There are no current or deferred income tax expense or benefit for the three months ended May 31, 2013 and 2012.
The provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes.
The Company did not have any temporary differences during the three months ended May 31, 2013 and 2012.
The Company has not recognized an income tax benefit for the period based on uncertainties concerning its ability to generate taxable income in future periods. The tax benefit for the current period presented is offset by a valuation allowance (100%) established against deferred tax assets arising from operating losses and other temporary differences, the realization of which could not be considered more likely than not. In future periods, tax benefits and related deferred tax assets will be recognized when management considers realization of such amounts to be more likely than not.
Management has evaluated subsequent events through the date the financial statements were issued. Based on our evaluation no events have occurred requiring adjustment or disclosure.
PART I — FINANCIAL INFORMATION (continued)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation
THIS FILING CONTAINS FORWARD-LOOKING STATEMENTS. THE WORDS “ANTICIPATED,” “BELIEVE,” “EXPECT,” “PLAN,” “INTEND,” “SEEK,” “ESTIMATE,” “PROJECT,” “WILL,” “COULD,” “MAY,” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INCLUDE, AMONG OTHERS, INFORMATION REGARDING FUTURE OPERATIONS, FUTURE CAPITAL EXPENDITURES, AND FUTURE NET CASH FLOW. SUCH STATEMENTS REFLECT THE COMPANY’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, INCLUDING, WITHOUT LIMITATION, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN FOREIGN, POLITICAL, SOCIAL, AND ECONOMIC CONDITIONS, REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS, THE ABILITY TO ACHIEVE FURTHER MARKET PENETRATION AND ADDITIONAL CUSTOMERS, AND VARIOUS OTHER MATTERS, MANY OF WHICH ARE BEYOND THE COMPANY’S CONTROL. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES OCCUR, OR SHOULD UNDERLYING ASSUMPTIONS PROVE TO BE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY AND ADVERSELY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, OR OTHERWISE INDICATED. CONSEQUENTLY, ALL OF THE FORWARD-LOOKING STATEMENTS MADE IN THIS FILING ARE QUALIFIED BY THESE CAUTIONARY STATEMENTS AND THERE CAN BE NO ASSURANCE OF THE ACTUAL RESULTS OR DEVELOPMENTS.
The following discussion and analysis of our financial condition and plan of operations should be read in conjunction with our financial statements and related notes appearing elsewhere herein. This discussion and analysis contains forward-looking statements including information about possible or assumed results of our financial conditions, operations, plans, objectives and performance that involve risk, uncertainties and assumptions. The actual results may differ materially from those anticipated in such forward-looking statements. For example, when we indicate that we expect to increase our product sales and potentially establish additional license relationships, these are forward-looking statements. The words expect, anticipate, estimate or similar expressions are also used to indicate forward-looking statements.
OVERVIEW OF THE COMPANY
On the Move Systems Corp. (“we”, “us”, “our”, “OMVS”, or the “Company”) was incorporated in the State of Florida on March 25, 2010. The Company’s business focus is in the mobile electronics markets but it is currently investigating business opportunities within the personal and business safety and protection products. The Company’s fiscal year ends on February 28. The Company is located at 3001 North Rocky Point Drive East, Suite 200, Tampa, Florida 33607. Our telephone number is 941-586-3938.
On March 25, 2011, Crawford Mobile Installation Corp. (“CMIC”), a wholly owned subsidiary of the Company acquired all of the assets and assumed certain liabilities of Crawford Mobile Install (“CMI”). The assets of CMI included cash, inventory, a vehicle and installation equipment. On the date of the acquisition, a material relationship existed between the parties, because John Crawford was the sole officer and director of both the Company and CMIC as well as being the sole proprietor of CMI. The purchase price for the assets and liabilities of CMI was $100,000. From the date of inception, March 25, 2010, through the date of the acquisition of CMI on March 25, 2011, the Company was in the development stage as defined in ASC 915, “Accounting and Reporting by Development Stage Enterprises”. As a result of the acquisition of CMI, the Company has begun to generate revenue from operations and has emerged from the development stage.
We currently provide mobile electronic services under the trade name “On the Move Systems Corporation.” Our services include the sale, installation, and servicing of after-market electronic and audio/video upgrades for markets such as auto, recreational vehicle and boat dealerships, and for government agencies and corporations that administer vehicle fleets for law enforcement, security, emergency response, sanitation, public utility, limousine, taxi, and other services.
To this end, we have created relationships with a multitude of dealerships to provide on-site electronics sales, installation and servicing for vehicles purchased by them or by their customers. We also provide services directly to individual consumers. We currently offer all of our services from our sales and installation vehicle, eliminating the need for our customers to travel to our place of business. Although we maintain a small inventory of the electronic products that we offer to our customers, we anticipate that we will continue to order a majority of these products on an as-needed basis.
