UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period endedNovember 30, 20172023

or

☐[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ______________

Commission File Number:  000-52365

PREAXIA HEALTH CARE PAYMENT SYSTEMS INC.

 (Exact name of registrant as specified in its charter)

PO Box 34072, 55-1610-37^th34075 Westbrook PO, 1610-37th Street S.W.S.W., Calgary, AlbertaT3C 3W2

(Address of principal executive offices) (Zip Code)

(403) (403) 850-4120

(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:

Common Stock, $0.001 par value
(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. Yes [X]  No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.

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 [X][X]

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.

19,667,698 commonAs of December 29, 2023 the registrant had 19,767,698 outstanding shares outstanding as of January 8, 2018Common Stock.

PREAXIA HEALTH CARE PAYMENT SYSTEMS INC.

TABLE OF CONTENTS

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 six monthsix-month period ended November 30, 20172023 are not necessarily indicative of the results that may be expected for the fiscal year endingended May 31, 2018.2024.  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, 2017.2023. 

PREAXIA HEALTH CARE PAYMENT SYSTEMS INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Months ended November 30, 2017

(Stated in US Dollars)

PREAXIA HEALTH CARE PAYMENT SYSTEMS INC.

CONSOLIDATED BALANCE SHEETS

November 30, 20172023 and May 31, 2017

(Stated in US Dollars)

SEE ACCOMPANYING NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS2022

PREAXIA HEALTH CARE PAYMENT SYSTEMS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

(Stated in U.S. Dollars)

SEE ACCOMPANYING NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

PREAXIA HEALTH CARE PAYMENT SYSTEMS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Stated in U.S. Dollars)

SEE ACCOMPANYING NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

PREAXIA HEALTH CARE PAYMENT SYSTEMS INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2017

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 28 January 2008.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.

The business objective of the Company is devoting substantially allthe development, distribution, marketing and sale of its present efforts to establish a new businesshealth care payment processing services and none ofproducts. The Company has realized only nominal revenues from its planned principal operations have commenced. operations.

The primary operations of the Company will eventuallyare expected to be primarily undertaken by its wholly owned subsidiary, PreAxia Canada IncHealth Care Payment Ltd. (“PreAxia Canada”Payment”).  , incorporated pursuant to the laws of the Province of Alberta on November 26, 2015.

PreAxia CanadaPayment is in the process of developing an online access system creating a health savingsspending account that allowswill facilitate card paymentspayment and processing services to third-party administrators, insurance companies and others. PreAxia Canada Inc. was incorporated pursuant to the laws of the Province of Alberta on January 28, 2008. PreAxia Canada Inc. is a wholly owned subsidiary of the Company.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentationpresentation

The Company’sunaudited condensed consolidated financial statements of the Company for the three and six months ended November 30, 2023 and 2022 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Reclassification

Certain prior period amounts in the consolidated financial statements have been reclassified to conform to current period presentation.

Unaudited Interim Financial Information

The accompanying unaudited consolidated financial statements of PreAxia Health Care Payment Systems Inc. (the “Company”) have been prepared in accordance with Securities and Exchange Commission requirements for interim financial statements. Therefore,information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K. Accordingly, they do not include all of 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 consolidatedbalance sheet information as of May 31, 2023 was derived from the audited financial statements included in the Company's financial statements as of and for the fiscal year ended May 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on August 30, 2023. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended May 31, 2017.

The interim consolidated financial information is unaudited. In the opinion of management, all adjustments necessary to present fairly the financial position as of November 30, 2017, and the results of operations, and cash flows presented herein have been included in the consolidated financial statements. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results of operations for the full year.

that report.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries (i) PreAxia Canada.Health Care Payment Systems Inc., incorporated pursuant to the laws of the Province of Alberta on January 28, 2008 (ii) PreAxia Canada Inc., incorporated pursuant to the laws of the Province of Alberta on January 28, 2008 and (iii) PreAxia Health Care Payment Ltd., incorporated pursuant to the laws of the Province of Alberta on November 26, 2015 (collectively, the “Subsidiaries”). All inter-company accounts and transactions have been eliminated in consolidation.

Going Concern

TheseThe accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted inassuming the United States applicable toCompany will continue as a going concern, which assumes thatcontemplates the Company will be able to meet its obligations and continue its operations for its next fiscal year.  Realization values may be substantially different from carrying values as shown and these consolidated financial statements do not give effect to adjustments that would be necessary to the carrying values and classificationrealization of assets and satisfaction of liabilities shouldin the normal course of business. During the six months ended November 30, 2023, the Company be unable to continueincurred a net loss of $86,028 and used cash in operating activities of $23,705, and as a going concern.  As of November 30, 2017, the Company2023, had not yet achieved profitable operations, has accumulated lossesa stockholders’ deficit of $4,050,487, has negative working capital of $1,291,319 and expects to incur further losses in the development of its business, all of which raises$2,382,758. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the consolidated financial statements are issued. The Company’s consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty should we be unable to continue as a going concern.

