Attached files
| file | filename |
|---|---|
| EX-32.1 - Transportation & Logistics Systems, Inc. | ex32-1.htm |
| EX-31.2 - Transportation & Logistics Systems, Inc. | ex31-2.htm |
| EX-31.1 - Transportation & Logistics Systems, Inc. | ex31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2020
| [ ] | 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
Transportation and Logistics Systems, Inc.
(Exact name of registrant as specified in its charter)
| Nevada | 26-3106763 | |
| (State or Other Jurisdiction | IRS Employer | |
| of Organization) | Identification Number |
| 5500 Military Trail, Suite 22-357 | ||
| Jupiter, Florida | 33458 | |
| (Address of principal executive offices) | (Zip code) |
(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:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer [ ] | Accelerated filer [ ] | Non accelerated filer [X] | Smaller reporting company [X] |
| Emerging growth company [ ] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
| Class | Outstanding as of November 13, 2020 | |
| Common Stock, $0.001 | 1,564,388,350 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC.
FORM 10-Q
September 30, 2020
INDEX
| 2 |
TRANSPORTATION AND LOGISTICS SYSTEMS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2020 | 2019 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 318,356 | $ | 50,026 | ||||
| Accounts receivable, net | 335,393 | 963,771 | ||||||
| Prepaid expenses and other current assets | 1,462,736 | 1,246,555 | ||||||
| Total Current Assets | 2,116,485 | 2,260,352 | ||||||
| OTHER ASSETS: | ||||||||
| Security deposit | 206,250 | 76,500 | ||||||
| Property and equipment, net | 658,815 | 240,406 | ||||||
| Right of use assets, net | 1,534,411 | 1,750,430 | ||||||
| Total Other Assets | 2,399,476 | 2,067,336 | ||||||
| TOTAL ASSETS | $ | 4,515,961 | $ | 4,327,688 | ||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Convertible notes payable, net of put premium of $0 and $385,385 and debt discounts of $346,953 and $2,210,950, respectively | $ | 1,338,961 | $ | 3,634,344 | ||||
| Notes payable, current portion, net of debt discount of $0 and $762,112, respectively | 4,079,592 | 2,425,003 | ||||||
| Note payable - related party | 500,000 | 500,000 | ||||||
| Accounts payable | 899,076 | 1,517,082 | ||||||
| Accrued expenses | 524,921 | 627,990 | ||||||
| Insurance payable | 2,697,300 | 2,948,261 | ||||||
| Contingency liability | 440,000 | 440,000 | ||||||
| Lease liabilities, current portion | 366,511 | 333,126 | ||||||
| Derivative liability | 2,886,811 | 2,135,939 | ||||||
| Due to related parties | 245,007 | 325,445 | ||||||
| Accrued compensation and related benefits | 1,113,079 | 886,664 | ||||||
| Total Current Liabilities | 15,091,258 | 15,773,854 | ||||||
| LONG-TERM LIABILITIES: | ||||||||
| Notes payable, net of current portion | 493,307 | - | ||||||
| Lease liabilities, net of current portion | 1,203,765 | 1,440,258 | ||||||
| Total Long-term Liabilities | 1,697,072 | 1,440,258 | ||||||
| Total Liabilities | 16,788,330 | 17,214,112 | ||||||
| Commitments and Contingencies (See Note 9) | ||||||||
| SHAREHOLDERS’ DEFICIT: | ||||||||
| Preferred stock, par value $0.001; authorized 10,000,000 shares: | ||||||||
| Series B convertible preferred stock, par value $0.001 per share; 1,700,000 shares designated; 700,000 and 1,700,000 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively (Liquidation value $700 and $1,700, respectively) | 700 | 1,700 | ||||||
| Series C preferred stock, par value $0.001 per share; 1 share designated; No shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively | - | - | ||||||
| Series D preferred stock, par value $0.001 per share; 1,250,000 shares designated; 124,376 and 0 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively ($6.00 per share liquidation value) | 124 | - | ||||||
| Common stock, par value $0.001 per share; 4,000,000,000 shares authorized; 1,472,924,335 and 11,832,603 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively | 1,472,924 | 11,833 | ||||||
