10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File No. 001-34970

Transportation and Logistics Systems, Inc.

(Exact name of registrant as specified in its charter)

Nevada	26-3106763
(State or Other Jurisdiction	IRS Employer
of Organization)	Identification Number

2833 Exchange Court, Suite A West Palm Beach, Florida 33409	33409
(Address of principal executive offices)	(Zip code)

561-801-9188

(Registrant’s telephone number, including area code)

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

Indicate by checkmark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]	Accelerated filer [  ]	Non accelerated filer [X]	Small reporting company [X]
Emerging growth company [  ]

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

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	TLSS	OTC Markets

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

Class	Outstanding as of August 19, 2019
Common Stock, $0.001	9,630,525

TRANSPORTATION AND LOGISTICS SYSTEMS, INC.

FORM 10-Q

June 30, 2019

INDEX

		Page
PART I. FINANCIAL INFORMATION		1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets - As of June 30, 2019 (unaudited) and December 31, 2018	1
	Condensed Consolidated Statements of Operations - For the Three and Six Months Ended June 30, 2019 and 2018 (unaudited)	2
	Consolidated Statements of Changes in Shareholders’ Deficit – For the Three and Six Months Ended June 30, 2019 and 2018 (unaudited)	3
	Consolidated Statements of Cash Flows - For the Six Months Ended June 30, 2019 and 2018 (unaudited)	4
	Condensed Notes to Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32
PART II. OTHER INFORMATION		33
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Mine Safety Disclosures	33
Item 5.	Other Information	33
Item 6.	Exhibits	34
Signatures		35

i

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TRANSPORTATION AND LOGISTICS SYSTEMS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2019			December 31, 2018
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	120,269		$	296,196
Accounts receivable		927,723			441,497
Prepaid expenses and other current assets		590,730			509,068
Assets of discontinued operations		-			335,894
Due from related party		81,489			-
Total Current Assets		1,720,211			1,582,655
OTHER ASSETS:
Security deposit		39,350			5,000
Property and equipment, net		728,054			936,831
Right of use asset		578,421			-
Intangible asset, net		2,420,191			4,668,334
Total Other Assets		3,766,016			5,610,165
TOTAL ASSETS	$	5,486,227		$	7,192,820
LIABILITIES AND SHAREHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Convertible notes payable, net of debt discounts of $0 and $1,595,627, respectively	$	1,800,000		$	1,411,876
Convertible notes payable - related parties		2,500,000			-
Notes payable, net of debt discount		4,256,738			1,509,804
Notes payable - related party, net of debt discount		-			213,617
Accounts payable		1,594,189			655,183
Accrued expenses		815,151			566,574
Insurance payable		1,403,070			1,108,368
Lease liability		102,407			-
Liabilities of discontinued operations		-			440,745
Derivative liability		-			7,888,684
Due to related parties		271,507			275,300
Accrued compensation and related benefits		674,566			435,944
Total Current Liabilities		13,417,628			14,506,095
LONG-TERM LIABILITIES:
Lease liability		490,126			-
Notes payable - related party		510,000			-
Notes payable		317,306			424,019
Total Long-term Liabilities		1,317,432			424,019
Total Liabilities		14,735,060			14,930,114
Commitments and Contingencies (See Note 10)
SHAREHOLDERS’ DEFICIT:
Preferred stock, par value $0.001; authorized 10,000,000 shares: Series A Convertible Preferred stock, par value $0.001 per share; authorized 4,000,000 shares; issued and outstanding 0 and 4,000,000 shares at June 30, 2019 and December 31, 2018, respectively (Liquidation value $0 and $4,000,000, respectively)		-			4,000
Common stock, par value $0.001 per share; authorized 500,000,000 shares; issued and outstanding 9,421,525 and 4,220,837 at June 30, 2019 and December 31, 2018, respectively		9,421			4,220
Common stock issuable, par value $0.001 per share; 700,000 and 0 shares		700
Additional paid-in capital		32,120,077			7,477,422
Accumulated deficit		(41,379,031	)		(15,222,936	)
Total Shareholders’ Deficit		(9,248,833	)		(7,737,294	)
Total Liabilities and Shareholders’ Deficit	$	5,486,227		$	7,192,820

See accompanying notes to unaudited condensed consolidated financial statements.

1

TRANSPORTATION AND LOGISTICS SYSTEMS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
REVENUES	$	8,101,412		$	626,820		$	13,904,619		$	626,820
COST OF REVENUES		7,522,973			535,945			13,072,675			535,945
GROSS PROFIT		578,439			90,875			831,944			90,875
OPERATING EXPENSES:
Compensation and related benefits		3,608,670			3,149,776			7,717,214			3,149,776
Legal and professional fees		566,242			1,328,658			1,071,082			1,373,993
Rent		86,406			-			185,237			-
General and administrative expenses		930,203			203,789			1,595,535			203,789
Impairment loss		1,724,591			-			1,724,591			-
Total Operating Expenses		6,916,112			4,682,223			12,293,659			4,727,558
LOSS FROM OPERATIONS		(6,337,673	)		(4,591,348	)		(11,461,715	)		(4,636,683	)
OTHER (EXPENSES) INCOME:
Interest expense		(1,377,051	)		(243,302	)		(2,597,443	)		(391,555	)
Interest expense - related parties		(121,078	)		-			(147,639	)		-
Loan fees		(601,121	)		-			(601,121	)		-
Gain on debt extinguishment, net		43,823,897			-			43,917,768			-
Derivative expense		(41,653,345	)		(9,721,800	)		(55,037,605	)		(9,505,352	)
Total Other (Expenses) Income		71,302			(9,965,102	)		(14,466,040	)		(9,896,907	)
LOSS FROM CONTINUING OPERATIONS		(6,266,371	)		(14,556,450	)		(25,927,755	)		(14,533,590	)
(LOSS) INCOME FROM DISCONTINUED OPERATIONS:
(Loss) income from discontinued operations		(695,087	)		45,536			(681,426	)		83,601
NET LOSS	$	(6,961,458	)	$	(14,510,914	)	$	(26,609,181	)	$	(14,449,989	)
NET LOSS PER COMMON SHARE - BASIC AND DILUTED
Net loss from continuing operations	$	(0.63	)	$	(13.93	)	$	(3.42	)	$	(17.97	)
Net (loss) income from discontinued operations		(0.07	)		0.04			(0.09	)		0.10
Net loss per common share - basic and diluted	$	(0.70	)	$	(13.89	)	$	(3.51	)	$	(17.87	)
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING:
Basic and diluted		9,891,525			1,044,831			7,573,522			808,780

See accompanying notes to unaudited condensed consolidated financial statements.

2

TRANSPORTATION AND LOGISTICS SYSTEMS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(Unaudited)

													Additional						Total
	Preferred Stock Series A				Common Stock				Common Stock Issuable				Paid-in			Accumulated			Shareholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Deficit			Deficit
Balance, December 31, 2017		4,000,000	$	4,000		570,106	$	570		-	$	-	$	(34,928	)	$	(744,779	)	$	(775,137	)
Net loss		-		-		-		-		-		-		-			60,925			60,925
Balance, March 31, 2018		4,000,000		4,000		570,106		570		-		-		(34,928	)		(683,854	)		(714,212	)
Shares issued for services		-		-		2,100,000		2,100		-		-		4,323,900			-			4,326,000
Shares issued for acquisition		-		-		1,500,000		1,500		-		-		3,088,500			-			3,090,000
Net loss		-		-		-		-		-		-		-			(14,510,914	)		(14,510,914	)
Balance, June 30, 2018		4,000,000	$	4,000		4,170,106	$	4,170		-	$	-	$	7,377,472		$	(15,194,768	)	$	(7,809,126	)

																	Additional					Total
	Preferred Stock Series A						Common Stock						Common Stock Issuable				Paid-in		Accumulated			Shareholders’
	Shares			Amount			Shares			Amount			Shares		Amount		Capital		Deficit			Deficit
Balance, December 31, 2018		4,000,000		$	4,000			4,220,837		$	4,220			-	$	-	$	7,477,422	$	(15,222,936	)	$	(7,737,294	)
Shares issued for services		-			-			2,670,688			2,671			-		-		2,748,137		-			2,750,808
Warrants issued in connection with debt		-			-			-			-			-		-		63,581		-			63,581
Cumulative effect adjustment for change in derivative accounting		-			-			-			-			-		-		-		453,086			453,086
Net loss		-			-			-			-			-		-		-		(19,647,723	)		(19,647,723	)
Balance, March 31, 2019		4,000,000			4,000			6,891,525			6,891			-		-		10,289,140		(34,417,573	)		(24,117,542	)
Shares issued for services		-			-			230,000			230			-		-		2,465,270		-			2,465,500
Shares issued for debt and warrant modifications								700,000			700			700,000		700		17,932,600		-			17,934,000
Shares issued for conversion of preferred shares		(4,000,000	)		(4,000	)		2,600,000			2,600			-		-		1,400		-			-
Return and cancellation of shares for disposal of Save On		-			-			(1,000,000	)		(1,000	)		-		-		57,987		-			56,987
Stock options granted		-			-			-			-			-		-		700,816		-			700,816
Warrants issued in connection with debt		-			-			-			-			-		-		672,864		-			672,864
Net loss		-			-			-			-			-		-		-		(6,961,458	)		(6,961,458	)
Balance, June 30, 2019		-		$	-			9,421,525		$	9,421			700,000	$	700	$	32,120,077	$	(41,379,031	)	$	(9,248,833	)

See accompanying notes to unaudited condensed consolidated financial statements.

3

TRANSPORTATION AND LOGISTICS SYSTEMS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Six Months Ended
	June 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(26,609,181	)	$	(14,449,989	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		617,632			173,629
Amortization of debt discount to interest expense		2,310,580			332,364
Amortization of debt discount to interest expense - related party		26,383			-
Stock-based compensation and consulting fees		5,216,308			4,326,000
Stock-based compensation and consulting fees - discontinued operations		700,816			-
Non-cash loan fees		601,121			-
Derivative expense (income)		55,037,605			9,505,352
Non-cash portion of gain on extinguishment of debt		(44,031,110	)		-
Deferred rent		14,112			-
Loss on disposal of property and equipment		47,022			-
Impairment loss		1,724,591			-
Change in operating assets and liabilities:
Accounts receivable		(486,226	)		(325,551	)
Prepaid expenses and other current assets		(81,662	)		-
Assets of discontinued operations		(53,193	)		(93,073	)
Due from related party		(81,489	)		-
Security deposit		(34,350	)		-
Accounts payable and accrued expenses		1,420,925			(130,902	)
Insurance payable		294,702			(5,108	)
Liabilities of discontinued operations		10,954			155,115
Accrued compensation and related benefits		238,622			197,097
NET CASH USED IN OPERATING ACTIVITIES		(3,115,838	)		(315,066	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash received in acquisition		-			38,198
Cash paid for acquisition		-			(489,174	)
Decrease in cash from disposal of subsidiary		(5,625	)		-
Purchase of property and equipment		(51,256	)		-
Proceeds from sale of property and equipment		81,000			-
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		24,119			(450,976	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible notes payable - related party		2,500,000			2,497,503
Debt issue costs paid		-			(1,009,714	)
Repayment of convertible notes payable		(273,579	)		-
Net proceeds from notes payable		6,631,020			-
Repayment of notes payable		(5,697,856	)		(611,406	)
Net proceeds from notes payable - related party		255,000			-
Repayment of notes payable - related party		(495,000	)		-
Net proceeds from related parties		(3,793	)		467,672
NET CASH PROVIDED BY FINANCING ACTIVITIES		2,915,792			1,344,055
NET (DECREASE) INCREASE IN CASH		(175,927	)		578,013
CASH, beginning of period		296,196			106,576
CASH, end of period	$	120,269		$	684,589
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest	$	2,239,463		$	-
Income taxes	$	-		$	-
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Debt discounts recorded	$	1,222,986		$	1,487,788
Increase in right of use asset and lease liability	$	631,723		$	-
Liabilities assumed in acquisition	$	-		$	3,503,552
Less: assets acquired in acquisition		-			1,959,655
Net liabilities assumed		-			1,543,897
Fair value of shares for acquisition		-			3,090,000
Increase in intangible assets - non-cash	$	-		$	4,633,897

See accompanying notes to unaudited condensed consolidated financial statements.

4

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS

Transportation and Logistics Systems, Inc. (“TLSS”), formerly PetroTerra Corp., was incorporated under the laws of the State of Nevada, on July 25, 2008.

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. Save On is a provider of integrated transportation management solutions consisting of brokerage and logistic services such as transportation scheduling, routing and other value added services related to the transportation of automobiles and other freight. As an early stage company, TLSS’s current operations are subject to all risks inherent in the establishment of a new business enterprise

The Share Exchange was treated as a reverse merger and recapitalization of Save On for financial reporting purposes since 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 Merger was replaced with the historical financial statements of Save On before the Merger. The balance sheets at their historical cost basis of both entities were combined at the merger date and the results of operations from the merger date forward include the historical results of Save On and results of TLSS from the merger date forward. The Merger was intended to be treated as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended. 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. Mr. Yariv ceased to be an officer or director of the Company effective with the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 as filed with the Securities and Exchange Commission of April 16, 2019.

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”), from its members pursuant to the terms and conditions of a Stock Purchase Agreement entered into among the Company and the Prime members on the Closing Date (the “SPA”). Prime is a New Jersey based transportation company with a focus on deliveries for on-line retailers in New York, New Jersey and Pennsylvania.

On July 24, 2018, the Company formed Shypdirect LLC (“Shypdirect”), a company organized under the laws of New Jersey. Shypdirect is a transportation company with a focus on tractor trailer and box truck deliveries of product on the east coast of the United States from one distributor’s warehouse to another warehouse or from a distributor’s warehouse to the post office.

TLSS and its wholly-owned subsidiaries, Prime and Shypdirect are hereafter referred to as the “Company”.

On July 16, 2018, the Company filed a Certificate of Amendment to the Amended and Restated Articles of Incorporation (the “Certificate of Amendment”) with the Secretary of State of the State of Nevada to (1) change the name of the Company from PetroTerra Corp. to Transportation and Logistics Systems, Inc., (2) authorize an increase of the shares of the preferred stock to 10,000,000 shares, par value $0.001 per share and (3) effect a 1-for-250 reverse stock split (the “Reverse Stock Split”) with respect to the outstanding shares of the Company’s common stock. The Certificate of Amendment became effective on July 17, 2018. The corporate name change, increase of authorized shares of preferred stock and Reverse Stock Split were previously approved by the sole director and the majority of stockholders of the Company. The corporate name change and the Reverse Stock Split were deemed effective at the open of business on July 18, 2018. All share and per share data in the accompanying consolidated financial statements have been retroactively restated to reflect the effect of the recapitalization.

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

Basis of presentation and principles of consolidation

The condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information and disclosures necessary for comprehensive presentation of financial position, results of operations or cash flow. However, these unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments and a non-recurring adjustment for the impairment of intangible assets, 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, 2018, and notes thereto included in the Company’s annual report on Form 10-K, filed on April 16, 2019.

5

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

The Company follows the same accounting policies in the preparation of its annual and interim reports. The results of operations in interim periods are not necessarily an indication of operating results to be expected for the full year.

The unaudited condensed consolidated financial statements of the Company include the accounts of TLSS and its wholly owned subsidiaries, Save On (through April 30, 2019), Prime and Shypdirect. All intercompany accounts and transactions have been eliminated in consolidation.

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

Going concern

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, for the six months ended June 30, 2019, the Company had a net loss of $26,609,181 and net cash used in operations was $3,115,838, respectively. Additionally, the Company had an accumulated deficit, shareholders’ deficit, and a working capital deficit of $41,379,031, $9,248,833 and $11,697,417, respectively, at June 30, 2019. Furthermore, the Company failed to make required payments of principal and interest on certain of its convertible debt instruments and defaulted on other provisions in these Notes. On April 9, 2019, the Company entered into agreements with these lenders that modified these Notes (See Note 7). 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. 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 is seeking to raise capital through additional debt and/or equity financings to fund its operations in the future. Although the Company has historically raised capital from sales of common shares and from the issuance of convertible promissory notes, there is no assurance that it will be able to continue to do so.

If the Company is unable to raise additional capital or secure additional lending in the near future, management expects that the Company will need to curtail its operations. These consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Use of estimates

The preparation of the condensed consolidated financial statements, in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates included in the accompanying unaudited condensed consolidated financial statements and footnotes include the valuation of accounts receivable, the useful life of property and equipment, the valuation of intangible assets, the valuation of right of use asset and related liability, assumptions used in assessing impairment of long-lived assets, estimates of current and deferred income taxes and deferred tax valuation allowances, the fair value of non-cash equity transactions, the valuation of derivative liabilities, and the fair value of assets acquired and liabilities assumed in business acquisitions.

Fair value of financial instruments

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 June 30, 2019. 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).

6

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

The three levels of the fair value hierarchy are as follows:

● 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.

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 at June 30, 2019 and December 31, 2018:

	At June 30, 2019						At December 31, 2018
Description	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Derivative liabilities		—		—	$	—		—		—	$	7,888,684

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

	For the Six Months Ended June 30, 2019
Balance at beginning of period	$	7,888,684
Gain on extinguishment of debt related to repayment of debt		(246,110	)
Gain on extinguishment of debt related to April 9, 2019 modifications		(61,841,708	)
Cumulative effect adjustment for change in derivative accounting		(838,471	)
Change in fair value included in derivative expense		55,037,605
Balance at end of period	$	-

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 balance sheets for cash, accounts receivable, accounts payable and accrued expenses 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.

Cash and cash equivalents

For purposes of the 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. At June 30, 2019 and December 31, 2018, the Company did not have any cash equivalents.

7

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. There were no balances in excess of FDIC insured levels as of June 30, 2019 and December 31, 2018. The Company has not experienced any losses in such accounts through June 30, 2019.

Accounts receivable

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

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

Intangible asset

Intangible assets are carried at cost less accumulated amortization, computed using the straight-line method over the estimated useful life, less any impairment charges. At June 30, 2019 and December 31, 2018, intangible asset consists of a customer relationship acquired on June 18, 2018 which is being amortized over a period of five years.

Leases

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, the Company 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; (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. 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 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.

Impairment of long-lived assets

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.

8

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

Segment reporting

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 the six months ended June 30, 2019 and 2018, the Company believes that it operates in one operating segment related to deliveries for on-line retailers in New York, New Jersey and Pennsylvania 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.

Derivative financial instruments

The Company has certain financial instruments that are embedded derivatives associated with capital raises. The Company evaluates all 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 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 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.

Revenue recognition and cost of revenue

On January 1, 2018, 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 and Shypdirect business activities, 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 net seven days from acceptance of delivery. The Company does not incur incremental costs obtaining service orders from its Prime customers, however, if the Company did, because all of Prime and Shypdirect 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.

9

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

For the Company’s Save On business activities, through the date of disposition on May 1, 2019, the Company recognized revenues and the related direct costs of such revenue which includes carrier fees and dispatch costs as of the date the freight is delivered by the carrier which is when the performance obligation is satisfied. Customer payments received prior to delivery are recorded as a deferred revenue liability and related carrier fees if paid prior to delivery are recorded as a deferred expense asset. In accordance with ASC Topic 606, the Company recognizes revenue on a gross basis. Our payment terms for corporate customers are net 30 days from acceptance of delivery and individual customers generally must pay in advance. The Company does not incur incremental costs obtaining service orders from our Save On customers, however, if the Company did, because all of the Save On customer’s contracts are less than a year in duration, any contract costs incurred would be expensed rather than capitalized. The Company’s adoption of this ASC, resulted in no cumulative effect at January 1, 2018 and no change prospectively to the Company’s results of operations or financial condition. The revenue that the Company recognizes arises from service orders it receives from its Save On customers. The Company’s performance obligations under these service orders correspond to each delivery of a vehicle that the Company makes for its customer under the service orders; as a result, each service order generally contains only one performance obligation based on the delivery to be completed.

Revenue disaggregation disclosure required pursuant to ASC 606 are disclosed in Note 13 – Segment Information.

Basic and diluted loss per share

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

Potentially dilutive common shares were excluded from the computation of diluted shares outstanding as they would have an anti-dilutive impact on the Company’s net losses and consisted of the following:

	June 30, 2019		June 30, 2018
Stock warrants		114,000		1,329,548
Stock options		80,000		-
Convertible debt		534,312		3,158,465
Series A convertible preferred stock		-		6,666,667

Stock-based compensation

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director 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 and director services received in exchange for an award based on the grant-date fair value of the award.

Through March 31, 2018, pursuant to ASC 505-50 – “Equity-Based Payments to Non-Employees”, all share-based payments to non-employees, including grants of stock options, were recognized in the consolidated financial statements as compensation expense over the service period of the consulting arrangement or until performance conditions are expected to be met. Using a Black-Scholes valuation model, the Company periodically reassessed the fair value of non-employee options until service conditions are met, which generally aligns with the vesting period of the options, and the Company adjusts the expense recognized in the consolidated financial statements accordingly. In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies several aspects of the accounting for nonemployee share-based payment transactions by expanding the scope of the stock-based compensation guidance in ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. ASU No. 2018-07 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted, but entities may not adopt prior to adopting the new revenue recognition guidance in ASC 606. The Company early adopted ASU No. 2018-07 in the second quarter of 2018 and there was no cumulative effect of adoption.

10

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

Recent Accounting Pronouncements

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

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

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.

NOTE 3 – DISCONTINUED OPERATIONS

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. Mr. Yariv ceased to be an officer or director of the Company effective with the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 as filed with the Securities and Exchange Commission of April 16, 2019.

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, the Company shall reflect 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 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.

The assets and liabilities classified as discontinued operations in the Company’s condensed consolidated financial statements as of June 30, 2019 and December 31, 2018, and for the three and six months ended June 30, 2019 and 2018 is set forth below.

	June 30, 2019		December 31, 2018
Assets:
Current assets:
Accounts receivable, net	$	-	$	334,275
Prepaid expenses and other		-		1,619
Total current assets		-		335,894
Total assets	$	-	$	335,894
Liabilities:
Current liabilities:
Accounts payable	$	-	$	409,053
Accounts payable – related party		-		3,700
Accrued expenses and other liabilities		-		27,992
Total current liabilities		-		440,745
Total liabilities	$	-	$	440,745

11

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

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

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019			2018
Revenues	$	359,728		$	1,132,009	$	1,491,253		$	2,309,771
Cost of revenues		263,073			860,079		1,114,269			1,756,634
Gross profit		96,655			271,930		376,984			553,137
Operating expenses		791,742			226,394		1,058,410			469,536
Loss from discontinued operations		(695,087	)		45,536		(681,426	)		83,601
Loss on disposal of discontinued operations		-			-		-			-
Loss from discontinued operations, net of income taxes	$	(695,087	)	$	45,536	$	(681,426	)	$	83,601

NOTE 4 – ACCOUNTS RECEIVABLE

At June 30, 2019 and December 31, 2018, accounts receivable, net consisted of the following:

	June 30, 2019		December 31, 2018
Accounts receivable	$	927,723	$	441,497
Allowance for doubtful accounts		-		-
Accounts receivable, net	$	927,723	$	441,497

NOTE 5 - PROPERTY AND EQUIPMENT

At June 30, 2019 and December 31, 2018, property and equipment consisted of the following:

	Useful Life	June 30, 2019			December 31, 2018
Delivery trucks and vehicles	5 - 6 years	$	899,139		$	1,033,397
Less: accumulated depreciation			(171,085	)		(96,566	)
Property and equipment, net		$	728,054		$	936,831

For the six months ended June 30, 2019 and 2018, depreciation expense is included in general and administrative expenses and amounted to $94,080 and $5,199, respectively. During the six months ended June 30, 2019, the Company traded in or sold delivery trucks and vehicles of $185,514 with related accumulated depreciation of $19,561, and received cash of $81,000 and reduced notes payable of $37,931, resulting in a loss of $47,022 which is included in general and administrative expenses on the accompanying condensed consolidated statement of operations.

NOTE 6 – INTANGIBLE ASSET

At June 30, 2019 and December 31, 2018, intangible asset consisted of the following:

	Useful life	June 30, 2019		December 31, 2018
Customer relationship	5 year	$	2,420,191	$	5,235,515
Less: accumulated amortization			-		(567,181	)
		$	2,420,191	$	4,668,334

12

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

For the six months ended June 30, 2019 and 2018, amortization of intangible assets amounted to $523,552 and $168,430, respectively.

At June 30, 2019, the Company conducted an impairment assessment on intangible assets based on the guidelines established in ASC Topic 360 to determine the estimated fair market value of intangible assets as of June 30, 2019. Such analysis considered future cash flows and other industry factors. Upon completion of this impairment analysis, the Company determined that the carrying value exceeded the fair market value of intangible assets. Accordingly, in connection with the impairment of such intangible assets, the Company recorded an impairment charge of $1,724,591 for the six months ended June 30, 2019, which was included in operating expenses on the accompanying condensed consolidated statements of operations.

