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Artificial Intelligence Technology Solutions Inc. - Quarter Report: 2016 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, 2016


or


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: 0-55079


ON THE MOVE SYSTEMS CORP.

(Exact name of registrant as specified in its charter)


Nevada

 

27-2343603

(State or other jurisdiction of Incorporation or organization)

 

(I.R.S. Employer Identification Number)

 

 

 

701 North Green Valley Parkway, Suite 200
Henderson, Nevada

 

89074

(Address of principal executive offices)

 

(Zip code)


Registrant’s telephone number, including area code: 702-990-3271


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 o No þ


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 28, 2016, there were 5,294,816 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 Statement of Stockholders’ Deficit  (Unaudited)

6

 

 

Consolidated Statements of Cash Flows  (Unaudited)

7

 

 

Notes to the Consolidated Financial Statements

8

 

 

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

12

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

13

 

 

Item 4. Controls and Procedures

13

 

 

PART II OTHER INFORMATION

14

 

 

Item 1. Legal Proceedings

14

 

 

Item 1A. Risk Factors

14

 

 

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

14

 

 

Item 3. Defaults upon Senior Securities

14

 

 

Item 4. Mine Safety Disclosures

14

 

 

Item 5. Other Information

14

 

 

Item 6. Exhibits

14


- 2 -



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 29, 2016. 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,” “OMVS”, “our,” and “us” refers to On the Move Systems Corp., a Nevada corporation.


- 3 -



PART I — FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS


ON THE MOVE SYSTEMS CORP.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


 

 

May 31, 2016

 

February 29, 2016

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

6,467

 

$

2,223

 

Prepaid expenses

 

 

2,533

 

 

3,484

 

Total current assets

 

 

9,000

 

 

5,707

 

 

 

 

 

 

 

 

 

Fixed assets net of accumulated depreciation of $512 and $182, respectively

 

 

3,409

 

 

3,739

 

TOTAL ASSETS

 

$

12,409

 

$

9,446

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

304,443

 

$

302,136

 

Advances payable

 

 

1,594

 

 

1,594

 

Current portion of convertible notes payable, net of discount of $409,732 and $422,298, respectively

 

 

591,896

 

 

515,418

 

Short-term convertible notes payable, net of discount of $11,000 and $7,333, respectively

 

 

75,000

 

 

38,667

 

Short-term accrued interest payable

 

 

1,127

 

 

 

Current portion of accrued interest payable

 

 

217,544

 

 

185,447

 

Current portion of capital lease

 

 

3,818

 

 

3,775

 

Total current liabilities

 

 

1,195,422

 

 

1,047,037

 

 

 

 

 

 

 

 

 

Convertible notes payable, net of discount of $461,692 and $500,485, respectively, net of current portion.

 

 

427,031

 

 

418,521

 

Accrued interest payable

 

 

120,899

 

 

105,492

 

Capital lease obligation, net of current portion

 

 

6,407

 

 

7,378

 

TOTAL LIABILITIES

 

 

1,749,759

 

 

1,578,428

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

Common Stock, $0.001 par value; 480,000,000 shares authorized 5,098,816 and 4,908,816 shares issued and outstanding at May 31, 2016 and February 29, 2016, respectively.

 

 

5,099

 

 

4,909

 

Series E Preferred Stock, $0.001 par value; 1,000,000 shares authorized; 1,000,000 shares issued and outstanding at May 31, 2016 and February 29, 2016, respectively.

 

 

1,000

 

 

1,000

 

Preferred Stock, undesignated; 19,000,000 shares authorized; no shares issued and outstanding at May 31, 2016 and February 29, 2016, respectively.

 

 

 

 

 

Additional paid-in capital

 

 

6,109,682

 

 

6,072,872

 

Accumulated deficit

 

 

(7,853,131

)

 

(7,647,763

)

Total stockholders’ equity (deficit)

 

 

(1,737,350

)

 

(1,568,982

)

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

$

12,409

 

$

9,446

 


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


- 4 -



ON THE MOVE SYSTEMS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


 

Three months ended
May 31,

 

 

2016

 

2015

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

General and administrative expenses

$

66,893

 

$

151,994

 

 

 

 

 

 

 

 

Operating Loss

 

(66,893

)

 

(151,994

)

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

Interest expense

 

(138,475

)

 

(187,639

)

 

 

 

 

 

 

 

NET LOSS

$

(205,368

)

$

(339,633

)

 

 

 

 

 

 

 

NET LOSS PER COMMON SHARE –
Basic and diluted

$

(0.04

)

$

(0.43

)

 

 

 

 

 

 

 

COMMON SHARES OUTSTANDING –
Basic and diluted

 

5,096,751

 

 

791,944

 


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


- 5 -



ON THE MOVE SYSTEMS CORP.