| Common stock issuable, par value $0.001 per share; 0 and 25,000 shares | - | 25 | ||||||
| Additional paid-in capital | 101,072,128 | 47,715,878 | ||||||
| Accumulated deficit | (114,818,245 | ) | (60,615,860 | ) | ||||
| Total Shareholders’ Deficit | (12,272,369 | ) | (12,886,424 | ) | ||||
| Total Liabilities and Shareholders’ Deficit | $ | 4,515,961 | $ | 4,327,688 | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 3 |
TRANSPORTATION AND LOGISTICS SYSTEMS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| REVENUES | $ | 6,309,509 | $ | 7,759,451 | $ | 23,503,384 | $ | 21,664,070 | ||||||||
| COST OF REVENUES | 5,978,265 | 6,293,699 | 20,831,870 | 19,366,374 | ||||||||||||
| GROSS PROFIT | 331,244 | 1,465,752 | 2,671,514 | 2,297,696 | ||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Compensation and related benefits | 551,306 | 3,433,741 | 1,955,854 | 11,150,955 | ||||||||||||
| Legal and professional fees | 621,105 | 517,277 | 3,523,811 | 1,588,359 | ||||||||||||
| Rent | 156,738 | 83,911 | 496,349 | 269,148 | ||||||||||||
| General and administrative expenses | 173,680 | 720,481 | 615,331 | 2,316,016 | ||||||||||||
| Impairment loss | - | - | - | 1,724,591 | ||||||||||||
| Total Operating Expenses | 1,502,829 | 4,755,410 | 6,591,345 | 17,049,069 | ||||||||||||
| LOSS FROM OPERATIONS | (1,171,585 | ) | (3,289,658 | ) | (3,919,831 | ) | (14,751,373 | ) | ||||||||
| OTHER (EXPENSES) INCOME: | ||||||||||||||||
| Interest expense | (2,028,958 | ) | (2,339,508 | ) | (7,016,597 | ) | (4,936,951 | ) | ||||||||
| Interest expense - related parties | (22,686 | ) | (35,753 | ) | (152,262 | ) | (183,392 | ) | ||||||||
| Loan fees | - | - | - | (601,121 | ) | |||||||||||
| Gain (loss) on debt extinguishment, net | 907,447 | (4,714,751 | ) | 7,151,041 | 39,203,017 | |||||||||||
| Other income | 91,950 | - | 266,918 | - | ||||||||||||
| Derivative income (expense), net | 37,826,129 | (981,244 | ) | (31,835,642 | ) | (56,018,849 | ) | |||||||||
| Total Other (Expenses) Income | 36,773,882 | (8,071,256 | ) | (31,586,542 | ) | (22,537,296 | ) | |||||||||
| INCOME (LOSS) FROM CONTINUING OPERATIONS | 35,602,297 | (11,360,914 | ) | (35,506,373 | ) | (37,288,669 | ) | |||||||||
| LOSS FROM DISCONTINUED OPERATIONS: | ||||||||||||||||
| Loss from discontinued operations | - | - | - | (681,426 | ) | |||||||||||
| NET INCOME (LOSS) | 35,602,297 | (11,360,914 | ) | (35,506,373 | ) | (37,970,095 | ) | |||||||||
| Deemed dividend related to ratchet adjustment | - | (981,548 | ) | (18,696,012 | ) | (981,548 | ) | |||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | 35,602,297 | $ | (12,342,462 | ) | $ | (54,202,385 | ) | $ | (38,951,643 | ) | |||||
| NET INCOME (LOSS) PER COMMON SHARE - BASIC | ||||||||||||||||
| Net income (loss) from continuing operations | $ | 0.03 | $ | (1.10 | ) | $ | (0.11 | ) | $ | (4.34 | ) | |||||
| Loss from discontinued operations | 0.00 | (0.00 | ) | (0.00 | ) | (0.08 | ) | |||||||||
| Net income (loss) per common share - basic | $ | 0.03 | $ | (1.10 | ) | $ | (0.11 | ) | $ | (4.42 | ) | |||||
| NET INCOME (LOSS) PER COMMON SHARE - DILUTED | ||||||||||||||||
| Net income (loss) from continuing operations | $ | 0.00 | $ | (1.10 | ) | $ | (0.11 | ) | $ | (4.34 | ) | |||||
| Loss from discontinued operations | 0.00 | (0.00 | ) | (0.00 | ) | (0.08 | ) | |||||||||
| Net income (loss) per common share - diluted | $ | 0.00 | $ | (1.10 | ) | $ | (0.11 | ) | $ | (4.42 | ) | |||||
| WEIGHTED AVERAGE COMMON SHARE OUTSTANDING: | ||||||||||||||||
| Basic | 1,136,231,561 | 11,247,054 | 472,432,161 | 8,811,489 | ||||||||||||
| Diluted | 2,506,145,678 | 11,247,054 | 472,432,161 | 8,811,489 | ||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 4 |
TRANSPORTATION AND LOGISTICS SYSTEMS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(Unaudited)
| Preferred
Stock Series A | Preferred
Stock Series B | Preferred
