PREAXIA HEALTH CARE PAYMENT SYSTEMS INC. - Quarter Report: 2008 November (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
|
R
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended November 30, 2008
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: 0000-52365
PREAXIA
HEALTH CARE PAYMENT SYSTEMS INC.
(Exact
name of registrant as specified in its charter)
|
Nevada
|
20-4395271
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification
No.)
|
|
1530
– 9th
Avenue S.E., Calgary, Alberta
|
T2G 0T7
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(403)
850-4120
(Registrant’s telephone
number, including area code)
Sun
World Partners Inc.(Former name, former address and former fiscal year, if
changed since last report)
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 R 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. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act.
Large Accelerated
filer £ Accelerated
filer £
Non-accelerated
filer £ Smaller
reporting Company R
(Do not check if a smaller reporting
company)
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange
Act.
Yes £ No
R
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.
15,750,000
common shares outstanding as of December 31, 2008.
PREAXIA
HEALTH CARE PAYMENT SYSTEMS INC.
TABLE
OF CONTENTS
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Page
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PART
I
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Item
1. Financial Statements
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3
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|
Item
2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
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4
|
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
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7
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Item
4T. Controls and Procedures
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7
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PART
II
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Item
1. Legal Proceedings
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7
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Item
1A. Risk Factors
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7
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Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
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7
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Item
3. Defaults Upon Senior Securities
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7
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|
Item
4. Submission of Matters to a Vote of Security
Holders
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7
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Item
5. Other Information
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7
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Item
6. Exhibits
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8
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Signatures
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8
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2
PART
I
ITEM
1. FINANCIAL
STATEMENTS
The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with 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 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 month period ended November 30,
2008, are not necessarily indicative of the results that may be expected for the
fiscal year ending May 31, 2009. For further information refer to the
consolidated financial statements and footnotes thereto included in the
Company’s Annual Report on Form 10-K for the year ended May 31,
2008.
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Page
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Unaudited
Consolidated Financial Statements
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|
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Consolidated
Balance Sheets
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F-1
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|
Unaudited
Consolidated Statements of Operations and Comprehensive
Loss
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F-2
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Unaudited
Consolidated Statements of Cash Flows
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F-3
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Notes
to Unaudited Consolidated Financial Statements
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F-4
to F-8
|
3
PREAXIA HEALTH CARE PAYMENT
SYSTEMS INC.
(A
Development Stage Company)
CONSOLIDATED
BALANCE SHEETS
(Stated in U.S.
Dollars)
|
November 30, 2008
|
May 31, 2008
|
|||||||
|
(Unaudited)
|
||||||||
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ASSETS
|
||||||||
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Current
|
||||||||
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Cash
|
$ | 25,077 | $ | 86,574 | ||||
|
Other
receivable
|
447 | - | ||||||
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Total
current assets
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25,524 | 86,574 | ||||||
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Loan
receivable (Note 3)
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- | 49,281 | ||||||
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Total
assets
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$ | 25,524 | $ | 135,855 | ||||
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LIABILITIES
|
||||||||
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Current
|
||||||||
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Accounts
payable and accrued liabilities
|
$ | 54,232 | $ | 40,353 | ||||
|
Accounts
payable – related party (Note 4)
|
86,360 | 30,000 | ||||||
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Loan payable – related party
(Note 4)
|
20,193 | 12,530 | ||||||
|
Loans payable (Note
5)
|
- | 25,000 | ||||||
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Convertible Debenture including
accrued interest, net discount (Note 6)
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25,811 | - | ||||||
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Total
liabilities
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186,596 | 107,883 | ||||||
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STOCKHOLDERS’ EQUITY
(DEFICIT)
|
||||||||
|
Capital
stock; $0.001 par value; 75,000,000 common shares authorized; 15,750,000
common shares issued and outstanding for November 30, 2008 and May 31,
2008
|
15,750 | 15,750 | ||||||
|
Additional
paid-in capital
|
65,464 | 36,969 | ||||||
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Accumulated
other comprehensive loss
|
(4,418 | ) | (395 | ) | ||||
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Deficit
accumulated during the development stage
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(237,868 | ) | (24,352 | ) | ||||
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Total
stockholders’ equity (deficit)
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(161,072 | ) | 27,972 | |||||
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Total
liabilities and stockholders’ equity (deficit)
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$ | 25,524 | $ | 135,855 | ||||
SEE
ACCOMPANYING NOTES
F-1
PREAXIA HEALTH CARE PAYMENT
SYSTEMS INC.
