NOTE 10 – DISCONTINUED OPERATIONS

On December 1, 2023, the Company ceased operations of its Freight Connections subsidiary and, in connection with the Freight Bankruptcy, all of the TLSS-FC and Freight Connections assets were assigned to the Freight Trustee for the liquidation and unwinding of the business. The Freight Trustee has been charged with liquidating the assets for the benefit of the TLSS-FC and Freight Connection’s creditors pursuant to the relevant provisions of the United States Bankruptcy Code. As a result of the Freight Bankruptcy, the Freight Trustee assumed all authority to manage TLSS-FC and Freight Connections. For these reasons, effective December 1, 2023, the Company relinquished control of TLSS-FC and Freight Connections. Therefore, the Company deconsolidated TLSS-FC and Freight Connections effective with the Freight Bankruptcy on December 3, 2023, and the Company recognized a loss on deconsolidation of $391,558. Additionally, on February 27, 2024, the Cougar Bankruptcy occurred. The Company and its other subsidiaries ceased all remaining logistic and transportation service operations in mid-February 2024. As a result, accordingly, the Company has classified the related assets and liabilities associated with its logistics and transportation services business as discontinued operations in its consolidated balance sheets and the results of its logistics and transportation services business has been presented as discontinued operations in its consolidated statements of operations for all periods presented as the discontinuation of its business had a major effect on its operations and financial results. Unless otherwise noted, discussion in the other notes to consolidated financial statements refers to the Company’s continuing operations.

The following table presents the major classes of assets and liabilities of the discontinued operations related to the Subsidiaries:

SCHEDULE OF ASSETS AND LIABILITIES OPERATIONS OF THE DISCONTINUED OPERATIONS 

The following table summarizes the results of operations of discontinued operations:

Accounts receivable

On December 31, 2024 and 2023, accounts receivable, net included in assets from discontinued operations consisted of the following:

SCHEDULE OF ACCOUNTS RECEIVABLE NET FROM DISCONTINUED OPERATIONS 

Property and equipment, net

As of December 31, 2024 and 2023, property and equipment included in assets from discontinued operations consisted of the following:

SCHEDULE OF PROPERTY AND EQUIPMENT INCLUDING ASSETS FROM DISCONTINUED OPERATIONS 

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2024 AND 2023

For the years ended December 31, 2024 and 2023, depreciation expenses amounted to $39,018 and $497,929, respectively, and are included in loss from discontinued operations.

Due to the Freight Bankruptcy and the assignment of all of the TLSS-FC and Freight Connections assets to the Freight Trustee for liquidation and unwinding of the business, during the year ended December 31, 2023, the Company recognized a loss on deconsolidation of the Freight Connections property and equipment, net of $1,006,357, which is included in loss from discontinued operations on the accompanying statements of operations. Due to the Cougar Express Bankruptcy and the assignment of all of the Cougar Express assets to the Cougar Express Trustee for liquidation and unwinding of the business, during the year ended December 31, 2024, the Company recognized a loss on deconsolidation of the Cougar Express property and equipment, net of $296,493, which is included in loss from discontinued operations on the accompanying consolidated statements of operations.

During the years ended December 31, 2024 and 2023, the Company wrote down property and equipment to net realizable value and recorded an impairment loss of $555,628 and $988,270, respectively, which is included in loss from discontinued operations on the accompanying statements of operations.

Intangible Assets and Goodwill

As a result of the acquisition of the Severance entities, during the year ended December 31, 2023, there was a $430,152 increase in the gross intangible assets made up of $430,152 of finite lived intangible assets (See Note 3). The increase in gross finite lived intangible assets was associated with customer relationships that have finite lives.

On December 1, 2023, due to the Freight Bankruptcy and the assignment of all of the TLSS-FC and Freight Connections assets to the Freight Trustee for liquidation and unwinding of the business, the Company recognized a loss on deconsolidation of the Freight Connections intangible assets and goodwill, net of $5,294,751, which is included in loss from discontinued operations on the accompanying statements of operations.

During the years ended December 31, 2024 and 2023, the Company recorded an impairment loss from the write off intangible assets and goodwill of $0 and $853,072, respectively, which is included in loss from discontinued operations on the accompanying statements of operations.

For the years ended December 31, 2024 and 2023, amortization of intangible assets amounted to $0 and $989,884, respectively, which is included in loss from discontinued operations on the accompanying statements of operations.

As of December 31, 2024 and 2023, intangible assets subject to amortization and goodwill amounted to $0.

