Artificial Intelligence Technology Solutions Inc. - Quarter Report: 2014 May (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)


þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2014


o	TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 333-168530

ON THE MOVE SYSTEMS CORP.

(Exact name of registrant as specified in its charter)


Florida		27-2343603
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification Number)

3001 North Rocky Point East, Suite 200 Tampa, FL		33607
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code: (813) 367-7748

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

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 Regulation S-T (§232.405 of this chapter) during the preceding 12 months.

Yes o No þ

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


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	þ
(Do not check is smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of July 20, 2014, 28,580,000 shares of common stock are issued and outstanding.

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION	4

Item 1. Financial Statements	4

Consolidated Balance Sheets (Unaudited)	4

Consolidated Statements of Operations (Unaudited)	5

Consolidated Statements of Cash Flows (Unaudited)	6

Notes to the Unaudited Consolidated Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3. Quantitative and Qualitative Disclosures about Market Risk	16

Item 4. Controls and Procedures	16

PART II — OTHER INFORMATION	17

Item 1. Legal Proceedings	17

Item 1A. Risk Factors	17

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	17

Item 3. Defaults upon Senior Securities	17

Item 4. Mine Safety Disclosures	17

Item 5. Other Information	17

Item 6. Exhibits	18

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements in this report contain or may contain forward-looking statements. These statements, identified by words such as “plan”, “anticipate”, “believe”, “estimate”, “should”, “expect” and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements are subject to known and unknown risks, uncertainties and other factors, which may cause actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward - looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to secure suitable financing to continue with our existing business or change our business and conclude a merger, acquisition or combination with a business prospect, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this report in its entirety, including but not limited to our financial statements and the notes thereto and the risks described in our Annual Report on Form 10-K for the fiscal year ended February 28, 2014. We advise you to carefully review the reports and documents we file from time to time with the Securities and Exchange Commission (the “SEC”), particularly our quarterly reports on Form 10-Q and our current reports on Form 8-K. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

OTHER PERTINENT INFORMATION

When used in this report, the terms, “we,” the “Company,” “our,” and “us” refers to On the Move Systems Corp., a Florida corporation.

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ON THE MOVE SYSTEMS CORP.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	May 31, 2014			February 28, 2014
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	35,307		$	32,618
Accounts receivable, net of allowance for bad debt of $1,642		2,575			755
Prepaid expenses		11,469			—
Inventory		4,687			3,815
Total current assets		54,038			37,188

Fixed assets net of accumulated depreciation of $44,144 and $41,745, respectively		46,783			17,751
TOTAL ASSETS	$	100,821		$	54,939

LIABILITIES AND STOCKHOLDERS’ DEFICIT

CURRENT LIABILITIES
Accounts payable and accrued expenses	$	300,807		$	251,343
Related party accounts payable and accrued expenses		16,650			13,227
Advances payable		235,667			130,037
Current portion of convertible notes payable		268,043			294,871
Note payable to related party		11,354			18,452
Current portion of capital lease obligation		5,193			—
Current portion of accrued interest payable		21,681			20,953
Total current liabilities		859,395			728,883

Convertible notes payable, net of discount of $578,687 and $615,024, respectively		79,866			43,529
Capital lease obligation		26,395			—
Accrued interest payable		45,953			29,354
TOTAL LIABILITIES		1,011,609			801,766

STOCKHOLDERS’ DEFICIT
Series E Preferred Stock, $0.001 par value; 1,000,000 shares authorized; 1,000,000 and 0 shares issued and outstanding at May 31, 2014 and February 28, 2014, respectively		1,000			—
Common Stock, $0.0001 par value; 100,000,000 shares authorized; 26,580,000 and 23,100,000 shares issued and outstanding at May 31, 2014 and February 28, 2014, respectively		2,658			2,310
Additional paid-in capital		4,714,695			4,581,243
Accumulated deficit		(5,629,141	)		(5,330,380	)
Total stockholders’ deficit		(910,788	)		(746,827	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	100,821		$	54,939

The accompany notes are an integral part of these unaudited consolidated financial statements.

