The Company estimated the fair value of the derivative liabilities using the Black-Scholes option pricing model using the following key assumptions during the six months ended August 31, 2016
Basic earnings per share (“EPS”) is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted EPS is similarly calculated except that the common shares outstanding for the period is increased to reflect the potential dilution that could occur if outstanding convertible notes payable were converted and warrants were exercised. Anti-dilutive shares represent potentially dilutive securities that which are excluded from the computation of diluted income or loss per share as their impact would be anti-dilutive.
The following is a calculation of basic and diluted weighted-average shares outstanding:
The following is a calculation of weighted-average shares excluded from diluted EPS due to the anti-dilutive effect:
On September 4, 2016, we issued into a convertible promissory note for $31,320, for $25,000 in cash proceeds.
On September 8, 2016, the holder of our modified convertible promissory note dated August 30, 2016, converted $6,002 of principal and accrued interest into 193,633 shares of our common stock.
On September 9, 2016, the holder of our convertible promissory note dated February 3, 2016, converted $7,268 of principal into 285,000 shares of our common stock.
On September 22, 2016, the holder of our convertible promissory note dated February 3, 2016, converted $3,065 of principal into 299,000 shares of our common stock.
On September 29, 2016, the holder of our modified convertible promissory note dated August 30, 2016, converted $1,558 of principal and accrued interest into 259,635 shares of our common stock.
On September 29, 2016, the holder of our convertible promissory note dated February 3, 2016, converted $1,928 of principal into 315,000 share of our common stock.
On October 10, 2016, the holder of our modified convertible promissory note dated August 30, 2016, converted $1,713 of principal and accrued interest into 339,142 shares of our common stock.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
On the Move Systems Corp. (“we”, “us”, “our”, “OMVS”, or the “Company”) was incorporated in Nevada on March 25, 2010. We reincorporated into Nevada on February 17, 2015. Our business focus is transportation services. We are currently exploring the on-demand logistics market by developing a network of logistics partnerships. Our year-end is February 28. The company is located at 701 North Green Valley Parkway, Suite 200, Henderson, Nevada 89074. Our telephone number is 702-990-3271.
Our business focus is transportation-related technology services. We are currently exploring the online, on-demand logistics market by developing a shared economy network of trucking partnerships. OMVS is in the process of building a shared economy app designed to put independent drivers and brokers together for more efficient pricing and booking, optimized operations and quick delivery turnarounds. The company has signed a letter of intent with a Houston-area software design firm regarding development of such a platform. The Company believes that this app, when released, could revolutionize the trucking industry by connecting national and local carriers, enabling each to maximize revenues and reduce costs.
Critical Accounting Policies
We prepare our Consolidated financial statements in conformity with GAAP, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on historical experience, current trends, and other factors that management believes to be important at the time the condensed Consolidated financial statements are prepared. On a regular basis, we review our accounting policies and how they are applied and disclosed in our condensed Consolidated financial statements.
While we believe that the historical experience, current trends and other factors considered support the preparation of our condensed consolidated financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.
For a full description of our critical accounting policies, please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for the year ended February 29, 2016 on Form 10-K.
Results of Operations
Six months ended August 31, 2016 compared to the six months ended August 31, 2015.
General and Administrative Expenses
We recognized general and administrative expenses in the amount of $160,595 and $266,393 for the six months ended August 31, 2016 and ended 2015, respectively. The decrease is due to a reduction in professional fees.
Interest Expense
Interest expense increased from $331,698 for the six months ended August 31, 2015 to $345,645 for the six months ended August 31, 2016. Interest expense for the six months ended August 31, 2016 included amortization of discount on convertible notes payable of $244,091, compared to $252,246 for the comparable period of 2015.
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Gain on Derivative Instruments
During the six months ended August 31, 2016, we realized a $11,321,247 gain on the derivative liabilities related to our convertible notes and warrants. We had no derivative liabilities during the six months ended August 31, 2015.