Notes Payable

On December 31, 2024 and 2023, notes payable included in liabilities of discontinued operations consisted of the following:

SCHEDULE OF NOTES PAYABLE INCLUDED IN LIABILITIES 

JFK Cartage acquisition promissory note

On July 31, 2022, in connection with the acquisition of JFK Cartage, JFK Cartage issued a promissory note in the amount of $696,935. Principal amount of $98,448 was paid prior to December 31, 2022. The remaining balance of $598,487 was payable in three annual installments of $199,496, with interest at 5% per annum, payable on July 31, 2023, July 31, 2024 and July 31, 2025, respectively. On August 28, 2023 and effective on July 31, 2023, the Company and the JFK Cartage Seller entered into a First Amendment to Secured Promissory Note (the “Amended Note”) to extend the first annual installment due on July 31, 2023 which was treated as a note modification. Pursuant to the Amended Note, the Company paid or should have paid:

On December 31, 2024 and 2023, the principal amount related to the Amended Note was $598,487, which is included in liabilities of discontinued operations on the accompanying consolidated balance sheets.

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2024 AND 2023

Severance Trucking acquisition promissory note

On January 31, 2023, in connection with the acquisition of the Severance entities, Severance Trucking issued a promissory note in the amount of $1,572,939 to the Severance Sellers (“Secured Severance Note”). The Secured Severance Note is a secured promissory note which accrues interest at the rate of 12% per annum. The entire unpaid principal under the Secured Severance Note was originally due and payable in three equal payments on August 1, 2023, February 1, 2024, and August 1, 2024, respectively, together with all accrued and unpaid interest thereunder, unless paid sooner. The Secured Severance Note was secured solely by the assets of Severance Trucking and a corporate guaranty from TLSS. During the fourth quarter ended December 31, 2023, the Company repaid $181,660 of this note. On December 31, 2024 and 2023, the principal amount related to this note was $1,395,768 and $1,391,279, respectively, which is included in liabilities of discontinued operations on the accompanying consolidated balance sheets. Subsequent to December 31, 2023, Severance Trucking ceased its operations and all fixed assets of the Company were voluntarily surrendered to the Severance Sellers.

On January 26, 2024, the Company received a: (i) Notice of Default and Demand Under Promissory Note and Security Agreement (“Payment Default Notice”) in connection with the Company’s failure to timely pay in accordance with that certain loan agreement (the “Severance Trucking Note”) entered into by and among the Severance Sellers, collectively as lender (“Severance Trucking Lenders”) and TLSS-STI, Severance Trucking, Severance Warehouse and McGrath, collectively as promissors (each a “Severance Trucking Debtor”, and collectively, the “Severance Trucking Debtors”) and (ii) Notice of Default and Demand Under Guaranty (“Guaranty Default Notice” and together with the Payment Default Notice, the “Default Notices”), in connection with an Absolute, Unconditional and Continuing Guaranty, dated February 1, 2023 between TLSS, as guarantor (the “Guarantor”), and the Severance Trucking Lenders, which guaranty secured the Severance Trucking Note. The Severance Trucking Note became immediately due and payable upon the Severance Trucking Debtors’ failure to make a payment in the amount of Fifty-Three Thousand Dollars ($53,000) on January 1, 2024 due under the Severance Trucking Note (the “Severance Trucking January Payment”).

The Severance Trucking Lenders demanded that the Severance Trucking Debtors and the Guarantor make the immediate full payment of (i) the entire principal balance due under the Severance Trucking Note, together with all interest accrued thereon, and (ii) a late charge of five percent (5%) of the Severance Trucking January Payment. The Severance Trucking Lenders also noted that if the full payment due under the Severance Trucking Note was not made to the Severance Trucking Lenders, then the Severance Trucking Lenders could immediately thereafter pursue all their rights and remedies under the Severance Trucking Note, including, without limitation, liquidation of all of the collateral of the Severance Trucking Debtors. If the Severance Trucking Lenders took such action, then, the Severance Trucking Debtors would be responsible for all costs and expenses in connection with the collection and enforcement (“Expenses”) of the payment due under the Default Notices, and that such Expenses shall accrue interest at a rate of 18% per annum. On February 26, 2024, the Company voluntarily surrendered the unencumbered owned fixed assets of Severance Trucking operations to the Severance Trucking Lenders.

Freight Connection acquisition promissory note

On September 16, 2022, in connection with the acquisition of Freight Connections, Freight Connections issued a promissory note in the amount of $4,544,671 to the Freight Connections Seller, who is considered a related party (See Note 3). The secured promissory accrued interest at the rate of 5% per annum and then 10% per annum as of March 1, 2023. The entire unpaid principal under the note, together with all accrued and unpaid interest thereon and all other amounts payable thereunder, shall be due and payable in one balloon payment on December 31, 2023, unless paid sooner. The promissory note was secured solely by the assets of Freight Connections. In connection with the Freight Bankruptcy and the assignment of all of the TLSS-FC and Freight Connections assets to the Freight Trustee for liquidation and unwinding of the business, the Company recognized a gain on deconsolidation of the Freight Connections acquisition note of $4,544,671, which is included in loss from discontinued operations on the accompanying statements of operations. On December 31, 2024 and 2023, the principal amount related to this note was $0 due to the deconsolidation of this note (see Note 8).

