10-K 1 form10k.htm ANNUAL REPORT FORM 10-K

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

Form 10-K

 

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2013

 

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: 333-130446

 

PRAXSYN CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

 

Illinois   20-3191557
(State or other jurisdiction of incorporation or organization)   (I. R. S. Employer Identification No.)

 

855 El Camino Suite 13A-184, Palo Alto, CA 94301

(Address of principal executive offices and zip code)

 

(415) 871-0678

(Registrant’s telephone number)

 

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: Common Stock

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(b) of the Act. Yes [X] No [  ]

 

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 [X] No [  ]

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained in this form, and no disclosure will be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] 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,” an “accelerated filer,” a “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

[  ] Large accelerated Filer [  ] Accelerated filer [  ] Non-accelerated filer [X] Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [  ] No [X]

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2013, the last business day of the registrant’s most recently completed second fiscal quarter, based on the last sales price of the issuer’s common stock as reported on the OTCQB of the OTC Markets Group’s quotation and trading system was $10,026,499. Shares of common stock held by each current executive officer and director and by each person who is known by the registrant to own 5% or more of the outstanding common stock have been excluded from this computation in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not a conclusive determination for other purposes.

 

The number of shares outstanding of the registrant’s Common Stock as of April 12, 2014 was 256,574,859 shares.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

NONE.

 

 

 

 
 

 

Praxsyn Corporation

(Formerly Known As The PAWS Pet Company, Inc.)

 

FORM 10-K INDEX

 

Item #   Description Page
         
    PART I    
         
Item 1.   Business.   3
         
Item 1A.   Risk Factors.   5
         
Item 2.   Properties.   5
         

Item 3.

 

Legal Proceedings

  5
         

Item 4.

 

Mine Safety Disclosures

  5
         
  PART II    
         
Item 5.   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Repurchases of Equity Securities.   6
         

Item 6.

 

Selected Financial Data.

  7
         
Item 7.   Management’s Discussion and Analysis of Financial Condition And Results of Operations.   7
         
Item 8.   Consolidated Financial Statements.   12
         
Item 9A.   Controls and Procedures.   13
         
  PART III    
         
Item 10.   Directors, Executive Officers, and Corporate Governance.   15
         
Item 11.   Executive Compensation.   17
         
Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.   18
         
Item 13.   Certain Relationships and Related Transactions, and Director Independence.   19
         
Item 14.   Principal Accountants Fees and Services.   20
         
  PART IV    
         
Item 15.   Exhibits and Financial Statement Schedules.   21
         
Signatures.   23

 

2
 

 

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

 

This report includes statements that may constitute “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts, including, without limitation, statements regarding future financial position, business strategy, budgets, projected sales, projected costs, and management objectives, are forward-looking statements. Terminology such as “may,” “will,” “expects,” “intends,” “plans,” “projects,” “estimates,” “anticipates,” or “believes” or the negative thereof, any variation thereon or similar terminology are intended to identify forward-looking statements.

 

These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially and adversely from the results proposed in such statements. Important factors that could cause actual results to differ from our expectations include, but are not limited to: the costs and availability of financing; our ability to maintain adequate liquidity; our ability to execute our business plan; our ability to control costs; our ability to attract and retain customers; transportation demand; general economic conditions; costs of aviation fuel; competitive pricing pressures; governmental regulation; weather conditions; and statements of assumption underlying any of the foregoing, as well as other factors set forth under “Item 7 — Management’s Discussions and Analysis of Financial Condition and Results of Operations” in this report.

 

Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date of this report. All forward-looking statements are qualified in their entirety by the foregoing cautionary statements. We assume no duty to update or revise our forward-looking statements based on changes in our expectations or events after the date hereof.

 

PART I

 

ITEM 1. BUSINESS

 

The terms “Praxsyn Corporation,” the “Company,” “management,” “we,” “us,” and “our” in this Annual Report on Form 10-K to refer collectively to Praxsyn Corporation and its subsidiary, formerly known as The PAWS Pet Company, Inc.

  

Organizational History

  

We were incorporated in the State of Illinois on June 6, 2005 as American Antiquities, Inc. (“AAI”). Historically, we purchased antiques and collectible items for resale, accepted items on consignment, and sold items through various auctions and third party internet websites.

 

On August 13, 2010, we completed a reverse acquisition transaction through a share exchange with Pet Airways, Inc. (Florida), which was a successor entity to Panther Air Cargo, LLC (the “Acquisition”), whereby AAI acquired 100% of the issued and outstanding capital stock of Pet Airways, Inc. (Florida) in exchange for 25,000,000 shares of our common stock, which constituted approximately 73% of our issued and outstanding capital stock on a post-acquisition basis as of and immediately after the consummation of the Acquisition.

 

Panther Air Cargo, LLC was formed as a limited liability company in the State of Florida in February 2005. From 2005 through 2009, Panther Air Cargo d/b/a Pet Airways evaluated the market for pet air travel, including reservation systems and processes. It also considered whether it should own its own planes or contract with third parties. It also evaluated the optimal ways to configure the aircraft for safe pet travel and the initial markets to commence flight operations in. Pet Airways began flight operations in July 2009 and from the period July 2009 to March 2010 operated a weekly scheduled service. In March 2010 Pet Airways suspended flight operations to upgrade its on-line reservation system and to raise additional capital. In June 2010 Pet Airways resumed flight operation after we implemented our new reservation system and raised additional capital by issuing a series of convertible debentures, shares of common stock and warrants. Immediately prior to the Acquisition Panther Air Cargo, LLC was renamed to Pet Airways, Inc., a Florida corporation. In January of 2012 the Company decided to cease operations of Pet Airways.

 

As a result of the Acquisition, Pet Airways, Inc. (Florida) became a wholly-owned subsidiary of ours and the controlling stockholders of Pet Airways, Inc. (Florida) became our controlling stockholders. Also, upon completion of the Acquisition, we changed our name from AAI to Pet Airways, Inc. and commenced trading under the symbol “PAWS” on the OTC QB. The OTC QB market tier of the OTC market helps investors identify companies that are current in their reporting obligations with the Securities and Exchange Commission (the “SEC”). OTC QB securities are quoted on OTC Markets Group's quotation and trading system. On July 27, 2011, we filed Articles of Amendment to amend our Articles of Incorporation to change our name to The PAWS Pet Company, Inc.

 

3
 

  

The share exchange transaction was treated as a reverse acquisition, with Pet Airways, Inc. (Florida) as the acquirer and The PAWS Pet Company, Inc. as the acquired party. Unless the context suggests otherwise, when we refer in this report to business and financial information for periods prior to the consummation of the reverse acquisition, we are referring to the business and financial information of Pet Airways, Inc. and its predecessors. For accounting purposes, the acquisition of Pet Airways, Inc. has been treated as a recapitalization with no adjustment to the historical book and tax basis of the companies’ assets and liabilities.

 

Upon the closing of the Acquisition on August 13, 2010, Joseph A. Merkel, our former Chief Executive Officer, President and director and Kevin T. Quinlan, our former Chief Financial Officer, Controller and director, resigned. On the same day, our board of directors approved an increase in the size of our board to three board members and appointed Dan Wiesel, Alysa Binder and Andrew Warner to our board of directors at the effective time of the resignation of Messrs. Merkel and Quinlan, to fill the vacancies created by their resignation. In addition, our board of directors appointed Mr. Wiesel as our Chief Executive Officer and Ms. Binder as our Executive Vice President effective immediately at the closing of the Acquisition.