Stock Series D | Common Stock | Common Stock Issuable | Additional Paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2019 | - | $ | - | 1,700,000 | $ | 1,700 | - | $ | - | 11,832,603 | $ | 11,833 | 25,000 | $ | 25 | $ | 47,715,878 | $ | (60,615,860 | ) | $ | (12,886,424 | ) | |||||||||||||||||||||||||||||
| Reduction of put premium upon conversion | - | - | - | - | - | - | - | - | - | - | 73,725 | - | 73,725 | |||||||||||||||||||||||||||||||||||||||
| Common stock issued for debt conversion | - | - | - | - | - | - | 5,290,406 | 5,290 | - | - | 336,229 | - | 341,519 | |||||||||||||||||||||||||||||||||||||||
| Beneficial conversion effect related to debt conversions | - | - | - | - | - | - | - | - | - | - | 172,720 | - | 172,720 | |||||||||||||||||||||||||||||||||||||||
| Relative fair value of warrants issued in connection with convertible debt | - | - | - | - | - | - | - | - | - | - | 262,872 | - | 262,872 | |||||||||||||||||||||||||||||||||||||||
| Accretion of stock-based compensation | - | - | - | - | - | - | - | - | - | - | 31,250 | - | 31,250 | |||||||||||||||||||||||||||||||||||||||
| Reclassification of warrants from equity to derivative liabilities | - | - | - | - | - | - | - | - | - | - | (11,381,885 | ) | - | (11,381,885 | ) | |||||||||||||||||||||||||||||||||||||
| Deemed dividend related to price protection | - | - | - | - | - | - | - | - | - | - | 18,696,012 | (18,696,012 | ) | - | ||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | (3,453,338 | ) | (3,453,338 | ) | |||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2020 | - | - | 1,700,000 | 1,700 | - | - | 17,123,009 | 17,123 | 25,000 | 25 | 55,906,801 | (82,765,210 | ) | (26,839,561 | ) | |||||||||||||||||||||||||||||||||||||
| Cancellation of issuable shares | - | - | - | - | - | - | - | - | (25,000 | ) | (25 | ) | 25 | - | - | |||||||||||||||||||||||||||||||||||||
| Reduction of put premium upon conversion | - | - | - | - | - | - | - | - | - | - | 311,660 | - | 311,660 | |||||||||||||||||||||||||||||||||||||||
| Common stock issued for debt conversion, accrued interest and fees | - | - | - | - | - | - | 412,573,593 | 412,573 | - | - | 2,317,667 | - | 2,730,240 | |||||||||||||||||||||||||||||||||||||||
| Beneficial conversion effect related to debt conversions | - | - | - | - | - | - | - | - | - | - | 15,531,703 | - | 15,531,703 | |||||||||||||||||||||||||||||||||||||||
| Common shares issued for cashless warrant exercise | - | - | - | - | - | - | 70,203,889 | 70,204 | - | - | (70,204 | ) | - | - | ||||||||||||||||||||||||||||||||||||||
| Warrants issued for services | - | - | - | - | - | - | - | - | - | - | 1,963,291 | - | 1,963,291 | |||||||||||||||||||||||||||||||||||||||
| Accretion of stock-based compensation | - | - | - | - | - | - | - | - | - | - | 5,208 | - | 5,208 | |||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | (67,655,332 | ) | (67,655,332 | ) | |||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2020 | - | - | 1,700,000 | 1,700 | - | - | 499,900,491 | 499,900 | - | - | 75,966,151 | (150,420,542 | ) | (73,952,791 | ) | |||||||||||||||||||||||||||||||||||||
| Common stock issued for series B preferred stock | - | - | (1,000,000 | ) | (1,000 | ) | - | - | 1,000,000 | 1,000 | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Common stock issued for debt conversion, accrued interest and fees | - | - | - | - | - | - | 477,682,407 | 477,682 | - | - | 4,334,087 | - | 4,811,769 | |||||||||||||||||||||||||||||||||||||||
| Beneficial conversion effect related to debt conversions | - | - | - | - | - | - | - | - | - | - | 19,700,260 | - | 19,700,260 | |||||||||||||||||||||||||||||||||||||||
| Common shares issued for cashless warrant exercise | - | - | - | - | - | - | 85,710,419 | 85,711 | - | - | 151,954 | - | 237,665 | |||||||||||||||||||||||||||||||||||||||
| Conversion of debt and accrued interest to series D preferred stock | - | - | - | - | 522,726 | 522 | - | - | - | - | 825,167 | - | 825,689 | |||||||||||||||||||||||||||||||||||||||
| Conversion of series D preferred stock to common stock | - | - | - | - | (398,350 | ) | (398 | ) | 398,350,000 | 398,350 | - | - | (397,952 | ) | - | - | ||||||||||||||||||||||||||||||||||||