The Company’s ability to continue as a going concern is dependent upon its ability to generate futuredevelop 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 and/or a source of revenue sufficient to obtain the necessary financingcover its operating costs and allow it to meet its obligationscontinue as a going concern. The Company’s officers or principal shareholders are committed to making advances or loans to pay for certain legal, accounting, and repay its liabilities arising from normal business operations when they come due.  administrative costs.

Management hasThe 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 formal plan in place to address this concern but believesassurance that the Company will be successful in this situation. Even if the Company is able to obtain additional funds byfinancing, 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 and/or related party advances; however there is no assurance of additional funding being available.financing.

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 accounting principlesin the United States requires management to make estimates and assumptions that affect the amounts reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of thein 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 reported amounts of revenues and expenses during the reporting period.  Significant estimates include the estimated useful lives of property and equipment.  Actualfuture, 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 PreAxia Canadathe 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 Statementstatement of Operationsoperations and Comprehensive Loss.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:

Fair Value of Financial Instruments

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures aboutdefines fair value of its financial instruments and paragraph 820-10-35-37 ofas the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”)exchange price that would be received for an asset or paid to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishestransfer a framework for measuring fair value in accounting principles generally acceptedliability (an exit price) in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparabilityprincipal or most advantageous market for the asset or liability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishesan orderly transaction between market participants on the measurement date. Management uses a fair value hierarchy which prioritizesthat 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 inputs to valuation techniques used to measure fair value into three (3) broad levels.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 (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs.inputs (Level 3). The three (3) levels of the fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

The fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of November 30, 2023 and May 31, 2023. The carrying amountamounts of the Company’s financialcurrent assets and current liabilities such as cash and accrued expenses approximate their fair value because of the relatively short maturityperiod of those instruments. The Company’s notes payable approximatetime between the fair valueorigination of suchthese instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at August 31, 2017.

The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis.and their expected realization.

GainNet Income (Loss) Per Share

Gain (loss)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 10,587,600 and 0 shares of potential common stock equivalents related tofor convertible note payable – related party loans as ofoutstanding during the periods ended November 30, 20172023 and 2016, respectively. A separate computation of diluted earnings (loss)May 31, 2023, which have been excluded from the loss per share is not presented since the Company hascomputation as their effect would have been anti-dilutive due to net losses as the effects would be anti-dilutive.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 six months ended November 30, 2023 and 2022, we incurred $3,700 and $4,844, respectively, in research and development expenses.

Software Development Costs

The Company accounts for software development costs in accordance with several accounting pronouncements, including FASB ASC 730, Research“Research and Development,” FASB ASC 350-40, Internal-Use“Internal-Use Software,” FASB 985-20, Costs“Costs of Computer Software to be Sold, Leased, or MarketedMarketed” and FASB ASC 350-50, Website“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 has capitalizedwill 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 have beenare capitalized under the same criteria as our marketed software.

Capitalized software costs are stated at cost.  The estimated useful life of costs capitalized is evaluated for each specific project. The software is being amortized over three years starting June 2014 and has been fully amortized as of November 30, 2017 and May 31, 2017.

Impairment of Long-LivedLong-lived Assets

The Company follows paragraph 360-10-05-4 of the FASB Accounting Standards Codification for its long-lived assets. The Company’s long-lived assets, which includes computer equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets.  Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.  If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.

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 determined that there were no impairmentsestimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of long-lived assets as of November 30, 2017.

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.

The Company follows paragraph 605-10-S99-1provides administrative services for Health Spending Accounts sponsored by employers (the “customer”). The Company does not take possession of goods or control the services provided as the employees of the FASB Accounting Standards Codification forcustomer are free to determine their health care provider. As such, the Company records revenue recognition.net of reimbursements to employees. The Company will recognize revenue when it is realized or realizable and earned.  The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or theCompany’s services have been rendered to the customer (iii)consist of reviewing medical costs for eligibility and reimbursing employees for eligible costs.

During the sales price is fixed or determinable,three and (iv) collectability is reasonably assured.six months ended November 30, 2023 and 2022, the Company had revenue of $0 and $0 and $0 and $0, respectively. The Company earns a 10% commission on amounts reimbursed for eligible expenses.

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 adoptedfollows 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.  The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of Section 740-10-25.

Cash Flows Reporting

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.  The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.

Subsequent Events

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued.  Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

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.statements as presented.

Note 4–Related Party Transactions

Accounts Payable and Accrued Liabilities - Related Party

As of November 30, 2023 and May 31, 2023, accounts payable and accrued liabilities – related party due to Tom Zapatinas (Chief Executive Officer and a Director of the Company) totaled $300,000 and $240,000, respectively. During the six months ended November 30, 2023 and 2022, Tom Zapatinas, earned $60,000 and $60,000, respectively, for consulting services provided to the Company.