 

On February 23, 2012, pursuant to a share exchange agreement (“the Agreement”) the Company acquired the 100% of the issued and outstanding capital stock of Impact Social Networking, Inc. (“ISN”), a Georgia corporation in exchange for 7,394,056 shares of the Company’s common stock, no par value per share valued at $1,035,168 on the date of the acquisition. ISN owns a number of technology assets that had not reached technical feasibility at the time of the acquisition. With the exception of these technology assets ISN had no other assets or liabilities at the time of the acquisition, and had except for the development costs incurred for these assets, had no other costs and no revenue. Following, the acquisition, the Company commenced a new strategy of developing technologies for pet owners and pet caregivers. In September we closed our social media application and are currently evaluating alternative business strategies.

 

On July 13, 2012 the company increased its authorized share capital of common stock to 350,000,000.

 

On March 9, 2013, the Company entered into a Securities Exchange Agreement whereby the Company issued 80,000 shares of the Company’s Series B Convertible Preferred Stock to the members of Advanced Access Pharmacy Services, LLC, a Nevada limited liability company (“AAPS”) in exchange for 100% of the outstanding units of limited liability company membership interests of AAPS.

 

AAPS was created to exploit specific niche opportunities in wholesale and retail pharmacies. AAPS intends to focus on workers' compensation and in-office physician pharmacy distribution as well as the limited purchase and collection of pharmaceutical and services related receivables. Leveraging decades of experience in pharmacy and medical receivables collections of the people being hired, the Company believes that it should be able to achieve significant profitability in a very short period with very limited investment.

 

On December 31, 2013 the Company agreed to acquire Mesa Pharmacy, Inc. (“Mesa”) from Pharmacy Development Corporation (“PDC-CA”) in the form of a First Amended Securities Exchange Agreement (“FA-SEA”), in exchange for 500,000 shares of Series D Convertible Preferred Stock. However, on March 20, 2014, the Company and PDC-CA agreed to amend, supersede and replace the FS-SEA with an Agreement and Plan of Merger Agreement (“APMA”) whereby PDC-CA would merge into the Company’s wholly-owned subsidiary, PDC, Inc (“PDC”), that was formed by the Company in 2014, via a forward triangular merger. The 500,000 shares are due under this agreement and the Company will take on an additional $646,500 in PDC-CA convertible notes and amend such notes so that they are convertible at a rate of one share of Series D preferred stock of the Company per $100 of PDC convertible notes. The Company and the holders of Series D preferred stock intend to amend the Certificate of Designation to add, at a minimum, the necessary 6,465 shares to the already authorized 500,000 shares. This transaction closed on March 31, 2014. PDC-CA and/or Mesa primarily operate as Mesa and focuses on providing custom compounded non-narcotic, transdermal topical pain medications that are marketed to industrial health physicians and clinics. Mesa has developed a series of topical ointments, in different strengths, that provide the pain relief doctors seek.

 

On March 26, 2014, the Company issued 60,000,000 Common Stock shares to Daniel Wiesel and Alysa Binder, both officers and directors of the Company, pursuant to the exemption provided by Section 4(2) of the Securities Act of 1933. The shares were issued in consideration of the cancellation of accrued, yet unpaid wages through December 31, 2013 and the agreement by The Watermark Company, Inc., a corporation controlled by the Daniel Wiesel and Alysa Binder, to purchase the Company’s interest in Pet Airways, Inc., a subsidiary through which the Company formerly operated its discontinued pet airline. The sale of Pet Airways, Inc. relieves the Company of debts totaling approximately $1,000,000. The Company had agreed, in principle, to allow Mr. Wiesel and Ms. Binder to reacquire Pet Airways and settle their outstanding unpaid wages as soon as the acquisition of PDC/MESA was complete. The Company retains the ownership of the flight reservation system developed by the Company; however, Pet Airways, Inc. retains a royalty free license to utilize the system in perpetuity. A sale of the flight reservation system is being considered.

 

On March 26, 2014, the Company changed its name to “Praxsyn Corporation” and increased the number of authorized shares of common stock to 1,400,000,000 shares.

 

4
 

 

Employees

 

As of December 31, 2013, we had 2 fulltime employees. We are not a party to any collective bargaining agreements and we believe that our relationship with our employees is good.

  

ITEM 1A. RISK FACTORS

 

Not applicable because we are a smaller reporting company.

 

ITEM 2. DESCRIPTION OF PROPERTY.

 

We lease office space in Palo Alto, California. The California office, which is our corporate headquarters, is used for corporate administrative functions. The office is owned by our CEO, Mr. Dan Wiesel, and we lease it free of charge on a month-to-month basis.

 

ITEM 3. LEGAL PROCEEDINGS.

 

From time to time, we are involved in legal proceedings, claims, and litigation that occur in connection with our business. We routinely assess our liabilities and contingencies in connection with these matters based upon the latest available information and, when necessary, we seek input from our third-party advisors when making these assessments. Consistent with SEC rules and requirements, we describe below material pending legal proceedings (other than ordinary routine litigation incidental to our business), material proceedings known to be contemplated by governmental authorities, other proceedings arising under federal, state, or local environmental laws and regulations (including governmental proceedings involving potential fines, penalties, or other monetary sanctions in excess of $10,000) and such other pending matters that we may determine to be appropriate.

 

On April 26, 2012, a judgment was entered against the Company in Circuit Court in and for Palm Beach County, Florida by Sky Way Enterprises, Inc. in the sum of $187,827 for services rendered, damages, including costs, statutory interest and attorneys’ fees. The balance due at December 31, 2013 inclusive of accrued interest was $196,544.

 

On March 4, 2013, a judgment was entered against us in District Court of Douglas County, Nebraska by Suburban Air Freight in the sum of $87,491 for services rendered, including statutory interest and attorneys’ fees. Other than the foregoing, there were no claims, actions, or lawsuits which to our knowledge are pending or threatened that could reasonably be expected to have a material effect on the results of our operations. The balance due at December 31, 2013 inclusive of accrued interest was $89,579.

 

On March 6, 2013, an order was issued by the labor commissioner of the State of California for our subsidiary, Pet Airways, Inc., to pay a former employee Alyce Tognotti wages and penalties in the sum of $17,611 for services rendered, including penalties, statutory interest and liquidated damages. The balance due at December 31, 2013 inclusive of accrued interest was $18,576.

 

On May 31, 2013, a motion for final judgment was filed against our subsidiary, Pet Airways, Inc., in Circuit Court in and for Broward County, Florida by AFCO Cargo BWI, LLC in the sum of $31,120 for services rendered, including statutory interest and attorneys’ fees. The balance due at December 31, 2013 inclusive of accrued interest is was $31,987.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

5
 

 

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Our stock is currently listed on the OTCQB for trading. Our stock trades now under the symbol “PAWS” and previously traded under AAQS. The following table sets forth, for the calendar quarters indicated, the high and low bid prices of our common stock. These quotations reflect inter-dealer prices, without mark-up, mark-down or commission, and may not represent actual transactions.

 

Year Ended December 31, 2013

 

    High   Low 
1st Quarter Ended March 31, 2013   $0.08   $0.00 
2nd Quarter Ended June 30, 2013   $0.08   $0.02 
3rd Quarter Ended September 30, 2013   $0.13   $0.01 
4th Quarter Ended December 31, 2013   $0.04   $0.01 

 

Year Ended December 31, 2012

 

    High   Low 
1st Quarter Ended March 31, 2012   $0.17   $0.06 
2nd Quarter Ended June 30, 2012   $0.14   $0.02 
3rd Quarter Ended September 30, 2012   $0.10   $0.00 
4th Quarter Ended December 31, 2012   $0.01   $0.00 

 

Dividends

 

We have not paid any dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. We intend to retain any earnings to finance operations and the growth of the business.

 

We cannot assure you that we will ever pay cash dividends. Whether we pay any cash dividends in the future will depend on the financial condition, results of operations and other factors that the Board of Directors will consider.