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ON THE MOVE SYSTEMS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three months ended May 31,
	2014			2013
				(Restated)

REVENUE	$	25,530		$	21,855
COST OF GOODS SOLD		17,730			14,763
GROSS PROFIT		7,800			7,092

OPERATING EXPENSES
Expenses related to joint ventures and other business development agreements		23,786			—
General and administrative expenses		220,875			89,743

LOSS FROM OPERATIONS		(236,861	)		(82,651	)

OTHER EXPENSE
Interest expense		(61,900	)		(7,088	)
Total other expense		(61,900	)		(7,088	)

NET LOSS	$	(298,761	)	$	(89,739	)

NET LOSS PER COMMON SHARE – Basic and diluted	$	(0.01	)	$	(0.00	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - Basic and diluted		24,558,696			18,500,000

The accompany notes are an integral part of these unaudited consolidated financial statements.

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ON THE MOVE SYSTEMS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Three months ended May 31,
	2014			2013
				(Restated)
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss	$	(298,761	)	$	(89,739	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of discount on convertible notes payable		36,337			—
Depreciation		2,972			1,304
Preferred stock issued for services		100,000			—
Changes in operating assets and liabilities:
Accounts receivable		(1,820	)		(3,146	)
Inventory		(872	)		(254	)
Prepaid expenses		(11,469	)		—
Accounts payable and accrued expenses		49,463			33,931
Related party accounts payable and accrued expenses		3,423			—
Accrued interest payable		25,300			7,088
NET CASH USED IN OPERATING ACTIVITIES		(95,427	)		(50,816	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from advances		105,630			—
Repayments of capital lease payable		(416	)		—
Proceeds from notes payable		—			83,955
Repayments of notes payable		—			(2,003	)
Repayments of related party notes payable		(7,098	)		(11,979	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		98,116			69,973

NET INCREASE IN CASH		2,689			19,157

CASH, at the beginning of the period		32,618			18,718

CASH, at the end of the period	$	35,307		$	37,875

Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	—		$	—
Taxes	$	—		$	—

Noncash investing and financing transaction:
Refinance of advances into convertible notes payable	$	—		$	261,595
Beneficial conversion on convertible note payable	$	—		$	261,595
Common stock issued for conversion of convertible notes payable	$	34,800		$	—
Automobile acquired under capital lease	$	32,004		$	—

The accompany notes are an integral part of these unaudited consolidated financial statements.

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NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. General Organization and Business

On the Move Systems Corp. (“we”, “us”, “our”, “OMVS”, or the “Company”) was incorporated in Florida on March 25, 2010. The Company’s business focus is the mobile electronics market, but is it currently exploring the specialized travel and transportation market by developing a network of niche travel, destination lodging and international logistics partnerships. The Company’s year-end is February 28. The company is located at 3001 North Rocky Point East, Suite 200, Tampa, FL 33607. Our telephone number is (813) 367-7748.

On March 25, 2011, Crawford Mobile Installation Corp. (“CMIC”), a wholly owned subsidiary of the Company acquired all of the assets and assumed certain liabilities of Crawford Mobile Install (“CMI”). The assets of CMI included cash, inventory, a vehicle and installation equipment. On the date of the acquisition, a material relationship existed between the parties, because John Crawford was the sole officer and director of both the Company and CMIC as well as being the sole proprietor of CMI. The purchase price for the assets and liabilities of CMI was $100,000.

We currently provide mobile electronic services under the trade name “On the Move Systems Corporation.” Our services include the sale, installation, and servicing of after-market electronic and audio/video upgrades for markets such as auto, recreational vehicle and boat dealerships, and for government agencies and corporations that administer vehicle fleets for law enforcement, security, emergency response, sanitation, public utility, limousine, taxi, and other services.

To this end, we have created relationships with a multitude of dealerships to provide on-site electronics sales, installation, and servicing for vehicles purchased by them or by their customers. We also provide services directly to individual consumers. We currently offer all of our services from our sales and installation vehicle, eliminating the need for our customers to travel to our place of business.

We provide our clients with electronic accessories and installation services that allow them and their customers to personalize vehicles for enhanced aesthetics and electronic performance. We believe that our service allows dealerships and other wholesale vehicle purchasers to order models with fewer options from their manufacturers, thereby reducing vehicle inventory costs. The corollary to this is that the dealerships’ retail customers can be given the alternative to select personalized electronic systems for their vehicles that are better suited to their individual budgets, tastes, and needs.

