NOTE 8 – DISCONTINUED OPERATIONS

On December 1, 2023, the Company ceased operations of its Freight Connections subsidiary and, in connection with the Freight Bankruptcy, all of the TLSS-FC and Freight Connections assets were assigned to the Freight Trustee for the liquidation and unwinding of the business. The Freight Trustee has been charged with liquidating the assets for the benefit of the TLSS-FC and Freight Connection’s creditors pursuant to the relevant provisions of the United States Bankruptcy Code. As a result of the Freight Bankruptcy, the Freight Trustee assumed all authority to manage TLSS-FC and Freight Connections. For these reasons, effective December 1, 2023, the Company relinquished control of TLSS-FC and Freight Connections. Therefore, the Company deconsolidated TLSS-FC and Freight Connections effective with the Freight Bankruptcy on December 3, 2023, and the Company recognized a loss on deconsolidation of $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, 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.

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

(Unaudited)

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

 SCHEDULE OF ASSETS AND LIABILITIES OPERATIONS OF DISCONTINUED OPERATIONS

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

Accounts receivable

On March 31, 2025 and December 31, 2024, accounts receivable, net included in assets from discontinued operations consisted of the following:

 SCHEDULE OF ACCOUNTS RECEIVABLE NET FROM DISCONTINUED OPERATIONS

Property and equipment, net

For the three months ended March 31, 2025, and 2024, depreciation expenses amounted to $0 and $39,018, respectively, and are included in loss from discontinued 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 three months ended March 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 unaudited consolidated statements of operations.

During the three months ended March 31, 2025, and 2024, the Company wrote down property and equipment to net realizable value and recorded an impairment loss of $0 and $555,628, respectively, which is included in loss from discontinued operations on the accompanying unaudited consolidated statements of operations.

Notes Payable

On March 31, 2025, and December 31, 2024, notes payable included in liabilities of discontinued operations consisted of the following:

 SCHEDULE OF NOTES PAYABLE INCLUDED IN LIABILITIES

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

(Unaudited)

JFK Cartage acquisition promissory note

On July 31, 2022, in connection with the acquisition of JFK Cartage, JFK Cartage issued a promissory note in the amount of $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 March 31, 2025, and December 31, 2024, 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. This note is in default.

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 March 31, 2025, and December 31, 2024, the principal amount related to this note was $1,395,768 and $1,395,768, 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.

Equipment and auto notes payable

On September 22, 2022, JFK Cartage entered into a promissory note for the purchase of a truck in the amount of $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 March 31, 2025, and December 31, 2024, the equipment note payable to this entity amounted to $41,624 and $41,624, respectively, which is included in liabilities of discontinued operations on the accompanying consolidated balance sheets. As of March 31, 2025, the trucks securing this loan were forfeited and returned to the lender.

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 March 31, 2025, and December 31, 2024, 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 March 31, 2025, 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 March 31, 2025, and December 31, 2024, the equipment note payable to this entity amounted to $40,537 and $40,537, respectively, which is included in liabilities of discontinued operations on the accompanying consolidated balance sheets. As of March 31, 2025, the trucks securing this loan were forfeited and returned to the lender.

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

(Unaudited)

On April 14, 2023, Severance Trucking entered into a promissory note for the purchase of a truck in the amount of $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 March 31, 2025, and December 31, 2024, the equipment note payable to this entity amounted to $45,079 and $45,079, respectively, which is included in liabilities of discontinued operations on the accompanying consolidated balance sheets. As of March 31, 2025, the trucks securing this loan were forfeited and returned to the lender.

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 March 31, 2025, and December 31, 2024, the equipment note payable to this entity amounted to $253,277 and $253,277, respectively, which is included in liabilities of discontinued operations on the accompanying consolidated balance sheets. As of March 31, 2025, 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 March 31, 2025, and December 31, 2024, the equipment note payable to this entity amounted to $76,149 and $76,149, respectively, which is included in liabilities of discontinued operations on the accompanying consolidated balance sheets. As of March 31, 2025, the trucks securing this loan were forfeited and returned to the lender.

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

In February 2024, the Company abandoned all remaining leased premises and as of December 31, 2023, the Company wrote off its remaining right of use assets and related security deposits.

On March 31, 2025, and December 31, 2024, operating and financing lease liabilities related to the ROU assets are included in liabilities of discontinued operations and are summarized as follows:

 SCHEDULE OF OPERATING LEASE LIABILITY TO ROU ASSET

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 March 31, 2025, and December 31, 2024, 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.