CONSOLIDATED STATEMENT OF CHANGE IN SHAREHOLDERS’ DEFICIT

(UNAUDITED)


 

 

Common Stock

 

Series E
Preferred Stock

 

Additional
Paid-In

 

Accumulated

 

 

 

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Deficit

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE,
February 29, 2016

 

4,908,816

 

$

4,909

 

1,000,000

 

$

1,000

 

$

6,072,872

 

$

(7,647,763

)

$

(1,568,982

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for debt and interest conversion

 

190,000

 

 

190

 

 

 

 

 

1,710

 

 

 

 

1,900

 

Common stock issued for services

 

 

 

 

 

 

 

 

 

 

 

 

 

Share rounding on reverse split

 

 

 

 

 

 

 

 

 

 

 

 

 

Beneficial conversion feature on issuance of convertible note payable

 

 

 

 

 

 

 

 

35,100

 

 

 

 

35,100

 

Net Loss

 

 

 

 

 

 

 

 

 

 

(205,368

)

 

(205,368

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE,
May 31, 2016

 

5,098,816

 

$

5,099

 

1,000,000

 

$

1,000

 

$

6,109,682

 

$

(7,853,131

)

$

(1,737,350

)


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


- 6 -



ON THE MOVE SYSTEMS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


 

 

Three months ended May 31,

 

 

 

2016

 

2015

 

 

 

 

 

 

 

 

 

CASH FLOW FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net Loss

 

$

(205,368

)

$

(339,633

)

 

 

 

 

 

 

 

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

Amortization of discount on convertible note payable

 

 

89,292

 

 

147,100

 

Depreciation & amortization

 

 

330

 

 

4,625

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Prepaid expenses

 

 

951

 

 

 

Accounts payable and accrued liabilities

 

 

37,407

 

 

88,502

 

Accrued interest payable

 

 

49,060

 

 

39,874

 

NET CASH USED IN OPERATING ACTIVITIES

 

 

(28,328

)

 

(59,532

)

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

Purchase of fixed assets

 

 

 

 

 

NET CASH USED IN INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

Proceeds from advances

 

 

 

 

65,383

 

Proceeds from convertible promissory note

 

 

33,500

 

 

 

Repayment of capital lease

 

 

(928

)

 

(1,376

)

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

 

32,572

 

 

64,007

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH

 

 

4,244

 

 

4,475

 

 

 

 

 

 

 

 

 

CASH, at the beginning of the period

 

 

2,223

 

 

2,679

 

 

 

 

 

 

 

 

 

CASH, at the end of the period

 

$

6,467

 

$

7,154

 

 

 

 

 

 

 

 

 

Supplemental Disclosures of Cash Flow Information:

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

Interest

 

$

122

 

$

 

Taxes

 

$

 

$

 

 

 

 

 

 

 

 

 

Noncash investing and financing transaction:

 

 

 

 

 

 

 

Refinancing of advances into convertible notes payable

 

$

35,100

 

$

65,383

 

Beneficial conversion on convertible note payable

 

$

35,100

 

$

65,383

 

Conversion of convertible notes payable and interest

 

$

1,900

 

$

102,900

 


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


- 7 -



ON THE MOVE SYSTEMS CORP.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2016


Note 1. General Organization and Business


On the Move Systems Corp. (“we”, “us”, “our”, “OMVS”, or the “Company”) was incorporated in Nevada on March 25, 2010. We reincorporated into Nevada on February 17, 2015. Our business focus is transportation services. We are currently exploring the on-demand logistics market by developing a network of logistics partnerships. Our year-end is February 28. The company is located at 701 North Green Valley Parkway, Suite 200, Henderson, Nevada 89074. Our telephone number is 702-990-3271.


Our business focus is transportation-related technology services.  We are currently exploring the online, on-demand logistics market by developing a shared economy network of trucking partnerships. We are in the process of building a shared economy app designed to put independent drivers and brokers together for more efficient pricing and booking, optimized operations and quick delivery turnarounds.  We have signed a letter of intent with a Houston-area software design firm regarding development of such a platform.  This app, when released, will revolutionize the trucking industry by connecting national and local carriers, enabling each to maximize revenues and reduce costs.


Note 2. Going Concern


The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.


