Transportation and Logistics Systems (TLSS) 10-K2023 FY Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark one)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File No. 001-34970

(833) 764-1443

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report.)

Securities Registered Pursuant to Section 12(b) of the Act:

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock, $ 0.001 Par Value

Indicate by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒.

Indicate by check mark if registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒.

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: ☐ No: ☒

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 (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files.

Yes: ☐ No: ☒

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

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 ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates cannot be calculated as our common stock is not traded on a national securities exchange.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

As of November 29, 2024, the registrant had outstanding 5,887,267,891 shares of common stock.

TRANSPORTATION AND LOGISTICS SYSTEMS, INC.

FORM 10-K

December 31, 2023

INDEX

For purposes of this Annual Report on Form 10-K (this “Annual 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”); Cougar Express, Inc. (“Cougar Express”), a wholly-owned subsidiary of TLSS-CE and 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 subsidiaries, TLSS-FC, Inc. (“TLSS-FC”) and Freight Connections, Inc. (“Freight Connections”).

Hereinafter, TLSSA, TLSS Ops, Shyp Fx, Shyp CX, TLSS-CE, TLSS-STI, TLSS-FC, Cougar Express, JFK Cartage, Severance and Freight Connections, are hereinafter, the “Subsidiaries”. Other than the Company, the results of operations and all accounts of the Subsidiaries for the years ended December 31, 2023 and 2022 are included as part of discontinued operations on the consolidated financial statements.

Forward-Looking Statements

Statements made in this Annual 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 this Annual Report, these risks and uncertainties include: our ability to meet our annual and quarterly periodic reporting obligations under Securities Exchange Act of 1934, as amended (“34 Act”), including obtaining sufficient financing to fund the necessary costs related to the preparation and filing of one or more of our future periodic reports; our ability to restructure our remaining existing debts and obligations and replace our discontinued businesses and/or enter into new line(s) of business, whether by acquisition or otherwise; our ability to attract and retain key personnel and skilled labor to meet the requirements of being a public company; our history of losses, deficiency in working capital and a stockholders’ deficit and inability to achieve sustained profitability; our need to procure substantial additional financing to fund ongoing losses and the growth of our business; our ability to successfully execute our business strategies, including integration of acquisitions and the future acquisition of other businesses to grow our company; adverse or unanticipated events in the litigation to which we are currently a party (or as to which we may become a party in the future); our ability to pay expenses and liabilities as they become due; adverse or unanticipated decisions by courts construing third-party liability insurance policies to which the Company and/or its subsidiaries is a party; a failure to obtain adequate liability insurance coverage in the future; material weaknesses in our internal control over financial reporting and our ability to maintain effective controls over financial reporting in the future; financial condition and results of operations and our ability to meet our payment obligations; the impact of new or changed laws, regulations or other industry standards that could adversely affect our ability to conduct our business; and changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural or man-made disasters.

These forward-looking statements represent our estimates and assumptions only as of the date of this Annual 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 Annual Report, as well as any amendments hereto or thereto, or other documents filed with the Securities and Exchange Commission.

PART I

Item 1. Description of Business.

Overview

Transportation and Logistics Systems, Inc. is a publicly-traded holding company. Until July 17, 2024, our shares of common stock were traded on the OTC: PINK market and are currently traded on the OTC Expert Market.

Until February 2024, the Company’s 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. The Company and its Subsidiaries operated several warehouse locations located in New York, New Jersey, Connecticut and Massachusetts. The Company and its Subsidiaries ceased all remaining operations as of mid-February 2024.

On December 1, 2023, TLSS-FC, Inc. and Freight Connections filed voluntary bankruptcy petitions under Chapter 7 of the United States Bankruptcy Code in the State of New Jersey. On February 27, 2024, Cougar Express filed a voluntary bankruptcy petition under Chapter 7 of the United States Bankruptcy Code in the State of New York. The Severance entities, JFK Cartage, TLSSA, TLSS Ops, Shyp CX, Shyp FX, TLSS-CE, TLSS-FC, and TLSS-STI have all ceased operations since mid-February 2024. Besides TLSS-FC, Inc., Freight Connections, and Cougar Express, none of the other Subsidiaries have filed bankruptcy.

On November 13, 2020, TLSS formed a wholly-owned subsidiary, Shyp FX, under the laws of the State of New Jersey. On January 15, 2021, through Shyp FX, we simultaneously executed an asset purchase agreement and closed a transaction to acquire substantially all 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”). On April 28, 2022, we entered into an asset purchase agreement with an unrelated third party to sell substantially all of the assets and specific liabilities of Shyp FX. On June 21, 2022, we closed the transaction and sold substantially all the assets of Shyp FX in an all-cash transaction.

On November 16, 2020, we formed a wholly owned subsidiary, TLSSA, under the laws of the State of Delaware. On March 24, 2021, TLSSA, acquired all 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 New York City 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, 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 provisions of the Chapter 7 Statute. As a result of Cougar Express filing the Chapter 7 petition, the 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 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 Chapter 7 bankruptcy petition on February 27, 2024.

On February 21, 2021, we formed a wholly-owned subsidiary, Shyp CX, a company incorporated under the laws of the State of New York. Shyp CX does not engage in any revenue-generating operations and is currently 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. In February 2024, due to lack of working capital to conduct its business, JFK Cartage ceased its operations and no longer conducts any business and all of its assets of the Company were voluntarily conveyed to the Cougar Trustee.

On August 17, 2022, the Company formed a wholly-owned subsidiary, TLSS-FC, under the laws of the State of Delaware. Effective September 16, 2022, TLSS-FC closed on an acquisition to acquire all outstanding stock of Freight Connections, a New Jersey-based company that offered an array of transportation, warehousing, consolidating, distribution, and local cartage services throughout the New York tri-state area. On December 1, 2023, TLSS-FC and its wholly-owned subsidiary, Freight Connections, filed a Chapter 7 bankruptcy petition in the State of New Jersey under the United States Bankruptcy Code, assigning all of the TLSS-FC and Freight Connections assets to Mr. Steven P Kartzman, Esq., as Trustee (the “TLSS Trustee”) for liquidation and unwinding of the business. The TLSS Trustee has been charged with liquidating the assets for the benefit of the TLSS-FC and Freight Connection’s creditors pursuant to the provisions of the Chapter 7 Statute. As a result of TLSS-FC and Freight Connections filing of the Chapter 7 petition, the TLSS Trustee assumed all authority to manage TLSS-FC and Freight Connections. Additionally, TLSS-FC and Freight Connections no longer conduct any business and are not permitted by the TLSS Trustee to conduct any business. 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 filing of the Chapter 7 petition on December 3, 2023. In November 2023, the Company fully impaired the goodwill, intangible assets and other long-lived assets of Freight Connection and the Company recognized a loss on deconsolidation of approximately $400,000.

On January 27, 2023, the Company formed a wholly-owned subsidiary, TLSS-STI, under the laws of the State of Delaware. TLSS-STI does not engage in any revenue-generating operations and is currently inactive. Effective January 31, 2023, TLSS-STI acquired all of the outstanding stock of each of Severance Trucking, Severance Warehouse and McGrath, which together offered less-than-truckload (LTL) trucking services throughout New England. In February 2024, due to the 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 prior owners.

On May 31, 2023, the Company formed TLSS Ops and TLSS-CE. Simultaneously 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.

On December 1, 2023, two of the Company’s subsidiaries, TLSS-FC, Inc. and Freight Connections filed voluntary bankruptcy petitions under Chapter 7 of the United States Bankruptcy Code in the State of New Jersey. JFK Cartage, the Severance entities, TLSSA, TLSS Ops, Shyp CX, Shyp FX, TLSS-CE, TLSS-FC, and TLSS-STI have all ceased operations since mid-February 2024.

