Quarterly Report for Quarter Ending February 28, 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, 2024, 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.

The Company primarily undertakes its operations through its wholly owned subsidiary, PreAxia Health Care Payment Limited ("PreAxia Payment"). PreAxia Payment was incorporated pursuant to the laws of the Province of Alberta on November 26, 2015.

General Overview

PreAxia Payment is a company which intends to deliver a comprehensive suite of solutions and services directed at the emerging health payment market, specifically the opportunities tied to the growth of health spending accounts ("HSA"). There is a rapid shift in healthcare traditional payment models to consumer-directed healthcare that is creating significant opportunities for financial services and insurance industries to deliver new dynamic products to this emerging market.

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 solutions 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 $123.3 billion in assets in 2023 and 37.4 million consumers in 2023, an increase of more than 18% 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.

Plan of Operation

Over the next twelve months, we plan to:

	(a)	Raise additional capital to execute our business plans;
	(b)	Penetrate the health care processing markets in Canada, the United States and worldwide, by continuing to develop innovative health care processing products and services;
	(c)	Build up a network of strategic alliances with several types of health insurance companies, governments and other alliances in various vertical markets, and;
	(d)	Fill the positions of senior management sales, administrative and engineering positions.

Liquidity and Capital Resources

As of February 28, 2025, PreAxia's cash balance was $3 compared to $14 as of May 31, 2024. Our Company will be required to raise capital to fund our operations. PreAxia had a working capital deficit of $2,427,935 as of February 28, 2025, compared with a working capital deficit of $2,396,179 as of May 31, 2024.

Our net cash provided by (used in) operating activities for the nine months ended February 28, 2025 and February 29, 2024 is $387 and ($17,074), respectively. Our net loss for the nine months ended February 28, 2025 of $31,756 was primarily offset by the Advances - related party of $24,030 to show a cash provided by operating activities of $387. Our net loss for the nine months ended February 29, 2024 of $94,838 was primary offset by the increase in accounts payable and accrued liabilities - related party of $60,000 to show a cash used in operating activities of $17,074.

Our net cash provided by investing activities for the nine months ended February 28, 2025 and February 29, 2024 is $0 and $0 respectively.

Our net cash (used in) provided by financing activities for the nine months ended February 28, 2025 and February 29, 2024 is ($398) and $18,262, respectively, mainly due to advances - loan payable - shareholders.

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.

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.

There is substantial doubt about our ability to continue as a going concern as the continuation of our business is dependent upon obtaining further long-term financing, successful and sufficient market acceptance of our products and achieving a profitable level of operations. 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. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

Our working capital (deficit) as of February 28, 2025 and May 31, 2024 is summarized as follows:

Working Capital

		February 28, 2025				May 31, 2024
Current Assets		$	3			$	14
Current Liabilities			(2,427,938	)			(2,396,193	)
Working Capital Deficit		$	(2,427,935	)		$	(2,396,179	)

The increase in our working capital deficit of $31,756 was primarily due to an increase in accounts payable and accrued liabilities of $8,148 and an increase in advance - related party of $23,995.

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 February 28, 2025 and February 29, 2024

For the three months ended February 28, 2025 and February 29, 2024

Our operating results for the three months ended February 28, 2025 compared to the three months ended February 29, 2024 are described below:

Revenue

During the three months ended February 28, 2025 and February 29, 2024, the Company had revenue of $0 and $0, respectively. The Company earns a 10% commission on amounts reimbursed for eligible expenses.

Expenses

Our total expenses for the three months ended February 28, 2025 were $13,463 compared to $8,810 for the three months ended February 29, 2024. The increase in total expenses of $4,653 for the three months ending February 28, 2025 is due to an increase in professional expense of $5,449, an increase of $1,640 in office and administration fees, and a decrease in research and development of $2,436.

Research and Development

Research and development expenses during the three months ended February 28, 2025 was $0, as compared to $2,436 during the three months ended February 29, 2024. The decrease is due to a decrease in software lease expenses from Microsoft.

Office and Administration

Office and administration expenses increased by $1,640 for the three months ended February 28, 2025 due to an increase in office supply expense and filing fees.

Professional Fees

Professional fees during the three months ended February 28, 2025 increased by $5,449 to $8,921, as compared to $3,472 during the three months ended February 29, 2024. Professional fees increased due the annual financial statement audit being completed in the second quarter of fiscal 2025. Typically, the audit is completed in the first quarter.

Interest Expense

Interest expense is $0 for the three months ended February 28, 2025 and February 29, 2024 because accounts payable and accrued liabilities - related party, convertible note payable - related party and loans payable - shareholders are non-interest bearing.

Results of Operations - Nine months ended February 28, 2025 and February 29, 2024

For the nine months ended February 28, 2025 and February 29, 2024

Our operating results for the nine months ended February 28, 2025 compared to the nine months ended February 29, 2024 are described below:

Revenue

During the nine months ended February 28, 2025 and February 29, 2024, the Company had revenue of $0 and $0, respectively. The Company earns a 10% commission on amounts reimbursed for eligible expenses.

Expenses

Our total expenses for the nine months ended February 28, 2025 were $31,756 compared to $94,838 for the nine months ended February 29, 2024. The decrease in total expenses of $63,082 for the nine months ending February 28, 2025 is due to a decrease in consulting fees of $60,000, a decrease of $5,027 in office and administration fees, and a decrease in research and development of $6,136 which was partially offset by an increase in professional expense of $8,081.

Consulting Fees

During the nine months ended February 28, 2025 and February 29, 2024, Tom Zapatinas, the Chief Executive Officer and Director of the Company, earned $0 and $60,000, respectively, for consulting services provided to the Company, which is included in accounts payable and accrued liabilities - related party. During the period from June 1, 2024 to February 28, 2025, the Company did not accrue compensation to Tom Zapatinas.

Research and Development

Research and development expenses during the nine months ended February 28, 2025 was $0, as compared to $6,136 during the nine months ended February 29, 2024. The decrease is due to a decrease in software lease expenses from Microsoft.

Office and Administration

Office and administration expenses decreased by $5,027 for the nine months ended February 28, 2025 due to a decrease in office supply expense and filing fees.

Professional Fees

Professional fees during the nine months ended February 28, 2025 increased by $8,081 to $23,704, as compared to $15,623 during the nine months ended February 29, 2024. Professional fees increased due an increase in audit fees.

Interest Expense

Interest expense is $0 for the nine months ended February 28, 2025 and February 29, 2024 because accounts payable and accrued liabilities - related party, convertible note payable - related party and loans payable - shareholders 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.