Amortization of intangible assets attributable to future periods is as follows:

Year ending June 30:	Amount
2020	$	611,417
2021		611,417
2022		611,417
2023		585,940
	$	2,420,191

NOTE 7 – CONVERTIBLE PROMISSORY NOTES PAYABLE AND NOTES PAYABLE

Red Diamond Partners LLC and RDW Capital, LLC

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 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, on April 25, 2017, the Company entered into a convertible promissory note in the aggregate principal amount of $100,000 and the Company received $95,000 after giving effect to the original issue discount of $5,000. This note matured on April 25, 2018 and each tranche matured one year after the date of such funding. The second Tranche was received on June 2, 2017 for $85,000 and the third Tranche for $85,000 was received on August 8, 2017 upon filing of the Registration Statement. The fourth Tranche was to be for $85,000, however, as of the date of this filing, the fourth tranche has not yet been received. The Purchaser is not required to fund any Tranche subsequent to the first Tranche if there is an event of default as described in the promissory notes. 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 for the previous ten trading days preceding the conversion. During 2018, the Company failed to make its required maturity date payments of principal and interest on Convertible Promissory 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. These convertible promissory notes contain cross default provisions whereby a default in any one note greater than $25,000 will cause a default in all the notes, however, this provision is only effective if there is a formal notice of default by the lender.

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 of which $15,000 had been recorded as advance from lender as of March 31, 2017 and the remaining $15,000 received on June 30, 2017. 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 is 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 previous 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 will become immediately due and payable and the Company will be 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 above, 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.

13

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

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 were not afforded the exemption for conventional convertible instruments due to their respective variable conversion rate and price protection provision. 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 condensed consolidated balance sheet as of the beginning of 2019, the period which the amendment is effective (See Note 2 - Derivative liabilities).

On April 9, 2019, the Company entered into agreements with RedDiamond, holding these convertible notes representing an aggregate principal amount of $510,000, and agreed with such holder to:

● extend the maturity date of the notes to December 31, 2020;

● remove all convertibility features of the notes; and

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

The aggregate principal amounts due as of June 30, 2019 and December 31, 2018 amounted to $510,000 and $510,000, respectively. At December 31, 2018, the principal balance of $510,000 was included in convertible notes payable, a current liability, on the accompanying consolidated balance sheet. At June 30, 2019, the principal balance of $510,000 was included in notes payable – related party, a long-term liability, on the accompanying consolidated balance sheet since on April 9, 2019, the conversion features on the notes were removed and RedDiamond became a principal shareholder of the Company when they converted their preferred shares to common stock (See Note 9). In connection with this debt modification, 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 $47,205 related to the reversal of default interest payable.

Bellridge Capital, LLC

On June 18, 2018, the Company entered into a securities purchase agreement (the “Purchase Agreement”), whereby it issued to an institutional investor (the “Lender”) a senior secured convertible note in the aggregate principal amount of $2,497,503 (the “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 Note term. The principal due under the Note accrues 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 Note in cash or common stock of the Company, at the Lender’s discretion.

In connection with the Purchase Agreement, the Lender 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. Additionally, the placement agent 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.

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

On December 27, 2018, the lender waived any and all defaults in existence on the Note and the Company agreed to issue a warrant that is convertible into 2% of the issued and outstanding shares existing as the time the Company files a registration statement or makes an application to up list to a national stock exchange. Pursuant to this 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, and on or prior to the close of business on the early of the first year anniversary of the issuance of December 27, 2018 (the “Termination Date”), 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 Note was modified with a monthly payment of principal and interests due beginning on January 18, 2019 of $156,219 with all remaining principal and interest amounts on the Note due on December 18, 2019. This modification was not considered a debt extinguishment.

14

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

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

Through April 9, 2019, all principal and accrued interest under the 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 Note includes 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 Note and cross default provisions on other Company obligations or contracts. Upon an event of default, all obligations under the Note will become immediately due and payable and the Company will be required to make certain payments to the Lender.

The Lender was granted a right of first refusal on future financing transactions of the Company while the Note remains outstanding, plus an additional three months thereafter. In connection with the issuance of the Note, the Company entered into a security agreement with the Lender (the “Security Agreement”) pursuant to which the Company agreed that obligations under the 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 the Lender pursuant to the Note and have granted a similar security interest over substantially all of their assets. A portion of the proceeds of the Note were used to acquire 100% of the membership interests of Prime.

During the term of this 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 “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, but subject to the Holder’s conversion rights set forth in the Purchase Agreement, then the Company shall use 20% of the gross proceeds of the Subsequent Offering and shall make payment to the Holder of an amount in cash equal to the product of (i) the sum of (x) the then outstanding principal amount of this Note and (y) all accrued but unpaid interest, multiplied by (ii) (x) 110%, if the Prepayment Date 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 shall add all other amounts owed pursuant to this Note, including, but not limited to, all Late Fees and liquidated damages.

In connection with the 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 hereunder or under applicable law, on the default date and on each monthly anniversary of each such default date (if the applicable event shall not have been cured by such date) until the ninetieth day from such Event Date, the Company shall 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 Purchase Agreement. Subsequent to the ninetieth day from such default date, the one percent (1%) penalty shall increase 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, the lender waived any and all defaults.

In connection with this 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 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 “Placement Warrant”). On April 9, 2019, the Company entered into an agreement with this placement agent that cancelled these warrant.

In connection with the issuance of this Note, Warrants, and Placement Warrant, the Company determined that this Note and there 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 convertible instrument and the Warrant and Placement Warrant 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 Warrant and Placement Warrant were determined using the Binomial valuation model and Monte-Carlo simulation model, respectively.

15

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

Convertible debt modifications and warrant cancellations

On April 9, 2019 (the “Modification Date”), the Company entered into an agreement with Bellridge Capital, L.P. (“Bellridge”) that modifies its existing obligations to Bellridge as follows:

● the overall principal amount of that certain Convertible Promissory Note, dated June 18, 2018, issued by the Company in favor of Bellridge (the “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, 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. As of August 19, 2019, 100,000 of these shares have been issued;

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

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

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

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

● the registration rights previously granted to Bellridge have now been eliminated; and

● those certain Warrants, dated June 18, 2018 and December 27, 2018, respectively, issued by the Company in favor of Bellridge shall be cancelled and of no further force or effect. In exchange, the Company will issue Bellridge 360,000 shares of restricted common stock.

In addition, on the 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 connection with the modification of the Bellridge Note and the cancellation of the related warrants, 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 convertible instrument and the Warrant and Placement Warrant were adjusted to fair value through earnings on the Modification Date. The fair value of this embedded conversion option derivative, and the Warrant and Placement Warrant were determined using the Binomial valuation model and Monte-Carlo simulation model, respectively. For the period from April 1, 2019 to April 9, 2019, the change of fair value of derivative liabilities associated with these instruments amounted to $41,653,345, which was recorded as derivative expense on the Modification date. The increase in derivative liabilities was caused by an increase in the Company’s stock price, as quoted on OTC Markets. Additionally, on the Modification Date, the Company analyzed the Bellridge Note modification and the cancellation of the warrants and pursuant to ASC 470-50, the modifications were treated as a debt extinguishment.

Gain on debt extinguishment

In connections with the RedDiamond and Bellridge debt modifications and warrants cancellations discussed above, on the Modification Date, the Company recorded a gain on debt extinguishment of $43,823,897 which consists of the following.

	Gain on Extinguishment on Modification Date
Gain from reversal of derivative liabilities on Modification Date	$	61,841,708
Fair value of common shares issued on Modification Date		(17,934,000	)
Write-off of remaining debt discount		(1,013,118	)
Reversal of put premium on stock-settled debt related to cancellation of conversion terms		385,385
Reduction of principal and interest balances due		543,922
Gain of debt extinguishment	$	43,823,897

16

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

Summary of derivative liabilities

Through April 9, 2019, the Company revalued the embedded conversion option and warrant derivative liabilities. In connection with these revaluations, the Company recorded derivative expense of $55,037,605 and $9,505,352 for the six months ended June 30, 2019 and 2018, respectively

During the six months ended June 30, 2019 and 2018, the fair value of the derivative liabilities was estimated using the Black-Sholes valuation model, Binomial valuation model, and the Monte-Carlo simulation model with the following assumptions:

	2019			2018
Expected dividend rate		-			-
Expected term (in years)		0.05 to 0.75			0.01 to 2.00
Volatility		228.1	%		261.2% to 307.75	%
Risk-free interest rate		2.23% to 2.40	%		1.32% to 2.11	%

Convertible note payable – related parties

On March 13, 2019, the Company entered into a convertible note agreement with an individual, who is affiliated to 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 shall be due and payable. Commencing on October 11, 2019 and continuing on the eleventh day of each month thereafter through April 11, 2021, payments of principal and interest of $31,902 shall be made, if not sooner converted as provided in the note agreement. The payment of all or any portion of the principal and accrued interest may be paid prior to the April 11, 2021. Interest shall 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. All past due principal and interest on this Note shall bear interest from maturity of such principal or interest (in whatever manner same may be brought about) until paid at the lesser of (i) 20% per annum, or (ii) the highest non-usurious rate allowed by applicable law. This Note may be converted by 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 $1.37. In connection with the issuance of this Note, the Company determined that this Note contains terms that are fixed monetary amounts at inception. Since the conversion price of $1.37 was equal to the quoted closing of the Company’s common shares on the note date, no beneficial feature conversion was recorded.

On April 11, 2019, the Company entered into a convertible note agreement with an entity affiliated with the Company’s chief executive officer in the amount of $2,000,000. Commencing on May 11, 2019, and continuing on the eleventh day of each month thereafter, payments of interest only on the outstanding principal balance of this Note of $30,000 shall be due and payable. Commencing on November 11, 2019 and continuing on the eleventh day of each month thereafter through April 11, 2021, payments of principal and interest of $117,611 are due, if the note is not sooner converted as provided in the note agreement. The payment of all or any portion of the principal and accrued interest may be prepaid prior to April 11, 2021. Interest shall 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. All past due principal and interest on this Note shall bear interest from maturity of such principal or interest until paid at the lesser of (i) 20% per annum, or (ii) the highest non-usurious rate allowed by applicable law. This Note may be converted by 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. Since the conversion price of $11.81 was equal to the quoted closing of the Company’s common shares on the note date, no beneficial feature conversion was recorded.

At June 30, 2019 and December 31, 2018, convertible promissory notes (third party and related parties) are as follows:

	June 30, 2019			December 31, 2018
Principal amount	$	1,800,000		$	3,007,503
Principal amounts – related parties		2,500,000			-
Total principal amount		4,300,000			3,007,503
Less: unamortized debt discount		-			(1,595,627	)
Convertible notes payable, net		4,300,000			1,411,876
Less: current portion of convertible notes payable		(4,300,000	)		(1,411,876	)
Convertible notes payable, net – long-term	$	-		$	-

17

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

For the six months ended June 30, 2019 and 2018, amortization of debt discounts related to these convertible notes amounted to $430,268 and $332,364, respectively, which has been included in interest expense on the accompanying unaudited condensed consolidated statements of operations.

NOTE 8 – NOTES PAYABLE

Secured merchant loans

In connection with the acquisition of Prime in 2018, the Company assumed several notes payable liabilities amounting to $944,281 pursuant to secured merchant agreements (the “Assumed Secured Merchant Loans”). Pursuant to the Assumed Secured Merchant Loans, the Company is required to repay the noteholders by making daily payments on each business day or on demand payments until the loans amounts are paid in full. Each payment is deducted directly from the Company’s bank accounts. The Assumed Secured Merchant Loans are secured by the assets of Prime, and are personally guaranteed by the former majority member of Prime.

During January 2019, the Company entered into a separate promissory note with one of these individuals and borrowed an additional $26,900 at a simple annual interest rate of 15% bringing the total promissory note balance to $77,090 for this individual. During the six months ended June 30, 2019, the Company repaid $57,355 of these notes. At June 30, 2019 and December 31, 2018, notes payable related to Assumed Secured Merchant Loans and a new promissory note amounted to $97,496 and $157,951, respectively. In connection with the January 2019 promissory note, the Company issued 1,000 warrants to purchase 1,000 shares of the Company’s common stock at an exercise price of $1.00 per share. The warrant is exercisable over a five year period.

On September 20, 2018, the Company entered into a secured Merchant Loan with a lender in the amount of $521,250 and received net proceeds of $375,000, net of original issue discount of $146,250. Pursuant to this Secured Merchant Loan, the Company is required to repay the noteholders by making daily payments of $3,724 on each business day until the loans amounts are paid in full. Each payment is deducted directly from the Company’s bank accounts. This Secured Merchant Loan is secured by the Company’s assets and are personally guaranteed by the former majority member of Prime. On January 14, 2019, the Company entered into a new secured Merchant Loan with this lender in the amount of $764,500. The Company simultaneously repaid the September 20, 2018 loan which had a remaining principal balance of $223,329, paid an origination fee of $10,034 and received net proceeds of $316,637, net of original issue discount of $214,500. Pursuant to this Secured Merchant Loan, the Company is required to repay the noteholders by making daily payments of $6,371 on each business day until the loans amounts are paid in full. Each payment is deducted directly from the Company’s bank account. On January 24, 2019, the Company entered into another secured Merchant Loan with this lender in the amount of $417,000. The Company simultaneously paid an origination fee of $7,998 and received net proceeds of $292,002, net of original issue discount of $117,000. Pursuant to this Secured Merchant Loan, the Company is required to repay the noteholders by making daily payments of $3,972 on each business day until the loans amounts are paid in full. Each payment is deducted directly from the Company’s bank account. On May 8, 2019, the Company entered into another secured Merchant Loan with this merchant in the principal amount of $1,242,000. The Company simultaneously repaid prior loans of $362,961 which were entered into during January 2019, paid origination fees totaling $9,000 and paid an original issue discount of $342,000, and received net proceeds of $528,039. Pursuant to this secured Merchant Loan, the Company is required to pay the noteholder by making daily payments of $10,265 on each business day until the loan amounts are paid in full. Each payment is deducted from the Company’s bank account. These Secured Merchant Loans are secured by the Company’s assets and are personally guaranteed by the former majority member of Prime. During the six months ended June 30, 2019, the Company repaid an aggregate of $1,774,274 of the loans. At June 30, 2019 and December 31, 2018, secured merchant notes payable related to these Secured Merchant Loans amounted to $655,347 and $190,125, which is net of unamortized debt discount of $258,173 and $74,169, respectively.

On October 1, 2018, the Company entered into a secured Merchant Loan in the amount of $209,850 and received net proceeds of $137,962, net of original issue discount of $59,850 and net of origination fees of $12,038. Pursuant to this Secured Merchant Loan, the Company is required to repay the noteholders by making daily payments of $1,749 on each business day until the loans amounts are paid in full. Each payment is deducted directly from the Company’s bank accounts. Additionally, on October 1, 2018, the Company entered into a second secured Merchant Loan in the amount of $139,900 and received net proceeds of $92,000, net of original issue discount of $39,900 and net of origination fees of $8,000. Pursuant to this Secured Merchant Loan, the Company is required to repay the noteholders by making daily payments of $1,166 on each business day until the loans amounts are paid in full. Each payment is deducted directly from the Company’s bank accounts. These Secured Merchant Loans are secured by the Company’s assets and are personally guaranteed by the former majority member of Prime. During the six months ended June 30, 2019, the Company repaid all of these notes. At June 30, 2019 and December 31, 2018, notes payable related to these Secured Merchant Loans amounted to $0 and $128,726, which is net of unamortized debt discount of $0 and $51,371, respectively.

18

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

On October 12, 2018, the Company entered into a secured Merchant Loan with a lender in the amount of $420,000. The Company simultaneously repaid a prior loan of $31,634, paid an origination fee of $10,500 and received net proceeds of $254,552, net of original issue discount of $123,314. Pursuant to this Secured Merchant Loan, the Company is required to repay the noteholder by making daily payments of $3,000 on each business day until the loans amounts are paid in full. Each payment is deducted directly from the Company’s bank accounts. This Secured Merchant Loans was secured by the Company’s assets and was personally guaranteed by the former majority member of Prime. On January 28, 2019, the Company entered into a new secured Merchant Loan with this lender in the amount of $759,000 and received net cash of $315,097 after paying origination fee of $25,750, an original issue discount of $209,000, and the repayment of October 12, 2018 remaining loan and interest due to this lender of $209,153. Pursuant to this Secured Merchant Loan, the Company is required to repay the noteholders by making daily payments of $4,897 on each business day until the loans amounts are paid in full. Each payment is deducted directly from the Company’s bank account. This Secured Merchant Loans is secured by the Company’s assets and are personally guaranteed by the former majority member of Prime. At June 30, 2019 and December 31, 2018, note payable related to these Secured Merchant Loans amounted to $163,435 and $171,752, which is net of unamortized debt discount of $81,403 and $86,248, respectively.

From February 25, 2019 to March 6, 2019, the Company entered into four secured Merchant Loans in the aggregate amount of $1,199,200. The Company simultaneously repaid prior loans of $69,327 which were entered into during October 2018, paid origination fees totaling $78,286 and received net proceeds of $652,387, net of original issue discounts of $399,200. Pursuant to these four secured Merchant Loans, the Company was required to pay the noteholders by making daily payments aggregating $11,993 on each business day until the loan amounts were paid in full. Each payment was deducted from the Company’s bank account. On April 10, 2019, the Company paid off these secured Merchant Loans in full by paying an aggregate amount of $703,899. As a result of paying off these loans early, the noteholders reduced the origination fees and debt discounts by $229,195 in the aggregate.

On April 17, 2019, the Company entered into a secured Merchant Loan in the principal amount of $650,000 and received net proceeds of $500,000, net of original issue discounts of $150,000. Pursuant to this secured Merchant Loan, the Company is required to pay the noteholders by making three monthly installments of $216,667 beginning in June 2019 to August 2019. At June 30, 2019, notes payable related to this Secured Merchant Loan amounted to $333,333, which is net of unamortized debt discount of $100,000.

From May 21, 2019 to June 30, 2019, the Company entered into three secured Merchant Loans in the aggregate amount of $1,349,400. The Company received net proceeds of $855,000, net of original issue discounts and origination fees of $494,100. Pursuant to these three secured Merchant Loans, the Company is required to pay the noteholders by making daily payments aggregating $8,000 on each business day and a weekly payment of $28,500 until the loan amounts were paid in full. Each payment was deducted from the Company’s bank account. At June 30, 2019, notes payable related to these Secured Merchant Loans amounted to $714,387, which is net of unamortized debt discount of $403,963.

Promissory notes

In connection with the acquisition of Prime, the Company assumed several notes payable liabilities due to entities or individuals amounting to $297,005 (the “Note”). These notes have effective interest rates ranging from 7% to 10%, and are unsecured. During the six months ended June 30, 2019, the Company repaid $25,000 of these notes and $40,000 of these notes was rolled into a new note. At June 30, 2019 and December 31, 2018, notes payable to these entities or individuals amounted to $65,000 and $130,000, respectively.

From October 31, 2018 to December 31, 2018, the Company entered into Original Discount Senior Secured Demand Promissory Notes with an investor (the “Promissory Note”). Pursuant to the 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 these promissory notes. During the six months ended June 30, 2019, the Company repaid $200,000 of these promissory notes. At June 30, 2019 and December 31, 2018, notes payable to this entity amounted to $350,000 and $505,945, which is net of unamortized debt discount of $0 and $44,055, respectively. The remaining notes were payable on demand. These promissory notes are secured by the Company’s assets.

From January 2019 to June 30, 2019, the Company entered into separate promissory notes with several individuals totaling $2,352,150, including $40,000 of a previous note rolled into these new notes, and received net proceeds of $2,048,900, net of original issue discounts of $263,250. These Notes are due between 45 and 273 days from the respective Note date. Other than the original issue discount, no additional interest is due to the holders. In connection with these promissory notes, the Company issued 58,000 warrants to purchase 58,000 shares of the Company’s common stock at an exercise price of $1.00 per share. The warrants are exercisable over a five year period. At June 30, 2019, notes payable to these individuals amounted to $1,638,480, which is net of unamortized debt discount of $21,365.

During March 2019, the Company entered into two separate promissory notes with an entity totaling $165,000 and received net proceeds of $150,000, net of original issue discounts of $15,000. During the six months ended June 30, 2019, the Company repaid $165,000 of these promissory notes. At June 30, 2019, notes payable to this entity amounted to $0.

19

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

Equipment and auto notes payable

In connection with the acquisition of Prime, the Company assumed several equipment notes payable liabilities due to entities amounting to $523,207 (the “Equipment Notes”). These Equipment Notes have effective interest rates ranging from 6.0% to 9.4%, and are secured by the underlying van or trucks. At June 30, 2019 and December 31, 2018, equipment notes payable to these entities amounted to $358,285 and $488,289, respectively.

During October and November 2018, the Company entered into several auto financing agreements. At June 30, 2019 and December 31, 2018, auto notes payable related to auto financing agreements amounted to $198,281 and $161,036, respectively.

At June 30, 2019 and December 31, 2018, notes payable consisted of the following:

	June 30, 2019			December 31, 2018
Principal amounts	$	5,438,948		$	2,189,666
Less: unamortized debt discount		(864,904	)		(255,843	)
Principal amounts, net		4,574,044			1,933,823
Less: current portion of notes payable		(4,256,738	)		(1,509,804	)
Notes payable – long-term	$	317,306		$	424,019

NOTE 9– STOCKHOLDERS’ DEFICIT

Preferred stock

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

Preferred stock of 4,000,000 shares is designated Series A Convertible Preferred Stock. Each share of Series A preferred stock has a par value of $.001 and a stated value of $1.00. Dividends are payable on Series A preferred shares at the rate per share of 7% per annum cumulative based on the stated value. The Series A preferred shares have no voting rights, except as required by law. Each share of preferred stock is convertible based on the stated value at a conversion price of $20.83 at the option of the holder; provided, however, if a triggering event occurs, as defined in the document, the conversion price shall thereafter be reduced, and only reduced, to equal forty percent of the lowest VWAP during the thirty consecutive trading day period prior to the conversion date. As of June 30, 2019, the Company believes a triggering event has occurred. The beneficial ownership limitation attached to conversion is 4.99%, which can be decreased or increased, upon not less than 61 days’ notice to the Company, but in no event exceeding 19.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of common stock upon conversion of the preferred stock. After 36 months, the Company has the right to redeem all, but not less than all, of the outstanding preferred shares in cash at a price equal to 130% of the stated value plus any accrued but unpaid dividends thereon.

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.

Common stock issued for services

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.

Cancellation of common shares

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 and the shares were cancelled. In connection with the disposal of Save On, the Company recorded an increase in equity of $56,987 related to the amount of net liabilities disposed of in a transaction with the former chief executive officer of the Company since the CEO is still a related party after this transaction as he remained a principal shareholder (see Note 3).

20

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

Shares issued in connection with debt modification

On April 9, 2019, the Company entered into an agreement with Bellridge that modifies 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. As of the date of this report, 100,000 of these shares have been issued and 700,000 shares are issuable. 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 (See Note 7).

Stock options

In connection the disposal of Save On, on May 1, 2019, the Company granted an aggregate of 80,000 options to certain employees of Save On. The options are exercisable at $8.85 per share for a period of five years. 25% of the options vest on January 1, 2020 and 25% shall vest annually thereafter. On May 1, 2019, the Company calculated the fair value of these options of $700,816 which was calculated using the Black-Sholes option pricing model with the following assumptions: expected dividend rate, 0%; expected term (in years), 5 years; volatility of 228.1% and risk-free interest rate of 2.31%. During the six months ended June 30, 2019, the Company recorded stock-based compensation of $700,816 related to these options which has been included in loss from discontinued operations on the accompany statement of operations.

Stock option activities for the six months ended June 30, 2019 are summarized as follows:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance Outstanding December 31, 2018		-	$	-		-	$	-
Granted		80,000		8.84
Cancelled		-		-
Balance Outstanding June 30, 2019		80,000	$	8.84		4.83	$	252,000
Exercisable, June 30, 2019		0	$	-		-	$	-

Warrants

In connection with the Purchase Agreement in 2018 (See Note 7 under Bellridge), the Lender 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. Additionally, the placement agent 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. Also, on December 27, 2018, the lender waived any and all defaults in existence on the Note and the Company agreed to issue a warrant that is convertible into 2% of the issued and outstanding shares existing as the time the Company files a registration statement or makes an application to up list to a national stock exchange. On April 9, 2019, the Company entered into an agreement with Bellridge and the Placement Agent that cancelled these warrants in exchange for an aggregate of 600,000 common shares of the Company. 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 (See Note 7).

In connection with several promissory notes payable (see Note 8), during the six months ended June 30, 2019, the Company issued 59,000 warrants to purchase 59,000 shares of common at an exercise price of $1.00 per share. During the six months ended June 30, 2019, the Company calculated the relative fair value of these warrants of $135,324 which was amortized into interest expense over the loan terms and was estimated using the Binomial valuation model with the following assumptions: expected dividend rate, 0%; expected term (in years), 5 years; volatility of 228.1% and risk-free interest rate ranging from 2.28% to 2.40%.

21

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

In connection with previous promissory notes payable (see Note 8), on June 11, 2019, the Company issued 55,000 warrants to purchase 55,000 shares of common at an exercise price of $1.00 per share. On June 11, 2019, the Company calculated the fair value of these warrants of $601,121 which was expensed and included in loan fees on the accompanying condensed consolidated statement of operations. These fair value of these warrants was estimated using the Binomial valuation model with the following assumptions: expected dividend rate, 0%; expected term (in years), 5 years; volatility of 228.1% and risk-free interest rate of 1.92%.