Subsequent to the cessation of all of the Company’s revenue generating operations and through the date of this Annual Report, the Company continues to remain insolvent and as a result, has been unable to meet its annual and quarterly periodic reporting obligations under 34 Act. The Company has obtained financing to enable us to complete the audit of the financial statements for this Annual Report and to commence the reviews for the subsequent 2024 quarters to enable the Company to prepare and file this Annual Report, and subsequent Quarterly Reports on Form 10-Q (the “2024 Quarterly Reports”). Following the filing of this Annual Report, we intend to continue working to complete the necessary interim financial statements and file the 2024 Quarterly Reports as soon as possible hereafter; however, the Company will require additional financing to fund the necessary costs related to the preparation and filing of one or more of the 2024 Quarterly Reports. In addition, we are also evaluating a possible 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.

Corporate History

TLSS was incorporated under the name “PetroTerra Corp.” in the State of Nevada on July 25, 2008. Prior to March 2017, TLSS was an independent oil or gas exploration and development company focused on the acquisition or lease of properties that potentially contained extractable oil or gas. However, at that time, we had not generated any revenues and, due to a decline in the oil and gas markets, elected to seek other business opportunities.

On March 30, 2017, TLSS entered into an agreement to acquire Save on Transport Inc., a Florida-based non-asset provider of integrated transportation management solutions, including brokerage and logistics services related to the transportation of automobiles and other freight (“Save on Transport”), as a wholly owned subsidiary. On June 18, 2018, TLSS completed the acquisition of all outstanding membership interests of Prime EFS from its members. On July 24, 2018, TLSS formed Shypdirect LLC, a company organized under the laws of New Jersey.

Between June 18, 2018 and September 30, 2020, we operated through Prime EFS and Shypdirect. The great bulk of Prime EFS’s business prior to September 30, 2020 was conducted pursuant to the Delivery Service Provider program of Amazon Logistics, Inc., a subsidiary of Amazon.com, Inc. (“Amazon”), but the program was terminated effective September 30, 2020. As a result, Prime EFS ceased operations on September 30, 2020. Shypdirect conducted its business as a carrier under a relay program service agreement with Amazon (the “Program Agreement”), but the Program Agreement expired on May 14, 2021. In June 2021, Shypdirect ceased its tractor trailer and box truck delivery services to Amazon, and in July 2021, Shypdirect ceased all operations.

On November 13, 2020, TLSS formed a wholly-owned subsidiary, Shyp FX, under the laws of the State of New Jersey. On January 15, 2021, through Shyp FX, we simultaneously executed an asset purchase agreement and closed a transaction to acquire substantially all 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”).

On November 16, 2020, we formed a wholly owned subsidiary, TLSSA, under the laws of the State of Delaware. On March 24, 2021, TLSSA, acquired all 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 New York City tri-state area.

On August 16, 2021, Prime EFS and Shypdirect executed Deeds of Assignment for the Benefit of Creditors in the State of New Jersey pursuant to N.J.S.A. §2A:19-1, et seq. (the “ABC Statute”), assigning all Prime EFS and Shypdirect assets to Terri Jane Freedman as Assignee for the Benefit of Creditors (the “Assignee”) and filing for dissolution. An “Assignment for the Benefit of Creditors,” “general assignment” or “ABC” in New Jersey is a state-law, voluntary, judicially-supervised corporate liquidation and unwinding similar to the Chapter 7 bankruptcy process pursuant to the United States Bankruptcy Code. On September 7, 2021, the ABCs were filed with the Bergen County Clerk in Bergen County, New Jersey and filed with the Surrogate Court, Bergen County, initiating judicial proceedings. Effective September 7, 2021, we relinquished control of Prime EFS and Shypdirect. Further, on October 13, 2021, Prime EFS and Shypdirect filed for dissolution with the Secretary of State of New Jersey. Therefore, we deconsolidated Prime EFS and Shypdirect effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021.

On April 28, 2022, we entered into an asset purchase agreement with an unrelated third party to sell substantially all of the assets and specific liabilities of Shyp FX. On June 21, 2022, we closed the transaction and sold substantially all the assets of Shyp FX in an all-cash transaction.

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. On August 17, 2022, the Company formed a wholly-owned subsidiary, TLSS-FC, under the laws of the State of Delaware. Effective September 16, 2022, TLSS-FC closed on an acquisition to acquire all outstanding stock of Freight Connections, a New Jersey-based company that offered an array of transportation, warehousing, consolidating, distribution, and local cartage services throughout the New York tri-state area.

On January 27, 2023, the Company formed a wholly-owned subsidiary, TLSS-STI, under the laws of the State of Delaware. Effective January 31, 2023, TLSS-STI acquired all of the outstanding stock of each of Severance Trucking, Severance Warehouse and McGrath, which together offered less-than-truckload (LTL) trucking services throughout New England.

On May 31, 2023, the Company formed TLSS Ops and TLSS-CE. Simultaneously 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.

On December 1, 2023, TLSS-FC and Freight Connections, filed a Chapter 7 bankruptcy petition in the State of New Jersey under the United States Bankruptcy Code, assigning all of the TLSS-FC and Freight Connections assets to Mr. Steven P Kartzman, Esq., as Trustee (the “TLSS Trustee”) for liquidation and unwinding of the business. The TLSS Trustee has been charged with liquidating the assets for the benefit of the TLSS-FC and Freight Connection’s creditors pursuant to the provisions of the Chapter 7 Statute. As a result of TLSS-FC and Freight Connections filing of the Chapter 7 petition, the TLSS Trustee assumed all authority to manage TLSS-FC and Freight Connections. Additionally, TLSS-FC and Freight Connections no longer conduct any business and are not permitted by the TLSS Trustee to conduct any business. 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 filing of the Chapter 7 petition on December 3, 2023.

On February 27, 2024, Cougar Express, filed a Chapter 7 bankruptcy petition in the State of New York under the United States Bankruptcy Code, 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 provisions of the Chapter 7 Statute. As a result of Cougar Express filing the Chapter 7 petition, the 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 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 Chapter 7 bankruptcy petition on February 27, 2024.

In February 2024, due to the lack of working capital to conduct its business, Severance Trucking ceased its operations and no longer conducts any business and all fixed assets of the Company were voluntarily surrendered to the prior owners. JFK Cartage, the Severance entities, TLSSA, TLSS Ops, Shyp CX, Shyp FX, TLSS-CE, TLSS-FC, and TLSS-STI have all ceased operations since mid-February 2024.

Our principal executive offices are located in the United States at 5500 Military Trail, Suite 22-357, Jupiter, Florida 33458, and our telephone number is (833) 764-1443. The Company’s website is www.tlss-inc.com.

Economic Factors

Our restructuring efforts and possible new business opportunities are subject to a number of general economic factors that may have a material effect on such results, many of which are largely out of our control, including our success in completing such restructuring, securing necessary financing as well as finding and closing on any new business opportunities.

Employees

As of the date of this Annual Report, we only have one employee who serves as our Chief Executive Officer and Chief Financial Officer. Since February 2024, other professional and executive services have been procured by TLSS through independent contractors.

Depending upon the outcome of our restructuring and if it leads to a new business opportunity, the Company would continue to evaluate its use of human capital measures or objectives in managing its business, such as the factors we employ or seek to employ in the development, attraction and retention of personnel and maintenance of diversity in its workforce.

Information Systems

Cougar Express, Freight Connections and Severance each used a suite of non-proprietary software programs and other technologies to manage dispatching of vehicles, employees, DOT compliance, vehicle maintenance, and scheduling. However, subsequent to the cessation of these operations and for reasons of nonpayment due to the Company’s insolvency, such information systems were no longer available to the Company.

How to Obtain our SEC Filings

We file annual, quarterly, and special reports, proxy statements, and other information with the Securities and Exchange Commission (SEC). Reports, proxy statements and other information filed with the SEC can be inspected and copied at the public reference facilities of the SEC at 100 F Street N.E., Washington, DC 20549. Such material may also be accessed electronically by means of the SEC’s website at www.sec.gov. You may also obtain our recent filings with the Securities and Exchange Commission from the “Investors—Regulatory Filings” section of our website www.tlss-inc.com.

Item 1A. Risk Factors.

Investing in our common stock involves a high degree of risk. You should not invest in our stock unless you are able to bear the complete loss of your investment. You should carefully consider the risks described below, as well as other information provided to you in this Annual Report, including information in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Cautionary Note Regarding Forward-Looking Information and Factors That May Affect Future Results” before making an investment decision. The risks and uncertainties described below are not the only ones facing TLSS. Additional risks and uncertainties not presently known to us or that we currently believe are immaterial may also impair our business operations. If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected, the value of our common stock could decline, and you may lose all or part of your investment.

