10-K: PreAxia Health Care Faces Going Concern Doubt

PreAxia Health Care Payment Systems Inc. reports significant operating losses and a substantial working capital deficit, raising serious concerns about its ability to continue as a going concern.

Summary

• PreAxia Health Care Payment Systems Inc. (PreAxia) filed its annual report for the fiscal year ended May 31, 2026.
• The company generated no revenue in fiscal years 2025 and 2026.
• Total expenses increased significantly to $992,700 in FY2026 from $152,124 in FY2025.
• The company has a working capital deficit of ($966,177) as of May 31, 2026, compared to ($2,314,169) in the prior year.
• PreAxia's cash balance was $1,003 as of May 31, 2026, down from $0 in the prior year.
• The company explicitly states there is substantial doubt about its ability to continue as a going concern, dependent on raising additional capital.
• New subsidiaries, Zane Inc. CA and Zane Inc. US, are focused on developing and marketing personal financial management tools and health care payment processing services, but these products are in the development stage.
• Research and development expenses were $307,605 in FY2026, an increase from $0 in FY2025, related to new software product design.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this filing as highly negative due to the company's continued lack of revenue, significant operating losses, substantial working capital deficit, and the explicit statement of substantial doubt about its ability to continue as a going concern.

Positives

• The company has established new subsidiaries, Zane Inc. CA and Zane Inc. US, to focus on personal financial management and health care payment processing.
• The company's working capital deficit decreased from ($2,314,169) in FY2025 to ($966,177) in FY2026.
• The company has a cash balance of $1,003 as of May 31, 2026, an improvement from $0 in the prior year.
• The company has a stock option plan with 2,600,000 options remaining available for future issuance.
• Pavel Bondarev, CEO of Zane subsidiaries, has extensive experience in AI, Data Science, and Digital Strategy.

Negatives

• The company generated $0 revenue in both fiscal years 2025 and 2026.
• Total expenses increased by $840,576 to $992,700 in FY2026.
• The company has a substantial working capital deficit of ($966,177) as of May 31, 2026.
• Cash and cash equivalents were only $1,003 as of May 31, 2026.
• There is substantial doubt about the company's ability to continue as a going concern.
• The company requires an estimated $1,800,000 over the next twelve months to fund operations and complete its business plan.
• The company's internal controls over financial reporting were not effective, with material weaknesses identified including a lack of accounting staff with sufficient technical knowledge and failure to file corporate tax returns from 2008-2025.
• The company recorded a loss on settlement of ($169,143) in FY2026 due to debt conversion at below market prices.

Risks

• The company's ability to continue as a going concern is dependent on obtaining additional long-term financing.
• Failure to obtain necessary financing could force the company to scale down or cease operations.
• Issuance of additional equity securities could result in significant dilution to current stockholders.
• Commercial loans, if obtained, would increase liabilities and future cash commitments.
• The company has not yet achieved profitable operations.
• The development stage of the company's products means there is no guarantee of market acceptance or successful commercialization.
• Cybersecurity threats pose a risk, although the company is developing procedures to assess and manage these risks.

Future Outlook

The company plans to raise additional capital to fund operations, develop personal financial management applications, penetrate US and Canadian markets, build strategic alliances, and fill key management and sales positions. The company's ability to continue as a going concern is dependent on obtaining further long-term financing and achieving profitable operations.

Management Comments

• "We're creating what we call a 'personal AI-banker in your pocket' - a revolutionary platform that combines the entire world's banking and financial knowledge with an intimate understanding of each user's unique situation, goals, and needs."
• "The Company's products are in the development stage."
• "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."

Industry Context

StockSavvy.ai notes that PreAxia operates in the rapidly evolving fintech sector, aiming to combine health care payment processing with personal financial management tools, leveraging AI. The HSA market is growing, with significant assets and consumers, presenting an opportunity, but PreAxia's products are still in development, facing intense competition and the challenge of achieving market traction.

Comparison to Industry Standards

• The HSA market in the US reached $122.8 billion in assets in 2023, with 33.9 million consumers in 2022, indicating a substantial and growing market.
• Competitors in the Canadian HSA market include Benecaid, Olympia Benefits, and QuickCard, who offer established products through various channels.
• Zelle is mentioned as a competitor in mobile internet money management, a space PreAxia's Zane subsidiaries aim to innovate within.
• The company's stated goal of a 10% APY on its High-Interest Super Account (HISA) is significantly higher than typical savings account rates offered by traditional banks, which often range from 0.5% to 5% depending on market conditions and account type.

Corporate Governance

Legal Proceedings

• The company knows of no material, active or pending legal proceedings against it, nor is it involved as a plaintiff in any material proceeding or pending litigation.

Related Party Transactions

• Tom Zapatinas invoiced $110,000 for management services rendered in FY2026.
• As of May 31, 2026, $66,838 was due to Tom Zapatinas for related party loans.
• Accruals and other current liabilities - related party include $510,000 due as officer compensation payable to Mr. Zapatinas as of May 31, 2026.
• A related party lent the Company $25,000 on April 7, 2026, for a convertible note with 10% interest.
• Subsequent to year-end, the company issued convertible notes for $100,000 and $150,000 to two related parties on June 10, 2026.
• Subsequent to year-end, the company issued a convertible note for $50,000 to a related party on July 15, 2026.
• Subsequent to year-end, the company issued a convertible note for $50,000 to a related party on August 26, 2026.

Stakeholder Impact

• Shareholders face significant dilution risk if new equity is issued to raise capital.
• Shareholders are exposed to the risk of the company's going concern status, which could lead to a complete loss of investment.
• Employees (consultants) may be impacted by the company's financial instability, although the company plans to hire additional staff.
• Creditors may face delays or non-payment if the company cannot secure necessary financing.
• Potential investors are crucial for the company's survival and future development.

Next Steps

• Raise additional capital to fund operations and execute business plans.
• Develop a suite of personal financial management applications and websites.
• Penetrate the United States and Canadian markets by continuing to develop innovative financial processing products and services.
• Build a network of strategic alliances with banking and insurance companies, governments, and other entities.
• Fill key positions in senior management, sales, administration, and engineering.

Key Dates

Recommendation

The company has generated no revenue, incurred significant losses, has minimal cash, and faces substantial doubt about its ability to continue as a going concern. The need for significant capital raises and the ongoing development stage of its products present extreme risk to investors. Until the company demonstrates revenue generation and a path to profitability, a sell recommendation is warranted.

Keywords

Health Spending Account, HSA, Personal Financial Management, Fintech, AI, Payment Processing, Startup, Nevada