Warrant activities for the six months ended June 30, 2019 are summarized as follows:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance Outstanding December 31, 2018		1,648,570		$	0.00		1.47	$	2,472,655
Granted		114,000			1.00
Cancellations		(1,421,059	)		0.00
Change in warrants related to dilutive rights		(227,511	)		0.00
Balance Outstanding June 30, 2019		114,000		$	1.00		4.82	$	1,254,000
Exercisable, June 30, 2019		114,000		$	1.00		4.82	$	1,254,000

NOTE 10 – COMMITMENTS AND CONTINGENCIES

Employment agreement

On June 18, 2018, the Company entered into an employment agreement with the chief operating officer of Prime. The Company shall pay to this executive a base salary of $520,000 per year, payable in accordance with the Company’s usual pay practices. The executive’s base salary will increase by $260,000 per year upon (i) Prime achieving revenue of $20 million on an annualized basis (the “Initial Target Goal”) for four consecutive weeks; and (ii) each time Prime achieves revenue of an additional $10 million increment above the Initial Target Goal (i.e., $30 million, $40 million, $50 million, etc.) on an annualized basis for four consecutive weeks. Executive’s base salary shall be subject to review annually by the Manager and may be increased (but not decreased). The executive shall be entitled to participate in any bonus plan that the Manager or its designee may approve for the senior executives of the Company and shall be entitled to participate in benefits under the Company’s benefit plans, profit sharing and arrangements, including, without limitation, any employee benefit plan or arrangement made available in the future by the Company to its employees or senior executives, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. Notwithstanding the foregoing, during the Employment, the Company will provide, at the Company’s expense, health and major medical insurance benefits to the Executive and his family members which are at least equal to the benefits provided to the Executive and his family members immediately prior to the Effective Date. The term of this Agreement (as it may be extended by the following sentence or terminated earlier pursuant to terms in the employment agreement shall begin on the Effective Date and end on the close of business on May 31, 2023. The Employment Term shall be automatically extended for additional one-year periods unless, at least sixty (60) days prior to the end of the expiration of the Employment Term.

Other

From time to time, we may be involved in litigation relating to claims arising out of our operation in the normal course of business. As of June 30, 2019, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on results of our operations.

22

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

NOTE 11– RELATED PARTY TRANSACTIONS AND BALANCES

Due to related parties

In connection with the acquisition of Prime, the Company acquired a balance of $14,019 that was due from the former majority owner of Prime. Pursuant to the terms of the SPA, the Company agreed to pay $489,174 in cash to the former majority owner of Prime who then advanced back the $489,174 to Prime. During the six months ended June 30, 2019, the Company repaid $50,000 of this advance. This advance is non-interest bearing and is due on demand. At June 30, 2019 and December 31, 2018, amount due to this related party amounted to $209,000 and $259,000.

During the period from acquisition date of Prime (June 18, 2018) to June 30, 2019, an employee of Prime who exerts significant influence over the business of Prime, paid costs and expenses and was reimbursed funds by the Company. These advances are non-interest bearing and are due on demand. At June 30, 2019 and December 31, 2018, amounts due from (to) this related party amounted to $81,489 and $(16,300), respectively.

Notes payable – related parties

From July 25, 2018 through December 31, 2018, the Company entered into several Promissory Notes with the Company’s former chief executive officer or the spouse of the Company’s former chief executive officer. Pursuant to these promissory notes, the Company borrowed an aggregate of $1,150,000 and received net proceeds of $1,050,000, net of original issue discounts of $100,000. From July 25, 2018 through December 31, 2018, $930,000 of these loans were repaid and during January 2019, the Company repaid the remaining existing promissory note totaling $220,000 with the spouse of the Company’s chief executive officer. In addition, during February 2019, the Company entered into another promissory note with the spouse of the chief executive officer totaling $220,000, net of an original issue discount of $20,000. In April 2019, the Company repaid this promissory note. During the six months ended June 30, 2019, amortization of debt discount related to these notes amounted to $26,383 and is included in interest expense – related parties on the accompanying condensed consolidated statement of operations.

On April 9, 2019, certain noteholders who were not considered related parties became related parties since they became beneficial owners of the Company’s common stock. Accordingly, notes payable amounting to $510,000 were reclassified from notes payable to note payable – related party (See Note 7).

At June 30, 2019 and December 31, 2018, notes payable – related parties amounted to $510,000 (non-current) and $213,617 (current), which is net of unamortized debt discount of $0 and $6,383, respectively.

Convertible note payable – related parties

On March 13, 2019, the Company entered into a convertible note agreement with an individual, who is affiliated to the Company’s chief executive officer, in the amount of $500,000 (See Note 7).

In April 2019, the Company entered into a convertible note agreement with a company, who is affiliated to the Company’s chief executive officer, in the amount of $2,000,000 (See Note 7).

During the six months ended June 30, 2019, interest expense related to these notes amounted to $107,506 and is included in interest expense – related parties on the accompanying condensed consolidated statement of operations.

NOTE 12 – OPERATING LEASE RIGHT-OF-USE (“ROU”) ASSETS AND OPERATING LEASE LIABILITIES

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 January 2024. From the lease commencement date until the last day of the second lease year, monthly rent shall be $14,000. At the beginning of the 25^th month following the commencement date and through the end of the term, minimum rent shall be $14,420 per month. The Company shall have one option to renew the term of this lease for an additional five years. In January 2019, the Company paid a security deposit of $28,000.

In 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.

23

TRANSPORTATION AND LOGISTICS SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

During the six months ended June 30, 2019 and 2018, in connection with this operating lease, the Company recorded rent expense of $84,112 and $0, respectively, which is expensed during the period and included in operating expenses on the accompanying condensed consolidated statements of operations.

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

At June 30, 2019, right-of-use asset (“ROU”) is summarized as follows:

	June 30, 2019
Office lease right of use asset	$	631,723
Less: accumulated amortization into rent expense		(53,302	)
Balance of ROU asset as of June 30, 2019	$	578,421

At June 30, 2019, operating lease liability related to the ROU asset is summarized as follows:

	June 30, 2019
Lease liability related to office lease right of use asset	$	592,533
Less: current portion of lease liability		(102,407	)
Lease liability – long-term	$	490,126

At June 30, 2019, future minimum base lease payments due under non-cancelable operating leases is as follows:

Year ended June 30,	Amount
2020	$	168,000
2021		170,520
2022		173,040
2023		173,040
2024		86,520
Total minimum non-cancelable operating lease payments	$	771,120
Less: discount to fair value		(178,587	)
Total lease liability at June 30, 2019		592,533

NOTE 13 – CONCENTRATIONS

For the six months ended June 30, 2019, one customer represented 99.1% of the Company’s total net revenues. This revenue is from one Prime customer. For the six months ended June 30, 2018, one customer represented 98.9% of the Company’s total net revenues. At June 30, 2019, one customer represented 96.9% of the Company’s accounts receivable balance.

During the six months ended June 30, 2019, the Company rented delivery vans from two vendors. Any shortage of supply of vans available to rent to the Company could have a material adverse effect on the Company’s business, financial condition and results of operations.

All revenues are derived from customers in the United States.

NOTE 14 – SUBSEQUENT EVENTS

Secured merchant loans

From July 1, 2019 to August 19, 2019, the Company entered into several secured Merchant Loans in the aggregate amount of $1,762,225. The Company received net proceeds of $557,500, net of original issue discounts and origination fees of $702,225 and the repayment of previous secured merchant loans of $502,500. Pursuant to these secured Merchant Loans, the Company is required to pay the noteholders by making daily payments on each business day until the loan amounts are paid in full. Each payment was deducted from the Company’s bank account.

Promissory notes

In August 2019, the Company entered into a promissory note with an entity totaling $52,500 and received net proceeds $50,000, net of original issue discount of $2,500. The note was due in one week and is currently in default. The default interest is 12% per annum.

Promissory notes – related party

On July 2. 2019, the Company entered into a note agreement with an entity, who is affiliated to the Company’s chief executive officer, in the amount of $500,000. The principal amount of this note and all accrued interest shall be due and payable on October 3, 2019 and is non-interest bearing. If the note is not paid by the due date, interest shall be 20% per annum.

Due to related party

On August 1, 2019, the Company’s chief executive officer advanced the Company $50,000 for working capital purposes, The advance is payable on demand and is non-interest bearing.

Sale of common stock

In August 2019, the Company entered into subscription agreements with investors for the sale of 209,000 units at $2.50 per unit which consists of 209,000 shares of common stock and 209,000 warrants exercisable at $2.50 per share for cash proceeds of $522,500.

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

FORWARD LOOKING STATEMENTS

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. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

Overview

We were incorporated under the laws of the State of Nevada on July 25, 2008 and prior to the reverse merger discussed below, were inactive.

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 TLSI (the “Reverse Merger”). Save On was incorporated in the State of Florida and started business on July 12, 2016 (“Inception Date”). Save On is a provider of integrated transportation management solutions consisting of brokerage and logistics services such as transportation scheduling, routing and other value added services related to the transportation of automobiles and other freight. As an early stage company, TLSI’s current operations are subject to all risks inherent in the establishment of a new business enterprise.

The Share Exchange was treated as a reverse merger and recapitalization of Save On for financial reporting purposes since 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 Merger were replaced with the historical financial statements of Save On before the Merger. The balance sheets at their historical cost basis of both entities were combined at the merger date and the results of operations from the merger date forward include the historical results of Save On and results of TLSI from the merger date forward. The Merger was intended to be treated as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended.

On June 18, 2018 (the “Acquisition Date”), we completed the acquisition of 100% of the issued and outstanding membership interests of Prime EFS, LLC, a New Jersey limited liability company (“Prime”), from its members pursuant to the terms and conditions of a Stock Purchase Agreement entered into among us and the Prime members on the Closing Date (the “SPA”). Prime is a New Jersey based transportation company with a focus on deliveries for on-line retailers in New York, New Jersey and Pennsylvania.

On July 16, 2018, we filed a Certificate of Amendment to the Amended and Restated Articles of Incorporation (the “Certificate of Amendment”) with the Secretary of State of the State of Nevada to (1) change the name of the Company from PetroTerra Corp. to Transportation and Logistics Systems, Inc., (2) authorize an increase of the shares of the preferred stock to 10,000,000 shares, par value $0.001 per share and (3) effect a 1-for-250 reverse stock split (the “Reverse Stock Split”) with respect to the outstanding shares of the Company’s common stock. The Certificate of Amendment became effective on July 17, 2018. The corporate name change, increase of authorized shares of preferred stock and Reverse Stock Split were previously approved by the sole director and the majority of stockholders of the Company. The corporate name change and the Reverse Stock Split were deemed effective at the open of business on July 18, 2018. All share and per share data in the accompanying consolidated financial statements and within this Quarterly Report have been retroactively restated to reflect the effect of the recapitalization.

On July 24, 2018, the Company formed Shypdirect LLC (“Shypdirect”), a company organized under the laws of New Jersey. Shypdirect is a transportation company with a focus on tractor trailer and box truck deliveries of product on the east coast of the United States from one distributor’s warehouse to another warehouse or from a distributor’s warehouse to the post office.

On May 1, 2019, we entered into a Share Exchange Agreement with Save On and Steven Yariv, whereby we 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 us. In addition, the Company will grant an aggregate of 80,000 options to certain employees of Save On. Mr. Yariv ceased to be an officer or director of the Company effective with the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as filed with the Securities and Exchange Commission on April 16, 2019. 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, we reflect 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 other periods presented.

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The following discussion highlights the results of our operations and the principal factors that have affected its 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 is based on the consolidated financial statements contained in this Quarterly Report, which has been prepared in accordance with generally accepted accounting principles in the United States. You should read the discussion and analysis together with such consolidated financial statements and the related notes thereto.

Basis of Presentation

The condensed consolidated financial statements for the six months ended June 30, 2019 and 2018 include a summary of our significant accounting policies and should be read in conjunction with the discussion below.

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.

Results of Operations

For the three and six months ended June 30, 2019 compared with the three and six months ended June 30, 2018

The following table sets forth our revenues, expenses and net loss for the three and six months ended June 30, 2019 and 2018. The financial information below is derived from our condensed consolidated financial statements included in this Quarterly Report.

	For the Three Months Ended June 30,
	2019			2018
Revenues	$	8,101,412		$	626,820
Cost of revenues		7,522,973			535,945
Gross profit		578,439			90,875
Operating expenses		6,916,112			4,682,223
Loss from operations		(6,337,673	)		(4,591,348	)
Other (expenses) income		71,302			(9,965,102	)
(Loss) income from discontinued operations		(695,087	)		45,536
Net loss	$	(6,961,458	)	$	(14,510,914	)

	For the Six Months Ended June 30,
	2019			2018
Revenues	$	13,904,619		$	626,820
Cost of revenues		13,072,675			535,945
Gross profit		831,944			90,875
Operating expenses		12,293,659			4,727,558
Loss from operations		(11,461,715	)		(4,636,683	)
Other (expenses) income		(14,466,040	)		(9,896,907	)
(Loss) income from discontinued operations		(681,426	)		83,601
Net loss	$	(26,609,181	)	$	(14,449,989	)

Revenues

For the three months ended June 30, 2019, our revenues from continuing operations were $8,101,412 as compared to $626,820 for the three months ended June 30, 2018, an increase of $7,474,592. This increase was a result of our acquisition of Prime on June 18, 2018. Revenue of $7,513,804 was attributable to the business of Prime which focuses on deliveries for on-line retailers in New York, New Jersey and Pennsylvania. Additionally, during the three months ended June 30, 2019, revenue related to our newly formed subsidiary, Shypdirect amounted to $587,608.

For the six months ended June 30, 2019, our revenues from continuing operations were $13,904,619 as compared to $626,820 for the six months ended June 30, 2018, an increase of $13,277,799. This increase was a result of our acquisition of Prime on June 18, 2018. Revenue of $12,909,864 was attributable to the business of Prime which focuses on deliveries for on-line retailers in New York, New Jersey and Pennsylvania. Additionally, during the six months ended June 30, 2019, revenue related to our newly formed subsidiary, Shypdirect amounted to $994,755.

On May 1, 2019, we entered into a Share Exchange Agreement with Save On and Steven Yariv, whereby we 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 us. Accordingly, for all periods presented, all revenues from Save On have been reflected as part of discontinued operations and we will not reflect any revenues from Save On in future periods.

Cost of Revenue

For the three months ended June 30, 2019, our cost of revenues from continuing operations were $7,522,973 compared to $535,945 for the three months ended June 30, 2018, an increase of $6,987,028. This increase was a direct result of our acquisition of Prime on June 18, 2018. Cost of revenue of $6,894,068 was attributable to the business of Prime. During the three months ended June 30, 2019, cost of revenue related to our newly formed subsidiary, Shypdirect amounted to $628,904. Cost of revenues relating to our Prime and Shypdirect segments consists of truck and van rental fees, insurance, gas, maintenance, and compensation and related benefits.

For the six months ended June 30, 2019, our cost of revenues from continuing operations were $13,072,675 compared to $535,945 for the six months ended June 30, 2018, an increase of $12,536,730. This increase was a direct result of our acquisition of Prime on June 18, 2018. Cost of revenue of $11,798,743 was attributable to the business of Prime. During the six months ended June 30, 2019, cost of revenue related to our newly formed subsidiary, Shypdirect amounted to $1,273,932. Cost of revenues relating to our Prime and Shypdirect segments consists of truck and van rental fees, insurance, gas, maintenance, and compensation and related benefits.

26

Gross Profit

For the three months ended June 30, 2019, our gross profit was $578,439, or 7.1% of revenue, as compared to $90,875, or 14.5% of revenue, for the three months ended June 30, 2018, an increase of $487,564. The increase in gross profit primarily resulted from the acquisition of Prime on June 18, 2018. The gross profit for the three months ended June 30, 2019 represents a full quarter of operating activity for Prime whereas the three months ended June 30, 2018 only represents twelve days of operating activity. For the three months ended June 30, 2019, gross profit and gross profit percentage for Prime amounted to $619,736, or 8.2%. For the three months ended June 30, 2019, gross loss and gross loss percentage for Shypdirect amounted to $(41,296), or (7.0)% primarily attributable to high payroll, vehicle rental, insurance and other costs incurred in the ramping up of the Shypdirect business.

For the six months ended June 30, 2019, our gross profit was $831,944, or 6.0% of revenue, as compared to $90,875, or 14.5% of revenue, for the six months ended June 30, 2018, an increase of $741,069. The increase in gross profit primarily resulted from the acquisition of Prime on June 18, 2018. The gross profit for the six months ended June 30, 2019 represents six months of operating activity for Prime whereas the six months ended June 30, 2018 only represents twelve days of operating activity. For the six months ended June 30, 2019, gross profit and gross profit percentage for Prime amounted to $1,111,121, or 8.6%. For the six months ended June 30, 2019, gross loss and gross loss percentage for Shypdirect amounted to $(279,177), or (28.1)% primarily attributable to high payroll, vehicle rental, insurance and other costs incurred in the ramping up of the Shypdirect business.

Operating Expenses

For the three months ended June 30, 2019, total operating expenses amounted to $6,916,112 as compared to $4,682,223 for the three months ended June 30, 2018, an increase of $2,233,889. For the six months ended June 30, 2019, total operating expenses amounted to $12,293,659 as compared to $4,727,558 for the six months ended June 30, 2018, an increase of $7,566,101. For the three and six months ended June 30, 2019 and 2018, operating expenses consisted of the following:

	For the Three Months Ended June 30,
	2019		2018
Compensation and related benefits	$	3,608,670	$	3,149,776
Legal and professional Fees		566,242		1,328,658
Rent		86,406		-0-
General and administrative expenses		930,203		203,789
Impairment loss		1,724,591		-0-
Total Operating Expense	$	6,916,112	$	4,682,223

	For the Six Months Ended June 30,
	2019		2018
Compensation and related benefits	$	7,717,214	$	3,149,776
Legal and professional Fees		1,071,082		1,373,993
Rent		185,237		-0-
General and administrative expenses		1,595,535		203,789
Impairment loss		1,724,591		-0-
Total Operating Expense	$	12,293,659	$	4,727,558

Compensation and related benefits

For the three months ended June 30, 2019, compensation and related benefits amounted to $3,608,670 compared to $3,149,776 for the three months ended June 30, 2018, an increase of $458,894. Compensation and related benefits for the three months ended June 30, 2019 and 2018 included stock-based compensation of $2,200,000 and $3,090,000 from the granting of shares of our common stock to an employee and former chief executive officer of the Company for services rendered, respectively. Additionally, during the three months ended June 30, 2019, general and administrative compensation and related benefits attributed to the business of Prime, which was acquired on June 18, 2018, were $954,641 and compensation and related benefits attributed to the business of Shypdirect was $395,869.

For the six months ended June 30, 2019, compensation and related benefits amounted to $7,717,214 compared to $3,149,776 for the six months ended June 30, 2018, an increase of $4,567,438. Compensation and related benefits for the six months ended June 30, 2019 and 2018 included stock-based compensation of $4,950,808 and $3,090,000 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, respectively. Additionally, during the six months ended June 30, 2019, compensation and related benefits attributed to the business of Prime, which was acquired on June 18, 2018, were $2,026,718 and compensation and related benefits attributed to the business of Shypdirect was $681,527.

Legal and professional fees

For the three months ended June 30, 2019, legal and professional fees were $566,242 as compared to $1,328,658 for the three months ended June 30, 2018, a decrease of $762,416. For the six months ended June 30, 2019, legal and professional fees were $1,071,082 as compared to $1,373,993 for the six months ended June 30, 2018, a decrease of $302,911. During the three and six months ended June 30, 2019, we incurred stock-based consulting fees of $265,500 from the issuance of our common shares to consultants for business development services rendered. During the three and six months ended June 30, 2018, we incurred stock-based consulting fees of $1,236,000 from the issuance of our common shares to consultants for business development services rendered.

Rent expense

For the three and six months ended June 30, 2019, rent expense was $86,406 and $185,237, respectively compared to $-0- and $-0- for the three and six months ended June 30, 2018, respectively. This increase was attributable to an expansion in office, warehouse and parking spaces pursuant to short and long-term operating leases related to Prime and Shypdirect segments.

General and administrative expenses

General and administrative expenses include office expenses and supplies, travel and entertainment, depreciation and amortization, and other expenses.

For the three months ended June 30, 2019, general and administrative expenses were $930,203 as compared to $203,789 for the three months ended June 30, 2018, an increase of $726,414. The increase in operating expenses compared to the prior year period is due to the acquisition of Prime, which was acquired on June 18, 2018. For the three months ended June 30, 2019, general and administrative expenses included a full quarter of operating activities. For the three months ended June 30, 2018, general and administrative expenses included only 12 days of operating activity. General and administrative expenses attributed to the business of Prime and Shypdirect were $874,136 and $46,854, respectively, which includes depreciation and amortization expense of $308,816 and $0, respectively.

For the six months ended June 30, 2019, general and administrative expenses were $1,595,535 as compared to $203,789 for the six months ended June 30, 2018, an increase of $1,391,746. The increase in operating expenses compared to the prior year period is due to the acquisition of Prime, which was acquired on June 18, 2018. For the six months ended June 30, 2019, general and administrative expenses included a full six months of operating activities. For the six months ended June 30, 2018, general and administrative expenses included only 12 days of operating activity. General and administrative expenses attributed to the business of Prime and Shypdirect were $1,474,342 and $111,980, respectively, which includes depreciation and amortization expense of $617,632 and $0, respectively.

Impairment expense

During the three and six months ended June 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 three and six months ended June 30, 2019. No impairment expense was recorded during the three and six months ended June 30, 2018.

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Loss from Operations

For the three and six months ended June 30, 2019, loss from operations amounted to $6,337,673 and $11,461,715, respectively, as compared to $4,591,348 and $4,636,683 for the three and six months ended June 30, 2018. This represents an increase in loss from operations of $1,746,325 for the three months ended June 30, 2019 compared to 2018 and an increase in loss from operations of $6,825,032 for the six months ended June 30, 2019 compared to 2018.

Other (Expenses) Income

Total other (expenses) income include interest expense, derivative (expense) income, loan fees, and a gain on debt extinguishment. For the three and six months ended June 30, 2019 and 2018, other expenses (income) consisted of the following:

	For the Three Months Ended June 30,
	2019			2018
Interest expense	$	(1,377,051	)	$	(243,302	)
Interest expense – related party		(121,078	)		-
Loan fees		(601,121	)		-
Gain on debt extinguishment		43,823,897			-
Derivative expense		(41,653,345	)		(9,721,800	)
Total Other (Expenses) Income	$	71,302		$	(9,965,102	)

	For the Six Months Ended June 30,
	2019			2018
Interest expense	$	(2,597,443	)	$	(391,555	)
Interest expense – related party		(147,639	)		-
Loan fees		(601,121	)		-
Gain on extinguishment of debt		43,917,768			-
Derivative (expense) income		(55,037,605	)		(9,505,352	)
Total Other (Expenses) Income	$	(14,466,040	)	$	(9,896,907	)

For the three months ended June 30, 2019 and 2018, aggregate interest expense was $1,498,129 and $243,302, respectively. For the six months ended June 30, 2019 and 2018, aggregate interest expense was $2,745,082 and $243,302, respectively. The increase in interest expense for both periods resulted from an increase in interest-bearing loans and an increase in the amortization in debt discount.

For the three months ended June 30, 2019 and 2018, derivative expense was $41,653,345 and $9,721,800, respectively, an increase of $31,931,545. For the six months ended June 30, 2019 and 2018, derivative expense was $55,037,605 and $9,505,352, respectively, an increase of $45,532,253. For the three and six months ended June 30, 2019, we adjusted our derivative liabilities to fair value and recorded derivative expense. This significant change was attributable to a higher stock price and having more financials instruments treated as derivatives, including embedded conversion options and warrants, as compared to the comparable previous period.

For the three and six months ended June 30, 2019 and 2018, loan fees were $601,121 and $-0-, respectively. In connection with previous promissory notes payable, on June 11, 2019, we issued 55,000 warrants to purchase 55,000 shares of common at an exercise price of $1.00 per share. On June 11, 2019, the Company calculated the fair value of these warrants of $601,121 which was expensed and included in loan fees on the accompanying condensed consolidated statement of operations.

For the three and six months ended June 30, 2019, gain on extinguishment of debt was $43,823,897 and $43,917,768, respectively. On April 9, 2019, in connections with certain debt modifications, debt repayments, share issuances and warrants cancellations, the Company recorded a gain on debt extinguishment, During the three and six months ended June 30,2018, we did not record any gain on debt extinguishment.

Discontinued Operations

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 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. For the three months ended June 30, 2019 and 2018, (loss) income from discontinued operations amounted to $(695,087) and $45,536, respectively. For the six months ended June 30, 2019 and 2018, (loss) income from discontinued operations amounted to $(681,426) and $83,601, respectively. During the three and six months ended June 30, 2019, we recorded stock-based option expense related to the 80,000 options granted to Save On employees of $700,816.

Net Loss

Due to factors discussed above, for the three months ended June 30, 2019 and 2018, net loss amounted to $6,961,458, or $(0.70) per basic and diluted common share, and $14,510,914, or $(13.89) per basic and diluted common share, respectively. For the six months ended June 30, 2019 and 2018, net loss amounted to $26,609,181, or $(3.51) per basic and diluted common share, and $14,449,989, or $(17.87) per basic and diluted common share, respectively.