RISKS ASSOCIATED WITH OUR BUSINESS AND INDUSTRY

We currently have no operating business and cannot determine, at this time, if we will be able to execute a go-forward restructuring of the Company.

Due to our inability to secure the requisite operating capital to meet our obligations, we ceased operations in the first quarter of 2024. Multiple of our operating subsidiaries have filed Chapter 7 and the remaining operating subsidiaries and the Company, remain insolvent. In order to pursue a possible go-forward restructuring plan, the Company must first regain compliance with its outstanding and past due SEC filings, which we are currently attempting to do. Our limited operating history and our proposed restructuring is subject to numerous risks, uncertainties, expenses and difficulties associated with an insolvent company. Such risks include, but are not limited to:

Because we are subject to these and other risks, you may have a difficult time evaluating the Company and your investment in the Company. We may be unable to successfully overcome these risks which could harm the Company further.

Our restructuring strategy may be unsuccessful, and we may be unable to address the risks we face in a cost-effective manner, if at all. If we are unable to successfully address these risks the Company will be further harmed.

We may be unable to successfully find a new business opportunity.

The Company currently intends to pursue the restructuring of our existing debts and obligations and explore new business opportunities. Exploration of potential new business opportunities, mergers or acquisitions requires significant attention to source and evaluate. In addition, we can expect to compete for new business opportunities with other companies, some of which may have greater financial and other resources than we do. We cannot ensure that we will have sufficient cash to start a new business, consummate a merger or acquisition, or otherwise be able to obtain financing under acceptable terms, or obtain financing at all, for any new business venture. If we are unable to access sufficient funding for a new business venture, we may not be able to complete transactions that we otherwise find advantageous. Any such acquisition will entail numerous risks, including:

● we may not achieve anticipated levels of revenue, efficiency, cash flows and profitability;

● we may experience difficulties managing and integrating new businesses;

● we may underestimate the resources required to support a new business opportunity;

● we may incur unanticipated costs to support a new business;

● liabilities we assume could be greater than our original estimates or may not be disclosed to us at the time of closing a new business opportunity; and

● we may incur additional indebtedness or we may issue additional equity to finance a new business venture or acquisitions, which could be dilutive to our stockholders.

To the extent we do not successfully avoid or overcome the risks or problems resulting from any new business opportunity we undertake, there could be a material adverse effect on our Company.

We have ongoing capital requirements that necessitate obtaining financing on favorable terms.

We have depended primarily on convertible and nonconvertible debt and equity financing to fund the Company. Unless financing is secured, we will continue to face liquidity constraints and may have to seek protection under the United States Bankruptcy Code. Lack of funding will adversely impact our ability to implement a business plan.

We have never been profitable and, given the cessation of our business operations, may continue to not be profitable.

Historically, the Company has never been profitable and is currently insolvent and has no operating business. There can be no assurance that we will be able to implement a business plan, generate sustainable revenue or ever achieve consistently profitable operations. If the Company continues to be insolvent, the Company may need to seek protection under the United States Bankruptcy Code or otherwise liquidate its remaining assets.

GENERAL OPERATING RISK

We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives.

As a public company, we incur significant legal, accounting, and other expenses. In addition, the Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC, have imposed various requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls as well as mandating certain corporate governance practices. In the past, our management and other personnel has devoted a substantial amount of time and financial resources to these compliance initiatives. However, due to significant cost cutting measures, the Company currently lacks the depth of management and personnel to meet such requirements.

We currently do not have a sufficiently staffed accounting and finance function to maintain internal control systems adequate to meet the demands that are placed upon us as a public company. As a result, we have been unable to report our financial results accurately or in a timely manner and our business and stock price, assuming that a market for our stock develops, has suffered and may continue to suffer. The costs of being a public company, as well as the lack of management depth, may have a material adverse effect on our future business and financial condition.

We currently lack the funds to develop a business, which may adversely affect our future growth.

The Company currently has no operations that generate revenue. Unless and until we can generate a sufficient amount of revenue, if ever, we can only expect to finance our capital needs through public or private equity offerings or debt financings. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of, our plans to grow our revenues or to consummate one or more strategic acquisitions or otherwise to scale back or abandon our business plans. In addition, we could be forced to reduce or forego any new business opportunities or file for bankruptcy. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. In addition, debt financing, if available, may involve restrictive covenants. We may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. Our access to the financial markets and the pricing and terms we receive in the financial markets could be adversely impacted by various factors, including changes in financial markets and interest rates.

Our forecasts regarding the sufficiency of our financial resources to support our current and planned operations are forward-looking statements and involve significant risks and uncertainties, and actual results could vary because of a number of factors, including the factors discussed elsewhere in this “Risk Factors” section. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Our future capital requirements may be substantial and will depend on many factors including:

Raising capital in the future could cause dilution to our existing stockholders or require us to relinquish rights.

In the future, we may seek additional capital through a combination of private and public equity offerings and debt financings. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a shareholder. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring additional debt, making capital expenditures or declaring dividends.

If we are unable to attract and retain qualified executive officers and managers, we will be unable to operate efficiently, which could adversely affect our business, financial condition, results of operations and prospects.

Currently, we depend on the continued efforts and abilities of our sole executive officer, Sebastian Giordano (“Mr. Giordano”), to oversee the completion of the Company’s SEC filings, restructuring, manage day-to-day business, and identify strategic opportunities. The loss of him could negatively affect our ability to execute our business strategy and adversely affect our business, financial condition, and business prospects. Competition for managerial talent with significant industry experience is high and we may lose access to executive officers for a variety of reasons, including more attractive compensation packages offered by our competitors. Although we had entered into an employment agreement with Mr. Giordano, we cannot guarantee that he or other key management personnel will remain employed by us for any length of time, especially since such employment agreement is and remains in default for nonpayment. Our inability to adequately fill vacancies in our senior executive positions on a timely basis could negatively affect our ability to implement our business strategy, which could adversely impact our results of operations and prospects.

Adverse publicity in connection with our Subsidiaries bankruptcy cases negatively affect our current and future business prospects.

Adverse publicity or news coverage relating to us or our business, including, but not limited to, publicity or news coverage in connection with our Subsidiaries that have filed for bankruptcy, may negatively impact our efforts to establish and promote our business, including with respect to our prospective customers, suppliers, and service providers.

If our cybersecurity measures are compromised or unauthorized access to customer or consumer data is otherwise obtained, our products and services may be perceived as not being secure, our reputation may be damaged and we may face further difficulties securing new business prospects.

Because our business requires the storage, transmission and utilization of consumer and customer information, we will continue to routinely be the target of attempted cybersecurity and other security threats by technically sophisticated and well-resourced outside third parties, among others, attempting to access or steal the data we store. We operate in an environment of significant risk of cybersecurity incidents resulting from unintentional events or deliberate attacks by third parties or insiders, which may involve exploiting security vulnerabilities or sophisticated attack methods. These threats include social engineering attacks, phishing attacks and other cyber-attacks, including state-sponsored cyber-attacks, industrial espionage, insider threats, denial-of-service attacks, computer viruses, ransomware and other malware, payment fraud or other cyber incidents. In addition, increased attention on and use of artificial intelligence increases the risk of cyber-attacks and data breaches, which can occur more quickly and evolve more rapidly when artificial intelligence is used. Further, use of artificial intelligence by our employees, whether authorized or unauthorized, increases the risk that our intellectual property and other proprietary information will be unintentionally disclosed.

