See accompanying notes to unaudited condensed consolidated financial statements.

	For the Three Months Ended
	March 31,						For the Three Months Ended
	2020			2019			March 31,
							2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(3,453,338	)	$	(19,647,723	)	$	(2,269,180	)	$	(3,453,338	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		14,188			308,816			85,760			14,188
Amortization of debt discount to interest expense		1,359,388			1,071,272			19,013			1,359,388
Amortization of debt discount to interest expense - related party		-			21,383
Stock-based compensation and consulting fees		31,250			2,750,808			-			31,250
Interest expense related to debt default		1,387,785			-
Derivative (income) expense		(144,839	)		13,384,260
Interest expense related to debt default added to principal								-			1,387,785
Derivative expense, net								694,983			(144,839	)
Non-cash portion of gain on extinguishment of debt, net		(327,584	)		(93,871	)		(59,853	)		(327,584	)
Rent expense		5,571			14,056			1,563			5,571
Loss on disposal of property and equipment		-			47,022
Change in operating assets and liabilities:
Accounts receivable		(99,454	)		(429,650	)		164,345			(99,454	)
Prepaid expenses and other current assets		819,161			(90,449	)		248,906			819,161
Assets of discontinued operations		-			(86,379	)
Security deposit		(124,750	)		(34,350	)		(8,000	)		(124,750	)
Accounts payable and accrued expenses		796,036			526,330			350,348			796,036
Insurance payable		(661,668	)		(15,058	)		(212,331	)		(661,668	)
Liabilities of discontinued operations		-			46,089
Accrued compensation and related benefits		288,180			243,466			(21,886	)		288,180

NET CASH USED IN OPERATING ACTIVITIES		(110,074	)		(1,983,978	)		(1,006,332	)		(110,074	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(460,510	)		(51,256	)		-			(460,510	)
Proceeds from sale of property and equipment		-			81,000
Cash acquired in acquisition								10,031			-
Cash used for acquisitions								(2,133,146	)		-

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES		(460,510	)		29,744
NET CASH USED IN INVESTING ACTIVITIES								(2,123,115	)		(460,510	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible notes payable - related party		-			500,000
Net proceeds from sale of series E preferred share units								3,258,000			-
Proceeds from convertible notes payable		1,860,000						-			1,860,000
Repayment of convertible notes payable		(159,988	)		(273,585	)		-			(159,988	)
Net proceeds from notes payable		1,033,510			3,521,120			-			1,033,510
Repayment of notes payable		(2,124,777	)		(2,033,973	)		(37,114	)		(2,124,777	)
Net proceeds from notes payable - related party		-			200,000
Repayment of notes payable - related party		-			(220,000	)
Net (repayments) proceeds from related parties		(55,561	)		28,815
Net payments on related party advances								(7,808	)		(55,561	)

NET CASH PROVIDED BY FINANCING ACTIVITIES		553,184			1,722,377			3,213,078			553,184

NET DECREASE IN CASH		(17,400	)		(231,857	)
NET INCREASE (DECREASE) IN CASH								83,631			(17,400	)

CASH, beginning of period		50,026			296,196			579,283			50,026

CASH, end of period	$	32,626		$	64,339		$	662,914		$	32,626

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest	$	741,627		$	778,399		$	33,415		$	741,627
Income taxes	$	-		$	-		$	-		$	-

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Debt discounts recorded	$	262,893		$	1,222,986		$	-		$	262,893
Increase in derivative liability and debt discount	$	1,267,473		$	-		$	-		$	1,267,473
Increase in right of use asset and lease liability	$	-		$	631,723
Conversion of debt and accrued interest for common stock	$	341,518		$	-		$	170,000		$	341,518
Reclassification of accrued interest to debt	$	80,155		$	-		$	-		$	80,155
Reclassification of due to related parties to accrued expenses							$	94,000		$	-
Decrease in put premium and paid-in capital	$	73,725		$	-		$	-		$	73,725
Reclassification of warrant value from equity to derivative liabilities	$	11,381,885		$	-		$	-		$	11,381,885
Deemed dividend related to price protection	$	18,696,012		$	-
Deemed dividend related to price protection and beneficial conversion features							$	777,510		$	18,696,012

ACQUISITIONS:
Assets acquired:
Accounts receivable							$	265,175		$	-
Prepaid expenses								7,534			-
Property and equipment								257,416			-
Right of use assets								44,388			-
Other receivable								622,240			-
Security deposits								33,340			-
Total assets acquired								1,230,093			-
Less: liabilities assumed:
Accounts payable								132,155			-
Accrued expenses								79,138			-
Notes payable								1,491,458			-
Lease liabilities								44,388			-
Total liabilities assumed								1,747,139
Increase in intangible assets - non-cash							$	517,046		$	-

See accompanying notes to unaudited condensed consolidated financial statements.

Transportation and Logistics Systems, Inc. (“TLSS” or the “Company”), ~~formerly PetroTerra Corp.,~~ was incorporated under the laws of the State of Nevada, on July 25, 2008. The Company operates through its active subsidiaries as a ~~leading~~ logistics and transportation company specializing in ecommerce fulfillment, last mile deliveries, two-person home delivery, mid-mile, and ~~line haul~~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 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~~~~”).~~Date. Prime EFS iswas a New Jersey based transportation company with a focus on deliveries for on-line retailers in New York, New Jersey and ~~Pennsylvania.~~Pennsylvania until it ceased operations on September 30, 2020.

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.However, the Company ceased its box truck delivery service early in the second quarter of 2021.

On June 19, 2020, Amazon Logistics, Inc. (“~~Amazon”~~Amazon”) notified Prime EFS in writing (the “Prime EFS Termination Notice”), that Amazon ~~does~~would not ~~intend to~~ renew its Delivery Service Partner (DSP) Agreement with Prime EFS when that agreement ~~expires (see Note 13 – Subsequent Events).~~(the “In-Force Agreement”) expired on September 30, 2020 and such In-Force Agreement, in fact, expired on September 30, 2020.

~~TLSS~~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 ~~wholly-owned subsidiaries,~~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 77.5% of the Company’s revenue of $1,491,699 for the three months ended March 31, 2021 was attributable to Shypdirect’s mid-mile and long-haul business with Amazon. The termination of the Amazon last-mile business on September 30, 2020 had a material adverse impact on the Company’s revenue beginning in the 4th fiscal quarter of 2020. Additionally, unless replaced with other business, the discontinuation of the Company’s Amazon mid-mile and long-haul business, which occurred on or about May 14, 2021, will have a material adverse impact on the Company’s business in 2nd fiscal quarter of 2021 and thereafter. As of May 17, 2021, the Company is still operating and plans to continue operating in the long-haul business.

While the Company will seek to replace its 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.

On November 13, 2020, the Company formed a wholly owned subsidiary, Shyp FX, Inc., a company incorporated under the laws of the State of New Jersey (“Shyp FX”). On January 15, 2021, through Shyp FX, the Company executed an asset purchase agreement (“APA”) and closed a transaction to acquire substantially all of the assets and certain liabilities of Double D Trucking, Inc., a northern New Jersey-based logistics provider specializing in servicing Federal Express over the past 25 years (“DDTI”) (See Note 3).

On November 16, 2020, the Company formed a wholly owned subsidiary, TLSS Acquisition, Inc., a company incorporated under the laws of the State of Delaware (“TLSS Acquisition”). On March 24, 2021, TLSS Acquisition acquired all of the issued and outstanding shares of capital stock of Cougar Express, Inc., a New York-based full-service logistics provider specializing in pickup, warehousing and delivery services in the tri-state area (“Cougar Express”). Cougar Express was a family-owned full-service transportation business that has been in operation for more than 30 years providing one-to-four person deliveries and offering white glove services. It utilizes its own fleet of trucks, warehouse/driver/office personnel and on-call subcontractors from its convenient and secure New York JFK airport area location, allowing it to pick-up and deliver throughout the New York tri-state area. Cougar Express serves a diverse base of approximately 50 commercial accounts, which are freight forwarders that work with some of the most notable retail businesses in the country (See Note 3).

On February 21, 2021, the Company formed a wholly owned subsidiary, Shyp CX, Inc., a company incorporated under the laws of the State of New York (“Shyp CX”).

Unless the context otherwise requires, TLSS and its wholly owned subsidiaries, Prime EFS, Shypdirect, TLSS Acquisition, Cougar Express, Shyp FX and Shyp CX are hereafter referred to as the “Company”. References herein to a “Company liability” may be to a liability which is owed solely by a subsidiary and not by TLSS.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

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 (“SEC”) 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,~~2020, and notes thereto included in the Company’s annual report on SEC Form 10-K, filed on ~~May 29, 2020.~~March 17, 2021.

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, Shypdirect, TLSS Acquisition, Cougar Express, Shyp FX and ~~Shypdirect.~~Shyp CX. All intercompany accounts and transactions have been eliminated in consolidation.

~~On May 1, 2019, the Company entered into~~ References below to a ~~Share Exchange Agreement with Save On~~“Company liability” may be to a liability which is owed solely by a subsidiary 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.not by TLSS.

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 three months ended March 31, 2021 and 2020, the Company had a net loss of $2,269,180 and $3,453,338 and net cash used in operations was ~~$110,074.~~$1,006,332 and $110,074, respectively. Additionally, the Company had an accumulated deficit, shareholders’ deficit, and a working capital deficit of ~~$82,765,210, $26,839,561~~$125,720,076, $14,906,922 and ~~$27,678,817,~~$18,968,045, respectively, aton March 31, ~~2020.~~2021. Furthermore, effective September 30, 2020 and in May 2021, the Company ~~failed to make required payments of principal and interest on certain of~~lost major contracts with its ~~convertible debt instruments and notes payable (see Note 6).~~ primary customer as described below.

On June 19, 2020, Amazon ~~Logistics, Inc. (“Amazon”)~~ notified Prime EFS ~~in writing~~by the Prime EFS Termination Notice that ~~Amazon~~it does not intend to renew the In-Force Agreement when that agreement expired. 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 ~~(DSP)~~Program Agreement ~~with~~between Amazon and Prime EFS ~~when~~would terminate effective September 30, 2020; that ~~agreement expires~~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. Unless and until replaced with other business, the expiration of the Program Agreement will have a material effect on the Company’s operation in the second fiscal quarter of 2021 and beyond. During the first quarter of 2021, the Company’s subsidiaries defaulted on certain truck leases. In connection with these defaults, the Lessor has demanded that the Company’s subsidiaries pay for the leased trucks in the amount of approximately $2,871,000 which was accrued and included in contingency liabilities on the accompanying condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020 (see Note ~~13 – Subsequent Events)~~10).

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. 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 Q2 2021, 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 2021, 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. InDuring the three months ended March 31, 2021 and in April ~~2020,~~2021, the ~~Company’s subsidiaries, Prime EFS~~Company issued an aggregate of 343,119 shares of its Series E preferred stock for net proceeds of $3,258,000 (see Notes 9 and ~~Shypdirect, entered into Paycheck Protection Program promissory notes with M&T Bank in~~14). The proceeds were used for the ~~aggregate amount~~acquisition of ~~$3,446,152 (see Note 13).~~Cougar Express and DDTI and for working capital purposes. 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 Amazon business with other, non-Amazon, customers; (ii) explore other strategic relationships; and (iii) identify potential acquisition opportunities, while continuing to execute its restructuring plan. 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 and preferred 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 condensed 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.

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 assets acquired and liabilities assumed, 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, the valuation of beneficial conversion features, and the value of claims against the Company.

The Financial Accounting Standards Board (“~~FASB”~~FASB”) issued ASC 820 — Fair Value Measurements and Disclosures, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 requires disclosures about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of financial instruments are based on pertinent information available to the Company on March 31, ~~2020.~~2021. Accordingly, the estimates presented in these financial statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments. ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

The Company measures certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows aton March 31, ~~2020~~2021 and December 31, ~~2019:~~2020:

	At March 31, 2020						At December 31, 2019						On March 31, 2021						On December 31, 2020
Description	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3		Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Derivative liabilities		—		—	$	13,978,061		—		—	$	2,135,939		—		—	$	4,876,170		—		—	$	4,181,187

A ~~roll forward~~roll-forward of the level 3 valuation financial instruments is as follows:

	For the Three Months ended March 31, 2020			For the Three Months ended March 31, 2019			For the Three Months ended March 31, 2021		For the Three Months ended March 31, 2020
Balance at beginning of period	$	2,135,939		$	7,888,684		$	4,181,187	$	2,135,939
Initial valuation of derivative liabilities included in debt discount		1,267,474			-			-		1,267,474
Initial valuation of derivative liabilities included in derivative expense		13,336,234			-			-		13,336,234
Gain on extinguishment of debt related to repayment/conversion of debt		(662,398	)		(246,111	)		-		(662,398	)
Reclassification of warrants from equity to derivative liabilities		11,381,885			-			-		11,381,885
Cumulative effect adjustment for change in derivative accounting		-			(838,471	)
Change in fair value included in derivative (gain) expense		(13,481,073	)		13,384,260
Change in fair value included in derivative expense								694,983		(13,481,073	)
Balance at end of period	$	13,978,061		$	20,188,362		$	4,876,170	$	13,978,061

The Company accounts for its derivative financial instruments, consisting of certain conversion options embedded in our convertible instruments and warrants, at fair value using level 3 inputs. The Company determined the fair value of these derivative liabilities using the ~~Black-Scholes option pricing model,~~ binomial lattice models, or other accepted valuation practices. When determining the fair value of its financial assets and liabilities using these methods, the Company is required to use various estimates and unobservable inputs, including, among other things, expected terms of the instruments, expected volatility of its stock price, expected dividends, and the risk-free interest rate. Changes in any of the assumptions related to the unobservable inputs identified above may change the fair value of the instrument. Increases in expected term, anticipated volatility and expected dividends generally result in increases in fair value, while decreases in the unobservable inputs generally result in decreases in fair value.

ASC 825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.

The carrying amounts reported in the condensed consolidated balance sheets for cash, accounts receivable, accounts payable, ~~and~~ accrued expenses, insurance payable, other payables, and contingency liabilities approximate their fair values based on the short-term maturity of these instruments. The carrying amount of the Company’s convertible notes payable and promissory note obligations approximate fair value, as the terms of these instruments are consistent with terms available in the market for instruments with similar risk.

For purposes of the condensed consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents. AtOn March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company did not have any cash equivalents.

The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. ~~There were no balances~~On March 31, 2021, cash in bank in excess of FDIC insured levels ~~as of March 31, 2020 and December 31, 2019.~~amounted to approximately $392,000. The Company has not experienced any losses in such accounts through March 31, ~~2020.~~2021.

Accounts receivable are presented net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, a customer’s historical payment history, its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection.

Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives of five to six years. Leasehold improvements are depreciated over the shorter of the useful life or lease term including scheduled renewal terms. Maintenance and repairs are charged to expense as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.

Intangible assets are carried at cost less accumulated amortization, computed using the straight-line method over the estimated useful life, less any impairment charges.

~~In February 2016,~~On January 1, 2019, the ~~FASB issued~~Company adopted ASU No. 2016-02, Leases (Topic 842). The updated guidance requires lessees to recognize lease assets and lease liabilities for most operating leases. In addition, the updated guidance requires that lessors separate lease and non-lease components in a contract in accordance with the new revenue guidance in ASC 606. The ~~updated guidance is effective for interim and annual periods beginning after December 15, 2018.~~

~~On January 1, 2019, the~~ Company ~~adopted ASU No. 2016-02, applying~~applied the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases ~~and;~~and (ii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the inception of a contract the Company assessed whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether it obtains the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. The Company will allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less.

Operating lease ROU assets represents the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is included in general and administrative expenses in the condensed consolidated statements of operations.

In accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value.

The Company uses “the management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating decision maker is the chief executive officer of the Company, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. ~~On May 1, 2019, the Company disposed of its Save On business segment and the results of operations of Save On are included in discontinued operations. Accordingly, during~~During the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, the Company believes that it operates in one operating segment related to deliveries for on-line retailers in New York, New Jersey, Pennsylvania and other areas, and 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.

The Company has certain financial instruments that are embedded derivatives associated with capital raises. The Company evaluates all of its financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-10-05-4, Derivatives and Hedging and 815-40, Contracts in Entity’s Own Equity. This accounting treatment requires that the carrying amount of any embedded derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or loss on extinguishment.

In July 2017, FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features. These amendments simplify the accounting for certain financial instruments with down-round features. The amendments require companies to disregard the down-round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. The guidance was adopted as of January 1, 2019 and the Company elected to record the effect of this adoption retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the condensed consolidated balance sheet as of the beginning of 2019, the period which the amendment is effective. In accordance with the guidance presented in the ASU 2017-11, the fair value of derivative liabilities associated with certain convertible notes as of December 31, 2018 of $838,471 and the offsetting effect of reclassifying such debt to stock-settled debt for which the Company recorded a put premium liability of $385,385 was reclassified by means of a cumulative-effect adjustment to opening accumulated deficit as of January 1, 2019 in the amount of $453,086.

The Company adopted ASC 606, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605, Revenue Recognition. This ASC is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASC also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer service orders, including significant judgments.

~~For the Company’s Prime EFS and Shypdirect business activities, the~~The Company recognizes revenues and the related direct costs of such revenue which generally include compensation and related benefits, gas costs, insurance, parking and tolls, truck rental fees, and maintenance fees, as of the date the freight is delivered which is when the performance obligation is satisfied. In accordance with ASC Topic 606, the Company recognizes revenue on a gross basis. Our payment terms are generally net seven days from acceptance of delivery. The Company does not incur incremental costs obtaining service orders from its ~~Prime EFS and Shypdirect~~ customers, however, if the Company did, because all of ~~Prime EFS and Shypdirect~~the Company’s customer contracts are less than a year in duration, any contract costs incurred would be expensed rather than capitalized. The revenue that the Company recognizes arises from deliveries of packages on behalf of the Company’s customers. Primarily, the Company’s performance obligations under these service orders correspond to each delivery of packages that the Company makes under the service agreements. Control of the package transfers to the recipient upon delivery. Once this occurs, the Company has satisfied its performance obligation and the Company recognizes revenue.

For the Company’s Save On business activities, through the date of disposition on May 1, 2019, the Company recognized revenues and the related direct costs of such revenue which included carrier fees and dispatch costs as of the date the freight was delivered by the carrier which was when the performance obligation is satisfied. Customer payments received prior to delivery were recorded as a deferred revenue liability and related carrier fees if paid prior to delivery were recorded as a deferred expense asset. In accordance with ASC Topic 606, the Company recognized revenue on a gross basis. Our payment terms for corporate customers were net 30 days from acceptance of delivery and individual customers generally were required to pay in advance. The Company did not incur incremental costs obtaining service orders from its Save On customers, however, if the Company did, because all of the Save On customer’s contracts were less than a year in duration, any contract costs incurred were expensed rather than capitalized. The revenue that the Company recognized arose from service orders it received from its Save On customers. The Company’s performance obligations under these service orders corresponded to each delivery of a vehicle that the Company made for its customer under the service orders; as a result, each service order generally contained only one performance obligation based on the delivery to be completed.

Management has reviewed the revenue disaggregation disclosure requirements pursuant to ASC 606 and determined that no further disaggregation disclosure is required to be presented.

Pursuant to ASC 260-10-45, basic ~~loss~~income (loss) per common share is computed by dividing net ~~loss~~income (loss) attributable to common shareholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted ~~loss~~income (loss) per share is computed by dividing net ~~loss~~income (loss) attributable to common shareholders by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially dilutive common shares consist of common stock issuable for stock warrants (using the treasury stock method) and shares issuable for convertible debt (using the as-if converted method). These common stock equivalents may be dilutive in the future.

Potentially dilutive common shares were excluded from the computation of diluted shares outstanding for the three months ended March 31, 2021 and 2020 as they would have an anti-dilutive impact on the Company’s net losses in that period and consisted of the following:

	March 31, 2020		March 31, 2019		March 31, 2021		March 31, 2020
Stock warrants		181,563,164		1,442,434		716,906,678		181,563,164
Stock options		80,000		-		80,000		80,000
Convertible debt		324,772,402		4,415,776		148,793,952		324,772,402
Series A convertible preferred stock		-		8,333,333
Series B convertible preferred stock		1,700,000		-		700,000		1,700,000
Series E convertible preferred stock						555,436,300		-
						1,421,916,930		508,115,566

Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation – Stock Compensation”, which requires recognition in the financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange for an award based on the grant-date fair value of the award. The Company has elected to recognize forfeitures as they occur as permitted under ASU 2016-09 Improvements to Employee Share-Based Payment.

~~In July 2017, FASB issued ASU No. 2017-11,~~ ~~Earnings Per Share~~ ~~(Topic 260);~~ ~~Distinguishing Liabilities from Equity~~ ~~(Topic 480);~~ ~~Derivatives and Hedging~~ ~~(Topic 815): (Part I)~~ ~~Accounting for Certain Financial Instruments with Down Round Features~~. These amendments simplify the accounting for certain financial instruments with down-round features. The amendments require companies to disregard the down-round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. The guidance was adopted as of January 1, 2019 and the Company elected to record the effect of this adoption retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the condensed consolidated balance sheet as of the beginning of 2019, the period which the amendment is effective. In accordance with the guidance presented in the ASU 2017-11, the fair value of derivative liabilities associated with certain convertible notes as of December 31, 2018 of $838,471 and the offsetting effect of reclassifying such debt to stock-settled debt for which the Company recorded a put premium liability of $385,385 was reclassified by means of a cumulative-effect adjustment to opening accumulated deficit as of January 1, 2019 in the amount of $453,086.

In August 2018, the FASB issued ASU 2018-13 to modify the disclosure requirements on fair value measurements. The amendments are effective for years beginning after December 15, 2019. An entity is permitted to early adopt any removed or modified disclosures and delay adoption of the additional disclosures until the effective date. Most amendments should be applied retrospectively, but certain amendments will be applied prospectively. The adoption of this standard did not have an impact on the Company’s consolidated financial position, results of operations and cash flows.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exception. The ASU also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early adoption is permitted. The Company is currently evaluating the impact of the adoption of the standard on the consolidated financial statements.

There are currently no other accounting standards that have been issued but not yet adopted that we believe will have a significant impact on our consolidated financial position, results of operations or cash flows upon adoption.

On ~~May 1, 2019,~~January 15, 2021, through Shyp FX, the Company ~~entered into~~executed an asset purchase agreement (“APA”) and closed a ~~Share Exchange Agreement with Save On and Steven Yariv, whereby the Company returned~~transaction to acquire substantially all of the ~~stock~~assets and certain liabilities of ~~Save On to Steven Yariv~~Double D Trucking, Inc., a northern New Jersey-based logistics provider specializing in ~~exchange~~servicing Federal Express over the past 25 years (“DDTI”). The purchase price was $100,000 of cash and a promissory note of $400,000. The principal assets involved in the acquisition were vehicles for ~~Mr. Yariv conveying 1,000,000 shares~~cargo transport, system equipment for vehicle tracking and navigation of ~~common stock~~vehicles, and delivery route rights together with assumption of associated customer relationships. The acquisition of DDTI made the Company ~~back to the Company. In addition,~~an approved contracted service provider of FedEx, which, the Company ~~granted an aggregate of 80,000 options~~believes fits in well with its current geographic coverage area and may lead to ~~certain employees of Save On. Mr. Yariv ceased to be an officer or director of~~additional expansion opportunities within the ~~Company effective with the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 as filed with the Securities and Exchange Commission on April 16, 2019.~~FedEx network.

~~Pursuant~~On March 24, 2021, TLSS Acquisition acquired all of the issued and outstanding shares of capital stock of Cougar Express, Inc., a New York-based full-service logistics provider specializing in pickup, warehousing and delivery services in the New York tri-state area (“Cougar Express”). The purchase price was $2,000,000 of cash plus cash for the acquisition of security deposits, a cash payment equal to ~~ASC 205-20-45,~~50% of the ~~financial statement~~difference between cash and accounts receivable acquired and accounts payable assumed, less the assumption of truck loans and leases, and a promissory note of $350,000. The previous owner of Cougar Express is barred from competing with the Cougar Express business for five years. Cougar Express was a family-owned full-service transportation business that has been in operation for more than 30 years providing one-to-four person deliveries and offering white glove services. It utilizes its own fleet of trucks, warehouse/driver/office personnel and on-call subcontractors from its convenient and secure New York JFK airport area location, allowing it to pick-up and deliver throughout the New York tri-state area. Cougar Express serves a diverse base of approximately 50 commercial accounts, which ~~net income or loss~~are freight forwarders that work with some of the most notable retail businesses in the country. The Company believes that the acquisition of Cougar Express fits its current business plan, given Cougar Express’s demographic location, services offered, and diversified customer base, and given that it would provide the Company with a ~~business entity~~long-standing, well-run profitable operation as a step to begin replacing the revenue it lost as a result of Amazon’s terminating its delivery service provider business. Furthermore, the Company believes that, because Cougar Express is ~~reported shall report~~strategically based in New York and serves the ~~results~~tri-state area, organic growth opportunities will be available for expanding its footprint into the Company’s primary base of operations in New Jersey, as well as efficiencies that could be derived by leveraging Shypdirect’s operational capabilities.

The assets acquired and liabilities assumed are recorded at their estimated fair values on the acquisition date, subject to adjustment during the measurement period with subsequent changes recognized in earnings or loss. These estimates are inherently uncertain and are subject to refinement. Management develops estimates based on assumptions as a part of the ~~discontinued operation~~purchase price allocation process to value the assets acquired and liabilities assumed as of the business acquisition date. As a result, during the purchase price measurement period, which may be up to one year from the business acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed based on completion of valuations, with the corresponding offset to intangible assets. After the purchase price measurement period, the Company did not record any adjustments to assets acquired or liabilities assumed in operating expenses in the period in which ~~a discontinued operation either has~~the adjustments may have been ~~disposed~~determined. Based upon the purchase price allocation, the following table summarizes the estimated fair value of ~~or is classified as held for sale. Accordingly,~~ the Company reflects Save On as discontinued operations beginning in the second quarter of 2019, the period that Save On was disposed of and retroactively for all periods presented in the accompanying condensed consolidated financial statements. The business of Save On are considered discontinued operations because: (a) the operations and cash flows of Save On were eliminated from the Company’s operations; and (b) the Company has no interest in the divested operations. As of March 31, 2020 and December 31, 2019, the Company did not have any remaining assets acquired and liabilities ~~classified as discontinued operations in~~assumed at the ~~Company’s condensed consolidated financial statements as~~date of ~~March 31, 2020 and December 31, 2019. The summarized operating result of discontinued operations included in~~ the ~~Company’s condensed consolidated statements of operations is as follows:~~respective acquisition:

In the event the Company consummates a Public Offering while the Q1Q1/Q2 2020 Notes are outstanding, then 25% of the net proceeds of such offering will, within two business days of the closing of such Public Offering, be applied to reduce the outstanding obligations pursuant to ~~theQ1~~the Q1/Q2 2020 Notes.

As the Equity Conditions have not been met, through March 31, 2021 and the date hereof, the Company has not prepaid any the Q1/Q2 2020 Notes, in whole or in part.

From the original issue date of a Q1Q1/Q2 2020 Note until such Q1Q1/Q2 2020 Note is no longer outstanding, such Q1Q1/Q2 2020 Note is convertible, in whole or in part, at any time, and from time to time, into shares of ~~common stock~~Common Stock at the option of the holder. The “Conversion Price” in effect on any Conversion Date (as defined in the ~~applicable Q1~~Q1/Q2 2020 ~~Note)~~Notes) means, as of any date of determination, $0.40 per share, subject to adjustment as provided ~~herein.~~therein and summarized below. If an Event of Default (as defined in the ~~applicable Q1~~Q1/Q2 2020 ~~Note)~~Notes) has occurred, regardless of whether it has been cured or remains ongoing, the Q1Q1/Q2 2020 Notes are convertible at the lower of: (i) $0.40 and (ii) 70% of the second lowest closing price of the common stock as reported on the Trading Market (as defined in the Q1/Q2 2020 Notes) during the 20 consecutive Trading Day (as defined in the Q1/Q2 2020 Notes) period ending and including the Trading Day immediately preceding the delivery or deemed delivery of the applicable Q1notice of conversion. All such Conversion Price determinations are to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the number of shares of Common Stock outstanding.

In the third fiscal quarter of 2020, the great majority of principal amount of Q1/Q2 2020 Notes was exchanged for Common Stock at the conversion price that applied if an Event of Default occurred. It is the Company’s position (and it was the Company’s intent at issuance) that, to the extent the Q1/Q2 2020 Notes were converted for Common Stock at the advantageous conversion price applicable to post-Events of Default, the Q1/Q2 Notes are not also entitled to receive the Mandatory Default Payment (as defined in the Q1/Q2 2020 Notes) of 130% of principal amount. However, since a note holder could conceivably disagree with the Company’s position in this regard, the Company has decided, out of an abundance of caution and despite its confidence that its construction of the Q1/Q2 2020 Notes is the only correct one, to accrue a reserve as if a note holder were entitled both to convert its Q1/Q2 Notes at the advantageous conversion price applicable to post-Events of Default and to receive the Mandatory Default Payment of 130% on the entire original principal amount of Q1/Q2 2020 Notes. Hence, as of March 31, 2021, convertible notes payable and default interest due related to the Q1/Q2 2020 Notes amounted to $736,866, which consists of $801,400 of principal and default penalty balances due and is net of unamortized debt discount of $64,535. On December 31, 2020, on the same construction of the Q1/Q2 Notes, convertible notes payable and default interest due related to the Q1/Q2 2020 Notes amounted to $717,852, which consists of $801,400 of principal and default penalty balances due and is net of unamortized debt discount of $83,548.

On April 20, 2020, the Company issued and sold to an investor a convertible promissory note in the principal amount of $456,500 (the “April 20 Note”). The April 20 Note contained a 10% original issue discount amounting to $41,500 for a purchase price of $415,000. The Company did not receive any proceeds from the April 20 Note because the investor converted previous notes and accrued interest due to him in the amount of $195,000 into the April 20 Note. In connection with the conversion of notes payable to the April 20 Note, the Company recorded a loss from debt extinguishment of $220,000. The April 20 Note initially bore interest at 6% per annum and becomes due and payable on April 20, 2022 (the “April 20 Note Maturity Date”). During the existence of an Event of Default (as defined in the April 20 Note), which includes, amongst other events, any default in the payment of principal and interest payment (including any April 20 Note Amortization Payments) under any note or any other indebtedness, interest accrues at the lesser of (i) the rate of 18% per annum, or (ii) the maximum amount permitted by law. Commencing on the thirteenth month anniversary of the April 20 Note, monthly payments of interest and monthly principal payments, based on a 12-month amortization schedule, will be due and payable (each, an “April 20 Note Amortization Payment”), until the April 20 Note Maturity Date, at which time all outstanding principal, accrued and unpaid interest and all other amounts due and payable under the April 20 Note will be immediately due and payable. The April 20 Note Amortization Payments will be made in cash unless the investor payment in the Company’s common stock in lieu of a cash payment (each, an “April 20 Note Stock Payment”). If the investor requests an April 20 Note Stock Payment, the number of shares of common stock issued will be based on the amount of the applicable April 20 Note Amortization Payment divided by 80% of the lowest VWAP (as defined in the April 20 Note) during the five Trading Day (as defined in the April 20 Note) period prior to the due date of the April 20 Note Amortization Payment.

The April 20 Note may be prepaid, provided that certain Equity Conditions, as defined in the April 20 Note, have been met (or any such failure to meet the Equity Conditions has been waived): (i) from April 20, 2020 until and through July 20, 2020 at an amount equal to 105% of the aggregate of the outstanding principal balance of the April 20 Note and accrued and unpaid interest, and (ii) after July 20, 2020 at an amount equal to 115% of the aggregate of the outstanding principal balance of the April 20 Note and accrued and unpaid interest. In the event that the Company closes a Public Offering, the holder may elect to: (x) have its principal and accrued interest prepaid directly from the proceeds of the Public Offering at the prices set forth above, (y) exchange its April 20 Note at the closing of the Public Offering for the securities being issued in the Public Offering at the Public Offering prices based upon the outstanding principal, accrued interest and other charges, or (z) continue to hold the April 20 Note. Except for a Public Offering and April 20 Note Amortization Payments, in order to prepay the April 20 Note, the Company must provide at least 30 days’ prior written notice to the holder, during which time the holder may convert the April 20 Note in whole or in part at the then applicable conversion price. For avoidance of doubt, the April 20 Note Amortization Payments will be prepayments and are subject to prepayment penalties equal to 115% of the April 20 Note Amortization Payment. In the event the Company consummates a Public Offering while the April 20 Note is outstanding, then 25% of the net proceeds of such offering will, within two business days of the closing of such Public Offering, be applied to reduce the outstanding obligations pursuant to the April 20 Note.