LIQUIDITY AND CAPITAL RESOURCES

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. At June 30, 2019 and December 31, 2018, we had a cash balance of $120,269 and $296,196, respectively and our working capital deficit was $11,697,417 and $12,923,440, respectively. We reported a net decrease in cash for the six months ended June 30, 2019 of $175,927.

Recent developments

On April 9, 2019, we entered into an agreement with Bellridge Capital, L.P. (“Bellridge”) that modifies our existing obligations to Bellridge as follows:

● the overall principal amount of that certain Convertible Promissory Note, dated June 18, 2018, issued by the Company in favor of Bellridge (the “Note”) was reduced from the original principal amount of $2,497,502 (principal amount of $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;

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

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

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

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

● the registration rights previously granted to Bellridge have now been eliminated; and

● those certain Warrants, dated June 18, 2018 and December 27, 2018, respectively, issued by the Company in favor of Bellridge shall be cancelled and of no further force or effect. In exchange, the Company will issue Bellridge 360,000 shares of restricted common stock.

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In addition, on April 9, 2019, 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.

On April 9, 2019, we entered into agreements with another institutional investor, RedDiamond Partners LLC, holding convertible notes representing an aggregate principal amount of $510,000, and agreed with such holder to:

● extend the maturity date of the notes to December 31, 2020;

● remove all convertibility features of the notes; and

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

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

On April 11, 2019, we entered into a convertible note agreement with an entity affiliated with the Company’s chief executive officer in the amount of $2,000,000. Commencing on May 11, 2019, and continuing on the eleventh day of each month thereafter, payments of interest only on the outstanding principal balance of this Note of $30,000 shall be due and payable. Commencing on November 11, 2019 and continuing on the eleventh day of each month thereafter through April 11, 2021, payments of principal and interest of $117,611 are due, if the note is not sooner converted as provided in the note agreement. The payment of all or any portion of the principal and accrued interest may be prepaid prior to April 11, 2021. Interest shall 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. All past due principal and interest on this Note shall bear interest from maturity of such principal or interest until paid at the lesser of (i) 20% per annum, or (ii) the highest non-usurious rate allowed by applicable law. This Note may be converted by 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.

Operating activities

Net cash flows used in operating activities for the six months ended June 30, 2019 amounted to $3,115,838. During the six months ended June 30, 2019, net cash used in operating activities was primarily attributable to a net loss of $26,609,181 adjusted for the add back (reduction) of non-cash items such as depreciation and amortization expense of $617,632, derivative expense of $55,037,605, amortization of debt discount of $2,336,963, stock-based compensation of $5,917,124, a gain on debt extinguishment of $(44,031,110), 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 $486,226, offset by an increase in accounts payable and accrued expenses of $1,420,925.

Net cash flows used in operating activities for the six months ended June 30, 2018 amounted to $315,066. During the six months ended June 30, 2018, the net cash used in operations was primarily attributable to net loss of $14,449,989 adjusted for the add back (reduction) of non-cash items such as depreciation and amortization expense of $173,629, derivative expense of $9,505,352, amortization of debt discount of $332,364, stock-based compensation of $4,326,000 and changes in operating assets and liabilities such as an increase in accounts receivable of $325,551 and a decrease in in accounts payable and accrued expenses of $130,902.

Investing activities

Net cash provided by investing activities for the six months ended June 30, 2019 amounted to $24,119 and consisted of cash received from the disposal of trucks and van of $81,000 offset by cash paid for the purchase of property and equipment of $51,256 and a reduction of cash related to the disposal of Save On of $5,625. Net cash used in investing activities for the six months ended June 30, 2018 amounted to $450,976 and consisted of cash received in acquisition of $38,198 offset by cash paid for the acquisition of Prime of $489,174.

Financing activities

For the six months ended June 30, 2019, net cash provided by financing activities totaled $2,915,792. For the six months ended June 30, 2019, we received proceeds from related party convertible notes of $2,500,000, proceeds from notes payable of $6,631,020 and proceeds from related party notes of $255,000 offset by the repayment of convertible notes of $273,579, the repayment of related party notes of $495,000, and the repayment of notes payable of $5,697,856.

For the six months ended June 30, 2018, net cash provided by financing activities totaled $1,344,055. For the six months ended June 30, 2018, we received proceeds from related party convertible notes of $2,497,503 and proceeds from related party notes of $467,672 offset by the repayment of notes payable of $611,406 and debt issue costs of $1,009,714.

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Going Concern Consideration

Our accompanying unaudited 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 unaudited condensed consolidated financial statements, we had a net loss of $26,609,181 for the six months ended June 30, 2019. The net cash used in operations was $3,115,838 for the six months ended June 30, 2019. Additionally, we had an accumulated deficit, shareholders’ deficit, and a working capital deficit of $41,379,031, $9,248,833 and $11,697,417, respectively, at June 30, 2019. Furthermore, as of June 30, 2019, the Company failed to make required payments of principal and interest on certain of its convertible debt instruments and defaulted on other provisions in these Notes. On April 9, 2019, the Company entered into agreements with these lenders that modified these Notes. It is management’s opinion that these factors raise substantial doubt about our ability to continue as a going concern for a period of twelve months from the issuance date of this report. Management cannot provide assurance that we will ultimately achieve profitable operations or become cash flow positive or raise additional debt and/or equity capital. 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 common shares and from the issuance of convertible promissory notes, 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. These consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

Contractual Obligations

We have certain fixed contractual obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments.

Off-Balance Sheet Arrangements

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.

Critical Accounting Policies and Significant Accounting Estimates

The methods, estimates, and judgments that we use in applying our accounting policies have a significant impact on the results that we report in our consolidated financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. Significant estimates included in the accompanying consolidated financial statements and footnotes include the valuation of accounts receivable, the useful life of property and equipment, the valuation of intangible assets, assumptions used in assessing impairment of long-lived assets, estimates of current and deferred income taxes and deferred tax valuation allowances, the fair value of non-cash equity transactions, the valuation of derivative liabilities, and the fair value of assets acquired and liabilities assumed in business acquisitions.

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

Accounts receivable

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.

Impairment of long-lived assets

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.

Derivative financial instruments

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.

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Leases

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; (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 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.

Revenue recognition and cost of revenue

On January 1, 2018, 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 Save On business activities, through April 30, 2019, we recognized revenues and the related direct costs of such revenue which includes carrier fees and dispatch costs as of the date the freight is delivered by the carrier which is when the performance obligation is satisfied. Customer payments received prior to delivery are recorded as a deferred revenue liability and related carrier fees if paid prior to delivery are recorded as a deferred expense asset. In accordance with ASC Topic 606, we recognize revenue on a gross basis. Our payment terms for corporate customers are net 30 days from acceptance of delivery and individual customers generally must pay in advance. We do not incur incremental costs obtaining service orders from our Save On customers, however, if we did, because all of Save On customer’s contracts are less than a year in duration, any contract costs incurred would be expensed rather than capitalized. Our adoption of this ASC, resulted in no cumulative effect at January 1, 2018 and no change prospectively to our results of operations or financial condition. The revenue that we recognize arises from service orders we receive from our Save On customers. Our performance obligations under these service orders correspond to each delivery of a vehicle that we make for our customer under the service orders; as a result, each service order generally contains only one performance obligation based on the delivery to be completed.

For the Company’s Prime and Shypdirect business activities, 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 customers, however, if we did, because all of Prime and Shypdirect’s 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.

Stock-based compensation

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director 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 and director services received in exchange for an award based on the grant-date fair value of the award.

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Through the current reporting period, pursuant to ASC 505-50 – “Equity-Based Payments to Non-Employees”, all share-based payments to non-employees, including grants of stock options, were recognized in the consolidated financial statements as compensation expense over the service period of the consulting arrangement or until performance conditions are expected to be met. Using a Black-Scholes valuation model, the Company periodically reassessed the fair value of non-employee options until service conditions are met, which generally aligns with the vesting period of the options, and the Company adjusts the expense recognized in the consolidated financial statements accordingly. In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies several aspects of the accounting for nonemployee share-based payment transactions by expanding the scope of the stock-based compensation guidance in ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. ASU No. 2018-07 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted, but entities may not adopt prior to adopting the new revenue recognition guidance in ASC 606. The Company early adopted ASU No. 2018-07 in the second quarter of 2018 and there was no cumulative effect of adoption.

Recently Enacted Accounting Standards

For a description of accounting changes and recent accounting standards, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see “Note 2: Recent Accounting Pronouncements” in the condensed financial consolidated statements filed with this Quarterly Report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, consisting of our sole officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Rule 13a-15(e)) as of June 30, 2019. Management recognizes that any disclosure controls and procedures no matter how well designed and operated, can only provide reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our management has assessed the effectiveness of our disclosure controls and procedures and based upon that evaluation, our sole officer concluded that our disclosure controls and procedures were not effective as of June 30, 2019.

As reported in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2018, our management concluded that our internal control over financial reporting was not effective as of that date because of a material weakness 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:

1)	Lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures;
2)	The Company lacks segregation of duties;
3)	There is a lack of 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 expertise;
5)	The Company does not have adequate controls over pre-closing legal and accounting review of loan transactions;
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; and
8)	The Company has not yet implemented any internal controls over financial reporting at its recently acquired subsidiary.
9)	The Company lacks control over who is granted authorization to bind the Company or its subsidiaries to legal contracts.

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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 June 30, 2019. Management also 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.

Changes in Internal Control over Financial Reporting

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.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the ordinary course of business, we may be involved in legal proceedings from time to time. At the date of this Quarterly Report on Form 10-Q, there are no known legal proceedings against the Company. No governmental agency has instituted proceedings, served, or threatened the Company with any litigation.

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

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.

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.

On April 9, 2019, the Company entered into an agreement with Bellridge that modifies 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. As of the date of this report, 100,000 of these shares have been issued and 700,000 shares are issuable. 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.

On April 9, 2019, the Company entered into an agreement with Bellridge and the Placement Agent that cancelled warrants in exchange for an aggregate of 600,000 common shares of the Company. These shares were valued at $7,686,000, or $12.81 per share, based on the quoted trading price on the date of grant.

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

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

No report required.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Exhibits:
31.1	Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act*
31.2	Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act*
32.1	Certification of Chief Executive Officer and Chief Financial Officer Under Section 1350 as Adopted Pursuant Section 906 of the Sarbanes-Oxley Act.*
101	Interactive data files pursuant to Rule 405 of Regulation S-T.*

* Filed Herewith

34

SIGNATURES

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.

	TRANSPORTATION & LOGISTICS SYSTEMS, INC.
Dated: August 19, 2019	By:	/s/ John Mercadante, Jr.
		John Mercadante, Jr.
		Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer)

35

EX-31.1

Exhibit 31.1

CERTIFICATION

I, John Mercadante, Jr., certify that:

1.	I have reviewed this quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2019 of Transportation and Logistics Systems, Inc. (the “registrant”);
2.	Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by report;
3.	Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	I am the only certifying officer responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d- 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure control and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 19, 2019

/s/ John Mercadante, Jr.

John Mercadante, Jr

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, John Mercadante, Jr., certify that:

1.	I have reviewed this quarterly report on Form 10-Q for the fiscal quarter ended June 30, 2019 of Transportation and Logistics Systems, Inc. (the “registrant”);
2.	Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by report;
3.	Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	I am the only certifying officer responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d- 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure control and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 19, 2019

/s/ John Mercadante, Jr.

John Mercadante, Jr.

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Transportation and Logistics Systems, Inc. on Form 10-Q for the period ended June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 19, 2019

/s/ John Mercadante, Jr.

John Mercadante, Jr.

Chief Executive Officer and Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 19, 2019
Document And Entity Information
Entity Registrant Name	Transportation & Logistics Systems, Inc.
Entity Central Index Key	0001463208
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business Flag	true
Entity Emerging Growth Company	false
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		9,630,525
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2019

XML

Condensed Consolidated Balance Sheets - USD ($)	Jun. 30, 2019	Dec. 31, 2018
CURRENT ASSETS:
Cash	$ 120,269	$ 296,196
Accounts receivable	927,723	441,497
Prepaid expenses and other current assets	590,730	509,068
Assets of discontinued operations		335,894
Due from related party	81,489
Total Current Assets	1,720,211	1,582,655
OTHER ASSETS:
Security deposit	39,350	5,000
Property and equipment, net	728,054	936,831
Right of use asset	578,421
Intangible asset, net	2,420,191	4,668,334
Total Other Assets	3,766,016	5,610,165
TOTAL ASSETS	5,486,227	7,192,820
CURRENT LIABILITIES:
Convertible notes payable, net of debt discounts of $0 and $1,595,627, respectively	1,800,000	1,411,876
Convertible notes payable - related parties	2,500,000
Notes payable, net of debt discount	4,256,738	1,509,804
Notes payable - related party, net of debt discount		213,617
Accounts payable	1,594,189	655,183
Accrued expenses	815,151	566,574
Insurance payable	1,403,070	1,108,368
Lease liability	102,407
Liabilities of discontinued operations		440,745
Derivative liability		7,888,684
Due to related parties	271,507	275,300
Accrued compensation and related benefits	674,566	435,944
Total Current Liabilities	13,417,628	14,506,095
LONG-TERM LIABILITIES:
Lease liability	490,126
Notes payable - related party	510,000
Notes payable	317,306	424,019
Total Long-term Liabilities	1,317,432	424,019
Total Liabilities	14,735,060	14,930,114
Commitments and Contingencies (See Note 10)
SHAREHOLDERS' DEFICIT:
Preferred stock, par value $0.001; authorized 10,000,000 shares: Series A Convertible Preferred stock, par value $0.001 per share; authorized 4,000,000 shares; issued and outstanding 0 and 4,000,000 shares at June 30, 2019 and December 31, 2018, respectively (Liquidation value $0 and $4,000,000, respectively)		4,000
Common stock, par value $0.001 per share; authorized 500,000,000 shares; issued and outstanding 9,421,525 and 4,220,837 at June 30, 2019 and December 31, 2018, respectively	9,421	4,220
Common stock issuable, par value $0.001 per share; 700,000 and 0 shares	700
Additional paid-in capital	32,120,077	7,477,422
Accumulated deficit	(41,379,031)	(15,222,936)
Total Shareholders' Deficit	(9,248,833)	(7,737,294)
Total Liabilities and Shareholders' Deficit	$ 5,486,227	$ 7,192,820

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Convertible notes payable, debt discounts	$ 0	$ 1,595,627
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	9,421,525	4,220,837
Common stock, shares outstanding	9,421,525	4,220,837
Common stock issuable, par value	$ 0.001	$ 0.001
Common stock issuable, shares	700,000	0
Series A Convertible Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	4,000,000	4,000,000
Preferred stock, shares issued	0	4,000,000
Preferred stock, shares outstanding	0	4,000,000
Preferred stock, liquidation value	$ 0	$ 4,000,000

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
REVENUES	$ 8,101,412	$ 626,820	$ 13,904,619	$ 626,820
COST OF REVENUES	7,522,973	535,945	13,072,675	535,945
GROSS PROFIT	578,439	90,875	831,944	90,875
OPERATING EXPENSES:
Compensation and related benefits	3,608,670	3,149,776	7,717,214	3,149,776
Legal and professional fees	566,242	1,328,658	1,071,082	1,373,993
Rent	86,406		185,237
General and administrative expenses	930,203	203,789	1,595,535	203,789
Impairment loss	1,724,591		1,724,591
Total Operating Expenses	6,916,112	4,682,223	12,293,659	4,727,558
LOSS FROM OPERATIONS	(6,337,673)	(4,591,348)	(11,461,715)	(4,636,683)
OTHER (EXPENSES) INCOME:
Interest expense	(1,377,051)	(243,302)	(2,597,443)	(391,555)
Interest expense - related parties	(121,078)		(147,639)
Loan fees	(601,121)		(601,121)
Gain on debt extinguishment, net	43,823,897		43,917,768
Derivative expense	(41,653,345)	(9,721,800)	(55,037,605)	(9,505,352)
Total Other (Expenses) Income	71,302	(9,965,102)	(14,466,040)	(9,896,907)
LOSS FROM CONTINUING OPERATIONS	(6,266,371)	(14,556,450)	(25,927,755)	(14,533,590)
(LOSS) INCOME FROM DISCONTINUED OPERATIONS:
(Loss) income from discontinued operations	(695,087)	45,536	(681,426)	83,601
NET LOSS	$ (6,961,458)	$ (14,510,914)	$ (26,609,181)	$ (14,449,989)
NET LOSS PER COMMON SHARE - BASIC AND DILUTED
Net loss from continuing operations	$ (0.63)	$ (13.93)	$ (3.42)	$ (17.97)
Net (loss) income from discontinued operations	(0.07)	0.04	(0.09)	0.10
Net loss per common share - basic and diluted	$ (0.70)	$ (13.89)	$ (3.51)	$ (17.87)
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING:
Basic and diluted	9,891,525	1,044,831	7,573,522	808,780

XML

Condensed Consolidated Statements of Changes in Shareholders' Deficit (Unaudited) - USD ($)	Preferred Stock Series A [Member]	Common Stock [Member]	Common Stock Issuable [Member]	Additional Paid-In Capital [Member]	Accumulated Deficit [Member]	Total
Balance at Dec. 31, 2017	$ 4,000	$ 570		$ (34,928)	$ (744,779)	$ (775,137)
Balance, shares at Dec. 31, 2017	4,000,000	570,106
Net loss					60,925	60,925
Balance at Mar. 31, 2018	$ 4,000	$ 570		(34,928)	(683,854)	(714,212)
Balance, shares at Mar. 31, 2018	4,000,000	570,106
Balance at Dec. 31, 2017	$ 4,000	$ 570		(34,928)	(744,779)	(775,137)
Balance, shares at Dec. 31, 2017	4,000,000	570,106
Net loss						(14,449,989)
Balance at Jun. 30, 2018	$ 4,000	$ 4,170		7,377,472	(15,194,768)	(7,809,126)
Balance, shares at Jun. 30, 2018	4,000,000	4,170,106
Balance at Mar. 31, 2018	$ 4,000	$ 570		(34,928)	(683,854)	(714,212)
Balance, shares at Mar. 31, 2018	4,000,000	570,106
Shares issued for services		$ 2,100		4,323,900		4,326,000
Shares issued for services, shares		2,100,000
Shares issued for acquisition		$ 1,500		3,088,500		3,090,000
Shares issued for acquisition, shares		1,500,000
Net loss					(14,510,914)	(14,510,914)
Balance at Jun. 30, 2018	$ 4,000	$ 4,170		7,377,472	(15,194,768)	(7,809,126)
Balance, shares at Jun. 30, 2018	4,000,000	4,170,106
Balance at Dec. 31, 2018	$ 4,000	$ 4,220		7,477,422	(15,222,936)	(7,737,294)
Balance, shares at Dec. 31, 2018	4,000,000	4,220,837
Shares issued for services		$ 2,671		2,748,137		2,750,808
Shares issued for services, shares		2,670,688
Warrants issued in connection with debt				63,581		63,581
Cumulative effect adjustment for change in derivative accounting					453,086	453,086
Net loss					(19,647,723)	(19,647,723)
Balance at Mar. 31, 2019	$ 4,000	$ 6,891		10,289,140	(34,417,573)	(24,117,542)
Balance, shares at Mar. 31, 2019	4,000,000	6,891,525
Balance at Dec. 31, 2018	$ 4,000	$ 4,220		7,477,422	(15,222,936)	(7,737,294)
Balance, shares at Dec. 31, 2018	4,000,000	4,220,837
Net loss						(26,609,181)
Balance at Jun. 30, 2019		$ 9,421	$ 700	32,120,077	(41,379,031)	(9,248,833)
Balance, shares at Jun. 30, 2019		9,421,525	700,000
Balance at Mar. 31, 2019	$ 4,000	$ 6,891		10,289,140	(34,417,573)	(24,117,542)
Balance, shares at Mar. 31, 2019	4,000,000	6,891,525
Shares issued for services		$ 230		2,465,270		2,465,500
Shares issued for services, shares		230,000
Warrants issued in connection with debt				672,864		672,864
Shares issued for debt and warrant modifications		$ 700	$ 700	17,932,600		17,934,000
Shares issued for debt and warrant modifications, shares		700,000	700,000
Shares issued for conversion of preferred shares	$ (4,000)	$ 2,600		1,400
Shares issued for conversion of preferred shares, shares	(4,000,000)	2,600,000
Return and cancellation of shares for disposal of Save On		$ (1,000)		57,987		56,987
Return and cancellation of shares for disposal of Save On, shares		(1,000,000)
Stock options granted				700,816		700,816
Net loss					(6,961,458)	(6,961,458)
Balance at Jun. 30, 2019		$ 9,421	$ 700	$ 32,120,077	$ (41,379,031)	$ (9,248,833)
Balance, shares at Jun. 30, 2019		9,421,525	700,000

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (26,609,181)	$ (14,449,989)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	617,632	173,629
Amortization of debt discount to interest expense	2,310,580	332,364
Amortization of debt discount to interest expense - related party	26,383
Stock-based compensation and consulting fees	5,216,308	4,326,000
Stock-based compensation and consulting fees - discontinued operations	700,816
Non-cash loan fees	601,121
Derivative expense (income)	55,037,605	9,505,352
Non-cash portion of gain on extinguishment of debt	(43,917,768)
Deferred rent	14,112
Loss on disposal of property and equipment	47,022
Impairment loss	1,724,591
Change in operating assets and liabilities:
Accounts receivable	(486,226)	(325,551)
Prepaid expenses and other current assets	(81,662)
Assets of discontinued operations	(53,193)	(93,073)
Due from related party	(81,489)
Security deposit	(34,350)
Accounts payable and accrued expenses	1,420,925	(130,902)
Insurance payable	294,702	(5,108)
Liabilities of discontinued operations	10,954	155,115
Accrued compensation and related benefits	238,622	197,097
NET CASH USED IN OPERATING ACTIVITIES	(3,115,838)	(315,066)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash received in acquisition		38,198
Cash paid for acquisition		(489,174)
Decrease in cash from disposal of subsidiary	(5,625)
Purchase of property and equipment	(51,256)
Proceeds from sale of property and equipment	81,000
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	24,119	(450,976)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible notes payable - related party	2,500,000	2,497,503
Debt issue costs paid		(1,009,714)
Repayment of convertible notes payable	(273,579)
Net proceeds from notes payable	6,631,020
Repayment of notes payable	(5,697,856)	(611,406)
Net proceeds from notes payable - related party	255,000
Repayment of notes payable - related party	(495,000)
Net proceeds from related parties	(3,793)	467,672
NET CASH PROVIDED BY FINANCING ACTIVITIES	2,915,792	1,344,055
NET (DECREASE) INCREASE IN CASH	(175,927)	578,013
CASH, beginning of period	296,196	106,576
CASH, end of period	120,269	684,589
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest	2,239,463
Income taxes
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Debt discounts recorded	1,222,986	1,487,788
Increase in right of use asset and lease liability	631,723
Liabilities assumed in acquisition		3,503,552
Less: assets acquired in acquisition		1,959,655
Net liabilities assumed		1,543,897
Fair value of shares for acquisition		3,090,000
Increase in intangible assets - non-cash		$ 4,633,897

XML

Organization and Business Operations

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Business Operations

NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS

Transportation and Logistics Systems, Inc. (“TLSS”), formerly PetroTerra Corp., was incorporated under the laws of the State of Nevada, on July 25, 2008.

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. Save On is a provider of integrated transportation management solutions consisting of brokerage and logistic services such as transportation scheduling, routing and other value added services related to the transportation of automobiles and other freight. As an early stage company, TLSS’s current operations are subject to all risks inherent in the establishment of a new business enterprise

The Share Exchange was treated as a reverse merger and recapitalization of Save On for financial reporting purposes since 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 Merger was replaced with the historical financial statements of Save On before the Merger. The balance sheets at their historical cost basis of both entities were combined at the merger date and the results of operations from the merger date forward include the historical results of Save On and results of TLSS from the merger date forward. The Merger was intended to be treated as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended. 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. Mr. Yariv ceased to be an officer or director of the Company effective with the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 as filed with the Securities and Exchange Commission of April 16, 2019.

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”), from its members pursuant to the terms and conditions of a Stock Purchase Agreement entered into among the Company and the Prime members on the Closing Date (the “SPA”). Prime is a New Jersey based transportation company with a focus on deliveries for on-line retailers in New York, New Jersey and Pennsylvania.

On July 24, 2018, the Company formed Shypdirect LLC (“Shypdirect”), a company organized under the laws of New Jersey. Shypdirect is a transportation company with a focus on tractor trailer and box truck deliveries of product on the east coast of the United States from one distributor’s warehouse to another warehouse or from a distributor’s warehouse to the post office.

TLSS and its wholly-owned subsidiaries, Prime and Shypdirect are hereafter referred to as the “Company”.

On July 16, 2018, the Company filed a Certificate of Amendment to the Amended and Restated Articles of Incorporation (the “Certificate of Amendment”) with the Secretary of State of the State of Nevada to (1) change the name of the Company from PetroTerra Corp. to Transportation and Logistics Systems, Inc., (2) authorize an increase of the shares of the preferred stock to 10,000,000 shares, par value $0.001 per share and (3) effect a 1-for-250 reverse stock split (the “Reverse Stock Split”) with respect to the outstanding shares of the Company’s common stock. The Certificate of Amendment became effective on July 17, 2018. The corporate name change, increase of authorized shares of preferred stock and Reverse Stock Split were previously approved by the sole director and the majority of stockholders of the Company. The corporate name change and the Reverse Stock Split were deemed effective at the open of business on July 18, 2018. All share and per share data in the accompanying consolidated financial statements have been retroactively restated to reflect the effect of the recapitalization.