Advances – Related PartiesParty

As of November 30, 2023 and May 31, 2023, advances payable due to Tom Zapatinas totaled $72,257 and $64,952, respectively. During the six months ended November 30, 2023 and 2022, Tom Zapatinas, advanced the Company $8,816 and $19,241, respectively, in cash and was repaid $1,511 and $306, respectively, in cash.

Loans Payable – Shareholders

As of November 30, 20172023 and May 31, 2017, Accounts2023, loans payable - shareholders are $191,329 and $173,067, respectively. Loans payable – related party totaled $52,228shareholders are unsecured, non-interest bearing and $0,due on demand. During the six months ended November 30, 2023 and 2022, the Company was advanced $18,262 and $4,992, respectively, duein cash, and payable to Mr. Zapatinas. There are no terms of repayment for this payable.was repaid $0 and $0, respectively, in cash.

Accounts payable - related party was increased by $60,000 for consulting services by Mr. Zapatinas and $2,406 for other expenses incurred during the period. The accounts payable - related party was also decreased during the period by $10,178 for payments made to Mr. Zapatinas.Promissory Note – Related Party

As of November 30, 2016, the accounts payable2023 and May 31, 2023, promissory note - related party was reduced by $44,445 relatedof $466,817 and $466,817, respectively, is due to the issuance of 88,890 shares of common stock.Tom Zapatinas. The Note is non-interest bearing, unsecured and payable on demand.

Loans

Convertible Note Payable - Shareholders– Related Party

As of November 30, 20172023 and May 31, 2017, the Company owed other shareholders $51,708 and $17,280, respectively.2023, convertible note payable - related party of $1,058,760 is due to Tom Zapatinas.. The terms of repayment are 30 days after demandNote is made by the shareholder.

Convertible Loan Payable – Related Party

The Convertible Note Payable - Related Party in the amount of $1,058,760 as at November 31, 2017 and May 31, 2017 is noninterestnon-interest bearing, isunsecured, payable on demand and can be convertedconvertible in whole or in part into common shares at $0.10 per share.

Note 5 – Stockholders’ Deficit

Common Stock

The Company is authorized to issue up to 75,000,000 shares of common stock. The shares of common stock are non-assessable, without pre-emption rights,of the Company at a conversion price of $0.10 per share, which equates to 10,587,600 shares.

Note 5 – Stockholders’ Deficit

Common Stock

Common Stock, par value of $0.001 per share; 75,000,000 shares authorized: 19,767,698 shares issued and do not carry cumulative voting rights.outstanding at November 30, 2023 and May 31, 2023. Holders of our common stock are entitled toCommon Stock have one vote for eachper share held on all matters submitted to a vote of our stockholders. Holders of our common stock are entitled to receive dividends if, as and when declared by our Board of Directors.

During the period ended November 30, 2016, the Company issued 127,326 shares of which 88,890 were for the reduction of $44,445 in accounts payable related party and 38,436 for $19,218 in cash received. The Company also received an additional $26,339 for 51,679 shares to be issued as discussed below.

Subscription Payable

On April 21, 2016, the Company recorded the receipt of $19,667 in cash for 39,334 shares to be issued. Shares have been issued during the period ended August 31, 2016.

On May 9, 2016, the Company recorded the receipt $15,395 in cash for 30,790 shares to be issued. Shares have been issued during the period ended August 31, 2016.

On September 26, 2016, the Company recorded the receipt of $7,577 in cash for 14,154 shares to be issued. On October 21, 2016, the Company recorded the receipt of $18,762 in cash for 37,525 shares to be issued.Common Stock held.

Note 6 – 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.

Note 7 – Subsequent Events

The Company has evaluated all subsequent events through to the date of these financial statements were issued, were issued pursuant to the requirements of ASC Topic 855 and no additional subsequent events occurred that required disclosure.

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”,“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, 2017,2023, together with notes thereto.  As used in this quarterly report, the terms “we”, “us”, “our”,“we,” “us,” “our,” “PreAxia” and the “Company” means PreAxia Health Care Payment Systems Inc. and its wholly-owned subsidiary, PreAxia Canada Inc. (“PreAxia Canada”) formerly PreAxia Health Care Payment System Inc. and, before that, H Pay Card Ltd.,subsidiaries, unless the context clearly requires otherwise.

General Overview

Corporate Overview

PreaxiaPreAxia Health Care Payment Systems Inc. (the “Company” or “PreAxia”) was incorporated on April 3, 2000 in the State of Nevada on April 3, 2000. On December 11, 2008, the Nevada Secretary of State effected a name change, which had been previously approved by the majority of the stockholders on October 28, 2008.Nevada.

Our companyThe Company primarily undertakes all of its operations through its wholly-owned subsidiary, PreAxia Health Care Payment Systems Inc.Limited (“PreAxia Canada”- formerly H Pay Card Inc)Payment”). PreAxia Canada, prior to being acquired by PreAxia,Payment was a private corporation incorporated pursuant to the laws of the Province of Alberta on January 28, 2008.November 26, 2015.