(A
Development Stage Company)
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
for the
Three Month Period Ended November 30, 2008 and the Six Month Period Ended
November 30, 2008 and the period from January 28, 2008 (Date of Inception)
through November 30, 2008
(Stated in U.S.
Dollars)
|
November
30, 2008
(3
months)
|
November
30,
2008
(6
months)
|
January
28, 2008
(Date
of Inception)
to
November 30, 2008
|
||||||||||
|
Expenses
|
||||||||||||
|
Amortization
of debt discount
|
$ | 7,124 | $ | 7,124 | $ | 7,124 | ||||||
|
Consulting
fees
|
75,213 | 141,105 | 141,105 | |||||||||
|
Professional
fee
|
20,892 | 44,609 | 44,609 | |||||||||
|
Office and
administration
|
9,426 | 21,294 | 34,876 | |||||||||
|
Research and
development
|
- | - | 10,770 | |||||||||
|
Operating
loss
|
(112,655 | ) | (214,132 | ) | (238,484 | ) | ||||||
|
Interest
Income (Expense)
|
0 | 616 | 616 | |||||||||
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Net
loss for the period
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(112,655 | ) | (213,516 | ) | (237,868 | ) | ||||||
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Other
comprehensive loss:
|
||||||||||||
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Foreign currency translation
adjustment
|
(2,336 | ) | (4,023 | ) | (4,418 | ) | ||||||
|
Comprehensive
loss for the period
|
$ | (114,991 | )) | $ | (217,539 | )) | $ | (242,286 | ) | |||
|
Basic
and diluted loss per share
|
$ | (0.01 | ) | $ | (0.01 | ) | ||||||
|
Weighted
average number of shares outstanding
|
15,750,000 | 15,750,000 | ||||||||||
SEE
ACCOMPANYING NOTES
F-2
PREAXIA HEALTH CARE PAYMENT
SYSTEMS INC.
(A
Development Stage Company)
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the
six months ended November 30, 2008 and
for the
period January 28, 2008 (Date of Inception) through November 30,
2008
(Stated in U.S.
Dollars)
|
November
30, 2008
|
January
28, 2008
(Date
of Inception)
to
November 30, 2008
|
|||||||
|
Cash
Flows From Operating Activities
|
||||||||
|
Net loss for the
period
|
$ | (213,516 | ) | $ | (237,868 | ) | ||
|
Amortization
of debt discount
|
7,124 | 7,124 | ||||||
|
Accrued
Interest
|
677 | 677 | ||||||
|
Other
receivable
|
(507 | ) | (507 | ) | ||||
|
Accounts
payable and accrued liabilities
|
94,520 | 94,520 | ||||||
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Cash
flows used in operating activities
|
(111,702 | ) | (136,054 | ) | ||||
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Cash
Flows from Investing Activities
|
||||||||
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Cash acquired from business
combination
|
0 | 86,692 | ||||||
|
Cash
flow provided by investing activities
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0 | 86,692 | ||||||
|
Cash
Flows from Financing Activities
|
||||||||
|
Proceeds from loan payable –
related party
|
7663 | 20193 | ||||||
|
Proceeds from loan payable –
convertible debenture
|
46,505 | 46,505 | ||||||
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Proceeds from sale of common
stock
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- | 12,047 | ||||||
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Cash
flows provided by financing activities
|
54168 | 78,745 | ||||||
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Effect
of exchange rate on cash
|
(3,963 | ) | (4,306 | ) | ||||
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Increase
(decrease) in cash during the period
|
(61,497 | ) | 25,077 | |||||
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Cash
at beginning of period
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86,574 | - | ||||||
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Cash
at end of period
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$ | 25,077 | $ | 25,077 | ||||
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Supplemental disclosure:
|
||||||||
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Non-cash
transactions
|
||||||||
|
Common
stock issued for acquisition of subsidiary
|
$ | - | $ | 12,000 | ||||
SEE
ACCOMPANYING NOTES
F-3
(Formerly
Sun World Partners, Inc.)