For the three months ended May 31, 2016, the Company had a net loss of $205,368 and negative cash flow from operating activities of $28,328. As of May 31, 2016, the Company had negative working capital of $1,186,422. 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.


The Company does not have the resources at this time to repay its credit and debt obligations, make any payments in the form of dividends to its shareholders or fully implement its business plan. Without additional capital, the Company will not be able to remain in business.


Management has plans to address the Company’s financial situation as follows:


In the near term, management plans to continue to focus on raising the funds necessary to implement the Company’s business plan. Management will continue to seek out debt financing to obtain the capital required to meet the Company’s financial obligations. There is no assurance, however, that lenders will continue to advance capital to the Company or that the new business operations will be profitable. The possibility of failure in obtaining additional funding and the potential inability to achieve profitability raises doubts about the Company’s ability to continue as a going concern.


In the long term, management believes that the Company’s projects and initiatives will be successful and will provide cash flow to the Company that will be used to finance the Company’s future growth. However, there can be no assurances that the Company’s planned activities will be successful, or that the Company will ultimately attain profitability. The Company’s long-term viability depends on its ability to obtain adequate sources of debt or equity funding to meet current commitments and fund the continuation of its business operations, and the ability of the Company to achieve adequate profitability and cash flows from operations to sustain its operations.


- 8 -



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 29, 2016 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, 2016 are not necessarily indicative of the results to be expected for the full fiscal year ending February 28, 2017.


Principles of Consolidation


The consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries, On the Move Experience, LLC and OMV Transports, LLC. Intercompany transactions have been eliminated in consolidation. The fiscal year-end for the Company and its subsidiaries is February 28.


Note 4. Advances


During the three months ended May 31, 2016, Vista View Ventures, Inc. (“Vista View”) paid $35,100 of expenses on behalf of the company. These funds were paid from Vista View to KMDA and then by KMDA to the Company on behalf of Vista View. At the end of the quarter, we issued a convertible promissory note to Vista View for $35,100. See Note 5 and Note 6.


At May 31, 2016 and February 29, 2016, we did not owe Vista View. anything for advances provided to us or expenses paid on our behalf.


At May 31, 2016 and February 29, 2016, we owed a third party. $1,594 and $1,594, respectfully, for advances provided to us.


Note 5. Related Party Transactions


Our officers and 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. We have not formulated a policy for the resolution of such conflicts.


Services Provided by KM Delaney & Assoc.


During the three months ended May 31, 2016 and 2015, KM Delaney & Associates (“KMDA”) provided certain administrative functions to us. The services provide include accounting and bookkeeping services, treasury and cash management services, financial reporting, and other support staffing requirements. As part of the services provided to the Company, KMDA receives the advances from the lender (See note 4) and disburses those funds to us. We discontinued our arrangement with KMDA on April 30, 2016. During the three months ended May 31, 2016 and 2015, KMDA billed us $35,100 and $73,119, respectively, for those services. As of May 31, 2016 and February 29, 2016, we owed KMDA $183,568 and $198,568, respectively. These amounts are included in accounts payable on the consolidated balance sheets.


- 9 -



Note 6. Convertible Notes Payable


Convertible notes payable consist of the following as of May 31, 2016 and February 29, 2016:


Issued

 

Maturity

 

Interest
Rate

 

Conversion
Rate per
Share

 

Balance
May 31,
2016

 

Balance
February 29,
2016

 

February 28, 2011

 

February 27, 2013

 

7%

 

$0.015

 

$

32,600

 

$

32,600

 

January 31, 2013

 

February 28, 2017

 

10%

 

$0.01

 

 

119,091

 

 

120,562

 

May 31, 2013

 

November 30, 2016

 

10%

 

$0.01

 

 

261,595

 

 

261,595

 

November 30, 2013

 

November 30, 2017

 

10%

 

$0.01

 

 

396,958

 

 

396,958

 

August 31, 2014

 

August 31, 2016

 

10%

 

$0.002

 

 

355,652

 

 

355,652

 

November 30, 2014

 

November 30, 2016

 

10%

 

$0.002

 

 

103,950

 

 

103,950

 

February 28, 2015

 

February 28, 2017

 

10%

 

$0.001

 

 

63,357

 

 

63,357

 

May 31, 2015

 

May 31, 2017

 

10%

 

$1.00

 

 

65,383

 

 

65,383

 

August 31, 2015

 

August 31, 2017

 

10%

 

$0.30

 

 

91,629

 

 

91,629

 

November 30, 2015

 

November 30, 2018

 

10%

 

$0.30

 

 

269,791

 

 

269,791

 

February 3, 2016

 