Equipment and auto notes payable

In connection with the acquisition of JFK Cartage, on July 31, 2022, the Company assumed several equipment notes payable due to entities amounting to $15,096. On December 31, 2024 and 2023, equipment notes payable to these entities amounted to $0 and $712, respectively, which is included in liabilities of discontinued operations on the accompanying consolidated balance sheets.

On July 7, 2022, Cougar Express entered into a promissory note for the purchase of a truck in the amount of $46,416. The note is due in sixty monthly installments of $1,019 which began in August 2022. The note was secured by the truck. On December 31, 2024 and 2023, the equipment note payable to this entity amounted to $0 (due to deconsolidation) and $34,847, respectively, which is included in liabilities of discontinued operations on the accompanying consolidated balance sheets.

On September 22, 2022, JFK Cartage entered into a promissory note for the purchase of a truck in the amount of $61,979. The note is due in forty-eight monthly installments of $1,645 which began in August 2022. The note was secured by the truck. On December 31, 2024 and 2023, the equipment note payable to this entity amounted to $41,624 and $42,783, respectively, which is included in liabilities of discontinued operations on the accompanying consolidated balance sheets. As of December 31, 2024, the trucks securing this loan were forfeited and returned to the lender.

On January 17, 2023, Cougar Express entered into a promissory note for the purchase of two trucks in the amount of $196,700. The note is due in sixty monthly installments of $4,059 which began in August 2022. The note was secured by the trucks. On December 31, 2024 and 2023, the equipment note payable to this entity amounted to $0 (due to deconsolidation) and $166,748, which is included in liabilities of discontinued operations on the accompanying consolidated balance sheets.

In connection with the acquisition of the Severance entities, on January 31, 2023, the Company assumed an equipment note payable due to an entity amounting to $23,000. On December 31, 2024 and 2023, equipment note payable to this entity amounted to $16,511, which is included in liabilities of discontinued operations on the accompanying consolidated balance sheets. As of December 31, 2024, the trucks securing this loan were forfeited and returned to the lender.

On April 1, 2023, Severance Trucking entered into a promissory note for the purchase of a yard truck in the amount of $50,634. The note is due in 48 monthly installments of $1,254 which began in April 2023. The note was secured by the truck. On December 31, 2024 and 2023, the equipment note payable to this entity amounted to $40,537 and $42,433, respectively, which is included in liabilities of discontinued operations on the accompanying consolidated balance sheets. As of December 31, 2024, the trucks securing this loan were forfeited and returned to the lender.

On April 14, 2023, Severance Trucking entered into a promissory note for the purchase of a truck in the amount of $53,275. The note is due in 48 monthly installments of $1,379 which began in April 2023. The note was secured by the truck. On December 31, 2024 and 2023, the equipment note payable to this entity amounted to $45,079 and $46,038, respectively, which is included in liabilities of discontinued operations on the accompanying consolidated balance sheets. As of December 31, 2024, the trucks securing this loan were forfeited and returned to the lender.

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2024 AND 2023

On July 13, 2023, Severance Trucking entered into a promissory note for the purchase of three trucks in the amount of $278,085. The note is due in 60 monthly installments of $5,762 which began in August 2023. The note is secured by the trucks. On December 31, 2024 and 2023, the equipment note payable to this entity amounted to $253,277 and $259,335, respectively, which is included in liabilities of discontinued operations on the accompanying consolidated balance sheets. As of December 31, 2024, the trucks securing this loan were forfeited and returned to the lender.

On September 8, 2023, Severance Trucking entered into a promissory note for the purchase of two trucks in the amount of $83,398. The note is due in 48 monthly installments of $2,107 which began in October 2023. The note is secured by the trucks. On December 31, 2024 and 2023, the equipment note payable to this entity amounted to $76,149 and $79,084, respectively, which is included in liabilities of discontinued operations on the accompanying consolidated balance sheets. As of December 31, 2024, the trucks securing this loan were forfeited and returned to the lender.

In December 2023, Cougar Express entered into two Merchant Loan (the “Merchant Loans”) with lenders in the aggregate principal amount of $335,000 and received net proceeds of $307,050, net of fees of $27,950, which was reflected as a debt discount to be amortized into interest expense over the term of the note. The Merchant Loans requires a weekly and daily payment of principal and interest of $11,250 and $2,774, respectively, through May 2024. On December 31, 2024 and 2023, the aggregate principal amount due on the Merchant Loans is $0 (due to deconsolidation) and $332,609, respectively, which is included in liabilities of discontinued operations on the accompanying consolidated balance sheets.