 

Holders

 

As of April 12, 2014, we had approximately 147 record holders of our common stock.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

The Company has a Stock Incentive Plan (the “Plan”). Under the Plan, at December 31, 2013 and 2012, the Company had 4,000,000 shares reserved for the issuance of stock options to employees, officers, directors and outside advisors. Under the Plan, the options may be granted to purchase shares of the Company’s common equity at fair market value, as determined by the Company’s Board of Directors, at the date of grant.

 

Plan Category  Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
(a)
   Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
   Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities
reflected in column(a))
(c)
 
Equity compensation plans not approved by shareholders   367,000   $0.16    3,633,000 

 

6
 

 

Sales of Unregistered Securities

 

There were no unregistered sales of securities during the period covered by this report that were not previously reported in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.

 

ITEM 6. SELECTED FINANCIAL DATA.

 

Not Applicable.

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

This Management’s Discussion and Analysis of Financial Condition and Results Of Operation and other parts of this Annual Report on Form 10-K contain forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this Annual Report on Form 10-K are based on information available to us on the date hereof, and except as required by law, we assume no obligation to update any such forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a number of factors. The following should be read in conjunction with our annual consolidated financial statements contained elsewhere in this report.

 

Dollar amounts of $1.0 million or more are rounded to the nearest one tenth of a million; all other dollar amounts are rounded to the nearest one thousand and all percentages are stated to the nearest one percent or one tenth of one percent.

 

Overview

 

We are a development stage company currently seeking new opportunities for investment.

 

Critical Accounting Policies

 

The discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continuously evaluate our estimates and judgments, including those related to revenue recognition, bad debts, impairment of intangible assets, income taxes, contingencies and litigation. Our estimates are based on historical experience and assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

Our Board of Directors has reviewed our related disclosures in our Form 10-K for the period ended December 31, 2013 and for the period ended December 31, 2012 filed with the SEC. We believe the following critical accounting policies, among others, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

 

Derivative Liabilities

 

We have utilized convertible debentures with warrants to purchase shares of common stock to settle certain liabilities and fund operations resulting in the recording of a derivative liability. Current guidance for valuing and classifying transactions of this type include ASC 470-20 “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement”),“EITF No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios” and EITF No. 00-27, “Application of Issue No. 98-5 to Certain Convertible Instruments.” Accordingly, we have used the Black-Scholes option-pricing model as our method of determining the fair value of the convertible debenture issued with a warrant. The resulting calculation of the beneficial conversion feature (BCF) and warrant equity component are recorded to APIC with an offset discount to the principal value of the convertible debenture. We have used the effective yield interest method for amortizing the discount to interest expense over the maturity term of the convertible debenture. We record to interest expense the unamortized discount value associated with a debenture converted in a period.

 

Accruals for Contingent Liabilities

 

We make estimates of liabilities that arise from various contingencies for which values are not fully known at the date of the accrual or during the periodic financial planning and analysis cycle. These contingencies may include, but are not limited, to accruals for reserves for costs and awards involving legal settlements, cost associated with planned changes in workforce or operating levels, costs associated with reduced flight services from Suburban, the building out of leased premises, vacating leased premises or abandoning leased equipment, and costs involved with the discontinuance of a segment of a business. Events may occur that are resolved over a period of time or on a specific future date. Management makes estimates using the facts available of the probability of the outcomes and range of cost, if measurable, of these occurrences and charges them to expense in the appropriate periods. If the ultimate resolution of any event is different than management’s estimate caused by a change in facts or material operating assumptions, compensating entries to earnings may be required.

 

7
 

 

Equity-Based Compensation

 

We are using the Black-Scholes option-pricing model as our method of valuation for share-based awards (e.g., warrant to purchase shares of common stock) used to settle certain liabilities to non-employees. Our determination of fair value of share-based payment awards on the date of grant using the option-pricing model is affected by our equity price as well as assumptions regarding our expected equity price volatility over the term of the awards, the selection of a risk free interest rate, the ultimate disposition of the award and the impact of the award on earnings per share. For example, in calculating the expected equity price volatility, we may consider using our historical experience only, our experience plus that of a publicly trade index volatility experience, or a blended volatility experience for public peer companies. We also evaluate carefully the expected life term of an award though the vesting of awards to date have been immediate .Finally, we attempt to use a risk free rate that is widely quoted and pertinent across a broad range of transactions.

 

Results of Operations

 

Comparison of the Year Ended December 31, 2013 to the Year Ended December 31, 2012.

 

The following table sets forth, certain statement of operations data relating to the business for the periods indicated.

 

   Year Ended December 31,   Year over Year Change 
   2013   2012   $   % 
                 
Operating expenses:                    
Sales, general and administration expenses  $988,480   $1,687,488   $699,008    -41.4%
Impairment of goodwill   -    1,035,168   $1,035,168    -100.0%
Total operating expenses   988,480    2,722,656    1,734,176    -63.7%
                     
Loss from operations   (988,480)   (2,722,656)   1,734,176    -63.7%
                     
Other income (expense):                    
Interest expense (including $172,657, $411,332 of amortization of debt discount)   (223,471)   (423,110)   199,639    47.2%
Loan default fee   (45,250)   -    (45,250)   -100.0%
Loss due to abandonment of equipment   -    (49,053)   49,053    100.0%
Deferred financing fee   -    (427,073)   427,073    100.0%
Net gain on conversion of convertible notes   (2,214,611)   61,661    (2,276,272)   -3691.6%
Subsidiary acquisition costs   (1,720,000)   -    (1,720,000)   -100.0%
Warrant liability valuation, net   (244,413)   2,682,587    (2,927,000)   -109.1%
Other income (expense), net   (4,447,745)   1,845,012    (6,292,757)   -341.1%
                     
(Loss) before provision for income taxes   (5,436,225)   (877,644)   (4,558,581)   -519.4%
Provision for income taxes   (800)   (1,600)   800    50.0%
                     
(Loss) from continuing operations, net of tax   (5,437,025)   (879,244)  $(4,557,781)   -518.4%
                     
Discontinued operations:                    
Loss from discontinued operations, net of tax   -   (339,570)   339,570    100.0%
                     
Net (loss)  $(5,437,025)  $(1,218,814)  $(4,218,211)   -346.1%
                     
(Loss) from continuing operations per share, basic and diluted  $(0.05)  $(0.01)          
Net (loss) per share, basic and diluted  $(0.05)  $(0.02)          
                    
Weighted average shares used in calculation of basic and diluted net income (loss) per share   99,543,062    71,122,936           

 

Revenue. Revenue for the years ended December 31, 2013 and December 31, 2012 was $0. This is due to discontinued operations as of January 2012.

 

8
 

 

Cost of revenue. Cost of revenue for the year ended December 31, 2013 and for the year ended December 31, 2012 was $0 due to discontinued operations as of January 2012.

 

Operating expenses. Operating expenses for the year ended December 31, 2013 consisted mainly of payroll costs, R&D costs, non-cash equity-based compensation, professional fees, and outside services. The operating expenses for the year ended December 31, 2013 were $988,480 compared to $2,722,656 for the year ended December 31, 2012. The decrease is mostly the result of a reduction in website development costs, consulting fees, and executive compensation, and an impairment charge of $1,035,168.

 

Other income (expense), net. Other income (expense), net decreased to an expense of $4,447,745 from an income of $1,845,012, or a change of income of $6,292,757 primarily due to the conversion of convertible debentures, warrant valuation expense, and expenses in connections with the purchase of AAPS in March, 2013.

 

Loss from discontinued operations. The Company closed the Pet Airway business and discontinued flight operations in January 2012. In closing the business we incurred $339,570 in discontinued operations related expenses in 2012 and $0 in 2013.

 

Net loss. Our net loss was $5,437,025 in 2013 as compared to $1,218,814 in 2012. The increase in losses is primarily attributable to an increase in other income (expense) items of $6,292,757.