| Common stock issued for settlement | - | - | - | - | - | - | 10,281,018 | 10,281 | - | - | 492,461 | - | 502,742 | |||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | 35,602,297 | 35,602,297 | |||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2020 | - | $ | - | 700,000 | $ | 700 | 124,376 | $ | 124 | 1,472,924,335 | $ | 1,472,924 | - | $ | - | $ | 101,072,128 | $ | (114,818,245 | ) | $ | (12,272,369 | ) | |||||||||||||||||||||||||||||
| 5 |
| Preferred
Stock Series A | Preferred
Stock Series B | Preferred
Stock Series D | Common Stock | Common Stock Issuable | Additional Paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2018 | 4,000,000 | $ | 4,000 | - | $ | - | - | $ | - | 4,220,837 | $ | 4,220 | - | $ | - | $ | 7,477,422 | $ | (15,222,936 | ) | $ | (7,737,294 | ) | |||||||||||||||||||||||||||||
| Warrants issued in connection with debt | - | - | - | - | - | - | - | - | - | - | 63,581 | - | 63,581 | |||||||||||||||||||||||||||||||||||||||
| Cumulative effect adjustment for change in derivative accounting | - | - | - | - | - | - | - | - | - | - | - | 453,086 | 453,086 | |||||||||||||||||||||||||||||||||||||||
| Shares issued for services | - | - | - | - | - | - | 2,670,688 | 2,671 | - | - | 2,748,137 | - | 2,750,808 | |||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | (19,647,723 | ) | (19,647,723 | ) | |||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2019 | 4,000,000 | 4,000 | - | - | - | - | 6,891,525 | 6,891 | - | - | 10,289,140 | (34,417,573 | ) | (24,117,542 | ) | |||||||||||||||||||||||||||||||||||||
| Shares issued for debt and warrant modifications | - | - | - | - | - | - | 700,000 | 700 | 700,000 | 700 | 17,932,600 | - | 17,934,000 | |||||||||||||||||||||||||||||||||||||||
| Shares issued for conversion of preferred shares | (4,000,000 | ) | (4,000 | ) | - | - | - | - | 2,600,000 | 2,600 | - | - | 1,400 | - | - | |||||||||||||||||||||||||||||||||||||
| Return and cancellation of shares for disposal of Save On | - | - | - | - | - | - | (1,000,000 | ) | (1,000 | ) | 57,987 | - | 56,987 | |||||||||||||||||||||||||||||||||||||||
| Stock options granted to employees of discontinued operations | - | - | - | - | - | - | - | - | - | - | 700,816 | - | 700,816 | |||||||||||||||||||||||||||||||||||||||
| Warrants issued in connection with debt | - | - | - | - | - | - | - | - | - | - | 672,864 | - | 672,864 | |||||||||||||||||||||||||||||||||||||||
| Shares issued for services | - | - | - | - | - | - | 230,000 | 230 | - | - | 2,465,270 | - | 2,465,500 | |||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | (6,961,458 | ) | (6,961,458 | ) | |||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2019 | - | - | - | - | - | - | 9,421,525 | 9,421 | 700,000 | 700 | 32,120,077 | (41,379,031 | ) | (9,248,833 | ) | |||||||||||||||||||||||||||||||||||||
| Shares issued for services | - | - | 1,000,000 | 1,000 | - | - | - | - | 50,000 | 50 | 2,527,596 | - | 2,528,646 | |||||||||||||||||||||||||||||||||||||||
| Common stock issued for cash and warrants | - | - | - | - | - | - | 585,000 | 585 | - | - | 1,461,915 | - | 1,462,500 | |||||||||||||||||||||||||||||||||||||||
| Common stock issued for debt conversion | - | - | - | - | - | - | 1,438,711 | 1,439 | - | - | 3,595,339 | - | 3,596,778 | |||||||||||||||||||||||||||||||||||||||
| Common of common shares issuable to Series B preferred | - | - | 700,000 | 700 | - | - | - | - | (700,000 | ) | (700 | ) | - | - | - | |||||||||||||||||||||||||||||||||||||
| Warrants issued in connection with debt conversion | - | - | - | - | - | - | - | - | - | - | 3,550,531 | - | 3,550,531 | |||||||||||||||||||||||||||||||||||||||
| Relative fair value of warrants issued in connection with convertible debt | - | - | - | - | - | - | - | - | - | - | 1,225,109 | - | 1,225,109 | |||||||||||||||||||||||||||||||||||||||
| Adjustment of conversion for debt extinguishment | - | - | - | - | - | - | - | - | - | - | 1,164,220 | - | 1,164,220 | |||||||||||||||||||||||||||||||||||||||