Until the April 20 Note is no longer outstanding, it is convertible, in whole or in part, at any time, and from time to time, into shares of common stock at the option of the investor. The “Conversion Price” in effect on any Conversion Date (as defined in the April 20 Note) means, as of any Conversion Date or other date of determination, the lower of: (i) $0.40 and (ii) 70% of the second lowest closing price of the common stock as reported on the Trading Market (as defined in the April 20 Note) during the 20 consecutive Trading Day (as defined in the ~~applicable Q1 2020~~April 20 Note) period ending and including the Trading Day immediately preceding the delivery or deemed delivery of the applicable notice of conversion. All such Conversion Price determinations are to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that ~~proportionately.~~proportionately decreases or increases the common stock.

The Q1 2020 Warrants are exercisable at any time on or after the date of the issuance and entitles the investors to purchase shares of the Company’s common stock for a period of five years from the initial date the Q1 2020 Warrants become exercisable. Under the terms of the Q1 2020 Warrants, the investors are entitled to exercise the Q1 2020 Warrants to purchase up to 838,200 shares of the Company’s common stock at an initial exercise price of $0.40, subject to adjustment as detailed in the respective Q1 2020 Warrants.

In connection with the issuance of the January 2020 warrants, the Company calculated the relative fair value of these warrants in the amount of $262,872 which was added to debt discount and paid-in capital, and shall be amortized over the term of the Q1 2020 Notes. In connection with the issuance of the January, February and March 2020 Notes and February and March 2020 Warrants, the Company determined that various terms of these Q1 2020 Notes and Q1 2020 Warrants, including the default provisions in the Q1 2020 Notes discussed above, caused derivative treatment of the embedded conversion options and warrants. During the three months ended March 31, 2020, on the initial measurement dates, the fair values of the embedded conversion option and warrant derivatives of $8,722,831 was recorded as derivative liabilities and was allocated as a debt discount up to the net proceeds of the Q1 2020 Notes of $1,267,473, with the remainder of $7,455,358 charged to current period operations as initial derivative expense.

~~The Q1 2020 Notes include~~April 20 Note includes a down-round provision under which the ~~Q1 2020~~April 20 Note conversion price could be affected, by future equity offerings undertaken by the Company. During the year ended December 31, 2020, down-provisions were triggered. Since these instruments contained embedded derivatives, the trigger only effected the quantity and valuation of derivative liabilities and there was no other accounting effect. As of March 31, 2021 and December 31, 2020, the conversion price of the April 20 Note was $0.006 per share.

~~Due to the default of amortization payments due on our August 2019 Notes~~On March 31, 2021 and other notes as discussed above, the Q1 2020 Notes were deemed in default. Accordingly, the outstanding principal balance on date of default increased by 30% which amounted to approximately $613,800, default interest accrues at 18%, and the default conversion terms apply.

~~At March~~December 31, 2020, convertible notes payable related to the ~~Q1 2020 Notes~~April 20 Note amounted to ~~$1,115,369,~~$69,300, which consists of ~~$2,659,800~~$69,300 of default penalty balance due.

As discussed in Note 8 below, on August 28, 2020, a note payable with a principal balance due of $185,000 was cancelled and a new convertible note was entered into with a principal balance of $185,000. This new convertible note bears no interest and is ~~net~~payable in monthly payments of ~~unamortized debt discount~~$7,500 commencing on September 1, 2020 until paid in full. The Holder shall have the right, at Holder’s option, at any time prior to the close of ~~$1,544,431.~~business five or more days prior to a payment of principal and interest, to convert any of such Holder’s Note, in whole or in part (in denominations of $20.000 or multiples of it), into that number of shares of common stock of the Company at the conversion price equal to the lowest closing price of the Company’s common stock on the OTC Market during the ten trading days ending the business day before the date of conversion. During the year ended December 31, 2020, the Company repaid $15,000 of this convertible note. On December 31, 2020, convertible notes payable related to the April 20 Note amounted to $170,000. In January 2021, the Company issued 15,454,546 shares of its common stock upon conversion of this convertible note.

During the three months ended March 31, 2021 and 2020, due to the non-payment of amortization payments due, substantially all convertible notes were deemed in default. Accordingly, for substantially all of the loans in default, the aggregate outstanding principal balance on date of default increased by 30% which amounted to an aggregate amount of $1,387,785. This default amount due of $1,387,785 was recorded as interest expense on the accompanying condensed consolidated statement of operations. Since the default principal due is convertible at the same default terms contained in the related convertible notes, the Company determined that various terms of the convertible notes discussed above caused derivative treatment of the embedded conversion options related to the principal and default principal due. Accordingly, under the provisions of ASC 815-40 - Derivatives and Hedging – Contracts in an Entity’s Own Stock, the embedded conversion option related to the principal and default principal due were accounted for as derivative liabilities at the date of issuance and shall be adjusted to fair value through earnings at each reporting date. The fair value of the embedded conversion option derivatives related to the principal balance default principal due was determined using the Binomial valuation model. At the end of each period and on the date that debt is converted into common shares, the Company revalues the embedded conversion option derivative liabilities. In connection with the default principal due, during the three months ended March 31, 2020, on the initial measurement date, the fair values of the embedded conversion option derivatives related to default principal due of $5,880,876 was recorded as derivative liabilities and charged to current period operations as initial derivative expense.

As discussed above, the Company issued debt that consists of the issuance of convertible notes with variable conversion provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company’s common stock, default provisions and payment of amortization payments in stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of each promissory note is indeterminate. Due to the fact that the number of shares of common stock issuable may exceed the Company’s authorized share limit, effective January 30, 2020, the equity environment is tainted and all convertible debentures and warrants ~~shall be~~are included in the value of the derivative. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants and shares to be issued were recorded as derivative ~~liabilities on the issuance date.~~liabilities. On January 30, 2020, the Company evaluated all outstanding warrants to determine whether these instruments are tainted and, due to reasons discussed above, all warrants outstanding were considered tainted. Accordingly, the Company recorded a reclassification from paid-in capital to derivative liabilities of $11,381,885 for warrants becoming tainted. On January 30, 2020, the fair value of the warrants to be reclassified to derivative liabilities was determined using the Binomial valuation model.

In connection with the issuance of the Q1Q1/Q2 2020 Notes and the warrants issued in February, March and ~~March~~April 2020, ~~Warrants,~~ the Company determined that various terms of the Q1Q1/Q2 2020 Notes and Q1Q1/Q2 2020 Warrants, including the default provisions in the Q1Q1/Q2 2020 Notes discussed above, caused derivative treatment of the embedded conversion options and warrants. Accordingly, under the provisions of ASC 815-40 - Derivatives and Hedging – Contracts in an Entity’s Own Stock, the embedded conversion option contained in the Q1Q1/Q2 2020 Notes and certain warrants were accounted for as derivative liabilities at the date of issuance and shall be adjusted to fair value through earnings at each reporting date. The fair value of the embedded conversion option derivatives and warrants was determined using the Binomial valuation model.

In connection with the issuance of the April 20 Note, the Company determined that various terms of the April 20 Note, including the default provisions in the April 20 Note discussed above, caused derivative treatment of the embedded conversion options and warrants. Accordingly, under the provisions of ASC 815-40 - Derivatives and Hedging – Contracts in an Entity’s Own Stock, the embedded conversion option contained in the April 20 Note were accounted for as derivative liabilities at the date of issuance and shall be adjusted to fair value through earnings at each reporting date. The fair value of the embedded conversion option derivative was determined using the Binomial valuation model. At the end of each period and on the date that the ~~Q1 2020 Notes~~April 20 Note are converted into common shares, the Company revalues the embedded conversion option derivative liabilities. During the three months ended March 31, 2020, on the initial measurement dates, the fair values of the embedded conversion option and warrant derivatives of $8,722,831 was recorded as derivative liabilities and was allocated as a debt discount up to the net proceeds of the Q1 2020 Notes of $1,267,473, with the remainder of $7,455,358 charged to current period operations as initial derivative expense.

In connection with the period end revaluations and the initial derivative expense recorded, the Company recorded aggregate derivative income (expense) of $144,839 and $(13,384,260) for the three months ended March 31, 2020 and 2019, respectively.

During the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, the fair value of the derivative liabilities, warrants and conversion option was estimated using the Binomial valuation model ~~and the Monte-Carlo simulation model~~ with the following assumptions:

	2020		2019		2021		2020
Expected dividend rate	-		-		-		-
Expected term (in years)	1.00 to 5.00		0.05 to 0.25		0.75 to 5.00		1.00 to 5.00
Volatility	154.2% to 257.0	%	228.1	%	275.4% to 367.0	%	154.2% to 257.0	%
Risk-free interest rate	0.14% to 1.62	%	2.40	%	0.07% to 0.87	%	0.14% to 1.62	%

AtOn March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, convertible promissory notes are as follows:

	March 31, 2020			December 31, 2019			March 31, 2021			December 31, 2020
Principal amount	$	8,498,121		$	5,459,909
Add: put premium		311,660			385,385
Principal and default penalty amount							$	892,764		$	1,062,764
Less: unamortized debt discount		(3,162,352	)		(2,210,950	)		(64,535	)		(83,548	)
Convertible notes payable, net		5,647,429			3,634,344			828,229			979,216
Less: current portion of convertible notes payable		(5,647,429	)		(3,634,344	)		(828,229	)		(979,216	)
Convertible notes payable, net – long-term	$	-		$	-		$	-		$	-

On March 31, 2021, the principal and default penalty amount due of $892,764 consisted of promissory note principal balances due of $181,000 and default penalty amounts due of $711,764. On December 31, 2020, the principal and default penalty amount due of $1,062,764 consisted of promissory note principal balances due of $351,000 and default penalty amounts due of $711,764.

For the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, amortization of debt discounts related to convertible notes amounted to ~~$764,943~~$19,013 and ~~$545,443,~~$764,943, respectively, which has been included in interest expense on the accompanying condensed consolidated statements of operations.

The weighted average interest rate during the three months ended March 31, ~~2020~~2021was approximately 18.0%.

From November 22, 2019 to December 31, 2019, the Company entered into several secured merchant loans in the aggregate amount of $2,283,540. The Company received net proceeds of $1,355,986, net of original issue discounts and origination fees of $927,554. Pursuant to these several secured merchant loans, the Company was required to pay the noteholders by making daily and/or weekly payments on each business day or week until the loan amounts were paid in full. Each payment was deducted from the Company’s bank account. During the year ended December 31, 2019, the Company repaid an aggregate of $464,344 of the loans. During the three months ended March 31, 2020, the Company entered into a new secured merchant loan in the aggregate amount of $1,274,150, which consisted of $670,700 of principal transferred to this new loan by two of these secured merchants. The Company received net proceeds of $150,000, net of original issue discounts and origination fees of $453,450. During the three months ended March 31, 2020, the Company repaid an aggregate of $1,549,639 of these loans, which includes payments pursuant to settlement agreements as discussed below.

In connection with these settlement agreements, the Company recorded a loss on debt extinguishment of $214,641 which consisted of the payment of cash of $67,548 and the write off of debt of remaining debt discount of $614,809, offset by the reduction of principal balance of $467,716.

At March 31, 2020, notes payable related to these secured merchant loans amounted to $393,972, which consists of $405,290 of principal balance due and is net of unamortized debt discount of $11,318. At December 31, 2019, notes payable related to these secured merchant loans amounted to $1,057,074, which consists of $1,819,196 of principal balance due and is net of unamortized debt discount of $762,122.

~~In connection with the acquisition of Prime EFS on June 18, 2018, the Company assumed several notes payable liabilities amounting to $944,281 pursuant to secured merchant agreements (the “~~~~Assumed Secured Merchant Loans~~~~”). At~~On March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, notes payable related to Assumed Secured Merchant Loans and ~~a new~~ promissory ~~note amounted to $98,592 and $98,592, respectively.~~

On August 28, 2019, a remaining secured merchant loan balance of $184,750 was converted into a new note. Pursuant to this new note, the Company will pay the lender in twelve monthly installments of $17,705 beginning on November 25, 2019 to the maturity date of November 25, 2020. This new note bears interest at 15% per annum. This note is secured by the Company’s assets and is personally guaranteed by the former majority member of Prime EFS. During the three months ended March 31, 2020, the Company repaid $60,388 of this note. At March 31, 2020 and December 31, 2019, notes payable related to the new note amounted to $115,951 and $176,339.

On August 28, 2019, secured merchant loan balances of $261,630 were converted into new notes payable. During the three months ended March 31, 2020, the Company repaid $135,742 of these notes. Pursuant to these new notes, the Company will pay the lenders in twelve monthly installments of $25,073 beginning on November 25, 2019 to the maturity date of November 25, 2020. During the three months ended March 31, 2020, the Company repaid $135,742 of these notes. During the three months ended March 31, 2020, $4,846 of accrued interest payable was reclassified to the principal balance. At March 31, 2020 and December 31, 2019, notes payable related to these notes amounted to ~~$113,962~~$80,490 and ~~$244,858,~~$80,490, respectively.

In connection with the acquisition of Prime EFS, the Company assumed several notes payable liabilities due to entities or individuals. These notes have effective interest rates ranging from 7% to 10%, and are unsecured. AtOn March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, remaining notes payable to an entity amounted to $40,000 and $40,000, respectively.

~~From October 31, 2018 to December 31, 2018, the Company entered into Original Discount Senior Secured Demand Promissory Notes with an investor (the “~~~~Fall 2018 Promissory Notes~~”). Pursuant to the Fall 2018 Promissory Notes, the Company borrowed an aggregate of $770,000 and received net proceeds of $699,955, net of original issue discount of $70,000 and fees of $45. In December 2018, the Company repaid $220,000 of the Fall 2018 Promissory Notes. During the year ended December 31, 2019, the Company repaid $437,532 of the Fall 2018 Promissory Notes and interest due of $36,760 was reclassified to principal amount due. During the three months ended March 31, 2020, the Company repaid $50,000 of the Fall 2018 Promissory Notes. At March 31, 2020 and December 31, 2019, notes payable to this entity amounted to $99,228 and $149,228, respectively. The remaining Fall 2018 Promissory Notes are payable on demand. The Fall 2018 Promissory Notes are secured by the Company’s assets.

During the year ended December 31, 2019, the Company entered into separate promissory notes with several individuals totaling $2,517,150, including $40,000 of a previous note rolled into these new notes, and received net proceeds of $2,238,900, net of original issue discounts of $238,250. These notes were due between 45 and 273 days from the respective note issuance date. In connection with these promissory notes, in 2019, the Company issued 58,000 warrants to purchase 58,000 shares of the Company’s common stock at an exercise price of $1.00 per share. The warrants are exercisable over a five-year period. During the year ended December 31, 2019, the Company repaid $1,118,400 of these notes. Additionally, during the year ended December 31, 2019, the Company issued 439,623 shares of its common stock and 439,623 five year warrants exercisable at $2.50 per share upon conversion of notes payable of $978,750 and accrued interest of $120,307 at a conversion price of $2.50 per share. Since the conversion price of $2.50 was equal to the fair value of the shares as determined by recent sales of the Company’s common shares, no beneficial feature conversion was recorded. During the ~~three months~~year ended ~~March~~December 31, 2020, the Company borrowed additional fund from individuals of $443,000, and received net proceeds of $423,000, net of original issue discount of $20,000, ~~and~~ the Company repaid ~~$298,000~~$320,500 of these ~~funds. At~~funds, and a note with a principal balance of $195,000 was transferred into the April 20, 2020 convertible note discussed above. Furthermore, on June 30, 2020, one of these notes with a principal balance due of $150,000 and accrued interest payable of $82,274 was settled and a new note was entered into with a principal balance of $200,000. This new note bores no interest and was payable in monthly payments of $7,500 commencing on July 1, 2020 until paid in full. The Company repaid $15,000 of such note. On August 28, 2020, this note payable with a principal balance due of $185,000 was cancelled and a new convertible note was entered into with a principal balance of $185,000 (See Note 7). On March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, notes payable related to these individuals amounted to ~~$565,000~~$220,000 and ~~$420,000,~~$220,000, respectively.

On January 15, 2021, in connection with the acquisition of DDTI, the Company issued a promissory note in the amount of $400,000. The principal amount of $400,000 is payable in four installments of $100,000 plus accrued interest as follows: $100,000 plus accrued interest was due and paid on April 15, 2021, $100,000 plus accrued interest is due on July 15, 2021, $100,000 plus accrued interest is due on October 15, 2021 and $100,000 plus all remaining accrued interest is due on January 15, 2022. Interest accrues at 4% per annum. On March 31, 2021, the liability related to this note was $400,000.

On March 24, 2021, in connection with the acquisition of Cougar Express, the Company issued a promissory note in the amount of $350,000. The principal amount of $350,000 is payable in two installments of $175,000 plus accrued interest as follows: $175,000 plus accrued interest is due on September 23, 2021 and $175,000 plus all remaining accrued interest is due on March 23, 2022. Interest accrues at 6% per annum. On March 31, 2021, the liability related to this note was $350,000.

In connection with the acquisition of Prime EFS, the Company assumed several equipment notes payable liabilities due to entities. AtOn March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, equipment notes payable to these entities amounted to ~~$53,668~~$39,825 and ~~$57,001,~~$43,363, respectively.

During the years ended December 31, 2019 and 2018, the Company entered into auto financing agreements in the amount of $44,905 and $162,868, respectively. ~~During the years ended December 31, 2019 and 2018, the Company repaid $24,030 and $1,832 of these notes, respectively. At~~On March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, auto notes payable to these entities amounted to ~~$173,239~~$143,699 and ~~$181,911,~~$151,710, respectively.

In November 2019, the Company entered into a promissory note for the purchase of five trucks in the amount of $460,510. The note is due in sixty monthly installments of $9,304. The first payment was paid in December 2019 and the remaining fifty-nine payments are due monthly commencing on January 27, 2020. The note is secured by the trucks and is personally guaranteed by the Company’s chief executive officer. ~~During the three months ended~~On March 31, ~~2020, the Company repaid $19,002 of this note. At March~~2021 and December 31, 2020, equipment note payable to this entity amounted to ~~$441,508.~~$354,741 and $375,422, respectively.

AtIn connection with the acquisition of DDTI, the Company assumed several truck notes payable liabilities due to entities. On March 31, 2021, truck notes payable to these entities amounted to $98,086.

In connection with the acquisition of Cougar Express, the Company assumed several equipment notes payable liabilities due to entities. On March 31, 2021, equipment notes payable to these entities amounted to $16,249.

On April 2, 2020, the Company’s subsidiary, Shypdirect, entered into a Paycheck Protection Program promissory note (the “Shypdirect PPP Loan”) with M&T Bank in the amount of $504,940 under the Small Business Administration (the “SBA”) Paycheck Protection Program (the “Paycheck Protection Program”) of the Coronavirus Aid, Relief and Economic Security Act of 2020 (the “CARES Act”). On April 28, 2020, the Shypdirect PPP Loan was approved and Shypdirect received the loan proceeds on May 1, 2020. Shypdirect used the proceeds for covered payroll costs, rent and utilities in accordance with the relevant terms and conditions of the CARES Act. The Shypdirect PPP Loan has a two-year term, matures on April 28, 2022, and bears interest at a rate of 1.00% per annum. Monthly principal and interest payments, less the amount of any potential forgiveness (discussed below), was to commence on November 28, 2020.

On April 15, 2020, the Company’s subsidiary, Prime EFS, entered into a Paycheck Protection promissory note (the “Prime EFS PPP Loan” and together with the Shypdirect PPP Loan, the “PPP Loans”) with M&T Bank in the amount of $2,941,212 under the SBA Paycheck Protection Program of the CARES Act. On April 15, 2020, the Prime EFS PPP Loan was approved and Prime EFS received the loan proceeds on April 22, 2020. Prime EFS used the proceeds for covered payroll costs, rent and utilities in accordance with the relevant terms and conditions of the CARES Act. The Prime EFS PPP Loan has a two-year term, matures on April 16, 2022, and bears interest at a rate of 1.00% per annum. Monthly principal and interest payments, less the amount of any potential forgiveness (discussed below), was to commence on November 16, 2020.

Neither Prime EFS nor Shypdirect provided any collateral or guarantees for these PPP Loans, nor did they pay any facility charge to obtain the PPP Loans. These promissory notes provide for customary events of default, including, among others, those relating to failure to make payment, bankruptcy, breaches of representations and material adverse effects. Prime EFS and Shypdirect may prepay the principal of the PPP Loans at any time without incurring any prepayment charges. These PPP Loans may be forgiven partially or fully if the loan proceeds are used for covered payroll costs, rent and utilities, provided that such amounts are incurred during the twenty-four week period that commenced on May 1, 2020 and ~~December 31, 2019, notes payable consisted~~at least 60% of any forgiven amount has been used for covered payroll costs. The Company exhausted such funds in the third quarter of 2020. In the fourth quarter of 2020, Shypdirect applied for full forgiveness of the ~~following:~~Shypdirect PPP Loan. In the second quarter of 2021, Prime EFS applied for partial loan forgiveness on the Prime EFS PPP Loan in the amount of $2,691,884. However, any forgiveness of these PPP Loans is subject to approval by the SBA and M&T Bank and there is no guarantee that such forgiveness will be granted.

During 2020, prior to the acquisition of Cougar Express by the Company, Cougar Express entered into a Paycheck Protection Program promissory note (the “Cougar PPP Loan”) in the amount of $622,240 under the SBA Paycheck Protection Program of the CARES Act. Pursuant to the Cougar Stock Purchase Agreement, the Company did not assume and shall not be responsible to pay the Cougar PPP loan. Cougar Express has filed for forgiveness of this loan and is waiting for the final determination by the bank and SBA. The prior shareholder of Cougar Express agreed to indemnify and hold the Buyer (and its directors, officers, employees and affiliates) harmless from and with respect to any and all claims, liabilities, losses, damages, costs and expenses, including, without limitation, the reasonable fees and expenses of counsel (collectively, the “Losses”), related to or arising directly or indirectly out of, among other items, any claim that any portion or all of the Cougar PPP loan secured by Cougar Express is to be repaid to the lender. Since the Cougar PPP Loan was not forgiven as of March 31, 2021, the Company has reflected the Cougar PPP loan of $622,240 as outstanding on March 31, 2021 and the Company recorded a note receivable of $622,240 which is due from the prior shareholder of Cougar Express if the Cougar PPP Loan is not forgiven. Any forgiveness of the Cougar PPP Loan is subject to approval by the SBA and the bank and there is no guarantee that such forgiveness will be granted.

For the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, amortization of debt discounts related to notes payable amounted to ~~$594,445~~$0 and ~~$525,829,~~$594,445, respectively, which has been included in interest expense on the accompanying condensed consolidated statements of operations.

~~The Company increased its authorized preferred shares to 10,000,000 shares in July 2018.~~

On April 9, 2019, the Company entered into agreements with all holders of its Series A Convertible Preferred Stock to exchange all 4,000,000 outstanding shares of preferred stock for an aggregate of 2,600,000 shares of restricted common stock. Upon conversion, pursuant to Section 9(i) of the Certificate of Designation, the Series A preferred stock became undesignated upon their return to the Company.

In August 2019, the Company designated Series B Preferred Shares consisting of 1,700,000 shares with a par value of $0.001 and a stated value of $0.001. The Series B preferred shares have no voting rights and are not redeemable. Each share of Series B Preferred stock is convertible into one share of common stock at the option of the holder subject to beneficial ownership limitation.

On August 16, 2019, the Company issued 1,000,000 Series B preferred shares for services rendered to the former member of Prime EFS who iswas considered a related party. ~~The~~On July 24, 2020, the Company issued 1,000,000 shares ~~were valued at $2.50 per shares on an as if converted basis to common shares based on recent sales~~ of ~~the Company’s~~its common stock upon conversion of ~~$2.50 per share. In connection with the issuance~~1,000,000 shares of ~~these~~ Series B Preferred ~~shares, the Company recorded stock-based compensation of $2,500,000.~~shares.

On August 16, 2019, the Company issued 700,000 shares of Series B Preferred shares upon settlement of 700,000 shares of issuable common ~~shares (see Note 6).~~shares.

~~Pursuant~~The Board of Directors (the “Board”) created the Series D pursuant to the ~~August 2019 Purchase Agreement (see Note 6), by and among the Company and the investors named therein (the “~~~~August 2019 Investors~~”), the Company is required to keep reserved for issuance to the August 2019 Investors three times the number of shares of common stock issuable to the August 2019 Investors upon conversion or exercise, as applicable, of convertible notes and warrants held by the August 2019 Investors (the “~~August 2019 Reserve Requirement~~~~��). If the Company fails to meet the August 2019 Reserve Requirement within 45 days after written notice from an August 2019 Investor, the Company must,~~ ~~inter alia~~~~, sell to the Lead Investor (as defined~~authority vested in the August 2019 Purchase Agreement) for $100 a series of preferred stock which holds voting power equal to 51% of the number of votes eligible to vote at any special or annual meeting of the Company’s stockholders (with the power to take actionBoard by ~~written consent in lieu of a stockholders meeting) for the sole purpose of amending~~ the Company’s Amended and Restated Articles of Incorporation to issue up to 10,000,0000 shares of preferred stock, $0.001 par value per share. The Company’s Amended and Restated Articles of Incorporation explicitly authorize the Board to issue any or all of such shares of preferred stock in one (1) or more classes or series and to fix the designations, powers, preferences and rights, the qualifications, limitations or restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any class or series, without further vote or action by the stockholders.

On July 20, 2020, the Board filed the Certificate of Designation of Preferences (“COD”), Rights and Limitations of Series D Preferred Stock (the “Series D COD”) with the Secretary of State of the State of Nevada designating 1,250,000 shares of preferred stock as Series D. The Series D does not have the right to vote. The Series D has a stated value of $6.00 per share (the “Stated Value”). Subject only to the liquidation rights of the holders of Series B Preferred Stock that is currently issued and outstanding, upon the liquidation, dissolution or winding up of the business of the Company, whether voluntary or involuntary, the Series D is entitled to receive an amount per share equal to the Stated Value and then receive a pro-rata portion of the remaining assets available for distribution to the holders of common stock on an as-converted to common stock basis. Until July 20, 2021, the holders of Series D have the right to participate, pro rata, in each subsequent financing in an amount up to 25% of the total proceeds of such financing on the same terms, conditions and price otherwise available in such subsequent financing.

Subject to a beneficial ownership limitation and customary adjustments for stock dividends and stock splits, each share of Series D is convertible into 1,000 shares of common stock. A holder of Series D may not convert any shares of Series D into common stock if the holder (together with the holder’s affiliates and any persons acting as a group together with the holder or any of the holder’s affiliates) would beneficially own in excess of 4.99% of the number of shares of common stock outstanding immediately after giving effect to the conversion, as such percentage ownership is determined in accordance with the terms of the Series D COD. However, upon notice from the holder to the Company, the holder may decrease or increase the beneficial ownership limitation, which may not exceed 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Series D COD, provided that any such increase or decrease in the beneficial ownership limitation will not take effect until 61 days following notice to the Company.

Approval of at least a majority of the outstanding Series D is required to: (a) amend or repeal any provision of, or add any provision to, the Company’s Articles of Incorporation or bylaws, or file any Certificate of Designation (however such document is named) or articles of amendment to create any class or any series of preferred stock, if such action would adversely alter or change in any respect the preferences, rights, privileges or powers, or restrictions provided for the benefit, of the Series D, regardless of whether any such action shall be by means of amendment to the Articles of Incorporation or bylaws or by merger, consolidation or otherwise or filing any Certificate of Designation, it being understood that the creation of a new security having rights, preferences or privileges senior to or on parity with the Series D in a future financing will not constitute an amendment, addition, alteration, filing, waiver or repeal for these purposes; (b) increase or decrease (other than by conversion) the authorized number of Series D; (c) issue any Series D, other than to the Investors; or (d) without limiting any provision hereunder, whether or not prohibited by the terms of the Series D, circumvent a right of the Series D.

On July 20, 2020 and July 22, 2020, the Company entered Exchange Agreements with two Investors to exchange outstanding August 2019 Notes and August 2019 Warrants for a newly created series of preferred stock designated the Series D Convertible Preferred Stock. Pursuant to the Exchange Agreements, the Investors exchanged August 2019 Notes with an aggregate remaining principal amount outstanding of $500,184, accrued interest payable of $85,827, and Warrants to purchase 423,159,293 shares of Common Stock for 522,726 shares of Series D (the “Exchange”). The Series D shares issued in the exchange had an equivalent fair value as if the investors had converted their debt to common stock at the contractual rate in the convertible notes and therefore, there was no gain or loss on the exchange, In connection with the issuance of the Series D shares, the Company recorded a loss on debt extinguishment of $239,678 which is associated with the fair market value of the excess shares issued upon conversion of other settlement amounts.

During the period from July 1, 2020 to December 31, 2020, the Company issued 522,726,000 shares of its common stock in connection with the conversion of 522,726 shares of Series D. The conversion ratio was 1,000 shares of common stock for each share of Series D based on the Series D COD. Accordingly, as of March 31, 2021 and December 31, 2020, no shares of Series D were outstanding.

These Series D preferred share issuances which were not redeemable were evaluated to determine whether temporary or permanent equity classification on the consolidated balance sheet was appropriate. As per the terms of the Series D preferred stock agreements, Series D preferred stock was not redeemable. As such, since Series D preferred stock was not redeemable, the Series D preferred stock was classified as permanent equity. The Company also concluded that the conversion rights under the Series D Preferred Stock were clearly and closely related to the equity host instrument. Accordingly, the conversion rights feature on the Series D Preferred Stock were not considered an embedded derivative that required bifurcation.

To consummate the Series E Offering, the Company’s Board of Directors (the “Board”) created the Series E Convertible Preferred Stock (the “Series E”) pursuant to the authority vested in the Board by the Company’s Amended and Restated Articles of Incorporation to issue up to 10,000,0000 shares of preferred stock, $0.001 par value per share, of which 7,049,999 are unissued and undesignated. The Company’s Amended and Restated Articles of Incorporation explicitly authorize the Board to issue any or all of such shares of preferred stock in one (1) or more classes or series and to fix the designations, powers, preferences and rights, the qualifications, limitations or restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any class or series, without further vote or action by the stockholders.

On October 6, 2020, the Board filed the Certificate of Designation of Preferences, Rights and Limitations of Series E Convertible Preferred Stock (the “Series E COD”) with the Secretary of State of the State of Nevada designating 562,250 shares of preferred stock as Series E. On December 28, 2020, the Board filed an Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series E Convertible Preferred Stock (the “Amended Series E COD”) with the Secretary of State of the State of Nevada. The Series E has a stated value of $13.34 per share (the “Stated Value”). Pursuant with the Amended Series E COD,

Subject to a beneficial ownership limitation and customary adjustments for stock dividends and stock splits, each share of Series E shall be convertible into that number of shares of Common Stock calculated by dividing the Stated Value of each share of Series E being converted by the Conversion Price. The initial Conversion Price shall be $0.01 which shall be subject to adjustment as provided below. In addition, the Company shall issue the Holder converting all or any portion of Series E an additional sum (the “Make Good Amount”) equal to $210 for each $1,000 of Stated Value of the Series E converted pro-rated for amounts more or less than $1,000, increasing to $310 for each $1,000 of Stated Value during the Triggering Event Period (the “Extra Amount”). Subject to the Beneficial Ownership Limitation, the Make Good Amount shall be paid in Shares of Common Stock, as follows: The number of shares of Common Stock issuable as the Make Good Amount shall be calculated by dividing the Extra Amount by the product of 80% times the average VWAP for the five Trading Days prior to the date a Holder delivered a notice of conversion to the Company (the “Conversion Date”). During the Triggering Event Period, the number of shares of Common Stock issuable as the Make Good Amount shall be calculated by dividing the Extra Amount by the product of 70% times the average VWAP for the five Trading Days prior to the Conversion Date.