(A Development Stage
Company)
NOTES TO
THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the
six months ended November 30, 2008 and the
period
from January 28, 2008 (Date of Inception) through November 30,
2008
Note
1- Basis of presentation
The
accompanying unaudited consolidated financial statements of PreAxia Health Care
Payment Systems Inc. (formerly Sun World Partners, Inc.) (the “Company”) have
been prepared in accordance with Securities and Exchange Commission requirements
for interim financial statements. Therefore, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. The financial statements
should be read in conjunction with the Company’s audited consolidated financial
statements for the year ended May 31, 2008.
The
interim financial statements present the balance sheets, statements of
operations and comprehensive loss and cash flows of the Company and wholly-owned
subsidiary Preaxia Health Care Payment System Inc. (“Preaxia Canada”)(formerly
H-Pay Card Ltd..) These financial statements have been prepared in accordance
with accounting principles generally accepted in the United States.
The
interim financial information is unaudited. In the opinion of
management, all adjustments necessary to present fairly the financial position
as of November 30, 2008, and the results of operations, and cash flows presented
herein have been included in the 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.
Note
2 – Summary of significant accounting policies
Nature and
Continuance of Operations
The
Company is in the development stage and has not yet realized any revenues from
its planned operations.
The
primary operations of the Company are presently undertaken by Preaxia
Canada. Preaxia Canada is in the process of developing an online
access system creating a health savings account that allows card payments and
processing services to third-party administrators, insurance companies and
others.
These
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles applicable to a going concern, which
assumes that 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 financial
statements do not give effect to adjustments that would be necessary to the
carrying values and classification of assets and liabilities should the Company
be unable to continue as a going concern. At November 30, 2008, the
Company had not yet achieved profitable operations, has accumulated losses of
$237,868 since inception, has negative working capital of $161,072 and expects
to incur further losses in the development of its business, all of which casts
substantial doubt about the Company’s ability to continue as a going
concern. The Company’s ability to continue as a going concern is
dependent upon its ability to generate future profitable operations and/or to
obtain the necessary financing to meet its obligations and repay its liabilities
arising from normal business operations when they come
due. Management has no formal plan in place to address this concern
but considers that the Company will be able to obtain additional funds by equity
financing and/or related party advances, however there is no assurance of
additional funding being available.
Use
of Estimates in the preparation of the financial statements
The
preparation of the Company's financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in these financial statements and
accompanying notes. Actual results could differ from those
estimates.
F-4
PREAXIA HEALTH CARE PAYMENT
SYSTEMS INC.
(Formerly
Sun World Partners, Inc.)
(A
Development Stage Company)
NOTES TO
THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the
six months ended November 30, 2008 and the
period
from January 28, 2008 (Date of Inception) through November 30,
2008
Note
2 – Summary of significant accounting policies (Continued)
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.
Foreign
Currency Translation
The
functional currency of the Company is the United States dollar. The
functional currency of Preaxia Canada is the Canadian dollar. Assets and
liabilities in the accompanying 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
gain (loss) account in Stockholders’ Equity (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 exchange gains and losses are included in the Statement of Operations
and Comprehensive Loss.
Development
Stage Company
The
Company is a development stage company as defined in Statement of Financial
Accounting Standards No. 7. The Company is devoting substantially all
of its present efforts to establish a new business and none of its planned
principal operations have commenced. All losses accumulated since
inception has been considered as part of the Company’s development stage
activities.
Gain
(Loss) Per Share
Gain
(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. Fully diluted earnings per share are not presented because
they are anti-dilutive.
Research
and Development Costs
Research
and development costs are expensed in the year in which they are
incurred.
New
Accounting Standards
Recently
Issued Accounting Pronouncements
In
September, 2006, the FASB issued SFAS No. 157, FAIR VALUE MEASUREMENTS. The
statement defines fair value, determines appropriate measurement methods, and
expands disclosure requirements about those measurements. SFAS No. 157 is
effective for our fiscal year beginning June 1, 2008.
In
February 2007, the FASB issued SFAS No. 159, THE FAIR VALUE OPTION FOR FINANCIAL
ASSETS AND FINANCIAL LIABILITIES, including an amendment of FASB Statement No.
