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 had been quoted on the OTC PINK since August 21, 2022, but was removed from the OTC PINK and listed on the OTC Expert Market on July 17, 2024. As of March 30, 2026, our shares of common stock are trading on the OTCID basic markets.
The Company ceased all remaining operations as of mid-February 2024. Prior to that, the Company and its Subsidiaries provided a full suite of asset-based logistics and transportation services, specializing in ecommerce fulfillment, last mile deliveries, two-person home delivery, mid-mile, and long-haul services. An asset-based delivery company, as compared to a non-asset-based delivery company, owns the majority of its transportation equipment, and employs the majority of its drivers. The Company and its Subsidiaries operated several warehouse locations located in New York, New Jersey, Connecticut, and Massachusetts.
On February 27, 2024, Cougar Express, filed a Chapter 7 bankruptcy petition in the State of New York under the United States Bankruptcy Code. The Company’s other subsidiaries have all ceased operations since mid-February 2024 and have not filed bankruptcy.
Subsequent to the cessation of all of the Company’s revenue generating operations in February 2024 and through the date of this Annual Report, the Company continues to remain insolvent. The Company obtained financing to enable it to complete the preparation and review of the annual and interim financial statements through September 30, 2025 and file this Annual Report; however, the Company will require additional financing to fund the necessary costs related to the preparation and filing of one or more of the additional periodic reports due with respect to the 2026 calendar year.
Between May 2025 and November 12, 2025, we entered into exchange agreements (the “Series J Exchange Agreements”) with certain then current and former holders (the “Exchange Holders”) of our Series E Convertible Preferred Stock (the “Series E Preferred”), Series G Convertible Preferred Stock (the “Series G Preferred”) and warrants to purchase shares of our Common Stock (the “Exchanged Warrants”). Pursuant to the Series J Exchange Agreements, (i) the Exchange Holders exchanged an aggregate of 21,418 shares of Series E Preferred and accrued dividends of $192,776, and exchanged an aggregate of 406,500 shares of Series G Preferred and accrued dividends of $925,047, and (ii) we cancelled warrants to purchase up to an aggregate of 864,357,146 shares of Common Stock all in exchange for the issuance of an aggregate of 54,975 shares of the Company’s Series J Senior Convertible Preferred Stock, par value $0.001 per share (the “Series J Preferred”).
Also, between May 2025 and September 30, 2025, we entered into settlement agreements (the “Series J Settlement Agreements”) with holders of our outstanding liabilities (the “2025 Creditors”), pursuant to which, the 2025 Creditors agreed to settle an aggregate of $3,688,149 in outstanding liabilities and accrued interest in exchange for an aggregate of 36,882 shares of Series J Preferred.
On October 15, 2025, we entered into settlement agreements (the “ Board Settlement Agreements ”) with certain directors of the Company pursuant to which the directors settled an aggregate of $374,491 in outstanding liabilities, in exchange for the issuance of an aggregate of 3,785 shares of Series J Preferred. $337,042, which was netted against additional paid-in capital and accordingly, no gain or loss was recognized on these settlements.
On December 15, 2025, we entered into a settlement agreement (the “CEO Settlement Agreement ”) with Sebastian Giordano, with respect to certain outstanding liabilities (the “ Outstanding Liabilities ”). Pursuant to the CEO Settlement Agreement, Mr. Giordano agreed to settle an aggregate of $1,400,712 in Outstanding Liabilities in exchange for the issuance of an aggregate of 10,007 shares of the Company’s Series J Preferred Stock.
In addition, we are also negotiating possible further restructuring of our remaining existing debts and obligations, as well as assessing the possibility of replacing our discontinued businesses and/or entering into new line(s) of business, whether by acquisition or otherwise. However, there can be no assurance that we will, in fact, be able to replace our former business and/or enter into new line(s) of business, or to do so profitably. The following discussion highlights the results of our operations and the principal factors that have affected the Company’s consolidated financial condition as well as its liquidity and capital resources for the periods described and provides information that management believes is relevant for an assessment and understanding of the consolidated financial condition and results of operations presented herein. The following discussion and analysis are based on the unaudited consolidated financial statements contained in this Annual Report, which have been prepared in accordance with GAAP. You should read the discussion and analysis together with such unaudited consolidated financial statements and the related notes thereto.
Critical Accounting Policies and Estimates
The methods, estimates, and judgments that we use in applying our accounting policies have a significant impact on the results that we report in our consolidated financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. Significant estimates included in the accompanying consolidated financial statements and footnotes include the valuation of accounts receivable, the useful life of property and equipment, the valuation of intangible assets, the valuation of assets acquired and liabilities assumed in a business combination, the valuation of right of use assets and related liabilities, assumptions used in assessing impairment of long-lived assets, estimates of current and deferred income taxes and deferred tax valuation allowances, the fair value of non-cash equity transactions, the valuation of assets and liabilities of discontinued operations, and the value of claims against the Company. Of the above significant estimates, we do not consider any to be critical given the discontinued operations presentation.