Gain on Debt Forgiveness
During the six months ended August 31, 2016, we recognized a $30,000 gain on accounts payable that had been forgiven. We had no gain on debt forgiveness in the prior year.
Loss on Debt Covenant Violations
During the six months ended August 31, 2016, we recognized a $43,000 loss on debt covenant violations. We had no losses on debt covenant violations in the prior year. See Note 7.
Net Income
We had net income of $10,802,007 for the six months ended August 31, 2016 as compared to a $598,091 loss for the comparable period of 2015. The increase in net income relates entirely to the gain on derivative instruments related to our convertible notes payable and warrants.
Three months ended August 31, 2016 compared to the three months ended August 31, 2015.
General and Administrative Expenses
We recognized general and administrative expenses in the amount of $93,702 and $114,399 for the three months ended August 31, 2016 and ended 2015, respectively. The decrease is due to lower professional fees during the current period.
Interest Expense
Interest expense increased from $144,059 for the three months ended August 31, 2015 to $207,170 for the three months ended August 31, 2016.
Interest expense for the three months ended August 31, 2016 included amortization of discount on convertible notes payable of $154,800, compared to $105,146 for the comparable period of 2015.
The remaining interest expense was due to interest on our convertible notes payable and the interest portion of our capital lease.
Gain on Derivative Instruments
During the three months ended August 31, 2016, we realized a $11,321,247 gain on the derivative liabilities related to our convertible notes. We had no derivative liabilities during the three months ended August 31, 2015.
Gain on Debt Forgiveness
During the three months ended August 31, 2016, we recognized a $30,000 gain on accounts payable that had been forgiven. We had no gain on debt forgiveness in the prior year.
Loss on Debt Covenant Violations
During the three months ended August 31, 2016, we recognized a $43,000 loss on debt covenant violations. We had no losses on debt covenant violations in the prior year. See Note 7.
Net Income
We had net income of $11,007,375 for the three months ended August 31, 2016 as compared to a $258,458 loss for the comparable period of 2015. The increase in net income relates entirely to the gain on derivative instruments related to our convertible notes payable.
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Liquidity and Capital Resources
At August 31, 2016, we had cash on hand of $735. The company has negative working capital of $1,439,476 . Net cash used in operating activities for the six months ended August 31, 2016 was $33,121. 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 August 31, 2016.
Additional Financing
Additional financing is required to continue operations. Although actively searching for available capital, the Company does not have any current arrangements for additional outside sources of financing and cannot provide any assurance that such financing will be available.
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This item is not applicable to smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Management’s Report on Internal Control over Financial Reporting
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of August 31, 2016. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of August 31, 2016, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
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| 1. | As of August 31, 2016, we did not maintain effective controls over the control environment. Specifically we have not developed and effectively communicated to our employees our accounting policies and procedures. This has resulted in inconsistent practices. Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness. |
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| 2. | As of August 31, 2016, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness. |
Our management, including our principal executive officer and principal financial officer, who is the same person, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
Change in Internal Controls Over Financial Reporting
There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 12, 2015, we received notice that it had been sued in the United States District Court for the Central District of California. The plaintiff alleges that we obtained certain trade secrets through a third party also named in the suit. We believe the suit is without merit and intend to vigorously defend it.
ITEM 1A. RISK FACTORS
This item is not applicable to smaller reporting companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On March 1, 2016, we issued 190,000 shares of common stock upon conversion of $1,900 of a convertible note.
Each issuance of securities was issued without registration in reliance of the exemption from registration Section 3(a)9 of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company has not defaulted upon senior securities.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable to the Company.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
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(1) | Incorporated by reference of our Form DEF 14C file with the Securities and Exchange Commission on February 11, 2015. |
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(2) | Incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission on August 4, 2010. |
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(3) | Filed or furnished herewith. |
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(4) | To be submitted by amendment. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| On the Move Systems Corp. |
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Date: November 4, 2016 | BY: /s/ Robert Wilson |
| Robert Wilson |
| President, Chief Executive Officer, Chief Financial Officer,
Principal Accounting Officer, Treasurer and Director |
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