PAXH 10-Q
Preaxia Health Care Payment Systems Inc. (PAXH)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from __________ to ______________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
(Title of class)
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.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an 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 | [_] | |
| [X] | 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes [_] No [_]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of April 20, 2026 the registrant had outstanding shares of Common Stock.
PREAXIA HEALTH CARE PAYMENT SYSTEMS INC.
TABLE OF CONTENTS
| PART I – FINANCIAL INFORMATION | 1 |
| ITEM 1. FINANCIAL STATEMENTS | 1 |
| ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 2 |
| ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 9 |
| ITEM 4. CONTROLS AND PROCEDURES | 9 |
| PART II – OTHER INFORMATION | 9 |
| ITEM 1. LEGAL PROCEEDINGS | 9 |
| ITEM 1A. RISK FACTORS | 9 |
| ITEM 1C CYBER SECURITY | 9 |
| ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 9 |
| ITEM 3. DEFAULTS UPON SENIOR SECURITIES | 9 |
| ITEM 4. MINE SAFETY DISCLOSURES | 9 |
| ITEM 5. OTHER INFORMATION | 9 |
| ITEM 6. EXHIBITS | 10 |
| SIGNATURES | 11 |
1
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 210 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature. Operating results for the three-month period ended November 30, 2025 are not necessarily indicative of the results that may be expected for the fiscal year ended May 31, 2026. For further information refer to the consolidated financial statements and footnotes thereto included in PreAxia's Annual Report on Form 10-K for the year ended May 31, 2025.
| Page | |
| Unaudited Condensed Consolidated Financial Statements | |
| Condensed Consolidated Balance Sheets as of November 30, 2025 (unaudited) and May 31, 2025 | F-1 |
| Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months ended November 30, 2025 and 2024 | F-2 |
| Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Deficit for the Three and Six Months ended November 30, 2025 and 2024 | F-3 |
| Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months ended November 30, 2025 and 2024 | F-4 |
| Notes to Unaudited Condensed Consolidated Financial Statements | F-5 |
2
| PreAxia Health Care Payment Systems Inc. | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
As of November 30, 2025, and May 31, 2025 Unaudited | ||||||||
| November 30, 2025 | May 31, 2025 | |||||||
| Assets | (Audited) | |||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Shareholders' Deficit | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accruals | $ | $ | ||||||
| Accruals and other current liabilities - related party | ||||||||
| Related party loans | ||||||||
| Bank indebtedness | ||||||||
| Short-term loans | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 8) | ||||||||
| Shareholders' Equity or Deficit | ||||||||
| Common stock, shares authorized, $ par value, and shares issued and outstanding at November 30, 2025, and May 31, 2025, respectively | ||||||||
| Additional paid in capital | ||||||||
| Stock subscription | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total shareholders' deficit | ( | ) | ( | ) | ||||
| Total liabilities and shareholders' deficit | $ | $ | ||||||
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
| F-1 |
PreAxia Health Care Payment Systems Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
Three and Six Months Ended November 30, 2025, and 2024
Unaudited
| Three Months Ended November 30, 2025 | Three Months Ended November 30, 2024 | Six months ended November 30, 2025 | Six months ended November 30, 2024 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| General and administrative expenses | ||||||||||||||||
| Consulting | ||||||||||||||||
| Research and development | ||||||||||||||||
| Management and labor | ||||||||||||||||
| Professional fees | ||||||||||||||||
| General and administration | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ||||||||||||||
| Other income | ||||||||||||||||
| Loss on settlement | ( | ) | ||||||||||||||
| Net loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Less Income tax expense | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other comprehensive loss | ( | ) | ( | ) | ||||||||||||
| Net comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares | ||||||||||||||||
| Earnings per share - basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
| F-2 |
PreAxia Health Care Payment Systems Inc.
Condensed Consolidated Statement of Changes in Shareholders’ Deficit
For the
Three and Six Months Ended November 30, 2025, and 2024
Unaudited
| Number of shares | Par $0.001 Common stock | Additional Paid in Capital | Stock Subscription | Other Comp Income | Accumulated deficit | Total | ||||||||||||||||||||||
| Balance, May 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Net Comprehensive loss | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, August 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net Comprehensive loss | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, November 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Balance, May 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Stock issued for cash | ||||||||||||||||||||||||||||
| Stock issued for debt | ||||||||||||||||||||||||||||
| Stock issued for short-term loans | ( | ) | ||||||||||||||||||||||||||
| Proceeds from options exercised | ||||||||||||||||||||||||||||
| Option expense | — | |||||||||||||||||||||||||||
| Net Comprehensive loss | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, August 31, 2025 | ( | ) | ||||||||||||||||||||||||||
| Option expense | — | |||||||||||||||||||||||||||
| Net Comprehensive loss | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Balance, November 30, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
| F-3 |
PreAxia Health Care Payment Systems Inc.
