Quarterly Report for Quarter Ending August 31, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This quarterly report contains forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "intends," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors which may cause our or our industry's actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.

Such factors include, among others, the following: international, national and local general economic and market conditions; demographic changes; the ability of PreAxia to sustain, manage or forecast its growth; the ability of PreAxia to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or failure to comply with government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other factors referenced in this and previous filings.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Given these uncertainties, readers of this Form 10-Q and investors are cautioned not to place undue reliance on such forward-looking statements. PreAxia disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments, except as required by applicable law, including the securities laws of the United States.

All amounts stated herein are in US dollars unless otherwise indicated.

The management's discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The following discussion of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements for the year ended May 31, 2025, together with notes thereto. As used in this quarterly report, the terms "we," "us," "our," "PreAxia" and the "Company" means PreAxia Health Care Payment Systems Inc. and its wholly-owned subsidiaries, unless the context clearly requires otherwise.

General Overview

Corporate Overview

PreAxia Health Care Payment Systems Inc. (the "Company" or "PreAxia") was incorporated on April 3, 2000, in the State of Nevada. On May 31, 2005, the Company acquired all of the outstanding stock of Tiempo de Mexico Ltd. ("Tiempo") in exchange for 5,000,000 shares of the common stock of the Company with a par value of $0.001. The Company had no operations prior to the date of the aforementioned acquisition.

The business objective of the Company is the development, distribution, marketing and sale of health care payment processing services and personal financial management applications, websites, and products. The Company's products are in the development stage.

The operations of the Company are expected to be primarily undertaken by its wholly owned subsidiary, PreAxia Health Care Payment Ltd. ("PreAxia Payment"), incorporated pursuant to the laws of the Province of Alberta on November 26, 2015.

On May 23, 2025, the Company created a wholly owned subsidiary in Alberta Canada, named Zane Inc. CA. This subsidiary will develop and market the personal financial management products and perfect the health care payment processing services. Zane Inc had no operations before June 30, 2025.

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 $122.8 billion in assets in 2023 and 33.9 million consumers in 2022, an increase of more than 11% of assets over the prior year. This coupled with the continued growth of the Canadian group insurance industry illustrates the emerging opportunity for innovative health payment services. We intend to initially launch our products in Canada. We believe that Canadian businesses are embracing a new healthcare financing vehicle to provide greater value to employees, increase profitability and get more return from their investment. We intend to provide them with services to capture this market opportunity.

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 August 31, 2025, PreAxia's cash balance was $130,285 compared to $0 as of May 31, 2025. Our Company will be required to raise capital to fund our operations. PreAxia had a working capital deficit of ($232,678) as of August 31, 2025, compared with a working capital deficit of ($2,341,169) as of May 31, 2025.

Our net cash used in operating activities for the three months ended August 31, 2025, and 2024 is ($74,801) and ($2,396), respectively. Our net loss for the three months ended August 31, 2025, of ($875,134) was primarily offset subscriptions offered for services of $780,000 and other minor changes in liabilities for cash used by operating activities of ($74,801). Our net loss for the three months ended August 31, 2024 of (4,627) was primary offset by the increase in accounts payable of $2,231 to show cash used in operating activities of ($2,396).

Our net cash provided by investing activities for three months ended August 31, 2025, and 2024 is $0 and $0 respectively.

Our net cash provided by financing activities for the three months ended August 31, 2025, and 2024 is $204,858 and $2,383, respectively. Cash provided from financing activities came from a stock subscription for $200,000 and proceeds for short-term and related party loans of $4,868.

Our ability to meet our financial liabilities and commitments is primarily dependent upon the continued issuance of equity to new shareholders 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 shareholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

Our working capital deficit as of August 31, 2025, and May 31, 2025, is summarized as follows:

Working Capital
		August 31, 2025				May 31, 2025
Current Assets		$	490,285			$	-
Current Liabilities			(722,963	)			(2,341,169	)
Working Capital Deficit		$	(232,678	)		$	(2,341,169	)

The increase in our working capital of $2,108,491 was primarily due to the conversion of debt, the sale of stock for cash, and stock subscription for services.