February 3, 2017

 

5%

 

49% discount

 

 

46,000

 

 

46,000

 

February 29, 2016

 

February 28, 2019

 

10%

 

60% discount

 

 

95,245

 

 

95,245

 

March 22, 2016

 

March 22, 2017

 

5%

 

49% discount

 

 

40,000

 

 

 

May 31, 2016

 

May 31, 2019

 

10%

 

60% discount

 

 

35,100

 

 

 

Total convertible notes payable

 

 

 

$

1,976,351

 

$

1,902,722

 

 

 

 

 

 

 

 

 

 

 

Less: short-term convertible notes payable

 

 

 

 

(86,000

)

 

(46,000

)

Less: current portion of convertible notes payable

 

 

 

 

(1,001,628

)

 

(937,716

)

Less: discount on noncurrent convertible notes payable

 

 

 

 

(461,692

)

 

(500,485

)

Long-term convertible notes payable, net of discount

 

 

 

$

427,031

 

$

418,521

 

 

 

 

 

 

 

 

 

 

 

Current portion of convertible notes payable

 

 

 

 

1,001,628

 

 

937,716

 

Less: discount on current portion of convertible notes payable

 

 

 

 

(409,732

)

 

(422,298

)

Current portion of convertible notes payable, net of discount

 

 

 

$

591,896

 

$

515,418

 

 

 

 

 

 

 

 

 

 

 

Short-term convertible notes

 

 

 

 

86,000

 

 

46,000

 

Less: discount on short-term convertible notes

 

 

 

 

(11,000

)

 

(7,333

)

Short-term convertible notes, net of discount

 

 

 

$

75,000

 

$

38,667

 


All of the notes above are unsecured. The note dated February 28, 2011 is currently in default and bears default interest at 18% per annum.


Convertible notes issued


Issued

 

Maturity

 

Interest Rate

 

Conversion Rate per Share

 

Amount of Note

 

Original Issue Discount

 

Beneficial Conversion Feature

 

March 22, 2016

 

March 22, 2017

 

5%

 

$

49% discount (1)

 

$

40,000

 

$

6,500

 

$

 

May 31, 2016

 

May 31, 2019

 

10%

 

 

60% discount (2)

 

 

35,100

 

 

 

 

35,100

 

Total

 

 

 

 

 

 

 

 

$

75,100

 

$

6,500

 

$

35,100

 


 

(1)

This note is convertible at 49% discount to the lowest trading price over the preceding 20 trading days. The note becomes convertible 180 days after issuance.

 

 

 

 

(2)

This note is convertible at a 60% discount to the volume weighted average closing price over the preceding five trading days, subject to the condition that the conversion price shall never be less than $0.01 per share.


- 10 -



Advances Refinanced into Convertible Notes


During the three months ended May 31, 2016, we refinanced $35,100 of non-interest bearing advances into a convertible note. All principal and accrued interest is payable on the maturity date.


The Company evaluated the terms of the notes in accordance with ASC Topic No. 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. We determined that the conversion features 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. We evaluated the conversion features 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, we recognized a discount for the beneficial conversion features of $35,100, in aggregate, on the date the notes were signed. We amortize the discounts for the notes dated May 31, 2016 at an effective interest rates of 317.38%. The beneficial conversion feature was recorded as an increase in additional paid-in capital and a discount to the convertible notes payable. The discount to the convertible notes payable will be amortized to interest expense over the life of the notes. During the three months ended May 31, 2016 and 2015, we amortized discount on convertible notes payable of $89,292 and $147,100, respectively, to interest expense.


Convertible Notes Issued for Cash


On March 22, 2016, we issued a convertible promissory note for $40,000. The note has an original issue discount of $6,500. The note matures on March 22, 2017, and bears interest at 5% per annum. The terms on the note allow the noteholder to convert principal and accrued interest into share of our common stock beginning 180 days after issuance. The variable conversion rate is a 49% discount to the lowest trading price over the preceding 20 trading days.


The Company evaluated the terms of the notes in accordance with ASC Topic No. 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. Once the note becomes convertible 180 days after issuance, the conversion features will meet the definition of a liability and therefore we will need to bifurcate the conversion feature and account for it as a separate derivative liability. We amortize the discounts for the notes dated May 31, 2016 at an effective interest rates of 26.12%. The original issue discount to the convertible notes payable will be amortized to interest expense over the life of the note.


Conversions to common stock


During three months ended May 31, 2016, the holders of the Convertible Note Payable dated January 31, 2013 elected to convert principal and accrued interest in the amounts show below into shares of common stock at a rate of $0.01 per share. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement that provided for conversion.