Cybersecurity breaches could expose us to a risk of loss, the unauthorized disclosure of consumer or customer information, significant litigation, regulatory fines, penalties, loss of customers or reputational damage, indemnity obligations and other liability. There is no assurance that the programs, technologies and processes that we have put in place in an effort to maintain the security and protection of our non-public information and that of our customers will be fully implemented, complied with or effective. If our cybersecurity measures are breached as a result of third-party action, employee error, malfeasance or otherwise, and as a result, someone obtains unauthorized access to our systems or to consumer or customer information, sensitive data may be accessed, stolen, disclosed or lost, our reputation may be damaged, our business may suffer and we could incur significant liability. Because the techniques used to obtain unauthorized access, disable or degrade service or to sabotage systems change frequently and generally are not recognized until launched against a target, or even for some time after, we may be unable to anticipate these techniques, implement adequate preventative measures or remediate any intrusion on a timely or effective basis. Because a successful breach of our computer systems, software, networks or other technology asset could occur and persist for an extended period of time before being detected, we may not be able to immediately address the consequences of a cybersecurity incident.

Risks Related to Our Financial Results and Financing Plans

We have a history of losses and may continue to incur losses in the future.

The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business.

Historically, we have primarily funded our operations with proceeds from sales of convertible debt, notes and convertible preferred stock. Since our inception, we have incurred recurring losses, including a net loss of $14,264,646 and $8,076,066 for the years ended December 31, 2023 and 2022, respectively. Until such time that we implement business operations, either internally or through an acquisition, we expect to continue to generate operating losses in the foreseeable future, mostly due to corporate overhead and costs of being a public company. These losses may increase, and we may never achieve profitability for a variety of reasons, including due to a lack of revenue generating operations, and other factors described elsewhere in this “Risk Factors” section.

As of December 2, 2024 and December 31, 2023, we had a cash balance of $257,628 and $218,152, respectively. Our cash balance as of December 2, 2024, will not be sufficient to fund our operations for at least the next twelve months from the date of this Annual Report and we will need to raise additional working capital.

We have identified material weaknesses in our internal control over financial reporting, and we cannot assure you that additional material weaknesses or significant deficiencies will not occur in the future. If our internal control over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results or prevent fraud, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.

We have historically had a small internal accounting and finance staff with limited experience in public reporting. This lack of adequate accounting resources has resulted in the identification of material weaknesses in our internal controls over financial reporting. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis. In connection with the preparation of our consolidated financial statements for the years ended December 31, 2023 and 2022, our management team identified material weaknesses relating to, among other matters:

We plan to take steps to seek to remediate these material weaknesses and to improve our financial reporting systems and implement new policies, procedures, and controls. However, as of the date of this Annual Report, due to cost cutting measures, we only have one employee dedicated to our financial and other public reporting obligations and have been untimely in reporting our financial results. If we continue to be unsuccessful in remediating the material weaknesses described above, or if other material weaknesses or other deficiencies arise in the future, we continue to be unable to accurately report our financial results on a timely basis. In addition, due to our lack of accounting and finance personnel our reported financial results may be materially misstated and require restatement which could result in the loss of investor confidence, delisting and/or cause the market price of our common stock to decline.

The control deficiencies in our internal control over financial reporting may until remedied cause errors in our financial statements or cause our filings with the SEC to not be timely.

There may be errors in our financial statements that could require a restatement, or our filings may not be timely made with the SEC. Based on the work undertaken and performed by us, however, we believe the financial statements contained in our reports filed with the SEC are fairly stated in all material respects in accordance with generally accepted accounting principles (“GAAP”) for each of the periods presented. At present, our internal control over financial reporting or disclosure controls and procedures are not effective. We identified material weaknesses including lack of sufficient internal accounting personnel in order to ensure complete documentation of complex transactions and adequate financial reporting.

We intend to implement additional corporate governance and control measures to strengthen our control environment as we are able, but we may not achieve our desired objectives. We may identify material weaknesses and control deficiencies in our internal control over financial reporting in the future that may require remediation and could lead investors losing confidence in our reported financial information, which could lead to a decline in our stock price.

Our preferred stock securities purchase agreements impose restrictions on us that may prevent us from engaging in beneficial transactions.

We have entered into preferred stock securities purchase agreements that contain covenants that restrict our ability to, among other things:

Actual results could differ from the estimates and assumptions that we use to prepare our consolidated financial statements.

To prepare consolidated financial statements in conformity with GAAP, management is required to make estimates and assumptions as of the date of the consolidated financial statements that affect the reported values of assets and liabilities, revenues and expenses, and disclosures of contingent assets and liabilities. Areas requiring significant estimates by our management include:

At the time the estimates and assumptions are made, we believe they are accurate based on the information available. However, our actual results could differ from, and could require adjustments to, those estimates.

A further decline in our available cash could result in our liquidation.

If we were to sustain a further decline in our or available cash, we could experience future difficulties in complying with our various financial obligations. The failure to comply with such obligations could result in an event of default under the various financial instruments that may then become immediately due and payable. In addition, should an event of default occur, such lenders could elect to terminate their commitments thereunder, cease making loans and institute foreclosure proceedings against our assets.

RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK

As a result of our ceasing of operations, we may be considered a “shell company” in which case shares of our common stock will subject to restrictions on resale.

Due to our ceasing of operations, we may currently have nominal operations with our assets consisting mostly of cash, and/or cash equivalents. Accordingly, we may be deemed a “shell company” as defined in Rule 12b-2 of the 34 Act. If we are deemed a “shell” company, until we are no longer a “shell company,” we would need to file a Form 10 level disclosure, and continue to be a reporting company pursuant to the 34 Act, as amended, and for twelve months, stockholders holding restricted, non-registered shares will not be able to use the exemptions provided under Rule 144 for the resale of their shares of common stock. Preclusion from any prospective investor using the exemptions provided by Rule 144 may be more difficult for us to sell equity securities or equity-related securities in the future to investors that require a shorter period before liquidity or may require us to expend limited funds to register their shares for resale in a future prospectus.

Conversion and/or exercise of our preferred stock and/or warrants, has, and is likely to continue to dilute the ownership interest of our existing stockholders, including holders who had previously converted their notes and preferred stock or exercised their warrants, and has and may continue to depress the price of our common stock, and may impede our ability to raise funds in the future.

In conjunction with capital raising efforts during 2022 and 2021, the Company made commitments to stockholders, preferred stockholders, and warrant holders to issue, or keep available for issuance, additional shares of common stock of the Company. On December 31, 2023 and 2022, the closing trading price of our common stock as quoted on OTC Pink market was $0.0008 and $0.0039, respectively. Anti-dilution protection features contained in our preferred stock securities purchase agreements and warrants only provide for one-way adjustment. If we issue or sell, or are deemed to have issued or sold, additional shares of common stock, options, warrants of convertible instruments, other than certain exempt issuances, 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 (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. As a result, the existing stockholders, including holders who earlier converted their notes or preferred stock, or exercised their warrants, will continue to be subject to substantial dilution.

The past and potential future dilution, and the potential lack of sufficient authorized shares, could make it more difficult for us to raise funds through future offerings of common stock, warrants or convertible securities, and could adversely impact the terms under which we could obtain additional capital. In addition, the existence of our convertible notes may encourage short selling by market participants because the conversion of any convertible notes or preferred shares could be used to satisfy short positions.

Our shares of common stock are currently quoted on the OTC Experts Market and there is a limited trading market for our common stock.

On July 17, 2024, our common stock was downgraded to the OTC Experts Market, after having been quoted on the OTC Pink Tier since August 21, 2022.

There is currently an active trading market for our common stock, but our common stock has traded in recent years only on a limited basis. Although there is an active trading market for our common stock, there are no assurances that trading activity will be sustained.

The public market for our common stock may be volatile. This may affect the ability of our investors to sell their shares as well as the price at which they sell their shares.

The market price for shares of our common stock may be significantly affected by factors such as variations in quarterly and yearly operating results, general trends in the transportation and logistics industry, and changes in state or federal regulations affecting us and our industry. Furthermore, in recent years the stock market has experienced extreme price and volume fluctuations that are unrelated or disproportionate to the operating performance of the affected companies. Such broad market fluctuations may adversely affect the market price of our common stock if a market for it develops.

Our common stock price has fluctuated in recent years, and the trading price of our common stock is likely to continue to reflect changes, which could result in losses to investors and litigation.