 

Non-Cash Expense Items

 

During 2013 and 2012, we entered into a number of equity financings for working capital purposes, the settlement of services rendered in lieu of cash and general corporate purposes. Additionally, other transactions and events occurred in which significant non-cash expense arose due to the nature of those occurrences.

 

The following tables summarize the non-cash expense items, total amount and percentage of our net loss for the years ended December 31, 2013 and 2012:

 

   Year Ended December 31, 
   2013    %     2012    %  
Cash and non-cash items in net income (loss):                    
Cash  $(700,808)   12.9%  $(934,804)   76.7%
Non-cash   (4,736,217)   87.1%   (284,010)   23.3%
Net loss  $(5,437,025)   100.0%  $(1,218,814)   100.0%

 

   2013   2012 
Summary of non-cash items:          
Derivative warrant valuation income (expense), net  $(244,413)  $2,682,587 
Impairment of Goodwill from Acquisition of Impact Social Networking, Inc.   -    (1,035,168)
Accelerated amortization of debt discount from          
conversion of debenture   (11,974)   (59,080)
Loss on abandonment of property and equipment   -    (49,053)
Net (Loss) gain on conversion of notes   (2,214,611)   61,661 
Subsidiary Acquisition Costs   (1,720,000)   - 
Amortization of debt discount   (160,683)   (352,252)
Loan Default Fee   (45,250)   - 
Common shares issued for interest payable in lieu of cash   (3,816)   (6,638)
Deferred financing fee   -    (427,073)
Equity based compensation   (7,107)   (25,173)
Depreciation and amortization   (41,163)   (53,098)
Common shares issued for license fee   -    (58,209)
Common shares issued for services rendered by non-employees   (287,200)   (818,514)
Common shares issued in lieu of cash to employees   -    (144,000)
Total non-cash  $(4,736,217)  $(284,010)

 

9
 

 

Liquidity and Capital Resources

 

At December 31, 2013, the Company had $1,272 in cash as compared to $81,755 in cash at December 31, 2012.

 

Net cash used in operating activities was $(153,816) and $(284,001) for the years ended December 31, 2013 and 2012, respectively. The Company’s operating activities were substantially curtailed as we stopped our Pet Airway operations. The Company still expended monies trying to develop the Pawdoodle initiative, in which the initiative was subsequently abandoned.

 

The Company had no investing activities during the years ended December 31, 2013 and 2012.

 

Net cash provided by financing activities was $73,333 and $327,500 during the years ended December 31, 2013 and 2012, respectively. The cash provided in 2013 and 2012 was received through issuance of convertible notes and sale of shares, which decreased due to fewer issuances in the current year.

 

Financings

 

We do not currently maintain a line of credit or term loan with any commercial bank or other financial institution. We will need to complete additional financing transactions in order to continue operations beyond the next twelve months. We do not currently have sufficient cash on hand to meet our needs to pay outstanding debt and payables. We currently do not generate any from our operations to cover our monthly operating costs. Financing transactions, if any, may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to generate sufficient revenues, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privilege senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we may have to significantly curtail or suspend our operations.

 

If we are unable to generate sufficient liquidity from operations or raise additional financing on acceptable terms, our business, results of operations, liquidity and financial condition could be adversely affected, and we may be required to significantly reduce our operations, including but not limited to terminating or suspending all operations and reorganizing or liquidating the Company.

 

Socius CG II, Ltd. Financing

 

On June 3, 2011, the Company entered into a securities purchase agreement with Socius, pursuant to which it secured $500,000 of immediate funding through the issuance and sale of 2,253,470 shares of common stock and a warrant to purchase up to 20,476,707 shares of common stock at an initial exercise price of $1.02 (subject to anti-dilution adjustments). In addition, Socius agreed to purchase up to an additional $5 million in non-convertible shares of Preferred Stock from the Company over the next two years, subject to the Company meeting certain conditions.

 

Subject to the terms and conditions of the securities purchase agreement, beginning 75 days after the closing of the initial purchase, at the Company’s sole discretion, the Company may submit to Socius a tranche notice to purchase a certain dollar amount of the Company’s Preferred Stock at $10,000 per share. The maximum amount that may be funded under any tranche cannot exceed 20% of the cumulative trading volume of the common stock for the 10 trading day-period prior to the applicable tranche notice date. In connection with the securities purchase agreement, the Company agreed to issue on the 75th day anniversary of the initial purchase by Socius, 1,126,735 shares of common stock to Socius as consideration for executing the securities purchase agreement. The fair value of the consideration was $371,823 using the August 18, 2011 common stock closing price of $0.33 per share and was recorded as a deferred financing fee.

 

In addition, with the closing of the Socius financing, the Company approved the issuance of an aggregate of 1,800,000 shares of common stock as contingent consideration valued at $1,260,000 using the June 3, 2011 common stock closing price of $0.70 per share to two non-employee consultants. The share issuance was recorded as a financing cost charged against APIC.

 

In connection with the issuance of the warrant to purchase up to 20,476,707 shares of common stock at an initial exercise price of $1.02 (subject to full ratchet, anti-dilution adjustment), using the Black Scholes option pricing model that valued the warrants at $0.70 and $0.65 per share at June 3 and September 30, 2011 respectively, the Company recorded a charge to operations of $12,839,860 and a credit to additional paid in capital of $470,000. In connection with the Socius transaction we recorded total deferred financing fees of $427,073 during the year ended December 31, 2011. As of March 31, 2012, the deferred financing fee balance was $427,073, however, because access to the $5 million financing is based on a percentage formula of the dollar value of stock traded, the Company determined that it is unlikely that sufficient stock volume will be reached over the balance of the term of the financing and has expensed the deferred financing fees of $427,073 during the quarter ended September 30, 2012.

 

10
 

  

The warrant agreement has an anti-dilution clause included and therefore the Company has had to issue additional warrants at the same time as new shares were sold to third parties. If the new third party shares are issued or sold for a consideration per share less than a price equal to the exercise price in effect immediately prior to such issue or sale or deemed issuance or sale, then immediately after such dilutive issuance, the exercise price then in effect shall be reduced to an amount equal to the new issuance. As such, the company recognizes a derivative liability. The value of the derivative warrant liability was $492,781 and $248,368 at December 31, 2013 and December 31, 2012, respectively.

 

Off-Balance Sheet Arrangements

 

As of December 31, 2013, the Company did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities that had been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

  

11
 

 

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS

 

The audited consolidated financial statements of the Company, the Notes thereto and the Report of Independent Registered Public Accounting Firm thereon required by this item appears in this report on the pages indicated in the following index:

 

Index to Consolidated Financial Statements:   Page
Report of Independent Registered Public Accounting Firm   F-1
     
Consolidated Balance Sheets — December 31, 2013 and 2012   F-2
     
Consolidated Statements of Operations — Years ended December 31, 2013 and 2012, and for the period from inception of development stage (February 1, 2012) to December 31, 2013   F-3
     
Consolidated Statement of Changes in Stockholders’ Deficit — Years ended December 31, 2013 and 2012, including the period from inception of development stage (February 1, 2012) to December 31, 2013   F-4
     
Consolidated Statements of Cash Flows — Years ended December 31, 2013 and 2012, and for the period from inception of development stage (February 1, 2012) to December 31, 2013   F-5
     
Notes to consolidated financial statements   F-6

 

12
 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders

Praxsyn Corporation and Subsidiaries (Formerly Known As The PAWS Pet Company, Inc.)