Management believes the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the consolidated financial statements.
Discontinued Operations
The Company has classified the related assets and liabilities associated with our logistics and transportation services business as discontinued operations in our consolidated balance sheets and the results of our logistics and transportation services business has been presented as discontinued operations in our consolidated statements of operations for all periods presented as the discontinuation of our business had a major effect on our operations and financial results.
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, 2025 compared with the year ended December 31, 2024
The following table sets forth our revenues, expenses and net loss for the years ended December 31, 2025 and 2024.
For the Year Ended
December 31,
Revenues
Operating expenses
Loss from operations
Other income (expenses), net
Income (loss) from continuing operations
Loss from discontinued operations
Net income (loss)
Deemed contribution on exchange of equity instruments
Deemed and accrued dividends
Net loss attributable to common stockholders
Results of Operations
Revenue
For the years ended December 31, 2025 and 2024, total revenue is reflected as $0. During the year ended December 31, 2025, we generated no revenues. During the year ended December 31, 2024, total revenues were 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, 2025, total operating expenses amounted to $1,407,876 compared to $1,873,250 for the year ended December 31, 2024, a decrease of $465,374, or 24.8%, as reflected in the accompanying chart and described more fully below.
For the years ended December 31, 2025 and 2024, operating expenses consisted of the following:
For the Year Ended
December 31,
Compensation and related benefits
Legal and professional fees
General and administrative expenses
Total Operating Expenses
Compensation and related benefits
For the year ended December 31, 2025, compensation and related benefits amounted to $673,026 as compared to $1,153,076 for the year ended December 31, 2024, a decrease of $480,050, or 41.6%. During the year ended December 31, 2025, the overall decrease in compensation and related benefits as compared to the year ended December 31, 2024 was primarily attributable to a decrease in compensation paid to significant employees, a decrease in administrative staff due to the discontinuation of our trucking businesses in February 2024 aggregating $8,101, and a decrease in stock-based compensation of $71,949. Additionally, during the year ended December 31, 2024, we recorded a $400,000 severance expense as compared to $0 during the year ended December 31, 2025.
Legal and professional fees
For the year ended December 31, 2025, legal and professional fees were $714,873 as compared to $590,695 for the year ended December 31, 2024, an increase of $124,178, or 21.0%, which was primarily attributable to an increase in legal fees of $95,270, an increase in stock-based professional fees of $7,750, an increase in accounting and auditing fees of $13,221 and a net increase in other professional fees of $7,937.
General and administrative expenses
General and administrative expenses include insurance expense and other general and administrative expenses. For the year ended December 31, 2025, general and administrative expenses were $19,977 as compared to $129,479 for the year ended December 31, 2024, a decrease of $109,502, or 84.6%. The decrease was primarily attributable to a decrease in insurance expense related to directors’ and officers’ insurance and a net decrease in other general and administrative expenses.
Loss from operations
For the year ended December 31, 2025, loss from operations amounted to $1,407,876 as compared to $1,873,250 for the year ended December 31, 2024, a decrease of $465,374, or 24.8%, primarily due to: (i) decreases in compensation and other benefits of $480,050; and (ii) a decrease in general and administrative expenses of $109,502, offset by an increase in legal and professional fees of expenses of $124,178, as discussed above.
Other (expenses) income, net
Total other income (expenses) includes interest expense and gain on debt extinguishment. For the years ended December 31, 2025 and 2024, other income (expenses) consisted of the following:
For the Year Ended
December 31,
Interest expense
Interest expense – related parties
Gain on debt extinguishment, net
Total Other Income (Expenses), net
For the year ended December 31, 2025 and 2024, aggregate interest expense was $139,412 and $232,711, respectively, a decrease of $93,299, or 40.1%. The decrease in interest expense was primarily attributable to an overall decrease in related party and third-party notes payable, as all notes payable and related accrued interest was converted to Series J Preferred Stock.
During the year ended December 31, 2025, we recognized a gain on debt extinguishment of $1,988,931. We did not recognize any gain on debt extinguishment during the year ended December 31, 2024.
Loss from discontinued operations
In February 2024, we ceased operations of all logistic and transportation services subsidiaries, and on February 27, 2024, Cougar Express filed a Chapter 7 bankruptcy petition in the State of New York under the United States Bankruptcy Code. Accordingly, the financial position and results of operations of all our Subsidiaries are reflected as discontinued operations for all periods presented.
The following table sets forth our revenues, expenses and net loss for the years ended December 31, 2025 and 2024 related to discontinued operations.
For the Year Ended
December 31,
Revenues
Cost of revenues
Gross profit (loss)
Operating expenses
Other expenses, net
Loss from discontinued operations
During the year ended December 31, 2024, operating expenses of discontinued operations included an impairment loss of $555,628 from the write down of property and equipment.