In addition to changes to market prices based on our results of operations and the factors discussed elsewhere in this “Risk Factors” section, the market price of and trading volume for our common stock may change for a variety of other reasons, not necessarily related to our actual operating performance. The capital markets have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. In addition, the average daily trading volume of the securities of small companies can be very low, which may contribute to future volatility. Factors that could cause the market price of our common stock to fluctuate significantly include:

Any of these factors, as well as broader market and industry factors, may result in large and sudden changes in the trading volume of our common stock and could seriously harm the market price of our common stock, regardless of our operating performance. This may prevent stockholders from being able to sell their shares at or above the price they paid for shares of our common stock, if at all. In addition, following periods of volatility in the market price of a company’s securities, stockholders often institute securities class action litigation against that company. Our involvement in any class action suit or other legal proceeding, including the existing lawsuits filed against us and described elsewhere in this report, could divert our senior management’s attention, and could adversely affect our business, financial condition, results of operations and prospects.

FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our common stock.

The Financial Industry Regulatory Authority (“FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

We do not intend to pay cash dividends in the foreseeable future.

We have never paid dividends on our common stock and do not presently intend to pay any dividends in the foreseeable future. We anticipate that any funds available for payment of dividends will be re-invested into our company to further its business strategy. Because we do not anticipate paying dividends in the future, the only opportunity for our stockholders to realize value in our common stock will likely be through a sale of those shares.

All of our debt obligations will have priority over our common stock with respect to payment in the event of a bankruptcy, liquidation dissolution or winding up and the convertible notes may be accelerated upon certain events of default.

In any bankruptcy, liquidation, dissolution or winding up of the Company, shares of common stock would rank in right of payment or distribution below all debt claims against us. As a result, holders of common stock will not be entitled to receive any payment or distribution in respect of their shares prior to the discharge of all debt claims against us. As a result, holders of shares of common stock will not be entitled to receive any payment or other distribution of assets in the event of a bankruptcy or upon a liquidation or dissolution until after all of our obligations to our debt holders. Accordingly, holders of common stock may lose their entire investment in the event of a bankruptcy, liquidation, dissolution or winding up of the Company.

Future sales of our securities could adversely affect the market price of our common stock and our future capital-raising activities could involve the issuance of equity securities, which would dilute your investment and could result in a decline in the trading price of our common stock.

We may sell securities in the public or private equity markets if and when conditions are favorable, or at prices per share below the current market price of our common stock, even if we do not have an immediate need for additional capital at that time. Sales of substantial amounts of shares of our common stock, or the perception that such sales could occur, could adversely affect the prevailing market price of our shares and our ability to raise capital. We may issue additional shares of common stock in future financing transactions or as incentive compensation for our executive management and other key personnel, consultants and advisors. Issuing any equity securities would be dilutive to the equity interests represented by our then-outstanding shares of common stock. Moreover, sales of substantial amounts of shares in the public market, or the perception that such sales could occur, may adversely affect the prevailing market price of our common stock and make it more difficult for us to raise additional capital. In addition, we have existing series of preferred stock outstanding that, if converted into shares of our common stock, would cause additional dilution to our existing stockholders. In future offerings, we may also be required to grant potential investors new securities rights, preferences, or privileges senior to those possessed by our then-existing stockholders to induce them to invest in our company. The issuance of these senior securities may adversely affect the holders of our common stock as a result of preferential dividend and liquidation rights over the common stock and dilution of the voting power of the common stock.

Item 1B. Unresolved Staff Comments.

As of the filing of this Annual Report on Form 10-K, there were no unresolved comments from the staff of the SEC.

Item 1C. Cybersecurity.

Given the size of our company and the nature of our operations, we do not believe that we face significant cybersecurity risk.

We have not adopted any cybersecurity risk management program or formal processes for assessing cybersecurity risk. We utilize standard commercial software for business operations, which includes basic security features such as password protection and data encryption. Our management is generally responsible for assessing and managing any cybersecurity threats.

To date, we have not experienced any material cybersecurity incidents, and there has been no known unauthorized access to our systems. Should any reportable cybersecurity incident arise, our management shall promptly report such matters to the Company’s Board of Directors (the “Board”) for further actions, including regarding the appropriate disclosure in accordance with SEC regulations, mitigation, and other response or actions that the Board deems appropriate to take.

Item 2. Properties.

Our principal executive offices are located in the United States at 5500 Military Trail, Suite 22-357, Jupiter, Florida 33458.

Due to the discontinuation of all of our operating businesses, we abandoned all leases related to properties used by Freight Connections, Severance, Cougar Express and JFK Cartage. Accordingly, during the year ended December 31, 2023, we wrote off the remaining balance of these right of use assets and recorded a loss on lease abandonment of $2,127,807. Additionally, in connection with the deconsolidation of Freight Connections, we wrote off the remaining right of use asset balances of $7,774,566, which was part of loss on deconsolidation of subsidiary. These losses are included in loss from discontinued operations.

Item 3. 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 15^th 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.

On February 9, 2021, the Company filed its answer, defenses and counterclaims in this action. Among other things, the Company avers that SCS’s claims are barred by its unclean hands and other inequitable conduct, including breach of its duties (i) to maintain the confidentiality of information provided to SCS and (ii) to work only in furtherance of the Company’s interests, not in furtherance of SCS’s own, and conflicting, interests. The Company also avers, in its counterclaims, that SLS owes the Company damages in excess of the $42,000 sought in the main action because SLS was at least grossly negligent in any due diligence it undertook before recommending that the Company acquire Prime EFS LLC in June 2018. SCS filed a motion to strike TLSS’s defenses and counterclaims, and TLSS opposed that application. Those motions remain sub judice.

A two-day non-jury trial was held in this action in Palm Beach County, Florida, on April 20-21, 2022. However, at the end of the second day a mistrial was declared because SCS had not withdrawn its motion to strike and answered the counterclaims.

On July 20, 2023, SCS moved for summary judgment in this action. On July 27, 2023, the Company filed papers opposing the motion. On August 21, 2023, the court conferenced SCS’s motion for summary judgment and SCS’s motion to strike counterclaims and dismiss the counterclaims. The court indicated it would deny the first motion and grant the second motion. On September 5, 2023, the Company filed Amended Affirmative Defenses and an Amended Counterclaim. On October 2, 2023, SCS filed a motion to Dismiss the Amended Counterclaim but it did not file a motion to strike the Amended Affirmative Defenses. On October 3, 2023, the Company filed a motion to strike SCS’s Motion to Dismiss the Amended Counterclaim on the grounds that SCS’s motion was not filed within ten (10) days as required under Florida law. On July 19, 2024, the court denied SCS’s motion for summary judgment on all claims in its entirety.

The Company believes it has substantial defenses to all claims alleged in SCS’s complaint, as well as valid affirmative defenses and counterclaims. The Company therefore intends to defend this case vigorously.

Because there have been no further filings or proceedings on this case since July 2024, it is not possible to evaluate the likelihood of a favorable or unfavorable outcome, nor is it possible to estimate the amount or range of any potential loss in the matter. The Company is currently in settlement discussions with SCS.

Shareholder Derivative Action

On June 25, 2020, the Company was served with a putative shareholder derivative action filed in the Circuit Court of the 15^th 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, and 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.

The Company believes the action to be frivolous and intend to mount a vigorous defense to this action. On September 15, 2024, the defendants filed a Motion to Strike Plaintiff’s Pleadings and to Preclude Plaintiff from Calling Any Witnesses or Introducing Any Exhibits at Trial to Plaintiff’s failure to (i) comply with the court’s Pretrial Order; and (ii) produce discovery.

Because no discovery has occurred in the case, it is not possible to evaluate the likelihood of a favorable or unfavorable outcome, nor is it possible to estimate the amount or range of any potential loss in the matter. In a derivative case, any recovery is to be paid to the corporation; however, the individual defendants in this case are fully indemnified by the Company unless a final judgment is entered against them for deliberate or intentional misconduct.

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.

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.)

TLSS intends to vigorously defend itself in this action and to pursue the third-party actions, in the name and right of Prime and Shypdirect, against both County Hall and TCE/ Acrisure.

All discovery in this case was completed on or before August 31, 2024.

Currently, there are 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, has 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. At this time, the parties are tentatively scheduled for mediation on December 6, 2024.

Because of this complex litigation involving multiple parties and claims, we cannot evaluate the likelihood of an adverse outcome or estimate the Company’s liability, if any, in connection with this claim.