Condensed Consolidated Statement of Cash Flows
Six Months Ended November 30, 2025, and 2024
| Six months ended November 30, 2025 | Six months ended November 30, 2024 | |||||||
| Cash used in Operating activities | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used by operating activities: | ||||||||
| Option expense | ||||||||
| Shares issued for services | ||||||||
| Loss on settlement of debt | ||||||||
| Changes in non-cash working capital: | ||||||||
| Accounts payable | ( | ) | ||||||
| Other current liabilities | ||||||||
| Net cash flows used by operating activities | ( | ) | ( | ) | ||||
| Investing activities | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| Net cash flows from investing activities | ( | ) | ||||||
| Financing activities | ||||||||
| Bank overdrafts | ( | ) | ( | ) | ||||
| Proceeds from long term debt | ||||||||
| Repayments of long term debt | ( | ) | ||||||
| Proceeds from related party debt | ||||||||
| Repayments to related party debt | ( | ) | ||||||
| Repayments to related parties | ||||||||
| Proceeds from sale of stock | ||||||||
| Net cash flows from financing activities | ||||||||
| Foreign currency change | ( | ) | ||||||
| Increase in cash during the period | ||||||||
| Cash, beginning of the period | ||||||||
| Cash, end of the period | $ | $ | ||||||
| Supplemental disclosures | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| Stock issued for related party debt | $ | $ | ||||||
| Stock issued for short-term debt | $ | $ | ||||||
| Stock and option expense for assets | $ | $ | ||||||
ee Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
| F-4 |
PREAXIA HEALTH CARE PAYMENT SYSTEMS INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended November 30, 2025, and May 31, 2025
Note 1 - Organization and Description of Business
PreAxia Health Care Payment Systems Inc. (the "Company" or "PreAxia") was incorporated on April 3, 2000, in the State of Nevada. On May 31, 2005, the Company acquired all of the outstanding stock of Tiempo de Mexico Ltd. ("Tiempo") in exchange for shares of the common stock of the Company with a par value of $. The Company had no operations prior to the date of the aforementioned acquisition.
The business objective of the Company is the development, distribution, marketing and sale of health care payment processing services and personal financial management applications, websites, and products. The Company’s products are in the development stage.
Formerly development operations of the Company were undertaken by its wholly owned subsidiary, PreAxia Health Care Payment Ltd. ("PreAxia Payment"), incorporated pursuant to the laws of the Province of Alberta on November 26, 2015. PreAxia Payments still manages the Calgary office activity.
On May 23, 2025, the Company created a wholly owned subsidiary in Alberta Canada, named Zane Inc. CA. This subsidiary will develop and market the personal financial management products and perfect the health care payment processing services. Zane Inc had no operations before June 30, 2025.
On September 11, 2025, the Company created a wholly owned subsidiary in Nevada, named Zane Inc US. This subsidiary will develop and market the personal financial management products and perfect the health care payment processing services. Zane Inc had no operations before October 20, 2025.
Note 2 - Summary of Significant Accounting Policies
Basis of presentation
The unaudited condensed consolidated financial statements of the Company for the three and six months ended November 30, 2025, and 2024 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of May 31, 2025 was derived from the audited financial statements included in the Company's financial statements as of and for the fiscal year ended May 31, 2025 included in the Company's Annual Report on Form I0-K filed with the Securities and Exchange Commission (the "SEC") on September 30, 2025. These financial statements should be read in conjunction with that report.
Principles of Consolidation
The consolidated financial statements include the accounts of PreAxia Health Care Systems Inc and its wholly owned subsidiaries (i) PreAxia Health Care Payment Ltd., (ii) Zane Inc CA, and (iii) Zane Inc. US. All inter-company accounts and transactions have been eliminated in consolidation.
Going Concern
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in
the normal course of business. During the six months ended November 30, 2025, the Company incurred a net comprehensive loss of ($
The Company's ability to continue as a going concern is dependent upon its ability to develop additional sources of capital and to ultimately achieve profitable operations. Currently, the Company does not have significant cash or other material assets, nor does it have operations or a source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. The Company's officers or principal shareholders are committed to making advances or loans to pay certain legal, accounting, and administrative costs.
The Company hopes to be able to attract suitable investors for our business plan, which will not require us to use our cash. There can be no assurance that the Company will be successful in this situation. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing.
| F-5 |
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents.
Use of Estimates
The preparation of the Company's consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Although these estimates are based on management's knowledge of current events and actions that our company may undertake in the future, actual results could differ from those estimates.
Foreign Currency Translation
The functional currency of the Company is the United States dollar. The functional currency of the Subsidiaries is the Canadian dollar. Assets and liabilities in the accompanying consolidated financial statements are translated into United States dollars at the exchange rate in effect at the balance sheet date and capital accounts are translated at historical rates. Income statement accounts are translated at the average rates of exchange prevailing during the period. Translation adjustments arising from the use of differing exchange rates from period to period are included in the accumulated other comprehensive income (loss) account in stockholders' deficit.
Transactions undertaken in currencies other than the functional currency of the entity are translated using the exchange rate in effect as of the transaction date. Any transaction exchange gains and losses are included in the statement of operations and comprehensive loss.
The Company's reporting currency is the U.S. dollar. All transactions initiated in Canadian Dollars are translated into U.S. dollars in accordance with Accounting Standards Codification ("ASC") 830-30, "Translation of Financial Statements," as follows:
| i) | assets and liabilities are translated at the closing rate at the date of the balance sheet; |
| ii) | income and expenses are translated at average exchange rates for the six months ended November 30, 2025; |
| iii) | all resulting exchange differences are recognized as other comprehensive income, a separate
component of equity. The exchange differences during the three and six months ended November 30, 2025, and November 30, 2024, were ($ |
| Foreign exchange rates | November 30, 2025 | May 31, 2025 | ||||||
| Ending exchange rate US$ to Canada$ | ||||||||
| Ending exchange rate Canada$ to US$ | ||||||||
| Average exchange rate US$ to Canada$ | ||||||||
| Average exchange rate Canada$ to US$ | ||||||||
Fair Value of Financial Instruments
The Company defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Management uses a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level l) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
Level l - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level l that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 - Inputs that are both significant to the fair value measurement and unobservable.
The fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of November 30, 2025, and May 31, 2024. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.
| F-6 |
Net loss per share of common stock is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. The Company has and zero shares of potential common stock equivalents in outstanding options during the periods ended November 30, 2025, and 2024, respectively, which have been excluded from the loss per share computation as their effect would have been anti-dilutive due to net losses.
Research and Development Costs
The Company expenses research and development costs as incurred in
accordance with FASB ASC 730 "Research and Development." During the three and six months ended November 30, 2025, and November
30, 2024, we incurred $
Software Development Costs
The Company accounts for software development costs in accordance with several accounting pronouncements, including FASB ASC 730, "Research and Development," FASB ASC 350-40, "Internal-Use Software," FASB 985-20, "Costs of Computer Software to be Sold, Leased, or Marketed" and FASB ASC 350-50, "Website Development Costs."
Costs incurred during the period of planning and design, prior to the period determining technological feasibility, for all software developed for use internal and external, has been charged to operations in the period incurred as research and development costs. Additionally, costs incurred after determination of readiness for market have been expensed as research and development.
The Company will capitalize certain costs in the development of our proprietary software (computer software to be sold, leased or licensed) for the period after technological feasibility was determined and prior to our marketing and initial sales.
Website development costs are capitalized under the same criteria as our marketed software.
During the three and six months ended November 30, 2025 and 2024, the
Company capitalized $
Impairment of Long-lived Assets
Long-lived assets such as property, equipment and identifiable intangibles are reviewed for impairment whenever facts and circumstances indicate that the carrying value 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.
Commitments and Contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
Revenue Recognition
In accordance with ASC 606, "Revenue from Contracts with Customers," revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods or services. ASC 606 requires us to apply the following steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, we satisfy the performance obligation.
Gross Versus Net Revenue
ASC 606 provides guidance on proper recognition of principal versus agent considerations which is used to determine gross versus net revenue recognition. Under ASC 606, the core objective of the guidance on gross versus net revenue recognition is to help determine whether an entity is a principal or an agent in a transaction. In general, the primary difference between these two is the performance obligation being satisfied. The principal has a performance obligation to provide the desired goods or services to the end customer, whereas the agent arranges for the principal to provide the desired goods or services. Additionally, a fundamental characteristic of a principal in a transaction is control. A principal substantively controls the goods and services before they are transferred to the customer as well as controlling the price of the good or service being provided. An agent normally receives a commission or fee for these activities. In addition to control, the level at which an entity controls the price of the good or service being transferred determines principal versus agent status. The more discretion over setting price a company has in providing the good or service, the more likely they are considered a principal rather than an agent. Under the guidance when another party is involved in providing a good or service to a customer, an entity is a principal if the entity obtains control of the asset or right to a service performed by the other party.
During the three and three and six months ended November 30, 2025,
and 2024, the Company had revenue of $
| F-7 |
Stock-Based Compensation
Our stock-based compensation awards principally consist of stock options and warrants. The Company follows Section 718-55-10 of the FASB Accounting Standards Codification, which requires, we determine the fair value of the equity-based awards.
We estimate the fair value of stock options and warrants to purchase our common stock using the Black-Scholes-Merton (“Black-Scholes”) option-pricing model. The Black-Scholes option pricing model considers several variables and assumptions in estimating the fair value of stock-based awards. These variables include:
| The per share fair value of the underlying common stock; | |
| The exercise price; | |
| The risk-free interest rate | |
| The expected term | |
| The expected stock price volatility over the expected term; and | |
| The expected annual dividend yield. |
We recognize the fair value of each option award as compensation expense on a straight-line basis over the requisite service period, which principally range from one to three years. We have elected to account for forfeitures as they occur and initially record stock-based compensation expense assuming all option holders will complete the requisite service period. If an employee or contractor forfeits an award because they fail to complete the requisite service period, we will reverse previously recognized stock-based compensation expense in the period the award is forfeited.
The warrants are subject to service-based or time-based vesting terms. For such awards, our accounting requires that we evaluate the probability of achievement of the vesting terms. Management concluded that the achievement of a vesting term is probable, we recognize compensation cost for that award according the vesting schedule.
We classify stock-based compensation expense in our consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s salary and related costs are classified or in which the award recipient’s service payments are classified. In future periods, we expect stock-based compensation expenses to increase, due in part to our existing unrecognized stock-based compensation expense and as we grant additional stock-based awards to continue to attract and retain employees.
Income Taxes
The Company follows Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of income and Comprehensive Income in the period that includes the enactment date.
The Company follows section 740-10-25 of the FASB Accounting Standards Codification ("Section 740-10-25") with regards to uncertain income tax positions. Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, "Earnings per Share". Basic earnings per common share ("EPS") calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
| F-8 |
Note 3 - Recent Accounting Pronouncements
The Company reviews new accounting standards as issued or updated. No new standards or updates had any material effect on these consolidated financial statements. The accounting pronouncements issued subsequent to the date of these consolidated financial statements that were considered significant by management were evaluated for the potential effect on these consolidated financial statements. Management does not believe any of the subsequent pronouncements will have a material effect on these consolidated financial statements as presented.
Segment reporting required by ASU 2023-07 Segment Reporting-Improvements to Reportable Segment Disclosures are included in these statements. There have been no other recent accounting pronouncements or changes in accounting pronouncements during the period ended May 31, 2025, that are of significance or potential significance to the Company. See note 9 below.
