Quarterly Report for Quarter Ending November 30, 2025 (Form 10-Q)

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.

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.

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.

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.

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.

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.