XML

Summary of Significant Accounting Policies and Basis of Presentation

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies and Basis of Presentation

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

Basis of presentation and principles of consolidation

The condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information and disclosures necessary for comprehensive presentation of financial position, results of operations or cash flow. However, these unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments and a non-recurring adjustment for the impairment of intangible assets, 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, 2018, and notes thereto included in the Company’s annual report on Form 10-K, filed on April 16, 2019.

The Company follows the same accounting policies in the preparation of its annual and interim reports. The results of operations in interim periods are not necessarily an indication of operating results to be expected for the full year.

The unaudited condensed consolidated financial statements of the Company include the accounts of TLSS and its wholly owned subsidiaries, Save On (through April 30, 2019), Prime and Shypdirect. All intercompany accounts and transactions have been eliminated in consolidation.

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

Going concern

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, for the six months ended June 30, 2019, the Company had a net loss of $26,609,181 and net cash used in operations was $3,115,838, respectively. Additionally, the Company had an accumulated deficit, shareholders’ deficit, and a working capital deficit of $41,379,031, $9,248,833 and $11,697,417, respectively, at June 30, 2019. Furthermore, the Company failed to make required payments of principal and interest on certain of its convertible debt instruments and defaulted on other provisions in these Notes. On April 9, 2019, the Company entered into agreements with these lenders that modified these Notes (See Note 7). 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. 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 is seeking to raise capital through additional debt and/or equity financings to fund its operations in the future. Although the Company has historically raised capital from sales of common shares and from the issuance of convertible promissory notes, there is no assurance that it will be able to continue to do so.

If the Company is unable to raise additional capital or secure additional lending in the near future, management expects that the Company will need to curtail its operations. These consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Use of estimates

The preparation of the condensed consolidated financial statements, in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates included in the accompanying unaudited condensed consolidated financial statements and footnotes include the valuation of accounts receivable, the useful life of property and equipment, the valuation of intangible assets, the valuation of right of use asset and related liability, assumptions used in assessing impairment of long-lived assets, estimates of current and deferred income taxes and deferred tax valuation allowances, the fair value of non-cash equity transactions, the valuation of derivative liabilities, and the fair value of assets acquired and liabilities assumed in business acquisitions.

Fair value of financial instruments

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 June 30, 2019. 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 three levels of the fair value hierarchy are as follows:

● 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.

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 at June 30, 2019 and December 31, 2018:

	At June 30, 2019						At December 31, 2018
Description	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Derivative liabilities		—		—	$	—		—		—	$	7,888,684

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

	For the Six Months Ended June 30, 2019
Balance at beginning of period	$	7,888,684
Gain on extinguishment of debt related to repayment of debt		(246,110	)
Gain on extinguishment of debt related to April 9, 2019 modifications		(61,841,708	)
Cumulative effect adjustment for change in derivative accounting		(838,471	)
Change in fair value included in derivative expense		55,037,605
Balance at end of period	$	-

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 balance sheets for cash, accounts receivable, accounts payable and accrued expenses 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.

Cash and cash equivalents

For purposes of the 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. At June 30, 2019 and December 31, 2018, the Company did not have any cash equivalents.

The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. There were no balances in excess of FDIC insured levels as of June 30, 2019 and December 31, 2018. The Company has not experienced any losses in such accounts through June 30, 2019.

Accounts receivable

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

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

Intangible asset

Intangible assets are carried at cost less accumulated amortization, computed using the straight-line method over the estimated useful life, less any impairment charges. At June 30, 2019 and December 31, 2018, intangible asset consists of a customer relationship acquired on June 18, 2018 which is being amortized over a period of five years.

Leases

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, the Company 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; (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. 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 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.

Impairment of long-lived assets

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.

Segment reporting

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 the six months ended June 30, 2019 and 2018, the Company believes that it operates in one operating segment related to deliveries for on-line retailers in New York, New Jersey and Pennsylvania 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.

Derivative financial instruments

The Company has certain financial instruments that are embedded derivatives associated with capital raises. The Company evaluates all 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 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 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.

Revenue recognition and cost of revenue

On January 1, 2018, 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 and Shypdirect business activities, 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 net seven days from acceptance of delivery. The Company does not incur incremental costs obtaining service orders from its Prime customers, however, if the Company did, because all of Prime and Shypdirect customer contracts are less than a year in duration, any contract costs incurred would be expensed rather than capitalized. The revenue that the Company recognizes arises from deliveries of packages on behalf of the Company’s customers. Primarily, the Company’s performance obligations under these service orders correspond to each delivery of packages that the Company makes under the service agreements. Control of the package transfers to the recipient upon delivery. Once this occurs, the Company has satisfied its performance obligation and the Company recognizes revenue.

For the Company’s Save On business activities, through the date of disposition on May 1, 2019, the Company recognized revenues and the related direct costs of such revenue which includes carrier fees and dispatch costs as of the date the freight is delivered by the carrier which is when the performance obligation is satisfied. Customer payments received prior to delivery are recorded as a deferred revenue liability and related carrier fees if paid prior to delivery are recorded as a deferred expense asset. In accordance with ASC Topic 606, the Company recognizes revenue on a gross basis. Our payment terms for corporate customers are net 30 days from acceptance of delivery and individual customers generally must pay in advance. The Company does not incur incremental costs obtaining service orders from our Save On customers, however, if the Company did, because all of the Save On customer’s contracts are less than a year in duration, any contract costs incurred would be expensed rather than capitalized. The Company’s adoption of this ASC, resulted in no cumulative effect at January 1, 2018 and no change prospectively to the Company’s results of operations or financial condition. The revenue that the Company recognizes arises from service orders it receives from its Save On customers. The Company’s performance obligations under these service orders correspond to each delivery of a vehicle that the Company makes for its customer under the service orders; as a result, each service order generally contains only one performance obligation based on the delivery to be completed.

Revenue disaggregation disclosure required pursuant to ASC 606 are disclosed in Note 13 – Segment Information.

Basic and diluted loss per share

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

Potentially dilutive common shares were excluded from the computation of diluted shares outstanding as they would have an anti-dilutive impact on the Company’s net losses and consisted of the following:

	June 30, 2019		June 30, 2018
Stock warrants		114,000		1,329,548
Stock options		80,000		-
Convertible debt		534,312		3,158,465
Series A convertible preferred stock		-		6,666,667

Stock-based compensation

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director 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 and director services received in exchange for an award based on the grant-date fair value of the award.

Through March 31, 2018, pursuant to ASC 505-50 – “Equity-Based Payments to Non-Employees”, all share-based payments to non-employees, including grants of stock options, were recognized in the consolidated financial statements as compensation expense over the service period of the consulting arrangement or until performance conditions are expected to be met. Using a Black-Scholes valuation model, the Company periodically reassessed the fair value of non-employee options until service conditions are met, which generally aligns with the vesting period of the options, and the Company adjusts the expense recognized in the consolidated financial statements accordingly. In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies several aspects of the accounting for nonemployee share-based payment transactions by expanding the scope of the stock-based compensation guidance in ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. ASU No. 2018-07 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted, but entities may not adopt prior to adopting the new revenue recognition guidance in ASC 606. The Company early adopted ASU No. 2018-07 in the second quarter of 2018 and there was no cumulative effect of adoption.

Recent Accounting Pronouncements

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

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

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.

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Discontinued Operations

6 Months Ended

Jun. 30, 2019

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

NOTE 3 – DISCONTINUED OPERATIONS

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. Mr. Yariv ceased to be an officer or director of the Company effective with the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 as filed with the Securities and Exchange Commission of April 16, 2019.

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, the Company shall reflect 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 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.

The assets and liabilities classified as discontinued operations in the Company’s condensed consolidated financial statements as of June 30, 2019 and December 31, 2018, and for the three and six months ended June 30, 2019 and 2018 is set forth below.

	June 30, 2019		December 31, 2018
Assets:
Current assets:
Accounts receivable, net	$	-	$	334,275
Prepaid expenses and other		-		1,619
Total current assets		-		335,894
Total assets	$	-	$	335,894
Liabilities:
Current liabilities:
Accounts payable	$	-	$	409,053
Accounts payable – related party		-		3,700
Accrued expenses and other liabilities		-		27,992
Total current liabilities		-		440,745
Total liabilities	$	-	$	440,745

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

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019			2018
Revenues	$	359,728		$	1,132,009	$	1,491,253		$	2,309,771
Cost of revenues		263,073			860,079		1,114,269			1,756,634
Gross profit		96,655			271,930		376,984			553,137
Operating expenses		791,742			226,394		1,058,410			469,536
Loss from discontinued operations		(695,087	)		45,536		(681,426	)		83,601
Loss on disposal of discontinued operations		-			-		-			-
Loss from discontinued operations, net of income taxes	$	(695,087	)	$	45,536	$	(681,426	)	$	83,601

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Accounts Receivable

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Accounts Receivable

NOTE 4 – ACCOUNTS RECEIVABLE

At June 30, 2019 and December 31, 2018, accounts receivable, net consisted of the following:

	June 30, 2019		December 31, 2018
Accounts receivable	$	927,723	$	441,497
Allowance for doubtful accounts		-		-
Accounts receivable, net	$	927,723	$	441,497

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Property and Equipment

6 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Abstract]

Property and Equipment

NOTE 5 - PROPERTY AND EQUIPMENT

At June 30, 2019 and December 31, 2018, property and equipment consisted of the following:

	Useful Life	June 30, 2019			December 31, 2018
Delivery trucks and vehicles	5 - 6 years	$	899,139		$	1,033,397
Less: accumulated depreciation			(171,085	)		(96,566	)
Property and equipment, net		$	728,054		$	936,831

For the six months ended June 30, 2019 and 2018, depreciation expense is included in general and administrative expenses and amounted to $94,080 and $5,199, respectively. During the six months ended June 30, 2019, the Company traded in or sold delivery trucks and vehicles of $185,514 with related accumulated depreciation of $19,561, and received cash of $81,000 and reduced notes payable of $37,931, resulting in a loss of $47,022 which is included in general and administrative expenses on the accompanying condensed consolidated statement of operations.

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Intangible Asset

6 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Asset

NOTE 6 – INTANGIBLE ASSET

At June 30, 2019 and December 31, 2018, intangible asset consisted of the following:

	Useful life	June 30, 2019		December 31, 2018
Customer relationship	5 year	$	2,420,191	$	5,235,515
Less: accumulated amortization			-		(567,181	)
		$	2,420,191	$	4,668,334

For the six months ended June 30, 2019 and 2018, amortization of intangible assets amounted to $523,552 and $168,430, respectively.

At June 30, 2019, the Company conducted an impairment assessment on intangible assets based on the guidelines established in ASC Topic 360 to determine the estimated fair market value of intangible assets as of June 30, 2019. Such analysis considered future cash flows and other industry factors. Upon completion of this impairment analysis, the Company determined that the carrying value exceeded the fair market value of intangible assets. Accordingly, in connection with the impairment of such intangible assets, the Company recorded an impairment charge of $1,724,591 for the six months ended June 30, 2019, which was included in operating expenses on the accompanying condensed consolidated statements of operations.

Amortization of intangible assets attributable to future periods is as follows:

Year ending June 30:	Amount
2020	$	611,417
2021		611,417
2022		611,417
2023		585,940
	$	2,420,191

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Convertible Promissory Notes Payable and Notes Payable

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Convertible Promissory Notes Payable and Notes Payable

NOTE 7 – CONVERTIBLE PROMISSORY NOTES PAYABLE AND NOTES PAYABLE

Red Diamond Partners LLC and RDW Capital, LLC

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 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, on April 25, 2017, the Company entered into a convertible promissory note in the aggregate principal amount of $100,000 and the Company received $95,000 after giving effect to the original issue discount of $5,000. This note matured on April 25, 2018 and each tranche matured one year after the date of such funding. The second Tranche was received on June 2, 2017 for $85,000 and the third Tranche for $85,000 was received on August 8, 2017 upon filing of the Registration Statement. The fourth Tranche was to be for $85,000, however, as of the date of this filing, the fourth tranche has not yet been received. The Purchaser is not required to fund any Tranche subsequent to the first Tranche if there is an event of default as described in the promissory notes. 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 for the previous ten trading days preceding the conversion. During 2018, the Company failed to make its required maturity date payments of principal and interest on Convertible Promissory 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. These convertible promissory notes contain cross default provisions whereby a default in any one note greater than $25,000 will cause a default in all the notes, however, this provision is only effective if there is a formal notice of default by the lender.

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 of which $15,000 had been recorded as advance from lender as of March 31, 2017 and the remaining $15,000 received on June 30, 2017. 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 is 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 previous 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 will become immediately due and payable and the Company will be 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 above, 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 were not afforded the exemption for conventional convertible instruments due to their respective variable conversion rate and price protection provision. 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 condensed consolidated balance sheet as of the beginning of 2019, the period which the amendment is effective (See Note 2 - Derivative liabilities).

On April 9, 2019, the Company entered into agreements with RedDiamond, holding these convertible notes representing an aggregate principal amount of $510,000, and agreed with such holder to:

● extend the maturity date of the notes to December 31, 2020;

● remove all convertibility features of the notes; and

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

The aggregate principal amounts due as of June 30, 2019 and December 31, 2018 amounted to $510,000 and $510,000, respectively. At December 31, 2018, the principal balance of $510,000 was included in convertible notes payable, a current liability, on the accompanying consolidated balance sheet. At June 30, 2019, the principal balance of $510,000 was included in notes payable – related party, a long-term liability, on the accompanying consolidated balance sheet since on April 9, 2019, the conversion features on the notes were removed and RedDiamond became a principal shareholder of the Company when they converted their preferred shares to common stock (See Note 9). In connection with this debt modification, 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 $47,205 related to the reversal of default interest payable.

Bellridge Capital, LLC

On June 18, 2018, the Company entered into a securities purchase agreement (the “Purchase Agreement”), whereby it issued to an institutional investor (the “Lender”) a senior secured convertible note in the aggregate principal amount of $2,497,503 (the “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 Note term. The principal due under the Note accrues 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 Note in cash or common stock of the Company, at the Lender’s discretion.

In connection with the Purchase Agreement, the Lender 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. Additionally, the placement agent 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.

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

On December 27, 2018, the lender waived any and all defaults in existence on the Note and the Company agreed to issue a warrant that is convertible into 2% of the issued and outstanding shares existing as the time the Company files a registration statement or makes an application to up list to a national stock exchange. Pursuant to this 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, and on or prior to the close of business on the early of the first year anniversary of the issuance of December 27, 2018 (the “Termination Date”), 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 Note was modified with a monthly payment of principal and interests due beginning on January 18, 2019 of $156,219 with all remaining principal and interest amounts on the 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 this lender that modified these Notes and cancelled these warrants (see below).

Through April 9, 2019, all principal and accrued interest under the 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 Note includes 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 Note and cross default provisions on other Company obligations or contracts. Upon an event of default, all obligations under the Note will become immediately due and payable and the Company will be required to make certain payments to the Lender.

The Lender was granted a right of first refusal on future financing transactions of the Company while the Note remains outstanding, plus an additional three months thereafter. In connection with the issuance of the Note, the Company entered into a security agreement with the Lender (the “Security Agreement”) pursuant to which the Company agreed that obligations under the 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 the Lender pursuant to the Note and have granted a similar security interest over substantially all of their assets. A portion of the proceeds of the Note were used to acquire 100% of the membership interests of Prime.

During the term of this 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 “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, but subject to the Holder’s conversion rights set forth in the Purchase Agreement, then the Company shall use 20% of the gross proceeds of the Subsequent Offering and shall make payment to the Holder of an amount in cash equal to the product of (i) the sum of (x) the then outstanding principal amount of this Note and (y) all accrued but unpaid interest, multiplied by (ii) (x) 110%, if the Prepayment Date 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 shall add all other amounts owed pursuant to this Note, including, but not limited to, all Late Fees and liquidated damages.

In connection with the 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 hereunder or under applicable law, on the default date and on each monthly anniversary of each such default date (if the applicable event shall not have been cured by such date) until the ninetieth day from such Event Date, the Company shall 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 Purchase Agreement. Subsequent to the ninetieth day from such default date, the one percent (1%) penalty shall increase 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, the lender waived any and all defaults.

In connection with this 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 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 “Placement Warrant”). On April 9, 2019, the Company entered into an agreement with this placement agent that cancelled these warrant.

In connection with the issuance of this Note, Warrants, and Placement Warrant, the Company determined that this Note and there 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 convertible instrument and the Warrant and Placement Warrant 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 Warrant and Placement Warrant were determined using the Binomial valuation model and Monte-Carlo simulation model, respectively.

Convertible debt modifications and warrant cancellations

On April 9, 2019 (the “Modification Date”), the Company entered into an agreement with Bellridge Capital, L.P. (“Bellridge”) that modifies its existing obligations to Bellridge as follows:

● the overall principal amount of that certain Convertible Promissory Note, dated June 18, 2018, issued by the Company in favor of Bellridge (the “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, 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. As of August 19, 2019, 100,000 of these shares have been issued;

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

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

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

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

● the registration rights previously granted to Bellridge have now been eliminated; and

● those certain Warrants, dated June 18, 2018 and December 27, 2018, respectively, issued by the Company in favor of Bellridge shall be cancelled and of no further force or effect. In exchange, the Company will issue Bellridge 360,000 shares of restricted common stock.

In addition, on the 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 connection with the modification of the Bellridge Note and the cancellation of the related warrants, 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 convertible instrument and the Warrant and Placement Warrant were adjusted to fair value through earnings on the Modification Date. The fair value of this embedded conversion option derivative, and the Warrant and Placement Warrant were determined using the Binomial valuation model and Monte-Carlo simulation model, respectively. For the period from April 1, 2019 to April 9, 2019, the change of fair value of derivative liabilities associated with these instruments amounted to $41,653,345, which was recorded as derivative expense on the Modification date. The increase in derivative liabilities was caused by an increase in the Company’s stock price, as quoted on OTC Markets. Additionally, on the Modification Date, the Company analyzed the Bellridge Note modification and the cancellation of the warrants and pursuant to ASC 470-50, the modifications were treated as a debt extinguishment.

Gain on debt extinguishment

In connections with the RedDiamond and Bellridge debt modifications and warrants cancellations discussed above, on the Modification Date, the Company recorded a gain on debt extinguishment of $43,823,897 which consists of the following.

	Gain on Extinguishment on Modification Date
Gain from reversal of derivative liabilities on Modification Date	$	61,841,708
Fair value of common shares issued on Modification Date		(17,934,000	)
Write-off of remaining debt discount		(1,013,118	)
Reversal of put premium on stock-settled debt related to cancellation of conversion terms		385,385
Reduction of principal and interest balances due		543,922
Gain of debt extinguishment	$	43,823,897

Summary of derivative liabilities

Through April 9, 2019, the Company revalued the embedded conversion option and warrant derivative liabilities. In connection with these revaluations, the Company recorded derivative expense of $55,037,605 and $9,505,352 for the six months ended June 30, 2019 and 2018, respectively

During the six months ended June 30, 2019 and 2018, the fair value of the derivative liabilities was estimated using the Black-Sholes valuation model, Binomial valuation model, and the Monte-Carlo simulation model with the following assumptions:

	2019			2018
Expected dividend rate		-			-
Expected term (in years)		0.05 to 0.75			0.01 to 2.00
Volatility		228.1	%		261.2% to 307.75	%
Risk-free interest rate		2.23% to 2.40	%		1.32% to 2.11	%

Convertible note payable – related parties

On March 13, 2019, the Company entered into a convertible note agreement with an individual, who is affiliated to 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 shall be due and payable. Commencing on October 11, 2019 and continuing on the eleventh day of each month thereafter through April 11, 2021, payments of principal and interest of $31,902 shall be made, if not sooner converted as provided in the note agreement. The payment of all or any portion of the principal and accrued interest may be paid prior to the April 11, 2021. Interest shall 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. All past due principal and interest on this Note shall bear interest from maturity of such principal or interest (in whatever manner same may be brought about) until paid at the lesser of (i) 20% per annum, or (ii) the highest non-usurious rate allowed by applicable law. This Note may be converted by 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 $1.37. In connection with the issuance of this Note, the Company determined that this Note contains terms that are fixed monetary amounts at inception. Since the conversion price of $1.37 was equal to the quoted closing of the Company’s common shares on the note date, no beneficial feature conversion was recorded.

On April 11, 2019, the Company entered into a convertible note agreement with an entity affiliated with the Company’s chief executive officer in the amount of $2,000,000. Commencing on May 11, 2019, and continuing on the eleventh day of each month thereafter, payments of interest only on the outstanding principal balance of this Note of $30,000 shall be due and payable. Commencing on November 11, 2019 and continuing on the eleventh day of each month thereafter through April 11, 2021, payments of principal and interest of $117,611 are due, if the note is not sooner converted as provided in the note agreement. The payment of all or any portion of the principal and accrued interest may be prepaid prior to April 11, 2021. Interest shall 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. All past due principal and interest on this Note shall bear interest from maturity of such principal or interest until paid at the lesser of (i) 20% per annum, or (ii) the highest non-usurious rate allowed by applicable law. This Note may be converted by 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. Since the conversion price of $11.81 was equal to the quoted closing of the Company’s common shares on the note date, no beneficial feature conversion was recorded.

At June 30, 2019 and December 31, 2018, convertible promissory notes (third party and related parties) are as follows:

	June 30, 2019			December 31, 2018
Principal amount	$	1,800,000		$	3,007,503
Principal amounts – related parties		2,500,000			-
Total principal amount		4,300,000			3,007,503
Less: unamortized debt discount		-			(1,595,627	)
Convertible notes payable, net		4,300,000			1,411,876
Less: current portion of convertible notes payable		(4,300,000	)		(1,411,876	)
Convertible notes payable, net – long-term	$	-		$	-

For the six months ended June 30, 2019 and 2018, amortization of debt discounts related to these convertible notes amounted to $430,268 and $332,364, respectively, which has been included in interest expense on the accompanying unaudited condensed consolidated statements of operations.

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Notes Payable

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Notes Payable

NOTE 8 – NOTES PAYABLE

Secured merchant loans

In connection with the acquisition of Prime in 2018, the Company assumed several notes payable liabilities amounting to $944,281 pursuant to secured merchant agreements (the “Assumed Secured Merchant Loans”). Pursuant to the Assumed Secured Merchant Loans, the Company is required to repay the noteholders by making daily payments on each business day or on demand payments until the loans amounts are paid in full. Each payment is deducted directly from the Company’s bank accounts. The Assumed Secured Merchant Loans are secured by the assets of Prime, and are personally guaranteed by the former majority member of Prime.

During January 2019, the Company entered into a separate promissory note with one of these individuals and borrowed an additional $26,900 at a simple annual interest rate of 15% bringing the total promissory note balance to $77,090 for this individual. During the six months ended June 30, 2019, the Company repaid $57,355 of these notes. At June 30, 2019 and December 31, 2018, notes payable related to Assumed Secured Merchant Loans and a new promissory note amounted to $97,496 and $157,951, respectively. In connection with the January 2019 promissory note, the Company issued 1,000 warrants to purchase 1,000 shares of the Company’s common stock at an exercise price of $1.00 per share. The warrant is exercisable over a five year period.

On September 20, 2018, the Company entered into a secured Merchant Loan with a lender in the amount of $521,250 and received net proceeds of $375,000, net of original issue discount of $146,250. Pursuant to this Secured Merchant Loan, the Company is required to repay the noteholders by making daily payments of $3,724 on each business day until the loans amounts are paid in full. Each payment is deducted directly from the Company’s bank accounts. This Secured Merchant Loan is secured by the Company’s assets and are personally guaranteed by the former majority member of Prime. On January 14, 2019, the Company entered into a new secured Merchant Loan with this lender in the amount of $764,500. The Company simultaneously repaid the September 20, 2018 loan which had a remaining principal balance of $223,329, paid an origination fee of $10,034 and received net proceeds of $316,637, net of original issue discount of $214,500. Pursuant to this Secured Merchant Loan, the Company is required to repay the noteholders by making daily payments of $6,371 on each business day until the loans amounts are paid in full. Each payment is deducted directly from the Company’s bank account. On January 24, 2019, the Company entered into another secured Merchant Loan with this lender in the amount of $417,000. The Company simultaneously paid an origination fee of $7,998 and received net proceeds of $292,002, net of original issue discount of $117,000. Pursuant to this Secured Merchant Loan, the Company is required to repay the noteholders by making daily payments of $3,972 on each business day until the loans amounts are paid in full. Each payment is deducted directly from the Company’s bank account. On May 8, 2019, the Company entered into another secured Merchant Loan with this merchant in the principal amount of $1,242,000. The Company simultaneously repaid prior loans of $362,961 which were entered into during January 2019, paid origination fees totaling $9,000 and paid an original issue discount of $342,000, and received net proceeds of $528,039. Pursuant to this secured Merchant Loan, the Company is required to pay the noteholder by making daily payments of $10,265 on each business day until the loan amounts are paid in full. Each payment is deducted from the Company’s bank account. These Secured Merchant Loans are secured by the Company’s assets and are personally guaranteed by the former majority member of Prime. During the six months ended June 30, 2019, the Company repaid an aggregate of $1,774,274 of the loans. At June 30, 2019 and December 31, 2018, secured merchant notes payable related to these Secured Merchant Loans amounted to $655,347 and $190,125, which is net of unamortized debt discount of $258,173 and $74,169, respectively.