| Deemed dividend related to price protection | - | - | - | - | - | - | - | - | - | - | 981,548 | (981,548 | ) | - | ||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | (11,360,914 | ) | (11,360,914 | ) | |||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2019 | - | $ | - | 1,700,000 | $ | 1,700 | - | $ | - | 11,445,236 | $ | 11,445 | 50,000 | $ | 50 | $ | 46,626,335 | $ | (53,721,493 | ) | $ | (7,081,963 | ) | |||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 6 |
TRANSPORTATION AND LOGISTICS SYSTEMS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2020 | 2019 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (35,506,373 | ) | $ | (37,970,095 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization expense | 42,101 | 873,020 | ||||||
| Amortization of debt discount to interest expense | 4,664,605 | 3,991,061 | ||||||
| Amortization of debt discount to interest expense - related party | - | 26,383 | ||||||
| Stock-based compensation and consulting fees | 1,999,749 | 7,744,954 | ||||||
| Stock-based compensation and consulting fees - discontinued operations | - | 700,816 | ||||||
| Non-cash loan fees | - | 601,121 | ||||||
| Other non-cash interest and fees | 9,080 | - | ||||||
| Interest expense related to debt default | 1,531,335 | - | ||||||
| Derivative expense, net | 31,835,642 | 56,018,849 | ||||||
| Non-cash portion of gain on extinguishment of debt, net | (7,203,589 | ) | (39,316,359 | ) | ||||
| Rent expense | 12,911 | 20,644 | ||||||
| Loss on disposal of property and equipment | - | 195,624 | ||||||
| Impairment loss | - | 1,724,591 | ||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | 628,378 | (147,696 | ) | |||||
| Prepaid expenses and other current assets | (216,181 | ) | (174,653 | ) | ||||
| Assets of discontinued operations | - | (53,193 | ) | |||||
| Due from related party | - | (89,873 | ) | |||||
| Security deposit | (129,750 | ) | (98,100 | ) | ||||
| Accounts payable and accrued expenses | (12,623 | ) | 1,626,306 | |||||
| Insurance payable | (250,961 | ) | 232,254 | |||||
| Liabilities of discontinued operations | - | 10,954 | ||||||
| Accrued compensation and related benefits | 226,415 | (148,523 | ) | |||||
| NET CASH USED IN OPERATING ACTIVITIES | (2,369,261 | ) | (4,231,915 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Decrease in cash from disposal of subsidiary | - | (5,625 | ) | |||||
| Purchase of property and equipment | (460,510 | ) | (59,256 | ) | ||||
| Proceeds from sale of property and equipment | - | 81,000 | ||||||
| NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES | (460,510 | ) | 16,119 | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from sale of common stock and warrants | - | 1,462,500 | ||||||
| Proceeds from convertible notes payable - related party | - | 2,500,000 | ||||||
| Proceeds from convertible notes payable | 1,912,382 | 1,938,900 | ||||||
| Repayment of convertible notes payable | (257,139 | ) | (473,579 | ) | ||||
| Net proceeds from notes payable | 4,479,662 | 7,791,020 | ||||||
| Repayment of notes payable | (2,956,366 | ) | (9,584,459 | ) | ||||
| Net proceeds from notes payable - related party | - | 755,000 | ||||||
| Repayment of notes payable - related party | - | (495,000 | ) | |||||
| Net payments on related party advances | (80,438 | ) | 31,960 | |||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 3,098,101 | 3,926,342 | ||||||
| NET INCREASE (DECREASE) IN CASH | 268,330 | (289,454 | ) | |||||
| CASH, beginning of period | 50,026 | 296,196 | ||||||
| CASH, end of period | $ | 318,356 | $ | 6,742 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | 1,051,418 | $ | 4,147,828 | ||||
| Income taxes | $ | - | $ | - | ||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Debt discounts recorded | $ | 262,872 | $ | 1,288,690 | ||||
| Increase in derivative liability and debt discount related to convertible notes | $ | 1,702,471 | $ | 936,645 | ||||