115. This pronouncement permits entities to choose to measure many financial
instruments and certain other items at fair value that are not currently
required to be measured at fair value. SFAS 159 is effective as of the beginning
of our fiscal year which begins June 1, 2008.
F-5
PREAXIA HEALTH CARE PAYMENT
SYSTEMS INC.
(Formerly
Sun World Partners, Inc.)
(A
Development Stage Company)
NOTES TO
THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the
six months ended November 30, 2008 and the
period
from January 28, 2008 (Date of Inception) to November 30, 2008
Note
2 – Summary of significant accounting policies (Continued)
New
Accounting Standards
Recently
Issued Accounting Pronouncements (Continued)
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), BUSINESS
COMBINATIONS. This revision to SFAS No. 141 requires an acquirer to recognize
the assets acquired, the liabilities assumed, and any non-controlling interest
in the acquiree at the acquisition date, at their fair values as of the
acquisition date, with limited exceptions. This revision also requires that
acquisition-related costs be recognized separately from the assets acquired and
that expected restructuring costs be recognized as if they were a liability
assumed at the acquisition date and recognized separately from the business
combination. In addition, this revision requires that if a business combination
is achieved in stages, that the identifiable assets and liabilities, as well as
the non-controlling interest in the acquiree, be recognized at the full amounts
of their fair values. The Company believes that is has correctly applied the
guidance under SFAS 141 to its recent business combination.
In
December 2007, the FASB issued SFAS No. 160, NONCONTROLLING INTERESTS IN
CONSOLIDATED FINANCIAL STATEMENTS, an amendment of ARB No. 51.
The objective of this statement is to improve the relevance, comparability, and
transparency of the financial statements by establishing accounting and
reporting standards for the Noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. The Company believes that this statement will
not have any impact on its financial statements, unless it deconsolidates a
subsidiary.
In March
2008, the FASB issued SFAS No. 161, DISCLOSURES ABOUT DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES (An amendment to SFAS No. 133). This statement is effective
for financial statements issued for fiscal years and interim periods beginning
after November 15, 2008 and requires enhanced disclosures with respect to
derivative and hedging activities. The Company will comply with the disclosure
requirements of this statement if it utilizes derivative instruments or engages
in hedging activities upon its effectiveness.
In
April 2008, the FASB issued FASB Staff Position No. 142-3,
DETERMINATION OF THE USEFUL LIFE OF INTANGIBLE ASSETS (“FSP No. 142-3”) to
improve the consistency between the useful life of a recognized intangible asset
(under SFAS No. 142) and the period of expected cash flows used to measure
the fair value of the intangible asset (under SFAS No. 141(R)). FSP
No. 142-3 amends the factors to be considered when developing renewal or
extension assumptions that are used to estimate an intangible asset’s useful
life under SFAS No. 142. The guidance in the new staff position is to be
applied prospectively to intangible assets acquired after December 31,
2008. In addition, FSP No. 142-3 increases the disclosure requirements
related to renewal or extension assumptions. The Company does not believe
implementation of FSP No. 142-3 will have a material impact on its financial
statements.
In May
2008, the FASB issued SFAS No. 162, THE HIERARCHY OF GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES. This statement identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States (the GAAP hierarchy).
F-6
PREAXIA HEALTH CARE PAYMENT
SYSTEMS INC.
(Formerly
Sun World Partners, Inc.)
(A
Development Stage Company)
NOTES TO
THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the
six months ended November 30, 2008 and the
period
from January 28, 2008 (Date of Inception) through November 30, 2008
Note
2 – Summary of significant accounting policies (Continued)
New
Accounting Standards
Recently
Issued Accounting Pronouncements (Continued)
This
statement is effective 60 days following the SEC’s approval of the Public
Company Accounting Oversight Board amendments to AU Section 411, “the Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles.”
In May
2008, the FASB issued SFAS No. 163, ACCOUNTING FOR FINANCE
GUARANTEE INSURANCE CONTRACTS – AN INTERPRETATION OF FASB STATEMENT NO. 60. The premium revenue
recognition approach for a financial guarantee insurance contract links premium
revenue recognition to the amount of insurance protection and the period in
which it is provided. For purposes of this statement, the amount of insurance
protection provided is assumed to be a function of the insured principal amount
outstanding, since the premium received requires the insurance enterprise to
stand ready to protect holders of an insured financial obligation from loss due
to default over the period of the insured financial obligation. This
Statement is effective for financial statements issued for fiscal years
beginning after December 15, 2008.