Note 4 – Property and equipment, net
The Company has recorded the following property and equipment:
| November 30, 2025 | May 31, 2025 | |||||||
| Software acquisition costs | $ | $ | ||||||
| Software development in process | — | |||||||
| Total property and equipment | ||||||||
| Less accumulated amortization | ( | ) | ( | ) | ||||
| Net property and equipment | $ | $ | ||||||
Depreciation
expense recorded for the years ended November 30, 2025, and 2024 were $
| F-9 |
Note 5– Short term loans payable
Short-term loans payable consists of a number
of loans from friends of the Company. The loans are normally on open accounts bearing no interest. On November 30, 2025, and May 31,
2025, the short-term loans totaled $
As of August 31, 2025, the Board of Directors negotiated with several loan holders and
agreed to convert several loans to PreAxia common stock. Three holders agreed to convert 125,645 in debt and subscriptions to 491,314
shares of common stock. Management determined the fair value of the common stock at the market price on the date of the conversion. A loss
of $
Note 6 - Related Party Transactions
On June 30, 2025, Pavel Bondarev became a director, shareholder, and a related party.
Accruals and other liabilities
Both Tom Zapatinas and Pavel Bondarev have employment
agreements with the Company. These agreements started on July 1, 2025. The base compensation for each person is $
As of November 30, 2025, and May 31, 2025, accruals and other current
liabilities - related party included accrued officer compensation due to Tom Zapatinas (Chief Executive Officer and a Director of the
Company) totaling $
During the three and six months ended November 30, 2025, and 2024,
Tom Zapatinas, earned $
Related party loans
As of November 30, 2025, and May 31, 2025, the related party loans
included advances payable due to Tom Zapatinas totaled $
As of November 30, 2025, and May 31, 2025, a convertible
promissory note - related
party of $
As of November 30, 2025, and May 31, 2025,
convertible note payable - related party of $
Intercompany loans have been eliminated.
Note 7 - Stockholders' Equity or Deficit
Common Stock
Common Stock, par value of $ per share; shares authorized: and shares issued and outstanding on November 30, 2025, and May 31, 2025, respectively. Holders of Common Stock have one vote per share of Common Stock held.
On June 30, 2025, the Company issued restricted warrants for shares of common stock at $ per share to acquire an exclusive contract with a vendor. Using the Black-Scholes model the employment contract was valued at $778,800. Forty percent (40%) of the vested and were issued issued as of the grant date and sixty percent (60%) of the warrants are being held in escrow to be released over the next three (3) years. The value of the management contract is being amortized to expenses over three (3) years.
Also on June 30, 2025, the Company issued restricted warrants for 1,500,000 shares of common stock for past services. The consulting contracts were valued at $70,800. Forty percent (40%) warrants vested and were as of the grant date as consulting expenses and sixty percent (60%) of the warrants are being held in escrow to be released over the next three (3) years. The unissued value of the consulting contract is being amortized to expenses over three (3) years.
| F-10 |
2025 Stock Plan
In connection with the ramp up of operations with the signing of the management contract with INARE, the Company adopted the 2025 Stock Plan, which provides for the issuance of stock options, restricted stock warrants and other stock-based compensation awards to employees, directors, officers, consultants or others who provide services to the Company. The specific terms of such awards are to be established by the board of directors or a committee thereof.
As of July 1, 2025, shares of the Company’s Common Stock were available for the grant of awards under the 2025 Stock Plan.
A summary of activity in the Company’s stock-option grants for the six months ended November 30, 2025, is as follows:
| Stock Options | Vesting | Number | Value | |||||||||
| Outstanding at May 31, 2025 | $ | |||||||||||
| Issued | ||||||||||||
| Forfeited | ( | ) | ( | ) | ( | ) | ||||||
| Vested | — | ( | ) | |||||||||
| Exercised | ||||||||||||
| Outstanding at November 30, 2025 | $ | |||||||||||
| Unvested at November 30, 2025 | ||||||||||||
| Option inputs | ||||
| The per share fair value of the underlying common stock; | $ - $ | |||
| The exercise price; | $ | |||
| The risk-free interest rate | % | |||
| The expected term | yrs | |||
| The expected stock price volatility over the expected term | % | |||
| The expected annual dividend yield. | % | |||
The option expense recorded as contract
labor costs for the three and six months ended November 30, 2025, and 2024, was $
Unrecognized compensation expense related to options was $ as of November 30, 2025, and is expected to be recognized over a weighted-average period of years.
Warrants
As noted above, the Company issued
warrants for shares of common stock for a management contract. These warrants were valued at $
During the three and six months ended
November 30 2025, and 2024, the Company recognized or $
| F-11 |
Consulting contracts
As noted above,
the Company issued warrants for shares of common stock for consulting contracts. These warrants were valued at $
During the three and six months ended
November 30, 2025, and 2024, the Company recognized $
A summary of warrant activity in the Company for the quarter ended November 30, 2025, is as follows:
Outstanding warrants at May 31, 2025.
| Issued | Name | Warrants | ||||||
| Management contract | ||||||||
| Consulting contracts | ||||||||
| Forfeited | ||||||||
| Vested and Exercised | ||||||||
| Management contract | ||||||||
| Consulting contracts | ||||||||
| Outstanding warrants at November 30, 2025 | ||||||||
Unrecognized compensation expense related to warrants was $ as of November 30, 2025, and is expected to be recognized over a weighted-average period of years.
