Amended Quarterly Report (10-q/a)

Date : 07/25/2017 @ 3:41PM
Source : Edgar (US Regulatory)
Stock : On The Move Systems Corp. (PN) (OMVS)
Quote : 0.0669  0.0029 (4.53%) @ 4:00PM

Amended Quarterly Report (10-q/a)


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q /A

Amendment No. 1


(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


or


[_]

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.




EXPLANATORY NOTE


The purpose of this Amendment No. 1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended May 31, 2017 (“Form 10-Q”) is to submit Exhibit 101 to the Form 10-Q in accordance with Rule 405 of Regulation S-T. Exhibit 101 consists of the Interactive Data Files from the Registrant’s Form 10-Q for the quarterly period ended May 31, 2017, filed with the Securities and Exchange Commission on July 24, 2017.


Additionally, we corrected a typographical error in the CONSOLIDATED BALANCE SHEETS on page 4. Under the “February 28, 2017” column heading, the line item “Retained Earnings” incorrectly stated a value of “16,198,135”. The value has been corrected to “26,198,135”.


No other changes were made to this report.



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


- 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 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.


- 3 -



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

 

 

26,198,135

 

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.


- 4 -



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.


- 6 -



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.


- 7 -



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.


- 8 -



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:


- 9 -



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.


- 10 -



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

 


- 11 -



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

 


- 12 -



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


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 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


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.


- 13 -



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.


- 14 -



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


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.


ITEM 1A. RISK FACTORS


This item is not applicable to smaller reporting companies.


- 15 -



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. (3) (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)

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.”



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 25, 2017

BY: /s/ Garett Parsons

 

Garett Parsons

 

President, Chief Executive Officer, Chief Financial Officer,

Principal Accounting Officer, Treasurer and Director


- 16 -


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