On October 1, 2018, the Company entered into a secured Merchant Loan in the amount of $209,850 and received net proceeds of $137,962, net of original issue discount of $59,850 and net of origination fees of $12,038. Pursuant to this Secured Merchant Loan, the Company is required to repay the noteholders by making daily payments of $1,749 on each business day until the loans amounts are paid in full. Each payment is deducted directly from the Company’s bank accounts. Additionally, on October 1, 2018, the Company entered into a second secured Merchant Loan in the amount of $139,900 and received net proceeds of $92,000, net of original issue discount of $39,900 and net of origination fees of $8,000. Pursuant to this Secured Merchant Loan, the Company is required to repay the noteholders by making daily payments of $1,166 on each business day until the loans amounts are paid in full. Each payment is deducted directly from the Company’s bank accounts. These Secured Merchant Loans are secured by the Company’s assets and are personally guaranteed by the former majority member of Prime. During the six months ended June 30, 2019, the Company repaid all of these notes. At June 30, 2019 and December 31, 2018, notes payable related to these Secured Merchant Loans amounted to $0 and $128,726, which is net of unamortized debt discount of $0 and $51,371, respectively.

On October 12, 2018, the Company entered into a secured Merchant Loan with a lender in the amount of $420,000. The Company simultaneously repaid a prior loan of $31,634, paid an origination fee of $10,500 and received net proceeds of $254,552, net of original issue discount of $123,314. Pursuant to this Secured Merchant Loan, the Company is required to repay the noteholder by making daily payments of $3,000 on each business day until the loans amounts are paid in full. Each payment is deducted directly from the Company’s bank accounts. This Secured Merchant Loans was secured by the Company’s assets and was personally guaranteed by the former majority member of Prime. On January 28, 2019, the Company entered into a new secured Merchant Loan with this lender in the amount of $759,000 and received net cash of $315,097 after paying origination fee of $25,750, an original issue discount of $209,000, and the repayment of October 12, 2018 remaining loan and interest due to this lender of $209,153. Pursuant to this Secured Merchant Loan, the Company is required to repay the noteholders by making daily payments of $4,897 on each business day until the loans amounts are paid in full. Each payment is deducted directly from the Company’s bank account. This Secured Merchant Loans is secured by the Company’s assets and are personally guaranteed by the former majority member of Prime. At June 30, 2019 and December 31, 2018, note payable related to these Secured Merchant Loans amounted to $163,435 and $171,752, which is net of unamortized debt discount of $81,403 and $86,248, respectively.

From February 25, 2019 to March 6, 2019, the Company entered into four secured Merchant Loans in the aggregate amount of $1,199,200. The Company simultaneously repaid prior loans of $69,327 which were entered into during October 2018, paid origination fees totaling $78,286 and received net proceeds of $652,387, net of original issue discounts of $399,200. Pursuant to these four secured Merchant Loans, the Company was required to pay the noteholders by making daily payments aggregating $11,993 on each business day until the loan amounts were paid in full. Each payment was deducted from the Company’s bank account. On April 10, 2019, the Company paid off these secured Merchant Loans in full by paying an aggregate amount of $703,899. As a result of paying off these loans early, the noteholders reduced the origination fees and debt discounts by $229,195 in the aggregate.

On April 17, 2019, the Company entered into a secured Merchant Loan in the principal amount of $650,000 and received net proceeds of $500,000, net of original issue discounts of $150,000. Pursuant to this secured Merchant Loan, the Company is required to pay the noteholders by making three monthly installments of $216,667 beginning in June 2019 to August 2019. At June 30, 2019, notes payable related to this Secured Merchant Loan amounted to $333,333, which is net of unamortized debt discount of $100,000.

From May 21, 2019 to June 30, 2019, the Company entered into three secured Merchant Loans in the aggregate amount of $1,349,400. The Company received net proceeds of $855,000, net of original issue discounts and origination fees of $494,100. Pursuant to these three secured Merchant Loans, the Company is required to pay the noteholders by making daily payments aggregating $8,000 on each business day and a weekly payment of $28,500 until the loan amounts were paid in full. Each payment was deducted from the Company’s bank account. At June 30, 2019, notes payable related to these Secured Merchant Loans amounted to $714,387, which is net of unamortized debt discount of $403,963.

Promissory notes

In connection with the acquisition of Prime, the Company assumed several notes payable liabilities due to entities or individuals amounting to $297,005 (the “Note”). These notes have effective interest rates ranging from 7% to 10%, and are unsecured. During the six months ended June 30, 2019, the Company repaid $25,000 of these notes and $40,000 of these notes was rolled into a new note. At June 30, 2019 and December 31, 2018, notes payable to these entities or individuals amounted to $65,000 and $130,000, respectively.

From October 31, 2018 to December 31, 2018, the Company entered into Original Discount Senior Secured Demand Promissory Notes with an investor (the “Promissory Note”). Pursuant to the 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 these promissory notes. During the six months ended June 30, 2019, the Company repaid $200,000 of these promissory notes. At June 30, 2019 and December 31, 2018, notes payable to this entity amounted to $350,000 and $505,945, which is net of unamortized debt discount of $0 and $44,055, respectively. The remaining notes were payable on demand. These promissory notes are secured by the Company’s assets.

From January 2019 to June 30, 2019, the Company entered into separate promissory notes with several individuals totaling $2,352,150, including $40,000 of a previous note rolled into these new notes, and received net proceeds of $2,048,900, net of original issue discounts of $263,250. These Notes are due between 45 and 273 days from the respective Note date. Other than the original issue discount, no additional interest is due to the holders. In connection with these promissory notes, the Company issued 58,000 warrants to purchase 58,000 shares of the Company’s common stock at an exercise price of $1.00 per share. The warrants are exercisable over a five year period. At June 30, 2019, notes payable to these individuals amounted to $1,638,480, which is net of unamortized debt discount of $21,365.

During March 2019, the Company entered into two separate promissory notes with an entity totaling $165,000 and received net proceeds of $150,000, net of original issue discounts of $15,000. During the six months ended June 30, 2019, the Company repaid $165,000 of these promissory notes. At June 30, 2019, notes payable to this entity amounted to $0.

Equipment and auto notes payable

In connection with the acquisition of Prime, the Company assumed several equipment notes payable liabilities due to entities amounting to $523,207 (the “Equipment Notes”). These Equipment Notes have effective interest rates ranging from 6.0% to 9.4%, and are secured by the underlying van or trucks. At June 30, 2019 and December 31, 2018, equipment notes payable to these entities amounted to $358,285 and $488,289, respectively.

During October and November 2018, the Company entered into several auto financing agreements. At June 30, 2019 and December 31, 2018, auto notes payable related to auto financing agreements amounted to $198,281 and $161,036, respectively.

At June 30, 2019 and December 31, 2018, notes payable consisted of the following:

	June 30, 2019			December 31, 2018
Principal amounts	$	5,438,948		$	2,189,666
Less: unamortized debt discount		(864,904	)		(255,843	)
Principal amounts, net		4,574,044			1,933,823
Less: current portion of notes payable		(4,256,738	)		(1,509,804	)
Notes payable – long-term	$	317,306		$	424,019

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Stockholders' Deficit

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Stockholders' Deficit

NOTE 9– STOCKHOLDERS’ DEFICIT

Preferred stock

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

Preferred stock of 4,000,000 shares is designated Series A Convertible Preferred Stock. Each share of Series A preferred stock has a par value of $.001 and a stated value of $1.00. Dividends are payable on Series A preferred shares at the rate per share of 7% per annum cumulative based on the stated value. The Series A preferred shares have no voting rights, except as required by law. Each share of preferred stock is convertible based on the stated value at a conversion price of $20.83 at the option of the holder; provided, however, if a triggering event occurs, as defined in the document, the conversion price shall thereafter be reduced, and only reduced, to equal forty percent of the lowest VWAP during the thirty consecutive trading day period prior to the conversion date. As of June 30, 2019, the Company believes a triggering event has occurred. The beneficial ownership limitation attached to conversion is 4.99%, which can be decreased or increased, upon not less than 61 days’ notice to the Company, but in no event exceeding 19.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of common stock upon conversion of the preferred stock. After 36 months, the Company has the right to redeem all, but not less than all, of the outstanding preferred shares in cash at a price equal to 130% of the stated value plus any accrued but unpaid dividends thereon.

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.

Common stock issued for services

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.

Cancellation of common shares

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 and the shares were cancelled. In connection with the disposal of Save On, the Company recorded an increase in equity of $56,987 related to the amount of net liabilities disposed of in a transaction with the former chief executive officer of the Company since the CEO is still a related party after this transaction as he remained a principal shareholder (see Note 3).

Shares issued in connection with debt modification

On April 9, 2019, the Company entered into an agreement with Bellridge that modifies 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. As of the date of this report, 100,000 of these shares have been issued and 700,000 shares are issuable. 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 (See Note 7).

Stock options

In connection the disposal of Save On, on May 1, 2019, the Company granted an aggregate of 80,000 options to certain employees of Save On. The options are exercisable at $8.85 per share for a period of five years. 25% of the options vest on January 1, 2020 and 25% shall vest annually thereafter. On May 1, 2019, the Company calculated the fair value of these options of $700,816 which was calculated using the Black-Sholes option pricing model with the following assumptions: expected dividend rate, 0%; expected term (in years), 5 years; volatility of 228.1% and risk-free interest rate of 2.31%. During the six months ended June 30, 2019, the Company recorded stock-based compensation of $700,816 related to these options which has been included in loss from discontinued operations on the accompany statement of operations.

Stock option activities for the six months ended June 30, 2019 are summarized as follows:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance Outstanding December 31, 2018		-	$	-		-	$	-
Granted		80,000		8.84
Cancelled		-		-
Balance Outstanding June 30, 2019		80,000	$	8.84		4.83	$	252,000
Exercisable, June 30, 2019		0	$	-		-	$	-

Warrants

In connection with the Purchase Agreement in 2018 (See Note 7 under Bellridge), the Lender 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. Additionally, the placement agent 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. Also, on December 27, 2018, the lender waived any and all defaults in existence on the Note and the Company agreed to issue a warrant that is convertible into 2% of the issued and outstanding shares existing as the time the Company files a registration statement or makes an application to up list to a national stock exchange. On April 9, 2019, the Company entered into an agreement with Bellridge and the Placement Agent that cancelled these warrants in exchange for an aggregate of 600,000 common shares of the Company. 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 (See Note 7).

In connection with several promissory notes payable (see Note 8), during the six months ended June 30, 2019, the Company issued 59,000 warrants to purchase 59,000 shares of common at an exercise price of $1.00 per share. During the six months ended June 30, 2019, the Company calculated the relative fair value of these warrants of $135,324 which was amortized into interest expense over the loan terms and was estimated using the Binomial valuation model with the following assumptions: expected dividend rate, 0%; expected term (in years), 5 years; volatility of 228.1% and risk-free interest rate ranging from 2.28% to 2.40%.

In connection with previous promissory notes payable (see Note 8), on June 11, 2019, the Company issued 55,000 warrants to purchase 55,000 shares of common at an exercise price of $1.00 per share. On June 11, 2019, the Company calculated the fair value of these warrants of $601,121 which was expensed and included in loan fees on the accompanying condensed consolidated statement of operations. These fair value of these warrants was estimated using the Binomial valuation model with the following assumptions: expected dividend rate, 0%; expected term (in years), 5 years; volatility of 228.1% and risk-free interest rate of 1.92%.

Warrant activities for the six months ended June 30, 2019 are summarized as follows:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance Outstanding December 31, 2018		1,648,570		$	0.00		1.47	$	2,472,655
Granted		114,000			1.00
Cancellations		(1,421,059	)		0.00
Change in warrants related to dilutive rights		(227,511	)		0.00
Balance Outstanding June 30, 2019		114,000		$	1.00		4.82	$	1,254,000
Exercisable, June 30, 2019		114,000		$	1.00		4.82	$	1,254,000

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 10 – COMMITMENTS AND CONTINGENCIES

Employment agreement

On June 18, 2018, the Company entered into an employment agreement with the chief operating officer of Prime. The Company shall pay to this executive a base salary of $520,000 per year, payable in accordance with the Company’s usual pay practices. The executive’s base salary will increase by $260,000 per year upon (i) Prime achieving revenue of $20 million on an annualized basis (the “Initial Target Goal”) for four consecutive weeks; and (ii) each time Prime achieves revenue of an additional $10 million increment above the Initial Target Goal (i.e., $30 million, $40 million, $50 million, etc.) on an annualized basis for four consecutive weeks. Executive’s base salary shall be subject to review annually by the Manager and may be increased (but not decreased). The executive shall be entitled to participate in any bonus plan that the Manager or its designee may approve for the senior executives of the Company and shall be entitled to participate in benefits under the Company’s benefit plans, profit sharing and arrangements, including, without limitation, any employee benefit plan or arrangement made available in the future by the Company to its employees or senior executives, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. Notwithstanding the foregoing, during the Employment, the Company will provide, at the Company’s expense, health and major medical insurance benefits to the Executive and his family members which are at least equal to the benefits provided to the Executive and his family members immediately prior to the Effective Date. The term of this Agreement (as it may be extended by the following sentence or terminated earlier pursuant to terms in the employment agreement shall begin on the Effective Date and end on the close of business on May 31, 2023. The Employment Term shall be automatically extended for additional one-year periods unless, at least sixty (60) days prior to the end of the expiration of the Employment Term.

Other

From time to time, we may be involved in litigation relating to claims arising out of our operation in the normal course of business. As of June 30, 2019, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on results of our operations.

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Related Party Transactions and Balances

6 Months Ended

Jun. 30, 2019

Related Party Transactions [Abstract]

Related Party Transactions and Balances

NOTE 11– RELATED PARTY TRANSACTIONS AND BALANCES

Due to related parties

In connection with the acquisition of Prime, the Company acquired a balance of $14,019 that was due from the former majority owner of Prime. Pursuant to the terms of the SPA, the Company agreed to pay $489,174 in cash to the former majority owner of Prime who then advanced back the $489,174 to Prime. During the six months ended June 30, 2019, the Company repaid $50,000 of this advance. This advance is non-interest bearing and is due on demand. At June 30, 2019 and December 31, 2018, amount due to this related party amounted to $209,000 and $259,000.

During the period from acquisition date of Prime (June 18, 2018) to June 30, 2019, an employee of Prime who exerts significant influence over the business of Prime, paid costs and expenses and was reimbursed funds by the Company. These advances are non-interest bearing and are due on demand. At June 30, 2019 and December 31, 2018, amounts due from (to) this related party amounted to $81,489 and $(16,300), respectively.

Notes payable – related parties

From July 25, 2018 through December 31, 2018, the Company entered into several Promissory Notes with the Company’s former chief executive officer or the spouse of the Company’s former chief executive officer. Pursuant to these promissory notes, the Company borrowed an aggregate of $1,150,000 and received net proceeds of $1,050,000, net of original issue discounts of $100,000. From July 25, 2018 through December 31, 2018, $930,000 of these loans were repaid and during January 2019, the Company repaid the remaining existing promissory note totaling $220,000 with the spouse of the Company’s chief executive officer. In addition, during February 2019, the Company entered into another promissory note with the spouse of the chief executive officer totaling $220,000, net of an original issue discount of $20,000. In April 2019, the Company repaid this promissory note. During the six months ended June 30, 2019, amortization of debt discount related to these notes amounted to $26,383 and is included in interest expense – related parties on the accompanying condensed consolidated statement of operations.

On April 9, 2019, certain noteholders who were not considered related parties became related parties since they became beneficial owners of the Company’s common stock. Accordingly, notes payable amounting to $510,000 were reclassified from notes payable to note payable – related party (See Note 7).

At June 30, 2019 and December 31, 2018, notes payable – related parties amounted to $510,000 (non-current) and $213,617 (current), which is net of unamortized debt discount of $0 and $6,383, respectively.

Convertible note payable – related parties

On March 13, 2019, the Company entered into a convertible note agreement with an individual, who is affiliated to the Company’s chief executive officer, in the amount of $500,000 (See Note 7).

In April 2019, the Company entered into a convertible note agreement with a company, who is affiliated to the Company’s chief executive officer, in the amount of $2,000,000 (See Note 7).

During the six months ended June 30, 2019, interest expense related to these notes amounted to $107,506 and is included in interest expense – related parties on the accompanying condensed consolidated statement of operations.

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Operating Lease Right-of-Use ('ROU') Assets and Operating Lease Liabilities

6 Months Ended

Jun. 30, 2019

Lessee Disclosure [Abstract]

Operating Lease Right-of-Use ("ROU") Assets and Operating Lease Liabilities

NOTE 12 – OPERATING LEASE RIGHT-OF-USE (“ROU”) ASSETS AND OPERATING LEASE LIABILITIES

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 January 2024. From the lease commencement date until the last day of the second lease year, monthly rent shall be $14,000. At the beginning of the 25^th month following the commencement date and through the end of the term, minimum rent shall be $14,420 per month. The Company shall have one option to renew the term of this lease for an additional five years. In January 2019, the Company paid a security deposit of $28,000.

In 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. 

During the six months ended June 30, 2019 and 2018, in connection with this operating lease, the Company recorded rent expense of $84,112 and $0, respectively, which is expensed during the period and included in operating expenses on the accompanying condensed consolidated statements of operations.

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

At June 30, 2019, right-of-use asset (“ROU”) is summarized as follows:

	June 30, 2019
Office lease right of use asset	$	631,723
Less: accumulated amortization into rent expense		(53,302	)
Balance of ROU asset as of June 30, 2019	$	578,421

At June 30, 2019, operating lease liability related to the ROU asset is summarized as follows:

	June 30, 2019
Lease liability related to office lease right of use asset	$	592,533
Less: current portion of lease liability		(102,407	)
Lease liability – long-term	$	490,126

At June 30, 2019, future minimum base lease payments due under non-cancelable operating leases is as follows:

Year ended June 30,	Amount
2020	$	168,000
2021		170,520
2022		173,040
2023		173,040
2024		86,520
Total minimum non-cancelable operating lease payments	$	771,120
Less: discount to fair value		(178,587	)
Total lease liability at June 30, 2019		592,533

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Concentrations

6 Months Ended

Jun. 30, 2019

Risks and Uncertainties [Abstract]

Concentrations

NOTE 13 – CONCENTRATIONS

For the six months ended June 30, 2019, one customer represented 99.1% of the Company’s total net revenues. This revenue is from one Prime customer. For the six months ended June 30, 2018, one customer represented 98.9% of the Company’s total net revenues. At June 30, 2019, one customer represented 96.9% of the Company’s accounts receivable balance.

During the six months ended June 30, 2019, the Company rented delivery vans from two vendors. Any shortage of supply of vans available to rent to the Company could have a material adverse effect on the Company’s business, financial condition and results of operations.

All revenues are derived from customers in the United States.

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Subsequent Events

6 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

Subsequent Events

NOTE 14 – SUBSEQUENT EVENTS

Secured merchant loans

From July 1, 2019 to August 19, 2019, the Company entered into several secured Merchant Loans in the aggregate amount of $1,762,225. The Company received net proceeds of $557,500, net of original issue discounts and origination fees of $702,225 and the repayment of previous secured merchant loans of $502,500. Pursuant to these secured Merchant Loans, the Company is required to pay the noteholders by making daily payments on each business day until the loan amounts are paid in full. Each payment was deducted from the Company’s bank account.

Promissory notes

In August 2019, the Company entered into a promissory note with an entity totaling $52,500 and received net proceeds $50,000, net of original issue discount of $2,500. The note was due in one week and is currently in default. The default interest is 12% per annum.

Promissory notes – related party

On July 2. 2019, the Company entered into a note agreement with an entity, who is affiliated to the Company’s chief executive officer, in the amount of $500,000. The principal amount of this note and all accrued interest shall be due and payable on October 3, 2019 and is non-interest bearing. If the note is not paid by the due date, interest shall be 20% per annum.

Due to related party

On August 1, 2019, the Company’s chief executive officer advanced the Company $50,000 for working capital purposes, The advance is payable on demand and is non-interest bearing.

Sale of common stock

In August 2019, the Company entered into subscription agreements with investors for the sale of 209,000 units at $2.50 per unit which consists of 209,000 shares of common stock and 209,000 warrants exercisable at $2.50 per share for cash proceeds of $522,500.

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Summary of Significant Accounting Policies and Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation and Principles of Consolidation

Basis of presentation and principles of consolidation

The condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information and disclosures necessary for comprehensive presentation of financial position, results of operations or cash flow. However, these unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments and a non-recurring adjustment for the impairment of intangible assets, 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, 2018, and notes thereto included in the Company’s annual report on Form 10-K, filed on April 16, 2019.

The Company follows the same accounting policies in the preparation of its annual and interim reports. The results of operations in interim periods are not necessarily an indication of operating results to be expected for the full year.

The unaudited condensed consolidated financial statements of the Company include the accounts of TLSS and its wholly owned subsidiaries, Save On (through April 30, 2019), Prime and Shypdirect. All intercompany accounts and transactions have been eliminated in consolidation.

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

Going Concern

Going concern

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, for the six months ended June 30, 2019, the Company had a net loss of $26,609,181 and net cash used in operations was $3,115,838, respectively. Additionally, the Company had an accumulated deficit, shareholders’ deficit, and a working capital deficit of $41,379,031, $9,248,833 and $11,697,417, respectively, at June 30, 2019. Furthermore, the Company failed to make required payments of principal and interest on certain of its convertible debt instruments and defaulted on other provisions in these Notes. On April 9, 2019, the Company entered into agreements with these lenders that modified these Notes (See Note 7). 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. 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 is seeking to raise capital through additional debt and/or equity financings to fund its operations in the future. Although the Company has historically raised capital from sales of common shares and from the issuance of convertible promissory notes, there is no assurance that it will be able to continue to do so.

If the Company is unable to raise additional capital or secure additional lending in the near future, management expects that the Company will need to curtail its operations. These consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Use of Estimates

Use of estimates

The preparation of the condensed consolidated financial statements, in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates included in the accompanying unaudited condensed consolidated financial statements and footnotes include the valuation of accounts receivable, the useful life of property and equipment, the valuation of intangible assets, the valuation of right of use asset and related liability, assumptions used in assessing impairment of long-lived assets, estimates of current and deferred income taxes and deferred tax valuation allowances, the fair value of non-cash equity transactions, the valuation of derivative liabilities, and the fair value of assets acquired and liabilities assumed in business acquisitions.

Fair Value of Financial Instruments

Fair value of financial instruments

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 June 30, 2019. 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 three levels of the fair value hierarchy are as follows:

● 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.

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 at June 30, 2019 and December 31, 2018:

	At June 30, 2019						At December 31, 2018
Description	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Derivative liabilities		—		—	$	—		—		—	$	7,888,684

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

	For the Six Months Ended June 30, 2019
Balance at beginning of period	$	7,888,684
Gain on extinguishment of debt related to repayment of debt		(246,110	)
Gain on extinguishment of debt related to April 9, 2019 modifications		(61,841,708	)
Cumulative effect adjustment for change in derivative accounting		(838,471	)
Change in fair value included in derivative expense		55,037,605
Balance at end of period	$	-

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 balance sheets for cash, accounts receivable, accounts payable and accrued expenses 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.

Cash and Cash Equivalents

Cash and cash equivalents

For purposes of the 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. At June 30, 2019 and December 31, 2018, the Company did not have any cash equivalents.

The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. There were no balances in excess of FDIC insured levels as of June 30, 2019 and December 31, 2018. The Company has not experienced any losses in such accounts through June 30, 2019.

Accounts Receivable

Accounts receivable

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

Property and equipment

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

Intangible Asset

Intangible asset

Intangible assets are carried at cost less accumulated amortization, computed using the straight-line method over the estimated useful life, less any impairment charges. At June 30, 2019 and December 31, 2018, intangible asset consists of a customer relationship acquired on June 18, 2018 which is being amortized over a period of five years.

Leases

Leases

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, the Company 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; (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. 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 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.

Impairment of Long-Lived Assets

Impairment of long-lived assets

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.

Segment Reporting

Segment reporting

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 the six months ended June 30, 2019 and 2018, the Company believes that it operates in one operating segment related to deliveries for on-line retailers in New York, New Jersey and Pennsylvania 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.

Derivative Financial Instruments

Derivative financial instruments

The Company has certain financial instruments that are embedded derivatives associated with capital raises. The Company evaluates all 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 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 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.

Revenue Recognition and Cost of Revenue

Revenue recognition and cost of revenue

On January 1, 2018, 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 and Shypdirect business activities, 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 net seven days from acceptance of delivery. The Company does not incur incremental costs obtaining service orders from its Prime customers, however, if the Company did, because all of Prime and Shypdirect customer contracts are less than a year in duration, any contract costs incurred would be expensed rather than capitalized. The revenue that the Company recognizes arises from deliveries of packages on behalf of the Company’s customers. Primarily, the Company’s performance obligations under these service orders correspond to each delivery of packages that the Company makes under the service agreements. Control of the package transfers to the recipient upon delivery. Once this occurs, the Company has satisfied its performance obligation and the Company recognizes revenue.