Note 8 - Contingencies and Commitments
From time to time the Company may be a party to litigation matters involving claims against the Company. Management believes that there are no current matters that would have a material effect on the Company's financial position or results of operations.
The Company does not have long-term commitments for equipment purchases or leases. The Company does not lease office space as the CEO operates the business from his personal residence.
Zane Inc CA started leasing an executive suite on a month-to-month basis in September 2025.
Note 9 - Segment reporting
FASB ASU 2023-07 requires all public entities to expand segment reporting on all significant segments and to report significant segment expenses when the chief operating decision maker uses this information to make decisions about resource allocation. The president and CEO of PreAxia was the chief operating decision maker during fiscal years ended, May 31, 2025, and the quarter ended November 30, 2025. At November 30, 2025 the assets consist of cash and software development costs. There were no assets at May 31, 2025.
| F-12 |
In July the Company focus switched to personal financial management software development. During the quarter ended November 30, 2025, management determined the Company is only operating in one segment but two locations. There are no revenues, and the expenses are split between a Canadian office and the US Holding company. Corporate expenses associated with public reporting, finance, and management are associated with the US holding Company. Software development and office costs are associated with the Canadian subsidiaries. The basic information on locations is as follows:
| Assets | November 30, 2025 | May 31, 2025 | $ diff | % diff | ||||||||||||
| Canadian assets | $ | $ | $ | |||||||||||||
| US assets | ||||||||||||||||
| $ | $ | $ | ||||||||||||||
| Operations | November, 2025 | November 30, 2024 | $ diff | % diff | ||||||||||||
| Canadian revenues | $ | $ | $ | |||||||||||||
| Canadian expenses | ( | ) | % | |||||||||||||
| Net | ( | ) | % | |||||||||||||
| US revenues | ||||||||||||||||
| US expenses | ( | ) | - | % | ||||||||||||
| Net | ( | ) | - | % | ||||||||||||
| Combined net loss | $ | $ | ( | ) | $ | % | ||||||||||
Note 10 - Subsequent Events
The Company has evaluated all subsequent events through the date these financial statements were issued, and no other subsequent events occurred that required disclosure, except:
Zane Inc CA started leasing an executive suite on a month-to-month basis in September 2025.
On December 10, 2025, the Company sold shares of common stock
for $
On March 9, 2026, the Company sold shares of common stock for $
| F-13 |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This quarterly report contains forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "intends," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors which may cause our or our industry's actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.
Such factors include, among others, the following: international, national and local general economic and market conditions; demographic changes; the ability of PreAxia to sustain, manage or forecast its growth; the ability of PreAxia to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or failure to comply with government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other factors referenced in this and previous filings.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Given these uncertainties, readers of this Form 10-Q and investors are cautioned not to place undue reliance on such forward-looking statements. PreAxia disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments, except as required by applicable law, including the securities laws of the United States.
All amounts stated herein are in US dollars unless otherwise indicated.
The management's discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The following discussion of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements for the year ended May 31, 2025, together with notes thereto. As used in this quarterly report, the terms "we," "us," "our," "PreAxia" and the "Company" means PreAxia Health Care Payment Systems Inc. and its wholly-owned subsidiaries, unless the context clearly requires otherwise.
General Overview
Corporate Overview
PreAxia Health Care Payment Systems Inc. (the "Company" or "PreAxia") was incorporated on April 3, 2000, in the State of Nevada. On May 31, 2005, the Company acquired all of the outstanding stock of Tiempo de Mexico Ltd. ("Tiempo") in exchange for 5,000,000 shares of the common stock of the Company with a par value of $0.001. The Company had no operations prior to the date of the aforementioned acquisition. On October 21, 2025, the Company was domiciles in Florida.
The business objective of the Company is the development, distribution, marketing and sale of health care payment processing services and personal financial management applications, websites, and products. The Company’s products are in the development stage.
The operations of the Company were formerly undertaken by its wholly owned subsidiary, PreAxia Health Care Payment Ltd. ("PreAxia Payment"), incorporated pursuant to the laws of the Province of Alberta on November 26, 2015. PreAxia Payment still manages the Calgary office activity.
On May 23, 2025, the Company created a wholly owned subsidiary in Alberta Canada, named Zane Inc. CA. This subsidiary is developing and plans to market personal financial management products and perfect the health care payment processing services. Zane Inc had no operations before June 30, 2025.
On September 11, 2025, the Company created a wholly owned subsidiary in Nevada, named Zane Inc US. This subsidiary will market the personal financial management products and the health care payment processing services in the United States. Zane Inc US had no operations before October 20, 2025.
General Overview
PreAxia Health Care Payment Systems Inc. (the "Company" or "PreAxia") was incorporated on April 3, 2000, in the State of Nevada. On May 31, 2005, the Company acquired all of the outstanding stock of Tiempo de Mexico Ltd. ("Tiempo") in exchange for 5,000,000 shares of the common stock of the Company with a par value of $0.001. The Company had no operations prior to the date of the aforementioned acquisition. On October 21, 2025, the Company was domiciles in Florida.