Subject to the Beneficial Ownership Limitation, at any time during the period commencing on the date of the occurrence of a Triggering Event and ending on the date of the cure of such Triggering Event (the “Triggering Event Period”), a Holder may, at such Holder’s option, by delivery of a conversion notice to the Company to convert all, or any number of Series E (such conversion amount of the Series E to be converted pursuant to this Section 6(b) (the “Triggering Event Conversion Amount”), into shares of Common Stock at the Triggering Event Conversion Price. The “Triggering Event Conversion Amount” means 125% of the Stated Value and the “Triggering Event Conversion Price” means $0.006.

Triggering events include, but are not limited to, (1) failure to satisfy Rule 144 current public information requirements; (2) ceasing to be a reporting company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or failing to comply with the reporting requirements of a reporting company under the Exchange Act; (3) suspension from or termination of trading; (4) failure to reserve sufficient shares of Common Stock (after cure periods and subject to certain extensions); (5) various insolvency proceedings (subject to certain carveouts); (6) material breach of the Series E Offering transaction documents; and (7) failure to comply with conversion of any Series E shares when requested by the holder thereof.

If and whenever on or after the Initial Issuance Date but not after two years from the Original Issuance Date, the Company issues or sells, or is deemed to have issued or sold, additional shares of common stock, options, warrants of convertible instruments, other than an Exempt Issuance, for a consideration per share (the “Base Share Price”) less than a price equal to the Conversion Price in effect immediately prior to such issuance or sale or deemed issuance or sale (such Conversion Price then in effect is reflected to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the conversion price then in effect shall be reduced to an amount equal to the Base Share Price.

From and after the Original Issuance Date, cumulative dividends on each share of Series E shall accrue, whether or not declared by the Board of Directors and whether or not there are funds legally available for the payment of dividends, on a daily basis in arrears at the rate of 6% per annum based on a 360-day year on the Stated Value plus all unpaid accrued and accumulated dividends thereon. During the three months ended March 31, 2021, the Company accrued dividends of $52,326 which has been included in accrued expenses on the accompanying condensed consolidated balance sheet.

On a pari passu basis with the holders of Series D Convertible Preferred Stock that was issued and outstanding, upon the liquidation, dissolution or winding up of the business of the Company, whether voluntary or involuntary, the Series E is entitled to receive an amount per share equal to the Stated Value and then receive a pro-rata portion of the remaining assets available for distribution to the holders of Common Stock on an as-converted to Common Stock basis. Until the date that such Series E shareholder no longer owns at least 50% of the Series E, the holders of Series E have the right to participate, pro rata, in each subsequent financing in an amount up to 25% of the total proceeds of such financing on the same terms, conditions and price otherwise available in such subsequent financing.

A holder of Series E may not convert any shares of Series E into Common Stock if the holder (together with the holder’s affiliates and any persons acting as a group together with the holder or any of the holder’s affiliates) would beneficially own in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the conversion, as such percentage ownership is determined in accordance with the terms of the Series E COD. However, upon notice from the holder to the Company, the holder may decrease or increase the beneficial ownership limitation, which may not exceed 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Amended Series E COD, provided that any such increase or decrease in the beneficial ownership limitation will not take effect until 61 days following notice to the Company.

Approval of at least a majority of the outstanding Series E is required to: (a) amend or repeal any provision of, or add any provision to, the Company’s Articles of Incorporation or bylaws, or file any Certificate of Designation (however such document is named) or articles of amendment to create any class or any series of preferred stock, if such action would adversely alter or change in any respect the preferences, rights, privileges or powers, or restrictions provided for the benefit, of the Series E, regardless of whether any such action shall be by means of amendment to the Articles of Incorporation or bylaws or by merger, consolidation or otherwise or filing any Certificate of Designation, but the creation of a new security having rights, preferences or privileges senior to or on parity with the Series E in a future financing will not constitute an amendment, addition, alteration, filing, waiver or repeal for these purposes; (b) increase or decrease (other than by conversion) the authorized number of Series E; (c) issue any Series D Convertible Preferred Stock, (d) issue any Series E in excess of 562,250 or (e) without limiting any provision under the Series E COD, whether or not prohibited by the terms of the Series E, circumvent a right of the Series E.

On October 8, 2020, the Company entered into a Securities Purchase Agreement with the investors party thereto (collectively the “Investors”) pursuant to which the Investors agreed to purchase units, severally and not jointly, which consisted of an aggregate of (i) 47,977 shares of Series E Convertible Preferred Stock (the “Series E”) and (ii) warrants (the “Warrants”) to purchase 23,988,500 shares of the Company’s common stock which are equal to 50% of the shares of common stock issuable upon conversion of the Series E if the Series E were converted on October 8, 2020 (the “October 2020 Series E Offering”). The gross proceeds to the Company were $640,000, or $13.34 per unit which is the stated value of each Series E share. The Company paid fees of $35,000 and received net proceeds of $605,000. The initial exercise price of the Warrants related to the October 2020 Series E Offering is $0.04 per share, subject to adjustment. Due to down-round provisions in the Warrants, the number of warrants was increased from 23,988,500 warrants to 95,954,000 warrants, and the exercise price was reduced to $0.01 per share.

On December 28, 2020 and December 30, 2020, the Company entered into Securities Purchase Agreements with investors pursuant to which the Investors agreed to purchase units, severally and not jointly, which consisted of an aggregate of (i) 57,400 shares of Series E and (ii) Warrants to purchase 76,571,429 shares of the Company’s common stock which are equal to 1,334 warrants for each for each share of Series E purchased (the “December 2020 Series E Offering”). The gross proceeds to the Company were $670,000, or $11.67 per unit. The Company paid fees of $112,000 and received net proceeds of $558,000. The initial exercise price of the Warrants related to the December 2020 Series E Offering is $0.01 per share, subject to adjustment. In connection with the issuance of the Series E and related warrants, the Company recorded a deemed dividend of $527,230 related to the beneficial conversion features of the Series E.

During the three months ended March 31, 2021, the Company entered into Securities Purchase Agreements with investors pursuant to which the Investors agreed to purchase units, severally and not jointly, which consisted of an aggregate of (i) 310,992 shares of Series E and (ii) Warrants to purchase 414,857,146 shares of the Company’s common stock which are equal to 1,334 warrants for each for each share of Series E purchased (the “Q1 2021 Series E Offering”). The gross proceeds to the Company were $3,630,000, or $11.67 per unit. The Company paid fees of $372,000 and received net proceeds of $3,258,000. The initial exercise price of the Warrants related to the Q1 2021 Series E Offering is $0.01 per share, subject to adjustment. Additionally, the Company issued 82,971,429 warrants to the placement agent at an initial exercise price of $0.01 per share. In connection with the issuance of the Series E and related warrants, during the three months ended March 31, 2021, the Company recorded a deemed dividend of $777,510 related to the beneficial conversion features of the Series E.

In connection with the Series E Offerings, the Company entered into Registration Rights Agreements (the “Series E Registration Rights Agreements”) pursuant to which the Company agreed to file a registration statement on Form S-1 to register the resale of the shares of Common Stock issuable to the Investors upon conversion of the Series E Preferred Stock and exercise of the Warrants. Pursuant to the Series E Registration Rights Agreements, if a registration statement registering for resale all of the shares of common stock issuable under Series E Convertible Preferred Stock and Warrants (i) is not filed with the Commission by the Company within 30 days of the closing dates or any other registration statement, (ii) is not declared effective by the Commission by the Effectiveness Date of the initial registration statement (90 days following the closing date) or any other registration statement, or (iii) after the effective date of a registration statement, such registration statement ceases for any reason to remain continuously effective as to all registrable securities included in such registration statement for more than 30 calendar days during any 12-month period (any such failure or breach being referred to as an “Event”, and the date on which such Event occurs, being referred to as “Event Date”), then, in addition to any other rights the Holders may have under the Series E Registration Rights Agreements or under applicable law, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, the Company is obligated to pay to each Holder an amount in cash, as partial liquidated damages and not as a penalty, equal to 1% of the purchase price paid by such Holder pursuant to the Series E Purchase Agreement, during which such Event continues uncured. Also pursuant to the Series E Registration Rights Agreements, the partial liquidated damages provisions summarized above apply on a daily pro rata basis for any portion of a month prior to the cure of an Event. The Company did not file its initial registration statement within 30 days of the closing date of certain of the Registration Rights Agreements (the “Filing Events”) and such registration statement was not declared effective by the Commission by the Effectiveness Date of certain of the Registration Rights Agreements (the “Effectiveness Events”). The Company filed a registration statement on Form S-1 for the shares of Common Stock issuable to the Investors upon conversion of the Series E Preferred Stock and exercise of the Warrants (the “S-1 Registration Statement”) on April 22, 2021 (the “Filing Date”), which was declared effective by the Commission on May 5, 2021 (the “Effective Date”). The filing of the S-1 Registration Statement cured the Filing Events as of the Filing Date. The declaration of effectiveness of the S-1 Registration Statement cured the Effectiveness Events as of the Effective Date.

These Series E preferred share issuances with redemption provisions that permit the issuer to settle in either cash or common stock, at the option of the issuer, were evaluated to determine whether temporary or permanent equity classification on the consolidated balance sheet was appropriate. As per the terms of the Series E preferred stock agreements, the Company shall have the right but not the obligation to redeem all outstanding Series E (and not any part of the Series E) at a price equal to 115% of (i) the Stated Value per share plus (ii) all unpaid dividends thereon. As such, since Series E preferred stock is redeemable upon the occurrence of an event that is within the Company’s control, the Series E preferred stock is classified as permanent equity.

The Company concluded that the Series E Preferred Stock represented an equity host and, therefore, the redemption feature of the Series E Preferred Stock was considered to be clearly and closely related to the associated equity host instrument. The redemption features did not meet the net settlement criteria of a derivative and, therefore, were not considered embedded derivatives that required bifurcation. The Company also concluded that the conversion rights under the Series E Preferred Stock were clearly and closely related to the equity host instrument. Accordingly, the conversion rights feature on the Series E Preferred Stock were not considered an embedded derivative that required bifurcation.

On December 8, 2020 the Company entered into an Engagement Agreement (the “Engagement Agreement”) with a placement agent to act as an exclusive selling/placement agent for the Company to assist in a financing for the Company. In connection with the engagement letter, the Company agreed to pay to the placement agent at each full or incremental closing of any equity financing, convertible debt financing, debt conversion or any instrument convertible or exercisable into the Company’s common stock (the “Securities Financing”) during the Exclusive Period which is for a period of 90 days from the date of execution of this Letter Agreement; (i) a cash transaction fee in the amount of 10% of the amount of the Securities Financing; and (ii) warrants (the “Warrants”) with a 5 year term and cashless exercise, equal to 10% of the amount of securities sold (on an as converted basis) in the Securities Financing, at an exercise price equal to the investor’s warrant exercise price of the Securities Financing. In connection with this Engagement Agreement, through December 31, 2020, the Company paid the placement agent cash of $67,000 and issued 15,314,285 warrants to the placement agent at an initial exercise price of $0.01 per share. Additionally, during the three months ended March 31, 2021, the Company paid the placement agent cash of $363,000 and issued 82,971,429 warrants to the placement agent at an initial exercise price of $0.01 per share. The cash fee of $363,000 was charged against the proceeds of the offering in additional paid-in capital and there is no effect on equity for the placement agent warrants.

On February 23, 2021, stockholders holding at least 51% of the voting power of the stock of the Company entitled to vote thereon consented, in writing, to amend the Company’s Amended and Restated Articles of Incorporation, by adoption of the Certificate of Amendment to the Amended and Restated Articles of Incorporation of the Company to authorize an increase of the number of shares of common stock that the Company ~~is authorized~~may issue to ~~issue, which such preferred stock will be automatically cancelled upon the effectiveness of the resulting~~10,000,000,000 shares, par value $0.001 (the “2021 Amendment”). The increase in the ~~Company’s~~number of authorized ~~stock. By letter agreement dated, June 4, 2020,~~share was needed to meet the ~~Lead Investor assigned this contract right to John Mercadante,~~share reserve requirements under the ~~chief executive officer of the Company.~~Series E.

~~On June 5, 2020,~~The Company filed a preliminary information statement on Schedule 14C regarding the stockholders’ consent to the Authorized Share Increase Amendment with the SEC on March 3, 2021. This consent was sufficient to approve the 2021 Amendment under Nevada law. The Company ~~sold~~filed a definitive information statement on Schedule 14C on March 15, 2021 and first mailed that information statement to ~~John Mercadante, for $100.00, one share of Series C Preferred Stock which has voting power equal to 51% of the number of votes eligible to vote at any special or annual meeting of the Company’s~~ stockholders (with the power to take action by written consent in lieu of a stockholders meeting) for the sole purpose of amending the Company’s Amended and Restated Articles of Incorporation to increase the number of shares of common stock that the Company is authorized to issue. Upon the effectiveness of the amendment, the Series C Preferred Stock will be automatically cancelled. The Series C Preferred Stock is not entitled to vote on any other matter, is not entitled to dividends, is not convertible into any other security of the Company and is not entitled to any distributions upon liquidation of the Company (See Note 13 – Subsequent Events).

On February 25, 2019, the Company granted an aggregate of 2,670,688 shares of its common stock to an executive officer, employees and consultants of the Company for services rendered. The shares were valued at $2,750,808, or $1.03 per share, based on the quoted trading price on the date of grant. In connection with these shares, the Company recorded stock-based compensation of $2,750,808.March 15, 2021.

On January 11, 2021, the Company issued 15,454,545 shares of its common stock in connection with the conversion of a convertible note payable of $170,000. The conversion price was based on contractual terms of the related debt.

During the three months ended March 31, 2020, the Company issued 5,290,406 shares of its common stock upon the partial conversion of a convertible note principal and default interest balances due of $310,894, and accrued interest payable of due of $30,625 at the contractual conversion price. The Company accounted for the partial conversion of these convertible notes pursuant to the guidance of ASC 470-20, Debt with Conversion and Other Options. Under ASC 470-20, the Company recognized an aggregate loss on debt extinguishment upon conversion in the amount of $172,720 which is associated with the difference between the fair market value of the shares issued upon conversion and the conversion price and is equal to the fair value of the shares of common stock transferred upon conversion.

Stock option activities for the three months ended March 31, ~~2020~~2021 are summarized as follows:

Warrants issued in connection with ~~convertible debt~~Series E preferred shares

In connection with certain down-round provisions on the Series E warrants issued in October 2020, the Company increased the number of warrants by 71,965,500.

~~During~~In connection with the sale of Series E preferred shares, during the three months ended March 31, ~~2020, the Company closed the Q1 2020 Purchase Agreements with accredited investors. Pursuant to the terms of the Q1 2020 Purchase Agreements,~~2021, the Company issued ~~Q1 2020 Warrants~~warrants to purchase ~~up to 818,400~~414,857,146 shares of the Company’s common ~~stock (See Note 6). The Q1 2020 Warrants are exercisable at any time on or after~~stock. Additionally, the ~~date of~~Company issued 82,971,429 warrants to the issuance and entitle the investors to purchase shares of the Company’s common stock for a period of five years from the initial date the Q1 2020 Warrants become exercisable. Under the terms of the Q1 2020 Warrants, the investors are entitled to exercise the Q1 2020 Warrants to purchase up to 818,400 shares of the Company’s common stockplacement agent at an initial exercise price of $0.40, subject to adjustment as detailed in the respective Q1 2020 Warrant. In connection with the 374,000 warrants issued in January 2020, the Company calculated the relative fair value of these warrants in the amount of $262,872 which was added to debt discount and will be amortized over the term of the notes (see Note 6)$0.01 per share. (See Series E preferred shares above). In connection with the 444,400 warrants issued in February and March 2020, the Company determined that various terms of these Q1 2020 Notes and Q1 2020 Warrants, including the default provisions in the Q1 2020 Notes discussed in Note 6, caused derivative treatment of the warrants. During the three months ended March 31, 2020, on the initial measurement dates, the fair value of the warrant derivatives of $456,631 was recorded as derivative liabilities and was allocated as a debt discount up to the net proceeds of the Q1 2020 Notes of $456,631. The fair value of these warrants was estimated using the Binomial valuation model with the assumptions as outlined in Note 6.

On August 30, 2019, pursuant to the terms of the August 2019 Purchase Agreements with accredited investors, the Company issued August 2019 Warrants to purchase up to 987,940 shares of the Company’s common stock (See Note 6). The August 2019 Warrants are exercisable at any time on or after the date of the issuance and entitles the investors to purchase shares of the Company’s common stock for a period of five years from the initial date the August 2019 Warrants become exercisable. Under the terms of the August 2019 Warrants, the investors were entitled to exercise the August 2019 Warrants to purchase up to 987,940 shares of the Company’s common stock at an initial exercise price of $3.50, subject to adjustment as detailed in the respective August 2019 Warrants. On September 6, 2019, the Company sold its common shares at $2.50 per share and accordingly, the August 2019 Warrant down-round provisions were triggered. As a result, the number of warrants was increased by 395,176 to 1,383,116 warrants and the exercise price was lowered to $2.50. On January 7, 2020, the Company issued new convertible debt with an initial conversion price of $0.40 per share and warrants exercisable at $0.40 per share and accordingly, the conversion price and warrant down-round provisions were triggered. As a result, the conversion price of this debt was reduced to $0.40 per share, and the number of warrants was increased to 8,644,474 warrants and the exercise price was lowered to $0.40. As a result of the January 7, 2020 trigger of the down-round provisions, on January 7, 2020, the Company recorded a deemed dividend of $17,836,244 which represents the fair value transferred to the warrant holders from the down-round feature being triggered. The Company calculated the difference between the August 2019 Warrants’ fair value on January 7, 2020, the date the down-round feature was triggered using the current exercise price and the new exercise price and the new number of warrants. The deemed dividend was recorded as an increase in accumulated deficit and increase in paid-in capital and increased the net loss to common shareholders by the same amount.

In October 2019, pursuant to the terms of the October 3 Purchase Agreement with an accredited investor, the Company issued the October 3 Warrant to purchase up to 66,401 shares of the Company’s common stock (See Note 6). The October 3 Warrant is exercisable at any time on or after the date of the issuance and entitles the investor to purchase shares of the Company’s common stock for a period of five years from the initial date the October 3 Warrant becomes exercisable. Under the terms of the October 3 Warrant, the investor is entitled to exercise the October 3 Warrant to purchase up to 66,401 shares of the Company’s common stock at an initial exercise price of $3.51, subject to adjustment as detailed in the October 3 Warrant. The October 3 Warrant includes a down-round provision under which the October 3 Warrant exercise price could be affected, on a full-ratchet basis, by future equity offerings undertaken by the Company. Subsequent to October 3, 2019, the Company issued convertible debt with a conversion price of $2.50 per share and accordingly, the October 3 Warrant down-round provisions were triggered. As a result, the October 3 Warrant exercise price was lowered to $2.50 and the number of warrants was increased to 66,667 warrants. On January 7, 2020, the Company issued new convertible debt with an initial conversion price of $0.40 per share and warrants exercisable at $0.40 per share and accordingly, the conversion price and warrant down-round provisions were triggered. As a result, the conversion price of this debt was reduced to $0.40 per share, and the number of warrants was increased to 416,669 warrants and the exercise price was lowered to $0.40. As a result of the January 7, 2020 trigger of the down-round provisions, on January 7, 2020, the Company recorded a deemed dividend of $859,768 which represents the fair value transferred to the warrant holders from the down-round feature being triggered. The Company calculated the difference between October 3 Warrant’s fair value on January 7, 2020, the date the down-round feature was triggered using the current exercise price and the new exercise price and the new number of warrants. The deemed dividend was recorded as an increase in accumulated deficit and increase in paid-in capital and increased the net loss to common shareholders by the same amount.

As discussed in Note 6 above, the Company issued debt that consists of the issuance of convertible notes with variable conversion provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company’s common stock, default provisions and payment of amortization Payments in stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Due to the fact that the number of shares of common stock issuable exceed the Company’s authorized share limit, effective January 30, 2020, the equity environment is tainted and all convertible debentures and warrants shall be included in the value of the derivative. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the warrants were recorded as derivative liabilities on the issuance date. On January 30, 2020, the Company evaluated all outstanding warrants to determine whether these instruments are tainted and, due to reasons discussed above, all warrants outstanding were considered tainted. Accordingly, the Company recorded a reclassification from paid-in capital to derivative liabilities of $11,381,885 for warrants becoming tainted. On January 30, 2020, the fair value of the warrants to be reclassified to derivative liabilities was determined using the Binomial valuation model.

Subsequent to January 30, 2020, the Company issued shares of its common upon conversion of debt at price lower than $0.40. Accordingly, the exercise price of the August 2019 Warrants and October 3 Warrant discussed above was lowered to $0.0203 and the aggregate number of warrants was increased from 9,061,143 warrants to 178,607,053 warrants. Since these warrants were treated as derivative liabilities, no additional deemed dividend was recorded.2021

Warrant activities for the three months ended March 31, ~~2020~~2021 are summarized as follows:

Simultaneously with the acquisition of Prime EFS, Prime EFS agreed to certain terms and conditions by which Prime EFS would continue to employ Frank Mazzola as its chief operating officer. Mr. Mazzola is related to the majority selling member of Prime EFS in the June 18, 2018 transaction.

Although Mr. Mazzola proposed a form of written agreement intended to memorialize all material terms of the employment relationship, Prime EFS did not sign the draft proposed by Mr. Mazzola in June 2018 or approve of all terms he was asking for because Prime EFS found some of those terms unfair and unreasonable.

Among other things, the draft proposed by Mr. Mazzola called for Prime EFS to make a 5-year commitment and to pay Mr. Mazzola a base salary of $520,000 per year, payable in accordance with Prime EFS’s usual pay practices. The draft proposed by Mr. Mazzola also called for his base salary to increase by $260,000 per year upon (i) Prime EFS achieving revenue of $20 million on an annualized basis (the “Initial Target Goal”) for four consecutive weeks; and (ii) each time Prime EFS achieves revenue of an additional $10 million increment above the Initial Target Goal (i.e., $30 million, $40 million, $50 million, etc.) on an annualized basis for four consecutive weeks. Prime EFS never agreed to any of these terms, orally or in writing.

The draft proposed by Mr. Mazzola also called for his base salary to be subject to review annually by the Manager of Prime EFS and that his salary could be increased (but not decreased). Prime EFS agreed to this term.

The draft proposed by Mr. Mazzola also provided that he would be entitled to participate in any bonus plan that the Manager of Prime EFS or its designee may approve for the senior executives of Prime EFS and shall be entitled to participate in benefits under the Prime EFS’s benefit plans, profit sharing and arrangements, including, without limitation, any employee benefit plan or arrangement made available in the future by Prime EFS to its employees or senior executives, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. Prime EFS agreed to these terms.

The draft proposed by Mr. Mazzola also provided that, notwithstanding the foregoing, during the term of his employment, Prime EFS would provide, at Prime EFS’s expense, health and major medical insurance benefits to Mr. Mazzola and his family members which were at least equal to the benefits provided to Mr. Mazzola and his family members by Prime EFS immediately prior to the June 18, 2018 acquisition. Prime EFS agreed to these terms.

The draft proposed by Mr. Mazzola also provided that the contract would begin on June 18, 2018 and end on May 31, 2023. Prime EFS did not agree to this term. The draft proposed by Mr. Mazzola also provided that the term of the employment would automatically be extended for additional one-year periods unless, at least sixty (60) days prior to the end of the expiration of the term of employment, one party gives notice to the other of an intent not to extend. Prime EFS did not agree to this provision.

The draft proposed by Mr. Mazzola also provided that his employment could not be terminated, even for cause, without the concurrence of two of the three “independent” directors of TLSS. Prime EFS did not agree to that provision and could not have done so, since TLSS did not have any independent directors at the time and nothing in the SPA, the stock purchase agreement between TLSS and the selling members of Prime EFS, dated June 18, 2018, obligated TLSS to appoint three or more independent directors.

~~The prior owners of Prime EFS (the “~~~~Prior Owners~~”) consummated the June 2018 SPA without insisting on the delivery, by TLSS, of a fully executed, integrated document memorializing all terms of the employment relationship between Prime EFS and Mr. Mazzola (an express condition of closing under the June 2018 SPA).

In addition, since June 18, 2018, the Prior Owners have never demanded that Prime EFS deliver a fully executed, integrated document memorializing all terms of the employment relationship between Prime EFS and Mr. Mazzola. On the basis of these facts, Prime EFS has obtained an opinion of counsel that Prime EFS has a strong argument that the Prior Owners ~~waived~~ ~~the condition in the June 2018 SPA requiring TLSS to deliver a fully-executed, integrated document memorializing all terms of an employment relationship between Prime EFS and Mr. Mazzola.~~

Current management of TLSS first became aware, only recently, that the prior chief executive officer of TLSS, Steven Yariv, had material disagreements with the form of employment agreement proposed by Mr. Mazzola and therefore never signed it.

In addition, on February 24, 2019, all officers of TLSS and Prime EFS, including Mr. Mazzola, orally agreed that, owing to the dire financial circumstances of the consolidated Company, no officer of TLSS or Prime EFS would be paid at a rate in excess of $350,000 per year unless and until the board of TLSS unanimously approved a different rate in writing. To date, the board of TLSS has not approved a different rate in writing. Mr. Mazzola now denies that he agreed to a permanent reduction in his salary, claiming instead that he agreed to a mere deferral.

From time to time, we may be involved in litigation relating to claims arising out of our operation in the normal course of business.

~~Elrac~~Disputes Between Prime EFS, ELRAC LLC, ~~v. Prime EFS~~and Enterprise Leasing Company of Philadelphia, LLC

On or about January 10, 2020, ~~the Company~~Prime EFS was named as sole defendant in a civil action captioned ~~Elrac~~ELRAC LLC v. Prime EFS, filed in the United States District Court for the Eastern District of New York, assigned Case No. 1 :20-cv-00211 (the “~~Elrac~~ELRAC Action”). The complaint in the ~~Elrac~~ELRAC Action alleged that Prime EFS failed to pay in full for repairs allegedly required by reason of property damage to delivery vehicles leased by Prime EFS from ~~Elrac~~ELRAC LLC (“~~Elrac~~ELRAC”) to conduct its business. The complaint sought damages of not less than $382,000 plus $58,000 in insurance claims that ~~Elrac~~ELRAC believes were collected by the Company and not reimbursed to ~~Elrac. Elrac~~ELRAC.

ELRAC subsequently moved for a default judgment against Prime EFS. By letter to the court dated March 9, 2020, Prime EFS opposed entry of a default judgment and contended that all claims in the ~~Elrac~~ELRAC Action were subject to mandatory arbitration clauses found in the individual lease agreements. On March 19, 2020, ~~Elrac~~ELRAC filed a stipulation dismissing the ~~Elrac~~ELRAC Action without prejudice and advised Prime EFS that it intends to file an arbitration at the American Arbitration Association alleging essentially identical claims.

During the period it was leasing vans and trucks from ~~Elrac~~ELRAC and its affiliate, Enterprise Leasing Company of Philadelphia, LLC (“Enterprise ~~PA”~~PA” and, with ~~Elrac, “Enterprise”~~ELRAC, “Enterprise”), Prime EFS ~~transferred~~paid $387,392 in deposits required by Enterprise as security for the payment of deductibles and uninsured damage to Enterprise’s fleet. Despite due demand, Enterprise never accounted to Prime EFS’s satisfaction regarding the application of these deposits. On June 10, 2020, Prime EFS therefore initiated an arbitration (the ~~“Prime EFS Arbitration”~~“Arbitration”) against Enterprise at the American Arbitration Association seeking the return of not less than $327,000 of these deposits. ~~Therefore, if, as expected, Elrac~~

On October 9, 2020, Enterprise filed its Answer and Counterclaims in the Arbitration. In its Answer, Enterprise denies liability to Prime for $327,000 or any other sum. In its Counterclaims, ELRAC seeks $382,000 in damages and Enterprise PA ~~continue~~seeks $256,000 in damages. Enterprise also seeks $62,000 in insurance payments allegedly made by Utica to ~~claim~~ Prime EFS owes it money, allegedly because the deposits together with insurance recoveries were insufficient to cover their alleged damages, Enterprise would have to interpose that contention not in its own arbitration but rather as a counterclaim in the Prime EFS Arbitration.EFS.

~~In the event that Enterprise files such a counterclaim,~~ Prime EFS ~~will contest it vigorously~~believes the Enterprise Answer and ~~pursue~~Counterclaims lack merit and intends to defend its ~~own claim for~~position in the ~~repayment of a large portion of the escrow deposits plus interest.~~Arbitration vigorously. Nevertheless, given the amount of the Counterclaim and the documentation which ~~Elrac~~Enterprise has submitted ~~to court~~ in the ~~Elrac Action, including an affidavit from its controller, as of March 31, 2020 and December 31, 2019,~~arbitration in support thereof, the Company ~~has reflected~~continues to reflect a liability of $440,000, i.e., the amount originally claimed as damages by ~~Elrac~~ELRAC in the ~~Elrac~~ELRAC Federal Action, ~~which has been included in~~as a contingency liability on the ~~accompanying condensed~~Company’s consolidated balance sheet. Based on our knowledge of the matter, as developed to date, we continue to agree with this estimate of probable total Company liability.

While it believes it has meritorious defenses to this action, out of an abundance of caution and without prejudice to its position in the matter, as of March 31, 2021, Prime EFS had accrued a contingency liability of $440,000 for purposes of this matter.

~~BMF~~Bellridge Capital, L.P. v. ~~Prime EFS LLC et al.~~TLSS and John Mercadante

After discontinuing a prior action in federal court, on April 23, 2021, Bellridge Capital, L.P. (“Bellridge”) filed a civil action in New York Supreme Court, New York County, against TLSS and John Mercadante. This mater, the “Bellridge Action,” was assigned civil action number 652728/2021.

The ~~Company is aware~~complaint in the Bellridge Action asserts 11 causes of action: (1) against TLSI, allegedly for breach of a ~~settlement~~convertible promissory note issued June 18, 2018 (the “June 2018 Note”), which claim seeks $539,114.06 for allegedly unpaid principal plus interest, costs and expenses; (2) against TLSI, also allegedly for breach of June 2018 Note, which claim seeks $343,000 plus interest, costs and expenses for TLSI’s alleged failure to honor certain conversion notices in timely fashion; (3) against TLSI, allegedly for breach of a promissory note dated December 26, 2018 (the “December 2018 Note”), which claim seeks $196,699 plus interest, costs and expenses for amounts allegedly unpaid under the note; (4) against TLSI, purportedly for breach of an exchange agreement ~~made~~between Bellridge and ~~entered into as~~TLSI dated April 13, 2019 (the “Exchange Agreement”), which claim seeks $3,337,500 plus costs and interest; (5) against TLSI and Mercadante, allegedly for fraud in connection with the Exchange Agreement, which claim seeks $447,500 plus costs and interest; (6) against TLSI and Mercadante, allegedly for negligent misrepresentation in connection with the Exchange Agreement, which claim seeks $447,500 plus costs and interest, in the alternative to the 5^th claim; (7) against TLSI, allegedly for breach of ~~March 6, 2020,~~certain preferred stock terms relating to the conversion of 31,500 series A preferred shares, which claim seeks not less than $57,960; (8) against TLSI and Mercadante, allegedly for fraudulent inducement of an August 2019 subordination agreement, which claim seeks a declaration annulling the subordination agreement; (9) against TLSI, allegedly for failing to provide all consideration recited in a subordination letter, which claim seeks a declaration that Bellridge is discharged from its obligations under the subordination agreement; (10) against TLSI, allegedly for failing to honor a condition precedent to the subordination agreement, which ~~Prime EFS~~claim seeks a declaration that Bellridge is discharged from any obligations under the subordination agreement; and ~~certain related entities agreed to pay BMF Capital (“~~~~BMF~~~~”) $275,000 on or by March 11, 2020,~~ ~~inter alia~~ to discharge a convertible note, to cancel certain warrants on 40,300 shares of TLSS common stock, and to settle certain claims made by BMF Capital under certain merchant cash advance agreements (MCAs) whereby BMF purchased specified percentages of Prime EFS’s total future accounts receivable up to certain agreed upon amounts in exchange(11) against TLSI, allegedly for ~~an upfront purchase price. Prime EFS did not pay a portion~~breach of the ~~agreed $275,000 settlement~~subordination agreement and/or subordination letter, which claim seeks damages in an amount to be determined at trial.

