10-K: PreAxia Health Care Payment Systems Reports 2025 Annual Results Amid Going Concern Doubts

PreAxia Health Care Payment Systems Inc. filed its annual 10-K report for fiscal year 2025, highlighting a net loss of $80,654 and a significant working capital deficit, alongside strategic plans for new financial products and capital raising.

Summary

• PreAxia Health Care Payment Systems Inc. filed its annual report for the fiscal year ended May 31, 2025.
• The company reported a net loss of $80,654 for FY2025, an improvement from a net loss of $99,449 in FY2024.
• Cash balance was $0 as of May 31, 2025, down from $14 in FY2024.
• The working capital deficit improved to $2,342,041 as of May 31, 2025, from $2,396,179 in FY2024.
• No revenue was generated in either FY2025 or FY2024, as the company remains in the development stage.
• Total expenses increased to $152,124 in FY2025 from $99,449 in FY2024, primarily due to higher consulting and professional fees.
• Management expressed substantial doubt about the company's ability to continue as a going concern.
• The company plans to raise an estimated $1,500,000 over the next twelve months to fund operations and complete its business plan.
• Disclosure controls and internal control over financial reporting were deemed ineffective due to material weaknesses, including insufficient accounting knowledge and failure to file corporate tax returns from 2008 through 2025.
• On June 30, 2025, CEO Tom Zapatinas converted $1,525,577 in convertible debt to common stock at $0.10 per share.
• Pavel Bondarev was appointed to the Board of Directors in June 2025 and will lead the new Zane subsidiaries.
• The company received $200,000 from a private placement in August 2025.
• A new subsidiary, Zane Inc US, was established in September 2025 to market mobile banking and personal finance management platforms in the United States.
• The Board decided to operate as PreAxia-Zane Financial starting September 2025.

Sentiment

Score: 2

Explanation: The company faces severe financial distress with zero revenue, a $0 cash balance, and explicit 'going concern' doubt. Material weaknesses in internal controls and a decade of unfiled tax returns highlight significant operational and governance failures. While strategic plans and recent capital raises offer some future potential, the current financial health and control environment are extremely poor, making it a highly speculative and risky investment.

Positives

• Net loss decreased to $80,654 in FY2025 from $99,449 in FY2024.
• Working capital deficit improved by $54,152, from $2,396,179 to $2,342,041.
• A gain on settlement of old accounts payable of $70,114 was recorded in FY2025.
• The CEO converted $1,525,577 in convertible debt into common stock, reducing related-party liabilities and strengthening the equity base.
• The company successfully raised $200,000 from a private placement in August 2025.
• Strategic expansion into personal financial management with the creation of Zane Inc CA and Zane Inc US, focusing on an AI-powered 'personal AI-banker' super-app.
• Pavel Bondarev, an executive with 15+ years of experience in AI, Data Science, and Digital Strategy, was appointed to the Board and will lead the Zane subsidiaries, bringing significant expertise.

Negatives

• The company reported zero revenue for both fiscal years ended May 31, 2025, and 2024.
• Cash balance was $0 as of May 31, 2025, indicating severe liquidity issues.
• Management explicitly stated "substantial doubt about our ability to continue as a going concern."
• Disclosure controls and internal control over financial reporting were deemed ineffective due to material weaknesses.
• The company failed to file corporate tax returns for 2008 through 2025.
• Total expenses increased by $52,675 in FY2025, primarily due to higher consulting fees ($40,000 increase) and professional fees ($28,824 increase).
• The company relies heavily on continued equity issuance and related party loans to fund its operations.
• There are no registered patents or trademarks for PreAxia-Zane's products or services.
• The company operates with only one full-time consultant, its President, Mr. Tom Zapatinas.

Risks

• The company's ability to raise additional capital to fund its operations and execute its business plans is uncertain.
• There is substantial doubt about the company's ability to continue as a going concern, dependent on obtaining further long-term financing and achieving profitable operations.
• Future equity issuances could result in significant dilution for current stockholders.
• Inability to obtain additional financing on a timely basis or on commercially reasonable terms could force the company to scale down or cease operations.
• Ineffectiveness of disclosure controls and internal control over financial reporting poses risks to financial integrity and compliance.
• Lack of accounting staff with sufficient technical knowledge for U.S. income taxes and complex US GAAP matters could lead to financial misstatements or non-compliance.
• Failure to file corporate tax returns from 2008 through 2025 could result in significant penalties, fines, and legal challenges.
• Competition from established Health Spending Account providers (e.g., Benecaid, Olympia Benefits, QuickCard) and mobile money management services (e.g., Zelle) could hinder market penetration.
• Risks associated with the development, marketing, licensing, and distribution of new products.
• Potential negative financial impact from claims, lawsuits, and other legal proceedings.

Future Outlook

Over the next twelve months, the company plans to raise additional capital, develop a suite of personal financial management applications and websites, penetrate the United States and Canadian markets with innovative financial processing products and services, build a network of strategic alliances, and fill senior management, sales, administrative, and engineering positions. The long-term vision for PreAxia-Zane extends beyond personal finance to aggregating transaction-level data for predictive analytics for B2B revenue streams.