The business objective of the Company is the development, distribution, marketing and sale of health care payment processing services and personal financial management applications, websites, and products. The Company’s products are in the development stage.
| 3 |
Spawned by the need to address escalating health care costs, changes in the regulatory environment and the growing consumer desire for greater participation in the management of their health benefits, the boundaries between health care and the financial services industries are becoming increasingly blurred. With the trend towards self-directed health payment systems and the growing demand for faster, easier and more convenient benefit services, the insurance and benefits industries are banking on HSA medical payments being their next big growth conduit. Studies suggest that HSAs in the US reached $122.8 billion in assets in 2023 and 33.9 million consumers in 2022, an increase of more than 11% of assets over the prior year. This coupled with the continued growth of the Canadian group insurance industry illustrates the emerging opportunity for innovative health payment services. We intend to initially launch our products in Canada. We believe that Canadian businesses are embracing a new healthcare financing vehicle to provide greater value to employees, increase profitability and get more return from their investment. We intend to provide them with services to capture this market opportunity.
Our new subsidiaries, Zane Inc CA and Zane US Inc., will concentrate on developing and marketing personal financial tools. Zane's product philosophy centers on a fundamental belief: everyone deserves access to genius level financial guidance. Zane is building the financial operating system for Generation Z - an AI-powered super-app that not only tracks money but also actively and automatically manages it. We're creating what we call a "personal AI-banker in your pocket" - a revolutionary platform that combines the entire world's banking and financial knowledge with an intimate understanding of each user's unique situation, goals, and needs.
The platform centers around three breakthrough innovations:
| 1. | High-Interest Super Account (HISA): Eliminates boundaries between checking, savings, and investment accounts, allowing every dollar to grow at a 10% APY average while remaining instantly accessible |
| 2. | Smart Debit Card: Enforces daily spending limits based on predictive budgeting, making overspending physically impossible while building credit automatically |
| 3. | MoneyNet: A distributed financial network monitors all user accounts across every institution, automatically orchestrating fund movements to prevent overdrafts, maximize returns, and minimize fees |
The Company will then concentrate on incorporating the comprehensive suite of systems and services directed at the emerging health payment market into personal financial management systems and marketing the combined systems to retail and wholesale customers.
Plan of Operation
Over the next twelve months, we plan to:
| (a) | Raise additional capital to execute our business plans; |
| (b) | Fill the positions of senior management sales, administrative and engineering positions. |
| (c) | Develop state-of-the-art personal financial management applications for younger professionals. |
| (d) | Penetrate markets in Canada, the United States and worldwide, with comprehensive financial and health care products and services; and |
| (e) | Build up a network of strategic alliances with several types of large employers, health insurance companies, governments and other alliances in various vertical markets. |
Liquidity and Capital Resources
As of November 30, 2025, PreAxia's cash balance was $13,846 compared to $0 as of May 31, 2025. Our Company will be required to raise capital to fund our operations. PreAxia had a working capital deficit of ($754,919) as of November 30, 2025, compared with a working capital deficit of ($2,341,169) as of May 31, 2025.
Our ability to meet our financial liabilities and commitments is primarily dependent upon the continued issuance of equity to new stockholders and our ability to achieve and maintain profitable operations. PreAxia's cash and cash equivalents will not be sufficient to meet its working capital requirements for the next twelve-month period. We will not initially have any cash flow from operating activities as we are in the startup stage. We project that we will require an estimated $1,000,000 over the next twelve-month period to pay our arms-length creditors approximately $300,000 plus an additional $700,000 to complete our business plan. The Company plans to raise the capital required to satisfy our immediate short-term needs and additional capital required to meet our estimated funding requirements for the next twelve months primarily through the private placement of our equity securities or by way of loans or such other means as PreAxia may determine.
| 4 |
Working Capital
| November 30, 2025 | May 31, 2025 | |||||||
| Current Assets | $ | 13,846 | $ | — | ||||
| Current Liabilities | (768,765 | ) | (2,341,169 | ) | ||||
| Working Capital Deficit | $ | (754,919 | ) | $ | (2,341,169 | ) | ||
There are no assurances that we will be able to obtain the funds required for our continued operations. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due, and we will be forced to scale down or perhaps even cease the operation of our business. The decrease in our working capital deficit of $2,136,246 was primarily due to the conversion of debt, the sale of stock for cash, and stock issued for services.
The increase in our working capital deficit of $1,837,532 was primarily due to the conversion of debt, the sale of stock for cash, and stock issued for services.
Off-balance Sheet Arrangements
We have no 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 stockholders.
Results of Operations - Three Months ended November 30, 2025, and November 30, 2024
The following summary of our results of operations should be read in conjunction with our condensed consolidated financial statements for the three months ended November 30, 2025, and 2024.
For the three months ended November 30, 2025, and 2024
Our operating results for the three months ended November 30, 2025, compared to the three months ended November 30, 2024, are described below:
Revenue
During the three months ended November 30, 2025, and 2024, the Company had revenue of $0 and $0, respectively.
Expenses
Our total expenses for the three months ended November 30, 2025, were $112,055 compared to $13,666 for the three months ended November 30, 2024. The increase in total expenses of $98,389 for the three months ended November 30, 2025, is due to an increase in of $8,030 in consulting costs, an increase in of $70,444 in management costs, an increase of $16,616 in professional fees, and an increase in office and administration fees of $3,299.
Consulting Fees
During each of the three months ended November 30, 2025, two contractors received $8,030 in consulting fees, compared to $0 consulting fees paid during the three months ended November 30, 2024.
Research and Development
Research and development expenses during the three months ended November 30, 2025, increased by $0 to $0, as compared to $0 during the three months ended November 30, 2024. During the three months ended November 30, 2025 and 2024, a total of $129,790 and $0, respectively of development costs were capitalized.