| Increase in right of use asset and lease liability | $ | - | $ | 1,984,320 | ||||
| Conversion of debt and accrued interest for common stock | $ | 7,362,182 | $ | 3,596,777 | ||||
| Reclassification of accrued interest to debt | $ | 89,262 | $ | - | ||||
| Decrease in put premium and paid-in capital | $ | 385,385 | $ | - | ||||
| Reclassification of warrant value from equity to derivative liabilities | $ | 11,381,885 | $ | - | ||||
| Deemed dividend related to price protection | $ | 18,696,012 | $ | - | ||||
| Conversion of debt and accrued interest for Series D preferred stock | $ | 586,012 | $ | - | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
| 7 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020
NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS
Transportation and Logistics Systems, Inc. (“TLSS” or the “Company”), was incorporated under the laws of the State of Nevada, on July 25, 2008. The Company operates through its subsidiaries as a logistics and transportation company specializing in ecommerce fulfillment, last mile deliveries, two-person home delivery, mid-mile, and long-haul services for predominantly online retailers.
On March 30, 2017 (the “Closing Date”), TLSS and Save On Transport Inc. (“Save On”) entered into a Share Exchange Agreement, dated as of the same date (the “Share Exchange Agreement”). Pursuant to the terms of the Share Exchange Agreement, on the Closing Date, Save On became a wholly-owned subsidiary of TLSS (the “Reverse Merger”). Save On was incorporated in the state of Florida and started business on July 12, 2016. This transaction was treated as a reverse merger and recapitalization of Save On for financial reporting purposes because the Save On shareholders retained an approximate 80% controlling interest in the post-merger consolidated entity. Save On was considered the acquirer for accounting purposes, and the Company’s historical financial statements before the Reverse Merger were replaced with the historical financial statements of Save On before the Reverse Merger. The balance sheets at their historical cost basis of both entities were combined at the Closing Date and the results of operations from the Closing Date forward include the historical results of Save On and results of TLSS from the Closing Date forward. On May 1, 2019, the Company entered into a share exchange agreement with Save On and Steven Yariv, whereby the Company returned all of the stock of Save On to Steven Yariv in exchange for Mr. Yariv conveying 1,000,000 shares of common stock of the Company back to the Company. In addition, the Company granted an aggregate of 80,000 options to certain employees of Save On. On April 16, 2019, Mr. Yariv ceased to be an officer or director of the Company.
On June 18, 2018 (the “Acquisition Date”), the Company completed the acquisition of 100% of the issued and outstanding membership interests of Prime EFS, LLC, a New Jersey limited liability company (“Prime EFS”), from its members pursuant to the terms and conditions of a Stock Purchase Agreement entered into among the Company and the Prime EFS members on the Acquisition Date (the “SPA”). Prime EFS is a New Jersey based transportation company with a focus on deliveries for on-line retailers in New York, New Jersey and Pennsylvania.
On July 24, 2018, the Company formed Shypdirect LLC (“Shypdirect”), a company organized under the laws of New Jersey. Shypdirect is a transportation company with a focus on tractor trailer and box truck deliveries of product on the east coast of the United States from one distributor’s warehouse to another warehouse or from a distributor’s warehouse to the post office.
On June 19, 2020, Amazon Logistics, Inc. (“Amazon”) notified Prime EFS in writing (the “Prime EFS Termination Notice”), that Amazon would not renew its Delivery Service Partner (DSP) Agreement with Prime EFS when that agreement (the “In-Force Agreement”) expired on September 30, 2020 and such In-Force Agreement, in fact, expired on September 30, 2020.