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We provide our clients with electronic accessories and installation services that allow them and their customers to personalize vehicles for enhanced aesthetics and electronic performance. We believe that our service allows dealerships and other wholesale vehicle purchasers to order models with fewer options from their manufacturers, thereby reducing vehicle inventory costs. The corollary to this is that the dealerships’ retail customers can be given the alternative to select personalized electronic systems for their vehicles that are better suited to their individual budgets, tastes and needs.
We provide our services on-site at vehicle dealerships and directly to individuals. Mr. John B. Crawford, President of CMIC, and our former Chief Executive officer, applies his 18 years of mobile electronic accessory sales and installation experience to identify the latest in mobile audio-visual, GPS, and telecommunications technology, and to consult with our clients to select technology best suited to their specific performance requirements and budgets. Our base of operations is in the city of Sarasota, Florida and we primarily market our services in and around that city. In keeping with future demand and as our capacity allows, we will market and provide our services further afield in adjacent cities and states.
The Company is currently investigating the opportunities in the personal and business safety and protection markets.
Our auditor issued a going concern opinion on our audited financial statements for the year ended February 28, 2013. This means there is substantial doubt that we can continue as an on-going business for the next eighteen (18) months unless we obtain additional capital to pay our bills. Accordingly, we must raise cash from sources other than loans we undertake.
Our ability to continue to implement our business plan is dependent on our ability to generate positive cash flow from operations and to secure sufficient financing, however there is no guarantee that we will be successful in this regard. In order to implement our business plan, we anticipate that we will require not less than $425,000 in financing. We have taken no steps to secure the $425,000 in additional financing that we will need to implement our business plan. Furthermore, even if we successfully execute our business and establish operations, there is no guarantee that there will be a significant market for our services or that we will achieve significant revenues, if any.
Results of Operations
Three months ended May 31, 2013 compared to the three months ended May 31, 2012
Revenue
During the three months ended May 31, 2013, we recognized revenue of $21,855 compared to $25,603 during the three months ended May 31, 2012. The decrease in revenue was primarily the result of charging a lower price for installed electronic equipment in order to compete.
Cost of Goods Sold
During the three months ended May 31, 2013, we recognized cost of goods sold of $14,763 which represents an increase from the comparable period of 2012 in the amount of $8,919. We recognized an increase in spite of a decrease in revenue. The increase was the result of increased sales volumes and higher prices of installed electronic components.
Gross Profit
Gross profit decreased to $7,092 for the three months ended May 31, 2013 from $16,684 for the three months ended May 31, 2012. The increase was the result of decreased revenue and increased cost of goods sold as discussed above.
General and administrative expenses
We recognized general and administrative expenses in the amount of $90,743 and $118,174 for the three months ended May 31, 2013 and 2012, respectively. The decrease is the result of our effort to control costs by spending less on rent and business development expenses.
Interest expense
We incurred interest expense of $7,088 and $2,724 for the three months ended May 31, 2013 and 2012, respectively. The increase in interest expense was the result of refinancing non-interest bearing advances into an interest bearing convertible note payable
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Net loss
Net loss for the three months ended May 31, 2013 decreased to $90,739 from $104,214 for the three months ended May 31, 2012. The decrease in the net loss was primarily the result of the decrease in general and administrative expenses discussed above partially offset by the increase in gross profit.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended May 31, 2013, we had net cash used in operating activities of $50,816. As of May 31, 2013, we had cash on hand of $37,875. We expect that this cash will be adequate to fund our operations for less than month. We will require additional funding to continue our business plan.
We anticipate needing a minimum of $425,000 to effectively execute our business plan over the next eighteen months. Currently available cash is not sufficient to allow us to commence full execution of our business plan. Our business expansion will require significant capital resources that may be funded through the issuance of common stock or of notes payable or other debt arrangements that may affect our debt structure. Despite our current financial status we believe that we may be able to issue notes payable or debt instruments in order to start executing our business plan. However, there can be no assurance that we will be able to raise money in this fashion and have not entered into any agreements that would obligate a third party to provide us with capital.
As of the date of this report, the current funds available to the Company will not be sufficient to continue maintaining a reporting status. Management believes if the Company cannot maintain its reporting status with the SEC it will have to cease all efforts directed towards the Company. As such, any investment previously made would be lost in its entirety.
The Company currently has no external sources of liquidity such as arrangements with credit institutions or off-balance sheet arrangements that will have or are reasonably likely to have a current or future effect on our financial condition or immediate access to capital.
If the Company is unable to raise the funds partially through this offering the Company will seek alternative financing through means such as borrowings from institutions or private individuals. There can be no assurance that the Company will be able to keep costs from being more than these estimated amounts or that the Company will be able to raise such funds. Even if we sell all shares offered through our registration statement, we expect that the Company will seek additional financing in the future. However, the Company may not be able to obtain additional capital or generate sufficient revenues to fund our operations. If we are unsuccessful at raising sufficient funds, for whatever reason, to fund our operations, the Company may be forced to seek a buyer for our business or another entity with which we could create a joint venture. If all of these alternatives fail, we expect that the Company will be required to seek protection from creditors under applicable bankruptcy laws.