Management Comments

• "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."
• "Zane's product philosophy centers on a fundamental belief: everyone deserves access to genius level financial guidance."
• "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."
• "PreAxia-Zane occupies a unique position in the fintech ecosystem, best understood not as a competitor to existing players but as a new category entirely."
• "Our long-term vision extends beyond personal finance into the broader economic ecosystem. By aggregating transaction-level data across millions of users, we'll possess unprecedented insights into consumer behavior, enabling us to offer predictive analytics to retailers, manufacturers, and service providers."

Industry Context

The healthcare industry is experiencing a rapid shift towards consumer-directed healthcare, creating significant opportunities in the health payment market, particularly with the growth of Health Spending Accounts (HSAs). US HSA assets reached $123.3 billion in 2024, with 34.7 million consumers in 2023, representing an 18% increase in assets over the prior year. This trend, coupled with the growth of the Canadian group insurance industry, underscores the demand for innovative health payment services. PreAxia aims to capitalize on this by offering HSA management solutions and, through its new Zane subsidiaries, an AI-powered personal financial management 'super-app,' positioning itself as a unique fintech player rather than a direct competitor to traditional banks or budgeting apps.

Comparison to Industry Standards

• The US HSA market reached $123.3 billion in assets in 2024 and served 34.7 million consumers in 2023, demonstrating significant growth potential (over 18% asset increase year-over-year) that PreAxia aims to tap into.
• Paul Verberne, a director, previously helped HSA Bank grow from $8 million to over $800 million in HSA deposits in six years, and it is now a leading US HSA provider with over $5 billion in assets, illustrating the potential for successful ventures in this market.
• PreAxia differentiates itself from Canadian HSA providers like Benecaid, Olympia Benefits, and QuickCard by focusing on a high-value, robust capability within specific target markets, rather than a 'one size fits all' approach.
• The Zane platform aims to create a new category in fintech, distinct from existing players like Zelle, by offering an AI-powered 'personal AI-banker' that automatically manages finances, eliminating the need for traditional budgeting apps or digital banks.

Management Changes

Corporate Governance

Legal Proceedings

• No material, active or pending legal proceedings against the company are known.
• No proceedings exist in which any directors, officers, affiliates, or registered/beneficial shareholders are adverse parties or have a material interest adverse to the company's interest.

Related Party Transactions

• Tom Zapatinas (CEO and Director) invoiced $100,000 for management services in FY2025 ($60,000 in FY2024).
• As of May 31, 2025, $102,716 was due to Mr. Zapatinas for advances and $400,000 for officer compensation payable.
• A promissory note of $466,817 is due to Tom Zapatinas, which is non-interest bearing, unsecured, and payable on demand.
• A convertible note payable of $1,058,760 is due to Tom Zapatinas, which is non-interest bearing, unsecured, payable on demand, and convertible into 10,587,600 shares at $0.10 per share.
• Loans payable to shareholders totaled $191,330 as of May 31, 2025, which are unsecured, non-interest bearing, and due on demand.
• On June 30, 2025, the CEO converted $1,525,577 in convertible debt to common stock at $0.10 per share.

Stakeholder Impact

• Shareholders face significant dilution risk from planned future equity raises and the recent debt conversion by the CEO. The 'going concern' doubt and zero revenue pose substantial risks to the value of their investment.
• Employees (currently one full-time consultant) may see potential job creation if the company successfully secures additional capital and executes its business plan.
• Creditors, particularly arms-length creditors, are owed approximately $200,000, which the company plans to pay with future capital raises. Related-party creditors have seen a significant portion of their debt converted to equity.
• Customers could benefit from new HSA management and personal financial management services if the company successfully develops and launches its products, but the company's financial instability presents a risk to service continuity.

Next Steps

• Raise additional capital to execute existing and new business plans.
• Develop a suite of personal financial management applications and websites.
• Penetrate the United States and Canadian markets with innovative financial processing products and services.
• Build a network of strategic alliances with banking and insurance companies, governments, and other vertical markets.
• Fill senior management, sales, administrative, and engineering positions.
• Hire staff with U.S. GAAP expertise if additional financing is obtained to remediate material weaknesses.
• Hire professionals to prepare and complete the filing of corporate tax returns.
• File an amendment to include the audit report once the financial statements have been audited or reviewed by a PCAOB Registered Accounting firm.

Key Dates

Recommendation

The company exhibits critical red flags including zero revenue, a $0 cash balance, and an explicit 'going concern' warning from management. Material weaknesses in internal controls, coupled with a failure to file corporate tax returns for over a decade, indicate severe operational and governance deficiencies. While strategic plans for new products and recent capital raises offer a speculative upside, the fundamental financial health and control environment are extremely poor, making the stock a high-risk, speculative investment with a high probability of further value erosion. A seasoned investor would likely avoid this stock due to the overwhelming financial and operational risks.

Keywords

Health Spending Accounts, HSA, Fintech, Personal Financial Management, AI-powered banking, Zane, PreAxia, Healthcare Payments, Financial Technology, Canada, United States, Startup, SEC Filing, 10-K, Going Concern