Off-balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to shareholders.

Results of Operations - Three Months ended August 31, 2025, and August 31, 2024

The following summary of our results of operations should be read in conjunction with our condensed consolidated financial statements for the three months ended August 31, 2025, and 2024.

For the three months ended August 31, 2025, and 2024

Our operating results for the three months ended August 31, 2025, compared to the three months ended August 31, 2024, are described below:

Revenue

During the three months ended August 31, 2025, and 2024, the Company had revenue of $0 and $0, respectively.

Expenses

Our total expenses for the three months ended August 31, 2025, were $875,203 compared to $4,627 for the three months ended August 31, 2024. The decrease in total expenses of ($870,576) for the three months ended August 31, 2025, is due to an increase in consulting fees of $65,000, an increase of $391,263 in research and development, an increase of $387,500 in management costs, an increase of $23,200 in professional fees, and an increase in office and administration fees of $6,113.

Management and labor

During each of the three months ended August 31, 2025, and August 31, 2024, Tom Zapatinas, the Chief Executive Officer and Director of the Company, earned $30,000 and $0, respectively, for consulting services provided to the Company, which is included in accounts payable and accrued liabilities - related party.

Pavel Bondarez, a director and CEO of Zane Inc CA and Zane Inc US, earned $20,000 for management services and received a stock subscription worth $660,000. His compensation was split between management and research and development during the three months ended August 31, 2025. He received $0 in the three months ended August 31, 2024.

Professional Fees

Professional fees during the three months ended August 31, 2025, increased by $20,700 to $23,200, as compared to $2,500 during the three months ended August 31, 2024, mostly due to audit fees and OTC market fees.

Consulting Fees

Consulting fees during the three months ended August 31, 2025, increased to$65,000 compared to $0 paid during the three months ended August 31, 2024. The increase is due to two contractors receiving stock subscriptions for $150,000 in consulting fees. $65,000 was recognized in this quarter and the rest will be recognized over the next three years.

Research and Development

Research and development expenses during the three months ended August 31, 2025, increased by $391,263 to $391,763, as compared to $0 during the three months ended August 31, 2024. Most of the increase was due to $367,500 allocated from a stock subscription listed in Management and labor above.

Interest Expense

Interest- net consists of $82 of interest income and ($13) of interest expense from banks during the three months ended August 31, 2025, and $0 for the three months ended August 31, 2024. Accounts payable, accrued liabilities - related party loans, and short-term loans are non-interest bearing.

Critical Accounting Policies

We have identified certain accounting policies, described below, that are the most important to the portrayal of our current financial condition and results of operations. Please refer to Note 2 of the accompanying consolidated financial statements for a full and complete disclosure of our accounting policies.

Revenue Recognition

In accordance with ASC 606, "Revenue from Contracts with Customers," revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods or services. ASC 606 requires us to apply the following steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, we satisfy the performance obligation.

Software Development Costs

The Company accounts for software development costs in accordance with several accounting pronouncements, including FASB ASC 730, "Research and Development," FASB ASC 350-40, "Internal-Use Software," FASB 985-20, "Costs of Computer Software to be Sold, Leased, or Marketed" and FASB ASC 350-50, "Website Development Costs."

Costs incurred during the period of planning and design, prior to the period determining technological feasibility, for all software developed for use internal and external, has been charged to operations in the period incurred as research and development costs. Additionally, costs incurred after determination of readiness for market have been expensed as research and development.

The Company will capitalize certain costs in the development of our proprietary software (computer software to be sold, leased or licensed) for the period after technological feasibility was determined and prior to our marketing and initial sales.

Website development costs are capitalized under the same criteria as our marketed software.