The purchase price stated in the June 2018 Note is $1,664,995. The principal amount of the June 2018 Note is $2,413,999.50. Hence the June 2018 Note was issued at a 33.33% discount (OID). The June 18 Note calls for the payment of interest computed at the rate of 10% per annum prior to any default. The term of the Note is one year. The June 2018 Note calls for the application of New York law. OID is treated as interest for purposes of the New York usury statutes (both civil and criminal). Since total interest payable under the Note at issuance was 41% per annum, for a period of one year, TLSI believes the June 2018 Note was void ab initio under N.Y. Penal Law § 190.40 and cannot be enforced in this action.

When Bellridge offered to engage in the Exchange Agreement, Bellridge was able to dictate terms and extract concessions from TLSI that were commercially unreasonable and unconscionable. It was able to do so solely because of its violations of N.Y. Penal Law § 190.40 Bellridge in July 2018. As such, TLSI believes the Exchange Agreement is null and void under N.Y. Penal Law § 190.40 and cannot be enforced in this action.

The defendants in this action have until June 4, 2021, to serve answer to the complaint in this matter or to move against it. The defendants believe they have good defenses to all claims alleged in the matter, including without limitation the defense of usury as outlined above. Both the Company ~~has subsequently paid~~and Mr. Mercadante intend to defend this case vigorously.

Based on the ~~$275,000 in full. Under the March 6, 2020 settlement agreement, BMF could make claim for additional amounts and/or for recognition~~early stage of the common stock warrants but to date it has not done so. In the event BMF pursues such a claim against Prime EFS, Prime EFS will contest the case vigorously. Since no such claim has in fact been filed in court, but merely threatened,this matter, it is not possible to evaluate the likelihood of a favorable or unfavorable outcome, nor is it possible to estimate the amount or range of any potential loss in the matter. ~~However, it appears that the value of any such claim is under $10,000.~~

~~Currently, the Company is in an ongoing dispute between the Company and two investors in the Company, namely Bellridge and SCS, LLC (“~~~~SCS~~”). Among other things, Bellridge claims that the Company is in breach of its obligations under an August 29, 2019 letter agreement to issue a confession of judgment and to pay Bellridge $150,000 per month against the amounts due under, ~~inter alia,~~ an April 2019 promissory note. In an April 28, 2020 letter, Bellridge contends that TLSS owed Bellridge $1,978,557.76 as of that date. In a purported standstill agreement subsequently proposed by Bellridge, Bellridge claims TLSS owes it $2,271,099.83, a figure which allegedly includes default rate interest. Bellridge also claims that a subordination agreement it signed with the Company on August 30, 2019, was void ~~ab initio.~~ Bellridge has also demanded the conversion of approximately $20,000 in indebtedness into the common stock of the Company, a conversion which the Company has not effectuated because the parties did not come to agreement on a conversion price. Such agreement is required for Bellridge to exercise its conversion rights under an agreement dated April 9, 2019 between Bellridge and the Company. SCS alleges it was induced by fraud to exchange two million shares of Company preferred stock for Company common stock and was damaged thereby. The Company is currently in discussions with Bellridge, SCS and the Company’s senior secured lenders to see whether this dispute can be amicably resolved. In the event Bellridge and/or SCS pursues the above claims against the Company, the Company will contest the case vigorously. Since no such claims have in fact been filed in court, but merely threatened, it is not possible to evaluate the likelihood of a favorable or unfavorable outcome, nor is it possible to estimate the amount or range of any potential loss in the matter.

On ~~or about June 7, 2020,~~January 14, 2021, a civil action was filed against the Company ~~was notified of the filing of civil action~~ in the ~~Supreme~~Circuit Court of the ~~State of New York, New York~~15^th Judicial Circuit in and for Palm Beach County, Florida, captioned SCS, LLC v. Transportation and Logistics Systems, Inc.

The ~~action~~case was ~~filed on May 26, 2020 and~~ assigned ~~Index~~Case No. ~~154433/2020.~~50-2020-CA-012684-xxxx-MB.

The plaintiff in ~~this action~~the case, SCS, LLC (“SCS”) alleges it is a limited liability company that entered into a renewable six-month consulting agreement with the Company dated September 5, 2019 and that the Company failed to make certain monthly payments due thereunder for the months of October 2019 through March 2020, summing to $42,000. The complaint alleges claims for breach of contract, quantum meruit,, unjust enrichment and account stated.

~~Although~~On February 9, 2021, the Company ~~has not yet~~ filed anits answer, indefenses and counterclaims to this ~~action, because the time period within which it must file an answer has not expired,~~action. Among other things, the Company ~~will deny~~avers that ~~it owes any sum to SCS, LLC,~~SCS’s claims are barred by its unclean hands and breaches of its duties under the consulting ~~agreement or otherwise. In addition, the~~agreement. SCS filed a motion to strike TLSI’s defenses and counterclaims and TLSI has opposed that application. Those motions remain sub judice.

The Company ~~expects~~believes it has substantial defenses to ~~file counterclaims against SCS, LLC for an amount~~all claims alleged in ~~excess of $42,000,~~SCS’s complaint. The Company therefore intends to defend this case vigorously.

Based on the ~~grounds that SCS, LLC, breached its express obligations under~~early stage of this matter, it is not possible to evaluate the ~~consulting agreement~~likelihood of a favorable or unfavorable outcome, nor is it possible to ~~hold Company confidential information “in strictest confidence” and to use that information, if at all, “for~~estimate the ~~sole and exclusive benefit”~~amount or range of any potential loss in the ~~Company. Accordingly, the Company intends to mount a vigorous defense to the action, as Company management believes the action to be entirely bereft of merit.~~matter.

On June 25, 2020, the Company was served with a ~~purported~~putative shareholder derivative action filed in the Circuit Court of the 15^thJudicial Circuit in and for Palm Beach County, Florida (the “Court”) captioned SCS, LLC, derivatively on behalf of Transportation and Logistics Systems, Inc. v. John Mercadante, Jr., Douglas Cerny, Sebastian Giordano, Ascentaur LLC and Transportation and Logistics Systems, Inc.

The action ~~was filed on June 18, 2020 with filing number 109085636.~~has been assigned Case No. 2020-CA-006581.

The plaintiff in this action, SCS, alleges it is a limited liability company formed by a former chief executive officer and director of the Company, Lawrence Sands. The complaint alleges that between April 2019 and June 2020, the current chairman and chief executive officer of the Company, the current chief development officer of the Company and, since February 2020, the Company’s restructuring consultant, breached fiduciary duties owed to the Company. The Company’s restructuring consultant, defendant Sebastian Giordano, renders his services through another defendant in the action, Ascentaur LLC. ~~In the Company’s understanding, the full text of the complaint is, or soon will be, available on-line at the Court’s website.~~

Briefly, the complaint alleges that the Company’s chief executive officer breached duties to the Company by, among other things, requesting, in mid-2019, that certain preferred equity holders, including SCS, convert their preferred shares into Company common stock in order to facilitate an equity offering by the Company and then not consummating an equity offering. The complaint also alleges that current management caused the Company to engage in purportedly wasteful and unnecessary transactions such as taking merchant cash advances (MCA) on disadvantageous terms. The complaint ~~also~~further alleges that current management “issued themselves over two million shares of common stock without consideration.” The complaint seeks unspecified compensatory and punitive damages on behalf of the Company for breach of fiduciary duty, negligent breach of fiduciary duty, constructive fraud, and civil conspiracy and the appointment of a receiver or custodian for the Company.

The Company’s current management has tendered the complaint to its directors’ and officers’ liability carrier for defense and indemnity ~~purposes.~~purposes, which coverage is subject to a $250,000 self-insured retention. Company management, Mr. Giordano and Ascentaur LLC each advise that they deny each and every allegation of wrongdoing alleged in the complaint. Among other things, current management asserts that it made every effort to consummate an equity offering in late 2019 and early 2020 and could not do so solely because of the Company’s precarious financial condition. Current management also asserts it made clear to SCS and other preferred equity holders, before they converted their shares into common stock, that there was no guarantee the Company would be able to consummate an equity offering in late 2019 or early 2020. In addition, current management asserts that it received equity in the Company on terms that were entirely fair to the Company and entered into MCA transactions solely because there was no other financing available to the Company. ~~Accordingly, current Company management, Mr. Giordano and Ascentaur LLC intend to mount a vigorous defense to the action, as they believe the action to be entirely bereft of merit.~~

On August 5, 2020, all defendants in this action moved to dismiss the complaint for failure to state a claim upon which relief can be granted. Among other things, all defendants allege in their motion that, through this lawsuit, SCS is improperly attempting to second-guess business decisions made by the Company’s Board of Directors, based solely on hindsight (as opposed to any well-pleaded facts demonstrating a lack of care or good faith). All defendants also assert that the majority of the claims are governed by Nevada law because they concern the internal affairs of the Company. Defendants further assert that, under Nevada law, each of the business decisions challenged by SCS is protected by the business judgment rule. Defendants further assert that, even if SCS could rebut the presumption that the business judgment rule applies to all such transactions, SCS has failed to allege facts demonstrating that intentional misconduct, fraud, or a knowing violation of the law occurred—a requirement under Nevada law in order for director or officer liability to arise. Defendants further assert that, because SCS’s constructive fraud claim simply repackages Plaintiff’s claims for breach of fiduciary duty, it too must fail. Defendants also contend that in the absence of an adequately-alleged independent cause of action—let alone an unlawful agreement between the defendants entered into for the purpose of harming the Company, SCS’s claim for civil conspiracy must also be dismissed. Finally, defendants contend that SCS’s extraordinary request that a receiver or custodian be appointed to manage and supervise the Company’s activities and affairs throughout the duration of this unfounded action is without merit because SCS does not allege the Company is subject to loss so serious and significant that the appointment of a receiver or custodian is “absolutely necessary to do complete justice.”

SCS has a right to file court papers opposing the above motion and thereafter the defendants intend to file reply papers in further support of the motion (the “MTD”). To date, the court has not entered an order scheduling these filings or a hearing on the MTD.

While they hope to prevail on the motion, win or lose, current Company management, Mr. Giordano and Ascentaur LLC advise that they intend to mount a vigorous defense to this action, as they believe the action to be entirely bereft of merit.

It is not possible to evaluate the likelihood of a favorable or unfavorable outcome, nor is it possible to estimate the amount or range of any potential loss in the matter.

On July 24, 2020, Prime EFS terminated the employment of Frank Mazzola effective that day. On July 27, 2020, Mr. Mazzola filed a Complaint and Jury Demand in the United States District Court for the Southern District of New York in which he named as defendants Prime EFS, the Company, John Mercadante and Douglas Cerny. The case was assigned # 1:20-CV-5788-VM. In this action, Mr. Mazzola alleges that he had an employment agreement with Prime EFS and that Prime EFS breached the alleged employment agreement through two alleged pay reductions and by terminating his employment. The Complaint contains eight counts: (1) breach of contract against Prime EFS; (2) breach of the covenant of good faith and fair dealing against Prime EFS; (3) intentional misrepresentation against Prime EFS, the Company and Mr. Mercadante; (4) negligent misrepresentation against Prime EFS, the Company and Mr. Mercadante; (5) tortious interference with contract against the Company, Mr. Mercadante and Mr. Cerny; (6) tortious interference with prospective economic advantage against the Company, Mr. Mercadante and Mr. Cerny; (7) conversion against all defendants; and (8) unjust enrichment against all defendants. Mr. Mazzola seeks specific performance of the alleged employment agreement and damages of not less than $3 million.

Without Answering the Complaint, on August 14, 2020, the defendants objected to the Complaint on the grounds of lack of personal jurisdiction, improper venue and because the Complaint failed to state a claim upon which relief could be granted. On August 25, 2020, the Court ordered Mr. Mazzola to respond to the defendant’s objections within three days. On August 28, 2020, Mr. Mazzola voluntarily withdrew the action.

On September 1, 2020, Mr. Mazzola served the defendants with a Complaint and Jury Demand that Mr. Mazzola filed in the Superior Court of New Jersey, Law Division, Bergen County, docket number BER-L-004967-20. The Complaint alleged the same claims as those set forth in the Complaint that Mr. Mazzola had filed in the now withdrawn New York federal lawsuit. On September 28, 2020, the defendants removed the New Jersey state court lawsuit to the United States District Court for the District of New Jersey, which has been assigned civil action number 2:20-cv-13387-BRM-ESK. On October 5, 2020, all defendants filed a motion to dismiss each and every claim asserted against them in the New Jersey federal action.

On December 7, 2020, Mr. Mazzola filed an amended complaint in this action (the “AC”) alleging three (3) claims for relief: one for Breach of Contract against Prime EFS; one for “Piercing the Corporate Veil” against the Company; and one for “Fraudulent Inducement” against Messrs. Mercadante and Cerny.

The damages sought by each claim are identical: “approximately $2,000,000, representing $1,040,000 in [alleged] severance”; $759,038.41 in alleged “accrued but unpaid salary”; and non-cash benefits under the alleged executive employment agreement.

On January 11, 2021, Prime EFS filed an answer to the AC, denying, under the faithless servant doctrine and otherwise, that it has any liability to Mr. Mazzola for any of the amounts sought. Prime EFS also filed counterclaims against Mr. Mazzola seeking recoupment of not less than $925,492 in W-2 compensation paid to Mr. Mazzola; damages in the amount of $168,750 which Mr. Mazzola paid to his mother for a no-show job; and damages of not less than $500,000 for usurpation of corporate opportunities belonging to Prime EFS. Also, on January 11, 2021, the Company, Mr. Mercadante and Mr. Cerny filed motions to dismiss the AC insofar as pled against them for failure to state a claim and for lack of personal jurisdiction.

On January 27, 2021, Prime EFS filed an amended answer to the AC, increasing the amount sought on its counterclaim for recoupment of income paid to Mr. Mazzola from $925,492 to $1,111,833.73 and adding a claim for indemnification for amounts paid by Prime EFS to resolve certain litigation against it such as the Valesky case (see below).

The motions to dismiss are currently sub judice. The case is currently in discovery.

Owing to the early stage of this matter, it is not possible to evaluate the likelihood of a favorable or unfavorable outcome, nor is it possible to estimate the amount or range of any potential loss in the matter.

On September 19, 2020, attorneys for Frank Mazzola’s mother, Rosemary Mazzola, filed an action in the United States District Court for the Southern District of New York against the Company and Douglas Cerny. The case was assigned docket number 1:20-cv-7582 and assigned to USDJ Gregory H. Woods. In this action, Ms. Mazzola claims that the Company entered into and breached an unspecified contract by failing to pay her $94,000. In addition, the complaint claims that, although he was not a party to the unspecified contract, Mr. Cerny falsely represented that the Company intended to “repay” Ms. Mazzola $94,000 plus interest. The complaint seeks $94,000 from each defendant, plus late fees, costs, prejudgment interest and attorneys’ fees and, from Mr. Cerny punitive damages in an unspecified amount. The complaint also alleges claims for account stated and breach of implied warranty of good faith and fair dealing, allegedly premised on the same indebtedness.

On November 23, 2020, counsel for Ms. Mazzola filed an Amended Complaint in this action, dropping Mr. Cerny and adding Prime EFS, LLC as a party. The new pleading demands $209,000 rather than the $94,000 in damages previously alleged. The new complaint alleges three claims: breach of contract against Prime EFS, alter ego liability against the company, and unjust enrichment against both the Company and Prime EFS. Ms. Mazzola also demands legal fees and expenses under a prevailing-party provision in the Amended Stock Purchase Agreement.

On January 29, 2021, both TLSI and Prime EFS, LLC timely moved to the dismiss the Amended Complaint. Opposition and reply papers on this motion were filed in February 2021. Meanwhile, on March 11, 2021, the court entered an order in the case requiring all fact discovery to be concluded by September 9, 2021.

As of December 31, 2020, out of an abundance of caution and without prejudice to its position in this matter, a $94,000 liability is included in due to related parties on Prime EFS’s balance sheet as of such date. However, if the motion to dismiss is denied, TLSS and/or Prime will file counterclaims seeking at least $168,750 from Ms. Mazzola.

Owing to the early stage of this matter, it is not possible for us to evaluate the likelihood of a favorable or unfavorable outcome, nor is it possible to estimate the amount or range of any potential loss in the matter.

On August 4, 2020, an action was filed against Shypdirect, Prime EFS and others in the Superior Court of New Jersey for Bergen County captioned Jose R. Mercedes-Mejia v. Shypdirect LLC, Prime EFS LLC et al. The case was assigned docket number BER-L-004534-20. In this action, the plaintiff seeks reimbursement of his medical expenses and damages for personal injuries following an accident with a box truck leased by Prime EFS and being driven by a Prime EFS employee, in which the plaintiff’s ankle was injured. Plaintiff has thus far transmitted medical bills exceeding $789,000. Prime EFS and Shypdirect have demanded their vehicle liability carrier assume the defense of this action. To date, the carrier has not done so, allegedly inter alia because the box truck was not on the list of insured vehicles at the time of the accident.

On November 9, 2020, Prime EFS and Shypdirect filed their answer to the complaint in this action and also filed a third-party action against the insurance company in an effort to obtain defense and indemnity for this action. We intend to vigorously defend against this claim and to pursue the coverage action. However, we cannot evaluate the likelihood of an adverse outcome or estimate our liability, if any, in connection with this claim.

Plaintiff, an ex-dispatcher for Prime EFS, brought this action in the U.S. District Court for the District of New Jersey under the Family and Medical Leave Act of 1993 and the New Jersey Law Against Discrimination seeking unspecified compensatory and punitive damages. In April 2021, we settled this matter for a payment of $35,000.

This action was brought on April 27, 2020 in the Superior Court of New Jersey for Bergen County by the plaintiff alleging injuries from a May 12, 2019 collision with a van leased by Prime EFS and operated by Prime EFS employees. The plaintiff has also filed a workers’ compensation claim. Prime EFS’s insurer has been defending this matter without charging Prime EFS, and the Company and Prime EFS expect that the insurer will ultimately indemnify Prime EFS for any damages assessed.

On June 4, 2020, Prime EFS LLC (“Prime EFS”), a wholly-owned subsidiary of the Company, agreed with two related creditors (the “Creditors”) to a payment plan (the “Payment Plan”) to settle, without interest, a total outstanding balance of $2,038,556 (the “Outstanding Balance”) owed by Prime EFS to the Creditors.

Pursuant to the Payment Plan, Prime EFS was obligated to pay $75,000 to the Creditors on or before June 5, 2020 and $75,000 to the Creditors on or before June 12, 2020.

Thereafter, under the Payment Plan, beginning on June 19, 2020, Prime EFS was obligated to make weekly payments of $15,000 to the Creditors each Friday for 125 weeks ending with a final payment of $13,556 on November 18, 2022.

Under the Payment Plan, Prime EFS also agreed that, if it fails to make a scheduled payment or otherwise defaults on its obligations, the remaining Outstanding Balance would be accelerated and due, in full, within five business days after receipt by Prime EFS of a notice of default from the Creditors.

Under the Payment Plan, Prime EFS also agreed that, if Prime EFS does not pay the remaining Outstanding Balance within five business days after receipt of a notice of default, then the Creditors will be entitled to 9% per annum simple interest on the remaining Outstanding Balance from the date of default and to recover attorneys’ fees and costs for enforcement.

Prime EFS made the $75,000 payments due on each of June 5, 2020 and June 12, 2020.

Prime EFS also made each of the weekly payments due through Friday, September 18, 2020. However, Prime EFS did not make the payment due Friday, September 25, 2020, did not make any further weekly payment due under the Payment Plan, and has no present plan or intention to make any further payments under the Payment Plan because it lacks the cash-on-hand to do so.

By letter dated October 16, 2020, attorneys for the Creditors gave Prime EFS notice of default (the “Notice of Default”) under the settlement agreement that documents the Payment Plan and related terms and conditions. The Notice of Default correctly states that Prime EFS did not make the payment due under the Payment Plan on September 25, 2020 and has not made any further weekly payments since September 25, 2020. The Notice of Default correctly demands, under the settlement agreement that documents the Payment Plan and related terms and conditions, that, as of the day of Prime EFS’s default, Prime EFS owed the Creditors $1,678,556.06, which is accrued and included in insurance payable on the accompanying consolidated balance on December 31, 2020. In the Notice of Default, the Creditors reserve the right to institute legal proceedings against Prime EFS for its defaults under the Payment Plan, to seek default interest at 9% per annum and to seek the Creditors’ costs of collection.

To date, Prime EFS has not responded to the Notice of Default and has no present plan or intention to respond.

By letter dated October 9, 2020, attorneys representing Patrick Nicholson allege that Prime EFS is in default of its payment obligations under a “10% Senior Secured Demand Promissory Note” issued February 13, 2019, in the principal amount of $165,000, and under a second promissory note issued April 24, 2019 in the principal amount of $55,000.

In the demand, the attorneys for Mr. Nicholson allege the total balance owed, including interest, is $332,702.84 and that interest is continuing to accrue on each promissory note.

In the demand, the attorneys for Mr. Nicholson also contend that the Company is jointly and severally liable with Prime EFS for this balance.

If, as threatened, Mr. Nicholson files suit for non-payment under either or both promissory notes, it is anticipated that the defendants will mount a vigorous defense to the action. Among other things, it is Prime EFS’s position that Mr. Nicholson knew or should have known that the promissory notes dated February 13, 2019, and April 24, 2019 were invalid and unenforceable, since they were signed by Rosemary Mazzola, as owner or managing member of Prime, and it was public information that, after June 18, 2018, Ms. Mazzola was no longer an owner or managing member of Prime EFS.

Nevertheless, out of an abundance of caution and without prejudice to its position in this matter, as of March 31, 2021, Prime EFS recorded notes payable due of $220,000 and accrued interest payable of $56,424.

On March 2, 2021, Shypdirect received a demand letter from Ryder Truck Rental, Inc. (“Ryder”) related to a breach of the Truck Lease and Service Agreement between Shypdirect and Ryder, dated October 9, 2018. Pursuant to the letter, Ryder terminated the Truck Lease and Service Agreement for failure to pay invoices due. Pursuant to the letter, Ryder also elected to require Shypdirect to purchase all of the terminated Vehicle(s) in accordance with the agreement for $2,871,272. In connection with this breach, as of December 31, 2020, the Company wrote off security deposits of $164,565 and has a recorded contingent liability, owed solely by Shypdirect, of $2,871,272 which is related to the default on truck leases for non-payment of monthly lease payments and the lessor’s demand for payment of the trucks for an aggregate contingency loss of $3,035,837. Shypdirect intends to dispute this demand. In addition, Shypdirect has returned all of the trucks to Ryder as Shypdirect is no longer using them.

Other than discussed above, as of March 31, ~~2020,~~2021, and as of the date of this filing, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on results of our operations.

~~On June 19,~~The Company retained the services of a consultant, Ascentaur, LLC (“Ascentaur”), pursuant to a Consulting Agreement between the Company and Ascentaur dated February 21, 2020, ~~Amazon Logistics, Inc.~~as amended (the “Consulting Agreement”). Under the Consulting Agreement, Sebastian Giordano, the CEO and principal of Ascentaur, provides management services to the Company in the role of chief executive under direction of the Board. Mr. Giordano devotes the majority of his business attention to the Company, but he may spend time on other business ventures. The Consulting Agreement runs until January 31, 2023 (“~~Amazon”~~Termination Date”), unless earlier terminated by an employment agreement between Mr. Giordano and the Company. As consideration for Mr. Giordano’s services, Ascentaur receives a base consulting fee of $300,000 annually, payable in installments of $12,500 twice a month and is eligible for bonuses based on certain Company revenue, EBITDA, market capitalization or capital raise milestones. In addition, upon approval by the Board, Ascentaur received stock warrants to purchase up to 25,000,000 shares of common stock of the Company at an exercise price of $0.06 per share. Mr. Giordano is also eligible for the Company’s standard medical and dental plans. Upon any termination of the Consulting Agreement by the Company without “Cause,” by Mr. Giordano for “Good Reason,” or by expiration and non-renewal of the Consulting Agreement as of the Termination, Mr. Giordano will receive (i) a separation payment equal to one year’s worth of the base consulting fee, (ii) all accrued and unpaid bonuses and (iii) accelerated vesting of all unvested options he may have received. The Company and Mr. Giordano have also, as required by Nevada Revised Statutes Section 78.751, entered into an Indemnity Agreement (the “Indemnity Agreement”) ~~notified Prime EFS in writing~~whereby the Company indemnifies Mr. Giordano and Ascentaur, to the fullest extent as provided by Nevada corporate law, for all fees, costs and charges (including attorneys’ fees) for any actual or threatened claims against him, except to the extent that ~~Amazon does not intend~~Mr. Giordano’s actions constituted gross negligence; criminal, fraudulent or reckless misconduct; or with respect to ~~renew its Delivery Service Partner (DSP) Agreement with Prime EFS when~~any criminal actions of Mr. Giordano that ~~agreement (expires see Note 13 – Subsequent Events).~~the Company had reasonable cause to believe were unlawful.

On March 2, 2021, Shypdirect received a demand letter from Ryder Truck Rental, Inc. (“Ryder”) related to a breach of the Truck Lease and Service Agreement between Shypdirect and Ryder, dated October 9, 2018. Pursuant to the letter, Ryder terminated the Truck Lease and Service Agreement for failure to pay invoices due. Pursuant to the letter, Ryder elected to require Shypdirect to purchase all of the terminated Vehicle(s) in accordance with the agreement for $2,871,272. In connection with this breach, as of December 31, 2020, the Company wrote off security deposits of $164,565 and has a recorded contingent liability of $2,871,272 which is related to the default on truck leases for non-payment of monthly lease payments and the lessor’s demand for payment of the trucks for an aggregate contingency loss of $3,035,837. The Company intends to dispute this demand and has returned all of the trucks to Ryder as Shypdirect is no longer using the trucks and accordingly, the trucks are not included as assets in the accompanying condensed consolidated balance sheet.

On March 31, 2021 and December 31, 2020, contingency liability related to the Ryder termination amounted to $2,871,272.

In connection with the acquisition of Prime EFS, the Company acquired a balance of $14,019 that was due from the former majority owner of Prime ~~EFS.~~EFS, Rosemary Mazzola. Pursuant to the terms of the SPA, the Company agreed to pay $489,174 in cash to the former majority owner of Prime EFS who then advanced back the $489,174 to Prime EFS. During the period from Acquisition Date of Prime EFS (June 18, 2018) to December 31, 2018, the Company repaid $216,155 of this advance. During the year ended December 31, 2019, the Company repaid $130,000 of this advance. During the ~~three months~~year ended ~~March~~December 31, 2020, the Company repaid $35,000 of this advance. This advance is non-interest bearing and is due on demand. ~~At March~~On December 31, 2020, ~~and December 31, 2019,~~ amount due to this ~~related party~~former majority owner of Prime amounted to $94,000, ~~and $129,000, respectively,~~ and have been included in due to related parties on the accompanying condensed consolidated balance sheets. On March 31, 2021, amount due to this former majority owner of Prime amounted to $94,000, and have been included in accrued expenses on the accompanying condensed consolidated balance sheet since Ms. Mazzola is no longer considered a related party.

During the year ended December 31, 2019, ana former employee of Prime EFS who ~~exerts~~exerted significant influence over the business of Prime EFS and Shypdirect, Frank Mazzola, advanced the Company $88,000. Additionally, during the ~~three months~~year ended ~~March~~December 31, 2020, this employee advanced the Company $75,000 and was repaid ~~$93,000.~~$163,000. During the ~~three months~~year ended ~~March~~December 31, 2020, the Company paid this employee interest of $57,200 related to these working capital advances. AtOn March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, amounts due to this former related party employee amounted to ~~$70,000 and $88,000, respectively, and have been included in due to related parties on the accompanying condensed consolidated balance sheets.~~$0.

During the year ended December 31, 2019, an entity which is controlled by ana former employee of Prime EFS who ~~exerts~~exerted significant influence over the business of Prime EFS and Shypdirect, Frank Mazzola, advanced the Company $25,000. In January 2020, this advance was repaid. During the ~~three months~~year ended ~~March~~December 31, 2020, the Company paid this entity interest expense of $27,500 related to 2019 working capital advances made. AtOn March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, amounts due to this former related party entity amounted to $0$0.

On December 22, 2020, the Company’s chief executive officer advanced the Company $30,000. The advance is non-interest bearing and ~~$25,000,~~payable on demand. On December 31, 2020, amount due to the chief executive officer amounted to $30,000 and has been included in due to related parties on the accompanying condensed consolidated balance ~~sheets, respectively.~~sheet. On January 29, 2021, the Company repaid this advance.

On July 3, 2019, the Company entered into a note agreement with an entity that is ~~affiliated with~~controlled by the Company’s chief executive ~~officer,~~officer’s significant other, in the amount of $500,000. Commencing on September 3, 2019 and continuing on the third day of each month thereafter, payments of interest only on the outstanding principal balance of this note is due and payable. Commencing on January 3, 2020 and continuing on the third day of each month thereafter through January 3, 2021, equal payments of principal and interest will be made. The principal amount of this note and all accrued, but unpaid interest under this note ~~will be~~was due and payable on the earlier to occur of (i) January 3, 2021 (the “CEO Note Maturity Date”), or (ii) an Event of Default (as defined in the note agreement). The payment of all or any portion of the principal and accrued interest may be paid prior to the CEO Note Maturity Date. Interest accrues with respect to the unpaid principal sum identified above until such principal is paid at a rate equal to 18% per annum. All past due principal and interest on this Note will bear interest from maturity of such principal or interest until paid at the lesser of (i) 20% per annum, or (ii) the highest rate allowed by applicable law. To date, no repayments have been made on this related party note. AtOn March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, interest payable to related parties amounted to ~~$105,884~~$195.884 and ~~$83,445~~$173,692 and is included in due to related parties on the accompanying condensed consolidated balance sheets, respectively.

At On March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, notes payable – related party amounted to $500,000 and $500,000, respectively. On March 17, 2021, the Company and the noteholder entered into a forbearance agreement whereby the Holder agreed to forbear from prosecuting any enforcement efforts in respect of the Note and extended the payment of the note until December 31, 2021.

During the three months ended March 31, 2021 and 2020, interest expense associated with advances from related parties, related party notes payable and convertible notes payable to related parties amounted to $22,192 and $107,138 and is included in interest expense – related parties on the accompanying condensed consolidated statement of operations.

NOTE 1112 – OPERATING LEASE RIGHT-OF-USE (“ROU”) ASSETS AND OPERATING LEASE LIABILITIES

On November 30, 2018, the Company entered into a commercial lease agreement for the lease of sixty parking spaces under an operating lease through November 2023 for a monthly rental fee of $6,000. Either party can cancel this lease on the annual anniversary date of the lease provided that the party who wishes to terminate provides the other party with at least 30-day prior written notice of such termination.

In December 2018, the Company entered into a lease agreement for the lease of office and warehouse space and parking spaces under a non-cancelable operating lease through December 2023. From the lease commencement date until the last day of the second lease year, monthly rent will be $14,000. At the beginning of the 30^th month following the commencement date and through the end of the term, minimum rent will be $14,420 per month. The Company will have one option to renew the term of this lease for an additional five years. In January 2019, the Company paid a security deposit of $28,000.

In July 2019, the Company entered into a 4.5-year lease agreement for the lease of office and warehouse space and parking spaces under a non-cancelable operating lease through February 2024. From the lease commencement date until the last day of the second lease year, monthly rent will be $10,000. At the beginning of the 25^th month following the commencement date and through the end of the term, minimum rent will be $10,500 per month. The Company will have one option to renew the term of this lease for an additional five years. In July 2019, the Company paid a security deposit of $20,000.

In July 2019, the Company entered into a five-year lease agreement for the lease of office and warehouse space and parking spaces under a non-cancelable operating lease through August 2024. During the first year on the lease term, the base monthly rent will be $18,000 and will increase by 3% each lease year. Additionally, the Company will pay its portion of operating expenses. The Company will have one option to renew the term of this lease for an additional five years. As of December 31, 2019, the Company paid a security deposit of $18,000.

On January 15, 2021, in connection with the acquisition of DDTI, the Company assumed leases for trucks with remaining terms over twelve months.

In adopting ASC Topic 842, Leases (Topic 842), the Company has elected the ‘package of practical expedients’, which permit it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs (see Note 2). In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 month or less.