In
June 2008, the FASB issued FASB Staff Position Emerging Issues Task
Force (EITF) No. 03-6-1, DETERMINING WHETHER INSTRUMENTS GRANTED IN
SHARE-BASED PAYMENT TRANSACTIONS ARE PARTICIPATING SECURITIES (“FSP EITF No.
03-6-1”). Under FSP EITF No. 03-6-1, unvested share-based payment
awards that contain rights to receive nonforfeitable dividends (whether paid or
unpaid) are participating securities, and should be included in the two-class
method of computing EPS. FSP EITF No. 03-6-1 is effective for fiscal years
beginning after December 15, 2008, and interim periods within those years,
and is not expected to have a significant impact on the Company’s financial
statements.
None of
the above new pronouncements has current application to the Company, but may be
applicable to the Company's future financial reporting.
Other
The
Company has selected May 31 as its year-end and the Company paid no dividends in
2008.
Going
Concern
The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern. As shown in the accompanying
consolidated financial statements, the Company has incurred a net loss of
$237,868 since inception, and currently has no sales. The future of the Company
is dependent upon its ability to obtain financing and upon future profitable
operations from the design, development and commercialization of its health care
payment processing services and products. Management has plans to seek
additional capital through private placements of its common stock. The
consolidated financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts of and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
Note
3 – Loan receivable
Loan
receivable consists of a promissory note for the remaining debt between former
wholly-owned subsidiary Tiempo de Mexico Ltd. and the Company in the amount of
$49,897 ($49,281 plus $616 of interest). The loan is for a term of one year
expiring May 20, 2009 and bears interest at a rate of 5% per
annum. This loan receivable was collected during the quarter ended
November 30, 2008.
F-7
PREAXIA HEALTH CARE PAYMENT
SYSTEMS INC.
(Formerly
Sun World Partners, Inc.)
(A
Development Stage Company)
NOTES TO
THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
For the
six months ended November 30, 2008 and the
period
from January 28, 2008 (Date of Inception) through November 30, 2008
Note 4 – Related Party
Transactions
During
the six month period ended November 30, 2008 the Company’s president, Tom
Zapatinas, invoiced $60,000 for management services rendered to the Company for
the period June 1 to November 30, 2008. As at November 30, 2008
Accounts payable – related party includes a total of $86,360 due and payable to
Mr. Zapatinas.
During
the six month period ended November 30, 2008 the Company’s president advanced
$7,663 for operations of wholly-owned subsidiary Preaxia Canada which amount is
included as a related party loan on the Company’s balance sheet. The
related party loan totaled $20,193 as at November 30, 2008.
Note
5 – Loans payable
Loans
payable totaling $25,000 is from arm’s length third parties bear no interest and
have no specific terms of repayment. During the quarter ended
November 30, 2008, this loan payable of $25,000 was paid.
Note
6 – Other
On
September 12, 2008, the Company accepted funds in the amount of $46,505 USD
($50,000 CDN) as a convertible debenture from a stockholder of the
Company. The debenture is for a period of one year and bears
interest at the rate of 10% per annum and is convertible by the stockholder into
common shares of the Company at $0.50 per share for a period of one
year. During the six months ended November 30, 2008 the Company
recorded amortization of loan discount in the amount of
$7,124. Unamortized discount at November 30, 2008 is $21,371, which
is being amortized over the term of the note, 12 months.
Note
7 – Comparative financial statements
The
comparative balance sheet for the fiscal year ended May 31, 2008 has been
reclassified from statements previously presented to conform to the presentation
of the November 30, 2008 consolidated balance sheet.
Note
8 – Subsequent Events
On
December 11, 2008 the Nevada Secretary of State effected a name change of the
Company from Sun World Partners, Inc. to PreAxia Health Care Payment Systems
Inc. pursuant to a Board of Directors Resolution as of October 22, 2008
approving the name change and the approval of the majority of the stockholders
on October 28, 2008. The Company is trading under the symbol
PAXH on the Over-the-Counter-Bulletin-Board as of the date of this
filing.