For the Company’s Save On business activities, through the date of disposition on May 1, 2019, the Company recognized revenues and the related direct costs of such revenue which includes carrier fees and dispatch costs as of the date the freight is delivered by the carrier which is when the performance obligation is satisfied. Customer payments received prior to delivery are recorded as a deferred revenue liability and related carrier fees if paid prior to delivery are recorded as a deferred expense asset. In accordance with ASC Topic 606, the Company recognizes revenue on a gross basis. Our payment terms for corporate customers are net 30 days from acceptance of delivery and individual customers generally must pay in advance. The Company does not incur incremental costs obtaining service orders from our Save On customers, however, if the Company did, because all of the Save On customer’s contracts are less than a year in duration, any contract costs incurred would be expensed rather than capitalized. The Company’s adoption of this ASC, resulted in no cumulative effect at January 1, 2018 and no change prospectively to the Company’s results of operations or financial condition. The revenue that the Company recognizes arises from service orders it receives from its Save On customers. The Company’s performance obligations under these service orders correspond to each delivery of a vehicle that the Company makes for its customer under the service orders; as a result, each service order generally contains only one performance obligation based on the delivery to be completed.

Revenue disaggregation disclosure required pursuant to ASC 606 are disclosed in Note 13 – Segment Information.

Basic and Diluted Loss Per Share

Basic and diluted loss per share

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

Potentially dilutive common shares were excluded from the computation of diluted shares outstanding as they would have an anti-dilutive impact on the Company’s net losses and consisted of the following:

	June 30, 2019		June 30, 2018
Stock warrants		114,000		1,329,548
Stock options		80,000		-
Convertible debt		534,312		3,158,465
Series A convertible preferred stock		-		6,666,667

Stock-Based Compensation

Stock-based compensation

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director 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 and director services received in exchange for an award based on the grant-date fair value of the award.

Through March 31, 2018, pursuant to ASC 505-50 – “Equity-Based Payments to Non-Employees”, all share-based payments to non-employees, including grants of stock options, were recognized in the consolidated financial statements as compensation expense over the service period of the consulting arrangement or until performance conditions are expected to be met. Using a Black-Scholes valuation model, the Company periodically reassessed the fair value of non-employee options until service conditions are met, which generally aligns with the vesting period of the options, and the Company adjusts the expense recognized in the consolidated financial statements accordingly. In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies several aspects of the accounting for nonemployee share-based payment transactions by expanding the scope of the stock-based compensation guidance in ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. ASU No. 2018-07 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted, but entities may not adopt prior to adopting the new revenue recognition guidance in ASC 606. The Company early adopted ASU No. 2018-07 in the second quarter of 2018 and there was no cumulative effect of adoption.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

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

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

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.

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Summary of Significant Accounting Policies and Basis of Presentation (Tables)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis

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 at June 30, 2019 and December 31, 2018:

	At June 30, 2019						At December 31, 2018
Description	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Derivative liabilities		—		—	$	—		—		—	$	7,888,684

Schedule of Reconciliation of Derivative Liability for Level 3 Inputs

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

	For the Six Months Ended June 30, 2019
Balance at beginning of period	$	7,888,684
Gain on extinguishment of debt related to repayment of debt		(246,110	)
Gain on extinguishment of debt related to April 9, 2019 modifications		(61,841,708	)
Cumulative effect adjustment for change in derivative accounting		(838,471	)
Change in fair value included in derivative expense		55,037,605
Balance at end of period	$	-

Schedule of Potentially Dilutive Shares Excluded from Computation of Diluted Shares Outstanding

Potentially dilutive common shares were excluded from the computation of diluted shares outstanding as they would have an anti-dilutive impact on the Company’s net losses and consisted of the following:

	June 30, 2019		June 30, 2018
Stock warrants		114,000		1,329,548
Stock options		80,000		-
Convertible debt		534,312		3,158,465
Series A convertible preferred stock		-		6,666,667

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Discontinued Operations (Tables)

6 Months Ended

Jun. 30, 2019

Discontinued Operations and Disposal Groups [Abstract]

Schedule of Condensed Consolidated Financial Statements and Statements of Operations for Discontinued Operations

The assets and liabilities classified as discontinued operations in the Company’s condensed consolidated financial statements as of June 30, 2019 and December 31, 2018, and for the three and six months ended June 30, 2019 and 2018 is set forth below.

	June 30, 2019		December 31, 2018
Assets:
Current assets:
Accounts receivable, net	$	-	$	334,275
Prepaid expenses and other		-		1,619
Total current assets		-		335,894
Total assets	$	-	$	335,894
Liabilities:
Current liabilities:
Accounts payable	$	-	$	409,053
Accounts payable – related party		-		3,700
Accrued expenses and other liabilities		-		27,992
Total current liabilities		-		440,745
Total liabilities	$	-	$	440,745

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

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019			2018
Revenues	$	359,728		$	1,132,009	$	1,491,253		$	2,309,771
Cost of revenues		263,073			860,079		1,114,269			1,756,634
Gross profit		96,655			271,930		376,984			553,137
Operating expenses		791,742			226,394		1,058,410			469,536
Loss from discontinued operations		(695,087	)		45,536		(681,426	)		83,601
Loss on disposal of discontinued operations		-			-		-			-
Loss from discontinued operations, net of income taxes	$	(695,087	)	$	45,536	$	(681,426	)	$	83,601

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Accounts Receivable (Tables)

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Schedule of Accounts Receivable

At June 30, 2019 and December 31, 2018, accounts receivable, net consisted of the following:

	June 30, 2019		December 31, 2018
Accounts receivable	$	927,723	$	441,497
Allowance for doubtful accounts		-		-
Accounts receivable, net	$	927,723	$	441,497

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Property and Equipment (Tables)

6 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment

At June 30, 2019 and December 31, 2018, property and equipment consisted of the following:

	Useful Life	June 30, 2019			December 31, 2018
Delivery trucks and vehicles	5 - 6 years	$	899,139		$	1,033,397
Less: accumulated depreciation			(171,085	)		(96,566	)
Property and equipment, net		$	728,054		$	936,831

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Intangible Asset (Tables)

6 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Asset

At June 30, 2019 and December 31, 2018, intangible asset consisted of the following:

	Useful life	June 30, 2019		December 31, 2018
Customer relationship	5 year	$	2,420,191	$	5,235,515
Less: accumulated amortization			-		(567,181	)
		$	2,420,191	$	4,668,334

Schedule of Future Amortization Expense

Amortization of intangible assets attributable to future periods is as follows:

Year ending June 30:	Amount
2020	$	611,417
2021		611,417
2022		611,417
2023		585,940
	$	2,420,191

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Convertible Promissory Notes Payable and Notes Payable (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Schedule of Gain on Debt Extinguishment

In connections with the RedDiamond and Bellridge debt modifications and warrants cancellations discussed above, on the Modification Date, the Company recorded a gain on debt extinguishment of $43,823,897 which consists of the following.

	Gain on Extinguishment on Modification Date
Gain from reversal of derivative liabilities on Modification Date	$	61,841,708
Fair value of common shares issued on Modification Date		(17,934,000	)
Write-off of remaining debt discount		(1,013,118	)
Reversal of put premium on stock-settled debt related to cancellation of conversion terms		385,385
Reduction of principal and interest balances due		543,922
Gain of debt extinguishment	$	43,823,897

Schedule of Fair Value of Derivative Liabilities Estimated Using Black-Sholes Valuation Model

During the six months ended June 30, 2019 and 2018, the fair value of the derivative liabilities was estimated using the Black-Sholes valuation model, Binomial valuation model, and the Monte-Carlo simulation model with the following assumptions:

	2019			2018
Expected dividend rate		-			-
Expected term (in years)		0.05 to 0.75			0.01 to 2.00
Volatility		228.1	%		261.2% to 307.75	%
Risk-free interest rate		2.23% to 2.40	%		1.32% to 2.11	%

Schedule of Convertible Promissory Notes

At June 30, 2019 and December 31, 2018, convertible promissory notes (third party and related parties) are as follows:

	June 30, 2019			December 31, 2018
Principal amount	$	1,800,000		$	3,007,503
Principal amounts – related parties		2,500,000			-
Total principal amount		4,300,000			3,007,503
Less: unamortized debt discount		-			(1,595,627	)
Convertible notes payable, net		4,300,000			1,411,876
Less: current portion of convertible notes payable		(4,300,000	)		(1,411,876	)
Convertible notes payable, net – long-term	$	-		$	-

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Notes Payable (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Schedule of Notes Payable

At June 30, 2019 and December 31, 2018, notes payable consisted of the following:

	June 30, 2019			December 31, 2018
Principal amounts	$	5,438,948		$	2,189,666
Less: unamortized debt discount		(864,904	)		(255,843	)
Principal amounts, net		4,574,044			1,933,823
Less: current portion of notes payable		(4,256,738	)		(1,509,804	)
Notes payable – long-term	$	317,306		$	424,019

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Stockholders' Deficit (Tables)

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Summary of Stock Option Activities

Stock option activities for the six months ended June 30, 2019 are summarized as follows:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance Outstanding December 31, 2018		-	$	-		-	$	-
Granted		80,000		8.84
Cancelled		-		-
Balance Outstanding June 30, 2019		80,000	$	8.84		4.83	$	252,000
Exercisable, June 30, 2019		0	$	-		-	$	-

Summary of Warrant Activities

Warrant activities for the six months ended June 30, 2019 are summarized as follows:

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance Outstanding December 31, 2018		1,648,570		$	0.00		1.47	$	2,472,655
Granted		114,000			1.00
Cancellations		(1,421,059	)		0.00
Change in warrants related to dilutive rights		(227,511	)		0.00
Balance Outstanding June 30, 2019		114,000		$	1.00		4.82	$	1,254,000
Exercisable, June 30, 2019		114,000		$	1.00		4.82	$	1,254,000

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Operating Lease Right-of-Use ('ROU') Assets and Operating Lease Liabilities (Tables)

6 Months Ended

Jun. 30, 2019

Lessee Disclosure [Abstract]

Schedule of Right of Use Asset

At June 30, 2019, right-of-use asset (“ROU”) is summarized as follows:

	June 30, 2019
Office lease right of use asset	$	631,723
Less: accumulated amortization into rent expense		(53,302	)
Balance of ROU asset as of June 30, 2019	$	578,421

Schedule of Operating Lease Liability Related to ROU Asset

At June 30, 2019, operating lease liability related to the ROU asset is summarized as follows:

	June 30, 2019
Lease liability related to office lease right of use asset	$	592,533
Less: current portion of lease liability		(102,407	)
Lease liability – long-term	$	490,126

Schedule of Lease Payments Due Under Operating Leases

At June 30, 2019, future minimum base lease payments due under non-cancelable operating leases is as follows:

Year ended June 30,	Amount
2020	$	168,000
2021		170,520
2022		173,040
2023		173,040
2024		86,520
Total minimum non-cancelable operating lease payments	$	771,120
Less: discount to fair value		(178,587	)
Total lease liability at June 30, 2019		592,533

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Organization and Business Operations (Details Narrative) - $ / shares	May 01, 2019	Jul. 16, 2018	Mar. 30, 2017	Jun. 30, 2019	Dec. 31, 2018	Jun. 18, 2018
Percentage of controlling interest retained			80.00%
Acquisition of business entity, percentage						100.00%
Proposed increase of preferred stock		10,000,000
Proposed increase of preferred stock, par value		$ 0.001		$ 0.001	$ 0.001
Reverse stock split, ratio		1-for-250
Share Exchange Agreement [Member] | Steven Yariv [Member]
Number of common stock shares return	1,000,000
Number of options granted to employees	80,000

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Summary of Significant Accounting Policies and Basis of Presentation (Details Narrative)		3 Months Ended				6 Months Ended		12 Months Ended
	May 01, 2019 shares	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)	Jun. 30, 2018 USD ($)	Mar. 31, 2018 USD ($)	Jun. 30, 2019 USD ($) Integer	Jun. 30, 2018 USD ($) Integer	Dec. 31, 2018 USD ($)	Jan. 02, 2019 USD ($)	Dec. 31, 2017 USD ($)
Net loss		$ (6,961,458)	$ (19,647,723)	$ (14,510,914)	$ 60,925	$ (26,609,181)	$ (14,449,989)
Net cash used in operations						(3,115,838)	(315,066)
Accumulated deficit		(41,379,031)				(41,379,031)		$ (15,222,936)
Shareholders' deficit		(9,248,833)	$ (24,117,542)	$ (7,809,126)	$ (714,212)	(9,248,833)	$ (7,809,126)	(7,737,294)		$ (775,137)
Working capital deficit		11,697,417				11,697,417
Cash equivalents
Cash in excess of FDIC limits
Amortized period						5 years		5 years
Number of operating segment | Integer						1	1
Fair value of derivative liabilities								$ 838,471
Premium liability								$ 385,385
Cumulative adjustment to accumulated deficit									$ 453,086
Minimum [Member]
Property and equipment, estimated useful lives						5 years
Maximum [Member]
Property and equipment, estimated useful lives						6 years
Share Exchange Agreement [Member] | Steven Yariv [Member]
Number of common stock shares return | shares	1,000,000

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Summary of Significant Accounting Policies and Basis of Presentation - Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Derivative liabilities		$ 7,888,684
Level 1 [Member]
Derivative liabilities
Level 2 [Member]
Derivative liabilities
Level 3 [Member]
Derivative liabilities		$ 7,888,684

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Summary of Significant Accounting Policies and Basis of Presentation - Schedule of Reconciliation of Derivative Liability for Level 3 Inputs (Details) - USD ($)		3 Months Ended		6 Months Ended
	Apr. 09, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Gain on extinguishment of debt related to April 9, 2019 modifications	$ 43,823,897	$ 43,823,897		$ 43,917,768
Level 3 [Member]
Balance at beginning of period				7,888,684
Gain on extinguishment of debt related to repayment of debt				(246,110)
Gain on extinguishment of debt related to April 9, 2019 modifications				(61,841,708)
Cumulative effect adjustment for change in derivative accounting				(838,471)
Change in fair value included in derivative expense				55,037,605
Balance at end of period

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Summary of Significant Accounting Policies and Basis of Presentation - Schedule of Potentially Dilutive Shares Excluded from Computation of Diluted Shares Outstanding (Details) - shares	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Stock Warrants [Member]
Antidilutive securities excluded from computation of earnings per share	114,000	1,329,548
Stock Options [Member]
Antidilutive securities excluded from computation of earnings per share	80,000
Convertible Debt [Member]
Antidilutive securities excluded from computation of earnings per share	534,312	3,158,465
Series A Convertible Preferred Stock [Member]
Antidilutive securities excluded from computation of earnings per share		6,666,667

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Discontinued Operations (Details Narrative) - Share Exchange Agreement [Member] - Steven Yariv [Member]	May 01, 2019 shares
Number of common stock shares return	1,000,000
Number of options granted to employees	80,000

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Discontinued Operations - Schedule of Condensed Consolidated Financial Statements and Statements of Operations for Discontinued Operations (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Discontinued Operations and Disposal Groups [Abstract]
Accounts receivable, net		$ 334,275		$ 334,275
Prepaid expenses and other		1,619		1,619
Total current assets		335,894		335,894	$ 335,894
Total assets		335,894		335,894
Accounts payable		409,053		409,053
Accounts payable - related party		3,700		3,700
Accrued expenses and other liabilities		27,992		27,992
Total current liabilities		440,745		440,745	$ 440,745
Total liabilities		440,745		440,745
Revenues	359,728	1,132,009	1,491,253	2,309,771
Cost of revenues	263,073	860,079	1,114,269	1,756,634
Gross profit	96,655	271,930	376,984	553,137
Operating expenses	791,742	226,394	1,058,410	469,536
Loss from discontinued operations	(695,087)	45,536	(681,426)	83,601
Loss on disposal of discontinued operations
Loss from discontinued operations, net of income taxes	$ (695,087)	$ 45,536	$ (681,426)	$ 83,601

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Accounts Receivable - Schedule of Accounts Receivable (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Receivables [Abstract]
Accounts receivable	$ 927,723	$ 441,497
Allowance for doubtful accounts
Accounts receivable, net	$ 927,723	$ 441,497

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Property and Equipment (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 94,080	$ 5,199
Delivery trucks and vehicles	185,514
Accumulated depreciation	19,561
Proceeds from sale of property and equipment	81,000
Reduction in notes payable	37,931
Loss on disposal of property and equipment	$ 47,022

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Property and Equipment - Schedule of Property and Equipment (Details) - USD ($)	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Less: accumulated depreciation	$ (171,085)	$ (96,566)
Property and equipment, net	$ 728,054	936,831
Minimum [Member]
Property and equipment, useful life	5 years
Maximum [Member]
Property and equipment, useful life	6 years
Delivery Trucks and Vehicles [Member]
Property and equipment, gross	$ 899,139	$ 1,033,397
Delivery Trucks and Vehicles [Member] | Minimum [Member]
Property and equipment, useful life	5 years
Delivery Trucks and Vehicles [Member] | Maximum [Member]
Property and equipment, useful life	6 years

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Intangible Asset (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of intangible assets			$ 523,552	$ 168,430
Impairment charges	$ 1,724,591		$ 1,724,591

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Intangible Asset - Schedule of Intangible Asset (Details) - USD ($)	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Intangible assets, gross	$ 2,420,191	$ 5,235,515
Less: accumulated amortization		(567,181)
Intangible assets, net	$ 2,420,191	$ 4,668,334
Customer Relationship [Member]
Intangible assets, useful life	5 years

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Intangible Asset - Schedule of Future Amortization Expense (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]
2020	$ 611,417
2021	611,417
2022	611,417
2023	585,940
Amortization of intangible assets	$ 2,420,191	$ 4,668,334

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Convertible Promissory Notes Payable and Notes Payable (Details Narrative) - USD ($)												3 Months Ended		6 Months Ended		12 Months Ended
	Aug. 19, 2019	Apr. 11, 2019	Apr. 09, 2019	Mar. 13, 2019	Dec. 31, 2018	Dec. 27, 2018	Jun. 18, 2018	Jan. 03, 2018	Jun. 30, 2017	Apr. 25, 2017	Mar. 31, 2017	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018	Jun. 11, 2019	Aug. 31, 2018	Aug. 08, 2017	Jun. 02, 2017
Proceeds from convertible promissory note														$ 2,500,000	$ 2,497,503
Proceeds from promissory notes														6,631,020
Convertible notes payable					$ 1,411,876							$ 1,800,000		1,800,000		$ 1,411,876
Notes payable - related party												510,000		510,000
Gain on debt extinguishment, net			$ 43,823,897									$ 43,823,897		43,917,768
Payments of debt issuance costs															1,009,714
Amortization of debt discount														430,268	332,364
Derivative expense														$ 55,037,605	$ 9,505,352
Subsequent Event [Member] | Warrant Holders [Member]
Percentage of warrant purchase	4.75%
Number of common stock issued	240,000
Subsequent Event [Member] | Offering of Equity [Member]
Debt instrument, description	If the Company completes an offering of equity or equity linked securities (including warrants, convertible preferred stock, convertible debentures or convertible promissory note) which results in gross proceeds to the Company of at least $4,000,000, then the Company shall use a portion of the proceeds thereof to repay not less than half of the obligations then outstanding pursuant to the Note
Proceeds from promissory notes	$ 4,000,000
Subsequent Event [Member] | Offering of Debt [Member]
Debt instrument, description	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 shall use a portion of the proceeds thereof to repay any remaining obligations then outstanding pursuant to the Note
Proceeds from promissory notes	$ 3,000,000
Warrants [Member]
Warrant exercise price												$ 1.00		$ 1.00			$ 1.00
Warrant term												5 years		5 years			5 years
RDW Capital, LLC [Member]
Debt, principal balance					510,000				$ 240,000			$ 510,000		$ 510,000		510,000
Purchase price									$ 30,000
Debt instrument interest rate									12.00%
Percentage of common stock option of lowest VWAP									50.00%
Increased interest rate per month								24.00%
Advance from lender									$ 15,000		$ 15,000
Convertible notes payable					$ 510,000											510,000
Notes payable - related party												$ 510,000		$ 510,000
Bellridge Capital, L.P [Member]
Note maturity date			Aug. 31, 2020
Gain on debt extinguishment, net			$ 10,248,000
Notes payable			2,223,918
Convertible debt			2,497,502
Reduction of convertible promissory debt			$ 1,800,000
Number of restricted common stock issued			800,000
Beneficial ownership limitation, description			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.
Number of owed shares			800,000
Percentage for beneficial ownership limitation			4.99%
Derivative expense			$ 41,653,345
Bellridge Capital, L.P [Member] | Subsequent Event [Member]
Debt instrument interest rate	10.00%
Number of common stock issued	100,000
Reduction of interest rate	5.00%
Bellridge Capital, L.P [Member] | Warrants [Member]
Number of restricted common stock issued						360,000	360,000
Convertible Debt [Member] | Bellridge Capital, LLC. [Member]
Percentage of warrant purchase						2.00%
Warrant exercise price						$ 100
Red Diamond Partners, LLC [Member]
Debt, principal balance			$ 510,000
Note maturity date			Dec. 31, 2020
Percentage of common stock option of lowest VWAP			65.00%
Debt instrument, description			If the Company completes an offering of equity or equity linked securities (including warrants, convertible preferred stock, convertible debentures or convertible promissory note) which results in gross proceeds to the Company of at least $4,000,000, then the Company shall use a portion of the proceeds thereof to repay not less than half of the obligations then outstanding pursuant to the notes.
Proceeds from promissory notes			$ 4,000,000
Gain on debt extinguishment, net			432,589
Debt put premium			385,385
Reversal of default interest payable			$ 47,205
Debt conversion price per share			$ 1.50
Red Diamond Partners, LLC [Member] | Convertible Promissory Note [Member]
Payment of principal and interest																$ 270,000
Increased interest rate per month					18.00%
Securities Purchase Agreement [Member] | Red Diamond Partners, LLC [Member]
Purchase price										$ 350,000
Transaction costs										$ 5,000
Debt instrument interest rate										12.00%
Percentage of common stock option of lowest VWAP										65.00%
Convertible promissory notes default amount										$ 25,000
Securities Purchase Agreement [Member] | Red Diamond Partners, LLC [Member] | Initial Tranche [Member]
Debt, principal balance										100,000
Proceeds from convertible promissory note										95,000
Debt original issue discount										$ 5,000
Note maturity date										Apr. 25, 2018
Each tranche matures term										Each tranche will mature 1 year after the date of such funding.
Securities Purchase Agreement [Member] | Red Diamond Partners, LLC [Member] | Second Tranche [Member]
Debt, principal balance																				$ 85,000
Securities Purchase Agreement [Member] | Red Diamond Partners, LLC [Member] | Third Tranche [Member]
Debt, principal balance																			$ 85,000
Securities Purchase Agreement [Member] | Red Diamond Partners, LLC [Member] | Fourth Tranche [Member]
Debt, principal balance										$ 85,000
Securities Purchase Agreement [Member] | Red Diamond Partners, LLC [Member] | Maximum [Member]
Debt, principal balance										$ 355,000
Securities Purchase Agreement [Member] | Lender [Member] | Bellridge Capital, LLC. [Member]
Debt, principal balance							$ 2,497,503
Purchase price							1,665,000
Debt original issue discount							$ 832,503
Note maturity date						Dec. 18, 2019
Debt instrument interest rate							10.00%
Payments of debt issuance costs							$ 177,212
Debt interest monthly payments						$ 156,219	$ 232,940
Percentage of warrant purchase							4.75%
Repayment of loan percentage																		125.00%
Debt converted conversion percentage						2.00%
Percentage on membership interests							100.00%
Proceeds from subsequent offering							$ 5,000,000
Proceeds from subsequent offering description							The Company shall use 20% of the gross proceeds of the Subsequent Offering and shall make payment to the Holder of an amount in cash equal to the product of (i) the sum of (x) the then outstanding principal amount of this Note and (y) all accrued but unpaid interest, multiplied by (ii) (x) 110%, if the Prepayment Date 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 shall add all other amounts owed pursuant to this Note, including, but not limited to, all Late Fees and liquidated damages.
Registration rights agreement description							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.
Aggregate purchase price of warrant							$ 100
Warrant term							2 years
Securities Purchase Agreement [Member] | Lender [Member] | Bellridge Capital, LLC. [Member] | Warrant [Member]
Percentage of warrant purchase							4.75%
Aggregate purchase price of warrant							$ 100
Warrant term							2 years
Securities Purchase Agreement [Member] | Placement Agent [Member] | Bellridge Capital, LLC. [Member]
Payments of debt issuance costs							$ 120,000
Percentage of warrant purchase							4.75%
Aggregate purchase price of warrant							$ 100
Warrant term							2 years
Convertible Note Agreement [Member] | Individual [Member]
Payment of principal and interest		$ 117,611		$ 31,902
Debt instrument, description		Commencing on May 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 $30,000 shall be due and payable. Commencing on November 11, 2019 and continuing on the eleventh day of each month thereafter through April 11, 2021, payments of principal and interest of $117,611 are due, if the note is not sooner converted as provided in the note agreement.		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 shall be due and payable. Commencing on October 11, 2019 and continuing on the eleventh day of each month thereafter through April 11, 2021, payments of principal and interest of $31,902 shall be made, if not sooner converted as provided in the note agreement.
Debt converted conversion percentage		18.00%		18.00%
Notes payable		$ 2,000,000		$ 500,000
Convertible debt		$ 30,000		$ 7,500
Debt conversion price per share		$ 11.81		$ 1.37
Debt conversion amount		$ 100,000		$ 100,000
Conversion description		All past due principal and interest on this Note shall bear interest from maturity of such principal or interest until paid at the lesser of (i) 20% per annum, or (ii) the highest non-usurious rate allowed by applicable law. This Note may be converted by 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.		All past due principal and interest on this Note shall bear interest from maturity of such principal or interest (in whatever manner same may be brought about) until paid at the lesser of (i) 20% per annum, or (ii) the highest non-usurious rate allowed by applicable law. This Note may be converted by 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 $1.37.