Net income (loss)
Due to factors discussed above, for the year ended December 31, 2025 and 2024, net income (loss) amounted to $33,833 and $(3,824,470), respectively. For the year ended December 31, 2025, net income attributable to common stockholders, which included dividends accrued on shares of the Company’s Series E Convertible Preferred Stock (the “Series E Preferred”), shares of the Company’s Series G Convertible Preferred Stock (the “Series G Preferred), and shares of the Company’s Series J Convertible Preferred Stock (the “Series J Preferred) of $730,906, and the recording of a deemed contribution on exchange of equity instruments of $800,380, amounted to $103,307, or $0.00 per basic and diluted common share. For the year ended December 31, 2024, net loss attributable to common stockholders, which included dividends accrued on shares of the Company’s Series E Convertible Preferred Stock (the “Series E Preferred”) and shares of the Company’s Series G Convertible Preferred Stock (the “Series G Preferred) of $310,268, amounted to $4,134,738, or $(0.00) per basic and diluted common share.
LIQUIDITY AND CAPITAL RESOURCES
On December 31, 2025, and 2024 we had a cash balance of $15,835 and $177,257, respectively. Our working capital deficit was $7,934,095 and $11,892,017 on December 31, 2025 and 2024, respectively. We reported a net decrease in cash for the year ended December 31, 2025 of $161,422 primarily as a result of cash used in operations of $486,422, which was offset by net cash proceeds received from notes payable of $325,000.
As of March 27, 2026, the Company had $11,246 in cash, consisting of: (i) $10,925 remaining from the issuance of unsecured promissory notes and (ii) $321 related to Severance Trucking.
Although we had historically raised capital from sales of shares of common stock, the sale of the Series E Preferred and the Series G Preferred, and from the issuance of convertible promissory notes and notes payable, the Company, in mid-February 2024, was unable to raise additional capital or secure additional lending to meet its debt and liability obligations and, as a result, the Company had to cease its remaining operations.
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 net income (loss) of $33,833 and $(3,824,470) for the years ended December 31, 2025 and 2024, respectively. The net cash used in operations was $486,422 and $386,699 for the years ended December 31, 2025 and 2024, respectively. Additionally, we had an accumulated deficit and working capital deficit of $147,165,109 and $7,934,095 on December 31, 2025, respectively. These factors, in addition to the cessation of all operations, raise substantial doubt about our ability to continue as a going concern for a period of twelve months from the date of this Annual Report.
Management cannot provide assurance that we will remain current in our SEC filings, successfully restructure our debts and liabilities, find a new business opportunity, achieve profitable operations, become cash flow positive or raise additional debt and/or equity capital. We are seeking to raise capital through additional debt and/or equity financing to fund the Company in the future and to pay our debt obligations. Although we have historically raised capital from sales of preferred shares, and from the issuance of promissory notes and convertible promissory notes, there is no assurance that it will be able to continue to do so. If the Company is unable to raise additional capital or secure additional lending in the near future, management expects that the Company would need to file bankruptcy. Our consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going .
Cash Flows
Operating activities
Net cash flows used in operating activities for the year ended December 31, 2025, amounted to $486,422. During the year ended December 31, 2025, net cash used in operating activities was primarily attributable to net income of $33,833, adjusted for non-cash gains on debt extinguishment of $1,988,931 and stock-based compensation and professional fees of $47,750, and changes in operating assets and liabilities as a result of increases in accounts payable and accrued expenses of $831,158, accrued expenses – related parties of $106,562, and an increase in accrued compensation and related benefits of $483,027.
Net cash flows used in operating activities for the year ended December 31, 2024 amounted to $386,699. During the year ended December 31, 2024, net cash used in operating activities was primarily attributable to a net loss of $3,824,470, adjusted for the add back (reduction) of non-cash items such as depreciation and amortization expense of $39,018, non-cash impairment loss from discontinued operations of $555,628, and non-cash stock based compensation of $111,949, which were offset by credit loss recovery of $3,937 and non-cash gain from the deconsolidation of subsidiaries of $158,347 and changes in operating assets and liabilities as a result of decreases in accounts payable and accrued expenses of $963,079, accrued compensation and related benefits of $831,099, accounts receivable of $636,647, prepaid expenses and other current assets of $235,222, accrued expenses – related parties of $221,258, and security deposit of $6,155.
Investing activities
Net cash used in investing activities for the year ended December 31, 2025 and 2024 amounted to $0.
Financing activities
For the year ended December 31, 2025, net cash provided by financing activities totaled $325,000. During the year ended December 31, 2025, we received cash proceeds of $325,000 from notes payable from unrelated third parties.
For the year ended December 31, 2024, net cash provided by financing activities totaled $345,804. During the year ended December 31, 2024, we received cash proceeds of $391,838 from notes payable from related parties and $300,000 from notes payable from unrelated third parties, which were offset by the repayment of notes payable of $346,034.
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.