F-8
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", 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 the
Comapny to sustain, manage or forecast its growth; the ability of the Company to
successfully make and integrate acquisitions; raw materaial 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. The
Company 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.
All
dollar 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 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, 2008,
together with notes thereto. As used in this quarterly report, the terms
"we", "us", "our", and the "Company" means PreAxia Health Care Payment
Systems Inc. (formerly Sun World Partners, Inc.) and its wholly- owned
subsidiary, PreAxia Health Care Payment System Inc. (formerly H Pay Card Ltd..),
unless the context clearly requires otherwise.
General
Overview
The
Company undertakes all of its operations through its wholly-owned subsidiary,
PreAxia Health Care Payment System Inc. (“PreAxia Canada”), previously H-Pay
Card Ltd. PreAxia Canada 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 will grow
to over $75 billion in assets and 25 million consumers by
2015. 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, increase profitability and get
more return from their investment. We intend to provide them with
services to capture this market opportunity.
4
Plan of Operation
Over the
next twelve months, we plan to:
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(a)
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Raise
additional capital to execute our business plans.
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(b)
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Penetrate
the health care processing market in Canada, and worldwide, by continuing
to develop innovative health care processing products and
services.
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(c)
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Build
up a network of strategic alliances with several types of health insurance
companies, governments and other alliances in various vertical
markets.
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(d)
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Fill
the positions of senior management sales, administrative and engineering
positions.
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Cash
Requirements
After a
further review of business opportunities with industry consultants, for the next
twelve months and given that we meet our forecasted revenues, we plan to spend a
total of approximately $4,614,513 in implementing our business plan of
development and marketing of health care processing products and
services. We would expect to generate revenues of $1,520,775 to
offset our cash requirements in year one, therefore we will be required to raise
a total of $3,093,738 to complete year one of our business plan for our wholly-
owned subsidiary, PreAxia Canada (previously H-Pay Card). In addition, we
estimate our operating expenses for the Company to total approximately
$250,000. Our working capital requirements for both the Company
and PreAxia Canada for the next twelve months are follows:
|
Estimated
Expenses
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||||
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General
and Administrative (the Company)
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$ | 250,000 | ||
|
Infrastructure
(PreAxia Canada)
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$ | 2,200,000 | ||
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Account
Acquisition Costs (PreAxia Canada)
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$ | 435,000 | ||
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Broker
Fees (PreAxia Canada)
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$ | 173,813 | ||
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Staff
and Professional Services (PreAxia Canada)
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$ | 1,695,000 | ||
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Usage
(PreAxia Canada)
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$ | 110,700 | ||
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Total
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$ | 4,864,513 | ||
Of this
amount we expect to offset our working capital requirements by total revenues of
$1,520,775.
Our
estimated expenses over the next twelve months are broken down as
follows:
|
1.
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General and Administrative:
We anticipate spending approximately $250,000 on general and
administration costs in the next twelve months, which will include
consulting, legal and accounting fees.
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2.
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Infrastructure: We
anticipate that we may spend up to $2,200,000 in the next
twelve months in the development and acquisition of infrastructure for our
processing services and products.
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3.
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Account Acquisition
Costs: We anticipate
spending approximately $435,000 as the costs of marketing and
education focused on new accounts.
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4.
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Broker
Fees: We anticipate that we may spend up to $173,813 in
the next twelve months for broker fees for the introduction and
commissions to gain accounts.
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5.
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Staff and Professional
Services: We anticipate that we may spend up to
$1,695,000 in the next twelve months for staff and professional
services.
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6.
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Usage: We anticipate
spending up to $110,700 from usage for each transaction
processed.
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5
Liquidity
and Capital Resources
As of
November 30, 2008, the Company’s cash balance is $25,077, compared to $86,574 as
at May 31, 2008. PreAxia Canada does not have any cash on hand and we
will be required to raise capital to fund our operations and the operations of
PreAxia Canada. The Company’s cash on hand is currently our only
source of liquidity. The Company had a working capital deficit of
$161,072 as of November 30, 2008 compared with a working capital deficit of
$21,309 as of May 31, 2008. 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. The Company's cash and cash equivalents will
not be sufficient to meet our 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 development stage with PreAxia
Canada. We project that we will require an estimated additional
$3,343,738 over the next twelve month period to fund our operating cash
shortfall. Our 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 the Company may determine. During the period, we raised a
total of $46,505 by way of a convertible debenture. The note is for a
term of one year with interest at 10% per annum and is convertible at $0.50 per
share. There are no assurances that we will be able to obtain 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 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.