On January 1, 2019, upon adoption of ASC Topic 842, the Company recorded right-of-use assets and lease liabilities of $631,723. Additionally, during the year ended December 31, 2019, the Company entered into new operating lease agreements as discussed above, that require the Company to record a lease liability and a right of use asset on its consolidated balance sheet, at fair value. Accordingly, the Company recorded right-of-use assets and lease liabilities of $1,352,597.

During the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, in connection with these operating leases, other miscellaneous rental payments and common area maintenance costs, the Company recorded rent expense of ~~$164,350~~$133,955 and ~~$98,831,~~$164,350, respectively, which is expensed during the period and included in operating expenses on the accompanying condensed consolidated statements of operations.

During the three months ended March 31, 2021 and 2020, the Company recognized sublease income of $108,035 and $67,831 which is included in other income on the accompanying condensed consolidated statement of operations, respectively.

The significant assumption used to determine the present value of the lease liability was a discount rate of 10% to 12% which was based on the Company’s estimated incremental borrowing rate.

AtOn March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, right-of-use asset (“ROU”) is summarized as follows:

AtOn March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, operating lease liabilities related to the ROU assets are summarized as follows:

	March 31, 2020			December 31, 2019			March 31, 2021			December 31, 2020
Lease liabilities related to office leases right of use assets	$	1,734,521		$	1,773,384
Lease liabilities related to office and truck leases right of use assets							$	1,432,116		$	1,483,460
Less: current portion of lease liabilities		(341,483	)		(333,126	)		(400,102	)		(380,843	)
Lease liabilities – long-term	$	1,393,038		$	1,440,258		$	1,032,014		$	1,102,617

~~At March 31, 2020,~~2021, future minimum base lease payments due under non-cancelable operating leases are as follows:

Year ended March 31,	Amount			Amount
2021	$	509,040
2022		522,913		$	548,794
2023		532,205			547,375
2024		485,440			488,156
2025		101,296			101,296
Total minimum non-cancelable operating lease payments		2,150,894			1,685,621
Less: discount to fair value		(416,373	)		(253,505	)
Total lease liability at March 31, 2020	$	1,734,521
Total lease liability on March 31, 2021				$	1,432,116

For the three months ended March 31, 2021, two customers, Amazon and Federal Express, represented 77.5% and 16.3% of the Company’s total net revenues, respectively. For the three months ended March 31, 2020, ~~and 2019,~~ one customer, Amazon, represented 97.9% ~~and 99.0%~~ of the Company’s total net revenues. AtOn March 31, ~~2020, this one customer~~2021, four customers, represented ~~93.9%~~70.0% of the Company’s accounts receivable ~~balance.~~balance (32.0%, 11.3%, 15.4% and 11.3%, respectively). On June 19, 2020, Amazon ~~Logistics, Inc. (“Amazon”)~~ notified Prime EFS in writing that Amazon does not intend to renew ~~its Delivery Service Partner (DSP)~~the In-Force Agreement ~~with Prime EFS~~ when that agreement expires. In the Prime EFS Termination Notice, Amazon stated that the In-Force Agreement expires ~~(see Note 13 – Subsequent Events).~~on September 30, 2020. Additionally, on July 17, 2020, Amazon notified Shypdirect that Amazon had elected to terminate the Program Agreement between Amazon and Shypdirect effective as of November 14, 2020. 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. On August 4, 2020, the Company, Prime EFS and Shypdirect accepted the Aug. 3 Proposal. The termination of the Amazon last-mile business had a material adverse impact on the Company’s business in the 1st fiscal quarter of 2021 and will have a material impact thereafter. As expected, the Company’s mid-mile business with Amazon terminated on or about May 14, 2021. Unless and until this business is resumed or replaced, its loss will have a material adverse impact on the Company’s business in the 2^nd fiscal quarter of 2021 and thereafter. As of May 17, 2021, the Company is still operating and plans to continue operating in the long-haul business.

During the three months year ended March 31, ~~2020~~2021 and ~~2019,~~2010, the Company rented delivery vans and trucks from a limited number of ~~vendors.~~vendors, some of which the Company has legal issues with (see Note 10). Any shortage of supply of vans and trucks available to rent to the Company could have a material adverse effect on the Company’s business, financial condition and results of operations.

OnDuring April ~~1, 2020,~~2021, the Company ~~closed on a securities purchase agreement~~entered into Securities Purchase Agreements with ~~an accredited investor (the “~~~~April 1 Purchase Agreement~~~~”). Pursuant~~investors pursuant to which the ~~terms of the April 1 Purchase Agreement, the Company issued and sold to an investor a convertible promissory note in the principal amount of $22,000 (the “~~~~April 1 Note~~~~”), and warrants~~Investors agreed to purchase upunits, severally and not jointly, which consisted of an aggregate of (i) 32,127 shares of Series E and (ii) Warrants to ~~8,800~~purchase 42,857,143 shares of the Company’s common stock which are equal to 1,334 warrants for each for each share of Series E purchased (the “~~April 1 Warrant~~”“April 2021 Series E Offering”). The gross proceeds to the Company were $375,000, or $11.67 per unit. The Company paid fees of $42,500 and received net proceeds of ~~$20,000, which is net of a 10% original issue discounts of $2,000.~~$332,500. The ~~April 1 Note bears interest at 6% per annum and becomes due and payable on the date that is the 24-month anniversary~~initial exercise price of the ~~original issue date of the April Note (the “~~~~April 1~~ ~~Maturity Date~~”). During the existence of an Event of Default (as defined in the April 1 Note), which includes, amongst other events, any default in the payment of principal and interest payment (including April 1 Note Amortization Payments) under any note or any other indebtedness, interest accrues at the lesser of (i) the rate of 18% per annum, or (ii) the maximum amount permitted by law. Commencing on the thirteenth month anniversary of the April 1 Note, monthly payments of interest and monthly principal payments, based on a 12 month amortization schedule (each, an “~~April 1 Note Amortization Payment~~”), will be due and payable, until the April 1 Maturity Date, at which time all outstanding principal, accrued and unpaid interest and all other amounts due and payable under the April 1 Note will be immediately due and payable. The April 1 Note Amortization Payments will be made in cash unless the investor requests it to be issued in the Company’s common stock in lieu of a cash payment (each, an “~~April 1 Note Stock Payment~~”). If the investor requests an April 1 Note Stock Payment, the number of shares of common stock issued will be based on the amount of the applicable April Note 1 Amortization Payment divided by 80% of the lowest VWAP (as defined in the April 1 Note) during the five Trading Day (as defined in the April 1 Note) period prior to the due date of the April 1 Note Amortization Payment.

The April 1 Note may be prepaid, provided that certain Equity Conditions, as defined in the April 1 Note, have been met (or any such failure to meet the Equity Conditions has been waived): (i) from April 1, 2020 until and through July 1, 2020 at an amount equal to 105% of the aggregate of the outstanding principal balance of the April 1 Note and accrued and unpaid interest, and (ii) after July 1, 2020 at an amount equal to 115% of the aggregate of the outstanding principal balance of the April 1 Note and accrued and unpaid interest. In the event that the Company closes a Public Offering, the holder may elect to: (x) have its principal and accrued interest prepaid directly from the proceeds of the Public Offering at the prices set forth above, or (y) exchange its April 1 Note at the closing of the Public Offering for the securities being issued in the Public Offering at the Public Offering prices based upon the outstanding principal, accrued interest and other charges, or (z) continue to hold the April 1 Note. Except for a Public Offering and April 1 Note Amortization Payments, in order to prepay the April 1 Note, the Company must provide at least 30 days’ prior written notice to the holder, during which time the holder may convert the April 1 Note in whole or in part at the then-applicable conversion price. For avoidance of doubt, the April 1 Note Amortization Payments will be prepayments and are subject to prepayment penalties equal to 115% of the April 1 Note Amortization Payment. In the event the Company consummates a Public Offering while the April 1 Note is outstanding, then 25% of the net proceeds of such offering will, within two business days of the closing of such Public Offering, be applied to reduce the outstanding obligations pursuantWarrants related to the April ~~1 Note.~~

~~Until the April 1 Note~~2021 Series E Offering is no longer outstanding, it is convertible, in whole or in part, at any time, and from time to time, into shares of common stock at the option of the investor. The “Conversion Price” in effect on any Conversion Date (as defined in the April 1 Note) means, as of any Conversion Date (as defined in the April 1 Note) or other date of determination, $0.40$0.01 per share, subject to ~~adjustment as provided herein. If an Event of Default (as defined in~~adjustment. Additionally, the ~~April 1 Note) has occurred, regardless of whether it has been cured or remains ongoing,~~Company issued 8,571,4293 warrants to the April 1 Note is convertible at the lower of: (i) $0.40 and (ii) 70% of the second lowest closing price of the common stock as reported on the Trading Market (as defined in the April 1 Note) during the 20 consecutive Trading Day (as defined in the April 1 Note) period ending and including the Trading Day immediately preceding the delivery or deemed delivery of the applicable notice of conversion. All such conversion price determinations are to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately.

The April 1 Warrant is exercisable at any time on or after the date of the issuance and entitles the investor to purchase shares of the Company’s common stock for a period of five years from the initial date the April 1 Warrant becomes exercisable. Under the terms of the April 1 Warrant, the investor is entitled to exercise the April 1 Warrant to purchase up to 8,800 shares of the Company’s common stockplacement agent at an initial exercise price of ~~$0.40, subject to adjustment as detailed in the April 1 Warrant.~~

In connection with the issuance of the April 1 Note, the Company determined that various terms of the April 1 Note and April 1 Warrant, including the April 1 Note Stock Payment terms discussed above and in Note 6, caused derivative treatment of the embedded conversion option and warrant. On the initial measurement dates, the fair values of the embedded conversion option derivative and warrant of $1,334 was recorded as derivative liabilities and was allocated as a debt discount up to the net proceeds of the April 1 Note of $1,334. Due to the default of August 2019 Note Amortization Payments due on our August 2019 Notes and other notes as discussed in Note 6, the April 1 Note was deemed in default. Accordingly, the outstanding principal balance on date of default increased by 30% which amounted to approximately $6,600, default interest accrues at 18%, and the default conversion terms apply.

~~On April 20, 2020, the Company issued and sold to an investor a convertible promissory note in the principal amount of $456,500 (the “~~~~April 20 Note~~”). The April 20 Note contained a 10% original issue discount amounting to $41,500 for a purchase price of $415,000. The Company did not receive any proceeds from the April 20 Note because the investor converted previous notes and accrued interest due to him into the April 20 Note. The April 20 Note bears interest at 6%$0.01 per ~~annum and becomes due and payable on April 20, 2022 (the “~~~~April 20 Note~~ ~~Maturity Date~~”). During the existence of an Event of Default (as defined in the April 20 Note), which includes, amongst other events, any default in the payment of principal and interest payment (including any April 20 Note Amortization Payments) under any note or any other indebtedness, interest accrues at the lesser of (i) the rate of 18% per annum, or (ii) the maximum amount permitted by law. Commencing on the thirteenth month anniversary of the April 20 Note, monthly payments of interest and monthly principal payments, based on a 12 month amortization schedule, will be due and payable(each, an “~~April 20 Note Amortization Payment~~”), until the April 20 Note Maturity Date, at which time all outstanding principal, accrued and unpaid interest and all other amounts due and payable under the April 20 Note will be immediately due and payable. The April 20 Note Amortization Payments will be made in cash unless the investor requests it to be issued in the Company’s common stock in lieu of a cash payment (each, an “~~April 20 Note Stock Payment~~”). If the investor requests an April 20 Note Stock Payment, the number of shares of common stock issued will be based on the amount of the applicable April 20 Note Amortization Payment divided by 80% of the lowest VWAP (as defined in the April 20 Note) during the five Trading Day (as defined in the April 20 Note) period prior to the due date of the April 20 Note Amortization Payment.

The April 20 Note may be prepaid, provided that Equity Conditions, as defined in the April 20 Note, have been met (or any such failure to meet the Equity Conditions has been waived): (i) from April 20, 2020 until and through July 20, 2020 at an amount equal to 105% of the aggregate of the outstanding principal balance of the April 20 Note and accrued and unpaid interest, and (ii) after July 20, 2020 at an amount equal to 115% of the aggregate of the outstanding principal balance of the April 20 Note and accrued and unpaid interest. In the event that the Company closes a Public Offering, the holder may elect to: (x) have its principal and accrued interest prepaid directly from the proceeds of the Public Offering at the prices set forth above, or (y) exchange its April 20 Note at the closing of the Public Offering for the securities being issued in the Public Offering at the Public Offering prices based upon the outstanding principal, accrued interest and other charges, or (z) continue to hold the April 20 Note. Except for a Public Offering and April 20 Note Amortization Payments, in order to prepay the April 20 Note, the Company must provide at least 30 days’ prior written notice to the holder, during which time the holder may convert the April 20 Note in whole or in part at the then=applicable conversion price. For avoidance of doubt, the April 20 Note Amortization Payments will be prepayments and are subject to prepayment penalties equal to 115% of the April 20 Note Amortization Payment. In the event the Company consummates a Public Offering while the April 20 Note is outstanding, then 25% of the net proceeds of such offering will, within two business days of the closing of such Public Offering, be applied to reduce the outstanding obligations pursuant to the April 20 Note.

Until the April 20 Note is no longer outstanding, it is convertible, in whole or in part, at any time, and from time to time, into shares of common stock at the option of the investor. The “Conversion Price” in effect on any Conversion Date (as defined in the April 20 Note) means, as of any Conversion Date or other date of determination, the lower of: (i) $0.40 and (ii) 70% of the second lowest closing price of the common stock as reported on the Trading Market (as defined in the April 20 Note) during the 20 consecutive Trading Day (as defined in the April 20 Note) period ending and including the Trading Day immediately preceding the delivery or deemed delivery of the applicable notice of conversion. All such Conversion Price determinations are to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately.

In connection with the issuance of the April 20 Note, the Company determined that various terms of the April 20 Note caused derivative treatment of the embedded conversion option and warrant. On the initial measurement dates, the fair values of the embedded conversion option derivative of $400,365 was recorded as derivative liabilities and was allocated as a debt discount of $400,365. Due to the default of August 2019 Note Amortization Payments due on our August 2019 Notes and other notes as discussed in Note 6, the April 20 Note was deemed in default. Accordingly, the outstanding principal balance on date of default increased by 30% which amounted to approximately $136,950, default interest accrues at 18%, and the default conversion terms apply.share.

~~On April 2, 2020, the Company’s subsidiary, Shypdirect, entered into a Paycheck Protection Program promissory note (the “~~~~Shypdirect PPP Loan~~”)Shares issued in connection with ~~M&T Bank in the amount of $504,940 under the Small Business Administration (the “~~~~SBA~~~~”) Paycheck Protection Program (the “~~~~Paycheck Protection Program~~~~”) of the Coronavirus Aid, Relief and Economic Security Act of 2020 (the “~~~~CARES Act~~”). On April 28, 2020, the Shypdirect PPP Loan was approved and Shypdirect received the loan proceeds on May 1, 2020. Shypdirect plans to use the proceeds for covered payroll costs, rent and utilities in accordance with the relevant terms and conditions of the CARES Act. The Shypdirect PPP Loan has a two-year term, matures on April 28, 2022, and bears interest at a rate of 1.00% per annum. Monthly principal and interest payments, less the amount of any potential forgiveness (discussed below), will commence on November 28, 2020.

~~On April 15, 2020, the Company’s subsidiary, Prime EFS, entered into a Paycheck Protection promissory note (the “~~~~Prime EFS PPP Loan~~~~” and together with the Shypdirect PPP Loan, the “~~~~PPP Loans~~”) with M&T Bank in the amount of $2,941,212 under the SBA Paycheck Protection Program of the CARES Act. On April 15, 2020, the Prime EFS PPP Loan was approved and Prime EFS received the loan proceeds on April 22, 2020. Prime EFS plans to use the proceeds for covered payroll costs, rent and utilities in accordance with the relevant terms and conditions of the CARES Act. The Prime EFS PPP Loan has a two-year term, matures on April 16, 2022, and bears interest at a rate of 1.00% per annum. Monthly principal and interest payments, less the amount of any potential forgiveness (discussed below), will commence on November 16, 2020.

Neither Prime EFS nor Shypdirect provided any collateral or guarantees for these PPP Loans, nor did they pay any facility charge to obtain the PPP Loans. These promissory notes provide for customary events of default, including, among others, those relating to failure to make payment, bankruptcy, breaches of representations and material adverse effects. Prime EFS and Shypdirect may prepay the principal of the PPP Loans at any time without incurring any prepayment charges. These PPP Loans may be forgiven partially or fully if the loan proceeds are used for covered payroll costs, rent and utilities, provided that such amounts are incurred during the twenty- four week period that commenced on May 1, 2020 and at least 60% of any forgiven amount has been used for covered payroll costs. Any forgiveness of these PPP Loans will be subject to approval by the SBA and M&T Bank and will require Prime EFS and Shypdirect to apply for such treatment in the future. The Company expects to exhaust such funds in the third quarter and file for forgiveness in the third quarter, although there is no guarantee that such forgiveness will be granted.

~~Common shares issued for~~ conversion of ~~convertible debt and interest~~Series E preferred shares

During the period from April 1, ~~2020~~2021 to ~~June 29, 2020,~~May 17, 2021, the Company issued ~~123,279,793~~352,560,190 shares of its common stock in connection with the conversion of ~~convertible notes payable~~210,232 shares of ~~$803,827 and accrued interest of $68,933, and fees of $500.~~Series E. The conversion ~~price~~ratio was based on ~~contractual terms~~the Series E certificate of ~~the related debt.~~designation, as amended.

~~Common shares~~Shares issued ~~in connection cashless~~upon exercise of warrants

During the period from ~~June~~April 1, ~~2020~~2021 to ~~June 29, 2020,~~May 17, 2021, the Company issued ~~70,203,889~~46,333,436 shares of its common stock in connection with the cashless exercise of 75,700,286 warrants. The exercise price was based on contractual terms of the related ~~debt.~~

~~Warrants~~In May 2021, the Company received proceeds of $100,000 from the exercise of 10,000,000 warrants at $0.01 per share.

On June 16, 2020, the Company issued an aggregate of 28,100,000 five-year warrants for the purchase of 28,100,000 shares of the Company’s common stock at an exercise price of $0.06 per share, subject to adjustment as defined in the respective warrant to two consultants for services rendered.

~~Pursuant to the August 2019 Purchase Agreement (see Note 6), by and among the Company and the investors named therein (the “~~~~August 2019~~ ~~Investors~~”), the Company is required to keep reserved for issuance to the August 2019 Investors three times the number of shares of common stock issuable to the August 2019 Investors upon conversion or exercise, as applicable, of convertible notes and warrants held by the August 2019 Investors (the “~~August 2019~~ ~~Reserve Requirement~~~~”). If the Company fails to meet the August 2019 Reserve Requirement within 45 days after written notice from an August 2019 Investor, the Company must,~~ ~~inter alia~~, sell to the Lead Investor (as defined in the August 2019 Purchase Agreement) for $100 a series of preferred stock which holds voting power equal to 51% of the number of votes eligible to vote at any special or annual meeting of the Company’s stockholders (with the power to take action by written consent in lieu of a stockholders meeting) for the sole purpose of amending the Company’s Amended and Restated Articles of Incorporation to increase the number of shares of common stock that the Company is authorized to issue, which such preferred stock will be automatically cancelled upon the effectiveness of the resulting increase in the Company’s authorized stock. By letter agreement dated, June 4, 2020, the Lead Investor assigned this contract right to John Mercadante, the chief executive officer of the Company.

The Company was unable to comply with the August 2019 Reserve Requirement within 45 days after written notice from an August 2019 Investor. Accordingly, on June 5, 2020, the Company sold to John Mercadante, for $100.00, 1 share of Series C Preferred Stock which has voting power equal to 51% of the number of votes eligible to vote at any special or annual meeting of the Company’s stockholders (with the power to take action by written consent in lieu of a stockholders meeting) for the sole purpose of amending the Company’s Amended and Restated Articles of Incorporation to increase the number of shares of common stock that the Company is authorized to issue. Upon the effectiveness of the amendment, the Series C Preferred Stock will be automatically cancelled. The Series C Preferred Stock is not entitled to vote on any other matter, is not entitled to dividends, is not convertible into any other security of the Company and is not entitled to any distributions upon liquidation of the Company.

On June 26, 2020, stockholders holding at least 51% of the voting power of the stock of the Company entitled to vote thereon consented, in writing, to amend the Company’s Amended and Restated Articles of Incorporation, by adoption of the Certificate of Amendment to the Amended and Restated Articles of Incorporation of the Company, which will authorize an increase of the number of shares of common stock that the Company may issue to 4,000,000,000 shares, par value $0.001 (the “~~Certificate of Amendment~~~~”).~~

The Company filed a preliminary information statement on Schedule 14C regarding the stockholders’ consent to the Certificate of Amendment with the SEC on June 8, 2020. The Company plans to file a definitive information statement on Schedule 14C on or before June 30, 2020 and to first mail that information statement to stockholders on or before June 30, 2020. The Certificate of Amendment is expected to take effect on July 20, 2020.

On June 19, 2020, Amazon Logistics, Inc. (“Amazon”) notified Prime EFS in writing, that Amazon does not intend to renew its Delivery Service Partner (DSP) Agreement with Prime EFS when that agreement (the “~~In-Force Agreement~~”) expires. Amazon stated that it believes the In-Force Agreement expires on September 30, 2020. Prime EFS, however, strongly disagrees with Amazon’s position in this regard and believes it has a strong argument that the In-Force Agreement does not expire, by its specific terms, until March 31, 2021, at the earliest. If Amazon disagrees with the forgoing, Prime EFS intends to arbitrate this issue through the American Arbitration Association; however, the Company cannot make give any assurances as to the success of its position.

Approximately 74% of the Company’s approximately $32 million of revenue reported in its recent Form 10-K Annual Report for the calendar year ended December 31, 2019 was attributable to Prime EFS’s last-mile DSP business with Amazon. Even if it lost the Amazon last-mile business, the Company intends to generate significant revenues from its mid-mile and long-haul business. While a termination of the Amazon last-mile business will have a material adverse impact on the Company’s business, the Company will continue to: (i) seek to expand its last-mile business with other non-Amazon customers, which includes having recently begun making deliveries for one of the largest carriers in the world; (ii) explore other strategic relationships; and (iii) identify potential acquisition opportunities, while continuing to execute our restructuring plan, commenced in February 2020.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements made in this Form 10-Q that are not historical or current facts are “forward-looking statements” made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange ~~Act.~~Act of 1934, as amended (the “Exchange Act”). These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. ~~We disclaim any obligation subsequently~~Factors that may affect the results of our operations include, among others: whether the OTC Markets Group approves our application to ~~revise any~~OTCQB; our ability to successfully execute our business strategies, including integration of acquisitions and the future acquisition of other businesses to grow our Company; customers’ cancellation on short notice of master service agreements from which we derive a significant portion of our revenue or our failure to renew such master service agreements on favorable terms or at all; our ability to attract and retain key personnel and skilled labor to meet the requirements of our labor-intensive business or labor difficulties which could have an effect on our ability to bid for and successfully complete contracts; the ultimate geographic spread, duration and severity of the coronavirus outbreak and the effectiveness of actions taken, or actions that may be taken, by governmental authorities to contain the outbreak or ameliorate its effects; our failure to compete effectively in our highly competitive industry, which could reduce the number of new contracts awarded to us or adversely affect our market share and harm our financial performance; our ability to adopt and master new technologies and adjust certain fixed costs and expenses to adapt to our industry’s and customers’ evolving demands; our history of losses, deficiency in working capital and a stockholders’ deficit and our inability to achieve sustained profitability; material weaknesses in our internal control over financial reporting and our ability to maintain effective controls over financial reporting in the future; our substantial indebtedness, which could adversely affect our business, financial condition and results of operations and our ability to meet our payment obligations; the impact of new or changed laws, regulations or other industry standards that could adversely affect our ability to conduct our business; and changes in general market, economic, social and political conditions in the United States and global economies or financial markets, including those resulting from natural or man-made disasters.

Other important factors which could cause our actual results to differ materially from the forward-looking statements in this document include, but are not limited to, ~~reflect~~those discussed in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as those discussed elsewhere in this report and as set forth from time to time in our other public filings and public statements. You should not assume that material events ~~or circumstances after~~subsequent to the date of ~~such statement~~this Quarterly Report on Form 10-Q have or have not occurred. In addition to ~~reflect~~ the ~~occurrence~~other information included in this report, including the factors identified in Part II Item 1A of ~~anticipated or unanticipated events.~~this report, and our other public filings and releases, a discussion of factors affecting our business is included in our Annual Report on Form 10-K for the year ended December 31, 2020 under “Item 1A. Risk Factors” and should be considered while evaluating our business, financial condition, results of operations and prospects.

You should read this report in its entirety and with the understanding that our actual future results may be materially different from what we expect. We may not update these forward-looking statements, even in the event that our situation changes in the future, except as required by law. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

The COVID-19 pandemic and resulting global disruptions have affected our businesses, as well as those of our customers and their third-party suppliers and sellers. To serve our customers while also providing for the safety of our employees and service providers, we have adapted numerous aspects of our logistics and transportation processes. We continue to monitor the rapidly evolving situation and expect to continue to adapt our operations to address federal, state, and local standards as well as to implement standards or processes that we determine to be in the best interests of our employees, customers, and communities.

As reflected in the discussion below, the impact of the pandemic and actions taken in response to it had minimal effects on our results of operations. We are experiencing higher net sales, which ~~reflects~~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 fulfillment 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. We expect 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 fulfillment costs and cost of sales as a percentage of net sales through at least ~~Q3 2020,~~Q2 2021, although it is not possible to determine the duration and spread of the pandemic or such actions, the ultimate impact on our results of operations during ~~2020,~~2021, or whether other currently unanticipated consequences of the pandemic are reasonably likely to materially affect our results of operations.

On June 19, 2020, Amazon Logistics, Inc. (“Amazon”) notified Prime EFS in writing (the “Prime EFS Termination Notice”), that Amazon did not intend to renew its Delivery Service Partner (DSP) Agreement with Prime EFS when that agreement (the “In-Force Agreement”) expired. In the Prime EFS Termination Notice, Amazon stated that the In-Force Agreement 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”). However, 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 would agree to cooperate in an orderly transition of its Amazon last-mile delivery business to other service providers, release any and all claims it may have had against Amazon, and covenant not to sue Amazon (the “Aug. 3 Proposal”). On August 4, 2020, the Company, Prime EFS and Shypdirect accepted the Aug. 3 Proposal.

Approximately 77.5% of the Company’s revenue of $1,491,699 for the three months ended March 31, 2021 was attributable to Shypdirect’s mid-mile and long-haul business with Amazon. The termination of the Amazon last-mile business on September 30, 2020 had a material adverse impact on the Company’s business beginning in the 4th fiscal quarter of 2020. Additionally, as expected, the Company’s mid-mile business with Amazon terminated on or about May 14, 2021. Unless and until this business is resumed or replaced, its loss will have a material adverse impact on the Company’s business in the 2^nd fiscal quarter of 2021 and thereafter. As of May 17, 2021, the Company is still operating and plans to continue operating in the long-haul business.

The Company will continue to: (i) seek to replace its lost 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.

Transportation and Logistics Systems, Inc. (“TLSS” or the “Company”)~~, formerly PetroTerra Corp.,~~ was incorporated under the laws of the State of Nevada, on July 25, 2008. The Company operates through its active subsidiaries as a ~~leading~~ logistics and transportation company specializing in ecommerce fulfillment, last mile deliveries, two-person home delivery, mid-mile, and ~~line haul~~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 April 16, 2019, Mr. Yariv ceased to be an officer or director of the Company.~~On.

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 iswas a New Jersey based transportation company with a focus on deliveries for on-line retailers in New York, New Jersey, and ~~Pennsylvania.~~Pennsylvania until it ceased operations on September 30, 2020.

On July 24, 2018, we 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.However, the Company ceased its box truck delivery service early in the second quarter of 2021.

On November 13, 2020, we formed a wholly owned subsidiary, Shyp FX, Inc., a company incorporated under the laws of the State of New Jersey (“Shyp FX”). On January 15, 2021, through Shyp FX, we executed an asset purchase agreement (“APA”) and closed a transaction to acquire substantially all of the assets and certain liabilities of Double D Trucking, Inc., a northern New Jersey-based logistics provider specializing in servicing Federal Express over the past 25 years (“DDTI”). The purchase price was $100,000 of cash and a promissory note of $400,000. The principal assets involved in the acquisition were vehicles for cargo transport, system equipment for vehicle tracking and navigation of vehicles, and delivery route rights together with assumption of associated customer relationships. The acquisition of DDTI made the Company an approved contracted service provider of FedEx, which, the Company believes fits in well with its current geographic coverage area and may lead to additional expansion opportunities within the FedEx network.

On November 16, 2020, we formed a wholly owned subsidiary, TLSS Acquisition, Inc., a company incorporated under the laws of the State of Delaware (“TLSS Acquisition”). On March 24, 2021, TLSS Acquisition acquired all of the issued and outstanding shares of capital stock of Cougar Express, Inc., a New York-based full-service logistics provider specializing in pickup, warehousing and delivery services in the tri-state area (“Cougar Express”). The purchase price was $2,000,000 of cash plus cash for the acquisition of security deposits, a cash payment equal to 50% of the difference between cash and accounts receivable acquired and accounts payable assumed, less the assumption of truck loans and leases, and a promissory note of $350,000. The previous owner of Cougar Express is barred from competing with the Cougar Express business for five years. Cougar Express was a family-owned full-service transportation business that has been in operation for more than 30 years providing one-to-four person deliveries and offering white glove services. It utilizes its own fleet of trucks, warehouse/driver/office personnel and on-call subcontractors from its convenient and secure New York JFK airport area location, allowing it to pick-up and deliver throughout the New York tri-state area. Cougar Express serves a diverse base of approximately 50 commercial accounts, which are freight forwarders that work with some of the most notable retail businesses in the country. We believe that the acquisition of Cougar Express fits our current business plan, given Cougar Express’s demographic location, services offered, and diversified customer base, and given that it would provide us with a long-standing, well-run profitable operation as a step to begin replacing the revenue it lost as a result of Amazon’s terminating its delivery service provider business. Furthermore, we believe that, because Cougar Express is strategically based in New York and serves the tri-state area, organic growth opportunities will be available for expanding its footprint into our primary base of operations in New Jersey, as well as efficiencies that could be derived by leveraging Shypdirect’s operational capabilities.

On February 21, 2021, the Company formed a wholly owned subsidiary, Shyp CX, Inc., a company incorporated under the laws of the State of New York (“Shyp CX”).

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 condensed consolidated financial statements contained in this Quarterly Report, which have been prepared in accordance with generally accepted accounting principles in the United States. You should read the discussion and analysis together with such condensed consolidated financial statements and the related notes thereto.

The condensed consolidated financial statements for the ~~periods~~three months ended March 31, ~~2020~~2021 and ~~2019~~2020 include a summary of our significant accounting policies and should be read in conjunction with the discussion below.

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 ~~condensed~~ 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 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 assets acquired and liabilities assumed, 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, the valuation of beneficial conversion features, and the ~~fair~~ value of ~~assets acquired and liabilities assumed in~~claims against the ~~business acquisition.~~Company.

We have identified the accounting policies below as critical to our business operation:

Accounts receivable are presented net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, a customer’s historical payment history, its current ~~credit-worthiness~~credit worthiness, and current economic trends. Accounts are written off after exhaustive efforts at collection.

In accordance with ASC Topic 360, we review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. We recognize an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value.

We have certain financial instruments that are embedded derivatives associated with capital raises. We evaluate all our financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 810-10-05-4 and 815-40. This accounting treatment requires that the carrying amount of any embedded derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or loss on extinguishment.

In July 2017, FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features. These amendments simplify the accounting for certain financial instruments with down-round features. The amendments require companies to disregard the down-round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. The guidance was adopted as of January 1, 2019 and we elected to record the effect of this adoption retrospectively to outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the condensed consolidated balance sheet as of the beginning of 2019, the period which the amendment is effective. In accordance with the guidance presented in ASU 2017-11, the fair value of derivative liabilities associated with certain convertible notes as of December 31, 2018 of $838,471 and the offsetting effect of reclassifying such debt to stock-settled debt for which we recorded a put premium liability of $385,385 was reclassified by means of a cumulative-effect adjustment to opening accumulated deficit as of January 1, 2019 in the amount of $453,086.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The updated guidance requires lessees to recognize lease assets and lease liabilities for most operating leases. In addition, the updated guidance requires that lessors separate lease and non-lease components in a contract in accordance with the new revenue guidance in ASC 606. The updated guidance is effective for interim and annual periods beginning after December 15, 2018.