Palo Alto, California

 

We have audited the accompanying consolidated balance sheets of Praxsyn Corporation and Subsidiaries (Formerly Known As The PAWS Pet Company, Inc.), (A Development Stage Company), (“the Company”) as of December 31, 2013 and 2012, and the related consolidated statements of operations, changes in shareholders’ deficit, and cash flows for each of the years in the two year period ended December 31, 2013, and for the period from inception of development stage (February 1, 2012) to December 31, 2013. Praxsyn Corporation’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Praxsyn Corporation and Subsidiaries (Formerly Known As The PAWS Pet Company, Inc.) as of December 31, 2013 and 2012, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2013, and for the period from inception of development stage (February 1, 2012) to December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Notes 1 and 14 to the consolidated financial statements, the Company has suffered recurring losses from operations, and is dependent upon shareholders to provide sufficient working capital to maintain continuity. These circumstances create substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ KBL, LLP  
April 23, 2014  

 

F-1
 

 

PRAXSYN CORPORATION AND SUBSIDIARIES

(FORMERLY KNOWN AS THE PAWS PET COMPANY, INC.)

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS

 

   December 31, 2013   December 31, 2012 
ASSETS          
Current assets:          
Cash  $1,272   $81,755 
Prepaid expenses   400    1,600 
Total current assets   1,672    83,355 
           
Property and equipment, at cost   169,136    169,136 
Less: accumulated depreciation and amortization   (157,916)   (116,753)
Total property and equipment, net   11,220    52,383 
           
Total assets  $12,892   $135,738 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
Current liabilities:          
Accounts and accrued expenses payable  $2,139,618   $1,596,826 
Convertible debentures, net of debt discount of $15,486 and $160,067 at December 31, 2013 and December 31, 2012, respectively   587,014    655,433 
Derivative warrant liability   492,781    248,368 
Accounts and accrued expenses payable, discontinued operations   865,565    865,565 
Total current liabilities   4,084,978    3,366,192 
           
Commitments and contingencies:          
           
Stockholders’ deficit:          
Preferred stock, no par value, 10,000,000 shares authorized:          

Series D, none issued outstanding at December 31, 2013 and December 31, 2012, respectively, (liquidation preference $0 and $0)

   -    - 

Series B, 79,615 and 0, respectively, outstanding at December 31, 2013 and December 31, 2012, respectively, (liquidation preference $2,388,450 and $0)

   -    - 
Series C, 1,645 and 0, respectively, outstanding at December 31, 2013 and December 31, 2012, respectively, (liquidation preference $1,645,000 and $0)   -    - 
Series A, none issued and outstanding at December 31, 2013 and December 31, 2012, respectively, (liquidation preference $0 and $0)   -    - 
Common stock, no par value, 1,100,000,000 shares authorized, 133,876,342 and 86,509,928 issued and outstanding at December 31, 2013 and December 31, 2012, respectively   -    - 
Additional paid-in capital   16,162,323    11,566,930 
Accumulated deficit from inception until discontinuance of operations (January 31, 2012)   (13,918,140)   (13,918,140)
Deficits accumulated during the development stage (February 1, 2012) to December 31, 2013 and 2012, respectively   (6,316,269)   (879,244)
           
Total stockholders’ deficit   (4,072,086)   (3,230,454)
Total liabilities and stockholders’ deficit  $12,892   $135,738 

 

The accompanying notes are an integral part of these consolidated financial statements

 

F-2
 

 

PRAXSYN CORPORATION AND SUBSIDIARIES

(FORMERLY KNOWN AS THE PAWS PET COMPANY, INC.)

 (A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

 

           For the period from 
           inception of 
           development stage 
   Year Ended December 31,   (February 1, 2012) to 
   2013   2012   December 31, 2013 
Operating expenses:               
Sales, general and administrative expenses  $988,480   $1,687,488   $2,725,021 
Impairment of goodwill   -    1,035,168    1,035,168 
Total operating expenses   988,480    2,722,656    3,760,189 
                
Loss from operations   (988,480)   (2,722,656)   (3,760,189)
                
Other income (expense):               
Interest expense (including $172,657, $411,332 and $583,989, respectively, of amortization of debt discount)   (223,471)   (423,110)   (646,581)
Loan default fee   (45,250)   -    (45,250)
Loss due to abandonment of equipment   -    (49,053)     
Financing fee   -    (427,073)   (427,073)
Net (loss) gain on conversion of convertible notes   (2,214,611)   61,661    (2,152,950)
Subsidiary acquisition costs   (1,720,000)   -    (1,720,000)
Warrant valuation adjustment, net   (244,413)   2,682,587    2,438,174 
Other income (expense), net   (4,447,745)   1,845,012    (2,553,680)
                
(Loss) before provision for income taxes   (5,436,225)   (877,644)   (6,313,869)
Provision for income taxes   (800)   (1,600)   (2,400)
                
(Loss) from continuing operations, net of tax   (5,437,025)   (879,244)   (6,316,269)
                
Discontinued operations:               
Loss from discontinued operations, net of tax   -   (339,570)   -
                
Net (loss)  $(5,437,025)  $(1,218,814)  $(6,316,269)
                
(Loss) from continuing operations per share, basic and diluted  $(0.05)  $(0.01)  $(0.07)
Net (loss) per share, basic and diluted  $(0.05)  $(0.02)  $(0.07)
               
Weighted average shares used in calculation of basic and diluted net loss per share   99,543,062    71,122,936    86,840,547 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-3
 

 

PRAXSYN CORPORATION AND SUBSIDIARIES

(FORMERLY KNOWN AS THE PAWS PET COMPANY, INC.)

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

 

   Series A
Preferred
Shares
   Series B
Preferred
Shares
   Series C
Preferred
Shares
   Series D Preferred
Shares 
   Common Stock,
No Par Value
Shares
   Additional
Paid-In
Capital
   Accumulated
deficit from
inception until
discontinuance
of operations
(January 31, 2012)
   Deficits
accumulated
during the
development stage
(February 1, 2012) to December 31, 2013
   Total
Stockholders’
Deficit
 
                                     
Balance, December 31, 2011   -    -    -    -    46,201,182   $9,114,465   $(13,578,570)  $-   $(4,464,105)
                                              
Net loss for the period January 1, 2012 to January 31, 2012   -    -    -    -    -    -    (339,570)   -    (339,570)
Common shares issued for cash   -    -    -    -    21,700,000    225,000    -    -    225,000 
Common shares issued for services to employees   -    -    -    -    1,200,000    144,000    -    -    144,000 
Common shares issued for services to non-employees   -    -    -    -    6,820,950    818,541    -    -    818,541 
Common shares issued in lieu of interest paid in cash   -    -    -    -    176,507    6,638    -    -    6,638 
Common shares issued for license agreement   -    -    -    -    733,335    58,209    -    -    58,209 
Common shares issued in exchange for shares in Impact Social Networking, Inc.   -    -    -    -    7,394,056    1,035,168    -    -    1,035,168 
Common shares issued for conversion of debenture   -    -    -    -    2,283,898    42,000    -    -    42,000 
Stock option expense   -    -    -    -    -    25,173    -    -    25,173 
Gain on conversion of convertible notes   -    -    -    -    -    8,339    -    -    8,339 
Value attributed to APIC from the issuance of a $350,000 convertible debenture with beneficial conversion feature and warrants   -    -    -    -    -    89,397    -    -    89,397 
Net loss for the period February 1, 2012 to December 31, 2012   -    -    -    -    -    -    -    (879,244)   (879,244)
Balance, December 31, 2012   -    -    -    -    86,509,928    11,566,930    (13,918,140)   (879,244)   (3,230,454)
                                              
Preferred Series C shares issued for cash   -    -    525    -    -    45,833    -    -    45,833 
Preferred Series B issued in exchange for shares   -    80,000    -    -    -    1,720,000    -    -    1,720,000 
Preferred Series C shares issued for conversion of debenture   -    -    2,415    -    -    2,415,000    -    -    2,415,000 
Cancellation and exchange of warrants   -    -    -    -    -    (38,985)   -    -    (38,985)
Common shares issued for services to non-employees   -    -    200    -    1,000,000    287,200    -    -    287,200 
Common shares issued in lieu of interest paid in cash   -    -    -    -    127,500    3,816    -    -    3,816 
Common shares issued for conversion of debenture   -    -    -    -    12,488,914    129,000    -    -    129,000 
Conversion of Preferred Shares to Common Stock   -    (385)   (1,495)   -    33,750,000    -    -    -    - 
Stock option expense   -    -    -    -    -    7,107    -    -    7,107 
Value attributed to APIC from the issuance of a $27,500 convertible debenture with beneficial conversion feature and warrants   -    -    -    -    -    26,422    -    -    26,422 
Net loss   -    -    -    -    -    -    -    (5,437,025)   (5,437,025)
Balance, December 31, 2013   -    79,615    1,645    -    133,876,342   $16,162,323   $(13,918,140)  $(6,316,269)  $(4,072,086)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-4
 

 

PRAXSYN CORPORATION AND SUBSIDIARIES

(FORMERLY KNOWN AS THE PAWS PET COMPANY, INC.)