Management and labor
During each of the three months ended November 30, 2025, and November 30, 2024, Tom Zapatinas, the Chief Executive Officer and Director of the Company, earned $30,000 and $0, respectively, for consulting services provided to the Company, which is included in accounts payable and accrued liabilities - related party.
| 5 |
Pavel Bondarez, a director and CEO of Zane Inc CA and Zane Inc US, earned $30,000 for management services and recognized three months of restricted stock warrant award equaling $88,331. His compensation was split between management and research and development during the three months ended November 30, 2025. He received $0 in the three months ended November 30, 2024.
Professional Fees
Professional fees during the three months ended November 30, 2025, increased by $16,616 to $28,899, as compared to $12,283 during the three months ended November 30, 2024.
Interest Income and Expense
Interest-net consists of $175 of interest income and ($0) of interest expense the three months ended November 30, 2025, and $0 for the three months ended November 30, 2024. Accounts payable, accrued liabilities - related party loans, and short-term loans are non-interest bearing.
Results of Operations - Six Months ended November 30, 2025, and November 30, 2024
The following summary of our results of operations should be read in conjunction with our condensed consolidated financial statements for the six months ended November 30, 2025, and 2024.
For the six months ended November 30, 2025, and 2024
Our operating results for the six months ended November 30, 2025, compared to the six months ended November 30, 2024, are described below:
Revenue
During the six months ended November 30, 2025, and 2024, the Company had revenue of $0 and $0, respectively.
Expenses
Our total expenses for the six months ended November 30, 2025, were $688,189 compared to $18,293 for the six months ended November 30, 2024. The increase in total expenses of $669,896 for the six months ended November 30, 2025, is due to an increase in of $36,350 in consulting expenses, an increase of $307,605 in management costs, an increase of $45,925 in professional fees, and an increase in office and administration fees of $16,612.
Consulting Fees
During each of the six months ended November 30, 2025, two contractors received $36,350 in consulting fees, compared to $0 consulting fees paid during the six months ended November 30, 2024.
Research and Development
Research and development expenses during the six months ended November 30, 2025, increased by $0 to $307,605, as compared to $0 during the six months ended November 30, 2024. Most of the increase was due to contractors and office expense allocated to developing new software. During the six months ended November 30, 2025 and 2024, a total of $120,790 and $0, respectively of development costs were capitalized.
Management and labor
During each of the six months ended November 30, 2025, and November 30, 2024, Tom Zapatinas, the Chief Executive Officer and Director of the Company, earned $50,000 and $0, respectively, for consulting services provided to the Company, which is included in accounts payable and accrued liabilities - related party.
| 6 |
Pavel Bondarez, a director and CEO of Zane Inc CA and Zane Inc US, earned $50,000 for management services and recognized six months of restricted stock award equaling $399,851. His compensation was split between management and research and development during the six months ended November 30, 2025. He received $0 in the six months ended November 30, 2024.
Professional Fees
Professional fees during the six months ended November 30, 2025, increased by $45,925 to $60,708, as compared to $14,783 during the six months ended November 30, 2024.
Interest Expense
Interest-net consists of $257 of interest income and ($13) of interest expense the six months ended November 30, 2025, and $0 for the six months ended November 30, 2024. Accounts payable, accrued liabilities - related party loans, and short-term loans are non-interest bearing.
Critical Accounting Policies
We have identified certain accounting policies, described below, that are the most important to the portrayal of our current financial condition and results of operations. Please refer to Note 2 of the accompanying consolidated financial statements for a full and complete disclosure of our accounting policies.
Revenue Recognition
In accordance with ASC 606, "Revenue from Contracts with Customers," revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods or services. ASC 606 requires us to apply the following steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, we satisfy the performance obligation.
Software Development Costs
The Company accounts for software development costs in accordance with several accounting pronouncements, including FASB ASC 730, "Research and Development," FASB ASC 350-40, "Internal-Use Software," FASB 985-20, "Costs of Computer Software to be Sold, Leased, or Marketed" and FASB ASC 350-50, "Website Development Costs."
Costs incurred during the period of planning and design, prior to the period determining technological feasibility, for all software developed for use internal and external, has been charged to operations in the period incurred as research and development costs. Additionally, costs incurred after determination of readiness for market have been expensed as research and development.
The Company will capitalize certain costs in the development of our proprietary software (computer software to be sold, leased or licensed) for the period after technological feasibility was determined and prior to our marketing and initial sales.
Website development costs are capitalized under the same criteria as our marketed software.
Stock-Based Compensation
Our stock-based compensation awards principally consist of stock options and restricted stock warrants. In each case, we must determine the fair value of the equity-based awards.
We estimate the fair value of stock options and warrants to purchase our common stock using the Black-Scholes-Merton (“Black-Scholes”) option-pricing model. The Black-Scholes option pricing model considers several variables and assumptions in estimating the fair value of stock-based awards. These variables include:
| The per share fair value of the underlying common stock; | |
| The exercise price; | |
| The risk-free interest rate | |
| The expected term | |
| The expected stock price volatility over the expected term; and | |
| The expected annual dividend yield. |
| 7 |
We recognize the fair value of each award as compensation expense on a straight-line basis over the requisite service period, which principally range from one to three years. We have elected to account for forfeitures as they occur and initially record stock-based compensation expense assuming all option holders will complete the requisite service period. If an employee or contractor forfeits an award because they fail to complete the requisite service period, we will reverse previously recognized stock-based compensation expense in the period the award is forfeited.