On January 1, 2019, we adopted ASU No. 2016-02, applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases ~~and;~~and (ii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the inception of a contract the Company assessed whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. We will allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. We have elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less.

Operating lease ROU assets represents the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As most leases do not provide an implicit rate, we use an incremental borrowing rate based on the information available at the adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is included in general and administrative expenses in the ~~condensed~~ consolidated statements of operations.

~~The Company~~We adopted ASC 606, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition. This ASC is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASC also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer service orders, including significant judgments.

~~For the Company’s Prime EFS and Shypdirect business activities, we~~We recognize revenues and the related direct costs of such revenue which generally include compensation and related benefits, gas costs, insurance, parking and tolls, truck rental fees, and maintenance fees as of the date the freight is delivered which is when the performance obligation is satisfied. In accordance with ASC Topic 606, we recognize revenue on a gross basis. Our payment terms are net seven days from acceptance of delivery. We do not incur incremental costs obtaining service orders from our ~~Prime EFS and Shypdirect~~ customers, however, if we did, because all of ~~Prime EFS and Shypdirect’s~~our customer contracts are less than a year in duration, any contract costs incurred would be expensed rather than capitalized. The revenue that we recognize arises from deliveries of packages on behalf of the Company’s customers. Primarily, our performance obligations under these service orders correspond to each delivery of packages that we make under the service agreements. Control of the delivery transfers to the recipient upon delivery. Once this occurs, we have satisfied our performance obligation and we recognize revenue.

Management has reviewed the revenue disaggregation disclosure requirements pursuant to ASC 606 and determined that no further disaggregation disclosure is required to be presented.

Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation –Stock Compensation”, which requires recognition in the financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange for an award based on the grant-date fair value of the award. We have elected to recognize forfeitures as they occur as permitted under ASU 2016-09 Improvements to Employee Share-Based Payment.

Our condensed 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.

We expect we will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.

For the three months ended March 31, ~~2020~~2021 compared with the three months ended March 31, ~~2019~~2020

The following table sets forth our revenues, expenses and net loss for the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020. The financial information below is derived from our condensed consolidated financial statements included in this Quarterly Report.

	For the Three Months Ended March 31,						For the Three Months Ended March 31,
	2020			2019			2021			2020
Revenues	$	8,635,060		$	5,803,207		$	1,491,699		$	8,635,060
Cost of revenues		7,855,749			5,549,702			1,898,778			7,855,749
Gross profit		779,311			253,505
Gross profit (loss)								(407,079	)		779,311
Operating expenses		1,566,488			5,377,547			1,229,305			1,566,488
Loss from operations		(787,177	)		(5,124,042	)		(1,636,384	)		(787,177	)
Other expenses		(2,666,161	)		(14,537,342	)
Loss from continuing operations		(3,453,338	)		(19,661,384	)
Income from discontinued operations		-			13,661
Other expenses, net								(632,796	)		(2,666,161	)
Net loss	$	(3,453,338	)	$	(19,647,723	)		(2,269,180	)		(3,453,338	)
Deemed dividend related to ratchet adjustment, beneficial conversion features, and accrued dividends								(829,836	)		(18,696,012	)
Net loss attributable to common shareholders							$	(3,099,016	)	$	(22,149,350	)

For the three months ended March 31, ~~2020,~~2021, our revenues ~~from continuing operations~~ were ~~$8,635,060~~$1,491,699 as compared to ~~$5,803,207~~$8,635,060 for the three months ended March 31, ~~2019, an increase~~2020, a decrease of ~~$2,831,853,~~$7,143,361, or ~~48.8%~~82.7%. This ~~increase~~decrease was primarily a result of ~~an increase in revenue of approximately $3,023,161 from box truck and tractor truck delivery services where we transport product from a distribution center to the post office offset by~~ a decrease in revenue attributable to Prime EFS’s last-mile ~~deliveries performed~~DSP business of ~~$191,308.~~$4,894,974, a decrease in revenue from Shypdirect’s mid-mile and long-haul business with Amazon of $2,405,722, and a decrease in revenue from other customers of $142,380. These decreases were offset from revenues generated from our newly acquired companies, DDTI and Cougar Express, of $242,568 and $57,147, respectively.

~~On May 1, 2019, we entered into a Share Exchange Agreement~~As discussed above, approximately 77.5% of our revenue of $1,491,699 for the three months ended March 31, 2021 was attributable to Shypdirect’s mid-mile and long-haul business with ~~Save On and Steven Yariv, whereby we returned all~~Amazon. The termination of the ~~stock~~Amazon last-mile business on September 30, 2020 had a material adverse impact on the Company’s business beginning in the 4th fiscal quarter of ~~Save On to Steven Yariv~~2020. Additionally, as expected, the Company’s mid-mile business with Amazon terminated on or about May 14, 2021. Unless and until this business is resumed or replaced, its loss will have a material adverse impact on the Company’s business in ~~exchange for Mr. Yariv conveying 1,000,000 shares~~the 2^nd fiscal quarter of ~~common stock~~2021 and thereafter. As of May 17, 2021, the Company ~~back~~is still operating and plans to ~~us. Accordingly, for all periods presented, all revenues from Save On have been reflected~~continue operating in the long-haul business.

We will continue to: (i) seek to replace the lost 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. In connection thereto, in January 2021, we completed the acquisition of DDTI and in March 2021, we completed the acquisition of Cougar Express, as ~~part of discontinued operations and we will not reflect any revenues from Save On in future periods.~~discussed elsewhere.

For the three months ended March 31, ~~2020,~~2021, our cost of revenues ~~from continuing operations were $7,855,749~~was $1,898,778 compared to ~~$5,549,702~~$7,855,749 for the three months ended March 31, ~~2019, an increase~~2020, a decrease of ~~$2,306,047,~~$5,956,971, or ~~41.6%.Cost~~75.8%. Cost of revenues ~~relating to our Prime EFS and Shypdirect segments~~ consists of truck and van rental fees, insurance, gas, maintenance, parking and tolls, and compensation and related benefits. ~~The increase was~~During the three months ended March 31, 2021, Prime EFS received a ~~direct result~~bill for approximately $304,000 for excess wear and tear on trucks that were rented for its last-mile DSP business that terminated in September 2020, which is included in cost of ~~an increase in routes serviced.~~sales.

For the three months ended March 31, ~~2020, our~~2021, we had a gross loss of $407,079, or (27.3)% of revenues, as compared to gross profit ~~was~~of $779,311, or 9.0% of ~~revenue, as compared to $253,505, or 4.4% of revenue,~~revenues, for the three months ended March 31, ~~2019, an increase~~2020, a decrease of ~~$525,806.~~$1,186,390, or 152.2%. The ~~increase~~decrease in gross profit for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020 primarily resulted from ~~an increase~~a decrease in revenues and a decrease in operational efficiencies in ~~both~~ Prime EFS and ~~Shypdirect.~~Shypdirect due to the termination of the Amazon last-mile business and decrease in revenues from our mid-mile and long-haul business. Additionally, as discussed above, during the three months ended March 31, 2021, Prime EFS received a bill for approximately $304,000 for excess wear and tear on trucks that were rented for its last-mile DSP business that terminated in September 2020.

For the three months ended March 31, ~~2020,~~2021, total operating expenses amounted to ~~$1,566,488~~$1,229,305 as compared to ~~$5,377,547~~$1,566,488 for the three months ended March 31, ~~2019,~~2020, a decrease of ~~$3,811,059,~~$337,183, or ~~70.9%~~21.5%. For the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, operating expenses consisted of the following:

	For the Three months Ended March 31,				For the Three Months Ended March 31,
	2020		2019		2021		2020
Compensation and related benefits	$	742,045	$	4,108,544	$	368,609	$	742,045
Legal and professional Fees		414,810		504,840
Legal and professional fees						530,538		414,810
Rent		164,350		98,831		133,955		164,350
General and administrative expenses		245,283		665,332		196,203		245,283
Total Operating Expense	$	1,566,488	$	5,377,547
Total Operating Expenses					$	1,229,305	$	1,566,488

For the three months ended March 31, ~~2020,~~2021, compensation and related benefits amounted to ~~$742,045~~$368,609 as compared to ~~$4,108,544 for the three months ended March 31, 2019, a decrease of $3,366,499. Compensation and related benefits~~$742,045 for the three months ended March 31, 2020, ~~and 2019 included stock-based compensation of $0 and $2,750,808 respectively,~~ a decrease of ~~$2,750,808, from the granting of shares of our common stock to employees, our former chief executive officer, and our new chief executive officer for services rendered. Additionally, during~~$373,436, or 50.3%. During the three months ended March 31, ~~2020, compensation and related benefits amounted to $742,045 as compared to $1,357,736 for~~2021, the ~~three months ended March 31, 2019, a decrease of $615,691. The~~ overall decrease in compensation and related benefits was attributable to ~~a decrease in stock-based compensation,~~ a decrease in compensation paid to significant employees and the reduction of staff.

For the three months ended March 31, ~~2020,~~2021, legal and professional fees were ~~$414,810~~$530,538 as compared to ~~$504,840~~$414,810 for the three months ended March 31, ~~2019, a decrease~~2020, an increase of ~~$90,030,~~$115,728, or ~~17.8%~~27.9%. During the three months ended March 31, 2021, we had an increase in legal fees of $151,523 related to an increase in ongoing legal matters, an increase in accounting fees of $96,766 incurred in the 2021 period that we incurred in the second quarter of 2020, and ~~2019, we incurred stock-based consulting~~an increase in other professional fees of ~~$31,250 and $0, respectively, from the issuance of our common shares to consultants for business development services rendered, an increase of $31,250. This increase was~~$54,779. These increases were offset by a decrease in ~~accounting~~consulting fees ~~attributable~~of $187,340 due to a decrease in ~~auditing and third-party accountant fees and legal fees offset by an increase in consulting fees.~~the use of consultants used for business development.

For the three months ended March 31, ~~2020,~~2021, rent expense was ~~$164,350~~$133,955 as compared to ~~$98,831~~$164,350 for the three months ended March 31, ~~2019, an increase~~2020, a decrease of ~~$65,519.~~$30,395, or 18.5%. This ~~increase~~decrease was attributable to a ~~significant expansion~~decrease in ~~office, warehouse and~~rented parking spaces pursuant to ~~short and long-term~~short-term operating leases related to the Prime EFS and Shypdirect businesses.

For the three months ended March 31, 2020, general and administrative expenses were $245,283 as compared to $665,332 for the three months ended March 31, 2019, a decrease of $420,049, or 63.1%. This decrease is primarily attributable to a decrease in general administrative expenses of $125,421 and a decrease in depreciation and amortization of $294,628. The decrease in depreciation and amortization expense was related to a decrease in amortization of intangible assets of $261,776 and a decrease in depreciation expense of $32,852. In 2020, we cut our overall general and administrative expenses due to cost-cutting measures taken.

For the three months ended March 31, ~~2020, loss from operations amounted to $787,177~~2021, general and administrative expenses were $196,203 as compared to ~~$5,124,042~~$245,283 for the three months ended March 31, ~~2019,~~2020, a decrease of ~~$4,336,865,~~$49,080, or ~~84.6%~~20.0%. This decrease is primarily attributable to cost-cutting measures taken.

For the three months ended March 31, 2021, loss from operations amounted to $1,636,384 as compared to $787,177 for the three months ended March 31, 2020, an increase of $849,207, or 107.9%.

Total other expenses (income) include interest expense, derivative expense, ~~loan fees,~~ gain on debt extinguishment, and other income. For the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, other expenses (income) consisted of the following:

	For the Three months Ended March 31,						For the Three Months Ended March 31,
	2020			2019			2021			2020
Interest expense	$	3,046,727		$	707,065		$	83,509		$	3,046,727
Interest expense – related parties		107,138			539,888			22,192			107,138
Gain on extinguishment of debt		(275,034	)		(93,871	)
Gain on debt extinguishment								(59,853	)		(275,034	)
Other income		(67,831	)		-			(108,035	)		(67,831	)
Derivative (gain) expense		(144,839	)		13,384,260
Total Other Expense, net	$	2,666,161		$	14,537,342
Derivative expense (income)								694,983			(144,839	)
Total Other Expenses, net							$	632,796		$	2,666,161

For the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, aggregate interest expense was $105,701 and $3,153,865, ~~and $1,246,953,~~ respectively, ~~an increase~~a decrease of $1,906,912. The increase in interest expense resulted from an increase in the interest rate on interest-bearing loans due to default provisions, an increase in the amortization of original issue discount, and an increase in interest paid to related parties. Additionally, during$3,048,164, or 96.7%. During the three months ended March ~~31, 2020,~~31,2020, we incurred a 30% default interest penalty of $1,387,785, which was included in interest expense. We did not incur this expense during the ~~2019~~2021 period. Additionally, the decrease in interest expense was attributable to a decrease in interest-bearing loans due to the conversion of debt to equity and a decrease in the amortization of original issue discount.

For the three months ended March 31, 2021 and 2020, the net gain on extinguishment of debt was ~~$275,304 as compared~~$59,853 and $275,034, respectively, a decrease of $215,181. The gains on debt extinguishment were attributable to ~~$93,871 for~~the settlement of convertible debt and warrants, the settlement of secured merchant loans, the conversion of convertible debt, and the settlement of other payables.

During the three months ended March 31, ~~2019, an increase~~2021 and 2020, we recorded other income of ~~$181,163 that was~~$108,035 and $67,831 which primarily ~~attributable~~related to the ~~settlement~~collection of ~~secured merchant loans in March 2020.~~rental income from the sublease of excess office, warehouse, and parking spaces.

For the three months ended March 31, 2021 and 2020, derivative expense (income) was $694,983 and ~~2019, derivative income (expense) was $144,839 and $(13,384,260)~~$(144,839), respectively, a change of ~~$13,529,099.~~$839,822. During the three months ended March 31, 2021 and 2020, we recorded a derivative expense (income) related to the calculated initial derivative fair value of conversion options and ~~2019,~~warrants. Additionally, we adjusted our derivative liabilities to fair value and recorded derivative expense or income. ~~This significant change was attributable to a high quoted stock price during the 2019 period as compared to the 2020 period.~~

For the three months ended March 31, 2020, loss from continuing operations amounted to $3,453,338 as compared to $19,661,384 for the three months ended March 31, 2019, a decrease of $16,208,046, or 82.4%.

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. Accordingly, we reflected Save On as a discontinued operations beginning in the second quarter of 2019, the period that Save On was disposed of and retroactively for all periods presented in the accompanying condensed consolidated financial statements. The businesses of Save On are considered discontinued operations because: (a) the operations and cash flows of Save On were eliminated from the Company’s operations; and (b) the Company has no interest in the divested operations. For the three months ended March 31, 2020 and 2019, income from discontinued operations amounted to $0 and $13,661, respectively.

Due to factors discussed above, for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, net loss amounted to ~~$3,453,338~~$2,269,180 and ~~$19,647,723,~~$3,453,338, respectively. For the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, net loss attributable to common shareholders, which included a deemed dividend related to price protection, beneficial conversion features on preferred stock, and the dividends accrued on Series E preferred stock of ~~$18,696,012~~$829,836 and ~~$0,~~$18,696,012, amounted to ~~$22,149,350,~~$3,099,016, or ~~$(1.79)~~$(0.00) per basic and diluted common share, and ~~$19,647,723,~~$22,149,350, or ~~$(3.76)~~$(1.79) per basic and diluted common share, respectively.

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. AtOn March 31, 2021 and December 31, 2020, we had a cash balance of ~~$32,626.~~$662,914 and $579,283, respectively. Our working capital deficit was ~~$27,678,817 at~~$18,968,045 on March 31, ~~2020.~~2021. We reported a net ~~decrease~~increase in cash for the three months ended March 31, 2021 as compared to December 31, 2020 of ~~$17,400.~~$83,631 primarily as a result of net cash proceeds received from the sale of Series E preferred stock units of $3,258,000, offset by the use of net cash for acquisitions of $2,123,115 and by cash used in operations.

We do not believe that our existing working capital and our future cash flows from operating activities will provide sufficient cash to enable us to meet our operating needs and debt requirements for the next twelve months. Our revenues decreased significantly since the fourth quarter of 2020 due to the termination of the Amazon last-mile business. Additionally, as discussed elsewhere, during the three months ended March 31, 2021 and on or about May 14, 2021, the date of termination of the Amazon Relay Carrier Terms of Service between Amazon and Shypdirect, there has been a significant decrease in cash flows from operations. We are seeking to (i) replace its last-mile DSP business and supplement its 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. In connection thereto, in January 2021, we completed the asset acquisition of DDTI and in March 2021, we completed the acquisition of Cougar Express, as discussed elsewhere.

Additionally, we are seeking to raise capital through additional debt and/or equity financings to fund our operations in the future. Although we have historically raised capital from sales of shares of common stock, the sale of Series E preferred stock, and from the issuance of convertible promissory notes and notes payable, there is no assurance that we will be able to continue to do so. If we are unable to raise additional capital or secure additional lending in the near future, management expects that we will need to curtail our operations.

On March 13, 2019, we entered into a convertible note agreement with Wendy Cabral, an individual, who is affiliated with the Company’s chief executive officer, in the amount of $500,000. Commencing on April 11, 2019, and continuing on the eleventh day of each month thereafter, payments of interest only on the outstanding principal balance of this note of $7,500 was due and payable. Interest was to accrue with respect to the unpaid principal sum identified above until such principal was paid or converted as provided below at a rate equal to 18% per annum compounded annually. This note was convertible by the holder at any time in principal amounts of $100,000 in accordance with its terms by delivery of written notice to the Company, into that number of shares of common stock equal to the amount obtained by dividing the portion of the aggregate principal amount that is being converted by $1.37. On July 12, 2019, we entered into a Note Conversion Agreement with Ms. Cabral. In connection with this Note Conversion Agreement, we issued 203,000 shares of our common stock at $2.50 per share for the full conversion of convertible note payable of $500,000 and accrued interest payable of $7,500, and we also issued Ms. Cabral warrants to purchase 203,000 shares of the Company’s common stock at an exercise price of $1.81 per share for a period of five years.

~~On April 9, 2019 (the “~~~~Bellridge Modification Date~~~~”), the Company entered into an agreement with Bellridge (the “~~~~Bellridge Modification Agreement~~~~”) that modified its existing obligations to Bellridge as follows:~~

In addition, on April 9, 2019, in addition, the Bellridge Note PA Warrants that were exercisable into an aggregate of 4.75% of the outstanding common stock of the Company all agreed to exercise such warrants for an aggregate of 240,000 shares of common stock of the Company.

~~On April 9, 2019, the Company entered into agreements (the “~~~~RedDiamond Amendments~~~~”) with RedDiamond Partners LLC and RDW Capital, LLC, the holders of these convertible notes representing an aggregate principal amount of $510,000, and agreed with such holders to:~~

On April 9, 2019, we entered into agreements with all holders of their Series A Convertible Preferred Stock to exchange all 4,000,000 outstanding shares of preferred stock for an aggregate of 2.6 million shares of common stock.

On April 11, 2019, we entered into a convertible note agreement with Westmount Financial Limited Partnership, an entity affiliated with the Company’s chief executive officer in the amount of $2,000,000. Commencing on May 11, 2019, and continuing on the eleventh day of each month thereafter, payments of interest only in the amount of $30,000 on the outstanding principal balance of this note was due and payable. Interest was to accrue with respect to the unpaid principal sum identified above until such principal is paid or converted as provided below at a rate equal to 18% per annum compounded annually. This note was convertible by the holder at any time in principal amounts of $100,000 in accordance with the terms by delivery of written notice to the Company, into that number of shares of common stock equal to the amount obtained by dividing the portion of the aggregate principal amount of this note that is being converted by $11.81. On July 12, 2019, we entered into a Note Conversion Agreement with Westmount Financial Limited Partnership. In connection with this Note Conversion Agreement, we issued 812,000 shares of our common stock at $2.50 per share for the full conversion of convertible note payable of $2,000,000 and accrued interest payable of $30,000. In connection with the conversion of this convertible note, we also issued to Westmount Financial Limited Partnership warrants to purchase 812,000 shares of the Company’s common stock at an exercise price of $2.50 per share for a period of five years.

On August 30, 2019, ~~we issued and sold to investors convertible promissory notes in~~ the ~~aggregate principal amount of $2,469,840 (the “~~~~August 2019 Notes~~~~”), and warrants to purchase up to 987,940 shares of our common stock (the “~~~~August 2019 Warrants~~~~”) pursuant to a~~Company closed Securities Purchase ~~Agreement~~Agreements (the “August 2019 Purchase Agreement”) with accredited investors. We received net proceeds of $295,534, which is net of a 10% original issue discounts of $246,984 and origination fees of $61,101, and is net of $1,643,367 for the repayment of notes payable, and net of $222,854 related to the conversion of existing notes payable already outstanding to these lenders into these August 2019 Notes. The August 2019 Notes bear interest at 10% per annum and become due and payable on November 30, 2020. During the existence of an Event of Default (as defined in the August 2019 Notes), interest accrues at the lesser of (i) the rate of 18% per annum, or (ii) the maximum amount permitted by law. Commencing on the four month anniversary of these August 2019 Notes, monthly payments of interest and monthly principal payments, based on a 12 month amortization schedule (each, an “~~August 2019 Note Amortization Payment~~”), are due and payable, until November 30, 2020, at which time all outstanding principal, accrued and unpaid interest and all other amounts due and payable under the August 2019 Notes will be immediately due and payable. The August 2019 Note Amortization Payments are made in cash unless the investor requests it to be issued in our common stock in lieu of a cash payment (each, an “~~August 2019 Note Stock Payment~~”). If the investor requests an August 2019 Note Stock Payment, the number of shares of common stock issued is based on the amount of the applicable August 2019 Note Amortization Payment divided by 80% of the lowest VWAP (as defined in the August 2019 Notes) during the five Trading Day (as defined in the August 2019 Notes) period prior to the due date of the August 2019 Note Amortization Payment.

The August 2019 Notes may be prepaid, provided that Equity Conditions, as defined in the August 2019 Notes, have been met (or any such failure to meet the Equity Conditions has been waived): (i) from August 30, 2019 until and through November 30, 2019 at an amount equal to 105% of the aggregate of the outstanding principal balance of the August 2019 Notes and accrued and unpaid interest, and (ii) after August 30, 2019 at an amount equal to 115% of the aggregate of the outstanding principal balance of the August 2019 Notes and accrued and unpaid interest. In the event that the Company closes a registered public offering of securities for its own account (a “~~Public Offering~~”), the holders may elect to: (x) have their principal and accrued interest prepaid directly from the proceeds of the Public Offering at the prices set forth above, or (y) exchange their August 2019 Notes at the closing of the Public Offering for the securities being issued in the Public Offering at the Public Offering prices based upon the outstanding principal, accrued interest and other charges, or (z) continue to hold their August 2019 Notes. Except for a Public Offering and August 2019 Amortization Payments, in order to prepay the August 2019 Notes, the Company must provide at least 20 days’ prior written notice to the holders, during which time the holders may convert their August 2019 Notes in whole or in part at the then-applicable conversion price. For avoidance of doubt, the August 2019 Amortization Payments are prepayments and are subject to prepayment penalties equal to 115% of the August 2019 Amortization Payment. In the event the Company consummates a Public Offering while the August 2019 Notes are outstanding, then 25% of the net proceeds of such offering will, within two business days of the closing of such Public Offering, be applied to reduce the outstanding obligations pursuant to the August 2019 Notes.

From the original issue date until the August 2019 Notes are no longer outstanding, the August 2019 Notes are convertible, in whole or in part, at any time, and from time to time, into shares of common stock at the option of the investor. The initial conversion price of the August 2019 Notes was the lower of: (i) $3.50 per share and (ii) the price per share paid by investors in the contemplated equity offering of up to $1,000,000. If an Event of Default (as defined in the August 2019 Notes) has occurred, regardless of whether it has been cured or remains ongoing, the August 2019 Notes were initially convertible at the lower of: (i) $3.50 and (ii) 70% of the second lowest closing price of the common stock as reported on the Trading Market (as defined in the August 2019 Notes) during the 20 consecutive Trading Day (as defined in the August 2019 Notes) period ending and including the Trading Day (as defined in the August 2019 Notes) immediately preceding the delivery or deemed delivery of the applicable notice of conversion (the “~~August 2019 Notes Default Conversion Price~~~~”).~~

In January 2020, we defaulted on our August 30, 2019 convertible debt due to non-payment of the required amortization payment due. Accordingly, the outstanding principal balance on date of default increased by 30% amounting to approximately $724,000, default interest accrues at 18%, and the default conversion terms now apply as described above. All such Conversion Price determinations are to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the common stock. These August 2019 Notes and related August 2019 Warrants ~~include a~~included down-round ~~provision~~provisions under which the August 2019 Note conversion price and August 2019 Warrant exercise price ~~were reduced,~~could be affected, on a full-ratchet basis, ~~to a fraction~~by future equity offerings undertaken by the Company. During 2020 and prior, down-round protection was triggered. As of ~~a penny due to~~March 31, 2021 and December 31, 2020, the ~~default~~conversion price on the August 2019 Notes ~~triggering~~was $0.006 per share and the ~~default conversion price. See Note 6 to the condensed consolidated financial statements for additional details.~~

~~On October 3, 2019, the Company closed on a securities purchase agreement (the “~~~~October 3 Purchase Agreement~~~~”) with an accredited investor. Pursuant to the terms~~exercise price of the ~~October 3,~~any remaining August 2019 ~~Purchase Agreement,~~Warrants was $0.006 per share. On March 31, 2021 and December 31, 2020, convertible notes payable related to August 30, 2019 convertible debt amounted to $22,064, which consists of $22,064 of principal balance and default interest due.

During the ~~Company~~year ended December 31, 2020, we issued and sold to ~~an investor a~~certain investors convertible promissory ~~note~~notes in the aggregate principal amount of ~~$166,667~~$2,068,000 (the “~~October 3 Note~~Q1/Q2 2020 Notes”), and warrants to purchase up to ~~66,401~~827,200 shares of the Company’s common stock (the “~~October 3 Warrant~~Q1/Q2 2020 Warrants”). ~~The Company~~We received net proceeds of ~~$150,000,~~$1,880,000, which is net of a 10% original issue discounts of ~~$16,667.~~$188,000. The October 3 Note initially bore interest at 10% per annum and becomes due and payable on January 3, 2021. During the existence of an Event of Default, interest accrues at the lesser of (i) the rate of 18% per annum, or (ii) the maximum amount permitted by law. Commencing on the four month anniversary of the October 3 Note, monthly payments of interest and monthly principal payments, based on a 12 month amortization schedule (each, an “~~October 3 Note Amortization Payment~~”), are due and payable, until the Maturity Date, at which time all outstanding principal, accrued and unpaid interest and all other amounts due and payable under the October 3 Note will be immediately due and payable. The October 3 Note Amortization Payments are made in cash unless the investor requests it to be issued in the Company’s common stock in lieu of a cash payment (each, an “~~October 3 Note Stock Payment~~”). If the investor requests a October 3 Note Stock Payment, the number of shares of common stock issued is based on the amount of the applicable October 3 Note Amortization Payment divided by 80% of the lowest VWAP (as defined in the October 3 Note) during the five Trading Day (as defined in the October 3 Note) period prior to the due date of the October 3 Note Amortization Payment.

The October 3 Note may be prepaid, provided that certain Equity Conditions, as defined in the October 3 Note, have been met (or any such failure to meet the Equity Conditions has been waived): (i) from October 3, 2019 until and through January 3, 2020, at an amount equal to 105% of the aggregate of the outstanding principal balance of the October 3 Note and accrued and unpaid interest, and (ii) after January 3, 2020, at an amount equal to 115% of the aggregate of the outstanding principal balance of the October 3 Note and accrued and unpaid interest. In the event that the Company closes a Public Offering, the holder may elect to: (x) have its principal and accrued interest prepaid directly from the proceeds of the Public Offering at the prices set forth above, or (y) exchange its October 3 Note at the closing of the Public Offering for the securities being issued in the Public Offering at the Public Offering prices based upon the outstanding principal, accrued interest and other charges, or (z) continue to hold the October 3 Note. Except for a Public Offering and October 3 Note Amortization Payments, in order to prepay the October 3 Note, the Company must provide at least 20 days’ prior written notice to the holder, during which time the holder may convert the October 3 Note in whole or in part at the conversion price. For avoidance of doubt, the October 3 Note Amortization Payments are prepayments and are subject to prepayment penalties equal to 115% of the October 3 Note Amortization Payment. In the event the Company consummates a Public Offering while the October 3 Note is outstanding, then 25% of the net proceeds of such offering will, within two business days of the closing of such Public Offering, be applied to reduce the outstanding obligations pursuant to the October 3 Note.

On the original issue date until the October 3 Note is no longer outstanding, the October 3 Note is convertible, in whole or in part, at any time, and from time to time, into shares of common stock at the option of the investor. The “Conversion Price” in effect on any Conversion Date means, as of any Conversion Date (as defined in the October 3 Note) or other date of determination, the lower of: (i) $2.51 per share and (ii) the price per share paid by investors in the contemplated equity offering of up to $1,000,000. If an Event of Default (as defined in the October 3 Note) has occurred, regardless of whether such Event of Default (as defined in the October 3 Note) has been cured or remains ongoing, the October 3 Note are convertible at the lower of: (i) $2.51 and (ii) 70% of the second lowest closing price of the common stock as reported on the Trading Market (as defined in the October 3 Note) during the 20 consecutive Trading Day (as defined in the October 3 Note) period ending and including the Trading Day (as defined in the October 3 Note) immediately preceding the delivery or deemed delivery of the applicable Notice of Conversion (the “~~October 3 Note Default Conversion Price~~”). All such conversion price determinations are to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the common stock.

This October 3 Note and the related October 3 Warrant include down-round provisions under which the October 3 Note conversion price and October 3 Warrant exercise price were reduced on a full-ratchet basis, to a fraction of a penny due to the adjusted conversion price of certain other convertible notes issued by the Company. See Note 8 to the consolidated financial statements for additional details.

The October 3 Warrant is exercisable at any time on or after the date of the issuance and entitles the investor to purchase shares of the Company’s common stock for a period of five years from the initial date the October 3 Warrant became exercisable. Under the terms of the October 3 Warrant, the investor is entitled to exercise the October 3 Warrant to purchase up to 66,401 shares of the Company’s common stock at an initial exercise price of $3.51, subject to adjustment as detailed in the October 3 Warrant.

In February 2020, due to the default of the February 2020 October 3 Note Amortization Payment, the October 3 Note was deemed in default. Accordingly, the outstanding principal balance on date of default increased by 30% which amounted to approximately $50,000, default interest accrues at 18%, and the default conversion terms apply as described above. See Note 6 to the condensed consolidated financial statements for additional details.

On October 14, 2019 and November 7, 2019, we entered into convertible note agreements with an accredited investor. Pursuant to the terms of these convertible note agreements, we issued and sold to an investor convertible promissory notes in the aggregate principal amount of $500,000 (the “~~Fall 2019 Notes~~”) and we received cash proceeds of $500,000. The Fall 2019 Notes bear interest at 10% per annum. The October 14, 2019 convertible promissory note of $300,000 becomes due and payable on October 14, 2020 and the November 7, 2019 convertible promissory note of $200,000 becomes due and payable on November 7, 2020. Commencing on the respective seven-month anniversaries of issuance, and continuing each month thereafter through the respective maturity date, payments of principal and interest will be made in accordance with the respective amortization schedule. During the existence of an Event of Default (as defined in the Fall 2019 Notes), interest will accrue at the lesser of (i) the rate of 18% per annum, or (ii) the maximum amount permitted by law. Commencing on the seventh month anniversary of each respective note, monthly payments of interest and monthly principal payments are due and payable, until the respective maturity dates, at which time all outstanding principal, accrued and unpaid interest and all other amounts due and payable under such Fall 2019 Note will be immediately due and payable.

