PREAXIA HEALTH CARE PAYMENT SYSTEMS INC.

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 controls 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 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.

During the three and nine months ended February 28, 2021 and 2020, the Company had revenue of $125 and $0 and $125 and $0, respectively. The Company earns a 10% commission on amounts reimbursed for eligible expenses.

Our total expenses for the three months ended February 28, 2021 was $41,351 compared to $45,115 for the three months ended February 28, 2020. The decrease in total expenses of $3,764 for the three months ending February 28, 2021 is due to a decrease in consulting fees of $3,187, a decrease in professional fees of $1,446, a decrease in research and development of $641 and an increase of $1,510 in office and administration fees.

During the nine months ended February 28, 2021 and February 29, 2020, the Company had revenue of $125 and $0, respectively. The Company earns a 10% commission on amounts reimbursed for eligible expenses.