(A DEVELOPMENT STAGE COMPANY) 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   Year Ended December 31,   For the period from
inception of
development stage
(February 1, 2012) to
 
   2013   2012   December 31, 2013 
             
CASH FLOWS FROM OPERATING ACTIVITIES:               
Net loss  $(5,437,025)  $(1,218,814)  $(6,316,269)
Adjustments to reconcile net loss to net cash used in operating activities:               
Depreciation and amortization   41,163    53,098    89,836 
Equity based compensation   7,107    25,173    32,280 
Warrant valuation adjustment, net   244,413    (2,682,587)   (2,438,174)
Loss on abandonment of property and equipment   -     49,053    - 
Accelerated amortization of debt discount from conversion of debenture   11,974    59,080    71,054 
Amortization of debt discount   160,683    352,252    512,935 
Loan default fee   45,250    -    45,250 
Net loss (gain) on conversion of convertible notes   2,214,611    (61,661)   2,152,950 
Subsidiary acquisition costs   1,720,000    -    1,720,000 
Impairment of goodwill   -    1,035,168    1,035,168 
Common shares issued in lieu of cash to Intellicell for license fee   -    58,209    58,209 
Common shares issued in lieu of cash for interest and penalty interest   3,816    6,638    10,454 
Preferred and common shares issued in lieu of cash for services rendered by non-employees   287,200    818,514    1,105,714 
Common shares issued in lieu of cash compensation to employees   -    144,000    144,000 
Financing fee   -    427,073    427,073 
Changes in certain assets and liabilities:               
Receivable due from credit card clearing house   -     59,418    - 
Prepaid expenses   1,200    (63)   1,137 
Security deposits and other   -    39,689    39,689 
Accounts payable and accrued expenses   545,792    350,474    860,613 
Accounts payable and accrued expenses, discontinued operations   -    201,285    - 
Net cash used in operating activities   (153,816)   (284,001)   (448,081)
                
CASH FLOWS FROM FINANCING ACTIVITIES:               
Proceeds from sale of preferred and common stock   45,833    225,000    270,833 
Proceeds from issuance of debt   27,500    102,500    130,000 
Net cash provided by financing activities   73,333    327,500    400,833 
Net change in cash and cash equivalents   (80,483)   43,499    (47,248)
Cash and cash equivalents at beginning of period   81,755    38,256    48,520 
Cash and cash equivalents at end of period  $1,272   $81,755   $1,272 
                
Supplementary disclosure of cash flow information               
Cash paid during the year for:               
Income taxes  $-   $-   $- 
Interest expense  $-   $-   $- 
Non-cash transactions:               
Conversion of convertible debentures to 12,488,914, 2,283,898 and 14,772,812 shares of common stock, respectively  $128,950   $42,000   $170,950 
Issuance of Series C shares in exchange for services, warrants and interest  $2,695,000   $-   $- 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-5
 

 

PRAXSYN CORPORATION AND SUBSIDIARIES

(FORMERLY KNOWN AS THE PAWS PET COMPANY, INC.)

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

1. Description of the Business

 

Praxsyn Corporation and its subsidiary formerly known as The PAWS Pet Company, Inc. (the “Company”) is a development stage company. On March 9, 2013 The Company entered into a Securities Exchange Agreement whereby the Company issued 80,000 shares of the Company’s Series B Convertible Preferred Stock to the members of Advanced Access Pharmacy Services, LLC, a Nevada limited liability company (“AAPS”) in exchange for 100% of the outstanding units of limited liability company membership interests of AAPS.

 

AAPS was created to exploit specific niche opportunities in wholesale and retail pharmacies. AAPS intends to focus on workers’ compensation and in-office physician pharmacy distribution as well as the limited purchase and collection of pharmaceutical and services related receivables. Leveraging decades of experience in pharmacy and medical receivables collections of the people being hired, the Company believes that it should be able to achieve significant profitability in a very short period with very limited investment.

 

On December 31, 2013 the Company agreed to acquire Mesa Pharmacy, Inc. (“Mesa”) from Pharmacy Development Corporation (“PDC-CA”) in the form of a First Amended Securities Exchange Agreement (“FA-SEA”), in exchange for 500,000 shares of Series D Convertible Preferred Stock. However, on March 20, 2014, the Company and PDC-CA agreed to amend, supersede and replace the FS-SEA with an Agreement and Plan of Merger Agreement (“APMA”) whereby PDC-CA would merge into the Company’s wholly-owned subsidiary, PDC, Inc (“PDC”), that was formed by the Company in 2014, via a forward triangular merger. This transaction closed on March 31, 2014. PDC-CA and/or Mesa primarily operate as Mesa and focuses on providing custom compounded non-narcotic, transdermal topical pain medications that are marketed to industrial health physicians and clinics. MESA has developed a series of topical ointments, in different strengths, that provide the pain relief doctors seek.

 

Continuation of Company as a Going Concern

 

The Company has experienced net losses in each calendar quarter since our inception and, as of December 31, 2013 and 2012, had a total accumulated deficit of $(20,234,409) and $(14,797,384), respectively. The Company has incurred excessive losses to common shareholders. As a result of these conditions, the report of our independent registered public accounting firm issued in connection with the audit of our consolidated financial statements as of and for our year ended December 31, 2013 contained a qualification raising a substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty. If we cannot continue as a viable entity, our stockholders may lose some or all of their investment in us.

 

2. Summary of Significant Accounting Policies

 

Fiscal Year

 

The Company’s fiscal year is the twelve month period ending on December 31.

 

Principles of Consolidation

 

The consolidated financial statements presented above include the accounts of the Company and its subsidiaries. All significant inter-company balances and transactions have been eliminated.

 

Development Stage Company

 

On January 31, 2012, the Company exited the pet airline business. The Company is planning to exploit specific niche opportunities in wholesale and retail pharmacies with a focus on workers’ compensation and in-office physician pharmacy distribution as well as the limited purchase and collection of pharmaceutical and services related receivables. The Company has been in the development stage since February 1, 2012 and has not yet realized any revenue since then. The Company is a development stage company as defined in Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) ASC 915 “Development Stage Entities.” A development stage enterprise is one in which planned and principal operations have not commenced or, if its operations have commenced, there has been no significant revenue there from. As a development stage enterprise the Company will report cumulative costs beginning from the time the Company discontinued its previous operations.

 

F-6
 

 

PRAXSYN CORPORATION AND SUBSIDIARIES

(FORMERLY KNOWN AS THE PAWS PET COMPANY, INC.)

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

Use of Estimates

 

The preparation of consolidated financial statements and related footnote disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Company evaluates, on an on-going basis, its estimates and judgments, including those related to revenue recognition, bad debts, impairment of goodwill and intangible assets, income taxes, contingencies and litigation. Its estimates are based on historical experience and assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

Cash

 

The Company considers all highly liquid investments with an original maturity or remaining maturity of three months or less at the date of purchase to be classified as cash and cash equivalents consisting of checking and money market accounts. Cash and cash equivalents are stated at cost, which approximates market value, and are primarily maintained at two financial institutions. There were no cash equivalents at December 31, 2013 and 2012.