XML

Convertible Promissory Notes Payable and Notes Payable - Schedule of Gain on Debt Extinguishment (Details) - USD ($)		3 Months Ended		6 Months Ended
	Apr. 09, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Debt Disclosure [Abstract]
Gain from reversal of derivative liabilities on Modification Date	$ 61,841,708
Fair value of common shares issued on Modification Date	(17,934,000)
Write-off of remaining debt discount	(1,013,118)
Reversal of put premium on stock-settled debt related to cancellation of conversion terms	385,385
Reduction of principal and interest balances due	543,922
Gain of debt extinguishment	$ 43,823,897	$ 43,823,897		$ 43,917,768

XML

Convertible Promissory Notes Payable and Notes Payable - Schedule of Fair Value of Derivative Liabilities Estimated Using Black-Sholes Valuation Model (Details)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Expected Dividend Rate [Member]
Fair value measurement, percentage	0.00	0.00
Expected Term [Member] | Minimum [Member]
Fair value derivative liabilities term (in years)	18 days	4 days
Expected Term [Member] | Maximum [Member]
Fair value derivative liabilities term (in years)	9 months	2 years
Volatility [Member]
Fair value measurement, percentage	2.281
Volatility [Member] | Minimum [Member]
Fair value measurement, percentage		2.612
Volatility [Member] | Maximum [Member]
Fair value measurement, percentage		3.0775
Risk Free Interest Rate [Member] | Minimum [Member]
Fair value measurement, percentage	0.0223	0.0132
Risk Free Interest Rate [Member] | Maximum [Member]
Fair value measurement, percentage	0.0240	0.0211

XML

Convertible Promissory Notes Payable and Notes Payable - Schedule of Convertible Promissory Notes (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Less: current portion of convertible notes payable	$ (1,800,000)	$ (1,411,876)
Convertible Promissory Notes [Member]
Principal amount	1,800,000	3,007,503
Principal amounts - related parties	2,500,000
Total principal amount	4,300,000	3,007,503
Less: unamortized debt discount		(1,595,627)
Convertible notes payable, net	4,300,000	1,411,876
Less: current portion of convertible notes payable	(4,300,000)	(1,411,876)
Convertible notes payable, net - long-term

XML

Notes Payable (Details Narrative)												1 Months Ended		2 Months Ended	3 Months Ended		6 Months Ended
	May 08, 2019 USD ($)	Apr. 17, 2019 USD ($)	Apr. 10, 2019 USD ($)	Mar. 06, 2019 USD ($)	Jan. 31, 2019 USD ($) $ / shares shares	Jan. 28, 2019 USD ($)	Jan. 24, 2019 USD ($)	Jan. 14, 2019 USD ($)	Oct. 12, 2018 USD ($)	Oct. 01, 2018 USD ($)	Sep. 20, 2018 USD ($)	Jun. 30, 2019 USD ($) $ / shares shares	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Jun. 30, 2019 USD ($) $ / shares shares	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) Integer $ / shares shares	Jun. 30, 2018 USD ($)
Payment of notes payable																	$ 5,697,856	$ 611,406
Proceeds from promissory notes																	6,631,020
Origination fees															$ 601,121		601,121
Secured Merchant Loans [Member]
Notes payable liabilities assumed												$ 944,281			944,281		944,281
Notes payable											$ 521,250
Payment of notes payable																	57,355
Notes payable, related parties												97,496		$ 157,951	97,496		97,496
Proceeds from promissory notes											375,000
Debt original issue discount											146,250
Debt instrument, periodic payment											$ 3,724
Promissory Notes [Member] | Individuals [Member]
Notes payable					$ 26,900
Debt instrument interest rate					15.00%
Convertible debt					$ 77,090
Warrant issued | shares					1,000
Warrant purchase of shares | shares					1,000
Warrant exercise price | $ / shares					$ 1.00
Warrant term					5 years
Promissory Notes [Member] | Seven Individuals [Member]
Notes payable												$ 2,352,150			$ 2,352,150		$ 2,352,150
Warrant issued | shares																	58,000
Warrant purchase of shares | shares												58,000			58,000		58,000
Warrant exercise price | $ / shares												$ 1.00			$ 1.00		$ 1.00
Warrant term												5 years			5 years		5 years
Proceeds from promissory notes																	$ 2,048,900
Unamortized debt discount												$ 263,250			$ 263,250		$ 263,250
Debt due date, description																	These Notes are due between 45 and 273 days from the respective Note date.
Promissory Notes [Member] | Individual [Member]
Notes payable												1,638,480			1,638,480		$ 1,638,480
Unamortized debt discount												21,365			21,365		21,365
One Secured Merchant Loan [Member]
Notes payable		$ 650,000						$ 764,500				655,347		190,125	655,347		655,347
Payment of notes payable																	1,774,274
Proceeds from promissory notes		500,000						316,637
Debt original issue discount		150,000
Debt instrument, periodic payment								6,371
Repayment of principal amount								223,329
Origination fees								10,034
Unamortized debt discount								$ 214,500				258,173		74,169	258,173		258,173
One Secured Merchant Loan [Member] | June 2019 to August 2019 [Member]
Debt instrument, periodic payment		$ 216,667
Second Secured Merchant Loan [Member]
Notes payable							$ 417,000					333,333			333,333		333,333
Proceeds from promissory notes							292,002
Debt original issue discount												100,000			100,000		$ 100,000
Debt instrument, periodic payment							3,972
Origination fees							7,998
Unamortized debt discount							$ 117,000
Number of installments | Integer																	3
Debt instrument, payment terms																	Making three monthly installments of $216,667 beginning in June 2019 to August 2019.
Third Secured Merchant Loan [Member]
Notes payable	$ 1,242,000					$ 759,000
Proceeds from promissory notes	528,039					315,097
Debt original issue discount	342,000
Debt instrument, periodic payment	10,265					4,897
Repayment of principal amount	362,961					209,153
Origination fees	$ 9,000					25,750
Unamortized debt discount						$ 209,000
Secured Merchant Loan [Member]
Notes payable									$ 420,000	$ 209,850
Proceeds from promissory notes									254,552	137,962
Debt original issue discount									123,314	59,850
Debt instrument, periodic payment									3,000	1,749
Repayment of principal amount									31,634
Origination fees									$ 10,500	12,038
Unamortized debt discount												81,403		86,248	81,403		$ 81,403
Notes and loans payable												163,435		171,752	163,435		163,435
Secured Merchant Loan One [Member]
Notes payable										139,900
Proceeds from promissory notes										92,000
Debt original issue discount										39,900
Debt instrument, periodic payment										1,166
Origination fees										$ 8,000
Unamortized debt discount												0		51,371	0		0
Notes and loans payable												0		128,726	0		0
Fourth Secured Merchant Loan [Member]
Notes payable				$ 1,199,200
Proceeds from promissory notes				652,387
Debt original issue discount				399,200
Debt instrument, periodic payment				11,993
Repayment of principal amount			$ 703,899	69,327
Origination fees				$ 78,286
Unamortized debt discount												229,195			229,195		229,195
Three Secured Merchant Loan [Member]
Notes payable												1,349,400			1,349,400		1,349,400
Proceeds from promissory notes												855,000
Debt instrument, periodic payment												8,000
Origination fees												494,100
Debt instrument, weekly periodic payments												28,500
Three Secured Merchant Loan One [Member]
Notes payable												714,387			714,387		714,387
Debt original issue discount												403,963			403,963		403,963
Promissory Notes [Member] | Entities or Individuals [Member]
Notes payable liabilities assumed												297,005			297,005		297,005
Payment of notes payable																	25,000
Notes and loans payable												$ 65,000		130,000	$ 65,000		$ 65,000
Promissory Notes [Member] | Entities or Individuals [Member] | Minimum [Member]
Debt instrument interest rate												7.00%			7.00%		7.00%
Promissory Notes [Member] | Entities or Individuals [Member] | Maximum [Member]
Debt instrument interest rate												10.00%			10.00%		10.00%
New Promissory Notes [Member] | Entities or Individuals [Member]
Payment of notes payable																	$ 40,000
Senior Secured Demand Promissory Notes [Member]
Proceeds from promissory notes														699,955
Debt original issue discount														70,000
Debt instrument, periodic payment														220,000			200,000
Origination fees														45
Additional notes payable borrowed														770,000
Senior Secured Demand Promissory Notes [Member] | Entities or Individuals [Member]
Notes payable												$ 350,000		505,945	$ 350,000		350,000
Unamortized debt discount												0		44,055	0		0
Previous Promissory Notes [Member] | Seven Individuals [Member]
Notes payable												40,000			40,000		40,000
Two Separate Promissory Notes [Member]
Notes payable													$ 165,000
Payment of notes payable																	165,000
Proceeds from promissory notes													150,000
Debt original issue discount													$ 15,000
Unamortized debt discount												0			0		0
Equipment Notes Payable [Member]
Notes payable liabilities assumed												523,207			523,207		523,207
Notes and loans payable												358,285		488,289	358,285		358,285
Equipment Notes Payable [Member] | Auto Financing Agreement [Member]
Notes and loans payable												$ 198,281		$ 161,036	$ 198,281		$ 198,281
Equipment Notes Payable [Member] | Minimum [Member]
Debt instrument interest rate												6.00%			6.00%		6.00%
Equipment Notes Payable [Member] | Maximum [Member]
Debt instrument interest rate												9.40%			9.40%		9.40%

XML

Notes Payable - Schedule of Notes Payable (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Less: current portion of notes payable	$ (4,256,738)	$ (1,509,804)
Notes payable - long-term	317,306	424,019
Notes Payable [Member]
Principal amounts	5,438,948	2,189,666
Less: unamortized debt discount	(864,904)	(255,843)
Principal amounts, net	4,574,044	1,933,823
Less: current portion of notes payable	(4,256,738)	(1,509,804)
Notes payable - long-term	$ 317,306	$ 424,019

XML

Stockholders' Deficit (Details Narrative)								3 Months Ended			6 Months Ended
	Jun. 14, 2019 USD ($) $ / shares shares	Jun. 11, 2019 USD ($) $ / shares shares	May 01, 2019 USD ($) $ / shares shares	Apr. 09, 2019 USD ($) $ / shares shares	Feb. 25, 2019 USD ($) $ / shares shares	Dec. 27, 2018 shares	Jun. 18, 2018 shares	Jun. 30, 2019 USD ($) $ / shares shares	Mar. 31, 2019 USD ($) shares	Jun. 30, 2018 USD ($) shares	Jun. 30, 2019 USD ($) $ / shares shares	Jun. 30, 2018 USD ($)	Dec. 31, 2018 $ / shares shares	Jul. 31, 2018 shares	Jul. 16, 2018 $ / shares
Preferred stock, authorized | shares								10,000,000			10,000,000		10,000,000	10,000,000
Preferred stock, par value | $ / shares								$ 0.001			$ 0.001		$ 0.001		$ 0.001
Value of stock issued for service rendered								$ 2,465,500	$ 2,750,808	$ 4,326,000
Common stock issuable, shares | shares								700,000			700,000		0
Gain on debt extinguishment, net				$ 43,823,897				$ 43,823,897			$ 43,917,768
Number of options granted | shares											80,000
Options exercisable for the period | $ / shares
Stock-based compensation and consulting fees - discontinued operations											$ 700,816
Expected Dividend Rate [Member]
Fair value of valuation assumptions		0.00						0.00			0.00
Volatility [Member]
Fair value of valuation assumptions		2.281						2.281			2.281
Risk Free Interest Rate [Member]
Fair value of valuation assumptions		0.0192
Warrants [Member]
Warrants expiration term		5 years						5 years			5 years
Warrant issued | shares		55,000									59,000
Warrant purchase of shares | shares		55,000						59,000			59,000
Warrant exercise price | $ / shares		$ 1.00						$ 1.00			$ 1.00
Fair value of warrants		$ 601,121						$ 135,324			$ 135,324
Maximum [Member] | Risk Free Interest Rate [Member]
Fair value of valuation assumptions								0.0240			0.0240
Minimum [Member] | Risk Free Interest Rate [Member]
Fair value of valuation assumptions								0.0228			0.0228
Bellridge Capital, L.P [Member]
Number of restricted common stock issued | shares				800,000
Shares issued, price per share | $ / shares				$ 12.81
Reduction of convertible promissory debt				$ 1,800,000
Beneficial ownership limitation, description				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.
Number of owed shares | shares				800,000
Percentage for beneficial ownership limitation				4.99%
Common stock issuable, shares | shares				700,000
Number of stock issued and to be issued during the period				$ 10,248,000
Gain on debt extinguishment, net				$ 10,248,000
Bellridge Capital, L.P [Member] | Warrants [Member]
Number of restricted common stock issued | shares						360,000	360,000
Chief Executive Officer [Member]
Number of stock issued for service rendered | shares					2,670,688
Value of stock issued for service rendered					$ 2,750,808
Shares issued, price per share | $ / shares					$ 1.03
Stock-based compensation					$ 2,750,808
Consultants [Member]
Number of stock issued for service rendered | shares			30,000
Value of stock issued for service rendered			$ 265,500
Shares issued, price per share | $ / shares			$ 8.85
Stock-based compensation			$ 265,500
Employees [Member]
Number of stock issued for service rendered | shares	200,000
Value of stock issued for service rendered	$ 2,200,000
Shares issued, price per share | $ / shares	$ 11.00
Stock-based compensation	$ 2,200,000
Number of options granted | shares			80,000
Options exercisable for the period | $ / shares			$ 8.85
Options exercisable term			5 years
Options vesting percentage			25.00%
Options vesting date			Jan. 01, 2020
Fair value of options			$ 700,816
Employees [Member] | Stock Options [Member]
Gain on debt extinguishment, net			$ 7,686,000
Expected dividend rate			0.00%
Expected term (in years)			5 years
Volatility			228.10%
Risk-free interest rate			2.31%
Stock-based compensation and consulting fees - discontinued operations											$ 700,816
Steven Yariv [Member]
Stock repurchased in exchange for common stock and cancellation of shares | shares			1,000,000
Former Chief Executive Officer [Member]
Increase in equity related to disposal of net liabilities			$ 56,987
Lender [Member] | Purchase Agreement [Member]
Percentage of fully diluted outstanding common stock						2.00%
Warrants expiration term								2 years			2 years
Aggregate purchase price of warrants											$ 100
Lender [Member] | Purchase Agreement [Member] | Maximum [Member]
Percentage of fully diluted outstanding common stock											4.75%
Placement Agent [Member] | Purchase Agreement [Member]
Warrants expiration term								2 years			2 years
Aggregate purchase price of warrants											$ 100
Placement Agent [Member] | Purchase Agreement [Member] | Maximum [Member]
Percentage of fully diluted outstanding common stock											4.75%
Placement Agent [Member] | Bellridge Capital, L.P [Member]
Shares issued, price per share | $ / shares				$ 12.81
Number of warrants cancelled in exchange for common stock, shares | shares				600,000
Number of warrants cancelled in exchange for common stock				$ 7,686,000
Series A Convertible Preferred Stock [Member]
Preferred stock, authorized | shares								4,000,000			4,000,000		4,000,000
Preferred stock, par value | $ / shares								$ 0.001			$ 0.001		$ 0.001
Preferred stock, stated value | $ / shares								$ 1.00			$ 1.00
Dividends payable rate								7.00%			7.00%
Preferred Stock [Member]
Dividends payable rate								130.00%			130.00%
Debt conversion price, per share | $ / shares								$ 20.83			$ 20.83
Debt conversion beneficial ownership, percent											4.99%
Common Stock [Member]
Debt conversion beneficial ownership, percent											19.99%
Preferred Stock Series A [Member]
Conversion of preferred shares | shares				4,000,000
Number of restricted common stock issued | shares				2,600,000
Number of stock issued for service rendered | shares
Value of stock issued for service rendered

XML

Stockholders' Deficit - Summary of Stock Option Activities (Details)	6 Months Ended
	Jun. 30, 2019 USD ($) $ / shares shares
Equity [Abstract]
Number of Options Outstanding, beginning balance | shares
Number of Options Outstanding, Granted | shares	80,000
Number of Options Outstanding, Cancelled | shares
Number of Options Outstanding, ending balance | shares	80,000
Number of Options Outstanding, Exercisable | shares	0
Weighted Average Exercise Price, beginning balance | $ / shares
Weighted Average Exercise Price, Granted | $ / shares	8.84
Weighted Average Exercise Price, Cancelled | $ / shares
Weighted Average Exercise Price, ending balance | $ / shares	8.84
Weighted Average Exercise Price, Exercisable | $ / shares
Weighted Average Remaining Contractual Term (Years), beginning balance	0 years
Weighted Average Remaining Contractual Term (Years), ending balance	4 years 9 months 29 days
Aggregate Intrinsic Value, beginning balance | $
Aggregate Intrinsic Value, ending balance | $	252,000
Aggregate Intrinsic Value, exercisable | $

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Stockholders' Deficit - Summary of Warrant Activities (Details) - Warrant [Member]	6 Months Ended
	Jun. 30, 2019 USD ($) $ / shares shares
Number of Warrants Balance Outstanding Beginning | shares	1,648,570
Number of Warrants Granted | shares	114,000
Number of Warrants Cancellations | shares	(1,421,059)
Number of Warrants Change is warrants related to dilutive rights | shares	(227,511)
Number of Warrants Balance Outstanding Ending | shares	114,000
Number of Warrants Exercisable Ending Balance | shares	114,000
Weighted Average Exercise Price Balance Outstanding Beginning | $ / shares	$ 0.00
Weighted Average Exercise Price Granted | $ / shares	1.00
Weighted Average Exercise Price Cancellations | $ / shares	0.00
Weighted Average Change is warrants related to dilutive rights | $ / shares	0.00
Weighted Average Exercise Price Balance Outstanding Ending | $ / shares	1.00
Weighted Average Exercise Price Exercisable Ending Balance | $ / shares	$ 1.00
Weighted Average Remaining Contractual Term (Years) Balance Outstanding Beginning	1 year 5 months 20 days
Weighted Average Remaining Contractual Term (Years) Granted	0 years
Weighted Average Remaining Contractual Term (Years) Balance Outstanding Ending	4 years 9 months 25 days
Weighted Average Remaining Contractual Term (Years) Exercisable Ending Balance	4 years 9 months 25 days
Aggregate Intrinsic Value Balance Outstanding Beginning | $	$ 2,472,655
Aggregate Intrinsic Value Balance Outstanding Ending | $	1,254,000
Aggregate Intrinsic Value Exercisable Ending Balance | $	$ 1,254,000

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Commitments and Contingencies (Details Narrative)	Jun. 18, 2018 USD ($)	Jun. 30, 2019 Integer
Number of lawsuits, pending | Integer		0
Employment Agreement [Member]
Executive's base salary | $	$ 520,000
Executive's base salary description	The executive's base salary will increase by $260,000 per year upon (i) Prime achieving revenue of $20 million on an annualized basis (the "Initial Target Goal") for four consecutive weeks; and (ii) each time Prime achieves revenue of an additional $10 million increment above the Initial Target Goal (i.e., $30 million, $40 million, $50 million, etc.) on an annualized basis for four consecutive weeks. Executive's base salary shall be subject to review annually by the Manager and may be increased (but not decreased).
Agreement expiration date	May 31, 2023
Operating lease, description	The Employment Term shall be automatically extended for additional one-year periods unless, at least sixty (60) days prior to the end of the expiration of the Employment Term.

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Related Party Transactions and Balances (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended		5 Months Ended	6 Months Ended
	Jan. 31, 2019	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018	Jun. 30, 2019	Jun. 30, 2018	Apr. 30, 2019	Apr. 09, 2019	Mar. 13, 2019	Feb. 28, 2019	Jul. 25, 2018
Cash paid for acquisition						$ 38,198
Proceeds from promissory notes					6,631,020
Notes payable - related party, current				$ 213,617
Notes payable, related parties, noncurrent		510,000			510,000
Amortization of debt discount					2,310,580	332,364
Interest expense, related party debt		121,078			147,639
Former Majority Owner [Member]
Acquired balance due from former majority owner		14,019			14,019
Payment of cash acquired					489,174
Cash paid for acquisition					489,174
Repayment of related party debt					50,000
Due to related party		209,000		259,000	209,000
Employee [Member]
Due to related party		81,489		(16,300)	81,489
Spouse of Company's CEO [Member] | Promissory Notes [Member]
Repayment of related party debt	$ 220,000			930,000
Convertible promissory notes				1,150,000						$ 220,000
Proceeds from promissory notes				1,050,000
Debt original issue discount		0		6,383	0					$ 20,000	$ 100,000
Notes payable - related party, current				$ 213,617
Notes payable, related parties, noncurrent		$ 510,000			510,000			$ 510,000
Amortization of debt discount					26,383
Convertible Note Agreement [Member]
Interest expense, related party debt					$ 107,506
Convertible Note Agreement [Member] | Individual [Member]
Due to related party									$ 500,000
Convertible Note Agreement [Member] | Company [Member]
Due to related party							$ 2,000,000

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Operating Lease Right-of-Use ('ROU') Assets and Operating Lease Liabilities (Details Narrative) - USD ($)		1 Months Ended	6 Months Ended
	Jan. 02, 2019	Dec. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Operating lease, rent expense			$ 84,112	$ 0
Lease liability, discount rate			12.00%
ASU 2016-02 [Member]
Operating lease, right-of-use asset and lease liabilities	$ 631,723
Lease Agreement [Member]
Operating lease, expiration date		Jan. 30, 2024
Operating lease, renewal term		5 years
Payments for security deposit	$ 28,000
Lease Agreement [Member] | From Lease Commencement Date to Last Day of Second Lease Year [Member]
Operating lease, monthly rent		$ 14,000
Lease Agreement [Member] | Twenty Fifth Month of Commencement Date [Member]
Operating lease, monthly rent		$ 14,420

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Operating Lease Right-of-Use ('ROU') Assets and Operating Lease Liabilities - Schedule of Right of Use Asset (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Leases [Abstract]
Office lease right of use asset	$ 631,723
Less: accumulated amortization into rent expense	(53,302)
Right of use asset, net	578,421
Lease liability related to office lease right of use asset	592,533
Less: current portion of lease liability	(102,407)
Lease liability - long-term	$ 490,126

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Operating Lease Right-of-Use ('ROU') Assets and Operating Lease Liabilities - Schedule of Lease Payments Due Under Operating Leases (Details)	Jun. 30, 2019 USD ($)
Leases [Abstract]
2020	$ 168,000
2021	170,520
2022	173,040
2023	173,040
2024	86,520
Total minimum non-cancelable operating lease payments	771,120
Less: discount to fair value	(178,587)
Total lease liability	$ 592,533

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Concentrations (Details Narrative) - One Customer [Member]	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Sales Revenue, Net [Member]
Concentration risk, percentage	99.10%	98.90%
Accounts Receivable [Member]
Concentration risk, percentage	96.90%

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Subsequent Events (Details Narrative) - USD ($)			1 Months Ended	2 Months Ended	6 Months Ended
	Oct. 12, 2018	Oct. 01, 2018	Aug. 31, 2019	Aug. 19, 2019	Jun. 30, 2019	Jun. 30, 2018	Aug. 02, 2019	Jul. 02, 2019	Mar. 13, 2019	Dec. 31, 2018
Proceeds from promissory notes					$ 6,631,020
Convertible Note Agreement [Member] | Individual [Member]
Due to related party									$ 500,000
Forecast [Member] | Subscription Agreement [Member]
Sale of stock, number of shares issued in transaction			209,000
Sale of stock price per unit			$ 2.50
Exercisable price of warrants			$ 2.50
Cash proceeds from sale of stock			$ 522,500
Forecast [Member] | Subscription Agreement [Member] | Common Stock [Member]
Sale of stock, number of shares issued in transaction			209,000
Forecast [Member] | Subscription Agreement [Member] | Warrant [Member]
Sale of stock, number of shares issued in transaction			209,000
Secured Merchant Loan [Member]
Notes payable	$ 420,000	$ 209,850
Proceeds from promissory notes	254,552	$ 137,962
Debt original issue discount					$ 81,403					$ 86,248
Repayment of principal amount	$ 31,634
Promissory Notes [Member] | Forecast [Member] | Entity and Individual [Member]
Notes payable			$ 52,500
Proceeds from promissory notes			50,000
Debt original issue discount			$ 2,500
Debt instrument due, description			The note was due in one week and is currently in default.
Debt default interest percentage			12.00%
Subsequent Event [Member] | Chief Executive Officer [Member]
Due to related party							$ 50,000
Subsequent Event [Member] | Secured Merchant Loan [Member]
Notes payable				$ 1,762,225
Proceeds from promissory notes				557,500
Debt original issue discount				702,225
Repayment of principal amount				$ 502,500
Subsequent Event [Member] | Promissory Notes [Member] | Convertible Note Agreement [Member] | Individual [Member]
Debt default interest percentage								20.00%
Due to related party								$ 500,000