Date

 

Amount Converted

 

Number of Shares Issued

March 1, 2016

 

$

1,900

 

190,000

Total

 

$

1,900

 

190,000


Note 7. Debt Payment Obligations


 

 

Twelve months ended May 31,

 

 

 

 

2017

 

 

2018

 

 

2019

 

 

2020

 

 

2021

 

 

Total

 

Convertible notes

 

$

1,087,628

 

$

488,587

 

$

400,136

 

$

 

$

 

$

1,976,351

 

Capital lease

 

 

3,818

 

 

3,993

 

 

2,414

 

 

 

 

 

 

10,225

 

Total

 

$

1,091,446

 

$

492,580

 

$

402,550

 

$

 

$

 

$

1,986,576

 


Note 8. Subsequent Events


On June 28, 2016, we issued 196,000 shares of common stock upon conversion of principal and interest on a convertible promissory note.


On July 18, 2016, we issued a convertible promissory note for $9,000. The note matures on July 18, 2017, bears interest at 8% per year, and is convertible into common stock at a 49% discount to the lowest trading price over the preceding 20 trading days.


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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 Nevada on March 25, 2010. We reincorporated into Nevada on February 17, 2015. Our business focus is transportation services. We are currently exploring the on-demand logistics market by developing a network of logistics partnerships. Our year-end is February 28. The company is located at 701 North Green Valley Parkway, Suite 200, Henderson, Nevada 89074. Our telephone number is 702-990-3271.


Our business focus is transportation-related technology services.  We are currently exploring the online, on-demand logistics market by developing a shared economy network of trucking partnerships.  OMVS is in the process of building a shared economy app designed to put independent drivers and brokers together for more efficient pricing and booking, optimized operations and quick delivery turnarounds.  The company has signed a letter of intent with a Houston-area software design firm regarding development of such a platform.  The Company believes that this app, when released, could revolutionize the trucking industry by connecting national and local carriers, enabling each to maximize revenues and reduce costs.


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 29, 2016 on Form 10-K.


Results of Operations


Three months ended May 31, 2016 compared to the three months ended May 31, 2015.


General and Administrative Expenses


We recognized general and administrative expenses in the amount of $66,893 and $151,994 for the three months ended May 31, 2016 and ended 2015, respectively. The decrease is due to lower professional fees during the current period.


Interest Expense


Interest expense decreased from $187,639 for the three months ended May 31, 2015 to $138,475 for the three months ended May 31, 2016.


Interest expense for the three months ended May 31, 2016 included amortization of discount on convertible notes payable of $89,292, compared to $147,100 for the comparable period of 2015.


The remaining interest expense was due to interest on our convertible notes payable and the interest portion of our capital lease.


Net Loss


We incurred a net loss of $205,368 for the three months ended May 31, 2016 as compared to $339,633 for the comparable period of 2015. The decrease in the net loss was primarily the result of lower professional fees and interest expense.


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Liquidity and Capital Resources


At May 31, 2016, we had cash on hand of $6,467. The Company has negative working capital of $1,186,422 . Net cash used in operating activities for the three months ended May 31, 2016 was $28,328. 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 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, 2016.


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


This item is not applicable to smaller reporting companies.


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, 2016. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of May 31, 2016, 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.


 

1.

As of May 31, 2016, 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, 2016, 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.


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PART II — OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS


On October 12, 2015, we received notice that it had been sued in the United States District Court for the Central District of California. The plaintiff alleges that we obtained certain trade secrets through a third party also named in the suit. We believe the suit is without merit and intend to vigorously defend it.


ITEM 1A. RISK FACTORS


This item is not applicable to smaller reporting companies.


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


On March 1, 2016, we issued 190,000 shares of common stock upon conversion of $1,900 of a convertible note.


Each issuance of securities was issued without registration in reliance of the exemption from registration Section 3(a)9 of the Securities Act of 1933.


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.


ITEM 6. EXHIBITS


3.1

Articles of Incorporation (1)

 

 

3.2

Bylaws (2)

 

 

14

Code of Ethics (2)

 

 

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. (4)

__________

(1)

Incorporated by reference of our Form DEF 14C file with the Securities and Exchange Commission on February 11, 2015.

 

 

(2)

Incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission on August 4, 2010.

 

 

(3)

Filed or furnished herewith.

 

 

(4)

To be submitted by amendment.


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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 28, 2016

BY: /s/ Robert Wilson

 

Robert Wilson

 

President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Treasurer and Director


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