Additionally, on July 17, 2020, Amazon notified Shypdirect that Amazon had elected to terminate the Amazon Relay Carrier Terms of Service (the “Program Agreement”) between Amazon and Shypdirect effective as of November 14, 2020 (the “Shypdirect Termination Notice”). On August 3, 2020, Amazon offered to withdraw the Shypdirect Termination Notice and extend the term of the Program Agreement to and including May 14, 2021, conditioned on Prime EFS executing, for nominal consideration, a separation agreement with Amazon under which Prime EFS agrees to cooperate in an orderly transition of its Amazon last-mile delivery business to other service providers, Prime EFS released any and all claims it may have against Amazon, and Prime EFS covenanted not to sue Amazon (the “Aug. 3 Proposal”). On August 4, 2020, the Company, Prime EFS and Shypdirect accepted the Aug. 3 Proposal.
Approximately 58.5% and 39.0% (for a total of 97.5%) of the Company’s revenue of $23,503,384 for the nine months ended September 30, 2020 was attributable to Prime EFS’s last-mile DSP business and Shypdirect’s mid-mile and long-haul business with Amazon, respectively. The termination of the Amazon last-mile business will have a material adverse impact on the Company’s business in the 4th fiscal quarter of 2020 and thereafter. If the Amazon mid-mile and long-haul business is discontinued after May 14, 2021 it would have a material adverse impact on the Company’s business in 2nd fiscal quarter of 2021 and thereafter.
While the Company will seek to replace its last-mile DSP Amazon business and supplement its mid-mile and long-haul Amazon business, such initiatives are consistent with its already existing business plan to: (i) seek new last-mile, mid-mile and long-haul business with other, non-Amazon, customers; (ii) explore other strategic relationships; and (iii) identify potential acquisition opportunities, while continuing to execute our restructuring plan, commenced in February 2020.
TLSS and its wholly-owned subsidiaries, Prime EFS and Shypdirect are hereafter referred to as the “Company”.
| 8 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Basis of presentation and principles of consolidation
The condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and the rules and regulations of the United States Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information and disclosures necessary for comprehensive presentation of financial position, results of operations or cash flow. However, these unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these unaudited interim condensed consolidated financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2019, and notes thereto included in the Company’s annual report on Form 10-K, filed on May 29, 2020.
The Company follows the same accounting policies in the preparation of its annual and interim reports. The results of operations in interim periods are not necessarily an indication of operating results to be expected for the full year.
The unaudited condensed consolidated financial statements of the Company include the accounts of TLSS and its wholly-owned subsidiaries, Save On (through April 30, 2019), Prime EFS and Shypdirect. All intercompany accounts and transactions have been eliminated in consolidation.
On May 1, 2019, the Company entered into a Share Exchange Agreement with Save On and Steven Yariv, whereby the Company returned all of the stock of Save On to Steven Yariv in exchange for Mr. Yariv conveying 1,000,000 shares of common stock of the Company back to the Company. Pursuant to Accounting Standard Codification (“ASC”) 205-20-45, the financial statement in which net income or loss of a business entity is reported shall report the results of operations of the discontinued operation in the period in which a discontinued operation either has been disposed of or is classified as held for sale. Accordingly, beginning in the second quarter of 2019, the period that Save On was disposed of, the Company reflects Save On as a discontinued operation and such presentation is retroactively applied to all periods presented in the accompanying condensed consolidated financial statements.
Going concern
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, for the nine months ended September 30, 2020, the Company had a net loss of $35,506,373 and net cash used in operations was $2,369,261. Additionally, the Company had an accumulated deficit, shareholders’ deficit, and a working capital deficit of $114,818,245, $12,272,369 and $12,974,773, respectively, at September 30, 2020. Furthermore, the Company failed to make required payments of principal and interest on certain of its convertible debt instruments and notes payable (see Note 6).