We provide our services on-site at vehicle dealerships and directly to individuals. Mr. John B. Crawford, President of CMIC, and our former Chief Executive officer, applies his eighteen years of mobile electronic accessory sales and installation experience to identify the latest in mobile audio-visual, GPS, and telecommunications technology, and to consult with our clients to select technology best suited to their specific performance requirements and budgets. Our base of operations is in the city of Sarasota, Florida and we primarily market our services in and around that city. In keeping with future demand and as our capacity allows, we will market and provide our services further afield in adjacent cities and states.

Restatement

On June 11, 2014, the Company determined that due to an error in accounting for our acquisition of Crawford Mobile Install (“CMI”), the Company’s consolidated financial statements as of and for the years ended February 28, 2013 should no longer be relied upon. The purpose of the restatement was to correct the accounting for our acquisition of Crawford Mobile Install (“CMI”). In the Original Filing, the acquisition of CMI was accounted for as an acquisition of a business. However, since John Crawford was our CEO at the time of the acquisition and also owned all of CMI, the acquisition should have been accounted for as a business acquired from an entity under common control according to ASC 805-50-30. We had originally recognized intangible assets and goodwill as a result of the acquisition of CMI. According to ASC 805-50-30, neither should have been recognized. As a result of the restatement, goodwill in the amount of $108,724 and intangible assets in the amount of $20,000 were removed from assets on the date of acquisition, March 25, 2011. In addition, we recognized a loss on the acquisition of CMI in the amount of $128,724 as of March 25, 2011.

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The Company as a result restated the consolidated statement of operations for the three months ended May 31, 2013 as follows:


	Three months ended May 31, 2013
	As originally reported			Adjustments		As Restated

GROSS PROFIT	$	7,092				$	7,092

General and administrative expense		90,743		(1,000	) (1)		89,743

LOSS FROM OPERATIONS		(83,651	)				(82,651	)

OTHER EXPENSE:
Interest expense		(7,088	)				(7,088	)

Net loss	$	(90,739	)			$	(89,739	)

Net loss per common share – basic and diluted	$	(0.00	)			$	(0.00	)

Weighted average number of common shares outstanding- basic and diluted		18,500,000					18,500,000

Adjustments to consolidated financial statements:

(1) Reverse amortization of intangible assets.

Joint Ventures

On February 11, 2014, the Company signed a joint venture agreement with The Xperience to offer fantasy travel packages beginning with auto racing events. OMVS has committed to fund up to $30,000 of the cash flow requirements of the joint venture at its discretion and to assist with creating the travel packages. OMVS will be allocated 40 percent of the earnings (losses) from this joint venture. During the three months ended May 31, 2014, the Company funded $15,000 to this joint venture for operating expenses, which the Company recorded as expenses related to joint ventures and other business development agreements in the consolidated statement of operations.

Additionally, during the three months ended May 31, 2014, we spent $8,786 for expenses related to preparing our race car for use at auto racing events in our XPerience segment.

Note 2. Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. For the three months ended May 31, 2014, we had a net loss of $298,761 and negative cash flow from operating activities of $95,427. As of May 31, 2014, the Company had negative working capital of $805,357. Management does not anticipate having positive cash flow from operations in the near future. These factors raise a substantial doubt about the Company’s ability to continue as a going concern.

We will need to obtain loans or other financing in order to fund operating shortfalls and do not foresee a change in this situation in the immediate future. There can be no assurance that we will be able to obtain these loans or that they will be available to us on terms that are acceptable to the Company. We will not be able to continue operations without them. We are pursuing alternate sources of financing, but there is no assurance that additional capital will be available to the Company when needed or on acceptable terms.

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Note 3. Summary of Significant Accounting Policies

Interim Financial Statements

These unaudited financial statements have been prepared in accordance with generally accepted accounting (“GAAP”) principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and such adjustments are of a normal recurring nature. These consolidated financial statements should be read in conjunction with the consolidated financial statements for the fiscal year ended February 28, 2014 and notes thereto and other pertinent information contained in our Form 10-K the Company has filed with the Securities and Exchange Commission (the “SEC”).

The results of operations for the three month period ended May 31, 2014 are not necessarily indicative of the results to be expected for the full fiscal year ending February 28, 2015.