General Overview

PreAxia and its wholly owned subsidiary, PreAxia Canada, are both development stage companies. PreAxia CanadaPayment is a company which offersintends 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 Accountshealth spending accounts (“HSAs”HSA”) and generally as a payment service between health care providers and consumers. Put differently, PreAxia offers a health care payment model that incorporates certain attributes of both PayPal and virtual banking.. 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.

The Canadian economy has undergone unprecedented growth over the past two decades. During this same period, the Internet has dramatically changed our way of communicating and conducting business. This has had dramatic effects on key industries such as retail, banking and travel. Consumers have shown a preference for relying on the Internet to handle many aspects of their personal and professional lives. This, in turn, has forced businesses to adapt. While the Health Care Industry has also grown during this time, the consumer has seen neither cost nor efficiency savings comparable to what has occurred in other industries.

Today, however, the economy is in a slow growth phase (at best) and more likely one of worldwide contraction. No less an authority than the head of Toronto-Dominion Bank has warned that Canada has “hardly begun to appreciate the implications” of the long-term economic disruption. In a speech to the Annual Ivey Business Leader Award Dinner (2011), Mr. Clark suggested that all western economies are facing one of the biggest challenges in a generation due to a series of economic and demographic forces that include a slow-growth economy. He goes on to explain that “… in too many countries, promises have been made that cannot be kept. Promises around health care, pensions and support systems, which seemed affordable at the time.”

PreAxia now offers what we believe to be the proper medicine for this economy.

PreAxia Health Care Payment Systems is a market disrupting technology that takes advantage of important trends in our society. Government budgets are strained. With health care requiring a large and growing portion of these budgets, it seems inevitable that efforts to reduce government expenditures are likely to target these health care expenditures. Reductions in government funding of health care services mean that individuals will have to take more individual responsibility for covering at least some of these costs. The growing responsibility for directly funding one’s own future health care expenditures combined with a desire to manage all sorts of financial dealings through the Internet presents the opportunity that PreAxia has now begun to exploit.

PreAxia has found a better way to service an existing and growing need. Utilizing the Internet to automate and eliminate paperwork, the company was developed to reflect the growing demand for Health Spending Accounts (“HSAs”) as a tax-free vehicle for managing and controlling health care expenditures.

The growing interest in HSAs has fueled the need for fund management and adjudication services, hence the creation and growth of Third Party Administrators (“TPAs”). The HSA/TPA clients are referred by Brokerage Firms and Independent Brokers, who receive a referral commission. The HSA industry is primarily focused on small to medium-size businesses which can, since 2003, offer HSAs as part of their employee benefits package. The incentive for a traditional insurer such as Manulife to service the small to medium-size employer (under 50 lives) with anything other than their traditional, premium-driven health insurance products is on the whole too small to warrant significant (i.e. costly) marketing efforts or the introduction of competing HSA-type products.

Using health plan innovations, including the HSA, these new alternative providers of employee health benefits have successfully gained an estimated 10% share of the $26-$30 Billion Canadian health benefits annual 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 will grow to over $75reached $122.8 billion in assets in 2023 and 2533.9 million consumers by 2017.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 control costs,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.

Description of Health Spending Account (“HSA”)

An HSA is a uniquely designed bank account established exclusively and specifically for the purpose of health care spending; an employer deposits funds into a special account for the employee; These funds can be used to pay for eligible medical and related health care expenses for the employee and their dependents. The funds in the HSA can be used to top up existing group coverage by covering residual amounts on prescription drugs, eyeglasses and hearing aids or to pay for medical, vision and dental expenses that otherwise may not be covered under the group benefit plan. Traditional health plan users pay premiums into a plan but do not see a return on money unless there is an issue with their health. In addition, most plans are established so that monies deposited into a plan by an employee are non-transferable upon the employee’s change of employment. HSAs provide employers and employees with greater control in both the amount of funds invested and how these funds are used.

Services and infrastructure provided by PreAxia will enable insurance companies, governments and corporations to replace cash and cheque payments and to eliminate all paper involved in the management of these accounts and benefit through savings in time and money. Our company’s plans are to provide instant issuing services that enable corporations to issue and fund Pre-Paid Interac or credit card services to beneficiaries in real time. The beneficiary will select a personal identification number (“PIN”) using a PIN and card activation terminal, thus gaining instant access to funds that can be reloaded.

PreAxia is in the process of developing a platform for processing and managing accounts and payment cards, including cardholder and customer account management, reconciliation and financial settlement, and customer reporting.

PreAxia is in the process of developing software systems for the issuing of health payment cards and financial transaction processing services that will be fully managed by a data center. Products and services are anticipated to include:

• Payment card issuance on behalf of issuing bank partners for customer-branded credit cards and Interac payment cards. The cards are anticipated to be issued with Canadian and United States access through Interac (Canada) and STAR (United States) ATM, as well as inter-bank networks.
• Payment processing and funds allocation on payment accounts through financial electronic data interchange, wire transfers, and the automatic clearing house (“ACH”), with a PreAxia connection to a financial institution payment gateway and the United States ACH network through a United States financial institution.
• Enabling cardholders to select a personal PIN using a PreAxia PIN selection and card activation terminal. These functions enable the end user to be issued a PreAxia generated payment card at a customer’s office which is ready for immediate use.
• Authorizing transactions based upon the business requirements of PreAxia customers.
• Monitoring for unusual transaction activities, fraud and compliance violations.
• Providing management reports to customers and payment beneficiaries.
• Customer support center for reporting lost or stolen cards and for answering cardholder inquiries.

