On December 5, 2014, the holder of the Convertible Promissory Note dated January 31, 2013 elected to convert $16,000 of principal and accrued interest into 1,600,000 shares of our Common Stock at a rate of $0.01 per share. The unamortized discount related to the converted principal was immediately amortized to interest expense. No gain or loss was recorded on the transaction as it occurred within the terms of the note agreement.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
On the Move Systems Corp. (“we”, “us”, “our”, “OMVS”, or the “Company”) was incorporated in Florida on March 25, 2010. The Company’s business focus was the mobile electronics market, but is it currently exploring the specialized travel and transportation market by developing a network of niche travel, destination lodging, and international logistics partnerships. The Company’s year-end is February 28. The company is located at 3001 North Rocky Point East, Suite 200, Tampa, FL 33607. Our telephone number is (813) 367-3511.
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 consolidated financial statements are prepared. On a regular basis, we review our accounting policies and how they are applied and disclosed in our consolidated financial statements.
While we believe that the historical experience, current trends and other factors considered support the preparation of our consolidated financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.
For a full description of our critical accounting policies, please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for the year ended February 28, 2014 on Form 10-K.
Results of Operations
Nine months ended November 30, 2014 compared to the nine months ended November 30, 2013.
Revenue
Revenue increased to $4,500 for the nine months ended November 30, 2014, compared to $0 for the nine months ended November 30, 2013 due to the commencement of race car advertising in June 2014.
Cost of Goods Sold
Cost of goods sold were $0 for the nine months ended November 30, 2014 and 2013. While we began advertising sales in June 2014, we had no cost of goods sold.
Gross Profit
Gross profit increased to $4,500 for the nine months ended November 30, 2014, compared to $0 for the nine months ended November 30, 2013. This was due to the commencement of race car advertising in June 2014.
Expenses related to joint ventures and other business development agreements
We recognized expenses related to joint ventures and other business development agreements in the amount of $63,178 for the nine months ended November 30, 2014, compared to $15,000 during the comparable period of 2013. The increase in these expenses is due to the commencement of operations of our XPerience travel operations in 2014.
General and Administrative Expenses
We recognized general and administrative expenses in the amount of $448,582 and $448,293 for the nine months ended November 30, 2014 and ended 2013, respectively.
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Interest Expense
Interest expense increased from $51,824 for the nine months ended November 30, 2013 to $229,402 for the nine months ended November 30, 2014. Interest expense for the nine months ended November 30, 2014 included amortization of discount on convertible notes payable in the amount of $145,463, compared to $17,738 for the comparable period of 2013. The remaining amount is the result of the Company entering into interest-bearing convertible notes payable.
Net Loss
We incurred a net loss of $758,571 for the nine months ended November 30, 2014 as compared to $547,267 for the comparable period of 2013. The increase in the net loss was primarily the result of the increase in interest expense.
Three months ended November 30, 2014 compared to the three months ended November 30, 2013.
Revenue
Revenue increased to $2,250 for the three months ended November 30, 2014, compared to $0 for the three months ended November 30, 2013 due to the commencement of race car advertising sales in June 2014.
Cost of Goods Sold
There were no cost of goods sold for the three months ended November 30, 2014 and 2013, as there are no cost of goods sold attributed to our sales.
Gross Profit
Gross profit increased to $2,250 for the nine months ended November 30, 2014, compared to $0 for the three months ended November 30, 2013 due to the commencement of race car advertising sales in June 2014.
Expenses related to joint ventures and other business development agreements
We recognized expenses related to joint ventures and other business development agreements in the amount of $12,000 for the three months ended November 30, 2014, compared to $15,000 during the comparable period of 2013. The increase in these expenses is due to the commencement of operations of our XPerience travel operations in 2014.
General and Administrative Expenses
We recognized general and administrative expenses in the amount of $113,853 and $181,430 for the three months ended November 30, 2014 and ended 2013, respectively. This was due to reductions in professional fees and advertising expense in the third quarter of this year.
Interest Expense
Interest expense increased from $23,724 for the three months ended November 30, 2013 to $104,430 for the nine months ended November 30, 2014. This was caused by increased amortization of the discount on our convertible notes payable. Additionally, we had higher convertible debt balances in 2014, leading to increased interest expense.
Liquidity and Capital Resources
At November 30, 2014, we had cash on hand of $13,330. The Company has negative working capital of $891,175 . Net cash used in operating activities for the nine months ended November 30, 2014 was $306,360. Cash on hand is adequate to fund our operations for less than one month. We do not expect to achieve positive cash flow from operating activities in the near future. We will require additional cash in order to fully implement our business plan. There is no guarantee that we will be able to obtain funds 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 November 30, 2014.
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Additional Financing
Additional financing is required to continue operations. Although actively searching for available capital, the Company does not have any current arrangements for additional outside sources of financing and cannot provide any assurance that such financing will be available.
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to a smaller reporting company.
ITEM 4. CONTROLS AND PROCEDURES
Management’s Report on Internal Control over Financial Reporting
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of November 30, 2014. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of November 30, 2014, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
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| As of November 30, 2014, we did not maintain effective controls over the financial reporting 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.
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| As of November 30, 2014, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness.
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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
We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder are an adverse party or has a material interest adverse to us.
ITEM 1A. RISK FACTORS
Not applicable to a smaller reporting company.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no sales of unregistered equity securities during the nine months ended November 30, 2014.
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
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3.1
| Articles of Incorporation (1)
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3.2
| Bylaws (1)
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31.1
| Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer and principal financial and account officer. (2)
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32.1
| Section 1350 Certification of principal executive officer and principal financial accounting officer. (2)
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101
| XBRL data files of Financial Statement and Notes contained in this Quarterly Report on Form 10-Q. (2),(3)
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(1)
| Incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission on April 14, 2010
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(2)
| Filed or furnished herewith
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(3)
| 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.”
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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.
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| On the Move Systems Corp.
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Date: January 14, 2015
| BY: /s/ Robert Wilson
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| Robert Wilson
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| President, Chief Executive Officer, Chief Financial Officer,
Principal Accounting Officer, Treasurer and Director
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