Our independent auditor has expressed substantial doubt about our ability to continue as a going concern and believes that our ability is dependent on our ability to implement our business plan, raise capital and generate revenues. See Note 2 of our financial statements.
Recent Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or The NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges are those that address board of directors’ independence, audit committee oversight, and the adoption of a code of ethics. Our Board of Directors is comprised of one individual who is also our executive officer. Our executive officer makes decisions on all significant corporate matters such as the approval of terms of the compensation of our executive officer and the oversight of the accounting functions.
Although the Company has adopted a Code of Ethics and Business Conduct the Company has not yet adopted any of these other corporate governance measures and, since our securities are not yet listed on a national securities exchange, the Company is not required to do so. The Company has not adopted corporate governance measures such as an audit or other independent committees of our board of directors as we presently do not have any independent directors. If we expand our board membership in future periods to include additional independent directors, the Company may seek to establish an audit and other committees of our board of directors. It is possible that if our Board of Directors included independent directors and if we were to adopt some or all of these corporate governance measures, stockholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees may be made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions.
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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.
Critical Accounting Policies
We prepare our financial statements in conformity with GAAP, which requires management to make certain estimates and assumptions 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 financial statements are prepared and actual results could differ from our estimates and such differences could be material. We have identified below the critical accounting policies which are assumptions made by management about matters that are highly uncertain and that are of critical importance in the presentation of our financial position, results of operations and cash flows. Due to the need to make estimates about the effect of matters that are inherently uncertain, materially different amounts could be reported under different conditions or using different assumptions. On a regular basis, we review our critical accounting policies and how they are applied in the preparation our financial statements.
USE OF ESTIMATES – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
IMPAIRMENT OF LONG-LIVED ASSETS – Long-lived assets, including fixed assets and identifiable intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset may not be recoverable. When required impairment losses on assets to be held and used are recognized based on the fair value of the asset. The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required. If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets. We did not recognize any impairment losses for any periods presented.
GOODWILL – Goodwill represents the excess of purchase price and related costs over the value assigned to the net tangible and intangible assets of businesses acquired. We evaluate goodwill for impairment utilizing undiscounted projected cash flows in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, “Intangibles — Goodwill and Other” (“ASC Topic 350”).
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of and for the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were not effective. Material weaknesses noted are: lack of a functioning audit committee due to a lack of a majority of independent members; lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; inadequate segregation of duties consistent with control objectives and affecting the functions of authorization, recordkeeping, custody of assets, and reconciliation; and, management dominated by a single individual/small group without adequate compensating controls.
Currently, management contracts with a professional services firm to assist with the preparation of the filings. However, until the Company has received additional funding, they are unable to remediate the above material weaknesses.
For a full discussion of our internal control over financial reporting, please refer to Item 9, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for the period ended February 28, 2013 on Form 10-K.
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Changes in Internal Control Over Financial Reporting
No change in the Company’s internal control over financial reporting occurred during the three months ended May 31, 2013, that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
As of the date of this Quarterly Report, neither we nor any of our officers or directors is involved in any litigation either as plaintiffs or defendants. As of this date, there is not any threatened or pending litigation against us or any of our officers or directors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three month period ended May 31, 2013, there was no modification of any instruments defining the rights of holders of the Company’s common stock and no limitation or qualification of the rights evidenced by the Company’s common stock as a result of the issuance of any other class of securities or the modification thereof.
Item 3. Defaults upon Senior Securities
There have been no defaults in any material payments during the covered period.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
The Company does not have any other material information to report with respect to the nine month period ended May 31, 2013.
Item 6. Exhibits
(a) Exhibits included herewith are:
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2.1 | Asset Purchase Agreement, dated as of March 25, 2011, by and among Crawford Mobile Installation Corporation and Crawford Mobile Install (sole proprietorship). (2) |
3.1 | Articles of Incorporation of On The Move Systems Corporation (1) |
3.2 | Bylaws of On The Move Systems Corporation (1) |
3.3 | Articles of Incorporation of Crawford Mobile Installation Corporation (2) |
3.4 | Bylaws of Crawford Mobile Installation Corporation (2) |
10.1 | Convertible Note from On the Move Systems Corporation to Global Equities Limited (2) |
10.2 | Note from Crawford Mobile Installation to John Crawford (2) |
10.3 | Note from Crawford Mobile Install to Greg Crawford dated September 28, 2010 (2) |
10.4 | Note from Crawford Mobile Install to Greg Crawford dated February 11, 2011 (2) |
31.1 * | Section 302 Certification |
32.1 * | Section 906 Certification |
101 ** | XBRL Interactive Data |
* Filed or furnished herewith
** To be submitted by amendment.
(1) Incorporated by reference to the comparable exhibit filed with our Registration Statement on Form S-1
(2) Incorporated by reference to the Form 8-K filed on March 28, 2011
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereto duly authorized:
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| ON THE MOVE SYSTEMS CORP |
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Dated: July 22, 2013 | By: | /s/ Patrick Brown |
| | Patrick Brown President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Secretary, Treasurer and Director |
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