The restricted stock warrants are subject to service-based or time-based vesting terms. For such awards, our accounting requires that we evaluate the probability of achievement of the vesting terms. When we conclude that the achievement of a vesting term is probable, we recognize compensation cost for that award. If the service period extends into the future, we recognize the cost as a prepaid expense and amortize the cost over the length of the service period on a straight-line basis.
We issued warrants to purchase common stock to service providers in exchange for services to us and we determined that those options should be accounted for as equity-classified awards. We determine the fair value of these warrants at the date of issuance using the Black-Scholes option pricing model, based on the variables and assumptions discussed above, and recognize the fair value as stock-based compensation expense in our consolidated statements of operations and comprehensive loss as the options vest.
We classify stock-based compensation expense in our consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s salary and related costs are classified or in which the award recipient’s service payments are classified. In future periods, we expect stock-based compensation expenses to increase, due in part to our existing unrecognized stock-based compensation expense and as we grant additional stock-based awards to continue to attract and retain employees.
| 8 |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Management evaluated the effectiveness of our disclosure controls and procedures, as defined under Exchange Act Rule 13a-15(e). Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of November 30, 2025, the disclosure controls and procedures, based on the Framework of Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") 2013, were not effective.
Disclosure controls and procedures are the controls and other procedures that are designed to ensure that information required to be disclosed in our Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities Exchange Commission's rules and forms.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the quarter ended November 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material pending legal proceedings to which our company or subsidiary is a party or of which any of our property is the subject. In addition, we do not know of any such proceedings contemplated by any governmental authorities.
We know of no material proceedings in which any director, officer or affiliate of our company, or any registered or beneficial stockholder of our company, or any associate of any such director, officer, affiliate, or stockholder is a party adverse to our company or subsidiary or has a material interest adverse to our company or subsidiary.
ITEM lA. RISK FACTORS
Not applicable to smaller reporting companies.
ITEM 1C. CYBERSECURITY
One of the key functions of our Board of Directors is informed oversight of our risk management process, including risks arising from cybersecurity threats. Our Chief Financial Officer and Chief Operating Officer are primarily responsible for assessing and managing material risks from cybersecurity threats on a day-to-day basis. Our Board of Directors is responsible for monitoring and assessing strategic risk exposure, and our management team is additionally responsible for the day-to-day management of the material risks we face. Our Board of Directors administers its cybersecurity risk oversight function directly as a whole. We additionally may utilize the assistance of a third-party service provider, an information technology systems service for purposes of broadly managing our cybersecurity risks.
We have not maintained any current customer lists or sensitive data, but will create the procedures to assess, identify, and manage material risks from cybersecurity threats in the upcoming year.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
During the quarter ended November 30, 2025, no director
or Section 16 officer
| 9 |
ITEM 6. EXHIBITS
| Exhibit Number | Description |
| 3.1 | Articles of Incorporation (Incorporated by reference to the Exhibits filed with the Form SB-2 filed with the SEC on March 16, 2006) |
| 3.2 | Certificate of Amendment to Articles of Incorporation (Incorporated by reference to the Exhibits filed with Schedule 14C on November 14, 2008) |
| 3.3 | Bylaws (Incorporated by reference to the Exhibits filed with the Form SB-2 filed with the SEC on March 16, 2006) |
| 3.4 | Amended Bylaws (Incorporated by reference to the Exhibits filed with the Form SB-2 filed with the SEC on March 16, 2006) |
| 10.1 | Share Exchange Agreement dated May 31, 2005 between Kimberley Coonfer, Caribbean Overseas Investments Ltd., Sun World Partners Inc. and Tiempo De Mexico Ltd. (Incorporated by reference to the Exhibits filed with the Form SB-2 filed with the SEC on March 16, 2006) |
| 10.2 | Letter of Intent dated February 22, 2008 between Sun World Partners Inc. and H Pay Card Ltd. (Incorporated by reference to the Exhibits filed with the Form 8-K on March 5, 2008) |
| 10.3 | Acquisition Agreement dated April 22, 2008 (Incorporated by reference to the Exhibits filed with the Form 8-K on May 19, 2008) |
| 10.4 | Promissory note dated June 1, 2011 issued to Macleod Projects Inc. (Incorporated by reference to the Exhibits filed with the annual report on Form 10-K for the year ended May 31, 2011 filed with the SEC on October 21, 2011) |
| 10.5 | Promissory note dated August 5, 2011 issued to Macleod Projects Inc. (Incorporated by reference to the Exhibits filed with the annual report on Form 10-K for the year ended May 31, 2011 filed with the SEC on October 21, 2011 ) |
| 31.1* | Section 302 Certification of Principal Executive Officer |
| 32.1* | Certification Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.INS* | XBRL INSTANCE DOCUMENT |
| 101.SCH* | XBRL TAXONOMY EXTENSION SCHEMA |
| 101.CAL* | XBRL TAXONOMY EXTENSION CALCULATION LINKBASE |
| 101.DEF* | XBRL TAXONOMY EXTENSION DEFINITION LINKBASE |
| 101.LAB* | XBRL TAXONOMY EXTENSION LABEL LINKBASE |
| 101.PRE* | XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE |
* Filed herewith.
| 10 |
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.
PREAXIA HEALTH CARE PAYMENT SYSTEMS INC.
By: /s/Tom Zapatinas
Name: Tom Zapatinas
Title: President, Chief Executive Officer and Chief Financial Officer
(Principal Executive Officer and Principal Financial Officer)
Date: April 21, 2026
| 11 |