Maria Lugo v. JFK Cartage

The Company’s JFK Cartage, Inc. subsidiary is one of three defendants in an action captioned Maria Lugo v. JFK Cartage, Inc. d/b/a Fifth Dimension Logistix, Joan Ton, individually, and Chris Bartley, individually. The case is pending in Supreme Court, State of New York, Queens County, Index No. 704862/2022.

In this action, which was filed March 4, 2022, a former employee of JFK Cartage alleges that she suffered discrimination and retaliation in violation of the New York City Human Rights Law and the New York State Human Rights Law. The former employee alleges that on December 28, 2021, she had Covid-19 symptoms, advised the defendants she was feeling ill and went home early to take a home test. She further alleges that on December 30, 2021, she tested positive for Covid-19 and informed defendants she had to isolate for 10 days. Plaintiff alleges that she returned to work on January 7, 2022, but that her employment was terminated later that day by defendant Bartley who “questioned the authenticity of the at-home test, accusing her of fraud.” Plaintiff claims her employment “was terminated due to her disability (a Covid-19 infection) and in retaliation for her requesting reasonable accommodation for the illness she suffered.” She seeks unspecified compensatory damages, including lost pay and benefits, punitive damages and attorneys’ fees.

On December 16, 2022, all defendants filed an answer and affirmative defenses, denying all claims for statutory violations. The conduct alleged in the complaint occurred prior to the Company’s July 31, 2022, acquisition of JFK Cartage, Inc. The Company believes that, in relation to this action, it has a right to full indemnification from the selling stockholder (including for attorneys’ fees) as well as set-off rights against notes payable to the selling stockholder.

On September 4, 2024, a Stipulation of Discontinuance was filed which resulted in the dismissal of this case and closure of the entire action.

Elaine Pryor v. Rocio Perez, et al.

The Company’s Freight Connections, Inc. subsidiary (“FCI”) was one of three named defendants in an action captioned Elaine Pryor v. Rocio Perez, North Trucking & Logistics, LLC and Freight Connections, Inc. in the Superior Court of New Jersey, Essex County, Docket No. ESX-L-5147-18.

In this action, which was filed in 2018, Plaintiff alleges that on February 1, 2017, she suffered personal injuries in a collision between her motor vehicle and a truck operated by a then employee of FCI. Plaintiff alleges that the truck was owned by FCI and leased to North Trucking & Logistics at the time.

Two other actions related to insurance coverage for the accident were filed. They are Acceptance Indemnity Insurance Company v. Freight Connections, LLC (Superior Court of New Jersey, Essex County, Docket No. ESX-L-7144-19) and New Jersey Manufacturers Insurance Company, as subrogee of Elaine Pryor v. Acceptance Indemnity Insurance Company (Superior Court of New Jersey, Essex County, Docket No. ESX-L-5120). However, these two actions involving insurance coverage issues have been consolidated with the Pryor personal injury claim.

In an opinion issued November 16, 2022, the court denied all parties’ motions for summary judgment on the insurance coverage issues.

The conduct alleged in the Pryor complaint occurred prior to the Company’s September 16, 2022, acquisition of FCI. The selling stockholder of FCI has advised the Company that the truck in question was not owned by FCI at the time of the accident and hence that FCI is not a proper party defendant in this action.

On May 8, 2023, the Court in the Elaine Pryor action the entered an order, on the consent of counsel for all parties, directing that the name of defendant FCI be changed to Freight Connections LLC and that this change be reflected in the caption of the case (the “May 8, 2023 Order”). Freight Connections LLC is not a corporate affiliate of FCI but is rather an independent trucking company that is wholly-owned by the individual who sold the stock of FCI to TLSS-FC effective September 16, 2022. (See Note 1 above.)

In light of the May 8, 2023 Order, the Company does not believe that it can be adjudged liable for any verdict or settlement in the Elaine Pryor action.

The case was scheduled for trial on September 16, 2024; however, the case settled before the trial date and a Stipulation of Dismissal was filed by all parties on September 25, 2024.

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 3/8/2022 and last worked 9/27/2022. 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 9/27/22, 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 12/27/22, 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.

Joseph Corbisiero v. Freight Connections, Inc., TLSS and TLSS-FC

On October 19, 2023, Joseph Corbisiero (“Corbisiero”) filed an action in the Superior Court of the State of New Jersey, Bergen County, against the Company’s subsidiary, Freight Connections, Inc. (“FC”), the Company, and the Company’s TLSS-FC, Inc. subsidiary. The case has been assigned # BER-L-005669-23. Corbisiero, who was then the sole stockholder of FC, sold all outstanding shares of FC capital stock to TLSS-FC effective September 16, 2022 (the “FC Closing Date”) and has acted as the CEO of FC since then.

The complaint in this action contained two counts, one for the alleged breach of a $4,544.671.23 secured promissory note executed by FC in Corbisiero’s favor as of the FC Closing Date (the “FC Promissory Note”), and the other for enforcement of a security agreement, also dated as of the FC Closing Date, pursuant to which FC granted Corbiserio a lien and security interest “on all” of FC’s property, assets and rights of every kind (the “FC Security Agreement”). Neither the Company, nor TLSS-FC, is a party to the FC Promissory Note or the FC Security Agreement. In the lawsuit, the Company and TLSS-FC are each denominated a “Nominal Defendant” and the complaint does not seek relief from either entity.

In the complaint, Corbisiero alleged that FC defaulted on the FC Promissory Note by failing to pay monthly interest beginning in or around August 1, 2023. Plaintiff also alleges that, by reason of its default, FC is also liable for default interest of 18% per annum plus late charges of 5% each delinquent payment, plus costs of collection. The complaint further alleged that by reason of FC’s default, FC became liable for the full repayment of principal prior to the December 31, 2023, maturity date set forth in the note.

The complaint also contained a single paragraph in which it is alleged that “TLSS and TLSS-FC are necessary and indispensable parties to the instant action by virtue of each entity’s express covenant and agreement to indemnify, defend, protect and hold harmless Plaintiff from and against all losses incurred by Plaintiff in connection with, among other things, any breach or nonfulfillment of any covenant or agreement on the part of TLSS-FC and TLSS under [the stock purchase and sale agreement pursuant to which, as amended, TLSS-FC (the “FC SPSA”) acquired the then-outstanding capital stock of FC].”

On May 13, 2024, a Notice of Voluntary Dismissal Without Prejudice was filed by Corbisiero and this case was dismissed due to the petitions for relief filed by Freight Connections and TLSS-FC under chapter 7 of title 11 of the United States Bankruptcy Code. Plaintiff expressly reserved all claims, causes of action, and defenses against the Company, both individually and collectively, in connection with this dispute.

Other than discussed above, as of the date of this Annual 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 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock was quoted on the OTC Pink Tier under the symbol “TLSS” from August 21, 2022, until July 17, 2024 when our common stock was moved to the OTC Experts Market. Trading in OTC Expert Market stocks can be volatile, sporadic, and risky, as thinly traded stocks tend to move more rapidly in price than more liquid securities. Such trading may also depress the market price of our common stock and make it difficult for our stockholders to resell their common stock. The following table reflects the high and low bid price for our common stock for the period indicated. The bid information for our common stock can be obtained from the OTC Markets Group, Inc. and reflects inter-dealer prices, without retail mark-up, markdown, or commission, and may not necessarily represent actual transactions.

Holders

As of November 29, 2024, there were 100 record holders of our common stock.

Dividends

We have not previously declared or paid any dividends on our common stock and do not anticipate declaring any dividends in the foreseeable future. The payment of dividends on our common stock is within the discretion of our board of directors. We intend to retain any earnings for use in our operations and the expansion of our business. Payment of dividends in the future will depend on our future earnings, future capital needs and our operating and financial condition, among other factors that our board of directors may deem relevant. We are not under any contractual restriction as to our present or future ability to pay dividends.

Securities Authorized for Issuance Under Equity Compensation Plans

The Company does not currently have any equity compensation plans.

Recent Sales of Unregistered Securities

None

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

Item 6. Selected Financial Data.

