Artificial Intelligence Technology Solutions Inc. - Quarter Report: 2017 May (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)


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

For the quarterly period ended May 31, 2017


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

Yes [X] No [_]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or 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	[_]	Smaller reporting company	[X]
(Do not check if smaller reporting company)		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 check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [_] No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of July 24, 2017, there were 71,739,750 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	13

Item 3. Quantitative and Qualitative Disclosures about Market Risk	15

Item 4. Controls and Procedures	15

PART II — OTHER INFORMATION	15

Item 1. Legal Proceedings	15

Item 1A. Risk Factors	15

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	16

Item 3. Defaults upon Senior Securities	16

Item 4. Mine Safety Disclosures	16

Item 5. Other Information	16

Item 6. Exhibits	16

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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, 2017. 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.

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ON THE MOVE SYSTEMS CORP.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	May 31, 2017			February 28, 2017
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	16,726		$	3,100
Note receivable		190,000			—
Total current assets		206,726			3,100

TOTAL ASSETS	$	206,726		$	3,100

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	110,213		$	98,214
Advances payable		1,594			1,594
Current portion of convertible notes payable, net of unamortized discount of $435,254 and $80,420, as of May 31, 2017 and February 28, 2017, respectively		1,612,112			1,549,734
Note payable to related party		85,000			85,000
Note payable		—			50,000
Current portion of accrued interest payable		499,451			456,185
Derivative liability		15,966,384			12,938,795
Total current liabilities		18,274,754			15,179,522

Convertible notes payable, net of unamortized discount of $379,889 and $358,159, as of May 31, 2017 and February 28, 2017, respectively, net of current portion		105,246			41,977
Accrued interest payable		50,304			41,093
TOTAL LIABILITIES		18,430,304			15,262,592

STOCKHOLDERS’ DEFICIT
Common Stock, $0.001 par value; 480,000,000 shares authorized 39,721,804 and 17,656,844 shares issued and outstanding at May 31, 2017 and February 28, 2017, respectively.		39,722			17,657
Series E Preferred Stock, $0.001 par value; 4,350,000 shares authorized; 1,000,000 shares issued and outstanding at May 31, 2017 and February 28, 2017, respectively.		1,000			1,000
Series F Convertible Preferred Stock, $0.001 par value; 4,350 shares authorized; 1,000 shares issued and outstanding at May 31, 2017 and February 28, 2017, respectively.		1,000			1,000
Preferred Stock, undesignated; 15,645,650 shares authorized; no shares issued and outstanding at May 31, 2017 and February 28, 2017, respectively.		—			—
Additional paid-in capital		(40,683,242	)		(41,477,284	)
Retained Earnings		22,417,942			16,198,135
Total stockholders’ deficit		(18,223,578	)		(15,259,492	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	206,726		$	3,100

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,
	2017			2016

OPERATING EXPENSES
General and administrative expenses	$	231,811		$	66,893

Loss from operations		(231,811	)		(66,893	)

OTHER EXPENSE
Interest expense		(161,683	)		(138,475	)
Prepayment penalty and other		(40,429	)		—
Loss on derivative instruments		(3,346,270	)		—
Total other expense		(3,548,382	)		(138,475	)

NET LOSS	$	(3,780,193	)	$	(205,368	)

NET LOSS PER COMMON SHARE –
Basic and diluted	$	(0.16	)	$	(0.04	)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING –
Basic and diluted		23,807,818			5,096,751

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)


						Series E			Series F			Additional
	Common Stock					Preferred Stock			Preferred Stock			Paid-In			Accumulated
	Shares		Amount			Shares	Amount		Shares	Amount		Capital			Deficit			Total

BALANCE, February 28, 2017	17,656,844		$	17,657		1,000,000	$	1,000	1,000	$	1,000	$	(41,477,284	)	$	26,198,135		$	(15,259,492	)

Common stock issued for debt conversion	22,664,960			22,665		—		—	—		—		61,111			—			83,776
Common stock canceled	(600,000	)		(600	)	—		—	—		—		—			—			(600	)
Release of derivative liability on conversion of convertible notes payable	—			—		—		—	—		—		732,931			—			732,931
Net loss	—			—		—		—	—		—		—			(3,780,193	)		(3,780,193	)