Principals of Consolidation

The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiary, Crawford Mobile Installation Corp. Significant intercompany transactions have been eliminated in consolidation. The fiscal year-end for the Company and its subsidiary is February 28.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

All cash, other than cash held in escrow, is maintained with a major financial institution in the United States. Deposits with this bank may exceed the amount of insurance provided on such deposits. Temporary cash investments with an original maturity of three months or less are considered to be cash equivalents. Cash and cash equivalents were $35,307 and $32,618 at May 31, 2014 and February 28, 2014, respectively.

Inventory

The Company follows ASC 330, Inventory. Inventory consists of aftermarket electronic products and other items valued at the lower of cost or market, with cost determined using the specific identification method, and with market defined as the lower of replacement cost or realizable value.

Fixed Assets

Fixed assets of the Company include vehicles and are stated at cost. In accordance with ASC Topic 360 Property, Plant and Equipment, expenditure for fixed assets that substantially increase the useful lives of existing assets are capitalized at cost and depreciated. Routine expenditures for repairs and maintenance are expensed as incurred.

Depreciation is provided principally on the straight-line method over the estimated useful lives of four years for financial reporting purposes.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If it is determined that an impairment loss has occurred, the loss is measured as the amount by which the carrying amount of the long-lived asset exceeds its fair value. The Company determined that there was no impairment of long-lived assets during the three months ended May 31, 2014.

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Revenue and Cost Recognition

The Company follows ASC 605, Revenue Recognition recognizing revenue when persuasive evidence of an arrangement exists, product delivery has occurred or the services have been rendered, the price is fixed or determinable and collectability is reasonably assured.

Advertising Costs

The Company’s policy is to expense advertising costs when they are incurred.

Income Taxes

The Company accounts for income taxes under ASC 740 Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized as of May 31, 2014 or February 28, 2014.

Earnings (Loss) per Common Share

The Company computes basic and diluted earnings per common share amounts in accordance with ASC Topic 260, Earnings per Share. Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted average common shares outstanding for the period. Diluted loss per common share is computed giving effect to all potentially dilutive common shares. Potentially dilutive common shares may consist of incremental shares issuable upon the exercise of stock options and warrants and the conversion of notes payable to common stock. In periods in which a net loss has been incurred, all potentially dilutive common shares are considered antidilutive and thus are excluded from the calculation.

The Company’s convertible debt is considered anti-dilutive due to the Company’s net loss for the three months ended May 31, 2014 and 2013. As a result, the Company did not have any potentially dilutive common shares for those periods. For the periods ended May 31, 2014 and 2013, potentially issuable shares as a result of conversions of convertible notes payable have been excluded from the calculation. At May 31, 2014, the Company had 94,638,233 potentially issuable shares upon the conversion of convertible notes payable and interest.

Related Parties

The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.

Financial Instruments

The Company’s balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period between the origination of these instruments and their expected realization.

FASB Accounting Standards Codification (ASC) 820 Fair Value Measurements and Disclosures (ASC 820) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

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	Level 1 -	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

	Level 2 -	Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

	Level 3 -	Inputs that are both significant to the fair value measurement and unobservable.

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of May 31, 2014. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include accounts receivable, other current assets, accounts payable, and accrued expenses. The fair value of the Company’s notes payable and capital lease obligation is estimated based on current rates that would be available for debt of similar terms that is not significantly different from its stated value.

Reclassifications

Certain reclassifications have been made to the prior year financial statements to conform with the current year presentation.

Subsequent Events

The Company evaluated material events occurring between the end of our quarter, May 31, 2014, and through the date when the consolidated financial statements were available to be issued for disclosure.

Recently Issued Accounting Pronouncements

We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

Note 4. Inventory

The Company follows FASB ASC 330, Inventory. Inventories are stated at the lower of cost or net realizable value. The cost of inventories comprises all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. The cost of inventories is determined using the weighted average cost method. Inventory is reduced for the estimated losses due to obsolescence. This reduction is determined for groups of products based on purchases in the recent past and/or expected future demand. Our inventory is made up of electronic components that we have acquired from wholesalers, retailers, and manufacturers to install in customer vehicles.

Note 5. Fixed Assets

Fixed assets of the Company include vehicles and are stated at cost. Expenditures for fixed assets that substantially increase the useful lives of existing assets are capitalized at cost and depreciated. Routine expenditures for repairs and maintenance are expensed as incurred.