Distribution Methods and Marketing Strategy

PreAxia operates on a Cloud Computing Platform that makes it accessible to anyone with a personal computer and Internet access. The preliminary market for PreAxia’s HSA Management Solution is small and medium sized companies that are not currently well served by the current group benefits model. The financial benefits of the PreAxia business model, however, are also relevant to larger employers and we believe that these larger employers will migrate to the PreAxia product over time.

PreAxia’s marketing strategy is to promote its existing platform to the groups that most need access to it. Namely, independent brokers, financial advisors and small to medium sized businesses. Brokers should see PreAxia as a superior method of promoting and supporting HSAs that allow them to earn above average commission rates on invested funds. Financial advisors should see PreAxia in a similar way as brokers except that there is the additional benefit of tax reduction. Small to medium sized businesses, which are expected to drive the growth in business, should see PreAxia as offering financial savings to the company and to employees by offering personal health care benefits through an HSA, along with the same conveniences they have come to expect from other services they currently utilize over the Internet. It is expected that the group benefits market will subsequently follow as they too realize the advantages of PreAxia over their current HSA offerings. PreAxia has begun and will continue to seek opportunities with lead customers and alliance partners to establish reference-able, high-profile implementations and market-leading, early-adopter firms for further developing innovative products and services. The company intends to design solutions targeted towards corporate financial management, financial risk, audit management and cash management while targeting product/service management as a support to financial management.

We anticipate that the prime target for services will be small to medium sized organizations that are not adequately served by the current insurance and group benefits offerings. These organizations should realize significant benefits in both cost and time savings by utilization of PreAxia technology while providing their employees with an increased level of benefits.

PreAxia intends to achieve service volume and the associated economies of scale through marketing directly to select target customers that provide the necessary transaction volumes, through market specific channel partners and through an education based public relations strategy geared to the small to mid-sized employers including the brokers and financial advisors utilized by these businesses. The channel strategy is supported in the solution design, as multiple channel partners will require branding and our company’s fee charging/collection capabilities.

It is our company’s intention to sell through multi-tiered, value-added resellers. For example, the Health Card solution may be provided by a subcontract to a leading vendor that rebrands and adds value to the solution. The leading vendor in turn may form part of a larger professional services systems integration engagement with the customer. One example of this approach is that a major bank may lead on selling our company’s solution to medical insurance companies and the health care industry under our product brand.

PreAxia has identified the following “channels” through which it will target prime end market customers:

• Benefits managers/adjudicators, including insurance, health or outsources government benefits processors that manage benefits disbursement
• Issuer banks, including partner banks that enable the issuance of Health Cards
• Application providers, including software manufacturers selling into the target vertical markets
• Independent brokers that sell, or desire to sell, Health Spending Accounts
• Financial advisors who manage funds and advise on tax saving strategies for individuals and corporations
• Accountants and bookkeepers who regularly advise businesses on financial and operational matters
• MGAs that provide services and education to the broker community
• Professional services, including consulting, development and implementation companies serving the target vertical markets

PreAxia intends to establish several key customer reference accounts, channel marketing partners and technology alliances. These corporate relationships are key to advance our company’s goals in 2017 for achieving a prime position in the Canadian public sector and establishing a solid service foundation.

Competitive Business Conditions and our Company’s Competitive Position in the Industry and Methods of Competition

PreAxia intends to offer a combination of products and services in its solution. However, there are other providers of components or versions of the service offerings in the marketplace. Our company is taking a different approach by providing a high value added and robust capability within specific target markets, rather than the “one size fits all” and mass volume approach of the larger companies in the Canadian and international market. In addition,,PreAxia is taking a unique approach by focusing exclusively on Health Spending Accounts and making it available on a Cloud Computing platform that provides both the sellers and users of this product with a superior offering. PreAxia also offers a differentiating USP to brokers by operating in a non-competitive position thereby acting as a partner to the brokers that ultimately sell HSAs. As awareness of PreAxia’s product grows in the marketplace, the company will seek out opportunities to expand its market share by integrating with the group benefits industry. The company also intends to expand its offering to markets in the USA and elsewhere. The following are some of the providers of products and services that are or may be potential competitors in PreAxia’s target markets:

Canadian Market:

• Pay Linx Financial Corporation is presently inactive, but was a company offering prepaid debit card payment solutions that integrated into the Interac and MasterCard financial networks in North America. Pay Linx Financial Corporation was presently 27.0% owned by Royal Bank of Canada and provided services to Royal Bank of Canada for Canadian governments throughQuickLinxTM,replacing cheque and voucher payments.
• DirectCash Income Fund offers prepaid debit and credit cards and processes cash card transactions. In addition, DirectCash Income Fund provides ATM and debit terminal transaction processing, sales and maintenance.
• CardOne Plus Ltd. offers prepaid debit card products designed to support merchant specific programs, including card graphics and merchant account management. These products are certified for acceptance on multiple card scheme and ATM networks.
• HyperWALLET Systems Inc. offers a product offering “flexible debit card payment solutions” through Alterna Savings, HSBC and the Credit Union Central of British Columbia, Canada. It also offers pre- authorized debit, credit card, EFT and bill payment services.
• NextWave Wireless Inc. is a joint venture between Money Mart and DataWave Systems Inc., established to provide card issuance solutions including prepaid debit and credit cards. ”Nextwave Titanium” prepaid cards issued by Money Mart support loading from Money Mart transactions, such as cheque cashing, bill payment and ATM cash withdrawal.
• DataWave Systems Inc. provides prepaid card products for scheme cards as well as prepaid phone cards and prepaid wireless airtime. It offers “instant activation” through retail point of sale (“POS”) terminals. DataWave Systems Inc. is owned by InComm, a global provider of prepaid services. DataWave Systems Inc. also powers the Peoples Trust Company’s card service initiative, “HorizonPlus”, which is the contracted provider of “Titanium” card services.
• Benecaid has become a leading provider of Health Spending Accounts in Canada by offering an easy to understand product through brokers and also directly through the company.
• Olympia Benefits has become a leading provider of Health Spending Accounts in Canada by offering a “Cost Plus” version of HSAs that has become popular in the marketplace.
• QuickCard is a provider of Health Spending Accounts and group insurance products. They are partially differentiated from competitors by virtue of a “credit type card” that is used to pay for qualified health products and services.
• Most major insurance companies offer some version of HSAs to their customers.
• Many brokers have created HSA products for their clients.
• Many accounting and financial services firms have created their own HSA products to offer to their clients.

International Market:

• Orbiscom Inc. is in an alliance with MasterCard to offer “custom use cards” that can be issued by MasterCard banks and provides for restricted authorizations (by merchant, merchant type or geography) as well as instant issuance.
• Comdata Corporation offers “controlled spending solutions”, with enhanced authorization and “real time” transfer of funds to payees, including government program payments.
• Affiliated Computer Services Inc. (ACS) is penetrating the U.S. government benefits card issuance marketplace through MasterCard prepaid cards that support “no fee” ATM cash withdrawals through participating ATM networks. ACS provides these services for a range of governmental benefits programs.
• Metavante Corporation is owned by Marshall & Ilsley Corporation and provides a wide range of payments products and services.
• Blackhawk Network is owned by Safeway and is a provider of the “gift card mall”, which can be used at participating merchants only. These cards are Visa, MasterCard or American Express branded and are activated at the POS.
• InComm is expanding its prepaid card services network “Fastcard” through an arrangement with Green Dot Corporation, which is a leading network of reloadable debit cards and processes for the MasterCard “repower” POS-based load network for prepaid cards.

Intangible Properties

When negotiating its arrangements with clients, PreAxia intends to ensure that all rights to and ownership of its intellectual property remains with the company. We anticipate that source codes or other proprietary knowledge will be protected through agreements entered into between PreAxia and its employees and contractors, and additional high standards of confidentiality and protection of data are set by clients and regulatory authorities within the industry.

Intellectual Property and Patent Protection

At present, PreAxia has two trademarks pending. One is for the company name (PreAxia) and another is for the company logo design.

Plan of Operation

Over the next twelve months, we plan to:

Cash Requirements

After a further review of business opportunities with industry consultants, for the next twelve months and given that we meet our forecasted expenses, we plan to spend a total of approximately $1,550,000 in implementing our business plan of development and marketing of health care processing products and services.  We do not expect to generate any revenues this year, therefore we will be required to raise a total of $2,843,915 to complete our business plan and pay our outstanding debts of approximately $1,293,915.   Our working capital requirements for PreAxia Canada for the next twelve months are estimated at $1,550,000 distributed, as follows:

Our estimated expenses over the next twelve months are broken down as follows:

Liquidity and Capital Resources

As of November 30, 2017,2023, PreAxia’s cash balance was $2,596$1,868 compared to $8,779$6 as atof May 31, 2017.2023.  Our Company will be required to raise capital to fund our operations.  PreAxia’s cash on hand is currently its only source of liquidity.  PreAxia had a working capital deficit of $1,291,319$2,382,758 as of November 30, 20172023, compared with a working capital deficit of $1,198,480$2,296,730 as of May 31, 2017.2023.  