The Company has the right to prepay in cash all or a portion of the outstanding principal due under the Fall 2019 Notes. The Company must provide the holders with written notice at least twenty business days prior to the date on which the Company will deliver payment of accrued interest and all or a portion, in $100,000 increments, of the principal.

Each Fall 2019 Note is convertible, in whole or in part, at any time, and from time to time, into shares of common stock at the option of the investor. The “Conversion Price” in effect on any Conversion Date means, as of any date of determination, the lower of: (i) $2.50 per share and (ii) the twenty day per share closing trading price of the Company’s common stock during the twenty trading days that close with the last previous trading day ended three days prior to the date of exercise. The Fall 2019 Notes do not contain anti-dilutive provisions. In May 2020, due to the default of a May 2020 Amortization Payment, the October 14, 2019 convertible note was deemed in default. Accordingly, default interest accrues at 18% and the October 14, 2019 convertible note became due on the date of default.

From August 2019 to October 2019, we issued 619,000 shares of our common stock and 619,000 five-year warrants to purchase common shares for an exercise price of $2.50 per common share to investors for cash proceeds of $1,547,500, or $2.50 per share, pursuant to unit subscription agreements. These issuances have no anti-dilution protection.

From November 22, 2019 to December 31, 2019, we entered into several secured merchant loans in the aggregate amount of $2,283,540. We received net proceeds of $1,355,986, net of original issue discounts and origination fees of $927,554. Pursuant to these several secured merchant loans, we were required to pay the noteholders by making daily and/or weekly payments on each business day or week until the loan amounts were paid in full. Each payment was deducted from the Company’s bank account. During the year ended December 31, 2019, we repaid an aggregate of $464,344 of the loans. At December 31, 2019, notes payable related to these secured merchant loans amounted to $1,057,074, which consists of $1,819,196 of principal balance due and is net of unamortized debt discount of $762,122. Subsequent to December 31, 2019, we settled and repaid substantially all of these notes.

~~Beginning in January 2020 and continuing through April 1, 2020, we have closed on a series of Securities Purchase Agreements with several accredited investors (the “~~~~2020 Purchase Agreements~~~~”). Pursuant to the terms of these 2020 Purchase Agreements, we have issued and sold to investors convertible promissory notes in the aggregate principal amount of $2,095,500 (the “~~~~2020 Notes~~~~”), and warrants to purchase up to 838,200 shares of the Company’s common stock (the “~~~~2020 Warrants~~~~”). We received net proceeds of $1,905,000, which is net of a 10% original issue discounts of $190,500. The~~Q1/Q2 2020 Notes ~~bear~~initially bore interest at 6% per annum and ~~becomes~~become due and payable on the date that is the 24-month anniversary of the original issue date of the respective Q1/Q2 2020 Note. During the existence of an Event of Default (as defined in the ~~applicable~~Q1/Q2 2020 ~~Note)~~Notes), which includes, amongst other events, any default in the payment of principal and interest payments (including Q1/Q2 2020 Note Amortization Payments) under any Q1/Q2 2020 Note or any other Indebtedness (as defined in the Q1/Q2 2020 Notes), interest accrues at the lesser of (i) the rate of 18% per annum, or (ii) the maximum amount permitted by law. Commencing on the thirteenth month anniversary of the issuance of each Q1/Q2 2020 Note, monthly payments of interest and monthly principal payments, based on a ~~12 month~~12-month amortization schedule (each, a “Q1/Q2 2020 Note Amortization Payment”), ~~will be~~was due and payable, until the Maturity Date (as defined in the applicable Q1/Q2 2020 Note), at which time all outstanding principal, accrued and unpaid interest and all other amounts due and payable ~~under the~~on such Q1/Q2 2020 ~~Notes~~Note will be immediately due and payable. The Q1/Q2 2020 Note Amortization Payments ~~will be made~~are being paid in cash unless the investor requests ~~it to be issued~~payment in the Company’s ~~common stock~~Common Stock in lieu of a cash payment (each, a “Q1/Q2 2020 Note Stock Payment”). If a holder of a Q1/Q2 2020 Note requests a Q1/Q2 2020 Note Stock Payment, the number of shares of common stock issued will be based on the amount of the applicable Q1/Q2 2020 Note Amortization Payment divided by 80% of the lowest VWAP (as defined in the ~~applicable~~Q1/Q2 2020 ~~Note)~~Notes) during the five Trading Day (as defined in the applicable Q1/Q2 2020 Note) period prior to the due date of such Q1/Q2 2020 Note Amortization Payment.

The Q1/Q2 2020 Notes may be prepaid, provided that certain Equity Conditions, as defined in the Q1/Q2 2020 Notes, have been met (or any such failure to meet the Equity Conditions has been waived): (i) from each Q1/Q2 2020 Note’s respective original issuance date until and through the day that falls on the third month anniversary of such original issue date (each a “Q1/Q2 2020 Note 3 Month Anniversary”) at an amount equal to 105% of the aggregate of the outstanding principal balance of the Q1/Q2 2020 Note and accrued and unpaid interest, and (ii) after the applicable Q1/Q2 2020 Note 3 Month Anniversary at an amount equal to 115% of the aggregate of the outstanding principal balance of the Q1/Q2 2020 Note and accrued and unpaid interest. In the event that the Company closes a Public Offering, each holder may elect to: (x) have its principal and accrued interest prepaid directly from the proceeds of the Public Offering at the prices set forth above, or (y) exchange its Q1/Q2 2020 Note at the closing of the Public Offering for the securities being issued in the Public Offering at the Public Offering prices based upon the outstanding principal, accrued interest and other charges, or (z) continue to hold its Q1/Q2 2020 Note(s). Except for a Public Offering and Q1/Q2 2020 Note Amortization Payments, in order to prepay a Q1/Q2 2020 Note, the Company must provide at least 30 days’ prior written notice to the holder thereof, during which time the holder may convert its Q1/Q2 2020 Note in whole or in part at the applicable conversion price. The Q1/Q2 2020 Note Amortization Payments are prepayments and are subject to prepayment penalties equal to 115% of the Q1/Q2 2020 Note Amortization Payment.

In the event the Company consummates a Public Offering while the Q1/Q2 2020 Notes are outstanding, then 25% of the net proceeds of such offering will, within two business days of the closing of such Public Offering, be applied to reduce the outstanding obligations pursuant to the Q1/Q2 2020 Notes. As the Equity Conditions have not been met, through March 31, 2021 and the date hereof, we have not prepaid any the Q1/Q2 2020 Notes, in whole or in part.

~~After~~From the original issue date of a Q1/Q2 2020 Note until such Q1/Q2 2020 Note is no longer outstanding, such Q1/Q2 2020 Note is convertible, in whole or in part, at any time, and from time to time, into shares of ~~common stock~~Common Stock at the option of the holder. The “Conversion Price” in effect on any Conversion Date (as defined in the ~~applicable~~Q1/Q2 2020 ~~Note)~~Notes) means, as of any date of determination, $0.40 per share, subject to adjustment as provided ~~herein.~~therein and summarized below. If an Event of Default (as defined in the Q1/Q2 2020 Notes) has occurred, regardless of whether it has been cured or remains ongoing, the Q1/Q2 2020 Notes are convertible at the lower of: (i) $0.40 and (ii) 70% of the second lowest closing price of the common stock as reported on the Trading Market (as defined in the Q1/Q2 2020 Notes) during the 20 consecutive Trading Day (as defined in the Q1/Q2 2020 Notes) period ending and including the Trading Day immediately preceding the delivery or deemed delivery of the applicable notice of conversion. All such Conversion Price determinations are to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the number of shares of Common Stock outstanding.

On April 20, 2020, we issued to an investor a convertible promissory note in the principal amount of $456,500 (the “April 20 Note”). The April 20 Note contained a 10% original issue discount amounting to $41,500 for a purchase price of $415,000. The Company did not receive any proceeds from the April 20 Note because the investor converted previous notes and accrued interest due to him in the amount of $195,000 into the April 20 Note. In connection with the conversion of notes payable to the April 20 Note, we recorded a loss from debt extinguishment of $220,000. The April 20 Note bore interest at 6% per annum and becomes due and payable on April 20, 2022 (the “April 20 Note Maturity Date”). During the existence of an Event of Default (as defined in the April 20 Note), which includes, amongst other events, any default in the payment of principal and interest payment (including any April 20 Note Amortization Payments) under any note or any other indebtedness, interest accrues at the lesser of (i) the rate of 18% per annum, or (ii) the maximum amount permitted by law. Commencing on the thirteenth month anniversary of the April 20 Note, monthly payments of interest and monthly principal payments, based on a 12-month amortization schedule, will be due and payable (each, an “April 20 Note Amortization Payment”), until the April 20 Note Maturity Date, at which time all outstanding principal, accrued and unpaid interest and all other amounts due and payable under the April 20 Note will be immediately due and payable. The April 20 Note Amortization Payments will be made in cash unless the investor requests payment in the Company’s common stock in lieu of a cash payment (each, an “April 20 Note Stock Payment”). If the investor requests an April 20 Note Stock Payment, the number of shares of common stock issued will be based on the amount of the applicable April 20 Note Amortization Payment divided by 80% of the lowest VWAP (as defined in the April 20 Note) during the five Trading Day (as defined in the April 20 Note) period prior to the due date of the April 20 Note Amortization Payment.

Until the April 20 Note is no longer outstanding, it is convertible, in whole or in part, at any time, and from time to time, into shares of common stock at the option of the investor. The “Conversion Price” in effect on any Conversion Date (as defined in the April 20 Note) means, as of any Conversion Date or other date of determination, the lower of: (i) $0.40 and (ii) 70% of the second lowest closing price of the common stock as reported on the Trading Market (as defined in the April 20 Note) during the 20 consecutive Trading Day (as defined in the ~~applicable 2020~~April 20 Note) period ending and including the Trading Day immediately preceding the delivery or deemed delivery of the applicable notice of conversion. All such Conversion Price determinations are to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that ~~proportionately. The~~proportionately decreases or increases the common stock.

On March 31, 2021 and December 31, 2020, ~~Notes contain down-round protection under~~convertible notes payable related to the April 20 Note amounted to $69,300, which consists of $69,300 of default penalty balance due.

On October 8, 2020, we entered into a Securities Purchase Agreement with the investors party thereto (collectively the “Investors”) pursuant to which the ~~2020 Note conversion price was reduced on a full-ratchet basis,~~Investors agreed to ~~a fraction~~purchase units, severally and not jointly, which consisted of ~~a penny due~~an aggregate of (i) 47,977 shares of Series E Convertible Preferred Stock (the “Series E”) and (ii) warrants (the “Warrants”) to ~~the adjusted conversion price of certain other convertible notes issued by the Company.~~

~~The 2020 Warrants are exercisable at any time on or after the date of the issuance and entitles the investors to~~ purchase 23,988,500 shares of the Company’s common stock ~~for a period of five years from the initial date the 2020 Warrants become exercisable. Under the terms~~which are equal to 50% of the shares of common stock issuable upon conversion of the Series E if the Series E were converted on October 8, 2020 (the “October 2020 Series E Offering”). The gross proceeds to the Company were $640,000, or $13.34 per unit which is the stated value of each Series E share. We paid fees of $35,000 and received net proceeds of $605,000. The initial exercise price of the Warrants related to the October 2020 Series E Offering is $0.04 per share, subject to adjustment. Due to down-round provisions in the Warrants, the number of warrants was increased from 23,988,500 warrants to 95,954,000 warrants, and the exercise price was reduced to $0.01 per share.

On December 28, 2020 and December 30, 2020, we entered into Securities Purchase Agreements with investors ~~are entitled~~pursuant to ~~exercise~~which the ~~2020~~Investors agreed to purchase units, severally and not jointly, which consisted of an aggregate of (i) 57,400 shares of Series E and (ii) Warrants to purchase ~~up to 838,200~~76,571,429 shares of the Company’s common stock which are equal to 1,334 warrants for each for each share of Series E purchased (the “December 2020 Series E Offering”). The gross proceeds to the Company were $670,000, or $11.67 per unit. We paid fees of $112,000 and received net proceeds of $558,000. The initial exercise price of the Warrants related to the December 2020 Series E Offering is $0.01 per share, subject to adjustment.

During the three months ended March 31, 2021, we entered into Securities Purchase Agreements with investors pursuant to which the Investors agreed to purchase units, severally and not jointly, which consisted of an aggregate of (i) 310,992 shares of Series E and (ii) Warrants to purchase 414,857,146 shares of the Company’s common stock which are equal to 1,334 warrants for each for each share of Series E purchased (the “Q1 2021 Series E Offering”). The gross proceeds to the Company were $3,630,000, or $11.67 per unit. We paid fees of $372,000 and received net proceeds of $3,258,000. The initial exercise price of the Warrants related to the Q1 2021 Series E Offering is $0.01 per share, subject to adjustment. Additionally, we issued 82,971,429 warrants to the placement agent at an initial exercise price of ~~$0.40, subject to adjustment as detailed in the respective 2020 Warrants.~~$0.01 per share.

Due to the default of August 2019 Amortization Payments due on our August 2019 Notes and other notes, these convertible notes were deemed in default. Accordingly, the outstanding principal balance on date of default increased by 30% which amounted to approximately $620,400, default interest accrues at 18%, and the default conversion terms apply.

The Company’s trading price quoted on the OTC Pink market fell from $3.50 per share on January 8, 2020 to ~~$0.01~~$0.034 on ~~April 21, 2020.~~March 31, 2021. This drop, together with anti-dilution protection features contained in the August 2019 Notes and August 2019 Warrants that were triggered upon the issuance of convertible debt beginning in January 2020, caused the conversion prices of most of the Company’s outstanding notes and the exercise price of many of the Company’s outstanding warrants, to fall to ~~a fraction of a penny.~~$0.006. Beginning in February 2020, note holders began converting the outstanding principal of their notes into substantial quantities of shares of the Company’s common stock. During the period from February 25, 2020 to ~~June 22,~~December 31, 2020, we issued ~~417,363,999~~1,013,408,088 shares of our common stock in connection with the conversion of convertible notes payable ~~of $2,068,131, accrued interest~~ and default interest of ~~$473,402,~~$8,353,965, accrued interest of $553,596, and fees of ~~$5,000.~~$9,080. Additionally, on January 11, 2021, we issued 15,454,545 shares of its common stock in connection with the conversion of a convertible note payable of $170,000. The conversion price was based on contractual terms of the related debt. On July 24, 2020, we issued 1,000,000 shares of our common stock upon the conversion of 1,000,000 shares of Series B preferred shares. Additionally, ~~the Company~~in 2020, we issued ~~70,203,889~~155,914,308 shares of its common stock upon the ~~cash-less~~cashless exercise of 157,297,448 warrants. Also, we issued 522,726,000 shares of common stock upon the conversion of 522,726 shares of series D preferred stock and issued other shares of common stock during fiscal 2020. Consequently, the total number of shares of common stock outstanding has increased from 11,832,603 on December 31, 2019, to ~~499,900,491~~1,749,302,040 on ~~June 26, 2020.~~March 31, 2021.

These anti-dilution protection features only provide for one-way adjustment, therefore, even if the Company cures any events of default, and the trading price increases, the conversion and exercise prices of the affected notes and warrants will remain a fraction of a penny. As a result, the Company has made commitments to shareholders, convertible note holders and warrant holders to issue, or keep available for issuance, large quantities of additional shares of common stock. ~~The~~

To enable the Company ~~does not currently have sufficient~~to meet these commitments, the Company’s Board of Directors unanimously adopted a resolution seeking stockholder approval to authorize the Board of Directors to amend the Amended and Restated Articles of Incorporation to increase the number of authorized shares of common stock ~~to satisfy all of such commitments.~~

~~The Company is currently authorized to issue up to~~from 500,000,000 shares to 4,000,000,000 shares (the “Authorized Share Increase Amendment”). Stockholder approval for the Authorized Share Increase Amendment was obtained on June 26, 2020 from stockholders that held at least 51% of ~~its common stock. As~~the voting power of the stock of the Company entitled to vote thereon, as of the record date of June 26, 2020. These consents constituted a ~~result~~sufficient number of ~~anti-dilution adjustment provisions in~~votes to approve the Authorized Share Increase Amendment under the Company’s ~~convertible notes~~Amended and ~~warrants~~Restated Articles of Incorporation, bylaws and Nevada law. Pursuant to applicable securities laws and Section 78.390 of the ~~reserve rights~~Nevada Revised Statutes, the Company prepared and mailed an Information Statement to its stockholders of ~~certain noteholders and warrant holders,~~record on the record date beginning on June 30, 2020. In compliance with Rule 14(c)-2(b) of the Securities Exchange Act of 1934, as ~~of June 28,~~amended, the Authorized Share Increase Amendment became effective on July 20, 2020 TLSS has 499,900,491 shares issued and outstanding, 99,509 shares that are reserved for conversions of specified note and warrant holders and no shares that are reserved for unspecified note and warrant holders.which was at least twenty calendar days after the Information Statement was first sent to stockholders.

~~On June 26, 2020,~~Additionally, on February 23, 2021, stockholders holding at least 51% of the voting power of the stock of the Company entitled to vote thereon consented, in writing, to amend the Company’s Amended and Restated Articles of Incorporation, by adoption of the Certificate of Amendment to the Amended and Restated Articles of Incorporation of the Company ~~which will~~to authorize an increase of the number of shares of common stock that the Company may issue to ~~4,000,000,000~~10,000,000,000 shares, par value $0.001 (the “~~Certificate of Amendment~~”“2021 Amendment”).

Upon effectiveness of the Certificate of Amendment and resulting increase in the number of authorized shares, the Company will cause all committed shares to be issued or reserved for issuance, as applicable. After completing such issuances and reservations, the Company intends to assess its options for optimizing its capital structure so that it can pursue and secure the financing required to execute its plans to grow its business through organic means of geographic and service line expansion and through the acquisition of selected businesses or properties.

The Company filed a preliminary information statement on Schedule 14C regarding the stockholders’ consent to the ~~Certificate of~~Authorized Share Increase Amendment with the SEC on ~~June 8, 2020.~~March 3, 2021.This consent was sufficient to approve the 2021 Amendment under Nevada law. The Company ~~plans to file~~filed a definitive information statement on Schedule 14C on ~~or before June 30, 2020~~March 15, 2021 and to first ~~mail~~mailed that information statement to stockholders on ~~or before June 30, 2020. The Certificate of Amendment is expected to take effect on July 20, 2020.~~March 15, 2021.

On April 15, 2020, our subsidiary, Prime EFS, entered into a Paycheck Protection promissory note (the “Prime EFS PPP Loan”) with M&T Bank in the amount of $2,941,212 under the Small Business Administration (the “SBA”) Paycheck Protection Program (the “Paycheck Protection Program”) of the Coronavirus Aid, Relief and Economic Security Act of 2020 (the “CARES Act”). On April 15, 2020, the Prime EFS PPP Loan was approved and Prime EFS received the loan proceeds on April 22, 2020. Prime EFS has used and plans to continue to use the proceeds for covered payroll costs, rent and utilities in accordance with the relevant terms and conditions of the CARES Act. The Prime EFS PPP Loan has a two-year term, matures on April 16, 2022, and bears interest at a rate of 1.00% per annum. Monthly principal and interest payments, less the amount of any potential forgiveness (discussed below), ~~will commence~~should have commenced on November 16, 2020. To date, no payment has been made.

On April 2, 2020, our subsidiary, Shypdirect, entered into a Paycheck Protection promissory note (the “Shypdirect PPP Loan” and together with the Prime EFS PPP Loan, the “PPP Loans”) with M&T Bank in the amount of $504,940 under the SBA Paycheck Protection Program of the CARES Act. On April 28, 2020, the Shypdirect PPP Loan was approved and Shypdirect received the Shypdirect PPP Loan proceeds on May 1, 2020. Shypdirect has used and plans to continue to use the proceeds for covered payroll costs, rent and utilities in accordance with the relevant terms and conditions of the CARES Act. The Shypdirect PPP Loan has a two-year term, matures on April 28, 2022, and bears interest at a rate of 1.00% per annum. Monthly principal and interest payments, less the amount of any potential forgiveness (discussed below), ~~will~~was to commence on November 28, 2020. To date, no payment has been made.

Neither Prime EFS nor Shypdirect provided any collateral or guarantees for these PPP Loans, nor did they pay any facility charge to obtain the PPP Loans. These promissory notes provide for customary events of default, including, among others, those relating to failure to make payment, bankruptcy, breaches of representations and material adverse effects. Prime EFS and Shypdirect may prepay the principal of the PPP Loans at any time without incurring any prepayment charges. These PPP Loans may be forgiven partially or fully if the respective loan proceeds are used for covered payroll costs, rent and utilities, provided that such amounts are incurred during the ~~eight-week~~twenty-four-week period that commenced on the date the proceeds of each loan were received and at least 60% of any forgiven amount has been used for covered payroll costs. Any forgiveness of these PPP Loans will be subject to approval by the SBA and M&T Bank and will require Prime EFS and Shypdirect to apply for such treatment in the future. The Company exhausted such funds in the third quarter of 2020. In the fourth quarter of 2020, Shypdirect applied for full loan forgiveness of the Shypdirect PPP Loan. In the second quarter of 2021, Prime EFS applied for loan forgiveness on the Prime EFS PPP Loan in the amount of $2,691,884. However, any forgiveness of these PPP Loans is subject to approval by the SBA and M&T Bank and there is no guarantee that such forgiveness will be granted.

Amazon Logistics Delivery Service Partner Agreement and Amazon Relay Carrier Terms of Service

On June 19, 2020, Amazon ~~Logistics, Inc. (“~~~~Amazon~~”) notified Prime EFS ~~in writing,~~by the Prime EFS Termination Notice that Amazon ~~does~~did not intend to renew ~~its Delivery Service Partner (DSP) Agreement with Prime EFS when that agreement (the “~~~~In-Force Agreement~~~~”) expires. Amazon stated that it believes~~ the In-Force Agreement ~~expires on September 30, 2020.~~when it expired. In the Prime EFS ~~however, strongly disagrees with Amazon’s position in this regard and believes it has a strong argument~~Termination Notice, Amazon stated that the In-Force Agreement ~~does not~~would expire ~~by its specific terms, until March 31,~~on September 30, 2020.

Additionally, on July 17, 2020, Amazon notified Shypdirect that Amazon had elected to terminate the Program Agreement between Amazon and Shypdirect effective as of November 14, 2020 (the “Shypdirect Termination Notice”). However, on August 3, 2020, pursuant to the Aug. 3 Proposal, Amazon offered to withdraw the Shypdirect Termination Notice and extend the term of the Program Agreement to and including May 14, 2021, ~~at the earliest. If Amazon disagrees with the forgoing,~~conditioned on Prime EFS ~~intends~~executing, for nominal consideration, a separation agreement with Amazon under which Prime EFS would agree to ~~arbitrate this issue through the American Arbitration Association; however,~~cooperate in an orderly transition of its Amazon last-mile delivery business to other service providers, release any and all claims it may have against Amazon, and covenant not to sue Amazon. On August 4, 2020, the Company, ~~cannot give any assurances as to~~Prime EFS and Shypdirect accepted the ~~success of its position.~~

Net cash flows used in operating activities for the three months ended March 31, 2021 amounted to $1,006,332. During the three months ended March 31, 2021, net cash used in operating activities was primarily attributable to a net loss of $2,269,180, adjusted for the add back (reduction) of non-cash items such as depreciation and amortization expense of $85,760, derivative expense of $694,983, amortization of debt discount of $19,013, and gain on debt extinguishment of $59,853, and changes in operating assets and liabilities such as a decrease in accounts receivable of $164,345, a decrease in prepaid expenses and other current assets of $248,906, an increase in security deposit of $8,000, an increase in accounts payable and accrued expenses of $350,348, a decrease in insurance payable of $212,331, and a decrease in accrued compensation and related benefits of $21,886.

Net cash flows used in operating activities for the three months ended March 31, 2020 amounted to $110,074. During the three months ended March 31, 2020, net cash used in operating activities was primarily attributable to a net loss of $3,453,338, adjusted for the add back (reduction) of non-cash items such as depreciation and amortization expense of $14,188, derivative income of $(144,839), amortization of debt discount of $1,359,388, interest expense related to debt default of $1,387,785, stock-based compensation of $31,250, a non-cash gain on debt extinguishment of $(327,584), and changes in operating assets and liabilities such as an increase in accounts receivable of $99,454, a decrease in prepaid expenses and other current assets of $819,161, an increase in accounts payable and accrued expenses of $796,036, a decrease in insurance payable of $661,668, and an increase in accrued compensation and benefits of $288,180.

Net cash ~~flows~~ used in ~~operating~~investing activities for the three months ended March 31, ~~2019~~2021 amounted to ~~$1,983,978. During the three months ended March 31, 2019,~~$2,123,115 and consisted of net cash used ~~in operating activities was primarily attributable to a net loss of $19,647,723 adjusted~~ for the ~~add back (reduction)~~acquisition of ~~non-cash items such as depreciation~~DDTI and amortization expense of $308,816, derivative expense of $13,384,260, amortization of debt discount of $1,071,272, stock-based compensation of $2,750,808, and a gain on debt extinguishment of $(93,871), and changes in operating assets and liabilities such as an increase in accounts receivable of $429,650 and an increase in prepaid expense and other current assets of $90,449, offset by an increase in accounts payable and accrued expenses of $526,330 and an increase in accrued compensation and related benefits of $243,466.

Net cash used in investing activities for the three months ended March 31, 2020 amounted to $460,510 and consisted of cash paid for the purchase of five box trucks of $460,510.

For the three months ended March 31, ~~2019 amounted to $29,744 and consisted of~~2021, net cash provided by financing activities totaled $3,213,078. During the three months ended March 31, 2021, we received proceeds from the ~~disposal~~sale of ~~trucks and vans~~Series E preferred shares of ~~$81,000~~$3,258,000, offset by ~~cash paid for~~ the ~~purchase~~repayment of ~~property~~notes payable of $37,114, and ~~equipment~~the repayment of ~~$51,256.~~

For the three months ended March 31, 2020, net cash provided by financing activities totaled $553,184. For the three months ended March 31, 2020, we received proceeds from convertible debt of $1,860,000 and proceeds from notes payable of $1,033,510, offset by the repayment of convertible notes of $159,988, the repayment of related party advances of $55,561, and the repayment of notes payable of $2,124,777.

For the three months ended March 31, 2019, net cash provided by financing activities totaled $1,722,377. For the three months ended March 31, 2019, we received gross proceeds from related party convertible notes of $500,000, proceeds from notes payable of $3,521,120, proceeds from related party notes of $200,000, and net cash proceeds from related party advances of $28,815 offset by the repayment of convertible notes of $273,585, the repayment of related party notes of $220,000, and the repayment of notes payable of $2,033,973.

~~Our~~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 three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, we had a net loss of ~~$3,453,338~~$2,269,180 and ~~$19,661,384~~$3,453,338 and net cash used in operations was ~~$110,074~~$1,006,332 and ~~$1,983,978,~~$110,074, respectively. Additionally, we had an accumulated deficit, shareholders’ deficit, and a working capital deficit of ~~$82,765,210, $26,839,561~~$125,720,076, $14,906,922 and ~~$27,678,817,~~$18,968,045, respectively, aton March 31, ~~2020.~~2021. Furthermore, ~~the Company failed to make required payments of principal~~effective September 30, 2020 and ~~interest on certain of~~in May 2021, we lost major contracts with its ~~convertible debt instruments and notes payable.~~ primary customer as described below.

On June 19, 2020, Amazon ~~Logistics, Inc. (“Amazon”)~~ notified Prime EFS ~~in writing~~by the Prime EFS Termination Notice that ~~Amazon~~it does not intend to renew the In-Force Agreement when that agreement expired. 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 ~~(DSP)~~Program Agreement ~~with~~between Amazon and Prime EFS ~~when~~would terminate effective September 30, 2020; that ~~agreement expires (see above~~Prime EFS and ~~Note 13 – Subsequent Events)~~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. The expiration of the Program Agreement upon expiration will have a material effect on the Company’s operation in the seconds quarter of 2021 and beyond. During the first quarter of 2021, the Company defaulted on certain truck leases . In connection with these defaults, the Lessor has demanded that the Company’s subsidiaries pay for the leased trucks in the amount of approximately $2,871,000.

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. InDuring the three months ended March 31, 2021 and in April ~~2020,~~2021, the ~~Company’s subsidiaries, Prime EFS~~Company issued an aggregate of 343,119 shares of its Series E preferred stock for net proceeds of $3,258,000. The proceeds were used for the acquisition of Cougar Express and ~~Shypdirect, entered into Paycheck Protection Program promissory notes with M&T Bank in the aggregate amount of $3,446,152.~~DDTI and for working capital purposes. Management cannot provide assurance that the Company will ultimately achieve profitable operations, become cash flow positive, or raise additional debt and/or equity capital.

We 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 its restructuring plan. We are seeking to raise capital through additional debt and/or equity financings to fund ~~the Company’s~~its operations in the future. Although we have historically raised capital from sales of common and preferred shares and from the issuance of convertible promissory notes and notes payable, there is no assurance that ~~the Company~~it will be able to continue to do so. If we are unable to replace its Amazon business, to raise additional capital or secure additional lending in the near future, management expects that we will need to curtail our operations. The condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

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.

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

We do not believe that inflation has had a material impact on our business, revenues, or operating results during the periods presented.

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 condensed consolidated financial statements filed with this Quarterly Report.

We are not required to provide quantitative and qualitative disclosures about market risk because we are a smaller reporting company.

Under the supervision and with the participation of our management, including John Mercadante, Jr, our Chief Executive Officer and Principal Accounting Officer, we carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of March 31, ~~2020.~~2021. Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only ~~provide~~ reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our management has assessed the effectiveness of our disclosure controls and procedures and, based upon that evaluation, management concluded that our disclosure controls and procedures were not effective as of March 31, ~~2020.~~2021.

As reported in Item 9A of our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, our management concluded that our internal control over financial reporting was not effective as of that date because of material weaknesses in our internal controls over financial reporting. The ineffectiveness of our disclosure controls and procedures was due to the following material weaknesses in our internal control over financial reporting:

We do not believe the material weaknesses described above caused any meaningful or significant misreporting of our consolidated financial condition and results of operations for the quarter ended March 31, ~~2020.~~2021. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of ~~directors’~~directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our consolidated financial statements in future periods.

There were no other changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. Other than discussed below, we are not currently a party to any other legal proceeding that we believe would have a material adverse effect on our business, financial condition, or operating results.

~~Elrac~~Disputes Between Prime EFS, ELRAC LLC, ~~v. Prime EFS~~and Enterprise Leasing Company of Philadelphia, LLC

On or about January 10, 2020, ~~the Company’s subsidiary,~~ Prime EFS was named as sole defendant in a civil action captioned ~~Elrac~~ELRAC LLC v. Prime EFS, filed in the United States District Court for the Eastern District of New York, assigned Case No. 1 :20-cv-00211 (the “~~Elrac~~ELRAC Action”). The complaint in the ~~Elrac~~ELRAC Action alleged that Prime EFS failed to pay in full for repairs allegedly required by reason of property damage to delivery vehicles leased by Prime EFS from ~~Elrac~~ELRAC LLC (“~~Elrac~~ELRAC”) to conduct its business. The complaint sought damages of not less than $382,000 plus $58,000 in insurance claims that ~~Elrac~~ELRAC believes were collected by the Company and not reimbursed to ~~Elrac. Elrac~~ELRAC.