BALANCE, May 31, 2017	39,721,804		$	39,722		1,000,000	$	1,000	1,000	$	1,000	$	(40,683,242	)	$	22,417,942		$	(18,223,578	)

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,
	2017			2016

CASH FLOW FROM OPERATING ACTIVITIES:
Net loss	$	(3,780,193	)	$	(205,368	)

Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of discount on convertible note payable		128,686			89,292
Loss on derivative liability		3,346,270			—
Depreciation & amortization		—			330
Changes in operating assets and liabilities:
Prepaid expenses		—			951
Accounts payable and accrued liabilities		11,999			37,407
Accrued interest payable		58,934			49,060
NET CASH USED IN OPERATING ACTIVITIES		(234,304	)		(28,328	)

CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for notes receivable		(190,000	)		—
NET CASH USED IN INVESTING ACTIVITIES		(190,000	)		—

CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of convertible promissory notes		(31,320	)		—
Repayment of note payable		(50,000	)		—
Proceeds from convertible promissory notes		519,250			33,500
Repayment of capital lease		—			(928	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		437,930			32,572

NET INCREASE (DECREASE) IN CASH		13,626			4,244

CASH, at the beginning of the period		3,100			2,223

CASH, at the end of the period	$	16,726		$	6,467

Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	1,288		$	122
Taxes	$	—		$	—

Noncash investing and financing transaction:
Refinancing of advances into convertible notes payable	$	—		$	35,100
Beneficial conversion discount on convertible note payable	$	—		$	35,100
Conversion of convertible notes payable and interest	$	83,776		$	1,900
Derivative liabilities released upon conversion of convertible notes payable	$	732,931		$	—
Debt discount recognized from derivative liability	$	414,250		$	—
Cancelation of common stock for convertible note payable	$	600		$	—

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

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ON THE MOVE SYSTEMS CORP.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2017

Note 1. Background Information

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 in the 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. As well, on May 11, 2017 the company announced that it has entered into a binding letter of intent with Robotic Assistance Devices (RAD - www.roboticassistancedevices.com) to acquire 100% of RAD. According to the binding LOI, RAD and OMVS will enter into a definitive agreement within the next 90 days to consummate the acquisition. RAD is specialized in the delivery of artificial intelligence and robotic solutions for operational, security and monitoring needs. RAD is initially targeting the security industry, which uses electronic systems, and approximately 1.1 million security guards in the US. The RAD robot security guard solution combines the best of both solutions to provide superior security at a price that delivers to its clients an immediate ROI.

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, 2017, the Company had negative cash flow from operating activities of $234,304. As of May 31, 2017, the Company had negative working capital of $18,068,028. 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.

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Note 3. Summary of Significant Accounting Policies

Interim Financial Statements

These unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) 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 GAAP 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, 2017 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, 2017 are not necessarily indicative of the results to be expected for the full fiscal year ending February 28, 2018.

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.

Note 4. Advances

At May 31, 2017 and February 28, 2017, we owed a third party $1,594 and $1,594, respectfully, for advances provided to us.

Note 5. Related Party Transactions

Our officer is involved in other business activities and may, in the future, become involved in other business opportunities that become available. He 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.

During the three months ended May 31, 2017, Garett Parsons was paid $12,000 for his services as CEO.

During the three months ended May 31, 2017, we paid Robert Wilson $7,030 for consulting services. During the three months ended May 31, 2016, we paid Robert Wilson $33,846 for his services as CEO.

KM Delaney & Assoc.

As of May 31, 2017, we had a note payable to KM Delaney & Assoc. in the amount of $85,000. The note is non-interest bearing and requires five monthly principal payments of $17,000 beginning June 1, 2017.

Note 6. Notes Receivable

On March 13, 2017, we loaned $40,000 to a third party. The note bore interest at 18% per annum and was payable on April 13, 2017. The note was not repaid by the due date. The note was subsequently amended to bear interest of 2% per month plus a $10,000 fee. It is payable on December 31, 2017 and is secured in senior rank on all assets of the borrower. The Company has not accrued interest income on the note based on the uncertainty of collection. The Company evaluated the note receivable to determine whether its lending activities create a variable interest entity which would require consolidation and determined that it does not create a variable interest entity.