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 additional $1,550,000$1,000,000 over the next twelve-month period to fundpay our operating cash shortfall andarms-length creditors approximately $300,000 plus an additional $700,000 to complete our business plan. Our companyThe 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 atof November 30, 2017 compared to2023 and May 31, 20172023 is summarized as follows:

Working Capital

The increase in our working capital deficit of $92,839$86,028 was primarily due to an increaseincreases in our accounts payableaccrued liabilities – related party of $60,000 and an increase in loansLoans payable from shareholders.- shareholders of $18,262.

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, 2023 and 2022

The following summary of our results of operations should be read in conjunction with our auditedcondensed consolidated financial statements for the three months ended November 30, 20172023 and 2016.2022.

For the three month periodmonths ended November 30, 20172023 and November 30, 20162022

Our operating results for the three month periodmonths ended November 30, 20172023 compared to the three month periodmonths ended November 30, 20162022 are described below:

Revenue

We have not earned any revenues since our inceptionDuring the three months ended November 30, 2023 and we do not anticipate earning revenues until such time as we have completed2022, the developmentCompany had revenue of our Health Card software$0 and obtained new customers.$0, respectively. The Company earns a 10% commission on amounts reimbursed for eligible expenses.

Expenses

The operating lossOur total expenses for the three month periodmonths ended November 30, 2017 was $42,7252023 were $45,109 compared to $68,463$45,092 for the three month periodmonths ended November 30, 2016.2022. The decreaseincrease in losstotal expenses of $25,738$17 for the three month period endingmonths ended November 30, 20172023 is due to a decrease in expenses of $6,000 in professional fees a decreaseof $2,603, an increase of $606 in research and development, of $7,315, a decrease of $3,207and an increase in office and administration fees a decrease in consulting fees of $704 and a decrease in amortization of software of $8,512.$2,014.

Consulting Fees

Consulting Fees duringDuring each of the three-month periodthree months ended November 30, 2017 decreased by $704 over2023 and 2022, Tom Zapatinas, the three-month period ended November 30, 2016, relatedChief Executive Officer and Director of the Company, earned $30,000 for consulting services provided to the completion of marketing strategies.Company, which is included in accounts payable and accrued liabilities – related party.

Research and Development

Research and Developmentdevelopment expenses during the three month periodmonths ended November 30, 2017 decreased2023 increased by $7,315 over$606 to $2,179, as compared to $1,573 during the three month periodmonths ended November 30, 2016, as web updates were completed and development of the platform was completed.2022.

Wages and Benefits

There were no wages and benefits during the three month periodmonths ended November 30, 2017 or November 30, 2016.2023 and 2022.

Office and Administration

Office and administration expenses decreasedincreased by $3,207$2,014 for the periodthree months ended November 30, 2017 compared to November 30, 2016,2023 due to a decreasean increase in traveloffice supply expenses.

Professional Fees

Professional fees during the three months ended November 30, 20172023 decreased by $6,000$2,603 to $4,437, as compared to November 30, 2016.

Amortization of Software

Amortization of software expenses of $nil as the software was fully amortized at the end of May 31, 2017 Amortization expenses for the period November 30, 2016 were $8,512 and this resulted in a decrease in expenses of a similar amount in$7,040 during the three month periodmonths ended November 30, 2017.2022.

Interest Expense

Interest expense is $0 for the three months ended November 30, 2023 and 2022 because accounts payable and accrued liabilities – related party, convertible note payable – related party and loans payable – shareholders are non-interest bearing.

Results of Operations – Six months ended November 30, 2023 and 2022

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, 2023 and 2022.

For the six-month periodsix months ended November 30, 20172023 and November 30, 20162022

Our operating results for the six month periodmonths ended November 30, 20172023 compared to the six month periodmonths ended November 30, 20162022 are described below:

Revenue

We have not earned any revenues since our inception

During the six months ended November 30, 2023 and we do not anticipate earning revenues until such time as we have completed2022, the developmentCompany had revenue of our Health Card software$0 and obtained new customers.$0, respectively. The Company earns a 10% commission on amounts reimbursed for eligible expenses.

Expenses

Our operating losstotal expenses for the six month periodmonths ended November 30, 2017 was $92,8392023 were $86,028 compared to $118,339$82,439 for the six month periodmonths ended November 30, 2016.2022. The decreaseincrease in losstotal expenses of $25,500$3,589 for the six month period endingmonths ended November 30, 20172023 is due to an increase in expensesprofessional fees of $2,534$2,611, an increase of $2,122 in consultingoffice and administration fees, and a decrease in research and development costs of $7,395, a decrease$1,144.

Consulting Fees

During each of the six months ended November 30, 2023 and 2022, Tom Zapatinas, the Chief Executive Officer and Director of the Company, earned $60,000 for consulting services provided to the Company, which is included in professional fees of $2,507, a decrease in officeaccounts payable and administration fees of $1,107accrued liabilities – related party.

Research and a decrease in amortization of software of $17,025.Development

Research and Development

Research and Developmentdevelopment expenses during the six month periodmonths ended November 30, 20172023 decreased by $7,395 over$1,144 to $3,700, as compared to $4,844 during the six month periodmonths ended November 30, 2016, as updates and license fees for major project components were completed.2022.