On May 1, 2014, the Company entered into a capital lease agreement to acquire a racecar, which will be used in our XPerience business segment. The race care has been recorded at the present value of the future minimum lease payments in the amount of $32,004.

Depreciation on the leased vehicle is provided on the straight-line method over term of the lease which is five years. Depreciation of other vehicles is provided on the straight-line method over the estimated useful lives of four years. The Company recognized depreciation expense of $2,972 and $1,304 during the three months ended May 31, 2014 and 2013, respectively.

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Note 6. Capital lease obligation


	May 31, 2014		February 28, 2014

Capital lease – race car, interest at 10%, payments of $680 per month, term 5 years	$	31,587	$	—
		31,587		—
Current portion of capital lease obligation		5,193		—
	$	26,394	$	—

The lease for the race car meets the accounting criteria for a capital lease with the lease covering over 75% of the economic life of the asset.

Capital Leases-Future Minimum Lease Payments

The future minimum lease payments required under the capital leases and the present value of the net minimum lease payments as of May 31, 2014, are as follows:


For the periods ending May 31,
2015	$	8,160
2016		8,160
2017		8,160
2018		8,160
2019		7,480
Total minimum lease payments	$	40,120

Total minimum lease payments	$	40,120
Less: Amount representing interest		(8,533	)
Present value of net minimum lease and debt payments		31,587
Less: Current maturities of capitalized lease obligation and debt		(5,193	)
Long-term capitalized lease obligation	$	26,394

Note 7. Related Party Transactions

The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities that become available. They may face a conflict in selecting between the Company and other business interests. The Company has not formulated a policy for the resolution of such conflicts.

Acquisition of CMIC

On March 25, 2011, CMIC, a wholly owned subsidiary of the Company, entered into an agreement to purchase all of the assets and the business of CMI for $100,000. CMI was a sole proprietorship owned and operated by John Crawford. John Crawford was also the sole officer-director of the Company and CMIC. The Company accounted for the acquisition as a transaction between entities under common control and, therefore, the transaction was accounted for at historical cost.

The purchase price was paid with $10,000 in cash at closing and a note payable for the remaining $90,000. The note bears interest at 10% per year and was payable in monthly installments of $2,500 with a balloon payment of the remaining principal and interest due February 1, 2014. The balance of the note payable was $11,354 and $18,452 as of May 31, 2014 and February 28, 2014, respectively. This note payable is in default.

Issuance of Preferred Stock

On May 8, 2014, the Company issued 1,000,000 shares of Series E preferred stock to Masclo Investment Corporation, a Panama corporation, (“Masclo”) for services. The Company recorded $100,000 of expense based on the fair value of the services provided. Masclo owned 9,000,000 shares of common stock of the Company prior to this transaction.

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Amounts Due to Related Parties

As of May 31, 2014 and February 28, 2014, there were accrued liabilities in the amount of $16,650 and $13,227 respectively owed to related parties. These amounts related primarily to accrued compensation, which remained unpaid. The above terms and amounts are not necessarily indicative of the terms and amounts that would have been incurred had comparable transactions been entered into with independent parties.

Note 8. Advances Payable

During the three months ended May 31, 2014, the Company received advances from Vista View Ventures Inc. totaling $105,630. These advances are non-interest bearing and payable on demand.

At May 31, 2014 and February 28, 2014, the Company owed Vista View $235,667 and $130,037, respectfully, of advances paid to the Company.

Note 9. Convertible Notes Payable

Convertible notes payable consist of the following as of May 31, 2014 and February 28, 2014:


Issued	Maturity	Interest Rate	Conversion Rate per Share	Balance May 31, 2014			Balance February 28, 2014
February 28, 2011	February 27, 2013	7%	$0.015	$	32,600		$	32,600
January 31, 2013	February 28, 2015	10%	$0.01		235,443			262,271
May 31, 2013	May 31, 2015	10%	$0.01		261,595			261,595
November 30, 2013	November 30, 2015	10%	$0.01		396,958			396,958
Total convertible notes payable					926,596			953,424

Less: current portion of convertible notes payable					(268,043	)		(294,871	)
Less: discount on noncurrent convertible notes payable					(578,687	)		(615,024	)
Long-term convertible notes payable, net of discount				$	79,866		$	43,529

The note dated February 28, 2011 is currently is in default and bears default interest at 18% per annum.