On April 27, 2017, we loaned $50,000 to RAD. The note is non-interest bearing and is unsecured. It will become due within 120 days of issuance.

On May 11, 2017, we loaned $100,000 to RAD. The note is non-interest bearing and unsecured. It will become due within 120 days of issuance.

Note 7. Convertible Notes Payable

Convertible notes payable consist of the following as of May 31, 2017 and February 28, 2017:

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Issued	Maturity	Interest Rate	Conversion Rate per Share	Balance May 31, 2017			Balance February 28, 2017
February 28, 2011	February 27, 2013 *	7%	$0.015	$	32,600		$	32,600
January 31, 2013	February 28, 2016 *	10%	$0.01		119,091			119,091
May 31, 2013	November 30,2016 *	10%	$0.01		261,595			261,595
November 30, 2013	November 30, 2017	10%	$0.01		374,458			394,458
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		—			5,299
February 29, 2016	February 28, 2019	10%	60% discount		95,245			95,245
March 22, 2016	March 22, 2017	10%	$0.003		—			60,000
May 31, 2016	May 31, 2019	10%	$0.003		35,100			35,100
July 18,2016	July 18,2017	10%	$0.003		6,500			6,500
August 30,2016	August 30,2017	10%	$0.003		—			—
September 6, 2016	September 6, 2017	10%	$0.003		—			31,320
January 4, 2017	January 4, 2018	—	—		—			1,320
January 13, 2017	October 13, 2017	—	50% discount (1)		38,000			38,000
March 1, 2017	March 1, 2018	8%	40% discount		75,000			—
March 3, 2017	October 3, 2017	8%	40% discount (1)		53,000			—
March 8, 2017	March 8, 2018	8%	40% discount		50,000			—
March 21, 2017	March 21, 2018	8%	40% discount		40,000			—
April 4, 2017	December 4, 2017	10%	40% discount		33,000			—
April 19, 2017	April 19, 2018	15%	50% discount		96,250			—
April 20, 2017	January 30, 2018	8%	40% discount (1)		28,000			—
April 26, 2017	April 26, 2018	—	$0.001		80			—
May 4, 2017	May 4, 2018	8%	40% discount		150,000			—
May 15, 2017	May 15, 2018	—	$0.001		9,830			—
May 17, 2017	May 17, 2020	10%	40% discount (1)		85,000			—

Total convertible notes payable				$	2,532,511		$	2,030,290

Less: current portion of convertible notes payable					(2,047,366	)		(1,630,154	)
Less: discount on noncurrent convertible notes payable					(379,899	)		(358,159	)
Noncurrent convertible notes payable, net of discount				$	105,246		$	41,977

Current portion of convertible notes payable					2,047,366			1,630,154
Less: discount on current portion of convertible notes payable					(435,254	)		(80,420	)
Current portion of convertible notes payable, net of discount				$	1,612,112		$	1,549,734

__________


*	The indicated notes were is in default as of May 31, 2017 and bear default interest of between 18% and 25% per annum.
(1)	The note is convertible beginning six months after the date of issuance.

During the three months ended May 31, 2017, we incurred original issue discounts of $91,000 and derivative discount of $414,250 on convertible notes issued during that period. These amounts are included in discounts on convertible notes payable and are being amortized to interest expense over the life of the notes. During the three months ended May 31, 2017 and 2016, we recognized interest expense related to the amortization of debt discounts of $128,686 and $89,292, respectively.

During the three months ended May 31, 2017, we issued convertible promissory notes of $610,250 and received cash proceeds of $519,250. See “Convertible Notes Issued” below.

During the three months ended May 31, 2017, we prepaid principal on a convertible note payable of $31,230 and incurred a prepayment penalty of $40,429. During the same period, we repaid a convertible note payable of $50,000.

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All of the notes above are unsecured. As of May 31, 2017, we had accrued interest payable of $549,755.

