exchange Securities to the Holder pursuant to Section 3(a)(9) of the Securities Act, nor will the Company take any action or steps that would cause the Exchange, issuance and delivery of the Exchange Securities to be integrated with other offerings to the effect that the delivery of the Exchange Securities to the Holder would be seen not to be exempt pursuant to Section 3(a)(9) of the Securities Act.
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2.8 No Third-Party Advisors. The Company has not engaged any third parties to assist in the solicitation with respect to the Exchange.
2.9 Subsidiaries. All of the direct and indirect Subsidiaries of the Company are set forth in Schedule 2.9. Except as may be set forth in the Schedule 2.9, the Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable.
2.10 Filings, Consents and Approvals. Other than for any filings with OTCQB, OTCQX, or the Pink Open Market (collectively, the “OTC”), any filings required to be made with the U.S. Securities and Exchange Commission (the “Commission”) pursuant to the Exchange Act or any state securities commission in connection with the transactions contemplated by this Agreement and any other Transaction Document, the Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or any natural person, firm, partnership, association, corporation, company, trust business trust or other entity (each, a “Person”) in connection with the execution, delivery and performance by the Company of the Transaction Documents.
2.11 Capitalization. The capitalization of the Company is as set forth in Schedule 2.11. Except as set forth in the Schedule 2.11, No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as set forth on Schedule 2.11, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, options or any securities of the Company which would entitle the holder thereof to acquire at any time shares of Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, shares of Common Stock. The issuance of the Exchange Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities; provided, however, except as explicitly provided herein, such waiver applies to the Exchange Securities and no other waivers are granted nor shall this provision impact the rights of any holder subsequent to this exchange. All of the outstanding shares of capital stock of the Company have been duly authorized and are validly issued, fully paid and nonassessable, and none of such outstanding shares were issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. There are no shareholders’ agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s shareholders.
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2.12 DTC Eligibility. The Company, through its transfer agent, currently participates in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) Program.
2.13 Litigation. Other than as set forth in the Schedule 2.13, there is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any Transaction Document or the Exchange Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect.
2.14 Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses (each, a “Material Permit”), except where the failure to possess such Material Permits could not reasonably be expected to result in a Material Adverse Effect, and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.
2.15 Labor Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which could reasonably be expected to result in a Material Adverse Effect.
2.16 Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property (to the extent owned by them) and good and marketable title in all personal property (to the extent owned by them) that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries, and (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.
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2.17 Insurance. To the extent that the Company and the Subsidiaries are insured, the Company and Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage (to the extent such coverage exists) as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.
2.18 Certain Fees. No brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiaries to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents.
2.19 Investment Company. The Company is not, and is not an Affiliate of, and immediately after consummation of the transactions contemplated hereunder, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.
2.20 No Integrated Offering. Assuming the accuracy of the Holder’s representations and warranties set forth in Section 3, neither the Company, nor any of its Affiliates, nor any Person acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the Exchange to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any trading markets or exchanges on which the Common Stock is listed, quoted or designated for trading on the date in question (each, a “Trading Market”).
2.21 Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department.
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2.22 Disclosure. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided the Holder or its agents or counsel with any information that it believes constitutes or might constitute material, non-public information. The Company understands and confirms that the Holder will rely on the foregoing representation in effecting transactions in securities of the Company. All of the disclosure furnished by or on behalf of the Company to the Holder regarding the Company and the Subsidiaries, their respective businesses and the transactions contemplated hereby, including any Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The press releases disseminated by the Company during the twelve (12) months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made and when made, not misleading. The Company acknowledges and agrees that the Holder makes no, nor has made, any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3 hereof.
2.23 Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any subsidiary know of no basis for any such claim.
2.24 Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent or other person acting on behalf of the Company or any Subsidiary, has: (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity; (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds; (iii) failed to disclose fully any contribution made by the Company or any subsidiary (or made by any person acting on its behalf of which the Company is aware) which is in violation of law or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act.
2.25 Regulation M Compliance. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the issuance or resale of any shares of Common Stock, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any Common Stock, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company.
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2.26 Bank Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.
2.27 Money Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.
Section 3. Representations and Warranties of the Holder. The Holder represents and warrants to the Company that:
3.1 Ownership of the Original Securities. The Holder is the legal and beneficial owner of the Original Securities. The Holder paid for the Original Securities and has continuously held the Securities since its purchase. The Holder owns the Original Securities outright and free and clear of any options, contracts, agreements, liens, security interests, or other encumbrances.
3.2 No Public Sale or Distribution. The Holder is acquiring the Exchange Securities in the ordinary course of business for its own account and not with a view toward, or for resale in connection with, the public sale or distribution thereof; provided, however, that by making the representations herein, the Holder does not agree to hold any of the Exchange Securities, for any minimum or other specific term and reserves the right to dispose of the Exchange Securities at any time in accordance with an exemption from the registration requirements of the Securities Act and applicable state securities laws. Except as contemplated herein, the Holder does not presently have any agreement or understanding, directly or indirectly, with any person to distribute, or transfer any interest or grant participation rights in, the Original Securities or the Exchange Securities.
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3.3 Accredited Investor and Affiliate Status. The Holder is an “accredited investor” as that term is defined in Rule 501 of Regulation D under the Securities Act. The Holder is not, and has not been, for a period of at least three (3) months prior to the date of this Agreement (a) an officer or director of the Company, (b) an “affiliate” of the Company (as defined in Rule 405 of the Securities Act) or (c) a “beneficial owner” of more than ten percent (10%) of the Common Stock (as defined for purposes of Rule 13d-3 of the Exchange Act).
3.4 Reliance on Exemptions. The Holder understands that the Exchange is being made in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Holder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Holder set forth herein in order to determine the availability of such exemptions and the eligibility of the Holder to complete the Exchange and to acquire the Exchange Securities.
3.5 Information. The Holder has been furnished with certain materials relating to the business, finances and operations of the Company and certain documentation relating to the Exchange which have been requested by the Holder. The Holder has been afforded the opportunity to ask questions of the Company. Neither such inquiries nor any other due diligence investigations conducted by the Holder or its representatives shall modify, amend or affect the Holder’s right to rely on the Company’s representations and warranties contained herein. The Holder acknowledges that not all of the documents the Company is required have timely filed under Sections 13(a), 14(a) or 15(d) of the Exchange Act have been filed and/or posted on the Commission’s EDGAR site, and the Holder has not relied on any statement of the Company not contained in such documents or in the Transaction Documents in connection with the Holder’s decision to enter into this Agreement and the Exchange. Additionally, the Holder is aware that the Company may be in default of certain of its contractual obligations. The Holder further acknowledges that it has been provided and have reviewed a copy of the draft Certificate of Designation and the Term Sheet.
3.6 Risk. The Holder understands that its investment in the Exchange Securities involves a high degree of risk. The Holder is able to bear the risk of an investment in the Exchange Securities including, without limitation, the risk of total loss of its investment. The Holder has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to the Exchange.
3.7 No Governmental Review. The Holder understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement in connection with the Exchange or the fairness or suitability of the investment in the Exchange Securities nor have such authorities passed upon or endorsed the merits of the Exchange Securities.
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3.8 Organization; Authorization. The Holder is either an individual or an entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization or formation, as the case may be, and has the requisite corporate or other power and authority to enter into and perform its obligations under this Agreement.
3.9 Validity; Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of the Holder and shall constitute the legal, valid and binding obligations of the Holder enforceable against the Holder in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law. If applicable, the execution, delivery and performance of this Agreement by the Holder and the consummation by the Holder of the transactions contemplated hereby (including, without limitation, the irrevocable surrender of the Original Securities) will not result in a violation of the organizational documents of the Holder.
3.10 Prior Investment Experience. The Holder acknowledges that it has prior investment experience, including investment in securities of the type being exchanged, including the Original Securities and the Exchange Securities, and has read all of the documents furnished or made available by the Company to it and is able to evaluate the merits and risks of such an investment on its behalf, and that it recognizes the highly speculative nature of this investment.
3.11 Tax Consequences. The Holder acknowledges that the Company has made no representation regarding the potential or actual tax consequences for the Holder which will result from entering into the Agreement and from consummation of the Exchange. The Holder acknowledges that it bears complete responsibility for obtaining adequate tax advice regarding the Agreement and the Exchange.
3.12 No Registration, Review or Approval. The Holder acknowledges, understands and agrees that the Exchange Securities are being exchanged for the Original Securities hereunder pursuant to an exchange offer exemption under Section 3(a)(9) of the Securities Act.
Section 4. Conditions Precedent to Obligations of the Company. The obligation of the Company to consummate the transactions contemplated by this Agreement is subject to the satisfaction of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion by providing the Holder with prior written notice thereof:
4.1 Delivery. The Holder shall have delivered to the Company the Original Securities or otherwise acknowledged in writing that it will deliver the Original Securities within ten (10) calendar days hereof;
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4.2 No Prohibition. No order of any court, arbitrator, or governmental or regulatory authority shall be in effect which purports to enjoin or restrain any of the transactions contemplated by this Agreement; and
4.3 Representations. The accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Holder contained herein (unless as of a specific date therein).
Section 5. Conditions Precedent to Obligations of the Holder. The obligation of the Holder to consummate the transactions contemplated by this Agreement is subject to the satisfaction of each of the following conditions, provided that these conditions are for the Holder’s sole benefit and may be waived by the Holder at any time in its sole discretion by providing the Company with prior written notice thereof:
5.1 No Prohibition. No order of any court, arbitrator, or governmental or regulatory authority shall be in effect which purports to enjoin or restrain any of the transactions contemplated by this Agreement;
5.2 Representations. The representations and warranties of the Company shall be true and correct in all material respects when made and on the Closing Date (unless as of a specific date therein), except for such representations and warranties contained herein that are qualified by “materiality” or “Material Adverse Effect,” in which case such representations and warranties of the Company shall be true and correct in all respects when made and on the Closing Date (unless as of a specific date therein);
5.3 All Obligations. All obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed; and
5.3 No Suspension. From the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or any Trading Market and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any trading market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of the Holder makes it impracticable or inadvisable to consummate the Exchange and accept the Exchange Securities on the Closing Date.
Section 6. Other Agreements between the Parties.
6.1 Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the Exchange of the Original Securities in a manner that would require the registration under the Securities Act of the sale of the Exchange Securities or that would be integrated with the offer of the Exchange Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.
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6.2 Replacement of Securities. If any certificate or instrument evidencing any of the Exchange Securities is mutilated, lost, stolen or destroyed, the Company shall convey or cause to be conveyed in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.
Section 7. Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement shall be construed under the laws of the state of New York, without regard to principles of conflicts of law or choice of law that would permit or require the application of the laws of another jurisdiction. The Company and the Holder each hereby agrees that all actions or proceedings arising directly or indirectly from or in connection with this Agreement shall be litigated only in the Supreme Court of the State of New York or the United States District Court for the Southern District of New York located in New York County, New York. The Company and the Holder each consents to the exclusive jurisdiction and venue of the foregoing courts and consents that any process or notice of motion or other application to either of said courts or a judge thereof may be served inside or outside the State of New York or the Southern District of New York by generally recognized overnight courier or certified or registered mail, return receipt requested, directed to such party at its or his address set forth below (and service so made shall be deemed “personal service”) or by personal service or in such other manner as may be permissible under the rules of said courts. THE COMPANY AND THE HOLDER EACH HEREBY WAIVES ANY RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION PURSUANT TO THIS AGREEMENT.
Section 8. Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party hereto and delivered to the other party hereto; provided that a facsimile or electronic signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile or electronic signature, as applicable.
Section 9. Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.
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Section 10. Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.
Section 11. No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rules of strict construction will be applied against any party hereto.
Section 12. Entire Agreement; Amendments. This Agreement supersedes all other prior oral or written agreements between the Holder, the Company, their Affiliates and Persons acting on their behalf with respect to the matters discussed herein, and this Agreement contains the entire understanding of the parties hereto with respect to the matters covered herein. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Holder. No provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought.
Section 13. Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (a) upon receipt, when delivered personally; (b) upon receipt, when sent by electronic mail (provided confirmation of transmission is electronically generated and kept on file by the sending party); or (c) one calendar day (excluding Saturdays, Sundays, and national banking holidays) after deposit with an overnight courier service, in each case properly addressed to the party to receive the same.
The addresses and e-mail addresses for such communications shall be:
If to the Company:
Transportation and Logistics Systems, Inc.
Attn: Sebastian Giordano
5500 Military Trail, Suite 22-357
Jupiter,
Florida 33458
E-mail: Sebastian.Giordano@tlss-inc.com
With a copy to:
Sullivan & Worcester LLP
Attn: David Danovitch, Esq.
1251 Avenue of the Americas
New York, New York 10020
Email: ddanovitch@sullivanlaw.com
If to the Holder:
to the address set forth on its signature page to this Agreement.
or to such other address, email address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party five (5) calendar days prior to the effectiveness of such change.
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Section 14. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, including any purchasers of the Exchange Securities. Subject to its compliance with applicable federal and state securities laws, the Holder may assign some or all of its rights hereunder without the consent of the Company, in which event such assignee shall be deemed to be the Holder hereunder with respect to such assigned rights.
Section 15. No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
Section 16. Survival of Representations. The representations and warranties of the Company and the Holder contained in Sections 2 and 3, respectively, will survive the closing of the transactions contemplated by this Agreement.
Section 17. Securities Law Disclosure; Publicity. The Company shall, by 5:30 pm (New York City Time) on the date hereof (or if this Agreement is executed after 5:30 pm (New York City Time) on the date hereof, no later than 9:30 am (New York City Time) on the next Trading Day), issue a press release and/or file a Form 8-K disclosing the material terms of the transactions contemplated hereby and attaching this Agreement, to the extent that it is required to be filed under the Exchange Act, that has not previously been filed with the Commission by the Company as an exhibit to such filing. From and after the release of such disclosure, the Company represents to the Holder that it shall have publicly disclosed all material, non-public information delivered to the Holder by the Company. In addition, effective upon the issuance of such disclosure, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, on the one hand, and the Holder or any of their Affiliates on the other hand, shall terminate and be of no further force or effect. Without the prior written consent of the Holder (which may be granted or withheld in the Holder’s sole discretion), except as required by applicable law, the Company shall not (and shall cause each of its Subsidiaries and Affiliates to not) disclose the name of the Holder in any filing, announcement, release or otherwise. The Company understands and confirms that the Holder shall be relying on the foregoing covenant in effecting transactions in securities of the Company.
Section 18. [Reserved].
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Section 19. Most Favored Nation. The Company hereby represents and warrants as of the date hereof and covenants and agrees from and after the date hereof until three (3) months following the date hereof (the “MFN Period”), that none of the terms offered to any other holder of the Company’s preferred stock pursuant to any other securities exchange agreement (or any amendment, modification or waiver thereof including other exchange agreements signed concurrently with this Agreement), is or will be more favorable to such other holder(s) of the Company’s securities than those of the Holder and this Agreement. If, and whenever on or after the date hereof during the MFN Period, the Company enters into another Exchange Agreement (or any amendment, modification or waiver with any other holder of warrants), then (i) the Company shall provide notice thereof to the Holder promptly following the occurrence thereof and (ii) the terms and conditions of this Agreement shall be, without any further action by the Holder or the Company, automatically amended and modified in an economically and legally equivalent manner such that the Holder shall receive the benefit of the more favorable terms and/or conditions (as the case may be) set forth in such other Agreement, provided that upon written notice to the Company at any time the Holder may elect not to accept the benefit of any such amended or modified term or condition, in which event the term or condition contained in this Agreement shall apply to the Holder as it was in effect immediately prior to such amendment or modification as if such amendment or modification never occurred with respect to the Holder. For the avoidance of doubt, this provision shall not apply to any new classes of preferred stock issued after the date of this Agreement nor to any other securities that are outstanding or may become outstanding after the date of this Agreement.
Section 20. [Reserved].
Section 21. Listing. The Company shall promptly secure the listing or designation for quotation (as the case may be) of all of the Exchange Shares upon each national securities exchange and automated quotation system, if any, upon which the Common Stock is then listed or designated for quotation (as the case may be) (subject to official notice of issuance) and shall maintain such listing or designation for quotation (as the case may be) of all Exchange Shares from time to time issuable under the terms of this Agreement and any other Transaction Documents on such national securities exchange or automated quotation system. The Company shall maintain the Common Stock’s listing or authorization for quotation (as the case may be) on any one (or more) of The New York Stock Exchange, the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the OTC (each, an “Eligible Market”). Neither the Company nor any of its Subsidiaries shall take any action which could be reasonably expected to result in the delisting or suspension of the Common Stock so that they are not listed or admitted for trading on any Eligible Market. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 21.
Section 22. Further Assurances. Each party hereto shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party hereto may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and any other Transaction Documents and the consummation of the transactions contemplated hereby and thereby.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties hereto have executed this Exchange Agreement as of the date first written above.
| TRANSPORTATION AND LOGISTICS SYSTEMS, INC. | ||
| By: | ||
| Name: | Sebastian Giordano | |
| Title: | Chief Executive Officer | |
[Company Signature Page to the Exchange Agreement]
AGREED TO AND ACCEPTED:
[●]
| By: | ||
| Name: | ||
| Title: |
Notice and Information to: [●]
[Holder Signature Page to the Exchange Agreement]
Exhibit A
Remaining Original Securities
| Warrant | Issue Date | Expiration Date | # of Underlying Shares | Exercise Price | ||||
Exhibit B
As Filed Certificate of Designation for Series J Senior Convertible Preferred Stock
Please see Exhibit 3.1 to our Current Report on Form 8-K filed on May 7, 2025.
Exhibit C
SUMMARY OF TERMS OF THE SERIES J SENIOR CONVERTIBLE PREFERRED STOCK
The purpose of this Summary of Terms (this “Term Sheet”) is to summarize the terms and rights of the Series J Senior Convertible Preferred Stock (the “Preferred Stock”) of Transportation and Logistics Systems, Inc. This Term Sheet is intended only to provide the basic terms of the Preferred Stock, and shall not be deemed, to be the definitive terms of the Preferred Stock. For more details, please see the as-filed Certificate of Designation of Preferences, Rights and Limitations of Series J Senior Convertible Preferred Stock filed as Exhibit 3.1 of our Current Report on Form 8-K filed with the Securities and Exchange Commission on May 7, 2025.
SUMMARY OF TERMS
FOR
SERIES J SENIOR CONVERTIBLE PREFERRED STOCK
OF
TRANSPORTATION AND LOGISITICS SYSTEMS, INC.
| Issuer: | Transportation and Logistics Systems, Inc. (the “Company”). |
| Authorized: | 1 million of shares of Series J Senior Convertible Preferred Stock (the “Preferred Stock”), convertible into shares of the Company’s common stock (the “Common Stock”). |
| Stated Value: | $100 per share of Preferred Stock. |
| Redemption: | Upon the occurrence of any trigger event, each holder shall have the right to cause the Company to redeem all or part of their Preferred Stock at a price per share equal to 110% of the stated value. Trigger events include, but are not limited to, (i) the failure to maintain listing on an eligible trading market for five consecutive trading days, (ii) failure to reserve sufficient number of Common Stock in case of full conversion of the Preferred Stock, and (iii) insolvency or bankruptcy. |
| Conversion: | At any time from and after the original issue date, subject to (i) the Common Stock beneficial ownership limitation of 4.99%, and (ii) limitation on converting more than 10% of the trading volume of the Common Stock on any given day except for if the conversion price is greater than $0.40 per share of Common Stock. |
| Conversion Price: | The Preferred Stock can be converted to Common Stock at any time for the conversion price of $0.001 per share, subject to adjustment including anti-dilution for subsequent equity issuances. |
| Liquidation Preference: | The Preferred Stock shall have a liquidation preference equal to and shall be entitled to receive out of the assets of the Company an amount in cash equal to 120% of the aggregate stated value of all shares of Series J Preferred Stock held by each holder, respectively, in addition to all accrued and unpaid dividends, prior and in preference to the Common Stock or any other series of preferred stock. |
| Dividends: | The Preferred Stock dividend is cumulative and accruing at the rate of ten percent (10%) per annum, payable at the option of the Company in shares of Common Stock or in cash, and shall be computed on the basis of a 360-day year and twelve 30-day months. Dividend payments are paid every six months beginning June 30, 2025. |
| Voting: | The Preferred Stock shall have voting rights on an as converted basis. Further, as long as any shares of Preferred Stock are outstanding, the Company shall not, without the affirmative vote of holders of a majority of the then-outstanding shares of Preferred Stock, (i) alter or change adversely the powers, preferences or rights given to the Preferred Stock or alter or amend the Certificate of Designation for the Preferred Stock, (ii) amend the Company’s Articles of Incorporation or other charter documents of the Company in a manner adverse to the holders of Preferred Stock, (iii) increase the number of authorized Series J Preferred Stock, or (iv) enter into any agreement with respect to (i) – (iii). |
SCHEDULE I TO FORM OF EXCHANGE AGREEMENT (WARRANTS)
| Holder | Date of Agreement | Number of Warrants to be Released | Number of Shares of Series J Preferred to be Issued | |||||||
| MBS Gloeq Corp | 6/26/2025 | 20,000,000 | 18 | |||||||
| Terry Brodt | 11/12/2025 | 89,053,572 | 79 | |||||||
| Ernsest Pellegrino | 11/12/2025 | 89,053,571 | 79 | |||||||
| Garden State Securities, Inc. | 11/12/2025 | 57,607,142 | 51 | |||||||
Exhibit 31.1
CERTIFICATION
Pursuant to Rules 13a-14(a) and 15d-14(a)
Under the Securities Exchange Act of 1934
As adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Sebastian Giordano, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Transportation and Logistics Systems, Inc. (the “registrant”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: November 13, 2025 | Signature: | /s/ Sebastian Giordano |
| Sebastian Giordano | ||
| Chief Executive Officer and Chief Financial Officer | ||
| (Principal Executive Officer and Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned principal executive officer and principal financial officer of Transportation and Logistics Systems, Inc. (the “Company”) does hereby certify, to such officer’s knowledge, that:
The Quarterly Report on Form 10-Q for the period ended September 30, 2025 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Dated: November 13, 2025 | By: | /s/ Sebastian Giordano |
| Sebastian Giordano | ||
Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer) |
The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of Form 10-Q or as a separate disclosure document.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.