Operating and Financing Lease Right-Of-Use (“Rou”) Assets and Operating and Financing Lease Liabilities

As a result of the acquisition of JFK Cartage and Freight Connections, the Company assumed several non-cancelable operating leases for the lease of office, warehouse spaces, and parking spaces. Additionally, as a result of the acquisition of Severance Trucking, the Company assumed several non-cancelable financing leases for revenue equipment.

Effective January 1, 2023, Freight Connections entered into a lease agreement for warehouse space in Ridgefield, NJ. The lease was for a period of 60 months, commencing on January 1, 2023 and expiring on December 31, 2027. Pursuant to the lease agreement, the lease required Freight Connections to pay a monthly base rent of; (i) $41,071 in the first year; (ii) $42,303 in the second year; (iii) $43,572 in the third year; (iv) $44,880 in the fourth year; and (v) $46,226 in the fifth year, plus a pro rata share of operating expenses beginning January 2023. In connection with this lease, on January 1, 2023, the Company increased right of use assets and lease liabilities by $2,180,356.

Effective February 1, 2023, Severance Trucking entered into a lease agreement for warehouse space in North Haven, CT. The lease is for a period of 24 months, commencing on February 1, 2023 and expiring on January 31, 2025. Pursuant to this lease agreement, the lease required Severance Trucking to pay a monthly base rent of $8,500. Additionally, effective February 1, 2023, Severance Trucking entered into a lease agreement for warehouse space in Dracut, MA. The lease is for a period of 60 months, commencing on February 1, 2023 and expiring on January 31, 2028. Pursuant to this lease agreement, the lease requires Severance Trucking to pay a monthly base rent of $32,000. In connection with these leases, on February 1, 2023, the Company increased right of use assets and lease liabilities by $2,180,356. In February 2024, Severance Trucking received a Notice of Default and Demand for Rent for its failure to pay rent due on December 1, 2023, and January 1, 2024 under the terms of a lease entered into on February 1, 2023 between Severance Trucking and the Severance Family Realty Trust. On February 26, 2024, Severance voluntarily vacated such premises.

On December 1, 2023, in connection with the Freight Bankruptcy and the assignment of all of the TLSS-FC and Freight Connections assets to the Freight Trustee for liquidation and unwinding of the business, Freight Connection abandoned all of its leased premises and during the year ended December 31, 2023, the Company recognized a loss on deconsolidation of the Freight Connections right of use assets of $7,774,566, which was included in loss from discontinued operations on the Company’s consolidated statements of operations and offset by a gain from the deconsolidation of lease liabilities. Additionally, certain landlords of Freight Connections initiated litigation against the Company for non-payment of lease amounts due which is part of the Freight Bankruptcy.

Additionally, in February 2024, the Company abandoned all remaining leased premises and as of December 31, 2023, the Company wrote off its remaining right of use assets and related security deposits and recorded an impairment loss of $2,127,807, which is included in loss from discontinued operations on the Company’s consolidated statements of operations for the year ended December 31, 2023.

The significant assumption used to determine the present value of the lease liabilities was discount rates ranging from 8% to 9%, which was based on the Company’s estimated average incremental borrowing rate.

On December 31, 2024 and 2023, right-of-use asset (“ROU”) included in assets of discontinued operations is summarized as follows:

SCHEDULE OF RIGHT TO USE ASSET 

On December 31, 2024 and 2023, operating and financing lease liabilities related to the ROU assets are included in liabilities of discontinued operations and are summarized as follows:

 SCHEDULE OF OPERATING LEASE LIABILITY TO ROU ASSET

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2024 AND 2023

Other liabilities of discontinued operations

On April 1, 2024, a judgment was entered against Severance Trucking on behalf of Emerson in the amount of $96,226, including prejudgment interest, statutory costs, and legal fees. Emerson, which was a customer of Severance Trucking, claimed that an employee of Severance Trucking stole $75,209 of Emerson’s products while under Severance Trucking’s control. Such amount is recorded as a liability of Severance Trucking and included in liabilities of discontinued operations.

On April 30, 2024, Severance Trucking received a letter from Ryder Truck Rental, Inc. requesting payment in the amount of $581,507 comprised of outstanding unpaid Truck Lease and Service Agreement charges of $55,136 in open invoices, $399,177 in early termination charges and $134,194 in attorney’s fees. As of December 31, 2024 and 2023, such amounts are recorded as a liability of Severance Trucking and included in liabilities of discontinued operations.

On August 24, 2024, TLSS Ops received a Notice of Default and Demand for Payment from RxBenefits, Inc. (“RxBenefits”) due to the Company’s failure to pay certain invoices, plus interest and late service charges due under the Administrative Services Agreement by and between RxBenefits and TLSS Operations Holding, in the amount of $111,618. Such amount is recorded as accounts payable of TLSS Ops, which is included in liabilities of discontinued operations.