Convertible notes issued

During the three months ended May 31, 2017, we issued the following convertible notes payable for cash proceeds. All principal and accrued interest is payable on the maturity date.


Issued	Maturity	Interest Rate	Conversion Rate per Share		Amount of Note		Original Issue Discount
March 1, 2017	March 1, 2018	8%		40% discount	$	75,000	$	3,750
March 3, 2017	October 3, 2017	8%		40% discount (1)		53,000		3,000
March 8, 2017	March 8, 2018	8%		40% discount		50,000		7,500
March 21, 2017	March 21, 2018	8%		40% discount		40,000		2,000
April 4, 2017	December 4, 2017	10%		40% discount		33,000		3,000
April 19, 2017	April 19, 2018	15%		50% discount		96,250		26,250
April 20, 2017	January 30, 2018	8%		40% discount (1)		28,000		3,000
April 26, 2017	April 26, 2018	—		$0.001		5,000		—
May 4, 2017	May 4, 2018	8%		40% discount		150,000		7,500
May 15, 2017	May 15, 2018	—		$0.001		15,000		—
May 17, 2017	May 17, 2020	10%		40% discount (1)		85,000		35,000
Total					$	610,250	$	91,000

__________


(1)	This note is convertible beginning six months after the date of issuance.

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 met the definition of a liability and therefore bifurcated the conversion feature and accounted for it as a separate derivative liability. During the three months ended May 31, 2017, we amortized discount on convertible notes payable of $128,686 to interest expense.

Conversions to common stock

During three months ended May 31, 2017, the holders of certain Convertible Note Payable elected to convert principal and accrued interest in the amounts shown below into shares of common stock. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement that provided for conversion.


Conversion	Principal		Interest		Total Amount		Shares
Date	Converted		Converted		Converted		Converted
March 7, 2017	$	1,840	$	—	$	1,840	880,000
March 22, 2017		1,971		—		1,971	920,000
April 3, 2017		1,487		3,397		4,884	760,119
April 7, 2017		1,000		—		1,000	1,000,000
April 20, 2017		920		—		920	920,000
April 24, 2017		6,876		—		6,876	1,070,000
April 26, 2017		1,130		—		1,130	1,130,000
May 2, 2017		1,130		—		1,130	1,130,000
May 4, 2017		1,240		—		1,240	1,240,000
May 4, 2017		8,854		—		8,854	1,240,000
May 8, 2017		9,296		—		9,296	1,302,000
May 12, 2017		1,432		—		1,432	1,432,000
May 15, 2017		11,661		—		11,661	1,429,000
May 15, 2017		1,550		—		1,550	1,550,000
May 18, 2017		13,629		—		13,629	1,572,000
May 23, 2017		9,684		3,059		12,743	1,469,841
May 24, 2017		1,730		—		1,730	1,730,000
May 30, 2017		1,890		—		1,890	1,890,000
Total	$	77,320	$	6,456	$	83,776	22,664,960

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During the three months ended May 31, 2017, the Company canceled 600,000 shares of common stock. The shares had been issued during the year ended February 28, 2017 for the conversion of principal of a convertible note payable of $600. As a result of the shares being canceled, $600 was added back to the principal of the note.

Note 8. Derivative Liabilities

During the three months ended May 31, 2017, we released $732,931 of our derivative liability to equity due to conversions of principal and interest on the associated notes.

On May 31, 2017, we revalued the fair value all of our derivative instruments and determined that we had total derivative liabilities of $15,966,384. During the three months ended May 31, 2017, we recognized loss on derivative of $3,346,270.