On June 19, 2020, Amazon notified Prime EFS by the Prime EFS Termination Notice that it does not intend to renew the In-Force Agreement when that agreement expires. In the Prime EFS Termination Notice, Amazon stated that the In-Force Agreement expires on September 30, 2020. Additionally, on July 17, 2020, pursuant to the Shypdirect Termination Notice, Amazon notified Shypdirect that Amazon had elected to terminate the Program Agreement between Amazon and Shypdirect effective as of November 14, 2020 (see Note 1). However, on August 3, 2020, Amazon offered pursuant to the Aug. 3 Proposal to withdraw the Shypdirect Termination Notice and extend the term of the Program Agreement to and including May 14, 2021, conditioned on Prime EFS executing, for nominal consideration, a separation agreement with Amazon under which Prime EFS agrees to cooperate in an orderly transition of its Amazon last-mile delivery business to other service providers, Prime EFS releases any and all claims it may have against Amazon, and Prime EFS covenants not to sue Amazon. In a “Separation Agreement” dated August 23, 2020, by and among Amazon, Prime EFS and the Company, Prime EFS and the Company agreed, for nominal consideration, that the Delivery Service Partner Program Agreement between Amazon and Prime EFS would terminate effective September 30, 2020; that Prime EFS and the Company would cooperate in an orderly transition of the last-mile delivery business from Prime EFS to other service providers; that Prime EFS would return any and all vehicles leased from Element Fleet Corporation by October 7, 2020 in good repair; and that Prime EFS would dismiss the Amazon Arbitration with prejudice. Under the same Separation Agreement, Prime EFS and the Company released any and all claims they had against Amazon and covenant not to sue Amazon. In a “Settlement and Release Agreement” dated August 21, 2020, by and among Amazon, Shypdirect, Prime EFS and the Company, Amazon withdrew the Shypdirect Termination Notice and extended the term of the Program Agreement to and including May 14, 2021. In the Settlement and Release Agreement, Shypdirect released any and all claims it had against Amazon, arising under the Program Agreement between Amazon and Shypdirect effective as of November 14, 2020, or otherwise.
| 9 |
TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2020
The COVID-19 pandemic and resulting global disruptions have affected the Company’s businesses, as well as those of the Company’s customers and their third-party suppliers and sellers. To serve the Company’s customers while also providing for the safety of the Company’s employees and service providers, the Company has adapted numerous aspects of its logistics and transportation processes. The Company continues to monitor the rapidly evolving situation and expect to continue to adapt its operations to address federal, state, and local standards as well as to implement standards or processes that the Company determines to be in the best interests of its employees, customers, and communities. The impact of the pandemic and actions taken in response to it had minimal effects on the Company’s results of operations. The Company is experiencing higher net sales, which reflect increased demand, particularly as more people are staying at home, for household staples and other essential products, partially offset by decreased demand for discretionary consumer products, delayed procurement and shipment of non-priority products, and supply chain interruptions. Other effects include increased fulfilment costs and cost of sales, primarily due to investments in employee hiring, pay, and benefits, as well as costs to maintain safe workplaces, and higher shipping costs. The Company expects to continue to be affected by possible procurement and shipping delays, supply chain interruptions, higher product demand in certain categories, lower product demand in other categories, and increased fulfilment costs and cost of sales as a percentage of net sales through at least Q4 2020, although it is not possible to determine the duration and spread of the pandemic or such actions, the ultimate impact on the Company’s results of operations during 2020, or whether other currently unanticipated consequences of the pandemic are reasonably likely to materially affect the Company’s results of operations.
It is management’s opinion that these factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report. In April 2020, the Company’s subsidiaries, Prime EFS and Shypdirect, entered into Paycheck Protection Program promissory notes with M&T Bank in the aggregate amount of $3,446,152 (see Note 7). Management cannot provide assurance that the Company will ultimately achieve profitable operations, become cash flow positive, or raise additional debt and/or equity capital.
The Company will continue to: (i) seek to replace its last-mile DSP Amazon business and supplement its mid-mile and long-haul Amazon business with other, non-Amazon, customers; (ii) explore other strategic relationships; and (iii) identify potential acquisition opportunities, while continuing to execute our restructuring plan, commenced in February 2020. The Company is seeking to raise capital through additional debt and/or equity financings to fund its operations in the future. Although the Company has historically raised capital from sales of common shares and from the issuance of convertible promissory notes and notes payable, there is no assurance that it will be able to continue to do so. If the Company is unable to replace its Amazon business, to raise additional capital or secure additional lending in the near future, management expects that the Company will need to curtail its operations. These 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 the Company be unable to continue as a going concern.
Use of estimates
The preparation of the condensed consolidated financial statements, in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates included in the accompanying unaudited condensed 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 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 derivative liabilities, and the value of claims against the Company.
Fair value of financial instruments