During the period it was leasing vans and trucks from ~~Elrac~~ELRAC and its affiliate, Enterprise Leasing Company of Philadelphia, LLC (“Enterprise PA” and, with ~~Elrac,~~ELRAC, “Enterprise”), Prime EFS ~~transferred~~paid $387,392 in deposits required by Enterprise as security for the payment of deductibles and uninsured damage to Enterprise’s fleet. Despite due demand, Enterprise never accounted to Prime EFS’s satisfaction regarding the application of these deposits. On June 10, 2020, Prime EFS therefore initiated an arbitration (the “~~Prime EFS~~ Arbitration”) against Enterprise at the American Arbitration Association seeking the return of not less than $327,000 of these deposits. ~~Therefore, if, as expected, Elrac~~

Prime EFS ~~owes it money, allegedly because~~believes the ~~deposits together with insurance recoveries were insufficient~~Enterprise Answer and Counterclaims lack merit and intends to ~~cover their alleged damages, Enterprise would have to interpose that contention not in~~defend its ~~own arbitration but rather as a counterclaim~~position in the ~~Prime EFS Arbitration.~~

~~In the event that Enterprise files such a counterclaim, Prime EFS will contest it vigorously and pursue its own claim for the repayment of a large portion of the escrow deposits plus interest.~~Arbitration vigorously. Nevertheless, given the amount of the Counterclaim and the documentation which ~~Elrac~~Enterprise has submitted ~~to court~~ in the ~~Elrac Action, including an affidavit from its controller, as of March 31, 2020 and December 31, 2019,~~arbitration in support thereof, the Company ~~has reflected~~continues to reflect a liability of $440,000, i.e., the amount originally claimed as damages by ~~Elrac~~ELRAC in the ~~Elrac~~ELRAC Federal Action, ~~which has been included in~~as a contingency liability on the ~~accompanying condensed~~Company’s consolidated balance sheet. Based on our knowledge of the matter, as developed to date, we continue to agree with this estimate of probable total Company liability.

While it believes it has meritorious defenses to this action, out of an abundance of caution and without prejudice to its position in this matter, as of March 31, 2021, Prime EFS had accrued a contingency liability of $440,000 for purposes of this matter.

~~BMF~~Bellridge Capital, L.P. and SCS, LLC v. ~~Prime EFS LLC et al.~~TLSS

~~We entered into~~After discontinuing a ~~settlement~~prior action in federal court, on April 23, 2021, Bellridge Capital, L.P. (“Bellridge”) filed a civil action in New York Supreme Court, New York County, against TLSS and John Mercadante. This mater, the “Bellridge Action,” was assigned civil action number 652728/2021.

The complaint in the Bellridge Action asserts 11 causes of action: (1) against TLSI, allegedly for breach of a convertible promissory note issued June 18, 2018 (the “June 2018 Note”), which claim seeks $539,114.06 for allegedly unpaid principal plus interest, costs and expenses; (2) against TLSI, also allegedly for breach of June 2018 Note, which claim seeks $343,000 plus interest, costs and expenses for TLSI’s alleged failure to honor certain conversion notices in timely fashion; (3) against TLSI, allegedly for breach of a promissory note dated December 26, 2018 (the “December 2018 Note”), which claim seeks $196,699 plus interest, costs and expenses for amounts allegedly unpaid under the note; (4) against TLSI, purportedly for breach of an exchange agreement between Bellridge and TLSI dated April 13, 2019 (the “Exchange Agreement”), which claim seeks $3,337,500 plus costs and interest; (5) against TLSI and Mercadante, allegedly for fraud in connection with the Exchange Agreement, which claim seeks $447,500 plus costs and interest; (6) against TLSI and Mercadante, allegedly for negligent misrepresentation in connection with the Exchange Agreement, which claim seeks $447,500 plus costs and interest, in the alternative to the 5^th claim; (7) against TLSI, allegedly for breach of certain preferred stock terms relating to the conversion of 31,500 series A preferred shares, which claim seeks not less than $57,960; (8) against TLSI and Mercadante, allegedly for fraudulent inducement of an August 2019 subordination agreement, which claim seeks a declaration annulling the subordination agreement; (9) against TLSI, allegedly for failing to provide all consideration recited in a subordination letter, which claim seeks a declaration that Bellridge is discharged from its obligations under the subordination agreement; (10) against TLSI, allegedly for failing to honor a condition precedent to the subordination agreement, which claim seeks a declaration that Bellridge is discharged from any obligations under the subordination agreement; and (11) against TLSI, allegedly for breach of the subordination agreement and/or subordination letter, which claim seeks damages in an amount to be determined at trial.

The purchase price stated in the December 2018 Note is $300,000. The principal amount of the December 2018 Note is $330,000. Hence the December 2018 Note was issued at a 10% discount (OID). The Note calls for the payment of interest computed at the rate of 10% per annum prior to any default. The term of the Note is under 90 days; that is, it was made payable, in full, on March ~~6, 2020,~~15, 2019, after which the principal amount increases “by 30%” and default interest is due under ~~which Prime EFS and certain related entities agreed~~the instrument at a rate of 18% per annum (§ 7(b)). The December 2018 Note, by its terms, is governed by New York law. As noted above, OID is to ~~pay BMF Capital (“~~~~BMF~~~~”) $275,000 on or by March 11, 2020,~~ ~~inter alia~~ to discharge a convertible note, to cancel certain warrants on 40,300 shares of TLSS Common Stock, and to settle certain claims made by BMF under certain merchant cash advance agreements (MCAs) whereby BMF purchased specified percentages of Prime EFS’s total future accounts receivable up to certain agreed upon amounts in exchangebe treated as interest for ~~an upfront purchase price. Prime EFS did not pay a portion~~purposes of the ~~agreed $275,000 settlement amount by March 11, 2020 but~~New York usury statutes (both civil and criminal). Since total interest payable under the Note, over its term of under 90 days, was more than 40% per annum, TLSI believes that the December 2018 Note, like the June 12018 Note, is void under N.Y. Penal Law § 190.40 and cannot be enforced in this action.

~~Currently, the Company is in an ongoing dispute between the Company and two investors in the Company, namely Bellridge Capital, L.P. (“~~~~Bellridge~~~~”) and SCS, LLC (“~~~~SCS~~”). Among other things, Bellridge claims that the Company is in breach of its obligations under an August 29, 2019 letter agreement to issue a confession of judgment and to pay Bellridge $150,000 per month against the amounts due under, ~~inter alia,~~ an April 2019 promissory note. In an April 28, 2020 letter, Bellridge contends that TLSS owed Bellridge $1,978,557.76 as of that date. In a purported standstill agreement subsequently proposed by Bellridge, Bellridge claims TLSS owes it $2,271,099.83, a figure which allegedly includes default rate interest. Bellridge also claims that a subordination agreement it signed with the Company on August 30, 2019, was void ~~ab initio.~~ Bellridge has also demanded the conversion of approximately $20,000 in indebtedness into the common stock of the Company, a conversion which the Company has not effectuated because the parties did not come to agreement on a conversion price. Such agreement is required for Bellridge to exercise its conversion rights under an agreement dated April 9, 2019 between Bellridge and the Company. SCS alleges it was induced by fraud to exchange two million shares of Company preferred stock for Company common stock and was damaged thereby. The Company is currently in discussions with Bellridge, SCS and the Company’s senior secured lenders to see whether this dispute can be amicably resolved. In the event Bellridge and/or SCS pursues the above claims against the Company, the Company will contest the case vigorously. Since no such claims have in fact been filed in court, but merely threatened, it is not possible to evaluate the likelihood of a favorable or unfavorable outcome, nor is it possible to estimate the amount or range of any potential loss in the matter.

The ~~action~~case was ~~filed on May 26, 2020 and~~ assigned ~~Index~~Case No. ~~154433/2020.~~50-2020-CA-012684-xxxx-MB.

On June 25, 2020, the Company was served with a ~~purported~~putative shareholder derivative action filed in the Circuit Court of the 15^thJudicial Circuit in and for Palm Beach County, Florida (the “~~Court~~”“Court”) captioned SCS, LLC, derivatively on behalf of Transportation and Logistics Systems, Inc. v. John Mercadante, Jr., Douglas Cerny, Sebastian Giordano, Ascentaur LLC and Transportation and Logistics Systems, Inc. The action has been assigned Case No. 2020-CA-006581.

While they hope to prevail on the motion, win or lose, current Company management, Mr. Giordano and Ascentaur LLC advise that they intend to mount a vigorous defense to ~~the~~this action, as they believe the action to be entirely bereft of merit.

It is not possible to evaluate the likelihood of a favorable or unfavorable outcome, nor is it possible to estimate the amount or range of any potential loss in the matter.

The motions to dismiss are currently sub judice. The case is currently in discovery.

Pursuant to the Payment Plan, Prime EFS was obligated to pay $75,000 to the Creditors on or before June 5, 2020 and $75,000 to the Creditors on or before June 12, 2020.

Prime EFS made the $75,000 payments due on each of June 5, 2020 and June 12, 2020.

To date, Prime EFS has not responded to the Notice of Default and has no present plan or intention to respond.

In the demand, the attorneys for Mr. Nicholson allege the total balance owed, including interest, is $332,702.84 and that interest is continuing to accrue on each promissory note.

In the demand, the attorneys for Mr. Nicholson also contend that the Company is jointly and severally liable with Prime EFS for this balance.

Other than discussed above, as of March 31, 2021, and as of the date of this filing, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on results of our operations.

~~Except as set forth below, there~~There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~

~~Amazon Logistics Has Given Notice of Termination of Prime EFS’s Delivery Service Partner Agreement~~

~~On June 19, 2020, Amazon Logistics, Inc. (“~~~~Amazon~~~~”) notified Prime EFS in writing that Amazon does not intend to renew its Delivery Service Partner (DSP) Agreement with Prime EFS when that agreement (the “~~~~In-Force Agreement~~~~”) expires.~~

~~In the same notice, Amazon stated that the In-Force Agreement expires on September 30,~~ 2020. However, Prime EFS disagrees with Amazon’s position in this regard. The In-Force Agreement is dated February 6, 2020. The agreement states it “is effective as of the date on which [Prime EFS] click[s] through this Agreement (the ‘Effective Date’).” Prime EFS clicked through the document on- line after receiving a link to it on February 6, 2020, so the In-Force Agreement could not have taken effect prior to February 6, 2020. In addition, paragraph 1(a) of the In-Force Agreement states: “This Agreement will start on the Effective Date and will continue until 12 months after the next occurring March 31 or September 30, whichever comes first (the ‘Initial Term’).” Therefore, Prime EFS believes it has a strong argument that the In-Force Agreement does not expire, by its terms, until March 31, 2021 at the earliest (as long as Prime EFS doesn’t materially breach the agreement beforehand).

If Amazon disagrees with the forgoing, Prime EFS intends to arbitrate this issue through the American Arbitration Association, a right Prime EFS has under the express provisions of the In-Force Agreement. While, as noted, should arbitration become necessary, Prime EFS believes it has strong arguments in support of its position, owing to the inherent uncertainties of litigation, the Company cannot make, and does not make, any prediction, forecast or assurance as to the ultimate outcome of any such arbitration.

We have incurred indebtedness under the CARES Act which will be subject to review, may not be forgivable in whole or in part, and may eventually have to be repaid, potentially with interests, fines, and/or other penalties.

Our subsidiaries Shypdirect and Prime EFS applied to M&T Bank for funds under the SBA Paycheck Protection Program of the CARES Act on April 2, 2020 and April 15, 2020, respectively, in the amounts of $504,940 and $2,941,212, respectively. The application for these funds required Prime EFS and Shydirect to, in good faith, certify that the current economic uncertainty made the loan requests necessary to support their ongoing operations. This certification further required Prime EFS and Shypdirect to take into account their current business activity and their ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. The receipt of these funds, and the forgiveness of the loan attendant to these funds, is dependent on Prime EFS and Shypdirect having initially qualified for the loan and qualifying for the forgiveness of such loan based on our future adherence to the forgiveness criteria.

Prime EFS received the loan proceeds on April 22, 2020 and Shypdirect received the loan proceeds on May 1, 2020. Under the terms of the CARES Act and the corresponding promissory note, the use of the proceeds of each loan is restricted to payroll costs (as defined in the CARES Act), covered rent, covered utility payments and certain other expenditures that, while permitted, would not result in forgiveness of a corresponding portion of the loan. Following recent amendments to the Paycheck Protection Program, after an eight- or twenty-four-week period starting with the disbursement of the respective loan proceeds, Prime EFS and Shydirect may apply for forgiveness of some or all of their loans, with the amount which may be forgiven equal to the sum of eligible payroll costs, covered rent, and covered utility payments, in each case incurred during the eight- or twenty-four-week period following the date of first disbursement. Certain reductions in the Prime EFS’ or Shypdirect’s payroll costs or full-time equivalent employees (when compared against the applicable measurement period) may reduce the amount of their loan eligible for forgiveness.

~~The U.S. Department of the Treasury (“~~~~Treasury~~”) and the SBA have announced that they will review all Paycheck Protection Program loans that equal or exceed $2.0 million. Guidance from Treasury and SBA has been slow to develop and occasionally unclear. At the same time, the Paycheck Protection Program has been amended twice with the latest series of amendments significantly altering the timeline associated with the Paycheck Protection Program spending and loan forgiveness. Moreover, the lack of clarity regarding loan eligibility under the Paycheck Protection Program has resulted in significant media coverage and controversy with respect to public companies applying for and receiving loans, including an article about the Company and its subsidiaries. While the Company and its subsidiaries believe that they acted in good faith and have complied with all requirements of the Paycheck Protection Program, if Treasury or SBA determined that Prime EFS’ and/or Shypdirect’s loan applications were not made in good faith or that the Company, Prime EFS and/or Shypdirect did not otherwise meet the eligibility requirements of the Paycheck Protection Program, Prime EFS and/or Shypdirect may not receive forgiveness of the loan (in whole or in part) and Prime EFS and/or Shypdirect could be subject to penalties, including significant civil, criminal and administrative penalties, and could be required to return the loans or a portion thereof. Further, there is no guarantee that Prime EFS and/or Shypdirect will receive forgiveness for any amount, and forgiveness will be subject to Prime EFS’ and Shypdirect’s submissions to their lender of information and documentation as required by SBA and the lender.

A failure to obtain forgiveness of the Paycheck Protection Program loans may adversely impact loan covenants under our senior debt securities. In the event that our Paycheck Protection Program loan was not forgiven in whole or in part, we may need to seek an amendment to our senior debt securities, a waiver from the holders of our senior debt securities, utilize cash to repay the Paycheck Protection Program debt and/or refinance or restructure our outstanding debt. There can be no assurance that we could obtain future amendments or waivers of our senior debt securities, or refinance or restructure our debt, in each case on commercially reasonably terms or at all. Our failure to maintain compliance with the covenants under our senior debt securities could result in an event of default, subject to applicable notice and cure provisions. Upon the occurrence of an event of default under our senior debt securities, holders of our senior debt securities could elect to declare all amounts outstanding thereunder to be immediately due and payable. If we were unable to repay all outstanding amounts in full, our lender could exercise various remedies including instituting foreclosure proceedings against our assets pledged to them as collateral to secure that debt. In addition, our receipt of the PPP Loans may result in adverse publicity and damage to our reputation, and a review or audit by the SBA or other government entity or claims under the False Claims Act could consume significant financial and management resources.

During the three months ended March 31, ~~2020,~~2021, we entered into Securities Purchase Agreements with investors pursuant to which the Investors agreed to purchase units, severally and not jointly, which consisted of an aggregate of (i) 310,992 shares of Series E and (ii) Warrants to purchase 414,857,146 shares of the Company’s common stock which are equal to 1,334 warrants for each for each share of Series E purchased (the “Q1 2021 Series E Offering”). The gross proceeds to the Company were $3,630,000, or $11.67 per unit. We paid fees of $372,000 and received net proceeds of $3,258,000. The initial exercise price of the Warrants related to the Q1 2021 Series E Offering is $0.01 per share, subject to adjustment. Additionally, we issued ~~5,290,406~~82,971,429 warrants to the placement agent at an initial exercise price of $0.01 per share.

On January 11, 2021, we issued 15,454,545 shares of our common stock ~~upon~~in connection with the ~~partial~~ conversion of a convertible note ~~principal and default interest balances due of $310,894, and accrued interest~~ payable of ~~due~~$170,000. The conversion price was based on contractual terms of ~~$30,625 at~~ the ~~contractual conversion price.~~related debt.

The above securities were issued in reliance upon the exemptions provided by ~~Section~~Sections 3(a)(9) and 4(a)(2) under the Securities Act of 1933, as amended.

The information contained in “Note 67 - Convertible Promissory Notes Payable and Notes Payable” is incorporated by reference to this Part II, Item 3.

On January 30, 2020, due to the default of the January 2020 August 2019 Notes Amortization Payments in the amount of approximately $224,397, the August 2019 Notes were deemed in default. Accordingly, the outstanding principal balance on date of default increased by 30% which amounted to $723,985, default interest accrues at 18%, and the default conversion terms apply.

In February 2020, due to the default of the February 2020 October 3 Note Amortization Payment in the amount of approximately $15,100, the October 3 Note was deemed in default. Accordingly, the outstanding principal balance on date of default increased by 30% which amounted to $50,000, default interest accrues at 18%, and the default conversion terms apply.

In May and June 2020, due to the default of a May 2020 and June 2020 Amortization Payments, the Fall 2019 Notes, in the amount of approximately $110,000, was deemed in default. Accordingly, default interest accrues at 18% and the Fall 2019 Notes became due on the respective date of default.

Due to the default of amortization payments due on our August 2019 Notes and other notes as discussed above, the 2020 Notes were deemed in default. Accordingly, the outstanding principal balance on date of default increased by 30% which amounted to approximately $613,800, default interest accrues at 18%, and the default conversion terms apply.

# The certification attached as Exhibit 32.1 that accompanies this Form 10-Q is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Transportation and Logistics Systems, Inc. under the Securities Act or the Exchange Act, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
N/A		N/A		N/A

Large accelerated filer [ ]	Accelerated filer [ ]	Non accelerated filer [X]	Smaller reporting company [X]

Emerging growth company [ ]

Class		Outstanding as of ~~June 26, 2020~~May 17, 2021
Common Stock, $0.001		~~499,900,491~~2,158,195,666

		Page
~~Note Regarding Reliance on SEC Order~~

PART I. FINANCIAL INFORMATION		1

Item 1.	Financial Statements	13
	Condensed Consolidated Balance Sheets - As of March 31, ~~2020~~2021 (unaudited) and December 31, ~~2019~~2020	13
	Condensed Consolidated Statements of Operations - For the Three Months Ended March 31, 2021 and 2020 ~~and 2019~~ (unaudited)	24
	Condensed Consolidated Statements of Changes in Shareholders’ Deficit – For the Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020 (unaudited)	35
	Condensed ~~consolidated~~Consolidated Statements of Cash Flows - For the Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020 (unaudited)	46
	Condensed Notes to Consolidated Financial Statements (unaudited)	57

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3730
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5039
Item 4.	Controls and Procedures	5039

PART II. OTHER INFORMATION		51

Item 1.	Legal Proceedings	5140
Item 1A.	Risk Factors	5344
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5444
Item 3.	Defaults Upon Senior Securities	5445
Item 4.	Mine Safety Disclosures	5445
Item 5.	Other Information	5445
Item 6.	Exhibits	5445
Signatures	55	46

	Preferred Stock Series A				Preferred Stock Series B				Common Stock				Common Stock Issuable				Additional Paid-in			Accumulated			Total Shareholders’
	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	)

	Preferred Stock Series B				Preferred Stock Series E				Common Stock				Common Stock Issuable				Additional Paid-in		Accumulated			Total Shareholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Deficit
Balance, December 31, 2020		700,000	$	700		105,378	$	105		1,733,847,494	$	1,733,848		-	$	-	$	104,872,991	$	(122,621,060	)	$	(16,013,416	)

Common stock issued for debt conversion		-		-		-		-		15,454,546		15,454		-		-		154,546		-			170,000

Sales of Series E preferred share units		-		-		310,992		311		-		-		-		-		3,257,689		-			3,258,000

Deemed dividend related to beneficial conversion features and accrued dividends		-		-		-		-		-		-		-		-		777,510		(829,836	)		(52,326	)

Net loss		-		-		-		-		-		-		-		-		-		(2,269,180	)		(2,269,180	)

Balance, March 31, 2021		700,000	$	700		416,370	$	416		1,749,302,040	$	1,749,302		-	$	-	$	109,062,736	$	(125,720,076	)	$	(14,906,922	)

	●	Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

	●	Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

	●	Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

	Three Months Ended
	March 31,
	2020		2019
Revenues	$	-	$	1,131,525
Cost of revenues		-		851,196
Gross profit		-		280,329
Operating expenses		-		266,668
Income from discontinued operations		-		13,661
Loss on disposal of discontinued operations		-		-
Income from discontinued operations, net of income taxes	$	-	$	13,661

	DDTI			Cougar Express			Total
Assets acquired:
Cash	$	-		$	10,031		$	10,031
Accounts receivable		-			265,175			265,175
Other assets		-			40,874			40,874
Transportation vehicles		209,585			-			209,585
Equipment		20,000			27,831			47,831
Right of use assets		44,388			-			44,388
Other receivable		-			622,240			622,240
Non-compete agreement		-			150,000			150,000
Customer relationship		373,449			2,116,712			2,490,161
Total assets acquired at fair value		647,422			3,232,863			3,880,285
Liabilities assumed:
Notes payable		(103,034	)		(16,184	)		(119,218	)
PPP loan payable		-			(622,240	)		(622,240	)
Accounts payable		-			(132,155	)		(132,155	)
Accrued expenses		-			(40,059	)		(40,059	)
Lease liabilities		(44,388	)		-			(44,388	)
Total liabilities assumed		(147,422	)		(810,638	)		(958,060	)
Net asset acquired	$	500,000		$	2,422,225		$	2,922,225

Purchase consideration paid:
Cash paid	$	100,000		$	2,033,146		$	2,133,146
Acquisition payable		-			39,079			39,079
Promissory notes		400,000			350,000			750,000
Total purchase consideration paid	$	500,000		$	2,422,225		$	2,922,225

	Useful Life	March 31, 2020			December 31, 2019			Useful Life	March 31, 2021			December 31, 2020
Delivery trucks and vehicles	5 - 6 years	$	761,652		$	301,142		3 - 6 years	$	971,237		$	761,652
Equipment	5 years		3,470			3,470		1 - 5 years		51,301			3,470
Subtotal			765,122			304,612				1,022,538			765,122
Less: accumulated depreciation			(78,394	)		(64,206	)			(216,696	)		(166,315	)
Property and equipment, net		$	686,728		$	240,406			$	805,842		$	598,807

	●	~~extend the maturity date of the notes to December 31, 2020;~~
	●	~~remove all convertibility features of the notes; and~~
	●	~~repay not less than half of the obligations then outstanding pursuant to the notes~~ if the Company completes an offering of equity or equity linked securities (including warrants, convertible preferred stock, convertible debentures or convertible promissory note) which results in gross proceeds to the Company of at least $4,000,000, using a portion of the proceeds thereof.

Year ending March 31:	Amount
2022	$	577,825
2023		577,825
2024		551,892
2025		453,342
2026		443,898
	$	2,604,782

	●	the overall principal amount of the Bellridge Note was reduced from the original principal amount of $2,497,502 (principal amount was $2,223,918 at April 9, 2019) to $1,800,000, in exchange for the issuance to Bellridge of 800,000 shares of restricted common stock, to be delivered to Bellridge, either in whole or in part, at such time or times as when the beneficial ownership of such shares by Bellridge will not result in Bellridge’s beneficial ownership of more than the Beneficial Ownership Limitation and such shares are to be issued within three business days of the date the Bellridge has represented to the Company that it is below the Beneficial Ownership Limitation. Such issuances will occur in increments of no fewer than the lesser of (i) 50,000 shares and (ii) the balance of the 800,000 shares owed. The “Beneficial Ownership Limitation” is 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable pursuant to the Bellridge Modification Agreement. In connection with these shares, the Company recorded a loss on debt extinguishment of $10,248,000 in April 2019. As of August 19, 2019, 100,000 of these shares have been issued and on August 16, 2019, the Company issued 700,000 shares of Series B Preferred shares upon settlement of 700,000 shares of issuable common stock;

	●	~~the maturity date of the Bellridge Note was extended to August 31, 2020;~~

	●	~~the interest rate was reduced from 10% to 5% per annum;~~

	●	if the Company completes an offering of equity or equity linked securities (including warrants, convertible preferred stock, convertible debentures or convertible promissory note) which results in gross proceeds to the Company of at least $4,000,000, then the Company will use a portion of the proceeds thereof to repay not less than half of the obligations then outstanding pursuant to the Bellridge Note;

	●	if the Company completes an offering of debt which results in gross proceeds to the Company of at least $3,000,000, then the Company will use a portion of the proceeds thereof to repay any remaining obligations then outstanding pursuant to the Bellridge Note;

	●	the convertibility of the Bellridge Note was amended such that the Bellridge Note is only convertible at a conversion price to be mutually agreed upon between the Company and the holder. As of the date of this report, the Company and holder have not mutually agreed on a conversion price, Since the conversion terms are unknown, the Company will account for this conversion feature when the contingency is resolved;

	●	~~the registration rights previously granted to Bellridge were eliminated; and~~

	●	The First Bellridge Warrant and the Second Bellridge Warrant were cancelled and of no further force or effect as of the Bellridge Modification Date. In exchange, the Company issued Bellridge 360,000 shares of restricted common stock.

	●	In connection with a settlement agreement dated March 4, 2020, the Company paid off a merchant loan with a principal balance of $936,410 for a payment of $600,000 which was made by the Company in March 2020.

	●	In connection with a settlement agreement dated March 9, 2020, the Company agreed to pay $233,434 in full settlement for a merchant loan of with a principal balance of $364,740. The payment was due on March 11, 2020. During the three months ended March 31, 2020, the Company paid $48,344 of this settlement and the remaining payment due of $185,090 was paid in May 2020.

	●	In connection with a settlement agreement dated March 9, 2020, the Company agreed to pay $275,000 in full settlement for a merchant loan with a principal balance of $272,700 and a senior secured convertible debt in the amount of $95,874 and cancellation of 40,300 warrants held by the same creditor. The settlement payment was due, in full, on March 12, 2020; however, due to cash constraints at the time, the Company paid the $275,000 in weekly installments, which the creditor accepted, with its final payment on May 12, 2020. The Company paid $52,500 during the three months ended March 31, 2020 and the remainder of $222,500 was paid in May 2020. While the Company never received a default or demand letter, the creditor verbally told the Company on May 12, 2020, that the original full amount should be paid, although the creditor has not made any formal demand or commenced any action. The Company believes any such claim, if made, would be without merit.

	March 31, 2020			December 31, 2019
Principal amounts	$	2,106,438		$	3,187,125
Less: unamortized debt discount		(11,318	)		(762,122	)
Principal amounts, net		2,095,120			2,425,003
Less: current portion of notes payable		(1,733,440	)		(2,425,003	)
Notes payable – long-term	$	361,680		$	-

	●	Each holder of Series E has the right to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Series E held by such holder are convertible as of the applicable record date.
	●	Unless prohibited by Nevada law governing distributions to stockholders, for a period of one-year beginning with the Original Issuance Date, as defined, the Corporation shall have the right but not the obligation to redeem all outstanding Series E (and not any part of the Series E) at a price equal to 115% of (i) the Stated Value per share plus (ii) all unpaid dividends thereon. If the Company fails to redeem all outstanding Series E on the redemption date, it shall be deemed to have waived its redemption right.

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance Outstanding December 31, 2019		80,000	$	8.84		-	$	-
Granted		-		-
Cancelled		-		-
Balance Outstanding March 31, 2020		80,000	$	8.84		4.08	$	-
Exercisable, March 31, 2020		20,000	$	8.84		4.08	$	-

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance Outstanding December 31, 2020		80,000	$	8.84		3.58		-
Granted		-		-
Cancelled		-		-
Balance Outstanding March 31, 2021		80,000	$	8.84		3.33	$	-
Exercisable, March 31, 2021		40,000	$	8.84		3.33	$	-

	Number of Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance Outstanding December 31, 2019		3,649,861	$	2.41		4.66	$	311,070
Granted		818,400		0.40
Increase in warrants related to price protection		177,094,903		0.02
Balance Outstanding March 31, 2020		181,563,164	$	0.05		4.22	$	1,731,883
Exercisable, March 31, 2020		181,563,164	$	0.05		4.22	$	1,731,883

	Number of Shares Issuable Upon Exercise of Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance Outstanding December 31, 2020		147,112,603		0.052		4.83	$	1,780,356
Granted		497,828,575		0.01
Increase in warrants related to price protection		71,965,500		0.01
Cancellations		-		-
Balance Outstanding March 31, 2021		716,906,678	$	0.02		4.81	$	16,475,530
Exercisable, March 31, 2021		71,906,678	$	0.02		4.81	$	16,475,530

	March 31, 2020			December 31, 2019
Office leases right of use assets	$	1,984,320		$	1,984,320
Less: accumulated amortization into rent expense		(278,324	)		(233,890	)
Balance of ROU assets as of end of period	$	1,705,996		$	1,750,430

	March 31, 2021			December 31, 2020
Office leases and truck right of use assets	$	2,028,708		$	1,984,320
Less: accumulated amortization into rent expense or cost of sales		(636,341	)		(539,046	)
Balance of ROU assets as of end of period	$	1,392,367		$	1,445,274

	1)	Lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;

	2)	The Company lacks segregation of duties;

	3)	~~There is a lack of~~The Company lacks segregation of duties and monitoring controls regarding accounting because there are a limited staff of accountants maintaining the books and records;

	4)	Our Chief Executive Officer does not have significant financial experience resulting in the Company’s use of outside consultants to assist in financial and public company expertise;

	5)	The Company does not have adequate controls over pre-closing legal and accounting review of loan ~~transactions;~~transactions or other financings;

	6)	The Company did not have adequate controls over accounting systems that would prohibit unauthorized changes to historical accounting records. Recently, the Company implemented controls to address this situation;

	7)	The Company lacks supervision of outside consultants who may negotiate transactions on behalf of the Company;

	8)	The Company has not yet implemented any internal controls over financial reporting at its recently acquired subsidiary; and

	9)	The Company lacks control over who is granted authorization to bind the Company or its subsidiaries to legal contracts.

Exhibits:
3.1		Certificate of Amendment to the Certificate of Designation, Preferences and Rights of the Series B Convertible Preferred Stock, dated August 16, 2019 (incorporated by reference to Exhibit 4.9 to our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission on May 29, 2020).
3.2		Certificate of Amendment to the Amended and Restated Articles of Incorporation of Transportation and Logistics Systems, Inc., effective as of July 20, 2020 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K dated July 21, 2020).
3.3		Certificate of Designation of Preferences, Rights and Limitations of Series CE Preferred Stock of the Company, filed on ~~June 4,~~October 6, 2020 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K dated ~~June~~October 9, 2020).
3.4		Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series E Preferred Stock of the Company, filed on December 28, 2020 (incorporated by reference to Exhibit 10.28 to our Form S-1/A dated February 10, 2021).
4.1		Form of Convertible Note dated between January 2020 and April 2020 (incorporated by reference to Exhibit 4.14 to our Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 29, 2020).
4.2		Form of Warrant dated between January 2020 and April 2020 (incorporated by reference to Exhibit 4.15 to our Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 29, 2020).
10.1		Promissory Note for $2,941,212.50 executed by Company in favor of M&T Bank, dated April 16, 2020 (incorporated by reference to Exhibit 10.1 to our Form 8-K dated April 27, 2020).
10.2		Promissory Note for $504,940 executed by Company in favor of M&T Bank, dated April 28, 2020 (incorporated by reference to Exhibit 10.1 to our Form 8-K dated May 8, 2020).
10.3		Form of Securities Purchase Agreement related to Series E Preferred Stock (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K dated October 9, 2020).
10.4		Form of Registration Rights Agreement related to Series E Preferred Stock (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K dated October 9, 2020).
10.5		Form of Amendment to Series E Transaction Documents, effective January 21, 2021, between TLSS and each purchaser identified on the signature pages thereto (incorporated by reference to Exhibit 10.2 to our Form 8-K dated January 28, 2021).
10.6		Stock Purchase Agreement, dated March 22, 2021, related to the sale of Series E preferred stock (incorporated by reference to Exhibit 10.1 to our Form 8-K dated March 23, 2021).
10.7		Stock Purchase Agreement, dated March 24, 2021, between TLSS Acquisition, Inc. (a wholly owned subsidiary of the Company) and Cougar Express, Inc. (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on March 24, 2021).
31.1*		Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act
31.2*		Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act
*32.1^#**		Certification of Chief Executive Officer and Chief Financial Officer Under Section 1350 as Adopted Pursuant Section 906 of the Sarbanes-Oxley Act.
101		Interactive data files pursuant to Rule 405 of Regulation S-T.*

	TRANSPORTATION & LOGISTICS SYSTEMS, INC.

Dated: ~~June 29, 2020~~May 17, 2021	By:	/s/ John Mercadante, Jr.
		John Mercadante, Jr.
		Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer)