(Former name, former address and former fiscal year, if changed since last report.)

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ~~[X]~~ ☒ No ~~[ ]~~☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files). Yes ~~[X]~~ ☒ No ~~[ ]~~☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ~~[ ]~~☐

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ~~[ ]~~ ☐ No ~~[X]~~ ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

	September 30,			December 31,
	2020			2019				September 30,			December 31,
	(Unaudited)							2021			2020
								(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	318,356		$	50,026			$	2,668,329		$	579,283
Accounts receivable, net		335,393			963,771				474,318			-
Prepaid expenses and other current assets		1,462,736			1,246,555				291,802			75,951
Assets subject to assignment for benefit of creditors, current portion									-			740,381

Total Current Assets		2,116,485			2,260,352				3,434,449			1,395,615

OTHER ASSETS:
Security deposit		206,250			76,500				33,340			-
Property and equipment, net		658,815			240,406				562,990			472,670
Intangible assets, net									2,322,190			-
Right of use assets, net		1,534,411			1,750,430				27,276			-
Assets subject to assignment for benefit of creditors									-			1,665,411

Total Other Assets		2,399,476			2,067,336				2,945,796			2,138,081

TOTAL ASSETS	$	4,515,961		$	4,327,688			$	6,380,245		$	3,533,696

LIABILITIES AND SHAREHOLDERS’ DEFICIT
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)							LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

CURRENT LIABILITIES:
Convertible notes payable, net of put premium of $0 and $385,385 and debt discounts of $346,953 and $2,210,950, respectively	$	1,338,961		$	3,634,344
Notes payable, current portion, net of debt discount of $0 and $762,112, respectively		4,079,592			2,425,003
Convertible notes payable, net of debt discounts of $0 and $83,548, respectively								$	-		$	979,216
Notes payable, current portion, net of debt discount of $0 and $0, respectively									511,788			85,207
Note payable - related party		500,000			500,000				500,000			500,000
Accounts payable		899,076			1,517,082				369,812			465,581
Accrued expenses		524,921			627,990				247,606			254,095
Insurance payable		2,697,300			2,948,261				183,892			26,794
Contingency liability		440,000			440,000
Lease liabilities, current portion		366,511			333,126				18,910			-
Derivative liability		2,886,811			2,135,939				-			4,181,187
Due to related parties		245,007			325,445				241,007			173,692
Accrued compensation and related benefits		1,113,079			886,664				78,333			2,670
Liabilities subject to assignment for benefit of creditors, current portion									-			11,338,459

Total Current Liabilities		15,091,258			15,773,854				2,151,348			18,006,901

LONG-TERM LIABILITIES:
Notes payable, net of current portion		493,307			-				278,985			290,215
Lease liabilities, net of current portion		1,203,765			1,440,258				8,366			-
Liabilities subject to assignment for benefit of creditors									-			1,249,996

Total Long-term Liabilities		1,697,072			1,440,258				287,351			1,540,211

Total Liabilities		16,788,330			17,214,112				2,438,699			19,547,112

Commitments and Contingencies (See Note 9)
Commitments and Contingencies (See Note 11)									-			-

SHAREHOLDERS’ DEFICIT:
Preferred stock, par value $0.001; authorized 10,000,000 shares:
Series B convertible preferred stock, par value $0.001 per share; 1,700,000 shares designated; 700,000 and 1,700,000 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively (Liquidation value $700 and $1,700, respectively)		700			1,700
Series C preferred stock, par value $0.001 per share; 1 share designated; No shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		-			-
Series D preferred stock, par value $0.001 per share; 1,250,000 shares designated; 124,376 and 0 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively ($6.00 per share liquidation value)		124			-
Common stock, par value $0.001 per share; 4,000,000,000 shares authorized; 1,472,924,335 and 11,832,603 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		1,472,924			11,833
Common stock issuable, par value $0.001 per share; 0 and 25,000 shares		-			25
SHAREHOLDERS’ EQUITY (DEFICIT):
Preferred stock, par value $0.001; authorized 10,000,000 shares:
Series B convertible preferred stock, par value $0.001 per share; 1,700,000 shares designated; 700,000 and 700,000 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively (Liquidation value $700 and $700, respectively)									700			700
Series D preferred stock, par value $0.001 per share; 1,250,000 shares designated; 0 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively ($6.00 per share liquidation value)									-			-
Series E preferred stock, par value $0.001 per share; 562,250 shares designated; 91,015 and 105,378 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively ($13.34 per share liquidation value)									91			105
Preferred stock
Common stock, par value $0.001 per share; 10,000,000,000 shares authorized; 2,837,199,009 and 1,733,847,494 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively									2,837,199			1,733,848
Additional paid-in capital		101,072,128			47,715,878				117,063,328			104,872,991
Accumulated deficit		(114,818,245	)		(60,615,860	)			(115,959,772	)		(122,621,060	)

Total Shareholders’ Deficit		(12,272,369	)		(12,886,424	)
Total Shareholders’ Equity (Deficit)									3,941,546			(16,013,416	)

Total Liabilities and Shareholders’ Deficit	$	4,515,961		$	4,327,688
Total Liabilities and Shareholders’ Equity (Deficit)								$	6,380,245		$	3,533,696

See accompanying notes to unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ ~~DEFICIT~~EQUITY (DEFICIT)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, ~~2020~~2021 AND ~~2019~~2020

Preferred Stock
Series A Preferred Stock
Series B Preferred Stock
Series D Common Stock Common Stock Issuable Additional
Paid-in Accumulated Total
Shareholders’
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Deficit

Balance, December 31, 2019 - $ - 1,700,000 $ 1,700 - $ - 11,832,603 $ 11,833 25,000 $ 25 $ 47,715,878 $ (60,615,860 ) $ (12,886,424 )

Reduction of put premium upon conversion - - - - - - - - - - 73,725 - 73,725

Common stock issued for debt conversion - - - - - - 5,290,406 5,290 - - 336,229 - 341,519

Beneficial conversion effect related to debt conversions - - - - - - - - - - 172,720 - 172,720

Relative fair value of warrants issued in connection with convertible debt - - - - - - - - - - 262,872 - 262,872

Accretion of stock-based compensation - - - - - - - - - - 31,250 - 31,250

Reclassification of warrants from equity to derivative liabilities - - - - - - - - - - (11,381,885 ) - (11,381,885 )

Deemed dividend related to price protection - - - - - - - - - - 18,696,012 (18,696,012 ) -

Net loss - - - - - - - - - - - (3,453,338 ) (3,453,338 )

Balance, March 31, 2020 - - 1,700,000 1,700 - - 17,123,009 17,123 25,000 25 55,906,801 (82,765,210 ) (26,839,561 )

Cancellation of issuable shares - - - - - - - - (25,000 ) (25 ) 25 - -

Reduction of put premium upon conversion - - - - - - - - - - 311,660 - 311,660

Common stock issued for debt conversion, accrued interest and fees - - - - - - 412,573,593 412,573 - - 2,317,667 - 2,730,240

Beneficial conversion effect related to debt conversions - - - - - - - - - - 15,531,703 - 15,531,703

Common shares issued for cashless warrant exercise - - - - - - 70,203,889 70,204 - - (70,204 ) - -

Warrants issued for services - - - - - - - - - - 1,963,291 - 1,963,291

Accretion of stock-based compensation - - - - - - - - - - 5,208 - 5,208

Net loss - - - - - - - - - - - (67,655,332 ) (67,655,332 )

Balance, June 30, 2020 - - 1,700,000 1,700 - - 499,900,491 499,900 - - 75,966,151 (150,420,542 ) (73,952,791 )

Common stock issued for series B preferred stock - - (1,000,000 ) (1,000 ) - - 1,000,000 1,000 - - - - -

Common stock issued for debt conversion, accrued interest and fees - - - - - - 477,682,407 477,682 - - 4,334,087 - 4,811,769

Beneficial conversion effect related to debt conversions - - - - - - - - - - 19,700,260 - 19,700,260

Common shares issued for cashless warrant exercise - - - - - - 85,710,419 85,711 - - 151,954 - 237,665

Conversion of debt and accrued interest to series D preferred stock - - - - 522,726 522 - - - - 825,167 - 825,689

Conversion of series D preferred stock to common stock - - - - (398,350 ) (398 ) 398,350,000 398,350 - - (397,952 ) - -

Common stock issued for settlement - - - - - - 10,281,018 10,281 - - 492,461 - 502,742

Net loss - - - - - - - - - - - 35,602,297 35,602,297

Balance, September 30, 2020 - $ - 700,000 $ 700 124,376 $ 124 1,472,924,335 $ 1,472,924 - $ - $ 101,072,128 $ (114,818,245 ) $ (12,272,369 )

See accompanying notes to unaudited condensed consolidated financial statements.

~~See accompanying notes to unaudited condensed consolidated financial statements.~~

Transportation and Logistics Systems, Inc. (“TLSS” or the “Company”), was incorporated under the laws of the State of Nevada, on July 25, 2008. The Company operates through its active subsidiaries as a logistics and transportation company specializing in ecommerce fulfillment, last mile deliveries, two-person home delivery, mid-mile, and long-haul ~~services for predominantly online retailers.~~services.

~~On March 30, 2017 (the “~~~~Closing Date~~~~”), TLSS and Save On Transport Inc. (“~~~~Save On~~~~”) entered into a Share Exchange Agreement, dated as of the same date (the “~~~~Share Exchange Agreement~~~~”). Pursuant to the terms of the Share Exchange Agreement, on the Closing Date, Save On became a wholly-owned subsidiary of TLSS (the “~~~~Reverse Merger~~”). Save On was incorporated in the state of Florida and started business on July 12, 2016. This transaction was treated as a reverse merger and recapitalization of Save On for financial reporting purposes because the Save On shareholders retained an approximate 80% controlling interest in the post-merger consolidated entity. Save On was considered the acquirer for accounting purposes, and the Company’s historical financial statements before the Reverse Merger were replaced with the historical financial statements of Save On before the Reverse Merger. The balance sheets at their historical cost basis of both entities were combined at the Closing Date and the results of operations from the Closing Date forward include the historical results of Save On and results of TLSS from the Closing Date forward. On May 1, 2019, the Company entered into a share exchange agreement with Save On and Steven Yariv, whereby the Company returned all of the stock of Save On to Steven Yariv in exchange for Mr. Yariv conveying 1,000,000 shares of common stock of the Company back to the Company. In addition, the Company granted an aggregate of 80,000 options to certain employees of Save On. On April 16, 2019, Mr. Yariv ceased to be an officer or director of the Company.

On June 18, 2018 (the “Acquisition Date”), the Company completed the acquisition of ~~100%~~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~~that generated substantially all of its revenues from Amazon Logistics, Inc. (“Amazon”) in New York, New Jersey, and ~~Pennsylvania.~~Pennsylvania until it ceased operations on September 30, 2020 due to Amazon’s non-renewal of its Delivery Service Partner (DSP) Agreement with Prime EFS, as described below.

On July 24, 2018, the Company formed Shypdirect LLC (“Shypdirect”), a company organized under the laws of New Jersey. Shypdirect iswas 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. Since its inception, Shypdirect generated substantially all of its revenues from Amazon, Inc. As described below, Amazon elected to terminate its Amazon Relay Carrier Terms of Service with Shypdirect. Accordingly, in June 2021, Shypdirect ceased its tractor trailer and box truck delivery services to Amazon, and in July 2021, Shypdirect ceased all operations.

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

Additionally, on July 17, 2020, Amazon notified Shypdirect that Amazon had elected to terminate the Amazon Relay Carrier Terms of Service (the “Program Agreement”) between Amazon and Shypdirect effective as of November 14, 2020 (the “Shypdirect Termination Notice”). On August 3, 2020, Amazon offered to withdraw the Shypdirect Termination Notice and extend the term of the Program Agreement to and including May 14, 2021, conditioned on Prime EFS executing, for nominal consideration, a separation agreement with Amazon under which Prime EFS agrees to cooperate in an orderly transition of its Amazon last-mile delivery business to other service providers, Prime EFS released any and all claims it may have against Amazon, and Prime EFS covenanted not to sue Amazon (the “Aug. 3 Proposal”). On August 4, 2020, the Company, Prime EFS and Shypdirect accepted the Aug. 3 Proposal.

During the year ended December 31, 2020 and 2019, one customer, Amazon, represented 96.7% and 98.7% of the Company’s total net revenues. Approximately ~~58.5% and 39.0% (for a total of 97.5%)~~36.7% of the Company’s revenue of ~~$23,503,384~~$4,273,498 for the nine months ended September 30, ~~2020~~2021 was attributable to ~~Prime EFS’s last-mile DSP business and~~ Shypdirect’s now terminated mid-mile and long-haul business with ~~Amazon, respectively.~~Amazon. The termination of the ~~Amazon~~Prime EFS last-mile business ~~will have~~with Amazon on September 30, 2020 had a material adverse impact on the ~~Company’s business~~operations of Prime EFS beginning in the 4th fiscal quarter of 2020 and ~~thereafter. If~~ the termination of Shypdirect’s Amazon mid-mile and long-haul business, ~~is discontinued after~~which was effective on or about May 14, 2021, ~~it would have~~had a material adverse impact on operations of Shypdirect beginning in the ~~Company’s business in~~ 2nd fiscal quarter of ~~2021~~2021. This impact has caused Prime EFS and ~~thereafter.~~Shypdirect to become insolvent and to cease operations.

While the Company ~~will seek to replace~~has commenced replacing its ~~last-mile DSP~~ Amazon business ~~and supplement its mid-mile and long-haul Amazon business,~~with the acquisitions as set forth below, 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~~its restructuring plan which 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”), including last-mile delivery services using vans and box trucks (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 ~~wholly-owned~~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”).

On August 16, 2021, the Company’s subsidiaries, Prime EFS and Shypdirect, executed Deeds of Assignment for the Benefit of Creditors in the State of New Jersey pursuant to N.J.S.A. §2A:19-1, et seq. (the “ABC Statute”), assigning all of the Prime EFS and Shypdirect assets to Terri Jane Freedman as Assignee for the Benefit of Creditors (the “Assignee”) and filing for dissolution. An “Assignment for the Benefit of Creditors,” “general assignment” or “ABC” in New Jersey is a state-law, voluntary, judicially-supervised corporate liquidation and unwinding similar to the Chapter 7 bankruptcy process found in the United States Bankruptcy Code. In an ABC, the debtor companies. Prime EFS and Shypdirect, together referred to as the “Assignors” executed Deeds of Assignment, assigning all of their assets to the Assignee chosen by the Company, who acts as a fiduciary similar to a Chapter 7 trustee in bankruptcy. On September 7, 2021, the ABC’s were filed with the Bergen County Clerk in Bergen County, New Jersey and filed with the Surrogate Court in the appropriate county, initiating a judicial proceeding. The Assignee has been charged with liquidating the assets for the benefit of the Prime EFS and Shypdirect creditors pursuant to the provisions of the ABC Statute.

As a result of Prime EFS and Shypdirect’s filing of the executed Deeds of Assignment for the Benefit of Creditors on September 7, 2021, the Company ceded authority for managing the businesses to the Assignee, and the Company’s management cannot carry on Prime EFS or Shypdirect’s activities in the ordinary course of business. Additionally, Prime EFS and Shypdirect no longer conduct any business and are not permitted by the Assignee and ABC Statute to conduct any business. For these reasons, the Company concluded that it had lost control of Prime EFS and Shypdirect, and no longer had significant influence over these subsidiaries during the ABC proceedings. Further, on October 13, 2021, Prime EFS and Shypdirect filed for dissolution with the Secretary of State of New Jersey. Therefore, the Company deconsolidated Prime EFS and Shypdirect effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021 (See Note 10).

The Company’s results of operations for the three and nine months ended September 30, 2021 and 2020 include the results of Prime EFS and Shypdirect prior to the September 7, 2021 filing of the executed Deeds of Assignment for the Benefit of Creditors with the State of New Jersey.

As of December 31, 2020, the assets and liabilities of Prime EFS and Shypdirect subject to the Assignment for the Benefit of Creditors have been reflected as “Assets subject to assignment for benefit of creditors” and “Liabilities subject to assignment for benefit of creditors” on the accompanying condensed consolidated balance sheets.

Unless the context otherwise requires, TLSS and its wholly owned subsidiaries, TLSS Acquisition, Cougar Express, Shyp FX and Shyp CX, and its deconsolidated subsidiaries, Prime EFS and Shypdirect, whose results of operations for the three and nine months ended September 30, 2021 and 2020 are included in the results of the Company prior to the September 7, 2021 filing of the executed Deeds of Assignment for the Benefit of Creditors with the State of New Jersey, 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.

On August 16, 2021 the Company’s subsidiaries, Prime EFS and Shypdirect executed Deed of Assignments for the Benefit of Creditors in the State of New Jersey ABC Statute, assigning all of the Prime EFS and Shypdirect assets to the Assignee and filing for dissolution. The Company’s results of operations for the three and nine months ended September 30, 2021 and 2020 include the results of Prime EFS and Shypdirect prior to the September 7, 2021 filing of the executed Deeds of Assignment for the Benefit of Creditors with the State of New Jersey. As a result of Prime EFS and Shypdirect’s filing of the executed Deeds of Assignment for the Benefit of Creditors on September 7, 2021, the Company ceded authority for managing the businesses to the Assignee, and the Company’s management cannot carry on Prime EFS or Shypdirect’s activities in the ordinary course of business. For these reasons, the Company concluded that it had lost control of Prime EFS and Shypdirect, and no longer had significant influence over these subsidiaries during the ABC proceedings. Therefore, the Company deconsolidated Prime EFS and Shypdirect effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021. As of December 31, 2020, the assets and liabilities of Prime EFS and Shypdirect subject to assignment for the benefit of creditors have to been reflected as “Assets subject to assignment for benefit of creditors” and “Liabilities subject to assignment for benefit of creditors” on the accompanying condensed consolidated balance sheets (See Note 10).

The unaudited condensed consolidated financial statements of the Company include the accounts of TLSS and its ~~wholly-owned~~wholly owned subsidiaries, ~~Save On (through April 30, 2019),~~TLSS Acquisition, Cougar Express, Shyp FX and Shyp CX, and Prime EFS and ~~Shypdirect.~~Shypdirect through the date of deconsolidation (September 7, 2021). All intercompany accounts and transactions have been eliminated in consolidation. References below to a “Company liability” may be to a liability which is owed solely by a subsidiary and not by TLSS.

On May 1, 2019, the Company entered into a Share Exchange Agreement with Save On and Steven Yariv, whereby the Company returned all of the stock of Save On to Steven Yariv in exchange for Mr. Yariv conveying 1,000,000 shares of common stock of the Company back to the Company. Pursuant to Accounting Standard Codification (“ASC”) 205-20-45, the financial statement in which net income or loss of a business entity is reported shall report the results of operations of the discontinued operation in the period in which a discontinued operation either has been disposed of or is classified as held for sale. Accordingly, beginning in the second quarter of 2019, the period that Save On was disposed of, the Company reflects Save On as a discontinued operation and such presentation is retroactively applied to all periods presented in the accompanying condensed consolidated financial statements.

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, for the nine months ended September 30, 2021 and 2020, the Company had a net loss from operations of ~~$35,506,373~~$5,251,336 and $3,919,831 and net cash used in operations was ~~$2,369,261.~~$2,863,483 and $2,369,261, respectively. Additionally, the Company had an accumulated deficit, shareholders’ ~~deficit,~~equity, and a working capital ~~deficit~~ of ~~$114,818,245, $12,272,369~~$115,959,772, $3,941,546, and ~~$12,974,773,~~$1,283,101, respectively, aton September 30, ~~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 notified Prime EFS by the Prime EFS Termination Notice that it does not intend to renew the In-Force Agreement when that agreement ~~expires.~~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 Program Agreement between Amazon and Prime EFS would terminate effective September 30, 2020; that Prime EFS and the Company would cooperate in an orderly transition of the last-mile delivery business from Prime EFS to other service providers; that Prime EFS would return any and all vehicles leased from Element Fleet Corporation by October 7, 2020 in good repair; and that Prime EFS would dismiss the Amazon Arbitration with prejudice. Under the same Separation Agreement, Prime EFS and the Company released any and all claims they had against Amazon and covenant not to sue Amazon. In a “Settlement and Release Agreement” dated August 21, 2020, by and among Amazon, Shypdirect, Prime EFS and the Company, Amazon withdrew the Shypdirect Termination Notice and extended the term of the Program Agreement to and including May 14, 2021. In the Settlement and Release Agreement, Shypdirect released any and all claims it had against Amazon, arising under the Program Agreement between Amazon and Shypdirect effective as of November 14, 2020, or otherwise. The termination of the Prime EFS last-mile business with Amazon on September 30, 2020 had a material adverse impact on the operations of Prime EFS beginning in the 4th fiscal quarter of 2020 and the termination of Shypdirect’s Amazon mid-mile and long-haul business, which was effective on or about May 14, 2021, had a material adverse impact on operations of Shypdirect beginning in the 2nd fiscal quarter of 2021. This impact has caused Prime EFS and Shypdirect to become insolvent and to cease operations. 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 liabilities subject to assignment for benefit of creditors on the accompanying condensed consolidated balance sheets as of December 31, 2020 (see Note 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. The Company is experiencing higher net sales, which reflect increased demand, particularly as more people are staying at home, for household staples and other essential products, partially offset by decreased demand for discretionary consumer products, delayed procurement and shipment of non-priority products, and supply chain interruptions. Other effectsEffects 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~~continues to be affected by possible procurement and shipping delays, supply chain interruptions, higher product demand in certain categories, ~~lower~~ product demand in other categories, and increased fulfilment costs and cost of sales as a percentage of net sales ~~through at least Q4 2020, although~~and it is not possible to determine the duration and spread of the pandemic or such actions, the ultimate impact on the Company’s results of operations during ~~2020,~~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. ~~In April 2020,~~During the ~~Company’s subsidiaries, Prime EFS and Shypdirect, entered into Paycheck Protection Program promissory notes with M&T Bank in~~nine months ended September 30, 2021, the Company issued an aggregate ~~amount~~ of ~~$3,446,152~~343,118 shares of its Series E preferred stock for net proceeds of $3,590,500 (see Note 7)9). The proceeds were used for the acquisition of Cougar Express and DDTI and for working capital purposes. Additionally, during the nine months ended September 30, 2021, the Company received proceeds of $3,940,669 from the exercise of stock warrants (see Note 9). Management cannot provide assurance that the Company will ultimately achieve profitable operations, become cash flow positive, or raise additional debt and/or equity capital.

The Company will continue to: (i) seek to replace its ~~last-mile DSP Amazon business and supplement its mid-mile and long-haul~~ Amazon business with other, non-Amazon, customers; (ii) explore other strategic relationships; and (iii) identify potential acquisition opportunities, while continuing to execute ~~our~~its restructuring ~~plan, commenced in February 2020.~~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”) 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 September 30, ~~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 September 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

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 September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company did ~~not~~0t 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 September 30, 2021, cash in bank in excess of FDIC insured levels ~~as September 30, 2020 and December 31, 2019.~~amounted to approximately $2,474,000. The Company has not experienced any losses in such accounts through September 30, ~~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.~~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 nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the Company believes that it operates in ~~one~~1 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.

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 income (loss) per common share is computed by dividing net income (loss) attributable to common shareholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted income (loss) per share is computed by dividing net 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 options and warrants (using the treasury stock method) and shares issuable for convertible debt and Series B and E preferred shares (using the as-if converted method). These common stock equivalents may be dilutive in the future.

The following table presents a reconciliation of basic and diluted net income (loss) per share:

Potentially dilutive common shares were excluded from the computation of diluted shares outstanding for the nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 as they would have an anti-dilutive impact on the Company’s net ~~losses~~income (loss) in that period and consisted of the following:

SCHEDULE OF POTENTIALLY DILUTIVE SHARES EXCLUDED FROM COMPUTATION OF DILUTED SHARES OUTSTANDING

September 30, 2020 September 30, 2019
Stock warrants 54,746,723 3,520,827
Stock options 80,000 80,000
Convertible debt 1,350,550,561 987,936
Series B convertible preferred stock 700,000 1,700,000
Series D convertible preferred stock 124,376,000 -

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.

The Company accounts for a gain or loss on deconsolidation of a subsidiary or derecognition of a group of assets in accordance with ASC 810-10-40-5. The Company measures the gain or loss as the difference between (a) the aggregate of fair value of any consideration received, the fair value of any retained noncontrolling investment and the carrying amount of any noncontrolling interest in the former subsidiary at the date the subsidiary is deconsolidated and (b) the carrying amount of the former subsidiary’s assets and liabilities or the carrying amount of the group of assets.

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 ~~condensed~~ consolidated financial statements.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This ASU clarifies the accounting for modifications or exchanges of freestanding equity-classified written call options (i.e. warrants) so that the transaction should be treated as an exchange of the original instrument for a new instrument. This standard is effective for fiscal years beginning after December 15, 2021 on a prospective basis, with early adoption permitted. The adoption of this update is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

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 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”), including last-mile delivery services using vans and box trucks. 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 March 24, 2021, TLSS Acquisition acquired all of the issued and outstanding shares of capital stock of ~~Save On~~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 ~~Steven Yariv in exchange for Mr. Yariv conveying 1,000,000 shares of common stock~~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. The Company ~~back to~~believes that the ~~Company. In addition,~~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 ~~granted an aggregate~~with a long-standing, well-run profitable operation as a step to begin replacing the revenue it lost as a result of ~~80,000 options to certain employees of Save On. Mr. Yariv ceased to be an officer or director of~~Amazon’s terminating its delivery service provider business. Furthermore, the Company ~~effective with~~believes that, because Cougar Express is strategically based in New York and serves the ~~filing of~~tri-state area, organic growth opportunities will be available for expanding its footprint into the Company’s ~~Annual Report on Form 10-K for the fiscal year ended December 31, 2018~~primary base of operations in New Jersey, as ~~filed with the Securities and Exchange Commission on April 16, 2019.~~well as efficiencies that could be derived by leveraging Shypdirect’s operational capabilities.

~~Pursuant~~The assets acquired and liabilities assumed are recorded at their estimated fair values on the acquisition date, subject to ~~ASC 205-20-45,~~adjustment during the ~~financial statement~~measurement period with subsequent changes recognized in ~~which net income~~earnings or ~~loss of~~loss. These estimates are inherently uncertain and are subject to refinement. Management develops estimates based on assumptions as a ~~business entity is reported shall report the results of operations~~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 may 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 of or is classified as held for sale. Accordingly,~~determined. During the three months ended September 30, 2021, the Company ~~reflects Save On as discontinued operations beginning in~~increased the ~~second quarter~~customer relations intangible asset acquired and accrued expenses by $7,057 to reflect additional funds due to the owner of ~~2019,~~Cougar Express.

Based upon the ~~period that Save On was disposed~~purchase price allocation, the following table summarizes the estimated fair value 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 September 30, 2020 and December 31, 2019, the Company did not have any remaining assets acquired and liabilities ~~classified as discontinued operations in the Company’s condensed consolidated financial statements as of September 30, 2020 and December 31, 2019.~~

~~For the Company’s Save On business activities, through~~assumed at the date of ~~disposition on May 1, 2019,~~the respective acquisition:

The Company shall record acquisition and transaction related expenses in the period in which they are incurred. During the nine months ended September 30, 2021 and 2020, acquisition and transaction related expenses primarily consisted of legal fees of approximately $8,200 and $0, respectively. Additionally, the Company ~~recognized revenues~~paid expenses and fees relating to the ~~related direct costs~~sale of ~~such revenue~~Series E preferred stock in which ~~included carrier fees and dispatch costs as~~a portion of the ~~date the freight was delivered by the carrier which was when the performance obligation is satisfied. Customer payments received prior to delivery~~proceeds 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 requiredused 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~~cash portion 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.consideration (see Note 9).

~~The summarized operating result of discontinued operations included in the Company’s condensed consolidated statements of operations is as follows:~~

AtOn September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, accounts receivable, net consisted of the following:

AtOn September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, property and equipment consisted of the following:

~~For the nine months ended September 30, 2020 and 2019, depreciation expense is included in general and administrative expenses and amounted to $42,101 and $130,035, respectively.~~ During the nine months ended September 30, ~~2019,~~2021, the Company ~~traded in,~~ sold ~~or disposed of delivery trucks and~~ vehicles of ~~$783,511~~$116,310 with related accumulated depreciation of ~~$176,178,~~$38,992, and received cash of ~~$81,000~~$3,451 and reduced notes payable of ~~$330,709,~~$73,864, resulting in a loss of ~~$195,624~~$3 which is included in general and administrative expenses on the accompanying condensed consolidated statement of operations.

For the nine months ended September 30, 2021 and 2020, depreciation expense is included in general and administrative expenses and amounted to $173,849 and $42,101, respectively.

NOTE 6 – ~~CONVERTIBLE PROMISSORY NOTES PAYABLE AND NOTES PAYABLE~~INTANGIBLE ASSETS

~~Red Diamond Partners LLC~~On September 30, 2021 and ~~RDW Capital, LLC~~

Amortization of ~~principal and interest on the RedDiamond Notes of $270,000. In accordance with these notes, the Company entered into default in 2018, which increased the interest rate~~intangible assets attributable to ~~18.0% per annum. The RedDiamond Notes contain cross default provisions whereby a default in any one note greater than $25,000 causes a default in all the notes, however, this provision~~future periods is ~~only effective if there is a formal notice of default by the lender.~~as follows:

On June 30, 2017, the Company issued RDW Capital, LLC a senior convertible note in the aggregate principal amount of $240,000, for an aggregate purchase price of $30,000. Through date of default, the principal due under the note accrued interest at a rate of 12% per annum. All principal and accrued interest under the note was due six months following the issue date of the note, and was convertible into shares of the Company’s common stock, at a conversion price equal to fifty (50%) of the lowest volume-weighted average price for the ten trading days immediately preceding the conversion. The note includes anti-dilution protection, including a down-round provision under which the conversion price could be affected by future equity offerings undertaken by the Company, as well as customary events of default, including non-payment of the principal or accrued interest due on the note. Upon an event of default, all obligations under the note become immediately due and payable and the Company is required to make certain payments to the lender. On December 31, 2017 the Company failed to make its required maturity date payment of principal and interest. In accordance with the note, the Company entered into default on January 3, 2018, which increased the interest rate to 24% per annum.

In connection with the issuance of these convertible promissory notes to RedDiamond and RDW Capital, LLC, the Company determined that the terms of these convertible promissory notes included a down-round provision under which the conversion price could be affected by future equity offerings undertaken by the Company.

The Company evaluated these convertible promissory note transactions in accordance with ASC Topic 815, Derivatives and Hedging. Through December 31, 2018, the Company determined that the conversion feature of the convertible promissory notes was not afforded the exemption for conventional convertible instruments due to their respective variable conversion rate and price protection provisions. Accordingly, through December 31, 2018, under the provisions of FASB ASC Topic No. 815-40, “Derivatives and Hedging – Contracts in an Entity’s Own Stock”, the embedded conversion option contained in the convertible instruments were accounted for as derivative liabilities at the date of issuance and shall be adjusted to fair value through earnings at each reporting date. On January 1, 2019, the Company adopted 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,~~ 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 consolidated balance sheet as of the beginning of 2019, the period which the amendment is effective (See Note 2 - Derivative financial instruments and summary of derivative liabilities below).

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

In connection with this debt modification, on April 9, 2019, the Company recorded a gain on debt extinguishment of $432,589, which consists of the removal of debt put premium of $385,385 since the debt is no longer convertible, and $47,204 related to the reversal of default interest payable.

Pursuant to the RedDiamond Amendments, the conversion provisions contained in the convertible promissory notes held by RedDiamond and RDW Capital, LLC were suspended and ceased to be exercisable beginning as of April 9, 2019. However, under the RedDiamond Amendments, the conversion provisions contained in the convertible promissory notes held by Red Diamond and RDW Capital, LLC were subject to reinstatement upon the occurrence of an event of default. The parties agreed that it would be considered an event of default under the convertible promissory notes if the Company consummated any new offering of equity or equity linked securities containing a conversion or exercise price which is variable based upon the market trading price of the Company’s securities. On August 30, 2019, the Company entered into a new offering of equity or equity linked securities containing a conversion or exercise price which is variable based upon the market trading price of the Company’s securities. Accordingly, the conversion terms were reinstated and the Company recorded a put premium of $385,385 and recorded interest expense of $385,385.

During the nine months ended September 30, 2020, the Company issued 96,661,102 shares of its common stock upon the conversion of debt of $510,000 and accrued interest of $158,141. Upon conversion, the Company reclassified put premium of $385,385 to paid-in capital.

The aggregate principal amounts due as of September 30, 2020 and December 31, 2019 amounted to $0 and $895,385, which included a put premium of $0 and $385,385, and principal balance of $0 and $510,000, and was included in convertible notes payable, a current liability, on the accompanying consolidated balance sheet, respectively.

~~On June 18, 2018, the Company entered into a securities purchase agreement (the “~~~~Bellridge Purchase Agreement~~~~”), whereby it issued to Bellridge Capital, LLC (“~~~~Bellridge~~~~”) a senior secured convertible note in the aggregate principal amount of $2,497,503 (the “~~~~Bellridge Note~~”), for an aggregate purchase price of $1,665,000, net of an original issue discount of $832,503. In addition, the Company paid issue costs of $177,212. The original issue discount and issue costs were recorded as a debt discount to be amortized over the term of the Bellridge Note. The principal due under the Bellridge Note initially accrued interest at a rate of 10% per annum. Principal and interest payments of $232,940 were payable monthly beginning on December 18, 2018 and were due monthly over the term of the Bellridge Note in cash or common stock of the Company, at Bellridge’s discretion.

In connection with the Bellridge Purchase Agreement, Bellridge was issued a warrant, with a term of two years, to purchase up to 4.75% of the fully-diluted outstanding common stock of the Company, for an aggregate purchase price of $100 (the “~~First Bellridge Warrant~~”). Additionally, the placement agent for the Bellridge Note was issued a warrant, with a term of two years, to purchase up to 4.75% of the fully-diluted outstanding common stock of the Company, for an aggregate purchase price of $100 (the “~~Bellridge Note PA Warrant~~~~”).~~

In August 2018, the Company defaulted on the Bellridge Note due to (i) default on the payment of monthly interest payments due, (ii) default caused by the late filing of the Company’s reports on Form 10-Q for the periods ended June 30, 2018 and September 30, 2018 and (iii) default due to failure to file a registration statement. Upon an event of default, all principal, accrued interest, and liquidated damages and penalties were due upon request of Bellridge at 125% of such amounts.

On December 27, 2018, Bellridge waived any and all defaults in existence on the Bellridge Note and the Company agreed to issue a warrant that is convertible into 2% of the issued and outstanding shares existing at the time the Company files a registration statement or makes an application to up list to a national stock exchange (the “~~Second Bellridge Warrant~~~~” and together with the First Bellridge Warrant and the Bellridge Note PA Warrant, the “~~~~Bellridge Warrants~~”). Pursuant to the Second Bellridge Warrant, at any time on or before the date that the Company files a registration statement on Form S-l or applies for up-listing to a National Exchange (as defined in the Second Bellridge Warrant), and on or prior to the close of business on the early of the first year anniversary of the issuance of December 27, 2018, Bellridge could have chosen to subscribe for and purchase from the Company up to 2% in shares of common stock for an aggregate exercise price of $100. Additionally, the principal interest amount due under the Bellridge Note was modified with a monthly payment of principal and interest due beginning on January 18, 2019 of $156,219 with all remaining principal and interest amounts on the Bellridge Note due on December 18, 2019. This modification was not considered a debt extinguishment.

~~On April 9, 2019, the Company entered into a new agreement with Bellridge that modified the Bellridge Note and cancelled these warrants (see below).~~

Through April 9, 2019, all principal and accrued interest under the Bellridge Note was convertible into shares of the Company’s common stock, at a conversion price equal to the lower of $1.50 and 65% of the lowest traded price during the fifteen trading days immediately prior to the conversion date. The Bellridge Note included anti-dilution protection, as well as customary events of default, including, but not limited to, non-payment of the principal or accrued interest due on the Bellridge Note and cross default provisions on other Company obligations or contracts. Upon an event of default, all obligations under the Bellridge Note become immediately due and payable and the Company is required to make certain payments to Bellridge.

Bellridge was granted a right of first refusal on future financing transactions of the Company while the Bellridge Note remains outstanding, plus an additional three months thereafter. In connection with the issuance of the Bellridge Note, the Company entered into a security agreement with Bellridge pursuant to which the Company agreed that obligations under the Bellridge Note and related documents will be secured by all of the assets of the Company. In addition, all of the Company’s subsidiaries are guarantors of the Company’s obligations to Bellridge pursuant to the Bellridge Note and have granted a similar security interest over substantially all of their assets. A portion of the proceeds of the Bellridge Note were used to acquire 100% of the membership interests of Prime EFS.

~~During the term of the Bellridge Note, in the event that the Company consummates any public or private offering or other financing or capital raising transaction of any kind (each a “~~~~Bellridge Note Subsequent Offering~~”), in which the Company receives, in one or more contemporaneous transactions, gross proceeds of at least $5,000,000, at any time upon ten (10) days written notice to the holder of the Bellridge Note, but subject to the Bellridge Note holder’s conversion rights set forth in the Bellridge Purchase Agreement, then the Company must use 20% of the gross proceeds of the Bellridge Note Subsequent Offering and must make payment to the Bellridge Note holder of an amount in cash equal to the product of (i) the sum of (x) the then outstanding principal amount of the Bellridge Note and (y) all accrued but unpaid interest, multiplied by (ii) (x) 110%, if the Prepayment Date (as defined in the Bellridge Note) is within 90 days of the date hereof the Closing Date (as defined in the Purchase Agreement), or (y) 125%, if the Prepayment Date is after the 90th day following the Closing Date, to which calculated amount the Company must add all other amounts owed pursuant to the Bellridge Note, including, but not limited to, all late fees and liquidated damages.

In connection with the Bellridge Purchase Agreement, the Company entered into a registration rights agreement which, among other things, required the Company to file a registration statement with the Securities and Exchange Commission no later than 120 days after June 18, 2018. The Company failed to file such registration statement. Accordingly, in addition to any other rights the holders may have under the Bellridge Purchase Agreement or under applicable law, on the default date and on each monthly anniversary of each such default date (if the applicable event is not cured by such date) until the ninetieth day from such default date, the Company will pay to each holder an amount in cash, as partial liquidated damages and not as a penalty, equal to the product of one percent (1%) multiplied by the aggregate subscription amount paid by the holder pursuant to the Bellridge Purchase Agreement. Subsequent to the ninetieth day from such default date, the one percent (1%) penalty increases to two percent (2%), with an aggregate cap of twenty percent (20%) per annum. If the Company fails to pay any of these partial liquidated damages in full within seven days after the date payable, the Company will pay interest thereon at a rate of 18% per annum to the holder, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. On December 27, 2018, Bellridge waived any and all defaults.

In connection with the Bellridge Purchase Agreement, the Company paid a placement agent $120,000 in cash which is included in issue costs previously discussed above and this placement agent was issued the Bellridge Note PA Warrant, with a term of two years, to purchase up to 4.75% of the fully-diluted outstanding common stock of the Company, for an aggregate purchase price of $100. On April 9, 2019, the Company entered into an agreement with this placement agent that cancelled the Bellridge Note PA Warrant.

In connection with the issuance of the Bellridge Note and the Bellridge Warrants, the Company determined that the Bellridge Note and the Bellridge Warrants contains terms that are not fixed monetary amounts at inception. Accordingly, under the provisions of ASC Topic No. 815-40, “Derivatives and Hedging – Contracts in an Entity’s Own Stock”, the embedded conversion option contained in the Bellridge Note and the Bellridge 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 this embedded conversion option derivative and the Bellridge Warrants were determined using the Binomial valuation model and Monte-Carlo simulation model, respectively.

~~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 the Bellridge Modification Date, warrant holders holding warrants 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.

In an agreement dated August 3, 2020, Bellridge and the Company resolved many of the disputes between them. Among other things, Bellridge and the Company agreed upon the balance of all indebtedness owed to Bellridge as of August 3, 2020 ($2,150,000), a new maturity date on the indebtedness (April 30, 2021), and a price of $0.02 for the conversion of all Bellridge indebtedness into shares of Company common stock. In the agreement, Bellridge also agrees to release its claims against the Company and its senior management in a definitive settlement agreement. However, the August 3 agreement did not contain a release of claims by either party.

During the three months ended September 30, 2020, the Company issued 107,500,001 shares of its common stock upon the conversion of debt of $1,813,402, accrued interest of $70,671 and any amounts due. In connection with the issuance of these shares, the Company recorded a loss on debt extinguishment of $512,366 which is associated with the fair market value of the excess shares issued upon conversion of the principal balances converted at the conversion price.

At September 30, 2020 and December 31, 2019, convertible notes payable related to this convertible debt amounted to $0 and $1,813,402, which consists of $0 and $1,813,402 of principal balance due and is net of unamortized debt discount of $0, respectively.

On August 30, 2019, the Company closed Securities Purchase Agreements (the “August 2019 Purchase ~~Agreement~~Agreements”) with accredited investors. ~~Pursuant to the terms of the August 2019 Purchase Agreement, the Company 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 the Company’s common stock (the “~~~~August 2019 Warrants~~”). The Company received net proceeds of $295,534, which is net of a 10% original issue discount 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 the August 2019 Notes.

The August 2019 Notes initially 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 the August 2019 Notes, monthly payments of interest and monthly principal payments, based on a 12-month amortization schedule (each, an “~~August 2019 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 Company’s August 2019 Note Amortization Payments due on December 30, 2019 were paid on January 6, 2020 and the Company did not receive any default notice for this late payment. The August 2019 Note Amortization Payments are made in cash unless the investor requests payment in the Company’s common stock in lieu of a cash payment (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 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 Amortization Payment.

The August 2019 Notes may be prepaid, provided that certain 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, (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.

In connection with the August 2019 Purchase Agreement, the Company entered into a registration rights agreement, pursuant to which the Company agreed to file a registration statement on Form S-1 to register the resale of the shares issuable to the investors pursuant to the August 2019 Purchase Agreement.

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. 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.

The August 2019 Notes and related August 2019 Warrants ~~include~~included down-round provisions under which the August 2019 Note conversion price and August 2019 Warrant exercise price could be affected, on a full-ratchet basis, by future equity offerings undertaken by the Company. ~~On September 6, 2019, the Company sold shares of its common stock at $2.50 per share~~During 2020 and accordingly, the conversion price and warrant down-round provisions were triggered. As a result, the conversion price of the August 2019 Notes was reduced to $2.50 per share and the number of shares issuable upon exercise of the warrants was increased to 1,383,116 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 August 2019 Notes was reduced to $0.40 per share, and the number of shares issuable upon exercise of the warrants was increased to 8,644,474 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 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 shares issuable upon exercise of the 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 summary of derivative liabilities below, as of January 30, 2020, the August 2019 Warrants are treated as derivative liabilities. Subsequent to January 7, 2020, additionalprior, down-round protection was triggered. As of ~~September 30,~~March 31, 2021 and December 31, 2020, the conversion price on the August 2019 Notes was ~~lowered to $0.006~~$0.006 per share and the exercise price of ~~the~~any remaining August 2019 Warrants was ~~lowered to $0.006~~$0.006 per ~~share, and the number shares issuable upon exercise of the August 2019 Warrants was increased.~~

In connection with the issuance of the August 2019 Notes, the Company determined that various terms of the August 2019 Notes, including the August 2019 Note Stock Payment terms discussed above, caused derivative treatment of the embedded conversion options.share. On August 30, 2019, the initial measurement date, the fair values of the embedded conversion option derivative of $1,953,968 was recorded as derivative liabilities and was allocated as a debt discount up to the net proceeds of the August 2019 Notes of $936,645, with the remainder of $1,017,323 charged to current period operations as initial derivative expense.

On January 30, 2020, due to the default of the January 2020 August 2019 Notes Amortization Payment, 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.

During the six months ended June 30, 2020, the Company repaid principal of $257,139, settled $128,674 of debt, and the Company issued 293,677,788 shares of its common stock upon the conversion of principal and default interest of $2,118,311, accrued interest of $48,685 and fees of $1,000. Additionally, accrued interest payable of $84,416 was reclassified to principal balance. During the three months ended September 30, ~~2020, the Company issued 39,885,602 shares of its common stock upon the conversion of principal~~2021 and ~~default interest of $284,249, accrued interest of $8,450 and fees of $900.~~

~~Additionally, on July 20, 2020 and July 22, 2020, the Company entered Exchange Agreements (the “~~~~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 (the “~~~~Series D~~”) (See Note 8). 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 $85,828, and Warrants to purchase 423,159,293 shares of Common Stock for 522,726 shares of Series D (the “~~Exchange~~”). In connection with the issuance of these 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 the principal balances and accrued interest converted at the conversion price.

~~In connection with Exchange, the Company and Investors entered into leak-out agreements, dated as of July 20, 2020 and July 22, 2020 (the “~~~~Leak-Out Agreements~~”), whereby the respective Investor agreed that, until the earliest to occur of (a) 120 days from date of Exchange Agreement, (b) the common stock trading at an average reported volume of at least 100,000,001 shares for three consecutive trading days, (c) the price per share of the common stock exceeding $0.10 in a transaction, (d) the time of release (whether by termination of an applicable leak-out agreement or otherwise), in whole or in part, of any leak-out agreement with any other holder of securities, or (e) any breach by the Company of any term of the Leak-Out Agreement that is not cured within five trading days following delivery of written notice of such breach by the respective Investor to the Company, neither Investor, nor any of its Affiliates (as defined in the respective Leak-Out Agreement), collectively, shall sell, on any trading day, more than 10% of the common stock sold on such trading day.

~~At September 30,~~December 31, 2020, convertible notes payable related to August 30, 2019 convertible debt amounted to ~~$22,064,~~$0 and $22,064, which consists of ~~$22,064~~$0 and $22,064 of ~~principal balance and~~ principal/default interest ~~due. At December 31, 2019, convertible notes payable related to August 30, 2019 convertible debt amounted to $658,623, which consists of $2,469,840 of principal balance~~balances due, ~~and is net of unamortized debt discount of $1,811,217.~~respectively.

~~On October 3, 2019, the Company issued and sold to an investor a convertible promissory note in the principal amount of $166,667 (the “~~~~October 3 Note~~~~”), and warrants to purchase up to 66,401 shares of the Company’s common stock (the “~~~~October 3 Warrant~~”). The Company received net proceeds of $150,000, which is net of a 10% original issue discount of $16,667. 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 Notes will be immediately due and payable. The October 3 Note Amortization Payments are made in cash unless the investor payment in the Company’s common stock in lieu of a cash payment (each, an “~~October 3 Note Stock Payment~~”). If the investor requests an 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. 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.

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 October 2019 the Company calculated the relative fair value of the October 3 Warrant in the amount of $82,771 which was added to debt discount and is being amortized over the term of the notes.

The October 3 Note and related October 3 Warrant include a down-round provision under which the October 3 Note conversion price and 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 convertible debt and warrant down-round provisions were triggered. As a result, the conversion price and the exercise price were lowered to $2.50 and the number of shares issuable upon exercise of the warrants was increased to 66,667. 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 the October 3 Note was reduced to $0.40 per share, and the number of shares issuable upon exercise of the warrants was increased to 416,669 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 October 3 Warrant holder from the down-round feature being triggered. The Company calculated the difference between the 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 shares issuable upon exercise of the 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 summary of derivative liabilities below, as of January 30, 2020, the October 3 Warrant is treated as derivative liabilities. Subsequent to January 7, 2020, additional down-round protection was triggered. As of September 30, 2020, the conversion price on the October 3 Note was lowered to $0.006 per share, the exercise price of the October 3 Warrant was lowered to $0.006 per share, and the number of shares issuable upon exercise of the October 3 Warrant was increased.

In connection with the issuance of the October 3 Note, the Company determined that various terms of the October 3 Note, including the October 3 Note Stock Payment terms discussed above, caused derivative treatment of the embedded conversion options. On October 3, 2019, the initial measurement date, the fair values of the embedded conversion option derivative of $123,795 was recorded as derivative liabilities and was allocated as a debt discount up to the net proceeds of the October 3 Note of $67,229, with the remainder of $56,566 charged to current period operations as initial derivative expense.

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 $50,000, default interest accrues at 18%, and the default conversion terms apply.

~~During the nine months~~year ended September 30, 2020, the Company issued 27,525,109 shares of its common stock upon the conversion of principal and default interest of $216,667, accrued interest of $11,774, fees of $5,000, and additional interest expense of $2,180.

~~At September 30, 2020, convertible notes payable related to the October 3, 2019 convertible debt amounted to $0. At~~ December 31, 2019, convertible notes payable related to the October 3, 2019 convertible debt amounted to $33,334, which consists of $166,667 of principal balance due and is net of unamortized debt discount of $133,333.

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 initially bore 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 dates, 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 accrues 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 and June 2020, due to the default of a May 2020 and June 2020 Fall 2019 Note Amortization Payments, the Fall 2019 Notes were deemed in default. Accordingly, default interest accrues at 18% and the Fall 2019 Notes became due on the respective dates of default. As of September 30, 2020, no repayments have been made on the Fall 2019 Notes.

In connection with the issuance of these convertible notes, the Company determined that various terms of the Fall 2019 Notes caused derivative treatment of the embedded conversion options. On the date of each respective Fall 2019 Note, the initial measurement date, the aggregate fair values of the embedded conversion option derivative of $328,638 was recorded as derivative liabilities and was allocated as a debt discount up to the net proceeds of the Fall 2019 Notes of $328,638.

At September 30, 2020, convertible notes payable related to the Fall 2019 Notes amounted to $430,783, which consists of $500,000 of principal balance due and is net of unamortized debt discount of $69,217. At December 31, 2019, convertible notes payable related to the Fall 2019 Notes amounted to $233,600, which consists of $500,000 of principal balance due and is net of unamortized debt discount of $266,400.

~~During the nine months ended September 30,~~ 2020, the Company issued and sold to certain investors convertible promissory notes in the aggregate principal amount of ~~$2,068,000~~$2,068,000 (the “Q1/Q2 2020 Notes”), and warrants to purchase up to 827,200 shares of the Company’s common stock (the “Q1/Q2 2020 Warrants”). The Company received net proceeds of ~~$1,880,000,~~$1,880,000, which is net of a ~~10%~~10% original issue discounts of ~~$188,000.~~ $188,000. The Q1/Q2 2020 Notes initially bore interest at 6% per annum and 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,~~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/~~“Q1/Q2 2020 Note Amortization ~~Payment~~”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 on such Q1/Q2 2020 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 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 Q1Q1/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, (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~~were prepayments and ~~are~~were 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, the Company has not prepaid any the Q1/Q2 2020 Notes, in whole or in part.

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~~$0.40 per share, subject to adjustment as provided therein and summarized below. If an Event of Default (as defined in the ~~applicable~~ Q1/Q2 2020 ~~Note)~~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 ~~applicable~~ Q1/Q2 2020 ~~Note)~~Notes) during the 20 consecutive Trading Day (as defined in the ~~applicable~~ Q1/Q2 2020 ~~Note)~~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 ~~common stock.~~

~~The Q1/Q2 2020 Warrants are exercisable at any time on or after the date~~number of ~~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/Q2 2020 Warrants become exercisable. Under the terms of the Q1/Q2 2020 Warrants, the investors are entitled to exercise the Q1/Q2 2020 Warrants to purchase up to 827,200 shares of the Company’s common stock at an initial exercise price of $0.40, subject to adjustment as detailed in the respective Q1/Q2 2020 Warrants.Common Stock outstanding.

In ~~connection with~~ the ~~issuance~~third fiscal quarter of 2020, the ~~January 2020 warrants, the Company calculated the relative fair value~~great majority of ~~these warrants in the~~principal amount of ~~$262,872 which~~Q1/Q2 2020 Notes was ~~added~~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 ~~debt discount and paid-in capital, and shall be amortized over~~ the ~~term of~~extent the Q1/Q2 2020 ~~Notes. In connection with~~Notes were converted for Common Stock at the ~~issuance~~advantageous conversion price applicable to post-Events of Default, the ~~notes in January, February, March and April 2020 and the issuance of the warrants in February, March and April 2020, the Company determined that various terms of these~~ Q1/Q2 ~~2020~~ Notes ~~and Q1/Q2 2020 Warrants, including~~are not also entitled to receive the ~~default provisions~~Mandatory Default Payment (as defined in the Q1/Q2 2020 ~~Notes discussed above, caused derivative treatment~~Notes) of 130% of principal amount. During 2020, since a note holder could conceivably disagree with the ~~embedded conversion options~~Company’s position in this regard, the Company has decided, out of an abundance of caution and warrants. During the nine months ended September 30, 2020, on the initial measurement dates, the fair values of the embedded conversion option and warrant derivatives of $8,817,568 was recorded as derivative liabilities and was allocated as a debt discount up to the net proceedsdespite 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 ~~$1,287,474, with~~Default and to receive the ~~remainder~~Mandatory Default Payment of ~~$7,530,095 charged to current period operations as initial derivative expense.~~

~~The~~130% on the entire original principal amount of Q1/Q2 2020 Notes include a down-round provision under which the Q1/Q2 2020 Note conversion price could be affected, by future equity offerings undertaken by the Company. During the nine months ended September 30, 2020, down-provisions were triggered. As of September 30, 2020, the conversion price of the Q1/Q2 Notes was lowered to $0.006 per share.Notes.

Due to the default of amortization payments due on our August 2019 Notes and other notes as discussed above, the Q1/Q2 2020 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.

During the three months ended ~~September~~June 30, ~~2020,~~2021, the Company and each investor entered into a letter agreement whereby the investor waived its right to any Mandatory Default Payment. Accordingly, during the three months ended June 30, 2021, the Company reversed the accrued Mandatory Penalty amount due of $664,400 and recorded a gain on debt extinguishment of $664,400. Additionally, during the three months ended June 30, 2021, the Company issued ~~291,796,804~~28,358,841 shares of its common stock upon the conversion of all remaining principal and ~~default~~ interest balances due aggregating $277,916. Hence, as of ~~$1,887,000 and accrued interest of $3,731.~~

At September 30, ~~2020,~~2021, convertible notes payable and default interest due related to the Q1/Q2 2020 Notes amounted to ~~$698,821,~~$0. 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~~$801,400 of principal ~~balance~~and default penalty balances due and is net of unamortized debt discount of ~~$102,579.~~$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~~$456,500 (the “April 20 Note”). The April 20 Note contained a 10% original issue discount amounting to ~~$41,500~~$41,500 for a purchase price of ~~$415,000.~~$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~~$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.~~$220,000. The April 20 Note initially bore interest at 6%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~~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 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 decreases or increases the common stock.

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. On the initial measurement dates, the fair values of the embedded conversion option derivative of $1,436,725 was recorded as derivative liabilities and was allocated as a debt discount up to the net proceeds of the April 20 Note of $415,000, with the remainder of $1,021,725 charged to current period operations as initial derivative expense. Due to the default of August 2019 Note Amortization Payments due on our August 2019 Notes and other notes, 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.

The April 20 Note includes a down-round provision under which the April 20 Note conversion price could be affected, by future equity offerings undertaken by the Company. During the ~~nine months~~year ended ~~September 30,~~December 31, 2020, down-provisions were triggered. AsSince these instruments contained embedded derivatives, the trigger only effected the quantity and valuation of ~~September 30, 2020, the conversion price of the April 20 Note~~derivative liabilities and there was ~~lowered to $0.006 per share.~~no other accounting effect.

During the three months ended ~~September~~June 30, ~~2020,~~2021, the Company issued ~~38,500,000~~15,923,322 shares of its common stock upon the conversion of all remaining principal and interest balances due aggregating $95,540. Hence, as of September 30, 2021, convertible notes payable and default interest ~~of $231,000.~~

~~At September 30,~~due related to the April 20 Note amounted to $0. On December 31, 2020, convertible notes payable related to the April 20 Note amounted to ~~$187,293,~~$69,300, which consists of ~~$362,450~~$69,300 of default penalty balance due.

As discussed in Note 10, 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 payable in monthly payments of $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 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 this 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 and accordingly, as of September 30, 2021, the convertible note balance ~~and default interest due and~~ is ~~net of unamortized debt discount of $175,157.~~$0.

~~During the nine months ended September 30,~~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 $1,531,335. This default amount due of $1,531,335 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 nine months ended September 30, 2020, on the initial measurement date, the fair values of the embedded conversion option derivatives related to default principal due of $6,340,248 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 iswas tainted, and all convertible debentures and warrants ~~are~~were 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 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~~$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 Q1/Q2 2020 Notes and the warrants issued in February, March and April 2020, the Company determined that various terms of the Q1/Q2 2020 Notes and Q1/Q2 2020 Warrants, including the default provisions in the Q1/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 Q1/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. At the end of each period and on the date that the Q1/Q2 2020 Notes are converted into common shares, the Company revalues the embedded conversion option derivative liabilities. During the nine months ended September 30, 2020, on the initial measurement dates, the fair values of the embedded conversion option and warrant derivatives of $8,817,568 was recorded as derivative liabilities and was allocated as a debt discount up to the net proceeds of the Q1/Q2 2020 Notes of $1,287,473, with the remainder of $7,530,095 charged to current period operations as initial derivative expense.

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 April 20 Note are converted into common shares, the Company revalues the embedded conversion option derivative liabilities.

During the nine months ended September 30, ~~2020, on the initial measurement dates, the fair values of the embedded conversion option of $1,436,725 was recorded as derivative liability~~2021 and ~~was allocated as a debt discount up to the net proceeds of the April 20 Note of $415,000, with the remainder of $1,021,725 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 expense of $31,835,642 and $56,018,849 for the nine months ended September 30, 2020, ~~and 2019, respectively.~~

~~During the nine months ended September 30, 2020 and 2019,~~ 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:

SCHEDULE OF FAIR VALUE OF DERIVATIVE LIABILITIES ESTIMATED USING BLACK-SHOLES VALUATION MODEL

On September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, convertible promissory notes are as follows:

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 nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, amortization of debt discounts related to convertible notes amounted to ~~$4,058,842~~$83,548 and ~~$594,924,~~$4,058,842, respectively, which has been included in interest expense on the accompanying condensed consolidated statements of operations.

On January 15, 2021, in connection with the acquisition of DDTI, the Company ~~entered into several secured merchant loans~~issued a promissory note in the ~~aggregate~~ amount of ~~$2,283,540.~~ $400,000. 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 aggregateprincipal amount of ~~$1,274,150, which consisted~~$400,000 is payable in 4 installments of ~~$670,700 of principal transferred~~$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 was due and paid 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 September 30, 2021, the liability related 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 nine months ended September 30, 2020, the Company repaid an aggregate of $1,954,930 of these loans, which includes payments pursuant to settlement agreements as discussed below.note was $200,000.

	●	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 nine months ended September 30, 2020, the Company paid $233,434 of this settlement.

	●	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 $275,000 during the nine months ended September 30, 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.

In connection with these settlement agreements, the Company recorded a loss on debt extinguishment of $76,777 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 $596,390 and accrued interest payable of $9,190.

At September 30, 2020, there were no secured merchant loans due and outstanding. 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.

InOn March 24, 2021, 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~~”). In May 2020, the Company settled one of these notes with a balance of $18,102 for a payment of $15,000 and, accordingly, the Company recorded a gain on debt extinguishment of $3,102. At September 30, 2020 and December 31, 2019, notes payable related to Assumed Secured Merchant Loans and promissory notes amounted to $80,490 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 nine months ended September 30, 2020, the Company repaid $176,339 of this note. At September 30, 2020 and December 31, 2019, notes payable related to the new note amounted to $0 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 September 30, 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 nine months ended September 30, 2020, the Company repaid $249,704 of these notes. During the nine months ended September 30, 2020, $4,846 of accrued interest payable was reclassified to the principal balance. At September 30, 2020 and December 31, 2019, notes payable related to these notes amounted to $0 and $244,858, 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 nine months ended September 30, 2020, the Company repaid $149,228 of the Fall 2018 Promissory Notes. At September 30, 2020 and December 31, 2019, notes payable to this entity amounted to $0 and $149,228, respectively. The remaining Fall 2018 Promissory Notes were payable on demand. The Fall 2018 Promissory Notes were 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,Cougar Express, the Company issued ~~58,000 warrants to purchase 58,000 shares~~a promissory note in the amount of ~~the Company’s common stock at an exercise price~~$350,000. The principal amount 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 nine months ended September 30, 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, the Company repaid $320,500 of these funds, and a note with a principal balance of $195,000 was transferred into the April 20 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 bears no interest and$350,000 is payable in ~~monthly payments~~2 installments of ~~$7,500 commencing~~$175,000 plus accrued interest as follows: $175,000 plus accrued interest was due and paid on ~~July 1, 2020 until paid in full. At~~September 23, 2021 and $175,000 plus all remaining accrued interest is due on March 23, 2022. Interest accrues at 6% per annum. On September 30, ~~2020 and December 31, 2019, notes payable~~2021, the liability related to ~~these individuals amounted to $397,500 and $420,000, respectively.~~this note was $175,000.

In connection with the acquisition of Prime EFS, the Company assumed several equipment notes payable liabilities due to entities. At September 30, 2020 and December 31, 2019, equipment notes payable to these entities amounted to $46,849 and $57,001, 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. At September 30, 2020 and December 31, 2019, auto notes payable to these entities amounted to $159,533 and $181,911, respectively.

In November 2019, the Company entered into a promissory note for the purchase of five trucks in the amount of ~~$460,510.~~$460,510. The note is due in ~~sixty~~60 monthly installments of ~~$9,304.~~$9,304. The first payment was paid in December 2019 and the remaining fifty-nine payments are due monthly commencing on January 27, ~~2020.~~2020. The note is secured by the trucks and is personally guaranteed by the Company’s chief executive officer. ~~During the nine months ended~~On September 30, ~~2020, the Company repaid $58,135 of this note. At September 30,~~2021 and December 31, 2020, equipment note payable to this entity amounted to ~~$402,375.~~$325,102 and $375,422, respectively.

In connection with the acquisition of DDTI, the Company assumed several truck notes payable liabilities due to entities. On September 30, 2021, truck notes payable to these entities amounted to $79,526.

In connection with the acquisition of Cougar Express, the Company assumed several equipment notes payable liabilities due to entities. On September 30, 2021, equipment notes payable to these entities amounted to $6,257.

~~On April 2,~~During 2020, prior to the ~~Company’s subsidiary, Shypdirect,~~acquisition of Cougar Express by the Company, Cougar Express entered into a Paycheck Protection Program promissory note (the “~~Shypdirect~~Cougar 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 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~~$622,240 under the SBA Paycheck Protection Program of the CARES ~~Act. On April 15, 2020,~~Act. Pursuant to the ~~Prime EFS~~Cougar Stock Purchase Agreement, the Company did not assume and shall not be responsible to pay the Cougar PPP loan. 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 ~~approved~~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 ~~Prime EFS~~the Company recorded a note receivable of $622,240 which was due from the prior shareholder of Cougar Express if the Cougar PPP Loan is not forgiven. Cougar Express filed for forgiveness of this loan and on June 10, 2021, Cougar Express received a Notice of Paycheck Protection Program Forgiveness Payment from the ~~loan proceeds on April 22, 2020. Prime EFS plans to use~~SBA. Accordingly, the ~~proceeds for covered payroll costs, rent~~note payable and ~~utilities in accordance~~related note receivable were reversed and no gain or loss was recorded.

The Company’s subsidiary, Cougar Express, maintains a $5,000 line of credit with the ~~relevant terms and conditions~~bank. The line of ~~the CARES Act. The Prime EFS PPP Loan has a two-year term, matures on April 16, 2022, and~~credit 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~~(20.0% 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 exhausted such funds in the third quarter and file for forgiveness in the fourth quarter, although there is no guarantee that such forgiveness will be granted.

At September 30, ~~2020~~2021) and ~~December 31, 2019,~~is payable of demand. On September 30, 2021, principal amount outstanding under the line of credit amounted to $4,888.

For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, amortization of debt discounts related to notes payable amounted to ~~$605,763~~$0 and ~~$1,880,312,~~$605,763, 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 Convertible Preferred Stock became undesignated upon their return to the Company. In July 2020, the Company filed a Certificate of Withdrawal of the Series A designation.

In August 2019, the Company designated Series B Preferred Shares consisting of 1,700,000 shares with a par value of ~~$0.001~~$0.001 and a stated value of ~~$0.001.~~$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.

~~On July 24, 2020, the Company issued 1,000,000 shares of its common stock upon conversion of 1,000,000 shares of Series B Preferred shares.~~

~~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.

On June 5, 2020, the Company sold to John Mercadante, for $100, 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 on July 20, 2020, the Series C Preferred Stock was automatically cancelled. The Series C Preferred Stock was not entitled to vote on any other matter, was not entitled to dividends, was not convertible into any other security of the Company and was not entitled to any distributions upon liquidation of the Company.

~~In connection with Exchange Agreements (See Note 6), the~~The Board of Directors (the “Board”) created the Series D 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~~10,000,000 shares of preferred stock, ~~$0.001~~$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~~$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%~~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%~~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 ~~(See Note 6)~~ 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,~~$500,184, accrued interest payable of ~~$85,827,~~$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~~$239,678 which is associated with the fair market value of the excess shares issued upon conversion of ~~the principal balances and accrued interest converted at the conversion price.~~other settlement amounts.

During the period from July 1, 2020 to ~~September 30,~~December 31, 2020, the Company issued ~~398,350,000~~522,726,000 shares of its common stock in connection with the conversion of ~~398,350~~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 September 30, 2021 and December 31, 2020, 0 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 10,000,000 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 nine months ended September 30, 2021, the Company accrued dividends of $125,276 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.

During April 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) 32,126 shares of Series E and (ii) Warrants to 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 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 $332,500. The initial exercise price of the Warrants related to the April 2021 Series E Offering is $0.01 per share, subject to adjustment. Additionally, the Company issued 8,571,429 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, on April 9, 2021, the Company recorded a deemed dividend of $104,533 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 nine months ended September 30, 2021, the Company paid the placement agent cash of $385,500 and issued 91,542,858 warrants to the placement agent at an initial exercise price of $0.01 per share. The cash fee of $400,500 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.

During the three months ended June 30, 2021, the Company issued 571,296,287 shares of its common stock in connection with the conversion of 340,346 shares of Series E. The conversion ratio was based on the Series E certificate of designation, as amended.

During the three months ended September 30, 2021, the Company issued 25,725,519 shares of its common stock in connection with the conversion of 17,135 shares of Series E. The conversion ratio was based on the Series E certificate of designation, as amended.

Pursuant to the terms of the Securities Purchase Agreements entered in connection with the Series E Offering by and among the Company and the investors named therein (the “Series E Investors”), the Company is required to keep reserved for issuance to the Series E Investors three times the number of shares of common stock issuable to the Series E Investors upon conversion or exercise, as applicable, of convertible notes and warrants held by the Series E Investors (the “Series E Reserve Requirement”). If the Company fails to meet the Series E Reserve Requirement within 45 days after written notice from a Series E Investor, the Company must, inter alia, sell to Company’s chief executive officer (or such other officer as the board of directors may designate) 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.

On February 22, 2021, the Company sold to John Mercadante, for $10, one share of Series F 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 on April 15, 2021, the Series F Preferred Stock was automatically cancelled. The Series F Preferred Stock was not entitled to vote on any other matter, was not entitled to dividends, was not convertible into any other security of the Company and was not entitled to any distributions upon liquidation of the Company.

On ~~June 26, 2020,~~February 23, 2021, stockholders holding at least ~~51%~~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 may issue to ~~4,000,000,000~~10,000,000,000 shares, par value ~~$0.001~~$0.001 (the “~~Authorized Share Increase Amendment~~”“2021 Amendment”). The increase in the number of authorized shares was needed to meet the share reserve requirements under the Series E.

The Company filed a preliminary information statement on Schedule 14C regarding the stockholders’ consent to the 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 filed a definitive information statement on Schedule 14C on ~~June 30, 2020~~March 15, 2021 and first mailed that information statement to stockholders on ~~June 30, 2020. The Authorized Share Increase Amendment became effective on July 20, 2020.~~March 15, 2021.

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.

On May 1, 2019, the Company granted an aggregate of 30,000 shares of its common stock to consultants for business development and investor relations services rendered. The shares were valued at $265,500, or $8.85 per share, based on the quoted trading price on the date of grant. In connection with these shares, the Company recorded stock-based professional fees of $265,500.

On June 14, 2019, the Company granted 200,000 shares of its common stock to an employee of the Company for services rendered. The shares were valued at $2,200,000, or $11.00 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 $2,200,000.

On July 8, 2019, pursuant to a one-year consulting agreement, the Company agreed to issue 50,000 shares of its common stock to a consultant for investor relations services to be rendered. These shares were valued at $125,000, or $2.50 per common share, based on contemporaneous common share sales. 25,000 of these shares vested on January 8, 2020 and 25,000 shares was to vest on July 8, 2020. In connection with these shares, the Company shall record stock-based consulting fees over the vest period of one year. Total unrecognized professional fees related to these unvested common shares at September 30, 2019 amounted to $96,354. At September 30, 2019, the 50,000 shares were reflected as common stock issuable on the accompanying condensed consolidated balance sheet. In April 2020, pursuant to a settlement agreement, 25,000 shares that were non-vested were cancelled. During the nine months ended September 30, 2020 and 2019, aggregate accretion of stock-based professional fees on granted non-vested shares amounted to $36,458 and $28,646, respectively.

On April 9, 2019, the Company entered into an agreement with Bellridge that modified its existing obligations to Bellridge. In connection with this modification, principal balance of the Bellridge Note was reduced to $1,800,000, in exchange for the issuance to Bellridge of 800,000 shares of restricted common stock, which shall 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 will 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” shall be 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 this Agreement. These 800,000 shares issued and issuable were valued at $10,248,000, or $12.81 per share, based on the quoted trading price on the date of grant. In connection with these shares, the Company recorded a loss on debt extinguishment of $10,248,000. In August 2019, 100,000 of these shares were issued and 700,000 shares issuable were converted into 700,000 shares of Series B preferred shares.

On April 9, 2019, the Company entered into an agreement with Bellridge and the Placement Agent that cancelled certain warrants in exchange for an aggregate of 600,000 common shares of the Company (360,000 shares to Bellridge and 240,000 shares to Placement Agent). These shares were valued at $7,686,000, or $12.81 per share, based on the quoted trading price on the date of grant. In connection with these shares, the Company recorded a loss on debt extinguishment of $7,686,000.

During the ~~three~~six months ended ~~September~~June 30, ~~2019,~~2020, the Company issued ~~423,711~~417,863,999 shares of its common stock ~~and 423,711 warrants at an exercise price~~upon the partial conversion of ~~$2.50 per share in connection with~~a convertible note which had bifurcated embedded conversion option derivatives including the conversion of ~~notes payable~~principal and default interest balances due of $946,250 and accrued interest of $113,028. These shares were valued at $1,059,277, or $2.50 per common share, based on contemporaneous common share sales. 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.

In connection with a Note Conversion Agreement dated July 12, 2019, the Company issued 203,000 shares of its common stock at $2.50 per share for the conversion of a related party convertible note payable of $500,000 and$2,844,979, accrued interest payable due of ~~$7,500. In connection with~~$218,600, and fees of $8,180, at the contractual conversion ~~of this convertible note, the Company issued the entity 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.~~

In connection with a Note Conversion Agreement dated July 12, 2019, the Company issued 812,000 shares of its common stock at $2.50 per share for the conversion of related party convertible note payable of $2,000,000 and accrued interest payable of $30,000. In connection with the conversion of this convertible notes, the Company issued the entity 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.

In connection with the modification of the related convertible notes, the Company changed the conversion price of the notes to $2.50 per share and issued an aggregate if 1,015,000 warrants as discussed above.price. The Company accounted for the ~~full~~partial conversion of these ~~related party~~ 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 ~~$3,669,367 of~~$15,704,425 which ~~$1,164,220~~ is associated with the ~~change~~difference between the ~~debt’s original conversion terms and the induced conversion terms and is equal to the~~ fair market value of the ~~additional~~ shares issued upon conversion and the amount of ~~common stock transferred in~~principal balances converted at the ~~transaction, and $2,505,147 association with the valuation of the 1,015,000 warrants.~~conversion price.

During the ~~six~~three months ended ~~June~~September 30, 2020, the Company issued ~~417,863,999~~477,682,407 shares of its common stock in connection with the conversion of convertible notes payable and default interest of $4,215,651, accrued interest of $82,852, and fees of $900. The conversion price was based on contractual terms of the related debt. In connection with the issuance of these shares, the Company recorded a loss on debt extinguishment of $512,366 which is associated with the fair market value of the excess shares issued upon conversion of the principal balances converted at the conversion price.

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 June 30, 2021, the Company and each Q1/Q2 2020 Note investor entered into a letter agreement whereby the investor waived its right to any Mandatory Default Payment. Accordingly, during the three months ended June 30, 2021, the Company reversed the accrued Mandatory Penalty amount due of $664,400 and recorded a gain on debt extinguishment of $664,400. Additionally, during the three months ended June 30, 2021, the Company issued 28,358,841 shares of its common stock upon the ~~partial~~ conversion of ~~a convertible note which had bifurcated embedded conversion option derivatives including~~all remaining Q1/Q2 2020 Note principal and interest balances due aggregating $277,916.

During the three months ended June 30, 2021, the Company issued 15,923,322 shares of its common stock upon the conversion of all remaining April 20 Note principal and ~~default~~ interest balances due ~~of $2,844,979, accrued interest payable due of $218,600, and fees of $8,180, at the contractual conversion price.~~aggregating $95,540. 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 ~~$15,704,425~~$143,872 which is associated with the difference between the fair market value of the shares issued upon conversion and the ~~amount~~conversion price and is equal to the fair value of ~~principal balances converted at~~ the shares of common stock transferred upon conversion.

Shares issued in connection with conversion ~~price.~~of Series E preferred shares

During the three months ended ~~September~~June 30, ~~2020,~~2021, the Company issued ~~477,682,407~~571,296,287 shares of its common stock in connection with the conversion of ~~convertible notes payable and default interest~~340,346 shares of ~~$4,215,651, accrued interest of $82,852, and fees of $900.~~Series E. The conversion ~~price~~ratio was based on ~~contractual terms~~the Series E certificate of designation, as amended.

During the ~~related debt. In~~three months ended September 30, 2021, the Company issued 25,725,519 shares of its common stock in connection with the ~~issuance of these shares, the Company recorded a loss on debt extinguishment of $512,366 which is associated with the fair market value of the excess shares issued upon~~ conversion of 17,135 shares of Series E. The conversion ratio was based on the ~~principal balances converted at the conversion price.~~Series E certificate of designation, as amended.

During the ~~period from~~six months ended June ~~1, 2020 to June 29,~~30, 2020, the Company issued 70,203,889 shares of its common stock in connection with the cashless exercise of warrants. The exercise price was based on contractual terms of the related warrant.

During the ~~period from July 1, 2020 to August 10,~~three months ended September 30, 2020, the Company issued 85,710,419 shares of its common stock in connection with the cashless exercise of 83,662,448 warrants. The exercise price was based on contractual terms of the related warrant. In connection with the cashless exercise of warrants, the Company recorded a loss on debt extinguishment of $237,664 which is associated with the fair market value of the excess common shares issued upon the cashless exercise of warrants over the number of shares issuable using the warrant exercise price.

During the three months ended June 30, 2021, the Company issued 52,482,141 shares of its common stock in connection with the cashless exercise of 98,557,429 warrants. The exercise price was based on contractual terms of the related warrant.

In May and June 2021, the Company issued 68,571,429 shares of its common stock and received proceeds of $685,714 from the exercise of 68,571,429 warrants at $0.01 per share.

During the three months ended September 30, 2021, the Company issued 325,539,430 shares of its common stock and received proceeds of $3,254,955 from the exercise of 325,539,430 warrants at $0.01 per share.

On July 20, 2020, in connection with the parties’ recent settlement, the Company issued 10,281,018 shares to Bellridge to settle certain claims of Bellridge (see Note 911 under legal matters). These shares were valued at ~~$502,742,~~$502,742, or ~~$0.049~~$0.049 per share, based on the quoted trading price on the date of grant. In connection with these shares, the Company recorded a loss on debt extinguishment of ~~$502,742.~~$502,742.

On July 24, 2020, the Company issued 1,000,000 shares to its common stock upon the conversion of 1,000,000 shares of Series B preferred shares.

During the three months ended September 30, 2020, the Company issued 398,350,000 shares of its common stock in connection with the conversion of 398,350 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.

~~During~~In connection with certain down-round provisions on the ~~three months ended September 30, 2019,~~Series E warrants issued in October 2020, the Company ~~issued 585,000~~increased the number of warrants by 71,965,500.

In connection with the sale of Series E preferred shares, of its common stock and 585,000 five-year warrants to purchase common shares for an exercise price of $2.50 per common share to investors for cash proceeds of $1,462,500 or $2.50 per share, pursuant to unit subscription agreements.

~~Stock option activities for~~during the nine months ended September 30, ~~2020 are summarized as follows:~~

~~During the nine months ended September 30, 2020,~~2021, the Company issued ~~Q1/Q2 2020 Warrants~~warrants to purchase up to 827,200 shares of the Company’s common stock (See Note 6). The Q1/Q2 2020 Warrants are exercisable at any time on or after the date of 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/Q2 2020 Warrants become exercisable. Under the terms of the Q1/Q2 2020 Warrants, the investors are entitled to exercise the Q1/Q2 2020 Warrants to purchase up to 827,200457,714,289 shares of the Company’s common stock at an initial exercise price of $0.40, subject to adjustment as detailed in the respective Q1/Q2 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). In connection with the 453,200 warrants issued in February, March 2020 and April 2020, the Company determined that various terms of these Q1/Q2 2020 Notes and Q1/Q2 2020 Warrants, including the default provisions in the Q1/Q2 2020 Notes discussed in Note 6, caused derivative treatment of the warrants. During the nine months ended September 30, 2020, on the initial measurement dates, the fair value of the warrant derivatives of $456,858 was recorded as derivative liabilities and was allocated as a debt discount up to the net proceeds of the Q1/Q2 2020 Notes of $456,858. 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,~~$0.01 per share. Additionally, the Company issued ~~August 2019 Warrants~~91,542,858 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 entitle 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 stockplacement agent at an initial exercise price of ~~$3.50, subject to adjustment as detailed in~~$0.01 per share. (See Series E preferred shares above).

During the 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 shares issuable upon exercise of the warrants was increased by 395,176 to 1,383,116 and the exercise price was lowered to $2.50. On January 7, 2020,three months ended June 30, 2021, 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 number of shares issuable upon exercise of the warrants was increased to 8,644,474 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 shares issuable upon exercise of the 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. Subsequent to January 7, 2020, additional down-round protection was triggered. As of September 30, 2020, the exercise price of the August 2019 Warrants was lowered to $0.006 per share, and the number of shares issuable upon exercise of the warrants was increased.

In August 2019, in connection with the sale of common stock, the Company issued 585,000 five-year warrants to purchase common shares for an exercise price of $2.50 per common share to investors. These warrants include down-round provisions under which the warrant exercise price could be affected by future equity offerings undertaken by the Company. During the nine months ended September 30, 2020, down-round provisions were triggered. As of September 30, 2020, the exercise price of these warrants was lowered to $0.006 per share.

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 shares issuable upon exercise of warrants was increased to 66,667. 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 number of shares issuable upon exercise of the warrants was increased to 416,669 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 shares issuable upon exercise of the 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. Subsequent to January 7, 2020, additional down-round protection was triggered. As of September 30, 2020, the exercise price of the October 3 Warrant was lowered to $0.006 per share, and the number of shares issuable upon exercise of the October 3 Warrant was increased.

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 stock upon conversion of debt at price lower than $0.40. Accordingly, the exercise prices of the August 2019 Warrants and October 3 Warrant discussed above were lowered to $0.006 and the aggregate number of shares issuable upon exercise of the warrants was increased from 9,061,143 shares to 604,076,186 shares. Since these warrants were treated as derivative liabilities, no additional deemed dividend was recorded.

~~During the period from June 1, 2020 to June 29, 2020, the Company issued 70,203,889~~52,482,141 shares of its common stock in connection with the cashless exercise of ~~73,635,000~~98,557,429 warrants. The exercise price was based on contractual terms of the related ~~debt.~~warrant.

In May and June 2021, the Company issued 68,571,429 shares of its common stock and received proceeds of $685,714 from the exercise of 68,571,429 warrants at $0.01 per share.

During the six months ended September 30, 2021, the Company entered into Securities Purchase Agreements with certain of the holders of its existing Series E preferred warrants (“Exercising Warrants Holders”). Pursuant to the Securities Purchase Agreements, the Exercising Warrants Holders and the Company agreed that the Exercising Warrants Holders would cash exercise their existing warrants, into shares of common stock underlying such existing warrants Shares. In order to induce the Exercising Warrant Holders to cash exercise their existing Warrants, the Securities Purchase Agreements provided for the issuance of new warrants (“New Warrants”) with such New Warrants to be issued in an amount equal to 50% of the number of shares acquired by the Existing Warrant Holder through the exercise of existing warrants for cash. The New Warrants are exercisable upon issuance and terminate five years following the initial exercise date. The New Warrants have an exercise price per share of $0.01. During the six months ended September 30, 2021, of the 394,110,859 warrants exercised for cash, a total of 382,682,287 existing warrants were exercised for cash contemporaneously with the execution of the Securities Purchase Agreements resulting in total proceeds to the Company of $3,826,383. In connection with the exercise of these existing warrants for cash, the Company issued an aggregate of ~~28,100,000 five-year~~191,341,147 New Warrants. The New Warrants issued in connection with the Securities Purchase Agreements were considered inducement warrants ~~to purchase 28,100,000 shares of the Company’s common stock at an exercise price of $0.06 per share, subject to adjustment as defined~~and are classified in ~~the respective warrant to two consultants for services rendered. On June 16, 2020, the Company calculated the~~equity. The fair value of ~~these warrants of $1,963,291 which~~the New Warrants issued was ~~calculated using the Binomial valuation model with the following assumptions: expected dividend rate, 0%; expected term of 5 years; volatility of 298.8%~~$4,193,134 and risk-free interest rate of 0.33%. During the nine months ended September 30, 2020, the Company recorded stock-based professional fees of $1,963,291 related to these warrants which has been included in professional feeswere expensed as warrant exercise inducement expense on the accompanying condensed consolidated statement of operations.

On July 20, 2020 and July 22, 2020, the Company entered Exchange Agreements (see Note 6) 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 (See above). 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 $85,828, and Warrants to purchase 423,159,293 shares of Common Stock for 522,726 shares of Series D. In connection with the issuance of these 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 the principal balances and accrued interest converted at the conversion price.

Warrant activities for the nine months ended September 30, ~~2020~~2021 are summarized as follows:

Stock option activities for the nine months ended September 30, 2021 are summarized as follows:

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, 2019 3,649,861 $ 2.410 4.66 $ 311,070
Granted 28,927,200 0.070
Increase in warrants related to price protection 602,626,403 0.006
Cashless exercise of warrants for Series D preferred (423,159,293 ) 0.006
Exercised (157,297,448 ) 0.006
Balance Outstanding September 30, 2020 54,746,723 $ 0.018 4.33 $ 154,908
Exercisable, September 30, 2020 54,746,723 $ 0.018 4.33 $ 154,908

On August 19, 2021 the Company’s subsidiaries, Prime EFS and Shypdirect executed Deed of Assignments for the Benefit of Creditors in the State of New Jersey pursuant to N.J.S.A. §2A:19-1, et seq. (the “ABC Statute”), assigning all of the Prime EFS and Shypdirect assets to Terri Jane Freedman as Assignee for the Benefit of Creditors (the “Assignee”) and filing for dissolution. An “Assignment for the Benefit of Creditors,” “general assignment” or “ABC” in New Jersey is a state-law, voluntary, judicially-supervised corporate liquidation and unwinding similar to the Chapter 7 bankruptcy process found in the United States Bankruptcy Code. In an ABC, the debtor companies. Prime EFS and Shypdirect, together referred to as the “assignors” executed Deeds of Assignment, assigning all of their assets to an Assignee chosen by the Company, who acts as a fiduciary similar to a Chapter 7 trustee in bankruptcy. Due to the termination of their respective agreements with Amazon, Prime EFS and Shypdirect are insolvent and are unable to pay their debts when they become due. Accordingly, the Company deemed it to be desirable and in the best interest of Prime EFS and Shypdirect and its creditors to make an assignment of all of Prime EFS and Shypdirect’s assets for the benefit of the Prime EFS and Shypdirect’s creditors in accordance with the ABC Statute.

On September 7, 2021, the ABC’s were filed with the Bergen County Clerk in Bergen County, New Jersey and filed with the Surrogate Court in the appropriate county, initiating a judicial proceeding. The Assignee has been charged with liquidating the assets for the benefit of the Prime EFS and Shypdirect creditors pursuant to the provisions of the ABC Statute. The Company’s results of operations for the three and nine months ended September 30, 2021 and 2020 include the results of Prime EFS and Shypdirect prior to the September 7, 2021 filing of the executed Deeds of Assignment for the Benefit of Creditors with the State of New Jersey. As a result of Prime EFS and Shypdirect’s filing of the executed Deeds of Assignment for the Benefit of Creditors on September 7, 2021, the Company ceded authority for managing the businesses to the Assignee, and the Company’s management cannot carry on Prime EFS or Shypdirect’s activities in the ordinary course of business. Additionally, Prime EFS and Shypdirect no longer conduct any business and is not permitted by the Assignee and ABC Statute to conduct any business. For these reasons, the Company concluded that it had lost control of Prime EFS and Shypdirect, and no longer had significant influence over these subsidiaries during the ABC proceedings. Further, on October 13, 2021, Prime EFS and Shypdirect filed for dissolution with the Secretary of State of New Jersey. Therefore, the Company deconsolidated Prime EFS and Shypdirect effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021.

In order to deconsolidate Prime EFS and Shypdirect, the carrying values of the assets and liabilities of Prime EFS and Shypdirect were removed from the Company’s unaudited condensed consolidated balance sheet as of September 7, 2021. In connection with the deconsolidation, the Company recognized a gain on deconsolidation of subsidiaries of $12,427,220 which is included in “Gain on deconsolidation of subsidiaries within other income (expenses) during the three and nine months ended September 30, 2021 and consisted of the following:

As of December 31, 2020, the assets and liabilities of Prime EFS and Shypdirect subject to assignment for the benefit of creditors have been reflected as “Assets subject to assignment for benefit of creditors” and “Liabilities subject to assignment for benefit of creditors” on the accompanying condensed consolidated balance sheets and consisted of the following:

On December 31, 2020, notes payable subject to assignment for benefit of creditors consisted of the following:

On December 31, 2020, notes payable related to a promissory note amounted to $80,490 and is due on demand and is included in liabilities subject to assignment for benefit of creditors on the Company’s unaudited condensed consolidated balance sheet. Effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021, this liability of $80,490 was deconsolidated and removed from the Company’s unaudited condensed consolidated balance sheet.

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. On December 31, 2020, Prime EFS remaining notes payable to an entity amounted to $40,000 and is included in liabilities subject to assignment for benefit of creditors on the Company’s unaudited condensed consolidated balance sheet. Effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021, this liability of $40,000 was deconsolidated and removed from the Company’s unaudited condensed consolidated balance sheet.

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. 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 439,623five 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 year ended 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, the Company repaid $320,500 of these 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 bore 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 December 31, 2020, Prime EFS notes payable related to one remaining individual amounted to $220,000 and is included in liabilities subject to assignment for benefit of creditors on the Company’s unaudited condensed consolidated balance sheet. Effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021, this liability of $220,000 was deconsolidated and removed from the Company’s unaudited condensed consolidated balance sheet.

In connection with the acquisition of Prime EFS, the Company assumed several equipment notes payable liabilities due to entities. On and December 31, 2020, Prime EFS equipment notes payable to these entities amounted to $43,364 and is included in liabilities subject to assignment for benefit of creditors on the Company’s unaudited condensed consolidated balance sheet. Effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021, the remaining liability of $36,233 was deconsolidated and removed from the Company’s unaudited condensed consolidated balance sheet.

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. On December 31, 2020, Prime EFS auto notes payable to these entities amounted to $151,710 and is included in liabilities subject to assignment for benefit of creditors on the Company’s unaudited condensed consolidated balance sheet. Effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021, the remaining liability of $85,175 was deconsolidated and removed from the Company’s unaudited condensed consolidated balance sheet.

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 December 31, 2020, Shypdirect PPP Loan amounted to $504,940 and is included in liabilities subject to assignment for benefit of creditors on the Company’s unaudited condensed consolidated balance sheet. Effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021, this liability of $504,940 was deconsolidated and removed from the Company’s unaudited condensed consolidated balance sheet.

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. On December 31, 2020, Prime EFS PPP Loan amounted to $2,941,212 and is included in liabilities subject to assignment for benefit of creditors on the Company’s unaudited condensed consolidated balance sheet. Effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021, this liability of $2,941,212 was deconsolidated and removed from the Company’s unaudited condensed consolidated balance sheet.

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. The Company exhausted such funds in the third quarter of 2020. In the fourth quarter of 2020, Shypdirect applied for full forgiveness of the 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.

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

Disputes Between Prime EFS, ELRAC LLC, and Enterprise Leasing Company of Philadelphia, LLC

On or about January 10, 2020, Prime EFS was named as sole defendant in a civil action captioned 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 Action”). The complaint in the 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 LLC (“ELRAC”) to conduct its business. The complaint sought damages of not less than ~~$382,000~~$382,000 plus ~~$58,000~~$58,000 in insurance claims that ELRAC believes were collected by the Company and not reimbursed to 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 Action were subject to mandatory arbitration clauses found in the individual lease agreements. On March 19, 2020, ELRAC filed a stipulation dismissing the 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 and its affiliate, Enterprise Leasing Company of Philadelphia, LLC (“Enterprise PA” and, with ELRAC, “Enterprise”), Prime EFS ~~transferred $387,392~~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 “Arbitration”) against Enterprise at the American Arbitration Association seeking the return of not less than ~~$327,000~~$327,000 of these deposits.

On October 9, 2020, Enterprise filed its Answer and Counterclaims in the Arbitration. In its Answer, Enterprise denies liability to Prime for ~~$327,000~~$327,000 or any other sum. In its Counterclaims, ELRAC seeks ~~$382,000~~$382,000 in damages and Enterprise PA seeks ~~$256,000~~$256,000 in damages. Enterprise also seeks ~~$62,000~~$62,000 in insurance payments allegedly made by Utica to Prime EFS.

Prime EFS believes the Enterprise Answer and Counterclaims lack merit and intends to defend its position in the Arbitration vigorously. Nevertheless, ~~given~~while it believes it has meritorious defenses to this action, out of an abundance of caution and without prejudice to its position in the ~~amount~~matter, as of December 31, 2021, Prime EFS accrued a contingency liability of $440,000 for purposes of this matter. Based on our knowledge of the ~~Counterclaim and the documentation which Enterprise has submitted in the arbitration in support thereof,~~matter, as developed to date, the Company ~~continues~~continue to ~~reflect a~~agree with this estimate of probable Prime EFS liability. Since the Company deconsolidated Prime EFS effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021, as of September 30, 2021, this liability of ~~$440,000, i.e., the amount originally claimed as damages by ELRAC in the ELRAC Federal Action, as a contingency liability~~$440,000 is no longer reflected on the Company’s condensed consolidated balance sheet.

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

~~As previously reported,~~After discontinuing a prior action in ~~a settlement agreement entered into as of March 6, 2020, the Company’s wholly-owned subsidiary Prime EFS agreed to pay BMF~~federal court, on April 23, 2021, Bellridge Capital, L.P. (“~~BMF~~Bellridge”) ~~$275,000 on or by March 11, 2020,~~ ~~inter alia~~ ~~to discharge~~filed a ~~convertible note, to cancel certain warrants on 40,300 shares of~~civil action in New York Supreme Court, New York County, against TLSS ~~common stock,~~ and ~~to settle certain claims made by BMF Capital under certain merchant cash advance agreements (MCAs). Prime EFS did not pay a portion of~~John Mercadante. This mater, the agreed $275,000 settlement amount by March 11, 2020 but the Company has subsequently paid the $275,000 in full. As more than eight months have now passed, and BMF has not again contacted Prime EFS concerning this matter, Prime EFS believes this matter to now be closed.“Bellridge Action,” was assigned civil action number 652728/2021.

~~By letter dated April 28, 2020, a prior investor~~The complaint in the ~~Company,~~ Bellridge ~~Capital, L.P. (“~~Action asserts 11 causes of action: (1) against TLSI, allegedly for breach of a convertible promissory note issued June 18, 2018 (the “~~Bellridge~~June 2018 Note”), ~~claimed that the Company was in~~which claim seeks $539,114.06 for allegedly unpaid principal plus interest, costs and expenses; (2) against TLSI, also allegedly for breach of ~~its obligations under an August 29, 2019 letter agreement~~June 2018 Note, which claim seeks $343,000 plus interest, costs and expenses for TLSI’s alleged failure to ~~issue~~honor certain conversion notices in timely fashion; (3) against TLSI, allegedly for breach of 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 the April 28, 2020 letter, Bellridge contended that TLSS owed Bellridge $1,978,557.76 as of that date. In a purported standstill agreement subsequently proposed by Bellridge, Bellridge claimed that TLSS owed it $2,271,099.83, a figure which allegedly includes default rate interest. Bellridge also claimed that a subordination agreement it signed with the Company on August 30, 2019, was void ~~ab initio.~~ Bellridge also demanded the conversion of approximately $20,000 in indebtedness into the common stock of the Company, a conversion which the Company had not effectuated at the time because the parties had not come to agreement on a conversion price. Such agreement was required for Bellridge to exercise its conversion rights under an agreementnote dated ~~April 9, 2019 between Bellridge and the Company.~~

On September 11, 2020, Bellridge filed a civil action against the Company, John Mercadante and Douglas Cerny in the United States District Court for the Southern District of New York, captioned Bellridge Capital, L.P. v. Transportation and Logistics Systems, Inc., John Mercadante and Douglas Cerny. The case was assigned Case No. 20-cv-7485. The complaint alleges two separate claims (the first and second claims for relief) for purported violations of section 10(b) of the Securities and Exchange Act of 1934, as amendedDecember 26, 2018 (the “~~Exchange Act~~December 2018 Note”), which claim seeks $196,699 plus interest, costs and ~~SEC Rule 10b-5 promulgated thereunder,~~expenses for amounts allegedly unpaid under the note; (4) against the Company, Mr. Mercadante and/or Mr. Cerny; a claim (the third claim for relief) purportedly for control person liability under section 20(a) of the Exchange Act against Messrs. Mercadante and Cerny; a claim (the fourth claim for relief) purportedly for fraudulent inducement against the Company; a claim (the fifth claim for relief) against the CompanyTLSI, purportedly for breach of an exchange agreement between Bellridge ~~Capital, L.P. (“~~~~Bellridge~~”) and ~~the Company allegedly~~TLSI dated April 13, 2019 (the “~~Purported~~ 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 ~~(the sixth claim~~seeks a declaration that Bellridge is discharged from its obligations under the subordination agreement; (10) against TLSI, allegedly for relief) against the Company purportedly for specific performance of the Purported Exchange Agreement; a claim against the Company (the seventh claim for relief) for purported non-payment of a promissory note dated December 26, 2018 pursuantfailing to ~~which the Company borrowed $300,000 and committed to pay Bellridge $330,000 on or by March 15, 2019 plus 10% interest per annum (the “~~~~December 2018 Note~~~~”); a claim (the eighth claim for relief) purportedly for a declaratory judgment that the Company allegedly failed to comply with~~honor a condition precedent to the ~~effectiveness of a~~ subordination agreement, ~~(the “~~~~Subordination Agreement~~~~”) executed and delivered in connection with the Purported Exchange Agreement; and a~~which claim ~~(the ninth claim for relief) for breach of an assignment agreement, executed on or about July 20, 2018 (the “~~~~Partial Assignment Agreement~~~~”) in connection with a purchase of 50,000 shares of Company convertible preferred stock, by Bellridge, from a third party.~~

The damages sought under the first, second and third claims for relief are not specified in the complaint. The fourth claim for relief seeks $128,394 in damages exclusive of interest and costs. The fifth claim for relief seeks $582,847 in damages exclusive of interest and costs. The sixth claim for relief demands that the Company honor allegedly outstanding stock conversions served by Bellridge at a price of $0.00545 per share. The seventh claim for relief seeks $267,970 in damages exclusive of interest and costs. The eighth claim for relief seeks a declaration that Bellridge is discharged from any obligations under the ~~Subordination~~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 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.

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 15, 2019, after which the principal amount increases “by 30%” and default interest is due under 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 be treated as interest for purposes of the 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 2018 Note, is void 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. The ninth~~void under N.Y. Penal Law § 190.40 and cannot be enforced in this action.

On June 4, 2021, TLSI and Mercadante moved to dismiss this action for failure to state a claim ~~for relief seeks~~and, as to Mercadante, lack of jurisdiction (the “MTD”). On July 7, 2021, Bellridge filed opposition papers and on July 21, 2021, the ~~difference between the conversion price of the shares at time of the originally requested conversion and the price~~defendants filed reply papers on the ~~actual date of conversion, plus liquidated~~MTD. The motion is scheduled to be argued to the assigned judge on October 20, 2021. In its reply papers, TLSI asserted, inter alia, that Bellridge has no damages ~~of $57,960.~~

~~Briefly,~~because giving effect to its conversions and cash payments by TLSI on the ~~complaint in this action alleges, among other things, that the Company failed to make payments required under two promissory notes, namely the~~June and December 2018 Note, Bellridge had no out-of-pocket losses and ~~a convertible promissory note~~made around $500,000 on an investment of $1.92 million.

In August 2021, Bellridge issued ~~June 18, 2018 as amended by~~discovery requests to the ~~Purported Exchange Agreement (the “~~~~June 2018 Note~~~~”). The complaint also alleges that~~defendants. In September 2021, the ~~Company and its senior officer gave false assurances about a potential PIPE transaction in order to induce Bellridge to execute and deliver~~Court stayed all discovery pending the Purported Exchange Agreement and the Subordination Agreement. The complaint also alleges that the Company failed to honor certain conversion notices issued by Bellridge and/or failed to negotiate an exercise price in good faith, allegedly as required by the Partial Assignment Agreement and/or the Purported Exchange Agreement. The forgoing discussion does no more than summarize certaindetermination of the ~~major allegations of a complaint running 25 pages. Readers wishing additional information should review~~Defendants’ MTD. On October 20, 2021, the ~~complaint and/or discuss same with management. The Company believes it has substantial defenses to some or~~Court decided the MTD, dismissing all claims in the ~~complaint,~~case against both Defendants predicated on fraud and negligent misrepresentation. The Court thereby dismissed the Complaint insofar as alleged against Mr. Mercadante. On October 29, 2021, the Company filed its Answer in this case. The Company intends to defend this case vigorously.

The Defendants believe they have good defenses to all claims alleged in the matter, including without limitation the defense ~~usury. Both~~of usury as outlined above. Based on the ~~Company and Mr. Mercadante intend to defend~~early stage of this ~~case vigorously.~~

Itmatter, however, 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 ~~May 26, 2020,~~January 14, 2021, a civil action was filed against the Company 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.~~Inc. The case was 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.~~$42,000. The complaint alleges claims for breach of contract, quantum meruit, unjust enrichment and account stated.

On ~~July 22, 2020,~~February 9, 2021, the Company filed its answer, defenses and counterclaims into this action. Among other things, the Company avers ~~in its answer~~ that SCS’s claims are barred by its unclean hands and ~~other inequitable conduct, including breach~~breaches of its duties ~~(i)~~under the consulting agreement. SCS filed a motion to ~~maintain the confidentiality of information provided to SCS on a confidential basis~~strike TLSI’s defenses and ~~(ii) to work only in furtherance of the Company’s interests, not in furtherance of SCS’s own,~~counterclaims and ~~conflicting, interests.~~ TLSI has opposed that application. Those motions remain sub judice.

The Company ~~also avers that~~believes it has substantial defenses to all claims alleged in SCS’s ~~alleged damages must be reduced by the compensation and other benefits received by Lawrence Sands, founder of SCS, as a W-2 employee of the Company.~~complaint. The Company ~~also avers that~~therefore intends to defend this case vigorously.

Based on the ~~New York Supreme Court lacks subject~~early stage of this matter, ~~jurisdiction of the action because SCS concedes~~ it is not possible to evaluate the likelihood of a ~~Florida LLC based in Florida and that~~favorable or unfavorable outcome, nor is it possible to estimate the ~~Company is a Nevada corporation based in Florida.~~

~~On July 31, 2020, SCS moved for summary judgment in this action. On August 18, 2020, the Company moved to dismiss this action for lack~~amount or range of subject matter jurisdiction. In its motion, among other things, the Company asserted that the New York court lacks subject matter jurisdiction because neither party was formed under New York law; neither party maintains an officeany potential loss in the State of New York; the consulting agreement between the parties dated September 5, 2019 was not performed in the State of New York; and, it was anticipated, at the time of contracting, that the bulk of SCS’s consulting services thereunder would be rendered in Florida, not New York.

On November 4, 2020, Supreme Court, New York County, heard argument on the Company’s motion to dismiss, granted the motion, and denied SCS’s motion summary judgment as moot (the “Decision”). SCS has a right to seek reconsideration and/or to take and perfect an appeal from the Decision within time periods prescribed by New York Civil Practice Law and Rules and related court rules.

~~As previously disclosed, on~~On June 25, 2020, the Company was served with a putative shareholder derivative action filed in the Circuit Court of the 15^th Judicial 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 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.

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 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, which coverage is subject to a ~~$250,000~~$250,000 self-insured ~~retention or “deductible.”~~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.

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

In the interim, SCS has propounded certain discovery requests to Mr. Giordano concerning his personal jurisdiction and de facto officer defenses to which Mr. Giordano responded in timely fashion, to the extent required by Florida court rules.

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 ~~then~~them in the New Jersey federal action. ~~The briefing and hearing of defendants’ motion have been adjourned owing to plaintiff Frank Mazzola’s decision to replace his lawyer~~

On December 7, 2020, Mr. Mazzola filed an amended complaint in this ~~action.~~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 ~~complaint lacks merit and intend to mount a vigorous defense~~alleged executive employment agreement.

~~It is~~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 ~~possible~~less than $925,492 in W-2 compensation paid to ~~evaluate the likelihood of a favorable or unfavorable outcome, nor is it possible to estimate~~Mr. Mazzola; damages in the amount ~~or range~~ of ~~any potential loss~~$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).

In a Decision and Order dated September 24, 2021, the Court decided that this action should be transferred back to New York given the venue selection clause in the ~~matter.~~employment agreement between Mr. Mazzola and Prime. The Court therefore denied the Defendants’ motions to dismiss as moot. The Defendants thereafter filed a motion for reconsideration.

On November 2, 2021, without any payment of money by any party to any other party, all claims and counterclaims in this action were dismissed with prejudice (meaning permanently) and all parties exchanged general releases.

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~~TLSI and ~~Douglas Cerny.~~Prime EFS. The case was assigned docket number 1:20-cv-7582 and assigned to USDJ Gregory H. Woods. In this action, Ms. Mazzola ~~claims~~originally claimed that ~~the Company~~TLSI entered into and breached an unspecified contract by failing to pay her ~~$94,000.~~$94,000. In addition, the complaint ~~claims~~claimed that, although he was not a party to the unspecified contract, Mr. Cerny falsely represented that ~~the Company~~TLSI intended to “repay” Ms. Mazzola ~~$94,000~~$94,000 plus interest. The complaint ~~seeks $94,000~~sought $94,000 from each defendant, plus late fees, costs, prejudgment interest and attorneys’ fees and, from Mr. Cerny punitive damages in an unspecified amount.

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 ~~also~~ alleges ~~claims for account stated and~~three claims: breach of ~~implied warranty of good faith~~contract against Prime EFS, alter ego liability against TLSI, and ~~fair dealing, allegedly premised~~unjust enrichment against both TLSI 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 ~~same indebtedness.~~court entered an order in the case requiring all fact discovery to be concluded by September 9, 2021.

On October ~~26, 2020, in lieu of filing an answer, all~~13, 2021, the Court denied the Defendants’ motion to dismiss. Also on October 13, 2021, the defendants ~~by counsel, submitted timely~~filed a letter motion (~~the “Oct. 26 Letter Motion”~~~~) for~~seeking leave to file a motion to dismiss the complaint, which filing pointed out numerous alleged deficiencies with the complaint. Among other things, in the Oct. 26 Letter Motion, defendants pointed out (a) that Mr. Cerny is not a proper defendant and that, in event, the Court lacks personal jurisdiction over him; (b) that the only conceivable contract on which the complaint could be based is the Amended and Restated Stock Purchase Agreement, dated September 30, 2018, pursuant to which Mrs. Mazzola and others sold their membership interests in Prime EFS to the Company; (c) that pursuant to that contract, “[i]n lieu of the receipt of cash by Rosemary Mazzola at Closing, Rosemary Mazzola has agreed to loan such cash amount [$489,174] to the Company” — defined to be Prime EFS, not the Company; and (d) therefore, that the only entity with an obligation to pay any amounts allegedly due to Mrs. Mazzola under the 2018 agreement is Prime EFS, not the Company.

In addition, in the Oct. 26 Letter Motion, defendants assert that, at least at this juncture, a claim against Prime EFS under the 2018 agreement would be improper. As noted above, in the 2018 agreement, it is merely agreed that, “[i]n lieu of the receipt of cash by Rosemary Mazzola at Closing, Rosemary Mazzola has agreed to loan such cash amount to the Company [Prime] to be used for working capital.” No terms and conditions of the loan were specified. Hence, defendants assert, a suit against Prime EFS on the loan today would be at least premature.

~~By order entered November 5, 2020, the Court gave new counsel for Mrs. Mazzola, the 80-year-old mother of~~add Frank Mazzola ~~until~~as a third-party defendant in this action. On October 27, 2021, the defendants filed their Answer and Counterclaims against Mrs. Mazzola.

On November ~~23, 2020,~~2, 2021, without any payment of money by any party to ~~file an amended complaint~~any other party, all claims and counterclaims in this action were dismissed with prejudice (meaning permanently) and ~~if warranted by the amended complaint, gave defendants until~~all parties exchanged general releases.

As of December 7,31, 2020, out of an abundance of caution and without prejudice to ~~file a renewed letter motion to dismiss this lawsuit.~~

~~Both defendants believe the complaint~~its position in this matter, ~~lacks merit and intend~~a $94,000 liability was included in liabilities subject to ~~mount a vigorous defense to~~assignment for the ~~action.~~

Asbenefit of creditors on the Company’s condensed consolidated balance sheet as of such date. Since the Company deconsolidated Prime EFS effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021, as of September 30, ~~2020,~~2021, this ~~$94,000~~ liability is ~~included in due to related parties~~no longer reflected on the ~~accompanying~~Company’s condensed consolidated balance sheet.

Jose R. Mercedes-Mejia v. Shypdirect LLC, Prime EFS, ~~v. Amazon Logistics, Inc~~et al..

~~As previously reported, on June 19,~~On August 4, 2020, ~~Amazon notified~~an action was filed against Shypdirect, Prime EFS ~~that Amazon does not intend to renew~~and others in the ~~In-Force Agreement when it expires. In the~~Superior Court of New Jersey for Bergen County captioned Jose R. Mercedes-Mejia v. Shypdirect LLC, Prime EFS ~~Termination Notice, Amazon stated that~~LLC et al. The case was assigned docket number BER-L-004534-20. In this action, the ~~In-Force Agreement expires on September 30, 2020.~~plaintiff seeks reimbursement of his medical expenses and damages for personal injuries following an accident with a box truck leased by Prime EFS ~~believed on advice of counsel that Amazon’s position misconstrued the expiration date under the In-Force Agreement.~~and being driven by a Prime EFS ~~therefore filed an arbitration~~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 ~~American Arbitration Association (the “~~~~AAA~~~~”) seeking temporary, preliminary, and permanent injunctive relief prohibiting Amazon from terminating~~time of the ~~In-Force Agreement prior to March 31, 2021 (the “~~~~Amazon Arbitration~~~~”).~~accident.

On May 21, 2021, Prime EFS and Shypdirect also filed in action in the Supreme Court, State of New York, Suffolk County, seeking defense and indemnity for the Mercedes-Mejia action from the insurance brokerage, Acrisure LLC, which sold the County Hall insurance policy to Prime.

On August 19, 2021, the Plaintiff filed a motion for leave to file a first amended complaint to name four (4) additional parties as defendants – TLSI, ShypCX, Inc., ShypFX, Inc. and Cougar Express, Inc. On September ~~30,~~16, 2021, each of these entities filed papers in opposition to this motion.

On September 24, 2021, the Court granted Plaintiff’s motion for leave to amend the complaint herein, thus adding TLSI, ShypCX, Inc., ShypFX, Inc. and Cougar Express, Inc. as Defendants.

All of the recently named Defendants in this action intend to vigorously defend themselves in this action and to pursue the third-party actions for defense and indemnity against both County Hall and Acrisure. However, owing to the early stage of this action, 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.

~~In a ruling issued July 30, 2020,~~ in the ~~arbitrator appointed~~Superior Court of New Jersey for Bergen County by the ~~AAA on an emergency basis affirmed the validity of Amazon’s construction of the In-Force Agreement~~plaintiff alleging injuries from a May 12, 2019 collision with a van leased by Prime EFS and ~~notice terminating that agreement effective September 30, 2020.~~operated by Prime EFS employees. The ~~Company concluded, on advice of counsel, that no court would suspend, vacate or modify the July 30, 2020, ruling.~~

Also as previously disclosed, on July 17, 2020, Amazon notified Shypdirect by the Shypdirect Termination Notice that Amazon had elected to terminate the Program Agreement between Amazon and Shypdirect effective as of November 14, 2020.

~~Amazon did not state~~plaintiff has also filed a ~~reason for the Shypdirect Termination Notice. Under the Program Agreement, Amazon can terminate the agreement~~workers’ compensation claim. Prime EFS’s insurer has been defending this matter without ~~a reason and solely for convenience on 120 days’ notice.~~

~~In a “Separation Agreement” dated August 23, 2020, by and among Amazon,~~charging Prime EFS, and the Company ~~Prime EFS and the Company agreed, for nominal consideration, that the Delivery Service Partner Program Agreement between Amazon~~ and Prime EFS ~~would terminate effective September 30, 2020;~~expect that the insurer will ultimately indemnify 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~~for 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.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 ~~$2,038,556.06~~$2,038,556 (the “Outstanding Balance”) owed by Prime EFS to the Creditors.

Pursuant to the Payment Plan, Prime EFS was obligated to pay ~~$75,000.00~~$75,000 to the Creditors on or before June 5, 2020 and ~~$75,000.00~~$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 ~~$15,000.00~~$15,000 to the Creditors each Friday for 125 weeks ending with a final payment of ~~$13,556.06~~$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%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~~$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,~~$1,678,556.06, which is accrued and included in insurance payable on the accompanying ~~condensed~~ consolidated balance aton September 30, 2021 and 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%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.

Since the Company deconsolidated Prime EFS effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021, as of September 30, ~~2020~~2021, this liability is no longer reflected on the Company’s condensed consolidated balance sheet.

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,~~$165,000, and under a second promissory note issued April 24, 2019 in the principal amount of ~~$55,000.~~

$55,000.

In the demand, the attorneys for Mr. Nicholson allege the total balance owed, including interest, is ~~$332,702.84~~$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~~TLSI is jointly and severally liable with Prime EFS for this balance.

In the demand, the attorneys for Mr. Nicholson also contend that the great bulk ($276,169) of the alleged balance due arises under the “10% Senior Secured Demand Promissory Note” issued February 13, 2019. However, this promissory note is, by its express terms, governed by New York law, and, in the opinion of Prime EFS’s counsel, such note is usurious on the face of it and unenforceable.

~~Further, in the opinion of counsel, formed after reasonable inquiry, neither promissory note is enforceable against any person or entity other than Prime EFS.~~ If, as threatened, Mr. Nicholson files suit for non-payment under either or both promissory notes, it is anticipated that the ~~defendant(s)~~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.

~~Jose R. Mercedes-Mejia v. Shypdirect LLC,~~As of June 30, 2021, Prime EFS ~~LLC et al.~~

~~On August 4, 2020,~~recorded notes payable of $220,000 and accrued interest payable of $66,297. Since the Company deconsolidated Prime EFS effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021, as of September 30, 2021, this liability is no longer reflects on the Company’s condensed consolidated balance sheet. If Mr. Nicholson files suit against TLSI on one or both promissory notes, TLSI would defend itself vigorously in such an action, ~~was filed against Shypdirect,~~as these debts are solely Prime EFS liabilities and ~~others in the Superior Court~~any finding 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, the Company~~TLSI is neither probable nor reasonably estimable. Thus, we cannot evaluate the likelihood of an adverse outcome or estimate ~~its~~our liability, if any, in connection with this claim.

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. Since the Company deconsolidated Shypdirect effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021, as of September 30, 2021, this liability of $2,871,272 is no longer reflected on the Company’s condensed consolidated balance sheet.

~~Valesky v. Prime EFS and Frank Mazzola~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Plaintiff, an ex-dispatcher for Prime EFS, brought an action in the United States District Court for the District of New Jersey under the Family and Medical Leave Act of 1933 and the New Jersey Law Against Discrimination seeking unspecified compensatory and punitive damages. Plaintiff alleges she was fired while still in a neck brace. Prime EFS’ insurer has acknowledged its duty to defend this matter and the Company and Prime EFS expect that the insurer will ultimately indemnify Prime EFS for any damages paid.

An action 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’ insurer has acknowledged its duty to defend this matter and the Company and Prime EFS expect that the insurer will ultimately indemnify Prime EFS for any damages paid.

Other than discussed above, as of September 30, ~~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.

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, 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 (“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~~$300,000 annually, payable in installments of ~~$12,500~~$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~~$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”) 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 Mr. Giordano’s actions constituted gross negligence; criminal, fraudulent or reckless misconduct; or with respect to any criminal actions of Mr. Giordano that the Company had reasonable cause to believe ~~his actions~~ 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 December 31, 2020, contingency liability related to the Ryder termination amounted to $2,871,272 and is included in liabilities subject to assignment for benefit of creditors on the accompanying condensed consolidated balance sheet. Effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021, this liability of $2,871,272 was deconsolidated and removed from the Company’s unaudited condensed consolidated balance sheet.

On June 15, 2021, the Company entered into a Securities Purchase and Sale Agreement (the “SPSA”) with Anthony Berritto (“Berritto,” who is the sole shareholder of SalSon Logistics, Inc., a Georgia corporation (“SalSon”)), for the Company to purchase 100% of all the issued and outstanding shares of capital stock of SalSon. SalSon, which is strategically located in the heart of Port of Newark, with additional locations in Florida, Georgia, New York, South Carolina, Texas, and Virginia, offers a range of services including warehousing, transload services, dedicated contract carriage, dray management, and store delivery servicing the retail, food and beverage, and industrial sectors. With more than 1,200 associates, over 1 million square feet of warehousing and a dedicated fleet of 550 tractors and 1,500 trailers, SalSon’s capabilities include cross dock, regional and local truckload, intermodal, vendor consolidation and deconsolidation, pool distribution, and unattended store delivery. The Company believes this acquisition could improve the growth potential of TLSS because, with SalSon as the core foundational operation of the Company, synergistic targets that complement this business could bring immediate value when more acquisitions are secured. Furthermore, the opportunity for broadening existing customer relationships of SalSon customers or future strategic acquisition customers would likely improve with a linchpin transaction like SalSon.

Consideration for the purchase of the shares of SalSon shall be $90 Million (the “Purchase Price”). If the verifiable earnings before interest, taxes, depreciation and amortization (“EBITDA”) of SalSon for the full 12 calendar month period ending prior to the month of the closing is less than $12 Million, then the Purchase Price shall be reduced to 7.5 times verifiable 12 months trailing EBITDA. Further, if the working capital of SalSon at the closing shall be greater than or less than the average month-end working capital of SalSon for the months ended May 31, 2020 to April 30, 2021, the Purchase Price shall be increased or decreased dollar-for-dollar by the difference as appropriate.

1) An amount of the Company’s common stock equal to 19.9% of the outstanding shares of the Company (the “Shares”);

2) $50 Million in immediately available funds (less the amount of unforgiven SalSon PPP loans, which amount will be held in escrow controlled by the lender that will be released to Mr. Berritto if such loans are forgiven or shall otherwise be applied to repayment of such loans); and

3) A secured promissory note (the “Note”) in the principal amount of $20 Million. The Note shall be secured by a second position pledge of the assets of SalSon, but such pledge shall be subordinate to the security interest to be granted in connection with the Financing (described below). The term of the Note shall be 60 months and interest shall accrue at 1.07% per annum. Principal and interest shall be due to Mr. Berritto on a monthly basis, based on a 25-year amortization, with a balloon payment due on the maturity date of the Note. The Note will be subject to certain mandatory pre-payments upon the occurrence of certain events described in the SPSA. If the value of the Shares is greater than or less than $20 Million (calculated as the average of the closing price for 5 consecutive trading days ending on the third business day before the closing), the principal balance of the Note will be decreased or increased as appropriate.

Mr. Berritto is expected to stay on to oversee the operation of SalSon and the Company’s existing fulfillment services subsidiaries. It is a condition to the closing of the transaction that Mr. Berritto enter into an employment agreement with SalSon. Mr. Berritto has agreed in principle to do so, but if the parties do not reach an agreement on employment terms, the Company does not intend to complete the transaction.

The transaction is contingent upon the Company’s ability to secure debt financing for the cash portion of the purchase price. The financing will be secured by the assets of SalSon, and it will likely rely exclusively on SalSon’s assets and financial performance. SalSon currently is profitable with almost $100 million in annual revenues. If the debt financing for the cash portion of the purchase price cannot be obtained, then the transaction will not close.

The Company expects that it will need to raise the aggregate of approximately $60 million in financing (including approximately $6 million in equity financing) to fund the cash portion of the purchase price, investment banking fees, transaction costs and working capital for SalSon and the Company’s other operations. If the financing is completed, the Company also will be required to issue up common stock equal in value to up to 5% of the value aggregate debt financing and warrants (with a 5-year term and cashless exercise) to purchase shares equal in value to up to 10% of the aggregate debt financed in common stock as investment banking fees, if completed. securities financing.

The Company has experienced losses in its recent years of operations, and currently has a negative net worth, and has not received any proposed terms for such financing. Therefore, no assurance can be provided that the Company will be able obtain such financing. If the contemplated additional equity financing cannot be obtained, the Company will not have adequate cash available to fully fund the acquisition and transaction costs, the operations of SalSon and its other subsidiaries and investment banking fees. Such inability could also impair the Company’s ability to raise the necessary debt financing, or, if. such inability is first encountered after the Company procures a commitment for the debt financing and the contingency period for terminating the stock purchase agreement lapses, then it could also result in the Company’s default under the stock purchase agreement, since the closing of the transaction is not conditioned upon the Company securing such additional equity financing.

The closing of the transaction under the SPSA (the “Closing”) was to occur within 90 days of the SPSA agreement date (on or before September 13, 2021), provided all conditions shall have been met or waived.

The parties are in the process of negotiating an extension to the due diligence and financing periods pursuant to the SPA, as a quality of earnings report (“Q of E”) for the period ending June 30, ~~2020~~2021, was completed and disseminated to prospective financing sources on October 19, 2021. A Q of E provides a more detailed analysis of a company’s revenue and expenses, such as whether earnings generate an equal or greater amount of cash and the extent to which they are recurring or one-time, and is usually a necessary requirement for potential lenders to evaluate a potential financing transaction. The Company has engaged its outside accounting professionals to undertake an addendum to such Q of E through the end of August 31, 2021, to update such report through the most current period for which financial results of operations are available. The Company expects such addendum to be completed in the near future.

The closing shall be further contingent on satisfaction of the Company’s due diligence review of SalSon and the absence of the occurrence of any material adverse effect on SalSon or its business. The transaction does not include any deposit, breakup or termination fee in the event that it does not close due to a failure to meet any of the contingencies, including that the Company cannot reach terms with Mr. Berritto for his employment or the Company cannot obtain the financing needed to close the acquisition.

In connection with the acquisition of Prime EFS, the Company acquired a balance of ~~$14,019~~$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~~$489,174 in cash to the former majority owner of Prime EFS who then advanced back the ~~$489,174~~$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~~$216,155 of this advance. During the year ended December 31, 2019, the Company repaid ~~$130,000~~$130,000 of this advance. During the ~~nine months~~year ended ~~September 30,~~December 31, 2020, the Company repaid ~~$35,000~~$35,000 of this advance. This advance is non-interest bearing and is due on demand. ~~At September 30, 2020 and~~On December 31, ~~2019,~~2020, amount due to this ~~related party~~former majority owner of Prime amounted to ~~$94,000 and $129,000, respectively,~~$94,000, and have been included in ~~due~~liabilities subject to ~~related parties~~assignment for benefit of creditors on the accompanying condensed consolidated balance ~~sheets.~~sheet. Effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021, this liability of $94,000 was deconsolidated and removed from the Company’s unaudited condensed consolidated balance sheet.

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.~~$88,000. Additionally, during the ~~nine months~~year ended ~~September 30,~~December 31, 2020, this employee advanced the Company ~~$75,000~~$75,000 and was repaid ~~$163,000.~~$163,000. During the ~~nine months~~year ended ~~September 30,~~December 31, 2020, the Company paid this employee interest of ~~$57,200~~$57,200 related to these working capital advances. AtOn September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, amounts due to this former related party employee amounted to ~~$0 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.~~$25,000. In January 2020, this advance was repaid. During the ~~nine months~~year ended ~~September 30,~~December 31, 2020, the Company paid this entity interest expense of ~~$27,500~~$27,500 related to 2019 working capital advances made. AtOn September 30, ~~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.~~$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%~~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%~~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 September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, interest payable to related parties amounted to ~~$151,007~~$241,007 and ~~$83,445~~$173,692 and is included in due to related parties on the accompanying condensed consolidated balance sheets, respectively.

At On September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, notes payable – related party amounted to ~~$500,000~~$500,000 and ~~$500,000,~~$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.

On October 31, 2021, the Company and this related party note holder entered into a confidential settlement agreement and mutual release. (See Note 15).

During the nine months ended September 30, 2021 and 2020, interest expense associated with advances from related parties, related party notes payable and convertible notes payable to related parties amounted to $67,315 and $152,262 and is included in interest expense – related parties on the accompanying condensed consolidated statement of operations.

NOTE 1113 – 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.~~2023. From the lease commencement date until the last day of the second lease year, monthly rent will be ~~$14,000.~~$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~~$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.~~$28,000. During 2021, this security deposit was applied against rent due.

In July 2019, the Company entered into a ~~4.5-year~~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.~~2024. From the lease commencement date until the last day of the second lease year, monthly rent will be ~~$10,000.~~$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~~$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.~~$20,000. During 2021, this security deposit was applied against rent due.

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.~~2024. During the first year on the lease term, the base monthly rent will be ~~$18,000~~$18,000 and will increase by 3% each lease ~~year.~~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.~~$18,000. During 2021, this security deposit was applied against rent due.

Due to a reduction in the Company’s revenues and the loss of its Amazon revenues, during the second and third quarter of 2021, the Company abandoned the above properties. Accordingly, during the nine months ended September 30, 2021, the Company wrote the remaining balance of these right of use assets and recorded a loss on lease abandonment of $1,223,628. As of September 30, 2021 and December 31, 2020, the remaining lease liabilities related to these abandoned properties of $1,263,494 and $1,483,460, respectively. have been included in liabilities subject to assignment for benefit of creditors on the accompanying condensed consolidated balance sheets (see Note 10). As of December 31, 2020, the remaining right of use assets aggregating totaling $1,445,274 have been included in assets subject to assignment for benefit of creditors on the accompanying condensed consolidated balance sheets (see Note 10).

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 nine months ended September 30, ~~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 ~~$496,349~~$521,688 and ~~$269,148,~~$496,349, respectively, which is expensed during the period and included in operating expenses on the accompanying condensed consolidated statements of operations.

During the nine months ended September 30, 2021 and 2020, the Company recognized sublease income of $194,823 and $241,308 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%~~10% to ~~12%~~12% which was based on the Company’s estimated incremental borrowing rate.

On September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, right-of-use asset (“ROU”) is summarized as follows:

AtOn September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, operating lease liabilities related to the ROU assets are summarized as follows:

AtOn September 30, ~~2020,~~2021, future minimum base lease payments due under non-cancelable operating leases are as follows:

2021, four customers represented 77.9% (36.7%, 19.6%, 11.3% and 10.3%, respectively) of the Company’s total net revenues, respectively. For the nine months ended September 30, 2020, ~~and 2019,~~ one customer, Amazon, represented ~~97.5% and 99.1%~~97.5% of the Company’s total net revenues. AtOn September 30, ~~2020, two~~2021, four customers, represented ~~79.5% and 16.4%~~59.4% of the Company’s accounts receivable balance respectively. On June 19, 2020, Amazon notified Prime EFS in writing that Amazon does not intend to renew the In-Force Agreement when that agreement expires. In the Prime EFS Termination Notice, Amazon stated that the In-Force Agreement expires on September 30, 2020. Additionally, on July 17, 2020, Amazon notified Shypdirect that Amazon had elected to terminate the Program Agreement between Amazon(19.9%, 16.6%, 12.1% 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. Approximately 58.5% and 39.0% of the Company’s revenue of $23,503,384 for the nine months ended September 30, 2020 was attributable to Prime EFS’s last-mile DSP business and Shypdirect’s mid-mile and long-haul business with Amazon. respectively. The termination of the Amazon last-mile business will have a material adverse impact on the Company’s business in the 4th fiscal quarter of 2020 and thereafter. If the Amazon mid-mile and long-haul business is discontinued after May 14, 2021 it would have a material adverse impact on the Company’s business in 2nd fiscal quarter of 2021 and thereafter.10.8%, respectively).

During the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2010, the Company rented delivery vans and trucks from a limited number of vendors. 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.

~~To consummate~~During the ~~Series E Offering, the Company’s Board of Directors (the “~~~~Board~~~~”) created the Series E Convertible Preferred Stock (the “~~~~Series E~~~~”) pursuant~~period from October 1, 2021 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. 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.

~~The Series E has a stated value of $13.34 per share (the “~~~~Stated Value~~~~”). If, on or after October 8,~~November 15, 2021, the Company does not have at least one class of securities listed on the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (subject to extension if the Company has an application pending for such a listing) the holders of a majority of the then-outstanding Series E may demand that their Series E be redeemed at a price equal to the Stated Value per share plus all declared but unpaid dividends thereon.

~~On a pari passu basis with the holders of Series D Convertible 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 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.

Subject to a beneficial ownership limitation and customary adjustments for stock dividends and stock splits, each share of Series E is initially convertible the Company’s common shares equal to the sum of (i) 1,000 multiplied by (ii) a fraction (A) the numerator if which is $0.01334 and (B) the denominator of which is equal to the conversion price in effect at the time of conversion. The initial conversion price of $0.01334 and is subject to adjustment for stock dividends and stock splits and dilutive issuances as defined in the Series E COD. 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 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.

Upon the occurrence of certain triggering events and until such triggering event is cured, each share of Series E will be convertible into 2,779.17 shares of Common Stock subject to the limitation described in the preceding paragraph. 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 redeem the Series E when demanded.

In connection with the Series E Offering, the Company entered into a Registration Rights Agreement 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 and exercise of the Warrants. 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 date of October 8, 2020 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 hereunder 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 shall 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 Purchase Agreement, during which such Event continues uncured. The partial liquidated damages pursuant to the terms hereof shall 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 registration statement with 30 days of the closing date. However, the Company plans on filing they registration statement prior to the Event Date.

~~The initial exercise price of the Warrants is $0.04 per share, subject to adjustment as provided therein.~~

~~Subsequent to September 30, 2020, the Company issued 32,269,000~~28,571,429 shares of its common stock and received proceeds of $285,714 from the exercise of 28,571,429 warrants at $0.01 per share.

On October 31, 2021, the Company and this related party note holder entered into a confidential settlement agreement and mutual release. The Parties have agreed to adjust, settle and compromise the principal balance of the Note of $500,000 and unpaid accrued interest thereon of $240,822, for a discounted amount of $600,000, in full settlement of any and all amounts

In connection with the ~~conversion~~legal matter, Frank Mazzola v. TLSI and Prime EFS, et al., on November 2, 2021, without any payment of ~~32,269 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.~~money by any party to any other party, all claims and counterclaims in this action were dismissed with prejudice (meaning permanently) and all parties exchanged general releases (see Note 11).

In ~~October 2020, the Company issued 53,255,583 shares of its common stock in~~ connection with the ~~conversion~~legal matter, Rosemary Mazzola v. TLSI and Prime EFS, on November 2, 2021, without any payment of ~~a convertible note payable~~money by any party to any other party, all claims in this action were dismissed with prejudice (meaning permanently) and ~~default interest of $293,150 and accrued interest of $26,384. The conversion price was based on contractual terms of the related debt.~~all parties exchanged general releases (see Note 11).

In October and November 2020, the Company issued 5,939,432 shares of its common stock in connection with the conversion of accrued interest of $36,317. The conversion price was based on contractual terms of the related debt.

On November 11, 2020 the Company’s wholly owned subsidiary, TLSS Acquisition, Inc. (the “Acquisition Sub”), entered into an asset purchase agreement (“APA”) to acquire substantially all of the assets and certain liabilities 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”). TLSS Acquisition, Inc. was incorporated on November 16, 2020 in the State of Delaware.

Cougar Express is 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 50 commercial accounts, which are freight forwarders that work with some of the most notable retail businesses in the country. Some of Cougar Express’s accounts have been customers of Cougar Express for more than 20 years.

The APA provides for a purchase price equal to $2,350,000 plus 50% of the difference between the accounts receivable acquired by the Acquisition Sub and the accounts payable assumed by the Acquisition Sub. The Acquisition Sub will also assume indebtedness on certain truck leases and other equipment and service plans for equipment and services that are used by Cougar Express and which will continue to be used by the Acquisition Sub post-closing. After closing, the Acquisition Sub plans to change its name to Cougar Express, Inc., and the seller (the current Cougar Express, Inc. corporation) and its owner would be barred from competing with the Cougar Express business for five years.

The transaction is scheduled to close no later than January 15, 2021, subject to the completion of satisfactory due diligence by TLSS to confirm the accuracy of all of Cougar Express’s representations and warranties in the APA and that Cougar Express has not suffered a material adverse change in its business, and also subject to Cougar Express’s procuring an acceptable landlord’s consent to Cougar Express’s assignment of the lease for its operating facility to the Acquisition Sub, and also subject to TLSS’s securing financing for the acquisition.

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 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. Factors that may affect the results of our operations include, among others: whether the OTC Markets Group approves our application to 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, 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 subsequent to the date of this Quarterly Report on Form 10-Q have or have not occurred. In addition to the other information included in this report, including the factors identified in Part II Item 1A of 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, ~~2019~~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~~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 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 shipmentEffects of ~~non-priority products, and supply chain interruptions. Other effects include~~the pandemic have included 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 Q4 ~~2020,~~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.

Transportation and Logistics Systems, Inc. (“TLSS” or the “Company”) was incorporated under the laws of the State of Nevada, on July 25, 2008. The Company operates through its active subsidiaries as a logistics and transportation company specializing in ecommerce fulfillment, last mile deliveries, two-person home delivery, mid-mile, and long-haul services for predominantly online retailers.

On March 30, 2017 (the “Closing Date”), TLSS and Save On Transport Inc. (“Save On”) entered into a Share Exchange Agreement, dated as of the same date (the “Share Exchange Agreement”). Pursuant to the terms of the Share Exchange Agreement, on the Closing Date, Save On became a wholly-owned subsidiary of TLSS (the “Reverse Merger”). Save On was incorporated in the state of Florida and started business on July 12, 2016. On May 1, 2019, the Company entered into a share exchange agreement with Save On and Steven Yariv, whereby the Company returned all of the stock of Save On to Steven Yariv in exchange for Mr. Yariv conveying 1,000,000 shares of common stock of the Company back to the Company. In addition, the Company granted an aggregate of 80,000 options to certain employees of Save On.

On 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 was a New Jersey based transportation company that generated substantially all of its revenues from Amazon Logistics, Inc. (“Amazon”) in New York, New Jersey, and Pennsylvania until it ceased operations on September 30, 2020 due to Amazon’s non-renewal of its Delivery Service Partner (DSP) Agreement with Prime EFS, as described below.

On July 24, 2018, we formed Shypdirect LLC (“Shypdirect”), a company organized under the laws of New Jersey. Shypdirect was 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. Since its inception, Shypdirect generated substantially all of its revenues from Amazon, Inc. As described below, Amazon elected to terminate its Amazon Relay Carrier Terms of Service with Shypdirect. Accordingly, in June 2021, Shypdirect ceased its tractor trailer and box truck delivery services to Amazon, and in July 2021, Shypdirect ceased all 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.

The termination of the ~~Amazon~~Prime EFS last-mile business ~~will have~~with Amazon on September 30, 2020 had a material adverse impact on the ~~Company’s business~~operations of Prime EFS beginning in the 4th fiscal quarter of 2020 and ~~thereafter. If~~ the termination of Shypdirect’s Amazon mid-mile and long-haul business, ~~is discontinued after~~which was effective on or about May 14, 2021, ~~it would have~~had a material adverse impact on operations of Shypdirect beginning in the ~~Company’s business in~~ 2nd fiscal quarter of ~~2021~~2021. This impact has caused Prime EFS and ~~thereafter.~~Shypdirect to become insolvent and to cease operations.

~~The Company will continue~~While we have commenced replacing our Amazon business with the acquisitions as set forth below, such initiatives are consistent with our already existing business plan to: (i) seek ~~to replace its~~new last-mile, ~~DSP Amazon business and supplement its~~ mid-mile and long-haul ~~Amazon~~ business with other, non-Amazon, customers; (ii) explore other strategic relationships; and (iii) identify potential acquisition opportunities, while continuing to execute our restructuring plan which commenced in February 2020.

~~Transportation and Logistics Systems,~~On November 13, 2020, we formed a wholly owned subsidiary, Shyp FX, Inc. (“~~TLSS~~~~” or the “~~~~Company~~~~”) was~~, a company incorporated under the laws of the State of ~~Nevada, on July 25, 2008. The Company operates~~New Jersey (“Shyp FX”). On January 15, 2021, through ~~its subsidiaries as~~Shyp FX, we executed an asset purchase agreement (“APA”) and closed a ~~logistics and transportation company specializing in ecommerce fulfillment, last mile deliveries, two-person home delivery, mid-mile, and long-haul services for predominantly online retailers.~~

~~On March 30, 2017 (the “~~~~Closing Date~~~~”), TLSS and Save On Transport Inc. (“Save On”) entered into a Share Exchange Agreement, dated as of the same date (the “~~~~Share Exchange Agreement~~~~”). Pursuant~~transaction 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 returnedacquire substantially all of the ~~stock~~assets and certain liabilities of ~~Save~~ Double D Trucking, Inc., a northern New Jersey-based logistics provider specializing in servicing Federal Express over the past 25 years (“DDTI”), including last-mile delivery services using vans and box trucks. 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 ~~to Steven Yariv in exchange for Mr. Yariv conveying 1,000,000 shares of common stock~~November 16, 2020, we formed a wholly owned subsidiary, TLSS Acquisition, Inc., a company incorporated under the laws of the ~~Company back to the Company. In addition, the Company granted an aggregate~~State of ~~80,000 options to certain employees of Save On.~~Delaware (“TLSS Acquisition”). On ~~April 16, 2019, Mr. Yariv ceased to be an officer or director of the Company.~~

~~On June 18, 2018 (the “~~March 24, 2021, TLSS Acquisition ~~Date~~~~”), the Company completed the acquisition of 100%~~acquired all of the issued and outstanding ~~membership interests~~shares of ~~Prime EFS, LLC,~~capital stock of Cougar Express, Inc., a New ~~Jersey limited liability company~~York-based full-service logistics provider specializing in pickup, warehousing, and delivery services in the tri-state area (“~~Prime EFS~~”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 ~~members pursuant~~convenient and secure New York JFK airport area location, allowing it to pick-up and deliver throughout the ~~terms~~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 ~~conditions of a Stock Purchase Agreement entered into among the Company~~diversified customer base, and ~~the Prime EFS members on the Acquisition Date (the “~~~~SPA~~~~”). Prime EFS is a New Jersey based transportation company~~given that it would provide us with a ~~focus on deliveries for on-line retailers~~long-standing, well-run profitable operation as a step to begin replacing the revenue it lost as a result of Amazon 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, ~~and Pennsylvania.~~as well as efficiencies that could be derived by leveraging Shypdirect’s operational capabilities.

On ~~July 24, 2018, we~~February 21, 2021, the Company formed ~~Shypdirect LLC (“~~~~Shypdirect~~”)a wholly owned subsidiary, Shyp CX, Inc., a company ~~organized~~incorporated under the laws of the State of New ~~Jersey.~~York (“Shyp CX”).

Due to the termination of their respective agreements with Amazon and recurring losses, Prime EFS and Shypdirect are insolvent and are unable to pay their debts when they become due. Accordingly, the Company deemed it to be desirable and in the best interest of Prime EFS and Shypdirect and its creditors to make an assignment of all of Prime EFS and Shypdirect’s assets for the benefit of the Prime EFS and Shypdirect’s creditors in accordance with the ABC Statute. On August 16, 2021, the Company’s subsidiaries, Prime EFS and Shypdirect, executed Deeds of Assignment for the Benefit of Creditors in the State of New Jersey pursuant to N.J.S.A. §2A:19-1, et seq. (the “ABC Statute”), assigning all of the Prime EFS and Shypdirect assets to Terri Jane Freedman as Assignee for the Benefit of Creditors (the “Assignee”) and filing for dissolution. An “Assignment for the Benefit of Creditors,” “general assignment” or “ABC” in New Jersey is a ~~transportation company with a focus on tractor trailer~~state-law, voluntary, judicially-supervised corporate liquidation and ~~box truck deliveries of product on~~unwinding similar to the ~~east coast of~~Chapter 7 bankruptcy process found in the United States ~~from one distributor’s warehouse~~Bankruptcy Code. In an ABC, the debtor companies. Prime EFS and Shypdirect, together referred to ~~another warehouse or from a distributor’s warehouse~~as the “Assignors” executed Deeds of Assignment, assigning all of their assets to the ~~post office.~~Assignee chosen by the Company, who acts as a fiduciary similar to a Chapter 7 trustee in bankruptcy. On September 7, 2021, the ABC’s were filed with the Bergen County Clerk in Bergen County, New Jersey and filed with the Surrogate Court in the appropriate county, initiating a judicial proceeding. The Assignee has been charged with liquidating the assets for the benefit of the Prime EFS and Shypdirect creditors pursuant to the provisions of the ABC Statute.

As of December 31, 2020, the assets and liabilities of Prime EFS and Shypdirect subject to the Assignment for the Benefit of Creditors have to been reflected as “Assets subject to assignment for benefit of creditors” and “Liabilities subject to assignment for benefit of creditors” on the accompanying condensed consolidated balance sheets.

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 ended September 30, 2020 and 2019 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 and nine months ended September 30, ~~2020~~2021 compared with the three and nine months ended September 30, ~~2019~~2020

The following table sets forth our revenues, expenses and net loss for the three and nine months ended September 30, ~~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 September 30, ~~2020,~~2021, our revenues ~~from continuing operations~~ were ~~$6,309,509~~$1,207,305 as compared to ~~$7,759,451~~$6,309,509 for the three months ended September 30, ~~2019,~~2020, a decrease of ~~$1,449,942,~~$5,102,204, or ~~18.7%~~80.9%. This decrease was primarily a result of a decrease in revenue attributable to Prime EFS’s last-mile DSP business of $3,528,236, a decrease in revenue from Shypdirect’s mid-mile and long-haul business with Amazon of $2,400,597, and a decrease in revenue from other customers of $340,956. These decreases were offset from revenues generated from our newly acquired companies, DDTI and Cougar Express, of $292,884 and $874,701, respectively.

For the nine months ended September 30, ~~2020,~~2021, our revenues ~~from continuing operations~~ were ~~$23,503,384~~$4,273,498 as compared to $21,664,070 for the nine months ended September 30, 2019, an increase of $1,839,314, or 8.5%. This (decrease) increase was primarily a result of an increase in revenue 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 last-mile deliveries performed.

~~As discussed above, approximately 58.5% and 39.0% of our revenue of~~ $23,503,384 for the nine months ended September 30, 2020, ~~were~~a decrease of $19,229,886, or 81.8%. This decrease was primarily a result of a decrease in revenue attributable to Prime EFS’s last-mile DSP business ~~and~~of $13,732,513, a decrease in revenue from Shypdirect’s mid-mile and long-haul business with Amazon of $7,607,842, and a decrease in revenue from other customers of $509,659. These decreases were offset from revenues generated from our newly acquired companies, DDTI and Cougar Express, of $836,428 and $1,783,700, respectively.

During the year ended December 31, 2020 and 2019, one customer, Amazon, represented 96.7% and 98.7% of the Company’s total net revenues. Additionally, as discussed above, approximately 36.7% of our revenue of $4,273,498 for the nine months ended September 30, 2021 was attributable to Shypdirect’s now terminated mid-mile and long-haul business with Amazon. The termination of the ~~Amazon~~Prime EFS last-mile business ~~will have~~with Amazon on September 30, 2020 had a material adverse impact on ~~our business~~the operations of Prime EFS beginning in the 4th fiscal quarter of 2020 and ~~thereafter. If~~ the termination of Shypdirect’s Amazon mid-mile and long-haul business, ~~is discontinued after~~which was effective on or about May 14, 2021, ~~it would have~~had a material adverse impact on operations of Shypdirect beginning in the ~~Company’s business in~~ 2nd fiscal quarter of ~~2021~~2021. This impact has caused Prime EFS and ~~thereafter. The Company~~Shypdirect to become insolvent and to cease operations.

We will continue to: (i) seek to replace ~~its last-mile DSP Amazon business and supplement its mid-mile and long-haul~~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 discussed elsewhere.

For the three months ended September 30, ~~2020,~~2021, our cost of revenues ~~from continuing operations~~ was ~~$5,978,265~~$1,178,113 compared to ~~$6,293,699~~$5,978,265 for the three months ended September 30, ~~2019,~~2020, a decrease of ~~$315,434,~~$4,800,152, or ~~5.0%~~80.3%. For the nine months ended September 30, ~~2020,~~2021, our cost of revenues ~~from continuing operations~~ was ~~$20,831,870~~$4,422,429 compared to ~~$19,366,374~~$20,831,870 for the nine months ended September 30, ~~2019, an increase~~2020, a decrease of ~~$1,465,496,~~$16,409,441, or ~~7.6%~~78.8%. 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. In the first quarter of 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, which is included in cost of sales. The decrease in cost of sales was consistent with the decrease in revenues.

For the three months ended September 30, ~~2020, our~~2021, we had gross profit ~~was $331,244,~~of $29,192, or ~~5.3%~~2.4% of ~~revenue,~~revenues, as compared to ~~$1,465,752,~~gross profit of $331,244, or ~~18.9%~~5.2% of ~~revenue, for the three months ended September 30, 2019, a decrease of $1,134,508, or 77.4%. The decrease in gross profit~~revenues, for the three months ended September 30, 2020, a decrease of $302,052, or 91.2%. For the nine months ended September 30, 2021, we had a gross loss of $(148,931), or (3.5)% of revenues, as compared to gross profit of $2,671,514, or 11.4% of revenues, for the nine months ended September 30, 2020, a decrease of $2,820,445, or 105.6%. The decreases in gross profit for the three and nine months ended September 30, 2021 as compared to the three and nine months ended September 30, ~~2019~~2020 primarily resulted from a decrease in ~~revenue~~revenues and a decrease in operational efficiencies in Prime EFS ~~doe~~and 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 September 30, 2021, total operating expenses amounted to $1,924,725 as compared to $1,502,829 for the three months ended September 30, 2020, an increase of $421,896, or 28.1%. For the nine months ended September 30, ~~2020, our gross profit was $2,671,514, or 11.4% of revenue,~~2021, total operating expenses amounted to $5,102,405 as compared to ~~$2,297,696, or 10.6% of revenue, for the nine months ended September 30, 2019, an increase of $373,818, or 16.3%. The increase in gross profit~~$6,591,345 for the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019 primarily resulted from an increase in operational efficiencies in both Prime EFS and Shypdirect. Additionally, during the nine months ended September 30, 2020, we received a reduction in workers’ compensation balances due of approximately $155,000 resulting from positive results from a prior period workers’ compensation premium audit.

~~For the three months ended September 30, 2020, total operating expenses amounted to $1,502,829 as compared to $4,755,410 for the three months ended September 30, 2019,~~ a decrease of ~~$3,252,581,~~$1,488,940, or 68.4%. For the nine months ended September 30, 2020, total operating expenses amounted to $6,591,345 as compared to $17,049,069 for the nine months ended September 30, 2019, a decrease of $10,457,724, or 61.3%22.6%. For the three and nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, operating expenses consisted of the following:

For the three months ended September 30, ~~2020,~~2021, compensation and related benefits amounted to ~~$551,306~~$351,908 as compared to ~~$3,433,741 for the three months ended September 30, 2019, a decrease of $2,882,435. Compensation and related benefits~~$551,306 for the three months ended September 30, 2020, ~~and 2019 included stock-based compensation of $0 and $2,500,000, respectively,~~ a decrease of ~~$2,500,000, from~~$199,398, or 36.2%. For 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 the three~~nine months ended September 30, 2021, compensation and related benefits amounted to $1,064,570 as compared to $1,955,854 for the nine months ended September 30, 2020, a decrease of $891,284, or 45.6%. During the three and nine months ended September 30, 2021, the overall decrease in compensation and related benefits was attributable to a decrease in compensation paid to significant employees and the reduction of ~~staff.~~staff due to the significant decrease in revenues and operations.

For the three months ended September 30, 2021, legal and professional fees were 487,473 as compared to $621,105 for the three months ended September 30, 2020, a decrease of $133,632, or 21.5%. During the three months ended September 30, 2021, we had a decrease in legal fees of $207,206 related to a decrease in activities on ongoing legal matters, and a decrease in other professional fees of $54,344. These decreases were offset by an increase in accounting fees of $98,272, and an increase in consulting fees of $29,646.

For the nine months ended September 30, ~~2020, compensation~~2021, legal and ~~related benefits amounted to $1,955,854~~professional fees were $1,470,926 as compared to ~~$11,150,955 for the nine months ended September 30, 2019, a decrease of $9,195,101. Compensation and related benefits~~$3,523,811 for the nine months ended September 30, 2020, ~~and 2019 included stock-based compensation of $0 and $7,450,809, respectively,~~ a decrease of $7,450,809, 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 the nine months ended September 30, 2020, the overall decrease in compensation and related benefits was attributable to a decrease in compensation paid to significant employees and the reduction of staff.

~~For the three months ended September 30, 2020, legal and professional fees were $621,105 as compared to $517,277 for the three months ended September 30, 2019, an increase of $103,828,~~$2,052,885, or 20,1%. During the three months ended September 30, 2020 and 2019, we incurred stock-based consulting fees of $0 and $28,646, respectively, from the issuance of our common shares and warrants to consultants for business development services rendered, a decrease of $28,646. Additionally, we had an incurred an increase in accounting fees attributable to an increase in auditing and third-party accountant fees, and an increase in legal fees. For the nine months ended September 30, 2020, legal and professional fees were $3,523,811 as compared to $1,588,359 for the nine months ended September 30, 2019, an increase of $1,935,452, or 121.8%58.3%. During the nine months ended September 30, ~~2020~~2021, we had a decrease in legal fees of $86,443 related to a decrease in activities on ongoing legal matters, a decrease in consulting fees of $133,312 and ~~2019, we incurred~~a decrease in stock-based consulting fees of $1,999,749 that we incurred in the 2020 period and ~~$294,145, respectively, from~~not in the ~~issuance of our common shares and warrants to consultants for business development services rendered, an increase of $1,705,603. Additionally, we had~~2021. These decreases were offset by an increase in ~~legal~~accounting fees ~~related to~~of $107,400 incurred, and an increase in ~~ongoing legal matters.~~other professional fees of $59,219 which primarily consisted of fees for the mailing of proxy and shareholder information.

For the three months ended September 30, ~~2020,~~2021, rent expense was ~~$156,738~~$154,132 as compared to ~~$83,911~~$156,738 for the three months ended September 30, ~~2019, an increase~~2020, a decrease of ~~$72,827,~~$2,606, or ~~86.8%~~1.7%. For the nine months ended September 30, ~~2020,~~2021, rent expense was ~~$496,349~~$521,688 as compared to ~~$269,148~~$496,349 for the nine months ended September 30, ~~2019,~~2020, an increase of ~~$227,201,~~$25,339, or ~~84.4%~~5.1%. ~~These increases were~~This increase was attributable to ~~a significant expansion~~an increase in ~~office, warehouse~~rental space due to the acquisition of Cougar Express. As of September 30, 2021, we abandoned our lease and ~~parking spaces pursuant to short and long-term operating leases~~vacated the premises related to the ceased operations of Prime EFS and ~~Shypdirect businesses.~~Shypdirect.

For the three months ended September 30, ~~2020,~~2021, general and administrative expenses were ~~$173,680~~$323,658 as compared to ~~$720,481~~$173,680 for the three months ended September 30, ~~2019, a decrease~~2020, an increase of ~~$546,801,~~$149,978, or ~~75.9%~~86.3%. ~~This decrease is~~For the nine months ended September 30, 2021, general and administrative expenses were $821,593 as compared to $615,331 for the nine months ended September 30, 2020, an increase of $206,262, or 33.5%. These increases were primarily attributable to ~~a decrease~~the acquisition of Double D Trucking and Cougar Express and were offset by decreases in general administrative expenses of $305,370 and a decrease in depreciation and amortization of $241,431. The decrease in depreciation and amortization expense was related to a decrease in amortization of intangible assets of $219,433 and a decrease in depreciation expense of $21,998. In 2020, we cut our overall general and administrative expenses due to cost-cutting measures taken. For the nine months ended September 30, 2020, general and administrative expenses were $615,331 as compared to $2,316,016 for the nine months ended September 30, 2019, a decrease of $1,700,685, or 73.4%. This decrease is primarily attributable

Due to a ~~decrease~~reduction in ~~general administrative expenses~~our revenues and the loss of ~~$869,766~~its Amazon revenues, during the second and ~~a decrease in depreciation and amortization~~third quarter of ~~$830,919. The decrease in depreciation and amortization expense was~~2021, we abandoned our leased premises related to ~~a decrease in amortization~~the ceased operations of ~~intangible assets of $742,985 due to impairment of the intangible in 2019,~~Prime EFS and ~~a decrease in depreciation expense of $87,934. In 2020, we cut our overall general and administrative expenses due to cost-cutting measures taken.~~

During the nine months ended September 30, 2019, management tested the intangible asset for impairment. Based on our analysis, we recorded intangible asset impairment expense of $1,724,591 in the unaudited consolidated statement of operations for the nine months ended September 30, 2019. No impairment expense was recordedShypdirect. Accordingly, during the three and nine months ended September 30, ~~2020.~~2021, we wrote the remaining balance of this right of use asset and recorded a loss on lease abandonment of $607,554 and $1,223,628, respectively.

For the three months ended September 30, ~~2020,~~2021, loss from operations amounted to ~~$1,171,585~~$1,895,533 as compared to ~~$3,289,658~~$1,171,585 for the three months ended September 30, ~~2019, a decrease~~2020, an increase of ~~$2,118,073,~~$723,948, or ~~64.4%~~61.8%. For the nine months ended September 30, ~~2020,~~2021, loss from operations amounted to ~~$3,919,831~~$5,251,336 as compared to ~~$14,751,373~~$3,919,831 for the nine months ended September 30, ~~2019, a decrease~~2020, an increase of ~~$10,831,542,~~$1,331,505, or ~~73.4%~~34.0%.

Total other expenses (income) include interest expense, derivative expense, ~~loan fees,~~warrant exercise inducement expense, gain on debt extinguishment, and other income. For the three and nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, other expenses (income) consisted of the following:

For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, aggregate interest expense was ~~$2,051,644~~$94,624 and ~~$2,375,261,~~$2,051,644, respectively, a decrease of $323,617. The decrease in interest expense resulted from a decrease in interest-bearing loans due to debt conversions into common shares and Series D preferred shares and a decrease in the amortization of original issue discount.$1,957,020, or 96.4%. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, aggregate interest expense was $358,213 and $7,168,859, ~~and $5,120,343,~~ respectively, ~~an increase~~a decrease of $2,048,516. The increase in interest expense resulted from an increase in the interest rate on interest-bearing loans due to default provisions and an increase in the amortization of original issue discount. Additionally, during$6,810,646, or 95.0%. During the nine months ended September ~~30, 2020,~~30,2020, we ~~incurred~~recorded a 30% default interest penalty of $1,531,335, which was included in interest expense. We did not incur this expense during the ~~2019 period.~~2021 periods. 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.

During the six months ended September 30, 2021, we entered into Securities Purchase Agreements with certain of the holders of its existing Series E preferred warrants (“Exercising Warrants Holders”). Pursuant to the Securities Purchase Agreements, the Exercising Warrants Holders and we agreed that the Exercising Warrants Holders would cash exercise their existing warrants, into shares of common stock underlying such existing warrants Shares. In order to induce the Exercising Warrant Holders to cash exercise their existing Warrants, the Securities Purchase Agreements provided for the issuance of new warrants (“New Warrants”) with such New Warrants to be issued in an amount equal to 50% of the number of shares acquired by the Existing Warrant Holder through the exercise of existing warrants for cash. The New Warrants are exercisable upon issuance and terminate five years following the initial exercise date. The New Warrants have an exercise price per share of $0.01. In connection with the exercise of these existing warrants for cash, the Company issued an aggregate of 191,341,147 New Warrants. The New Warrants issued in connection with the Securities Purchase Agreements were considered inducement warrants and are classified in equity. During the three and nine months ended September 30, 2019, loan fees were $601,121. In connection with previous promissory notes payable, on June 11, 2019, we issued 55,000 warrants to purchase 55,000 shares of common stock an exercise price of $1.00 per share. On June 11, 2019, we calculated2021 and 2020, the fair value of ~~these warrants of $601,121, which~~the New Warrants issued was $4,193,134 and were expensed ~~and included in loan fees~~as warrant exercise inducement expense on the accompanying condensed consolidated statement of operations. ~~We did not incur such expense during the 2020 periods.~~

For the three months ended September 30, 2021 and 2020, ~~and 2019,~~the net gain ~~(loss)~~ on extinguishment of debt was ~~$907,447~~$0 and ~~$(4,714,751),~~$907,447, respectively, a ~~change~~decrease of ~~$5,622,198.~~$907,447, or 100.0%. For the nine months ended September 30, 2021 and 2020, ~~and 2019,~~the net gain on extinguishment of debt was ~~$7,151,041~~$1,564,941 and ~~$39,203,017,~~$7,151,041, respectively, a decrease of ~~$32,051,976.~~$5,586,100, or 78.1%. The gains ~~(loss)~~ on debt extinguishment were attributable to the settlement of convertible debt and warrants, the settlement of secured merchant ~~in 2020,~~loans, the conversion of convertible debt, and the settlement of other payables.

During the three months ended September 30, 2021 and 2020, we recorded other income of $11,001 and $91,950. During the nine months ended September 30, 2021 and 2020, we recorded other income of $194,823 and $266,98. Other income was primarily related to the collection of rental income from the sublease of excess office, warehouse, and parking spaces. As of September 30, 2021, the Company abandoned substantially all of its leased properties and will no longer receive sublease income in the future.

For the three and nine months ended September 30, 2021, we recognized a gain on deconsolidation of subsidiaries of $12,427,220. We did not recognize this gain during the 2020 periods.

For the three months ended September 30, 2021 and 2020, derivative expense (income) was $0 and ~~2019, derivative (income) expense was~~ $(37,826,129) ~~and $981,244,~~, respectively, a change of ~~$38,807,373.~~$37,826,129. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, derivative expense (income) was ~~$31,835,642~~$(3,284,306) and ~~$56,018,849,~~$31,835,642, respectively, a ~~decrease~~change of ~~$24,183,207.~~$35,119,948. During the three and nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, we recorded a derivative expense (income) related to the calculated initial derivative fair value of conversion options and warrants. Additionally, we adjusted our derivative liabilities to fair value and recorded derivative expense or income. ~~Furthermore, upon the conversion of debt to equity, we reduce the derivative liability and record derivative income.~~

For the three months ended September 30, 2020, income (loss) from continuing operations amounted to $35,602,297 as compared to $(11,360,914) for the three months ended September 30, 2019, a change of $46,963,211. For the nine months ended September 30, 2020, loss from continuing operations amounted to $35,506,373 as compared to $37,288,669 for the nine months ended September 30, 2019, a decrease of $1,782,296, or 4.8%.

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 nine months ended September 30, 2019, loss from discontinued operations amounted to $681,426. We did not have discontinued operations during the 2020 periods.

Due to factors discussed above, for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, net income ~~(loss)~~ amounted to ~~$35,602,297, or $0.03 per basic common share~~$6,254,930 and ~~$(0.00) diluted common share, and $(11,360,914), or $(1.10) per basic and diluted common share~~$35,602,297, respectively. For the ~~nine~~three months ended September 30, 2021 and 2020, ~~and 2019,~~ net ~~loss amounted to $35,506,373 and $37,970,095, respectively. For the nine months ended September 30, 2020 and 2019, net loss~~income 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~~$21,386 and ~~$981,548,~~$0, amounted to ~~$54,202,385,~~$6,233,544, or $0.00 per basic and diluted common share, and $35,602,297, or $0.03 per basic common share and $0.00 per diluted common share, respectively.

Due to factors discussed above, for the nine months ended September 30, 2021 and 2020, net income (loss) amounted to $7,668,607 and $(35,506,373), respectively. For the nine months ended September 30, 2021 and 2020, net income (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 $1,007,319 and $18,696,012, amounted to $6,661,288, or $0.00 per basic and diluted common share, and $(54,202,385), or $(0.11) per basic and diluted common share, ~~and $38,951,643, or $(4.42) 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 September 30, 2021 and December 31, 2020, we had a cash balance of ~~$318,356.~~$2,668,329 and $579,283, respectively. Our working capital ~~deficit~~ was ~~$12,974,773 at~~$1,283,101 on September 30, ~~2020.~~2021. We reported a net increase in cash for the nine months ended September 30, 2021 as compared to December 31, 2020 of ~~$268,330~~$2,089,046 primarily as a result of net cash proceeds received from ~~payroll protection loans~~the sale of Series E preferred stock units of $3,590,500 and ~~convertible debt,~~cash proceeds from the exercise of warrants of $3,940,669, offset by the use of net cash for acquisitions of $2,123,115, the repayment of notes payable of $496,291, and by cash used in ~~operations.~~operations of $2,863,483.

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. ~~We expect cash flows to decrease~~Our revenues decreased significantly insince the fourth quarter of 2020 due to the termination of the Amazon last-mile business. Additionally, as discussed elsewhere, during the nine months ended September 30, 2021 due to the 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 25, 2017, the Company entered into a securities purchase agreement with RedDiamond Partners LLC (“~~~~RedDiamond~~~~”) pursuant to which the Company would issue to RedDiamond convertible promissory notes (the “~~~~RedDiamond Notes~~”) in an aggregate principal amount of up to $355,000, which includes a purchase price of $350,000 and transaction costs of $5,000. Pursuant to this securities purchase agreement, during 2017, the Company entered into three RedDiamond Notes in the aggregate principal amount of $270,000 and the Company received $265,000 after giving effect to the original issue discount of $5,000. The RedDiamond Notes matured during 2018. RedDiamond is not required to fund any additional tranches under the securities purchase agreement. Through date of default, the RedDiamond Notes bore interest at a rate of 12% per annum and were convertible into shares of the Company’s common stock at RedDiamond’s option at 65% of the lowest VWAP (as defined in the RedDiamond Notes) for the ten trading days preceding the conversion. During 2018, the Company failed to make its required maturity date payments of principal and interest on the RedDiamond Notes of $270,000. In accordance with these notes, the Company entered into default in 2018, which increased the interest rate to 18.0% per annum. The RedDiamond Notes contain cross default provisions whereby a default in any one note greater than $25,000 causes a default in all the notes, however, this provision is only effective if there is a formal notice of default by the lender.

~~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:~~

~~During the nine months ended September 30,~~Q1/Q2 2020 ~~we issued 96,661,102 shares of our common stock upon the conversion of debt of $510,000 and accrued interest of $158,141.~~

On December 27, 2018, Bellridge waived any and all defaults in existence on the Bellridge Note and the Company agreed to issue a warrant that is convertible into 2% of the issued and outstanding shares existing at the time the Company files a registration statement or makes an application to up list to a national stock exchange (the “~~Second Bellridge Warrant~~~~” and together with the First Bellridge Warrant and the Bellridge Note PA Warrant, the “~~~~Bellridge Warrants~~”). Pursuant to the Second Bellridge Warrant, at any time on or before the date that the Company files a registration statement on Form S-l or applies for up-listing to a National Exchange (as defined in the Second Bellridge Warrant), and on or prior to the close of business on the early of the first year anniversary of the issuance of December 27, 2018, Bellridge could have chosen to subscribe for and purchase from the Company up to 2% of the outstanding shares of common stock for an aggregate exercise price of $100. Additionally, the principal interest amount due under the Bellridge Note was modified with a monthly payment of principal and interest due beginning on January 18, 2019 of $156,219 with all remaining principal and interest amounts on the Bellridge Note due on December 18, 2019. This modification was not considered a debt extinguishment.

~~On April 9, 2019, the Company entered into a new agreement with Bellridge that modified the Bellridge Note and cancelled these warrants (see below).~~

In connection with the Bellridge Purchase Agreement, the Company paid a placement agent $120,000 in cash, which is included in issue costs previously discussed above and this placement agent was issued the Bellridge Note PA Warrant, with a term of two years, to purchase up to 4.75% of the fully-diluted outstanding common stock of the Company, for an aggregate purchase price of $100. On April 9, 2019, the Company entered into an agreement with this placement agent that cancelled the Bellridge Note PA Warrant.

In addition, on April 9, 2019, the holders of 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 July 20, 2020, in connection with the parties’ recent settlement, the Company issued 10,281,018 shares to Bellridge to settle certain claims of Bellridge (see Note 9 under legal matters). During the three months ended September 30, 2020, we issued 107,500,001 shares of our common stock upon the conversion of debt of $1,813,402 and accrued interest of $70,671.

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, payment 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 entered into a Securities Purchase Agreement with the investor parties thereto (collectively, the “~~~~Equity Investors~~”), pursuant to which the Equity Investors agreed to purchase, severally and not jointly, 585,000 units of the Company, each unit comprised of one share of common stock, and a warrant to purchase one (1) share of common stock (the “~~Equity Offering~~”) at an exercise price of $2.50 per share of common stock. The warrants include down-round provisions under which the warrant exercise price could be affected by future equity offerings undertaken by the Company. During the nine months ended September 30, 2020, down-round provisions were triggered. As of September 30, 2020, the exercise price of these warrants was lowered to $0.006 per share.

Including the Equity Offering, 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.

~~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 Securities Purchase Agreement (the “~~~~August 2019 Debt Purchase Agreement~~”) with accredited investors. We received net proceeds of $295,534, which is net of 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 initially 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 payment 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.

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 Note 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 down-round provision under which the August 2019 Note conversion price and August 2019 Warrant exercise price were reduced, on a full-ratchet basis, to $0.006 due to the default on the August 2019 Notes triggering the default conversion price. See Note 6 to the condensed consolidated financial statements for additional details.

During the six months ended June 30, 2020, we repaid principal of $257,139, settled $128,674 of debt, and we issued 293,677,788 shares of our common stock upon the conversion of principal and default interest of $2,118,311, accrued interest of $48,685 and fees of $1,000. Additionally, accrued interest payable of $84,416 was reclassified to principal balance. During the three months ended September 30, 2020, we issued 39,885,602 shares of our common stock upon the conversion of principal and default interest of $284,249, accrued interest of $8,450 and fees of $900.

~~Additionally, on July 20, 2020 and July 22, 2020, we entered Exchange Agreements (the “~~~~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 (the “~~~~Series D~~~~”) (See below).~~

At September 30, 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. At December 31, 2019, convertible notes payable related to August 30, 2019 convertible debt amounted to $658,623, which consists of $2,469,840 of principal balance due and is net of unamortized debt discount of $1,811,217.

~~On July 20, 2020, the Company entered an Exchange Agreement (the “~~~~Cavalry Exchange Agreement~~~~”) with one of the investors in the August 2019 Notes and August 2019 Warrants, Cavalry Fund I, LP, (“~~~~Cavalry~~~~”) 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 (the “~~~~Series D~~”). Pursuant to the Cavalry Exchange Agreement, Cavalry exchanged August 2019 Notes with an aggregate remaining principal and accrued interest amounts outstanding of $559,846.31 and August 2019 Warrants to purchase 228,713,916 shares of common stock for 301,457 shares of Series D (the “~~Cavalry Exchange~~~~”).~~

~~On July 22, 2020, the Company entered an Exchange Agreement (the “~~~~Puritan Exchange Agreement~~~~”) with another investor, Puritan Partners LLC (“~~~~Puritan~~”) to exchange outstanding August 2019 Notes and August 2019 Warrants for Series D. Pursuant to the Puritan Exchange Agreement, Puritan exchanged August 2019 Notes with an aggregate remaining principal amount outstanding of $265,843.79 and August 2019 Warrants to purchase 194,445,377 shares of common stock for 221,269 shares of Series D (the “~~Puritan Exchange~~~~” and together with the Cavalry Exchange, the “~~~~Series D Exchanges~~~~”).~~

~~In connection with Cavalry Exchange, the Company and Cavalry entered into a leak-out agreement, dated as of July 20, 2020 (the “~~~~Cavalry Leak-Out Agreement~~”), whereby Cavalry agreed that, until the earliest to occur of (a) 120 days from July 20, 2020, (b) the common stock trading at an average reported volume of at least 100,000,001 shares for three consecutive trading days, (c) the price per share of the common stock exceeding $0.10 in a transaction, (d) the time of release (whether by termination of an applicable leak-out agreement or otherwise), in whole or in part, of any leak-out agreement with any other holder of securities, or (e) any breach by the Company of any term of the Cavalry Leak-Out Agreement that is not cured within five trading days following delivery of written notice of such breach by Cavalry to the Company, neither Cavalry, nor any of its Affiliates (as defined in the Cavalry Leak-Out Agreement), collectively, shall sell, on any trading day, more than 10% of the common stock sold on such trading day.

~~In connection with the Puritan Exchange, the Company and Puritan entered into a Leak-Out Agreement, dated as of July 22, 2020 (the “~~~~Puritan Leak-Out Agreement~~”), whereby Puritan agreed that, until the earliest to occur of (a) 120 days from July 22, 2020, (b) the common stock trading at an average reported volume of at least 100,000,001 shares for three consecutive trading days, (c) the price per share of the common stock exceeding $0.10 in a transaction, (d) the time of release (whether by termination of an applicable leak-out agreement or otherwise), in whole or in part, of any leak-out agreement with any other holder of securities, or (e) any breach by the Company of any term of the Puritan Leak-Out Agreement that is not cured within five trading days following delivery of written notice of such breach by Puritan to the Company, neither Puritan, nor any of its Affiliates (as defined in the Puritan Leak-Out Agreement), collectively, shall sell, on any trading day, more than 10% of the common stock sold on such trading day.

~~In connection with the Series D Exchanges, the Board of Directors (the “~~~~Board~~”) created the Series D 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. 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, 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.

~~On October 3, 2019, the Company issued and sold to an investor a convertible promissory note in the principal amount of $166,667 (the “~~~~October 3 Note~~~~”), and warrants to purchase up to 66,401 shares of the Company’s common stock (the “~~~~October 3 Warrant~~”). The Company received net proceeds of $150,000, which is net of a 10% original issue discounts of $16,667. 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 payment in the Company’s common stock in lieu of a cash payment (each, an “~~October 3 Note Stock Payment~~”). If the investor requests an 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, (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 is 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 $0.006 due to the adjusted conversion price of certain other convertible notes issued by the Company. See Note 6 to the consolidated financial statements for additional details.

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.

During the nine months ended September 30, 2020, the Company issued 27,525,109 shares of its common stock upon the conversion of principal and default interest of $216,667, accrued interest of $11,774, fees of $5,000, and additional interest expense of $2,180.

At September 30, 2020, convertible notes payable related to the October 3, 2019 convertible debt amounted to $0. At December 31, 2019, convertible notes payable related to the October 3, 2019 convertible debt amounted to $33,334, which consists of $166,667 of principal balance due and is net of unamortized debt discount of $133,333.

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 became due and payable on October 14, 2020 and the November 7, 2019 convertible promissory note of $200,000 became 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.

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 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~~ issued and sold to certain investors convertible promissory notes in the aggregate principal amount of $2,068,000 (the “Q1/Q2 2020 Notes”), and warrants to purchase up to 827,200 shares of the Company’s common stock (the “Q1/Q2 2020 Warrants”). We received net proceeds of $1,880,000, which is net of a 10% original issue discounts of $188,000. The Q1/Q2 2020 Notes initially bore interest at 6% per annum and 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~~on such Q1/Q2 2020 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 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.

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 therein and summarized ~~in this report.~~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 ~~applicable~~ Q1/Q2 2020 ~~Note)~~Notes) during the 20 consecutive Trading Day (as defined in the ~~applicable~~ Q1/Q2 2020 ~~Note)~~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 ~~common stock. 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 ~~contain down-round protection under which~~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 ~~Note~~Notes were converted for Common Stock at the advantageous conversion price ~~was reduced on a full-ratchet basis,~~applicable to ~~$0.006 due~~post-Events of Default, the Q1/Q2 Notes are not also entitled to receive the ~~adjusted conversion price of certain other convertible notes issued by~~Mandatory Default Payment (as defined in the ~~Company.~~

~~The~~ Q1/Q2 2020 ~~Warrants are exercisable at any time on or after the date~~Notes) of ~~the issuance and entitle the investors to purchase shares~~130% of principal amount. However, since a note holder could conceivably disagree with the Company’s ~~common stock for a period~~position in this regard, the Company has decided, out of ~~five years from the initial date the 2020 Warrants become exercisable. Under the terms~~an abundance of caution and despite its confidence that its construction of the Q1/Q2 2020 ~~Warrants,~~Notes is the ~~investors are~~only correct one, to accrue a reserve as if a note holder were entitled both to ~~exercise~~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 ~~Warrants to purchase up to 827,200 shares~~Notes. Accordingly. as of ~~the Company’s common stock at an initial exercise price of $0.40, subject to adjustment as detailed in the respective Q1/Q2 2020 Warrants.~~

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.

~~During the three months ended September 30, 2020, we issued 291,796,804 shares of our common stock upon the conversion of principal and default interest of $1,887,000 and accrued interest of $3,731.~~

~~At September 30, 2020,~~March 31, 2021, convertible notes payable and default interest due related to the Q1/Q2 2020 Notes amounted to ~~$698,821,~~$736,866, which consists of $801,400 of principal ~~balance~~and default penalty balances due and is net of unamortized debt discount of ~~$102,579.~~$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.

During the three months ended June 30, 2021, the Company and each investor entered into a letter agreement whereby the investor waived its right to any Mandatory Default Payment. Accordingly, during the three months ended June 30, 2021, we reversed the accrued Mandatory Penalty amount due of $664,400 and recorded a gain on debt extinguishment of $664,400. Additionally, during the three months ended June 30, 2021, we issued 28,358,841 shares of its common stock upon the conversion of all remaining principal and interest balances due aggregating $277,916. Hence, as of September 30, 2021, convertible notes payable and default interest due related to the Q1/Q2 2020 Notes amounted to $0. 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, 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~~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.

Due to the default of August 2019 Note Amortization Payments due on our August 2019 Notes and other notes, 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.

During the three months ended ~~September~~June 30, ~~2020,~~2021, we issued ~~38,500,000~~15,923,322 shares of ~~our~~its common stock upon the conversion of all remaining principal and interest balances due aggregating $95,540. Hence, as of September 30, 2021, convertible notes payable and default interest ~~of $231,000.~~

On October 8, 2020, we 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 ~~default interest due~~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. We paid fees of $35,000 and received net proceeds of ~~unamortized debt discount~~$605,000. The initial exercise price of ~~$175,157.~~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 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. 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 $0.01 per share.

During April 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) 32,127 shares of Series E and (ii) Warrants to 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 2021 Series E Offering”). The gross proceeds to the Company were $375,000, or $11.67 per unit. We paid fees of $42,500 and received net proceeds of $332,500. The initial exercise price of the Warrants related to the April 2021 Series E Offering is $0.01 per share, subject to adjustment. Additionally, the Company issued 8,571,4293 warrants to the placement agent at an initial exercise price of $0.01 per share.

The Company’s trading price quoted on the OTC Pink market fell from $3.50 per share on January 8, 2020 to ~~$0.01~~$0.0267 on September 30, ~~2020.~~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 $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 ~~September 30,~~December 31, 2020, we issued ~~895,546,406~~1,013,408,088 shares of our common stock in connection with the conversion of convertible notes payable and default interest of ~~$7,060,630,~~$8,353,965, accrued interest of ~~$301,452,~~$553,596, and fees of $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 155,914,308 shares of its common stock upon the cashless exercise of 157,297,448 warrants. Also, we issued ~~398,350,000~~522,726,000 shares of common stock upon the conversion of ~~398,350~~522,726 shares of series D preferred ~~stock.~~ stock and issued other shares of common stock during fiscal 2020.

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.

During the three months ended June 30, 2021, we issued 28,358,841 shares of its common stock upon the conversion of all remaining Q1/Q2 2020 Note principal and interest balances due aggregating $277,916.

During the three months ended June 30, 2021, we issued 15,923,322 shares of its common stock upon the conversion of all remaining April 20 Note principal and interest balances due aggregating $95,540.

During the three months ended June 30, 2021, we issued 52,482,141 shares of its common stock in connection with the cashless exercise of 98,557,429 warrants. The exercise price was based on contractual terms of the related warrant.

In May and June 2021, we issued 68,571,429 shares of its common stock and received proceeds of $685,714 from the exercise of 68,571,429 warrants at $0.01 per share.

Consequently, the total number of shares of common stock outstanding has increased from 11,832,603 on December 31, 2019, to ~~1,472,924,335~~2,837,199,009 on September 30, ~~2020.~~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.

To enable the Company 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 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 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 sufficient number of votes to approve the Authorized Share Increase Amendment under the Company’s Amended and Restated Articles of Incorporation, bylaws and Nevada law. Pursuant to applicable securities laws and Section 78.390 of the Nevada Revised Statutes, the Company prepared and mailed an Information Statement to its stockholders of 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 amended, the Authorized Share Increase Amendment became effective on July 20, 2020 which was at least twenty calendar days after the Information Statement was first sent to stockholders.

~~On July 24, 2020, we issued 1,000,000~~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 to authorize an increase of the number of shares of ~~our~~ common stock ~~upon~~that the ~~conversion of 1,000,000~~Company may issue to 10,000,000,000 shares, ~~of Series B preferred shares.~~par value $0.001 (the “2021 Amendment”). 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 filed a definitive information statement on Schedule 14C on March 15, 2021 and first mailed that information statement to stockholders on 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 December 31, 2020, Prime EFS PPP Loan amounted to $2,941,212 and is included in liabilities subject to assignment for benefit of creditors on the Company’s unaudited condensed consolidated balance sheet. Effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021, this liability of $2,941,212 was deconsolidated and removed from the Company’s unaudited condensed consolidated balance sheet.

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. On December 31, 2020, Shypdirect PPP Loan amounted to $504,910 and is included in liabilities subject to assignment for benefit of creditors on the Company’s unaudited condensed consolidated balance sheet. Effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021, this liability of $504,940 was deconsolidated and removed from the Company’s unaudited condensed consolidated balance sheet.

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 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 notified Prime EFS by the Prime EFS Termination Notice that Amazon did not intend to renew the In-Force Agreement when it expired. In the Prime EFS Termination Notice, Amazon stated that the In-Force Agreement would expire 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, 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 against Amazon, and covenant not to sue Amazon. On August 4, 2020, the Company, Prime EFS and Shypdirect accepted the Aug. 3 Proposal.

~~Approximately 58.4% and 39.0% of the Company’s revenue of $23,503,384~~Cash Flows

Net cash flows used in operating activities for the nine months ended September 30, ~~2020~~2021 amounted to $2,863,483. During the nine months ended September 30, 2021, net cash used in operating activities was primarily attributable to ~~Prime EFS’s last-mile DSP business~~net income of $7,668,607, adjusted for the add back (reduction) of non-cash items such as depreciation and ~~Shypdirect’s mid-mile~~amortization expense of $498,876, derivative income of $3,284,306, amortization of debt discount of $83,548, gain on debt extinguishment of $1,564,941, warrant exercise inducement expense of $4,193,134, a non-cash gain from the deconsolidation of subsidiaries of $12,448,899 and ~~long-haul business with Amazon. respectively. The termination~~loss on lease abandonment of ~~the Amazon last-mile business will have~~$1,223,628, and changes in operating assets and liabilities such as a ~~material adverse impact on the Company’s business~~decrease in ~~the 4th fiscal quarter~~accounts receivable of ~~2020~~$173,941, a decrease in prepaid expenses and ~~thereafter. If the Amazon mid-mile~~other current assets of $159,142, a decrease in security deposit of $94,000, an increase in accounts payable and ~~long-haul business is discontinued after May 14, 2021 it would have~~accrued expenses of $500,908, a ~~material adverse impact on the Company’s business~~decrease in ~~2nd fiscal quarter~~insurance payable of ~~2021~~$123,445, and ~~thereafter.~~a decrease in accrued compensation and related benefits of $16,310.

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 our restructuring plan, commenced in February 2020.

Net cash flows used in operating activities for the nine months ended September 30, 2020 amounted to $2,369,261. During the nine months ended September 30, 2020, net cash used in operating activities was primarily attributable to a net loss of $35,506,373, adjusted for the add back (reduction) of non-cash items such as depreciation and amortization expense of $42,101, derivative expense of $31,835,642, amortization of debt discount of $4,664,605, interest expense related to debt default of $1,531,335, stock-based compensation of $1,999,749, a non-cash gain on debt extinguishment of $(7,203,589), and changes in operating assets and liabilities such as a decrease in accounts receivable of $628,378, an increase in prepaid expenses and other current assets of $216,181, an increase in security deposit of $129,750, a decrease in accounts payable and accrued expenses of $12,623, a decrease in insurance payable of $250,961, and an increase in accrued compensation and benefits of $226,415.

Net cash ~~flows~~ used in ~~operating~~investing activities for the nine months ended September 30, ~~2019~~2021 amounted to ~~$4,231,915. During the nine months ended September 30, 2019,~~$2,119,664 and consisted of net cash used ~~in operating activities was primarily attributable to a net loss of $37,970,095, adjusted~~ for the ~~add back (reduction)~~acquisition of ~~non-cash items such as depreciation~~DDTI and amortization expense of $873,020, derivative expense of $56,018,848, amortization of debt discount of $4,017,444, stock-based compensation of $8,445,770, a gain on debt extinguishment of $(39,316,358), impairment expense of $1,724,591, non-cash loan fees of $601,121 and changes in operating assets and liabilities such as an increase in accounts receivable of $147,696, an increase in prepaid expenses and other current assets of $174,653, and a decrease in accrued compensation and related benefits of $148,523Cougar Express offset by ~~an increase in accounts payable~~cash proceeds from the sale of property and ~~accrued expenses~~equipment of ~~$1,626,306.~~$3,451.

Net cash used in investing activities for the nine months ended September 30, 2020 amounted to $460,510 and consisted of cash paid for the purchase of five box trucks of $460,510.

For the nine months ended September 30, ~~2019 amounted to $16,119 and consisted of~~2021, net cash provided by financing activities totaled $7,072,193. During the nine months ended September 30, 2021, we received proceeds from the ~~disposal~~sale of ~~trucks~~Series E preferred shares of $3,590,500, cash proceeds of $3,940,669 from the exercise of warrants and ~~van~~an increase in amounts due to related party of ~~$81,000~~$37,315, offset by ~~cash paid for~~ the ~~purchase~~repayment of ~~property and equipment~~notes payable of ~~$59,256 and a reduction of cash related to the disposal of Save On of $5,625.~~$496,291.

For the nine months ended September 30, 2020, net cash provided by financing activities totaled $3,098,101. For the nine months ended September 30, 2020, we received proceeds from convertible debt of $1,912,382 and proceeds from notes payable of $4,479,662, offset by the repayment of convertible notes of $257,139, the repayment of related party advances of $80,438, and the repayment of notes payable of $2,956,366.

For the nine months ended September 30, 2019, net cash provided by financing activities totaled $3,926,342. For the nine months ended September 30, 2019, we received proceeds from the sale of common stock and warrants of $1,462,500, proceeds from related party convertible notes of $2,500,000, proceeds from convertible debt of $1,938,900, proceeds from notes payable of $7,791,020 and proceeds from related party notes of $755,000 offset by the repayment of convertible notes of $473,579, the repayment of related party notes of $495,000, and the repayment of notes payable of $9,584,459.

~~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 nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, we had ~~a net~~ loss from operations of ~~$35,506,373~~$5,251,336 and ~~$37,970,095~~$3,919,831 and net cash used in operations was ~~$2,369,261~~$2,863,483 and ~~$4,231,915,~~$2,369,261, respectively. Additionally, we had an accumulated deficit, shareholders’ ~~deficit,~~equity, and a working capital ~~deficit~~ of ~~$114,818,245, $12,272,369~~$115,959,772, $3,941,546, and ~~$12,974,773,~~$1,283,101, respectively, aton September 30, ~~2020.~~2021. Furthermore, ~~the Company failed to make required payments of principal~~effective September 30, 2020 and ~~interest on certain of its convertible debt instruments and notes payable.~~in May 2021, we lost major contracts with our primary customer as described below.

On June 19, 2020, Amazon notified Prime EFS by the Prime EFS Termination Notice that ~~Amazon would~~it does not intend to renew ~~its Delivery Service Partner (DSP) Agreement with Prime EFS when~~ the In-Force Agreement ~~expired on September 30, 2020 and such~~when that agreement expired. In the Prime EFS Termination Notice, Amazon stated that the In-Force Agreement ~~in fact, expired~~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).~~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 ~~would agree~~agrees to cooperate in an orderly transition of its Amazon last-mile delivery business to other service providers, ~~release~~Prime EFS releases any and all claims it may have against Amazon, and ~~covenant~~Prime EFS covenants not to sue Amazon. In a “Separation Agreement” dated August 23, 2020, by and among Amazon, Prime EFS and the Company, Prime EFS and the Company agreed, for nominal consideration, that the Delivery Service Partner Program Agreement between Amazon and Prime EFS would terminate effective September 30, 2020; that Prime EFS and the Company would cooperate in an orderly transition of the last-mile delivery business from Prime EFS to other service providers; that Prime EFS would return any and all vehicles leased from Element Fleet Corporation by October 7, 2020 in good repair; and that Prime EFS would dismiss the Amazon Arbitration with prejudice. Under the same Separation Agreement, Prime EFS and the Company released any and all claims they had against Amazon and ~~covenanted~~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 termination of the Prime EFS last-mile business with Amazon on September 30, 2020 had a material adverse impact on the operations of Prime EFS beginning in the 4th fiscal quarter of 2020 and the termination of Shypdirect’s Amazon mid-mile and long-haul business, which was effective on or about May 14, 2021, had a material adverse impact on operations of Shypdirect beginning in the 2nd fiscal quarter of 2021. 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 which was accrued and included in contingency liabilities on the accompanying condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020.

The COVID-19 pandemic and resulting global disruptions have affected the Company’s businesses, as well as those of the Company’s customers and their third-party suppliers and sellers. To serve the Company’s customers while also providing for the safety of the Company’s employees and service providers, the Company has adapted numerous aspects of its logistics and transportation processes. The Company continues to monitor the rapidly evolving situation and expect to continue to adapt its operations to address federal, state, and local standards as well as to implement standards or processes that the Company determines to be in the best interests of its employees, customers, and communities. The impact of the pandemic and actions taken in response to it had minimal effects on the Company’s results of operations. 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 continues 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 and 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. ~~In April 2020,~~During the ~~Company’s subsidiaries, Prime EFS~~nine months ended September 30, 2021, the Company issued an aggregate of 343,118 shares of its Series E preferred stock for net proceeds of $3,590,500. 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. In May and June 2021, the Company issued 68,571,429 shares of its common stock and received proceeds of $685,714 from the exercise of 68,571,429 warrants at $0.01 per share. During the three months ended September 30, 2021, the Company issued 325,539,430 shares of its common stock and received proceeds of $3,254,955 from the exercise of 325,539,430 warrants at $0.01 per share.

We will continue to: (i) seek to replace ~~the Company’s~~its last-mile DSP Amazon business and supplement its mid-mile and long-haul Amazon business with other, non-Amazon, customers; (ii) explore other strategic relationships; and (iii) identify potential acquisition opportunities, while continuing to execute ~~our~~its restructuring ~~plan, commenced in February 2020.~~plan. We are seeking to raise capital through additional debt and/or equity financings to fund ~~our~~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 weit will be able to continue to do so. If we are unable to replace ~~our~~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. ~~These~~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 ~~the Company~~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 September 30, ~~2020.~~2021. Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only 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 September 30, ~~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 September 30, ~~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 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.

Disputes Between Prime EFS, ELRAC LLC, and Enterprise Leasing Company of Philadelphia, LLC

On or about January 10, 2020, Prime EFS was named as sole defendant in a civil action captioned 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 Action”). The complaint in the 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 LLC (“ELRAC”) to conduct its business. The complaint sought damages of not less than $382,000 plus $58,000 in insurance claims that ELRAC believes were collected by the Company and not reimbursed to ELRAC.

During the period it was leasing vans and trucks from ELRAC and its affiliate, Enterprise Leasing Company of Philadelphia, LLC (“Enterprise PA” and, with 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 “Arbitration”) against Enterprise at the American Arbitration Association seeking the return of not less than $327,000 of these deposits.

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 seeks $256,000 in damages. Enterprise also seeks $62,000 in insurance payments allegedly made by Utica to Prime EFS.

Prime EFS believes the Enterprise Answer and Counterclaims lack merit and intends to defend its position in the Arbitration vigorously. Nevertheless, ~~given the amount~~while it believes it has meritorious defenses to this action, out of ~~the Counterclaim~~an abundance of caution and ~~the documentation which Enterprise has submitted~~without prejudice to its position in the ~~arbitration in support thereof, the Company continues to reflect~~matter, as of December 31, 2021, Prime EFS accrued a contingency liability of $440,000 ~~i.e.,~~for purposes of this matter. Based on our knowledge of the ~~amount originally claimed~~matter, as ~~damages by ELRAC~~developed to date, the Company continue to agree with this estimate of probable Prime EFS liability. Since the Company deconsolidated Prime EFS effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in ~~the ELRAC Federal Action,~~September 2021, as ~~a contingency~~of September 30, 2021, this liability of $440,000 is no longer reflected on the Company’s condensed consolidated balance sheet.

~~As previously reported, in a settlement agreement entered into as of March 6, 2020, the Company’s wholly-owned subsidiary Prime EFS 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). Prime EFS did not pay a portion of the agreed $275,000 settlement amount by March 11, 2020 but the Company has subsequently paid the $275,000 in full. As more than eight months have now passed, and BMF has not again contacted Prime EFS concerning this matter, Prime EFS believes this matter to now be closed.

~~By letter dated April 28, 2020,~~After discontinuing a prior ~~investor~~action in ~~the Company,~~federal court, on April 23, 2021, Bellridge Capital, L.P. (“Bellridge”), claimed that the Company was 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 the April 28, 2020 letter, Bellridge contended that TLSS owed Bellridge $1,978,557.76 as of that date. In a purported standstill agreement subsequently proposed by Bellridge, Bellridge claimed that TLSS owed it $2,271,099.83, a figure which allegedly includes default rate interest. Bellridge also claimed that a subordination agreement it signed with the Company on August 30, 2019, was void ~~ab initio.~~ Bellridge also demanded the conversion of approximately $20,000 in indebtedness into the common stock of the Company, a conversion which the Company had not effectuated at the time because the parties had not come to agreement on a conversion price. Such agreement was required for Bellridge to exercise its conversion rights under an agreement dated April 9, 2019 between Bellridge and the Company.

~~On September 11, 2020, Bellridge~~ filed a civil action in New York Supreme Court, New York County, against TLSS and John Mercadante. This mater, the ~~Company, John Mercadante and Douglas Cerny~~“Bellridge Action,” was assigned civil action number 652728/2021.

The complaint in the ~~United States District Court~~Bellridge Action asserts 11 causes of action: (1) against TLSI, allegedly for ~~the Southern District~~breach of New York, captioned Bellridge Capital, L.P. v. Transportation and Logistics Systems, Inc., John Mercadante and Douglas Cerny. The case was assigned Case No. 20-cv-7485. The complaint alleges two separate claims (the first and second claims for relief) for purported violations of section 10(b) of the Securities and Exchange Act of 1934, as amendeda convertible promissory note issued June 18, 2018 (the “~~Exchange Act~~June 2018 Note”), which claim seeks $539,114.06 for allegedly unpaid principal plus interest, costs and ~~SEC Rule 10b-5 promulgated thereunder,~~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 ~~Company, Mr. Mercadante and/or Mr. Cerny; a claim (the third claim for relief) purportedly for control person liability under section 20(a) of the Exchange Act~~note; (4) against ~~Messrs. Mercadante and Cerny; a claim (the fourth claim for relief) purportedly for fraudulent inducement against the Company; a claim (the fifth claim for relief) against the Company~~TLSI, purportedly for breach of an exchange agreement between Bellridge ~~Capital, L.P. (“~~~~Bellridge~~”) and ~~the Company allegedly~~TLSI dated April 13, 2019 (the “~~Purported~~ 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 ~~(the sixth claim~~seeks a declaration that Bellridge is discharged from its obligations under the subordination agreement; (10) against TLSI, allegedly for relief) against the Company purportedly for specific performance of the Purported Exchange Agreement; a claim against the Company (the seventh claim for relief) for purported non-payment of a promissory note dated December 26, 2018 pursuantfailing to ~~which the Company borrowed $300,000 and committed to pay Bellridge $330,000 on or by March 15, 2019 plus 10% interest per annum (the “~~~~December 2018 Note~~~~”); a claim (the eighth claim for relief) purportedly for a declaratory judgment that the Company allegedly failed to comply with~~honor a condition precedent to the ~~effectiveness of a~~ subordination agreement, ~~(the “~~~~Subordination Agreement~~~~”) executed and delivered in connection with the Purported Exchange Agreement; and a~~which claim ~~(the ninth claim for relief) for breach of an assignment agreement, executed on or about July 20, 2018 (the “~~~~Partial Assignment Agreement~~~~”) in connection with a purchase of 50,000 shares of Company convertible preferred stock, by Bellridge, from a third party.~~

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.~~void under N.Y. Penal Law § 190.40 and cannot be enforced in this action.

On June 4, 2021, TLSI and Mercadante moved to dismiss this action for failure to state a claim and, as to Mercadante, lack of jurisdiction. On July 7, 2021, Bellridge filed opposition papers and on July 21, 2021, the defendants filed reply papers on this motion. The ~~ninth claim for relief seeks~~motion is scheduled to be argued to the ~~difference between the conversion price of the shares at time of the originally requested conversion~~assigned judge on October 20, 2021. In its reply papers, TLSI asserted, inter alia, that Bellridge has no damages because giving effect to its conversions and ~~the price~~cash payments by TLSI on the ~~actual date of conversion, plus liquidated damages of $57,960.~~

~~Briefly, the complaint in this action alleges, among other things, that the Company failed to make payments required under two promissory notes, namely the~~June and December 2018 Note, Bellridge had no out-of-pocket losses and ~~a convertible promissory note~~made approximately $500,000 on an investment of $1.92 million.

Itmatter, however, 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 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.

~~As previously disclosed, on~~On June 25, 2020, the Company was served with a putative shareholder derivative action filed in the Circuit Court of the 15^th Judicial 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.~~Inc. The action has been assigned Case No. 2020-CA-006581.

The Company’s current management has tendered the complaint to its directors’ and officers’ liability carrier for defense and indemnity purposes, which coverage is subject to a $250,000 self-insured ~~retention or “deductible.”~~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.

SCS has a right to file court papers opposing the above motion and thereafter the defendants ~~have a right~~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.

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.

~~All defendants believe the complaint lacks merit and intend to mount a vigorous defense~~

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.

On October ~~26, 2020, in lieu of filing an answer, all~~13, 2021, the Court denied the Defendants’ motion to dismiss. Also on October 13, 2021, the defendants ~~by counsel, submitted timely~~filed a letter motion (seeking leave to add Frank Mazzola as a third-party defendant in this action. On October 27, 2021, the ~~“Oct. 26 Letter Motion”~~)defendants filed their Answer and Counterclaims against Mrs. Mazzola.

As of December 31, 2020, out of an abundance of caution and without prejudice to its position in this matter, a $94,000 liability was included in liabilities subject to assignment for the benefit of creditors on the Company’s condensed consolidated balance sheet as of such date. Since the Company deconsolidated Prime EFS effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021, as of September 30, 2021, this liability is no longer reflected on the Company’s condensed consolidated balance sheet.

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.

On August 19, 2021, the Plaintiff filed a motion for leave to file a first amended complaint to name four (4) additional parties as defendants – TLSI, ShypCX, Inc., ShypFX, Inc. and Cougar Express, Inc. On September 16, 2021, each of these entities filed papers in opposition to this motion.

On September 24, 2021, the Court granted Plaintiff’s motion for leave to ~~dismiss~~amend the complaint ~~which filing pointed out numerous alleged deficiencies with the complaint. Among other things, in the Oct. 26 Letter Motion, defendants pointed out (a) that Mr. Cerny is not a proper defendant~~herein, thus adding TLSI, ShypCX, Inc., ShypFX, Inc. and that, in event, the Court lacks personal jurisdiction over him; (b) that the only conceivable contract on which the complaint could be based is the Amended and Restated Stock Purchase Agreement, dated September 30, 2018, pursuant to which Mrs. Mazzola and others sold their membership interests in Prime EFS to the Company; (c) that pursuant to that contract, “[i]n lieuCougar Express, Inc. as Defendants.

All of the ~~receipt of cash by Rosemary Mazzola at Closing, Rosemary Mazzola has agreed~~recently named Defendants in this action intend to loan such cash amount [$489,174] to the Company” — defined to be Prime EFS, not the Company; and (d) therefore, that the only entity with an obligation to pay any amounts allegedly due to Mrs. Mazzola under the 2018 agreement is Prime EFS, not the Company.

~~By order entered November 5, 2020, the Court gave new counsel for Mrs. Mazzola, the 80-year-old mother of Frank Mazzola, until November 23, 2020, to file an amended complaint~~vigorously defend themselves in this action and to pursue the third-party actions for defense and indemnity against both County Hall and Acrisure. However, owing to the early stage of this action, we cannot evaluate the likelihood of an adverse outcome or estimate our liability, if ~~warranted~~any, in connection with this claim.

This action was brought on April 27, 2020 in the Superior Court of New Jersey for Bergen County by the ~~amended complaint, gave defendants until December 7, 2020 to file~~plaintiff alleging injuries from a ~~renewed letter motion to dismiss this lawsuit.~~

~~Both defendants believe the complaint in~~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 ~~lacks merit and intend to mount a vigorous defense to the action.~~

~~As of September 30, 2020, this $94,000 liability is included in due to related parties on the accompanying condensed consolidated balance sheet.~~

As previously reported, on June 19, 2020, Amazon notified Prime EFS that Amazon does not intend to renew the In-Force Agreement when it expires. In the Prime EFS Termination Notice, Amazon stated that the In-Force Agreement expires on September 30, 2020. Prime EFS believed on advice of counsel that Amazon’s position misconstrued the expiration date under the In-Force Agreement. Prime EFS therefore filed an arbitration at the American Arbitration Association (the “~~AAA~~~~”) seeking temporary, preliminary, and permanent injunctive relief prohibiting Amazon from terminating the In-Force Agreement prior to March 31, 2021 (the “~~~~Amazon Arbitration~~~~”).~~

In a ruling issued July 30, 2020, the arbitrator appointed by the AAA on an emergency basis affirmed the validity of Amazon’s construction of the In-Force Agreement and notice terminating that agreement effective September 30, 2020. The Company concluded, on advice of counsel, that no court would suspend, vacate or modify the July 30, 2020, ruling.

~~Amazon did not state a reason for the Shypdirect Termination Notice. Under the Program Agreement, Amazon can terminate the agreement~~ without ~~a reason and solely for convenience on 120 days’ notice.~~

Pursuant to the Payment Plan, Prime EFS was obligated to pay ~~$75,000.00~~$75,000 to the Creditors on or before June 5, 2020 and ~~$75,000.00~~$75,000 to the Creditors on or before June 12, 2020.

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.

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 ~~condensed~~ consolidated balance aton September 30, 2021 and 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. Since the Company deconsolidated Prime EFS effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021, as of September 30, 2021, this liability is no longer reflected on the Company’s condensed consolidated balance sheet.

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.

~~Further, in the opinion of counsel, formed after reasonable inquiry, neither promissory note is enforceable against any person or entity other than Prime EFS.~~ If, as threatened, Mr. Nicholson files suit for ~~nonpayment~~non-payment under either or both promissory notes, it is anticipated that the ~~defendant(s)~~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.

~~Jose R. Mercedes-Mejia v. Shypdirect LLC,~~Since the Company deconsolidated Prime EFS ~~LLC et al.~~

~~On August 4, 2020,~~effective with the filing of executed Deeds of Assignment for the Benefit of Creditors in September 2021, as of September 30, 2021, this liability is no longer reflects on the Company’s condensed consolidated balance sheet. If Mr. Nicholson files suit against TLSI on one or both promissory notes, TLSI would defend itself vigorously in such an action, ~~was filed against Shypdirect,~~as these debts are solely Prime EFS liabilities and ~~others in the Superior Court~~any finding 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,~~TLSI is neither probable nor reasonably estimable. Thus, we cannot evaluate the likelihood of an adverse outcome or estimate our liability, if any, in connection with this claim.

On March 2, 2021, Shypdirect received a demand letter from Ryder Truck Rental, Inc. (“Ryder”) related to a breach of the Truck Lease and ~~Frank Mazzola~~

~~Plaintiff,~~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 ~~ex-dispatcher for Prime EFS, brought an action in~~aggregate contingency loss of $3,035,837. Shypdirect intends to dispute this demand. In addition, Shypdirect has returned all of the ~~United States District Court~~trucks to Ryder as Shypdirect is no longer using them. Since the Company deconsolidated Shypdirect effective with the filing of executed Deeds of Assignment for the ~~District~~Benefit of ~~New Jersey under~~Creditors in September 2021, as of September 30, 2021, this liability of $2,871,272 is no longer reflected on the ~~Family~~Company’s condensed consolidated balance sheet.

Other than discussed above, as of September 30, 2021, and ~~Medical Leave Act~~as of ~~1933 and~~ the ~~New Jersey Law Against Discrimination seeking unspecified compensatory and punitive damages. Plaintiff alleges she was fired while still in~~date of this filing, there were no pending or threatened lawsuits that could reasonably be expected to have a ~~neck brace. Prime EFS’ insurer has acknowledged its duty to defend this matter and the Company and Prime EFS expect that the insurer will ultimately indemnify Prime EFS for any damages paid.~~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.~~2020.

~~Amazon has given Notice of Termination of Prime EFS’s Delivery Service Partner Agreement~~

On June 19, 2020, Amazon notified Prime EFS in writing by the Prime EFS Termination Notice that Amazon did not intend to renew the In-Force Agreement when it expired. In the Prime EFS Termination Notice, Amazon stated that the In-Force Agreement would expire on September 30, 2020.

Additionally, on July 17, 2020, Amazon notified Shypdirect by the Shypdirect Termination Notice that Amazon had elected to terminate the Program Agreement between Amazon and Shypdirect effective as of November 14, 2020. 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, 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 against Amazon, and covenant not to sue Amazon. On August 4, 2020, the Company, Prime EFS and Shypdirect accepted the Aug. 3 Proposal.

Approximately 58.4% and 39.0% of the Company’s revenue of $23,503,384 for the nine months ended September 30, 2020 was attributable to Prime EFS’s last-mile DSP business and Shypdirect’s mid-mile and long-haul business with Amazon. respectively. The termination of the Amazon last-mile business will have a material adverse impact on the Company’s business in the 4th fiscal quarter of 2020 and thereafter. If the Amazon mid-mile and long-haul business is discontinued after May 14, 2021 it would have a material adverse impact on the Company’s business in 2nd fiscal quarter of 2021 and thereafter.

The Company will continue to: (i) seek to replace the Company’s last-mile DSP Amazon business and supplement its mid-mile and long-haul Amazon business with other, non-Amazon, customers; (ii) explore other strategic relationships; and (iii) identify potential acquisition opportunities, while continuing to execute our restructuring plan, commenced in February 2020. If the Shypdirect mid-mile and long-haul business with Amazon is terminated and not replaced, the Company would have to curtail most or all operations.

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 interest, 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 Shypdirect 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 Shypdirect 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 lenders 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 September 30, 2020, the Company issued 477,682,407 shares of its common stock in connection with the conversion of convertible notes payable and default interest of $4,215,651, accrued interest of $82,852, and fees of $900. The conversion price was based on contractual terms of the related debt. In connection with the issuance of these shares, the Company recorded a loss on debt extinguishment of $512,366, which is associated with the fair market value of the excess shares issued upon conversion of the principal balances converted at the conversion price.

During the period from July 1, 2020 to August 10, 2020, the Company issued 85,710,419 shares of its common stock in connection with the cashless exercise of 83,662,448 warrants. The exercise price was based on contractual terms of the related warrant. In connection with the cashless exercise of warrants, the Company recorded a loss on debt extinguishment of $237,664, which is associated with the fair market value of the excess common shares issued upon the cashless exercise of warrants over the number of shares issuable using the warrant exercise price.

On July 20, 2020, in connection with the parties’ recent settlement, the Company issued 10,281,018 shares to Bellridge to settle certain claims of Bellridge (see Note 9 under legal matters). These shares were valued at $502,742, or $0.049 per share, based on the quoted trading price on the date of grant. In connection with these shares, the Company recorded a loss on debt extinguishment of $502,742.

~~On July 24, 2020, the Company issued 1,000,000 shares to its common stock upon the conversion of 1,000,000 shares of Series B preferred shares.~~

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~~”). 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 the principal balances and accrued interest converted at the conversion price.

During the period from July 1, 2020 to September 30, 2020, the Company issued 398,350,000 shares of its common stock in connection with the conversion of 398,350 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.

On October 8, 2020, the Company entered into a Securities Purchase Agreement with the Selling Stockholders pursuant to which the Selling Stockholders agreed to purchase, severally and not jointly, an aggregate of (i) 47,977 shares of Series E Stock and (ii) the Warrants to purchase 23,988,500 shares of common stock, $0.001 par value per share, which are equal to 50% of the shares of Common Stock issuable upon conversion of the Series E Stock if the Series E Stock were converted on October 8, 2020. The securities issued in this transaction were issued pursuant to Section 4(a)(2) of the Securities Act.

~~Subsequent to September 30, 2020,~~2021, we issued ~~32,269,000~~25,725,519 shares of our common stock in connection with the conversion of ~~32,269~~17,135 shares of Series D.E. The conversion ratio was ~~1,000 shares of common stock for each share of Series D~~ based on the Series ~~D COD.~~E certificate of designation, as amended.

~~In October 2020,~~During the three months ended September 30, 2021, we issued ~~53,255,583~~325,539,430 shares of ~~our~~its common stock ~~in connection with~~and received proceeds of $3,254,955 from the ~~conversion~~exercise of ~~a convertible note payable and default interest of $293,150 and accrued interest of $26,384. The conversion price was based on contractual terms of the related debt.~~325,539,430 warrants at $0.01 per share.

In October and November 2020, we issued 5,939,432 shares of our common stock in connection with the conversion of accrued interest of $36,317. The conversion price was based on contractual terms of the related debt.

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

~~The information contained in “Note 6 - Convertible Promissory Notes Payable and Notes Payable” is incorporated by reference to this Part II, Item 3.~~None.

On January 30, 2020, due to the default of the 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. As of November 14, 2020, the total arrearage on the August 2019 Notes is $0.

In February 2020, due to the default of the 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. As of November 14, 2020, the October 3 Note was fully converted.

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 $500,000, were deemed in default. Accordingly, default interest accrues at 18% and the Fall 2019 Notes became due on the respective date of default. As of November 14, 2020, the total arrearage on the Fall 2019 Notes is $500,000.

Due to the default of amortization payments due on our August 2019 Notes and other notes as discussed above, the Q1/Q2 2020 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. As of November 14, 2020, the total arrearage on the Q1/Q2 Notes is $801,400.

Due to the default of amortization payments due on our August 2019 Notes and other notes as discussed above, 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. As of November 14, 2020, the total arrearage on the April 20 Note is $69,300.

# 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 November ~~13, 2020~~15, 2021
Common Stock, $0.001		~~1,564,388,350~~2,865,770,438

		Page

PART I. FINANCIAL INFORMATION		3

Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets - As of September 30, ~~2020~~2021 (unaudited) and December 31, ~~2019~~2020	3
	Condensed Consolidated Statements of Operations - For the Three and Nine Months Ended September 30, 2021 and 2020 ~~and 2019~~ (unaudited)	4
	Condensed Consolidated Statements of Changes in Shareholders’ ~~Deficit~~Equity (Deficit) – For the Three and Nine Months Ended September 30, 2021 and 2020 ~~and 2019~~ (unaudited)	5
	Condensed ~~consolidated~~Consolidated Statements of Cash Flows - For the Nine Months Ended September 30, 2021 and 2020 ~~and 2019~~ (unaudited)	76
	~~Condensed~~ Notes to Unaudited Consolidated Financial Statements ~~(unaudited)~~	87

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4546
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6462
Item 4.	Controls and Procedures	6462

PART II. OTHER INFORMATION		65

Item 1.	Legal Proceedings	6563
Item 1A.	Risk Factors	70
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7170
Item 3.	Defaults Upon Senior Securities	7170
Item 4.	Mine Safety Disclosures	7270
Item 5.	Other Information	7270
Item 6.	Exhibits	7271
Signatures		7372

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019

REVENUES	$	6,309,509		$	7,759,451		$	23,503,384		$	21,664,070

COST OF REVENUES		5,978,265			6,293,699			20,831,870			19,366,374

GROSS PROFIT		331,244			1,465,752			2,671,514			2,297,696

OPERATING EXPENSES:
Compensation and related benefits		551,306			3,433,741			1,955,854			11,150,955
Legal and professional fees		621,105			517,277			3,523,811			1,588,359
Rent		156,738			83,911			496,349			269,148
General and administrative expenses		173,680			720,481			615,331			2,316,016
Impairment loss		-			-			-			1,724,591

Total Operating Expenses		1,502,829			4,755,410			6,591,345			17,049,069

LOSS FROM OPERATIONS		(1,171,585	)		(3,289,658	)		(3,919,831	)		(14,751,373	)

OTHER (EXPENSES) INCOME:
Interest expense		(2,028,958	)		(2,339,508	)		(7,016,597	)		(4,936,951	)
Interest expense - related parties		(22,686	)		(35,753	)		(152,262	)		(183,392	)
Loan fees		-			-			-			(601,121	)
Gain (loss) on debt extinguishment, net		907,447			(4,714,751	)		7,151,041			39,203,017
Other income		91,950			-			266,918			-
Derivative income (expense), net		37,826,129			(981,244	)		(31,835,642	)		(56,018,849	)

Total Other (Expenses) Income		36,773,882			(8,071,256	)		(31,586,542	)		(22,537,296	)

INCOME (LOSS) FROM CONTINUING OPERATIONS		35,602,297			(11,360,914	)		(35,506,373	)		(37,288,669	)

LOSS FROM DISCONTINUED OPERATIONS:
Loss from discontinued operations		-			-			-			(681,426	)

NET INCOME (LOSS)		35,602,297			(11,360,914	)		(35,506,373	)		(37,970,095	)

Deemed dividend related to ratchet adjustment		-			(981,548	)		(18,696,012	)		(981,548	)

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	35,602,297		$	(12,342,462	)	$	(54,202,385	)	$	(38,951,643	)

NET INCOME (LOSS) PER COMMON SHARE - BASIC
Net income (loss) from continuing operations	$	0.03		$	(1.10	)	$	(0.11	)	$	(4.34	)
Loss from discontinued operations		0.00			(0.00	)		(0.00	)		(0.08	)

Net income (loss) per common share - basic	$	0.03		$	(1.10	)	$	(0.11	)	$	(4.42	)

NET INCOME (LOSS) PER COMMON SHARE - DILUTED
Net income (loss) from continuing operations	$	0.00		$	(1.10	)	$	(0.11	)	$	(4.34	)
Loss from discontinued operations		0.00			(0.00	)		(0.00	)		(0.08	)

Net income (loss) per common share - diluted	$	0.00		$	(1.10	)	$	(0.11	)	$	(4.42	)

WEIGHTED AVERAGE COMMON SHARE OUTSTANDING:
Basic		1,136,231,561			11,247,054			472,432,161			8,811,489
Diluted		2,506,145,678			11,247,054			472,432,161			8,811,489


	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	)
Common stock issued for conversion of Series E preferred shares
Common stock issued for conversion of Series E preferred shares, shares
Common stock issued for warrant exercise
Common stock issued for warrant exercise, shares
Beneficial conversion effect related to debt conversions
Warrant exercise inducement expense
Reduction of put premium upon conversion
Relative fair value of warrants issued in connection with convertible debt
Accretion of stock-based compensation
Reclassification of warrants from equity to derivative liabilities
Deemed dividend related to price protection
Cancellation of issuable shares
Cancellation of issuable shares, shares
Common stock issued for debt conversion, accrued interest and fees
Common stock issued for debt conversion, accrued interest and fees, shares
Common shares issued for cashless warrant exercise
Common shares issued for cashless warrant exercise, shares
Warrants issued for services
Common stock issued for Series B preferred stock
Common stock issued for Series B preferred stock, shares
Conversion of debt and accrued interest to series D preferred stock
Conversion of debt and accrued interest to series D preferred stock, shares
Conversion of series D preferred stock to common stock
Conversion of series D preferred stock to common stock, shares
Common stock issued for settlement
Common stock issued for settlement

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	)

Common stock issued for debt conversion		-		-		-			-			44,282,163		44,282						329,174			-			373,456

Sales of Series E preferred share units		-		-		32,126			32			-		-		-		-		332,468			-			332,500

Common stock issued for conversion of Series E preferred shares		-		-		(340,346	)		(340	)		571,296,287		571,296		-		-		(570,956	)		-			-

Common stock issued for warrant exercise		-		-		-			-			121,053,570		121,054		-		-		564,660			-			685,714

Beneficial conversion effect related to debt conversions		-		-		-			-			-		-		-		-		143,872			-			143,872

Deemed dividend related to beneficial conversion features and accrued dividends		-		-		-			-			-		-		-		-		104,533			(156,097	)		(51,564	)

Net income		-		-		-			-			-		-		-		-		-			3,682,857			3,682,857

Balance, June 30, 2021		700,000		700		108,150			108			2,485,934,060		2,485,934		-		-		109,966,487			(122,193,316	)		(9,740,087	)

Common stock issued for conversion of Series E preferred shares		-		-		(17,135	)		(17	)		25,725,519		25,726		-		-		(25,709	)		-			-

Common stock issued for warrant exercise		-		-		-			-			325,539,430		325,539		-		-		2,929,416			-			3,254,955

Warrant exercise inducement expense		-		-		-			-			-		-		-		-		4,193,134			-			4,193,134

Deemed dividend related to beneficial conversion features and accrued dividends		-		-		-			-			-		-		-		-		-			(21,386	)		(21,386	)

Net income		-		-		-			-			-		-		-		-		-			6,254,930			6,254,930

Balance, September 30, 2021		700,000	$	700		91,015		$	91			2,837,199,009	$	2,837,199		-		-	$	117,063,328		$	(115,959,772	)	$	3,941,546

	Preferred Stock Series A				Preferred Stock Series B						Preferred Stock Series D						Common Stock				Common Stock Issuable						Additional Paid-in			Accumulated			Total Shareholders’
	Shares		Amount		Shares			Amount			Shares			Amount			Shares		Amount		Shares			Amount			Capital			Deficit			Deficit

Balance, December 31, 2019		-	$	-		1,700,000		$	1,700			-		$	-			11,832,603	$	11,833		25,000		$	25		$	47,715,878		$	(60,615,860	)	$	(12,886,424	)

Reduction of put premium upon conversion		-		-		-			-			-			-			-		-		-			-			73,725			-			73,725

Common stock issued for debt conversion		-		-		-			-			-			-			5,290,406		5,290		-			-			336,229			-			341,519

Beneficial conversion effect related to debt conversions		-		-		-			-			-			-			-		-		-			-			172,720			-			172,720

Relative fair value of warrants issued in connection with convertible debt		-		-		-			-			-			-			-		-		-			-			262,872			-			262,872

Accretion of stock-based compensation		-		-		-			-			-			-			-		-		-			-			31,250			-			31,250

Reclassification of warrants from equity to derivative liabilities		-		-		-			-			-			-			-		-		-			-			(11,381,885	)		-			(11,381,885	)

Deemed dividend related to price protection		-		-		-			-			-			-			-		-		-			-			18,696,012			(18,696,012	)		-

Net loss		-		-		-			-			-			-			-		-		-			-			-			(3,453,338	)		(3,453,338	)

Balance, March 31, 2020		-		-		1,700,000			1,700			-			-			17,123,009		17,123		25,000			25			55,906,801			(82,765,210	)		(26,839,561	)

Cancellation of issuable shares		-		-		-			-			-			-			-		-		(25,000	)		(25	)		25			-			-

Reduction of put premium upon conversion		-		-		-			-			-			-			-		-		-			-			311,660			-			311,660

Common stock issued for debt conversion, accrued interest and fees		-		-		-			-			-			-			412,573,593		412,573		-			-			2,317,667			-			2,730,240

Beneficial conversion effect related to debt conversions		-		-		-			-			-			-			-		-		-			-			15,531,703			-			15,531,703

Common shares issued for cashless warrant exercise		-		-		-			-			-			-			70,203,889		70,204		-			-			(70,204	)		-			-

Warrants issued for services		-		-		-			-			-			-			-		-		-			-			1,963,291			-			1,963,291

Accretion of stock-based compensation		-		-		-			-			-			-			-		-		-			-			5,208			-			5,208

Net loss		-		-		-			-			-			-			-		-		-			-			-			(67,655,332	)		(67,655,332	)

Balance, June 30, 2020		-		-		1,700,000			1,700			-			-			499,900,491		499,900		-			-			75,966,151			(150,420,542	)		(73,952,791	)

Common stock issued for series B preferred stock		-		-		(1,000,000	)		(1,000	)		-			-			1,000,000		1,000		-			-			-			-			-

Common stock issued for debt conversion, accrued interest and fees		-		-		-			-			-			-			477,682,407		477,682		-			-			4,334,087			-			4,811,769

Beneficial conversion effect related to debt conversions		-		-		-			-			-			-			-		-		-			-			19,700,260			-			19,700,260

Common shares issued for cashless warrant exercise		-		-		-			-			-			-			85,710,419		85,711		-			-			151,954			-			237,665

Conversion of debt and accrued interest to series D preferred stock		-		-		-			-			522,726			522			-		-		-			-			825,167			-			825,689

Conversion of series D preferred stock to common stock		-		-		-			-			(398,350	)		(398	)		398,350,000		398,350		-			-			(397,952	)		-			-

Common stock issued for settlement		-		-		-			-			-			-			10,281,018		10,281		-			-			492,461			-			502,742

Net loss		-		-		-			-			-			-			-		-		-			-			-			35,602,297			35,602,297

Balance, September 30, 2020		-	$	-		700,000		$	700			124,376		$	124			1,472,924,335	$	1,472,924		-		$	-		$	101,072,128		$	(114,818,245	)	$	(12,272,369	)

	●	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.

	At September 30, 2020						At December 31, 2019						On September 30, 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		—		—	$	2,886,811		—		—	$	2,135,939		—		—	$	—		—		—	$	4,181,187

	For the Nine Months ended September 30, 2020			For the Nine Months ended September 30, 2019			For the Nine Months ended September 30, 2021			For the Nine Months ended September 30, 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		1,702,474			936,644			-			1,702,474
Initial valuation of derivative liabilities included in derivative expense		14,892,068			1,017,323			-			14,892,068
Gain on extinguishment of debt related to April 9, 2019 modifications		-			(61,841,708	)
Gain on extinguishment of debt related to repayment/conversion of debt		(44,169,129	)		(246,110	)		(896,881	)		(44,169,129	)
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		16,943,574			55,001,526			(3,284,306	)		16,943,574
Balance at end of period	$	2,886,811		$	1,917,888		$	-		$	2,886,811

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Income (loss) per common share - basic:
Net income (loss)	$	35,602,297		$	(11,360,914	)	$	(35,506,373	)	$	(37,970,095	)
Less: deemed dividend related to ratchet adjustment		-			(981,548	)		(18,696,012	)		(981,548	)
Net income (loss) attributable to common shareholders	$	35,602,297		$	(12,342,462	)	$	(54,202,385	)	$	(38,951,643	)
Weighted average common shares outstanding - basic		1,136,231,561			11,247,054			472,432,161			8,811,489
Net income (loss) per common share - basic	$	0.03		$	(1.10	)	$	(0.11	)	$	(4.42	)

Income (loss) per common share - diluted:
Net income (loss) allocated to common shareholders - basic	$	35,602,297		$	(12,342,462	)	$	(54,202,385	)	$	(38,951,643	)
Add: interest of convertible debt		1,990,000			-			-			-
Less: derivatives income		(37,826,129	)		-			-			-
Numerator for income (loss) per common share - diluted	$	(233,832	)	$	(12,342,462	)	$	(54,202,385	)	$	(38,951,643	)

Weighted average common shares outstanding - basic		1,136,231,561			11,247,054			472,432,161			8,811,489
Effect of dilutive securities:
Warrants		19,363,556			-			-			-
Preferred shares		-
Convertible notes payable		1,350,550,561			-			-			-
Weighted average common shares outstanding – diluted		2,506,145,678			11,247,054			472,432,161			8,811,489
Net income (loss) per common share - diluted	$	(0.00	)	$	(1.10	)	$	(0.11	)	$	(4.42	)

	September 30, 2021		September 30, 2020
Stock warrants		467,008,109		54,746,723
Stock options		80,000		80,000
Convertible debt		-		1,350,550,561
Series B convertible preferred stock		700,000		700,000
Series D convertible preferred stock		-		124,376,000
Series E convertible preferred stock		121,414,010		-
Antidilutive securities excluded from computation of earnings per share		589,202,119		1,530,453,284

	September 30, 2020		September 30, 2019
Stock warrants		54,746,723		3,520,827
Stock options		80,000		80,000
Convertible debt		1,350,550,561		987,936
Series B convertible preferred stock		700,000		1,700,000
Series D convertible preferred stock		124,376,000		-

	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 relations		373,449			2,123,768			2,497,217
Total assets acquired at fair value		647,422			3,239,919			3,887,341
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		$	2,429,281		$	2,929,281

Purchase consideration paid:
Cash paid	$	100,000		$	2,033,146		$	2,133,146
Acquisition payable		-			46,135			46,135
Promissory notes		400,000			350,000			750,000
Total purchase consideration paid	$	500,000		$	2,429,281		$	2,929,281

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Revenues	$	-	$	-	$	-	$	1,491,253
Cost of revenues		-		-		-		1,114,269
Gross profit		-		-		-		376,984
Operating expenses		-		-		-		1,058,410
Loss from discontinued operations		-		-		-		(681,426	)
Loss on disposal of discontinued operations		-		-		-		-
Loss from discontinued operations, net of income taxes	$	-	$	-	$	-	$	(681,426	)

	September 30, 2020			December 31, 2019			September 30, 2021		December 31, 2020
Accounts receivable	$	355,393		$	983,771		$	474,318	$	-
Allowance for doubtful accounts		(20,000	)		(20,000	)		-		-
Accounts receivable, net	$	335,393		$	963,771		$	474,318	$	-

	Useful Life	September 30, 2020			December 31, 2019			Useful Life	September 30, 2021			December 31, 2020
Delivery trucks and vehicles	5 - 6 years	$	761,652		$	301,142		3 - 6 years	$	691,715		$	544,010
Equipment	5 years		3,470			3,470		1 - 5 years		51,301			3,470
Subtotal			765,122			304,612				743,016			547,480
Less: accumulated depreciation			(106,307	)		(64,206	)			(180,026	)		(74,810	)
Property and equipment, net		$	658,815		$	240,406			$	562,990		$	472,670

Year ending September 30:	Amount
2022	$	577,825
2023		577,825
2024		520,771
2025		453,342
2026		192,427
Total	$	2,322,190

	●	~~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.

	●	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 would 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 notes) 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. In July 2020, the parties agreed to a fixed conversion price of $0.02 per share, although final documents are pending.

	●	~~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.

	September 30, 2020			December 31, 2019			September 30, 2021		December 31, 2020
Principal amount	$	1,685,914		$	5,459,909
Add: put premium		-			385,385
Principal and default penalty amount							$	-	$	1,062,764
Less: unamortized debt discount		(346,953	)		(2,210,950	)		-		(83,548	)
Convertible notes payable, net		1,338,961			3,634,344			-		979,216
Less: current portion of convertible notes payable		(1,338,961	)		(3,634,344	)		-		(979,216	)
Convertible notes payable, net – long-term	$	-		$	-		$	-	$	-

	●	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 September 30, 2020		80,000	$	8.84		3.58	$	-
Exercisable, September 30, 2020		20,000	$	8.84		3.58	$	-

	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		549,257,147			0.01
Inducement warrants granted		191,341,147			0.01
Increase in warrants related to price protection		71,965,500			0.01
Exercises		(492,668,288	)		0.01
Balance Outstanding September 30, 2021		467,008,109		$	0.02		4.54	$	7,291,764
Exercisable, September 30, 2021		467,008,109		$	0.02		4.54	$	7,291,764

	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 September 30, 2021		80,000	$	8.84		2.59	$	-
Exercisable, September 30, 2021		40,000	$	8.84		2.59	$	-

	September 30, 2021
Liabilities deconsolidated:
Notes payable (a)	$	3,908,050
Accounts payable		1,242,421
Accrued expenses		314,927
Insurance payable		1,678,556
Contingency liabilities		3,311,272
Lease liabilities, current portion		1,263,494
Accrued compensation and related benefits		827,753
Total liabilities deconsolidated		12,546,473
Assets deconsolidated:
Cash		21,679
Accounts receivable		1,078
Property and equipment, net		96,496
Total assets deconsolidated		119,253
Gain on deconsolidation of subsidiaries	$	12,427,220

	December 31, 2020
Assets:
Current assets:
Accounts receivable, net	$	372,922
Prepaid expenses and other		367,459
Total current assets subject to assignment for benefit of creditors		740,381
Other Assets:
Security deposit		94,000
Property and equipment, net		126,137
Right of use assets, net		1,445,274
Total other assets subject to assignment for benefit of creditors		1,665,411
Total assets subject to assignment for benefit of creditors	$	2,405,792
Liabilities:
Current liabilities:
Notes payable (a)	$	3,834,337
Accounts payable		638,682
Accrued expenses		170,500
Insurance payable		1,959,099
Contingency liabilities		3,311,272
Lease liabilities, current portion		380,843
Due to related parties		124,000
Accrued compensation and related benefits		919,726
Total current liabilities subject to assignment for benefit of creditors		11,338,459
Long-term liabilities:
Notes payable, net of current portion (a)		147,379
Lease liabilities, net of current portion		1,102,617
Total long-term liabilities subject to assignment for benefit of creditors		1,249,996
Total liabilities subject to assignment for benefit of creditors	$	12,588,455

	December 31, 2020
Principal amounts	$	3,981,716
Less: current portion of notes payable		(3,834,337	)
Notes payable subject to assignment for benefit of creditors – long-term	$	147,379

	September 30, 2020			December 31, 2019
Office leases right of use assets	$	1,984,320		$	1,984,320
Less: accumulated amortization into rent expense		(449,909	)		(233,890	)
Balance of ROU assets as of end of period	$	1,534,411		$	1,750,430

	September 30, 2021			December 31, 2020
Office leases and truck right of use assets	$	44,393		$	-
Less: accumulated amortization into rent expense or cost of sales		(17,177	)		-
Balance of ROU assets as of end of period	$	27,276		$	-

Year ended September 30,	Amount
2021	$	515,316
September 30,				Amount
2022		528,767		$	21,053
2023		535,659			8,765
2024		318,611
Total minimum non-cancelable operating lease payments		1,898,353			29,818
Less: discount to fair value		(328,077	)		(2,542	)
Total lease liability at September 30, 2020	$	1,570,276
Total lease liability on September 30, 2021				$	27,276

	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)	The Company lacks of 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 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.