Not applicable.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

TLSS is a publicly-traded holding company whose common stock was listed on OTC: PINK but was downgraded to the OTC Experts Market as of July 17, 2024.

The Company has 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 December 1, 2023, TLSS-FC, Inc. and Freight Connections filed voluntary bankruptcy petitions under Chapter 7 of the United States Bankruptcy Code in the State of New Jersey 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. 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 and through the date of this Annual Report, the Company continues to remain insolvent and as a result, has been unable to meet its annual and quarterly periodic reporting obligations under the 34 Act. The Company has obtained financing to enable us to complete the audit of the financial statements included in this Annual Report and to commence reviews for the 2024 Quarterly Reports. Following the filing of this Annual Report, we are going to continue working to complete the necessary financial statements and file the 2024 Quarterly Reports as soon as possible hereafter; however, the Company will require additional financing to fund the necessary costs related to the preparation and filing of one or more of the 2024 Quarterly Reports. In addition, we are also evaluating a possible 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 consolidated financial statements contained in this Annual Report, which have been prepared in accordance with GAAP. You should read the discussion and analysis together with such 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.

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 year ended December 31, 2023 compared with the year ended December 31, 2022

The following table sets forth our revenues, expenses and net loss for the years ended December 31, 2023 and 2022.

Results of Operations

Revenue

For the years ended December 31, 2023 and 2022, total revenue is reflected as $0 as all activities of the Subsidiaries were reclassified as discontinued operations on our consolidated financial statements.

Operating Expenses

For the year ended December 31, 2023, total operating expenses amounted to $2,458,141 as compared to $4,214,373 for the year ended December 31, 2022, a decrease of $1,756,232, or 41.7%, as reflected in the accompanying chart and described more fully below.

For the years ended December 31, 2023 and 2022, operating expenses consisted of the following:

Compensation and related benefits

For the year ended December 31, 2023, compensation and related benefits amounted to $1,270,883 as compared to $2,532,634 for the year ended December 31, 2022, a decrease of $1,261,751, or 49.8%. During the year ended December 31, 2023, the overall decrease in compensation and related benefits as compared to the year ended December 31, 2022 was primarily attributable to a decrease in compensation paid to significant employees, including the departure of our chief financial officer in October 2023, a decrease in administrative staff due to lack of working capital and a decrease in stock-based compensation of $958,424.

Legal and professional fees

For the year ended December 31, 2023, legal and professional fees were $983,868 as compared to $1,216,551 for the year ended December 31, 2022, a decrease of $232,683, or 19.1%, which was primarily attributable to a decrease in accounting and auditing fees of $198,813 and a net decrease in other professional fees of $33,870.

General and administrative expenses

General and administrative expenses include insurance expense and other general and administrative expenses. For the year ended December 31, 2023, general and administrative expenses were $353,390 as compared to $265,188 for the year ended December 31, 2022, an increase of $88,202, or 33.3%. The increase was primarily attributable to an increase in insurance expense related to directors’ and officers’ insurance and a net increase in other general and administrative expenses. We expect future decreases in general and administrative expenses due to cost-cutting measures taken and the cessation of operations.

Contingency (gain) loss

For the year ended December 31, 2022, contingency loss amounted to $200,000 as compared to a contingency gain of ($150,000) for the year ended December 31, 2023, a change of $350,000, or 175.0%. In connection with the finalization of the assignment for the benefit of creditors executed between Prime EFS and Shypdirect, in 2022, Terri Jane Freedman, as assignee, had demanded a one-time payment of $200,000 to close out the estates of Prime EFS and Shypdirect. During 2023, we negotiated this amount and settled on a payment of $50,000. Accordingly, during the year ended December 31, 2023 we recorded a contingency gain of $150,000 and during the year ended December 31, 2022, we recorded a contingency loss of $200,000. As of December 31, 2023 and 2022, accrued expenses related to this settlement amounted to $50,000 and $200,000, respectively, which is included in accrued expenses on the accompanying consolidated balance sheets.

Loss from operations

For the year ended December 31, 2023, loss from operations amounted to $2,458,141 as compared to $4,214,373 for the year ended December 31, 2022, a decrease of $1,756,232, or 41.7 %, primarily due to: (i) decreases in compensation and other benefits of $1,261,751 and legal expenses of $232,683 due to the cessation of business operations; offset by (ii) a $350,000 increase in contingency gain attributable to reduced settlement amount as discussed above. Such decreases were partially offset by an increase in general and administrative expenses of $88,202.

Other (expenses) income, net

Total other income (expenses) includes interest income, interest expense, derivative expense, warrant exercise inducement expense, gain on debt extinguishment, settlement expense, gain on deconsolidation of subsidiaries, and other income. For the years ended December 31, 2023 and 2022, other (expenses) income consisted of the following:

For the year ended December 31, 2023 and 2022, interest income was $992 and $31,166, respectively, a decrease of $30,176, or 96.8% due to lower cash balances in 2023 as compared to 2022.

For the year ended December 31, 2023 and 2022, aggregate interest expense was $79,035 and $4,351, respectively, an increase of $74,684. The increase in interest expense was primarily attributable to an increase in related party notes payable.

During the year ended December 31, 2023 and 2022, we recorded a gain from the sale of assets of our subsidiary, Shyp FX, of $9,983 to reflect miscellaneous post-closing adjustments and $293,975 to record the gain referenced herein, as of the closing date of the transaction, respectively.

During the year ended December 31, 2022, we recorded settlement expense of $237,961 as compared to $0 for the year ended December 31, 2023 related to a one-time settlement expense paid to Bellridge Capital, L.P.

Loss from discontinued operations

In November 2023, we ceased operations of our Freight Connections subsidiary and on December 1, 2023, Freight Connections and TLSS-FC filed a Chapter 7 bankruptcy petition in the State of New Jersey under the United States Bankruptcy Code. Additionally, 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 years ended December 31, 2023 and 2022 related to discontinued operations.

During the year ended December 31, 2023, operating expenses of discontinued operations included an impairment loss of $4,107,226 from the write down of property and equipment, right of use assets, intangible assets and goodwill. During the year ended December 31, 2022, operating expenses of discontinued operations included an impairment loss of $2,090,567 from the write down of intangible assets and goodwill.

Net loss

Due to factors discussed above, for the year ended December 31, 2023 and 2022, net loss amounted to $14,264,646 and $8,076,066, respectively. For the year ended December 31, 2023, net loss attributable to common stockholders, which included dividends accrued on Series E and Series G preferred stock of $558,553, amounted to $14,823,199, or $(0.00) per basic and diluted common share. For the year ended December 31, 2022, net loss attributable to common stockholders, which included dividends accrued on Series E and Series G preferred stock of $417,546, amounted to $8,493,612, or $(0.00) per basic and diluted common share.

LIQUIDITY AND CAPITAL RESOURCES

On December 31, 2023, and December 31, 2022 we had a cash balance of $218,152 and $1,470,807, respectively. Our working capital deficit was $7,997,436 and $4,403,460 on December 31, 2023 and December 31, 2022, respectively. We reported a net decrease in cash for the year ended December 31, 2023 of $1,252,655 primarily as a result of the use of cash used to purchase property and equipment of $519,644, cash used in operations of $2,812,443, net cash used for acquisitions of $506,115, and the repayment of notes payable of $445,656, offset by net cash proceeds received from the exercise of warrants of $619,111, proceeds from notes payable of $997,092, proceeds from related party notes payable of $1,160,000, and proceeds from the collection of a note receivable of $255,000. As of December 2, 2024, the Company had $257,628 in cash, primarily attributable to the issuance of two (2) unsecured promissory notes in each of August 2024 and October 2024 and one (1) unsecured promissory note in November 2024 in the aggregate principal amounts of $150,000, $100,000, and $50,000 respectively, as discussed below.

Although we had historically raised capital from sales of shares of common stock, the sale of Series E and Series G preferred stock, 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 consolidated financial statements, we had a net loss of $14,264,646 and $8,076,066 for the years ended December 31, 2023 and 2022, respectively. The net cash used in operations was $2,812,443 and $3,422,359 for the years ended December 31, 2023 and 2022, respectively. Additionally, we had an accumulated deficit and working capital deficit of $142,333,298 and $7,997,436, respectively, on December 31, 2023. 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 Annual Report.