 

Advertising Costs

 

Advertising and marketing costs of $0 were expensed as incurred in each of the years ended December 31, 2013 and 2012 and for the period from inception of the development stage (February 1, 2012) to December 31, 2013, respectively.

 

Property and equipment

 

Property and equipment are stated at cost. Depreciation of computer equipment and software is computed using the straight line method over the estimated useful lives of the assets. Estimated useful lives of three to five years are used for computer equipment and software. Property and equipment sold, retired or disposed of, together with related accumulated depreciation is removed from the appropriate accounts and the resultant gain or loss is included in income or loss. The interest expense amount subject to capitalization during the construction period of the Pet Lounges was immaterial as of December 31, 2012.

 

Long-lived assets

 

The Company reviews long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable based on the undiscounted future cash flows of the asset. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset, and its eventual disposition. Measurement of an impairment loss for intangible and long-lived assets that management expects to hold and use is based on the fair value of the asset as estimated using a discounted cash flow model. The goodwill acquired in connection to the share exchange agreement with Impact Social Networking, Inc. was impaired as of March 31, 2012, and written off to the Statement of Operations. There were no long-lived assets as of December 31, 2013 and 2012, respectively.

 

Concentrations

 

Payment collected is invested in money market and interest earning deposit accounts at a FDIC insured financial institution at times at levels that may exceed the $250,000 insurance limit afford each account holder.

 

Revenue Recognition

 

The Company recognizes revenue when (i) persuasive evidence of an arrangement exists; (ii) the service or sale is completed; (iii) the price is fixed or determinable; and (iv) the ability to collect is reasonably assured. Deferred or unearned revenue is recorded as a liability until all these requirements have been satisfied.

  

Income Taxes

 

The Company accounts for income taxes using the asset and liability approach in accordance with ASC 740, “Accounting for Income Taxes”. The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. The effect on deferred taxes of a change in tax rates is recognized in operations in the period that includes the enactment date. Pursuant to accounting guidance concerning provision for uncertain income tax provisions contained in Accounting Standards Codification (“ASC”) 740-10, there are no uncertain income tax positions. The federal, state, and city income tax returns of the Company are subject to examination by the federal and state taxing authorities, generally for three years after they were filed.

 

F-7
 

 

PRAXSYN CORPORATION AND SUBSIDIARIES

(FORMERLY KNOWN AS THE PAWS PET COMPANY, INC.)

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

Computation of Earnings per Share

 

In accordance with FASB ASC 260, “Earnings per Share”, the basic earnings or loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per common share is computed in a manner similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. As the Company has incurred losses for the years ended December 31, 2013 and 2012, the Company stock equivalents were anti-dilutive and excluded in the diluted loss per share computation. At December 31, 2013 and 2012, there were 146,797,487 and 87,266,730, respectively, of potential dilutive shares outstanding that were not included in the calculation as the effect would be anti-dilutive.

  

Equity Based Award Compensation

 

The Company accounts for equity-based compensation under the provisions of ASC 718-10 and ASC 505-50 “Stock Compensation and Equity Based Payments to Non-Employees”. ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our Statement of Operations.

 

The Company uses the Black-Scholes option-pricing model as its method of valuation for share-based awards. Our determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to our expected stock price volatility over the term of the awards, and certain other market variables such as the risk free interest rate. Equity-based compensation expense for awards to employees and non-employees recognized was $294,307 and $987,687 for the years ended December 31, 2013 and 2012, respectively, and $1,281,994 for the period from inception of development stage (February 1, 2012) to December 31, 2013.

 

Segment Information

  

ASC 280, “Disclosures about Segments of an Enterprise and Related Information”, establishes standards for reporting information regarding operating segments in annual consolidated financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. It also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance. The Company originally operated as a single segment company; however, as of February 1, 2012 the Company became a development stage company. Effective March 31, 2014, the Company focuses on providing custom compounded non-narcotic, transdermal topical pain medications that are marketed to industrial health physicians and clinics.

 

Fair Value Measurement

 

The Company adopted the provisions of ASC 820 “Fair Value Measurements and Disclosures” on January 1, 2009, the beginning of our 2009 fiscal year. ASC 820 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements are separately disclosed by level within the fair value hierarchy. As originally issued, it was effective for fiscal years beginning after November 15, 2007, with early adoption permitted. It does not require any new fair value measurements. It only applies to accounting pronouncements that already require or permit fair value measures, except for standards that relate to share-based payments.

 

On February 12, 2008, the FASB allowed deferral of the effective date of ASC 820 for one year, as it relates to nonfinancial assets and liabilities. Accordingly, our adoption related only to financial assets and liabilities. Upon adoption ASC 820, there was no cumulative effect adjustment to beginning retained earnings and no impact on the consolidated financial statements as of December 31, 2013 and 2012, respectively.

 

Valuation techniques considered under ASC 820 techniques are based on observable and unobservable inputs. The ASC classifies these inputs into the following hierarchy:

 

F-8
 

 

PRAXSYN CORPORATION AND SUBSIDIARIES

(FORMERLY KNOWN AS THE PAWS PET COMPANY, INC.)

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

Level 1 inputs are observable inputs and use quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date and are deemed to be most reliable measure of fair value.

 

Level 2 inputs are observable inputs and reflect assumptions that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Level 2 inputs includes 1) quoted prices for similar assets or liabilities in active markets, 2) quoted prices for identical or similar assets or liabilities in markets that are not active, 3) observable inputs such as interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, credits risks, default rates, and 4) market-corroborated inputs.

 

Level 3 inputs are unobservable inputs and reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available under the circumstances.

 

In October 2008, the FASB clarified the application of ASC 820 in determining the fair value of a financial asset when the market for that financial asset is not active.

 

The Company adopted the provisions of ASC 825, “The Fair Value Option for Financial Assets and Liabilities”, on January 1, 2009, the beginning of our 2009 fiscal year. ASC 825 permits us to choose to measure certain financial assets and liabilities at fair value that are not currently required to be measured at fair value (the “Fair Value Option”). Election of the Fair Value Option is made on an instrument-by-instrument basis and is irrevocable. At the adoption date, unrealized gains and losses on financial assets and liabilities for which the Fair Value Option has been elected are reported as a cumulative adjustment to beginning retained earnings.

 

Our current and non-current debentures payable obligations are valued using Level 3 inputs. The fair values of the obligations exceed their carrying cost and are fairly presented throughout our consolidated financial statements at December 31, 2013.

  

The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2013:

 

   Level 1   Level 2   Level 3   Total 
Assets                    
Cash  $1,272   $-   $-   $1,272 
                     
Liabilities                    
Convertible debentures  $-   $-   $587,014   $587,014 
Derivative liabilities   -    -    492,781    492,781 
Total  $-   $-   $1,079,795   $1,079,795 

 

The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2012:

 

   Level 1   Level 2   Level 3   Total 
Assets                    
Cash  $81,755   $-   $-   $81,755 
                     
Liabilities                    
Convertible debentures  $-   $-   $655,433   $655,433 
Derivative liabilities   -    -    248,368    248,368 
Total  $-   $-   $903,801   $903,801 

 

Reclassifications

 

Certain prior year amounts have been reclassified to conform to the current year’s financial statement presentation. The reclassification had no effect on the Company’s net loss for the year ended December 31, 2012.