Wages and Benefits

There were no wages and benefits during the six month periodmonths ended November 30, 2017 or November 30, 2016.2023 and 2022.

Office and Administration

Office and administration expenses decreasedincreased by $1,107$2,122 for the periodsix months ended November 30, 2017 compared to November 30, 2016,2023 due to an increase in traveloffice supply expenses.

Professional Fees

Professional fees during the six months ended November 30, 2017 decreased2023 increased by $2,507$2,611 to $12,151, as compared to November 30, 2016.

Rent

There were no rent expenses$9,540 during the six months ended November 30, 2017 or November 30, 2016 due to the closure of the Calgary main office.2022.

Amortization of Software

Amortization of software expenses of $17,025 were incurredInterest Expense

Interest expense is $0 for the six months ended November 30, 20162023 and there was no amortization of software expenses for the six months ended November 30, 2017 as amortization of the. Software was completed by May 31, 2017.2022 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.

Revenue recognitionRecognition

PreAxia recognizes revenue inIn 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 provision ofconsideration to which we expect to be entitled to receive in exchange for these goods or services. ASC 606 requires us to apply the Securities and Exchange Commission, which establishes guidancefollowing steps: (1) identify the contract with the customer; (2) identify the performance obligations in applying generally accepted accounting principles to revenue recognition in financial statements.  This provision requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered;the contract; (3) determine the transaction price; (4) allocate the transaction price to the buyer is fixedperformance obligations in the contract; and determinable; and (4) collectability is reasonably assured(5) recognize revenue when, or as, we satisfy the performance obligation.

Gross Versus Net Revenue

ResearchASC 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 developmentservices 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.

The Company provides administrative services for Health Spending Accounts sponsored by employers (the “customer”). The Company does not take possession of goods or control the services provided as the employees of the customer are free to determine their health care provider. As such, the Company records revenue net of reimbursements to employees. The Company’s services to the customer consist of reviewing medical costs for eligibility and reimbursing employees for eligible costs.

Software Development Costs

The Company accounts for software development costs in accordance with several accounting pronouncements, including FASB ASC 730, Research“Research and Development,” FASB ASC 350-40, Internal-Use“Internal-Use Software,” FASB 985-20, Costs“Costs of Computer Software to be Sold, Leased, or MarketedMarketed” and FASB ASC 350-50, Website“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 has capitalized 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 have been capitalized, under the same criteria as our marketed software.  

Capitalized software costs are stated at cost.  The estimated useful life of costs capitalized is evaluated for each specific project. The software is being amortized over three years starting June 2014 and has been fully amortized as of May 31, 2017 November 30, 2017.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURESPROCEDURES.

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15 or 15d-15 under the Securities Exchange Act of 1934, we have carried out an evaluation ofManagement evaluated the effectiveness of our disclosure controls and procedures, as of the end of the period covered by this quarterly report, being August 31, 2017. This evaluation was carried outdefined under the supervision and with the participation of our management, including our principal executive officer and principal financial officer.

Our management does not expect that our disclosure controls or our internal control over financial reporting will prevent all error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, but not absolute, assurance that the objectives of a control system are met. Further, any control system reflects limitations on resources, and the benefits of a control system must be considered relative to its costs. These limitations also include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of a control. The design of a control system is also based upon certain assumptions about potential future conditions; over time, currently implemented controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Due to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

Exchange Act Rule 13a-15(e). Based upon theirthis evaluation, our principal executive officerthe Chief Executive Officer and principal financial officerChief Financial Officer concluded that, ouras of November 30, 2023, 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 as at the end of the period covered by this quarterly report.effective.

Our company determined that our disclosureDisclosure controls and procedures were not effective as of November 30, 2017 dueare the controls and other procedures that are designed to the following two material weaknesses in our internal control over financial reportingensure that we identified in our annual report on Form 10-K for the fiscal year ended May 31, 2017: (i) we do not have accounting staff with sufficient technical accounting knowledge relatinginformation required to accounting for U.S. income taxes and complex US GAAP matters; and (ii) we failed to file our corporate tax returns for the years 2008 through 2017. As webe disclosed in our annual report on Form 10-K forCompany’s Exchange Act reports is recorded, processed, summarized and reported within the fiscal year ended May 31, 2017, we intend to take appropriatetime periods specified in the Securities Exchange Commission’s rules and reasonable steps to make the necessary improvements to remediate these material weaknesses. In particular, we intend to hire staff with U.S. GAAP expertise if we can obtain additional financing and hire professionals to prepare and complete the filing of our corporate tax returns.forms.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting that occurred during the fiscal six month periodquarter ended November 30, 20172023 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 1A. RISK FACTORS

Not applicable to smaller reporting companies.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the period ended November 30, 2017 the Company did not issue any shares of its Capital Stock.None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicableapplicable.

ITEM 5.  OTHER INFORMATION

None

None.

ITEM 6.   EXHIBITS

* Filed herewith.

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: January 16, 2018December 29, 2023