On August 12, 2024, the Company issued two (2) promissory notes (the “August 2024 Notes”) in the aggregate principal amount of $150,000, with two lenders, who are holders of shares of the Company’s Series E and Series G preferred stock (the “2024 Lenders”). The August 2024 Notes have an interest rate of 10% per annum that mature six (6) months from the date of issuance. The primary purpose of the use of proceeds from the August 2024 Notes were to fund initial costs related to: (i) the commencement of the Company’s 2023 audit and quarterly reviews for 2024; (ii) regaining compliance with required SEC filings; (iii) maintaining the Company’s OTC listing; and (iv) keeping the Company in good standing with requisite taxing authorities. Such financing anticipates the Company would secure additional financing to complete such audit and file its past due SEC filings, although there is no guarantee that any such additional financing will be secured.

If the Company defaults on the August 2024 Notes, the 2024 Lenders have the right to demand repayment of the August 2024 Notes in full upon five (5) business days’ notice to the Company. In the event that full payment is not made upon the expiry of a thirty (30) day period, a default penalty equal to 5.0% per month during the period of default in addition to the 10% interest rate will apply to the entire amount of the August Notes outstanding, including any accrued but unpaid interest.

On October 9, 2024, the Company issued two unsecured non-convertible promissory notes (the “October 2024 Notes”) in the aggregate principal amount of $100,000, with an interest rate of 10% per annum that mature six months from the date of issuance, to the 2024 Lenders. If the Company defaults on the October 2024 Notes, the 2024 Lenders have the right to demand repayment of the October 2024 Notes in full upon five business days’ notice to the Company. In the event that full payment is not made upon the expiry of a thirty-day period, a default penalty equal to 5.0% per month during the period of default in addition to the 10% interest rate will apply to the entire amount of the October 2024 Notes outstanding, including any accrued but unpaid interest. The primary use of the proceeds from the October 2024 Notes were for use in (i) the Company’s 2023 audit and quarterly reviews for 2024; (ii) regaining compliance with required SEC filings; (iii) maintaining the Company’s OTC listing; (iv) keeping the Company in good standing with requisite taxing authorities; and (v) fees for routine litigation matters in the ordinary course of business.

Similar to the August 2024 Notes, if the Company defaults on the October 2024 Notes, the 2024 Lenders have the right to demand repayment of the October 2024 Notes in full upon five (5) business days’ notice to the Company. In the event that full payment is not made upon the expiry of a thirty (30) day period, a default penalty equal to 5.0% per month during the period of default in addition to the 10% interest rate will apply to the entire amount of the October Notes outstanding, including any accrued but unpaid interest.

On November 22, 2024, Company issued an unsecured non-convertible promissory note (the “November 2024 Note”) in the aggregate principal amount of $50,000, with an interest rate of 10% per annum that matures six (6) months from the date of issuance, to the 2024 Lenders. If the Company defaults on the November 2024 Note, the 2024 Lenders have the right to demand repayment of the November 2024 Note in full upon five (5) business days’ notice to the Company. In the event that full payment is not made upon the expiry of a thirty (30) day period, a default penalty equal to 5.0% per month during the period of default in addition to the 10% interest rate will apply to the entire amount of the November 2024 Note outstanding, including any accrued but unpaid interest.

Concurrently with the issuance of the November 2024 Note, the Company also entered into a letter agreement of even date (the “November 2024 Letter Agreement”) with the 2024 Lenders setting forth, among other items, the intended use of proceeds of the November 2024 Notes which include: (i) the completion of the Company’s 2023 audit and reviews for the subsequent 2024 quarters; (ii) preparation and submission of any requisite filings with the SEC and OTC Expert Market; (iii) maintaining good standing with requisite taxing authorities; and (iv) fees for routine litigation matters in the ordinary course of business.

Management cannot provide assurance that we will ultimately get current in our SEC filings, successfully restructure its 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 financings to fund our 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 year ended December 31, 2023 amounted to $2,812,443. During the year ended December 31, 2023, net cash used in operating activities was primarily attributable to a net loss of $14,264,646, adjusted for the add back (reduction) of non-cash items such as depreciation and amortization expense of $1,487,813, non-cash impairment loss from discontinued operations of $4,107,226, non-cash loss from the deconsolidation of subsidiaries of $391,558, loss on disposal of property and equipment of $88,995 and bad debt expense of $397,346 and changes in operating assets and liabilities such as a decrease in accounts receivable of $991,985, a decrease in prepaid expenses and other current assets of $32,244, decrease in security deposit of $89,171, an increase in accounts payable and accrued expenses of $3,077,389, an increase in accrued expenses – related parties of $68,875, and an decrease in accrued compensation and related benefits of $77,631.

Net cash flows used in operating activities for the year ended December 31, 2022 amounted to $3,422,359. During the year ended December 31, 2022, net cash used in operating activities was primarily attributable to net loss of $8,076,066, adjusted for the add back (reduction) of non-cash items such as depreciation and amortization expense of $1,134,037, stock-based compensation of $1,386,570, stock-based professional fees of $10,000, impairment loss of $2,090,567, related to the impairment of intangible assets, bad debt expense of $162,400, and a non-cash gain from the sale of the assets of Shyp FX of $296,689, and changes in operating assets and liabilities such as a decrease in accounts receivable of $450,715, a decrease in prepaid expenses and other current assets of $110,606, a decrease in security deposit of $20,185, a decrease in accounts payable and accrued expenses of $218,364, a decrease in insurance payable of $130,590, and a decrease in accrued compensation and related benefits of $102,983.

Investing activities

Net cash used in investing activities for the year ended December 31, 2023 amounted to $770,759 and consisted of net cash used for acquisitions of $713,586, and cash used for the purchase on transportation equipment of $519,644 offset by cash proceeds from a note receivable of $255,000 and the cash received from acquisitions of $207,471.

Net cash used in investing activities for the year ended December 31, 2022 amounted to $1,384,633, which consisted of cash used for acquisitions of $1,930,712, cash used for the purchase of property and equipment of $143,948, and cash used for investment on note receivable of $255,000, offset by net proceeds received from the sale of the assets of Shyp FX of $748,500 and cash acquired in acquisitions of $196,527.

Financing activities

For the year ended December 31, 2023, net cash provided by financing activities totaled $2,330,547. During the year ended December 31, 2023, we received cash proceeds of $1,160,000 from notes payable from related parties, $997,092 from notes payable and $619,111 from the exercise of warrants, offset by the repayment of notes payable of $445,656.

For the year ended December 31, 2022, net cash provided by financing activities totaled $210,107. During the year ended December 31, 2022, we received proceeds from the sale of shares of Series G preferred stock of $855,000, cash proceeds of $245,714 from the exercise of warrants, and cash from notes payable of $108,395, offset by the repayment of notes payable of $975,002 and the payment of liquidating damages of $24,000.

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 consolidated financial statements filed with this Annual Report.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk.

Not Applicable

Item 8. Financial Statements and Supplementary Data.

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2023 AND 2022

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of:

Transportation and Logistics Systems, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Transportation and Logistics Systems, Inc. and Subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, changes in shareholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023 and 2022, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company had a net loss and cash used in operations of $14,264,646 and $2,812,443, respectively for the year ended December 31, 2023. Additionally, the Company had an accumulated deficit and working capital deficit of $142,333,298 and $7,997,436, respectively, on December 31, 2023. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ Salberg & Company, P.A.

SALBERG & COMPANY, P.A.

We have served as the Company’s auditor since 2017.

Boca Raton, Florida

December 5, 2024

2295 NW Corporate Blvd., Suite 240 ● Boca Raton, FL 33431-7328

Phone: (561) 995-8270 ● Toll Free: (866) CPA-8500 ● Fax: (561) 995-1920

www.salbergco.com ● info@salbergco.com

Member National Association of Certified Valuation Analysts ● Registered with the PCAOB

Member CPAConnect with Affiliated Offices Worldwide ● Member AICPA Center for Audit Quality

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See accompanying notes to consolidated financial statements.

TRANSPORTATION AND LOGISTICS SYSTEMS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes to consolidated financial statements.

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022