On May 31, 2013 the Company signed a convertible promissory note with Vista View Ventures Inc. which refinanced non-interest bearing advances in the amount of $261,695 into a convertible note payable. The convertible promissory note bears interest at 10 percent per annum and is payable along with accrued interest on May 31. 2015. The convertible promissory note is convertible into common stock at the option of the holder at the rate of $0.01 per share.

During three months ended May 31, 2014, the holders of the convertible note payable dated January 31, 2013 elected to convert principal and accrued interest in the amounts of $34,800 into 3,480,000 shares of common stock.

The Company evaluated the terms of the convertible notes in accordance with ASC 815 – 40, Derivatives and Hedging - Contracts in Entity’s Own Stock and determined that the underlying common stock is indexed to the Company’s common stock. The Company determined that the conversion feature did not meet the definition of a liability and therefore did not bifurcate the conversion feature and account for it as a separate derivative liability. The Company evaluated the conversion feature for a beneficial conversion feature. The effective conversion price was compared to the market price on the date of the notes and was deemed to be less than the market value of underlying common stock at the inception of the note. Therefore, the Company recognized a beneficial conversion feature in the amount of $261,595 at May 31, 2013. The beneficial conversion feature is being amortized to interest expense over the life of the notes using the effective interest method.

Note 10. Stockholders’ Equity

Conversion of convertible notes payable

During three months ended May 31, 2014, the holders of our convertible notes elected to convert principal and interest of $34,800 into 3,480,000 shares of common stock.

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Preferred Stock

On May 8, 2014, the board of directors designated 1,000,000 shares of Series E preferred stock. The Series E preferred stock has a par value of $0.001 and ranks subordinate to the Company’s common stock. The outstanding shares of Series E preferred stock have the right to take action by written consent or vote based on the number of votes equal to twice the number of votes of all outstanding shares of capital stock. On the same date, the Company issued 1,000,000 shares of Series E preferred stock to Masclo Investment Corporation, a Panama corporation, (“Masclo”) for services. The Company recorded $100,000 of expense in connection with the issuance of these shares based on the value of the services provided. Masclo owned 9,000,000 shares of common stock of the Company prior to this transaction.

Note 11. Business Segments

The Company has two reportable operating segments: (1) CMIC and (2) specialized travel and transportation. These reportable segments are managed separately due to differences in their products.

The only segment which generates revenue is CMIC. Management evaluates and monitors performance of this segment primarily through, among other measures, gross profit. The specialized travel and transportation segment is in the development stage and has not begun to generate revenue.

The result of operations and financial position of the two reportable operating segments and corporate were as follows:


	Three months ended May 31,
	2014		2013
			(restated)
REVENUE
CMIC	$	25,530	$	21,855
Specialized travel and transportation		—		—
Corporate		—		—
	$	25,530		21,855

GROSS PROFIT
CMIC	$	7,800	$	7,092
Specialized travel and transportation		—		—
Corporate		—		—
	$	7,800	$	7,092

OPERATING EXPENSES
CMIC	$	22,077	$	13,077
Specialized travel and transportation		23,786		—
Corporate		198,798		76,666
	$	244,661	$	89,743

Corporate operating expense includes general and administrative costs not allocated to operating segments.


	May 31,		February 28,
	2014		2014
			(restated)
TOTAL ASSETS
CMIC	$	23,644	$	24,756
Specialized travel and transportation		31,460		—
Corporate		45,716		30,183
	$	100,820	$	54,939

Note 12. Subsequent Events

During June 2014, the holders of the Convertible Promissory Note date January 31, 2013 elected to convert principal and accrued interest in the amount of $20,000 into 2,000,000 shares of common stock at a rate of $0.01 per share.

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

Overview

On the Move Systems Corp. (“we”, “us”, “our”, “OMVS”, or the “Company”) was incorporated in Florida on March 25, 2010. The Company’s business focus is the mobile electronics market, but is it currently exploring the specialized travel and transportation market by developing a network of niche travel, destination lodging, and international logistics partnerships. The Company’s year-end is February 28. The company is located at 3001 North Rocky Point East, Suite 200, Tampa, FL 33607. Our telephone number is (813) 367-7748.