The Company estimated the fair value of the derivative liabilities using the Black-Scholes option pricing model using the following key assumptions during the year ended May 31, 2017:


Expected dividends	—	%
Expected term (years)	0.13 – 4.13
Volatility	307% – 476	%
Risk-free rate	0.88% – 2.38	%

The following fair value hierarchy table presents information about the Company’s financial liabilities measured at fair value on a recurring basis as of May 31, 2017 and February 28, 2017:


	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at May 31, 2017
Liabilities
Derivative liabilities	$	—	$	—	$	15,966,384	$	15,966,384
Total liabilities	$	—	$	—	$	15,966,384	$	15,966,384


	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at February 28, 2017
Liabilities
Derivative liabilities	$	—	$	—	$	12,938,795	$	12,938,795
Total liabilities	$	—	$	—	$	12,938,795	$	12,938,795

The rollforward of Level 3 liabilities is as follows:


	Three months ended May 31, 2017
Balance as of February 28, 2017	$	12,938,795
Release of derivative liability on conversion of convertible notes payable		(732,931	)
Debt discount due to derivative liabilities		414,250
Change in fair value of derivative liabilities		3,346,270
Balance as of May 31, 2017	$	15,966,384

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Note 9. Stockholders’ Equity

Conversion of convertible notes payable

During the three months ended May 31, 2017, we issued 22,664,960 shares of common stock upon conversion of principal and accrued interest on a convertible note payable of $83,776. See Note 7.

Common stock canceled

Note 10. Commitments and Contingencies

Litigation

In February 2016, we received notice that the Company had been sued in the Clark County District Court of Nevada. 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. We have not accrued any liability for this lawsuit as we believe that the likelihood of an unfavorable outcome is remote.

Note 11. Subsequent Events

During the period from June 1, 2017 through the filing of this report, we issued 23,095,667 shares of common stock upon conversion of convertible notes payable of $26,088.

During the period from June 1, 2017 through the filing of this report, we issued 8,922,279 shares of common stock upon exercise of warrants held by one of the Company’s lenders.

On June 8, 2017, we loaned Robotic Assistance Devices, LLC $150,000 principal under a promissory note. The note is due on August 22, 2017 and is not interest bearing.

On June 16, 2017, the holder of the convertible note payable dated November 30, 2013, sold principal on the note in the amount of $15,000 to a third party. The Company agreed to amend the terms of the note that was sold to be non-interest bearing and payable on June 16, 2018. The conversion price was changed to $0.001 per share. The Company did not receive any proceeds from this transaction.

On July 8, 2017, we issued a convertible note payable for $200,000 which bears interest at 8% per annum and is due July 6, 2018. The note is convertible into common stock of the Company at a 40% discount to the lowest trading price in during the 20 trading days prior to conversion.

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

Overview

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.

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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, 2017 on Form 10-K.

Results of Operations

Three months ended May 31, 2017 compared to the three months ended May 31, 2016.

General and Administrative Expenses

We recognized general and administrative expenses in the amount of $231,811 and $66,893 for the three months ended May 31, 2017 and ended 2016, respectively. The decrease is due to a reduction in professional fees.

Interest Expense

Interest expense increased from $138,475 for the three months ended May 31, 2016 to $161,683 for the three months ended May 31, 2017. Interest expense for the three months ended May 31, 2017 included amortization of discount on convertible notes payable of $128,686, compared to $89,292 for the comparable period of 2016.

Prepayment Penalties

During the three months ended May 31, 2017, we recognized a $40,429 prepayment penalty as a result of paying off certain convertible notes payable. We had no penalties in the prior year. See Note 7.

Loss on Financial Derivatives

During the three months ended May 31, 2017, we recognized a $3,346,270 non-cash loss on the embedded derivatives in our convertible promissory notes. During the same period in the prior year, our notes did not contain embedded derivatives.

Net Loss

We incurred a net loss of $3,780,193 for the three months ended May 31, 2017 as compared to a $205,368 loss for the comparable period of 2016. The increase in the net gain was the results of the non-cash gain on financial derivatives.

Liquidity and Capital Resources

At May 31, 2017, we had cash on hand of $16,726. The company has negative working capital of $18,068,028. Net cash used in operating activities for the Three months ended May 31, 2017 was $234,304. 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, 2017.

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.

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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, 2017. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of May 31, 2017, 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, 2017, 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, 2017, 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

ITEM 1A. RISK FACTORS

This item is not applicable to smaller reporting companies.

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

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.

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 24, 2017	BY: /s/ Garett Parsons
	Garett Parsons
	President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Treasurer and Director

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