Off-balance
Sheet Arrangements
We have
no off-balance sheet arrangements.
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.
Revenue
recognition
The
Company recognizes revenue in accordance with the provision of the Securities
and Exchange Commission Staff Accounting Bulletin ("SAB") No. 104 which
establishes guidance in applying generally accepted accounting principles to
revenue recognition in financial statements. SAB No. 104 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; (3) the price to the buyer is fixed and determinable; and (4)
collectability is reasonably assured.
Research
and development
All costs
of research and development activities are expensed as incurred.
The
Company presently does not have any off-balance sheet
arrangements.
6
ITEM
3. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not
applicable.
ITEM
4T. CONTROLS
AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of our disclosure controls and procedures, as such term is defined
under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as
amended (Exchange Act), as of November 30, 2008. Based on this
evaluation, our principal executive officer and principal financial officer
concluded that our disclosure controls and procedures are effective in alerting
them on a timely basis to material information relating to our Company required
to be included in our reports filed or submitted under the Exchange
Act.
Changes
in Internal Controls
There
were no significant changes (including corrective actions with regard to
significant deficiencies or material weaknesses) in our internal controls over
financial reporting that occurred during the quarter ended November 30, 2008,
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
PART
II – OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
Not
Applicable
ITEM
1A. RISK FACTORS
Not
Applicable
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
Not
Applicable
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
Not
Applicable
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On
October 28, 2008 a majority of stockholders holding a total of 9,500,000 shares
of common stock constituting 60% of the total issued and outstanding common
stock of the Company voted to effect a name change of the Company from Sun World
Partners Inc. to PreAxia Health Car Payment Systems Inc.
ITEM
5. OTHER INFORMATION
On
September 12, 2008, the Company accepted funds in the amount of $46,505 USD as a
convertible debenture from a stockholder of the Company. The
debenture is for a period of one year and bears interest at the rate of 10% per
annum and is convertible into common shares of the Company at $0.50 per share
for a period of one year.
On
December 11, 2008 the Nevada Secretary of State effected a name change of the
Company from Sun World Partners, Inc. to PreAxia Health Care Payment Systems
Inc. pursuant to a Board of Directors Resolution as of October 22, 2008
approving the name change and the approval of the majority of the stockholders
on October 28, 2008. The Company is trading under the symbol
PAXH on the Over-the-Counter-Bulletin-Board as of the date of this
filing.
7
ITEM
6. EXHIBITS
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Number
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Description
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3.1
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Articles
of Incorporation
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Incorporated
by reference to the Exhibits filed with the Form SB-2 filed with the SEC
on March 16, 2006
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3.1(i)
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Amended
Articles of Incorporation
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Incorporated
by reference to the Exhibits filed with Schedule 14C on November 14,
2008.
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3.2
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Bylaws
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Incorporated
by reference to the Exhibits filed with the Form SB-2 filed with the SEC
on March 16, 2006
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10.1
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Letter
of Intent, 2008 between the Company and Preaxia Health Care Payment System
Inc. (formerly H-Pay Card Ltd.)
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Incorporated
by reference to the Exhibits filed with Form 8-K on March 5,
2008.
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22.1
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Notice
of Annual Meeting of Shareholders
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Incorporated
by reference to our Definitive Schedule 14C filed with the SEC on May 27,
2008
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31.1
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Section
302 Certification- Principal Executive Officer
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Filed
herewith
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31.2
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Section
302 Certification Principal Financial Officer
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Filed
herewith
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32.1
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Certification
Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
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Filed
herewith
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32.2
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Certification
Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
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Filed
herewith
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SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) 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, on this 20th day of
January, 2009.
PREAXIA
HEALTH CARE PAYMENT SYSTEMS INC.
By: /s/Tom
Zapatinas
Name: Tom
Zapatinas
|
|
Title: President
and Director (Principal Executive
Officer)
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Date: January
20, 2009
By: /s/ Ron
Lizee
Name: Ron
Lizee
Title: Treasurer
and Director (Principal Financial Officer and Principal Accounting
Officer)
Date: January
20, 2009
8