Critical Accounting Policies

We prepare our Consolidated financial statements in conformity with GAAP, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on historical experience, current trends, and other factors that management believes to be important at the time the condensed Consolidated financial statements are prepared. On a regular basis, we review our accounting policies and how they are applied and disclosed in our condensed consolidated financial statements.

While we believe that the historical experience, current trends and other factors considered support the preparation of our condensed consolidated financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.

For a full description of our critical accounting policies, please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for the year ended February 28, 2014 on Form 10-K.

Results of Operations

Three months ended May 31, 2014 compared to the three months ended May 31, 2013.

Revenue

Revenue increased to $25,530 for the three months ended May 31, 2014, compared to $21,855 for the three months ended May 31, 2013 due to higher mobile equipment installation activity.

Cost of Goods Sold

Cost of Goods Sold increased to $17,730 for the three months ended May 31, 2014, compared to $14,763 for the comparable period in 2013. This increase is consistent with the increase in revenue.

Gross Profit

Gross profit increased to $7,800 for the three months ended May 31, 2014, compared to $7,092 for the three months ended May 31, 2013. This increase is consistent with the increase in revenue.

Expenses related to joint ventures and other business development agreements

We recognized expenses related to joint ventures and other business development agreements in the amount of $23,786 for the three months ended May 31, 2014. There were no such expenses during the comparable period of 2013. These expenses are related to our beginning to operate our XPerience segment.

General and Administrative Expenses

We recognized general and administrative expenses in the amount of $220,875 and $89,743 for the three months ended May 31, 2014 and ended 2013, respectively. The increase was due to increased professional fees.

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Interest Expense

Interest expense increased from $7,088 for the three months ended May 31, 2013 to $61,900 for the three months ended May 31, 2014. Interest expense for the three months ended May 31, 2014 included amortization of discount on convertible notes payable in the amount of $36,337, compared to $0 for the comparable period of 2013. The remaining amount is the result of the Company entering into interest-bearing convertible notes payable.

Net Loss

We incurred a net loss of $298,761 for the three months ended May 31, 2014 as compared to $89,739 for the comparable period of 2013. The increase in the net loss was primarily the due to the increases in professional fees, development of our specialty travel and transportation segment, and interest expense.

Liquidity and Capital Resources

At May 31, 2014, we had cash on hand of $35,307. The company has negative working capital of $805,357. Net cash used in operating activities for the three months ended May 31, 2014 was $95,427. Cash on hand is adequate to fund our operations for less than one month. We do not expect to achieve positive cash flow from operating activities in the near future. We will require additional cash in order to fully implement our business plan. There is no guarantee that we will be able to attain fund when we need them or that funds will be available on terms that are acceptable to the Company. We have no material commitments for capital expenditures as of May 31, 2014.

Additional Financing

Additional financing is required to continue operations. Although actively searching for available capital, the Company does not have any current arrangements for additional outside sources of financing and cannot provide any assurance that such financing will be available.

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 is material to investors.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to a smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES

Management’s Report on Internal Control over Financial Reporting

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of May 31, 2014. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of May 31, 2014, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

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1.	As of May 31, 2014, we did not maintain effective controls over the control environment. Specifically we have not developed and effectively communicated to our employees our accounting policies and procedures. This has resulted in inconsistent practices. Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

2.	As of May 31, 2014, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness.

Our management, including our principal executive officer and principal financial officer, who is the same person, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

Change in Internal Controls Over Financial Reporting

There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder are an adverse party or has a material interest adverse to us.

ITEM 1A. RISK FACTORS

Not applicable to a smaller reporting company.

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

There were no sales of unregistered equity securities.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

The Company has not defaulted upon senior securities.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable to the Company.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS


3.1	Articles of Incorporation (1)

3.2	Bylaws (1)

21	Subsidiaries of the registrant (3)

31.1	Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer and principal financial and account officer. (3)

32.1	Section 1350 Certification of principal executive officer and principal financial accounting officer. (3)

101	XBRL data files of Financial Statement and Notes contained in this Quarterly Report on Form 10-Q. (2),(4)

__________


(1)	Incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission on April 14, 2010

(2)	In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.”

(3)	Filed or furnished herewith

(4)	To be submitted by amendment

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.


	On the Move Systems Corp.


Date: July 21, 2014	BY: /s/ Robert Wilson
	Robert Wilson
	President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Treasurer and Director

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