 

F-9
 

 

Recently Adopted Accounting Standards

 

In December 2011, the FASB issued authoritative guidance that creates new disclosure requirements about the nature of an entity’s rights of offset and related arrangements associated with its financial instruments and derivative instruments. This revised guidance helps reconcile differences in the offsetting requirements under U.S. GAAP and International Financial Reporting Standards (“IFRS”). These requirements mandate that entities disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions subject to an agreement similar to a master netting arrangement.  The Company currently does not hold any financial or derivative instruments that are subject to an enforceable master netting arrangement. However, the Company currently utilizes the right of offset when netting certain negative cash balances in its statement of financial position. This disclosure-only guidance became effective for the Company’s fiscal 2013 third quarter, with retrospective application required, and did not have a material impact on the Company’s consolidated financial statements.

 

In June 2011, the FASB amended its authoritative guidance related to the presentation of comprehensive income, requiring entities to present items of net income and other comprehensive income either in one continuous statement or in two separate consecutive statements. This guidance also required entities to present reclassification adjustments for each component of accumulated other comprehensive income in both net income and other comprehensive income on the face of the financial statements. In December 2011, the FASB issued an update to this guidance deferring the requirement to present reclassification adjustments on the face of the financial statements. However, the Company is still required to present reclassification adjustments on either the face of the financial statement where comprehensive income is reported or disclose the reclassification adjustments in the notes to the financial statements. This guidance, including the deferral, becomes effective for the Company’s fiscal 2013 first quarter, with early adoption permitted and full retrospective application required. The guidance did not have a material impact on the Company’s consolidated financial statements.

 

Recently Issued Accounting Standards

 

In July 2013, the FASB issued authoritative guidance that requires an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss (“NOL”) carryforward, a similar tax loss, or a tax credit carryforward. If either (i) an NOL carryforward, a similar tax loss, or tax credit carryforward is not available as of the reporting date under the governing tax law to settle taxes that would result from the disallowance of the tax position or (ii) the entity does not intend to use the deferred tax asset for this purpose (provided that the tax law permits a choice), an entity should present an unrecognized tax benefit in the financial statements as a liability and should not net the unrecognized tax benefit with a deferred tax asset. This guidance becomes effective prospectively for unrecognized tax benefits that exist as of the Company’s fiscal 2015 first quarter, with retrospective application and early adoption permitted. The Company is currently evaluating the timing of adoption and the impact of this balance sheet presentation guidance but does not expect it to have a significant impact on the Company’s consolidated financial statements.

 

In February 2013, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance requiring an entity to present, in a single location either parenthetically on the face of the financial statements or in a separate note, significant amounts reclassified from each component of accumulated other comprehensive income (loss) (“AOCI”) and the income statement line items affected by the reclassification. An entity is not permitted to provide this information parenthetically on the face of the income statement if it has items that are not required to be reclassified in their entirety to net income. Instead of disclosing the income statement line affected, a cross reference to other disclosures that provide additional details on these items is required. This guidance became effective prospectively for the Company’s fiscal 2014 first quarter and the adoption of this disclosure-only guidance is not expected to have an impact on the Company’s consolidated financial statements.

 

In July 2012, the FASB amended its authoritative guidance related to testing indefinite-lived intangible assets for impairment. Under the revised guidance, entities testing their indefinite-lived intangible assets for impairment have the option of performing a qualitative assessment before performing further impairment testing. If entities determine, on the basis of qualitative factors, that it is more-likely-than-not that the asset is impaired, a quantitative test is required. The guidance becomes effective in the beginning of the Company’s fiscal 2014, with early adoption permitted. The Company is currently evaluating the timing of adopting this guidance which is not expected to have an impact on the Company’s consolidated financial statements.

 

Other ASU’s that have been issued or proposed by the FASB ASC that do not require adoption until a future date and are not expected to have a material impact on the financial statements upon adoption.

 

F-10
 

 

3. Acquisition of Subsidiary and Impairment

 

On February 23, 2012, pursuant to a share exchange agreement (the “Exchange Agreement”) the Company acquired 100% of the issued and outstanding capital stock of Impact Social Networking, Inc. (“ISN”), a Georgia corporation in exchange for 7,394,056 shares of the Company’s common stock, no par value per share valued at $1,035,168 on the date of the acquisition. ISN owns a number of technology assets that had not reached technical feasibility at the time of the acquisition. With the exception of these technology assets ISN had no other assets or liabilities at the time of the acquisition, and had except for the development costs incurred for these assets, had no other costs and no revenue. The transaction was accounted for using the acquisition method under ASC Topic 805, Business Combinations. Under the acquisition method, the purchase price was allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective fair values, with the remainder allocated to goodwill. None of the goodwill recorded in connection with the transaction will be deductible for income tax purposes.

 

Following the acquisition, the Company commenced a new strategy of developing technologies for pet owners and pet caregivers. On March 16, 2012, the Company launched a beta version of a social media application called “Pawdoodle.” This was an application that could be used in conjunction with social media platforms such as Facebook, Twitter and Google Plus. We believe Pawdoodle was the first social networking application that had been developed specifically for pet owners and pet caregivers that worked across a number of social media platforms. By using Pawdoodle, pet owners could build web pages for their pets, post and view pictures of their pets, follow pet breeds and pet adoptions. Pawdoodle also allowed pet owners to store pet microchip data.

 

In September, 2012, the Company decided not to continue to pursue the development of Pawdoodle. The Company, during its annual impairment review of long-lived assets determined that the fair value of the goodwill was zero based that the software purchased was not finished and internally developed and therefore, wrote off the value of the goodwill of $1,035,168 as impaired per the Statement of Operations.

 

F-11
 

 

PRAXSYN CORPORATION AND SUBSIDIARIES

(FORMERLY KNOWN AS THE PAWS PET COMPANY, INC.)

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

4. Property and Equipment

 

Property and equipment consist of the following at:

 

   For the Years ended December 31, 
   2013   2012 
Equipment and furniture  $13,312   $13,312 
Website development   155,824    155,824 
    169,136    169,136 
Less: accumulated depreciation and amortization   (157,916)   (116,753)
Property and equipment, net  $11,220   $52,383 

 

Depreciation and amortization expense was $41,163 for the year ended December 31, 2013 compared to $53,098 for the year ended December 31, 2012, that comprised of $1,497 and $51,601 of expense, related to discontinued and continuing operations, respectively, and $89,836 from inception of development stage (February 1, 2012) to December 31, 2013. In January 2012, the Company abandoned equipment located in several formerly rented facilities related to the airline business therefore, recognizing a loss due to abandonment of equipment of $49,053.

 

5. Capital

 

Common Stock

 

The Company is authorized to issue up to 350,000,000 shares of common stock, no par value. There were 133,876,342 and 86,509,928 shares of common outstanding as of December 31, 2013 and 2012, respectively. Holders of the common stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of funds legally available therefore. Upon the liquidation, dissolution, or winding up of our Company, the holders of common stock are entitled to share ratably in all of our assets which are legally available for distribution after payment of all debts and other liabilities and liquidation preference of any outstanding common stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights. The outstanding shares of common stock are validly issued, fully paid and non-assessable.

 

There were no stock warrants or stock options exercised during the years ended December 31, 2013 and 2012.

  

F-12
 

 

PRAXSYN CORPORATION AND SUBSIDIARIES

(FORMERLY KNOWN AS THE PAWS PET COMPANY, INC.)

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

The Company has issued common stock various times during 2013 and 2012, the following table shows each date, reason for issuance, fair value of the transaction and number of shares issued:

 

Common Stock Issued           
Date issued  Reason for issuance  Fair value   Number of shares 
January 26, 2012  Common Stock issued for license agreement  $5,500    45,833 
February 23, 2012  Common Stock issued in acquisition of subsidiary  $1,035,168    7,394,056 
February 26, 2012  Common Stock issued for license agreement  $6,417    45,833 
March 26, 2012  Common Stock issued for license agreement  $4,583    45,833 
March 31, 2012  Common Stock issued for debenture interest  $4,442    49,354 
April 2, 2012  Common Stock issued for cash  $10,000    200,000 
April 10, 2012  Common Stock issued for services  $740,514    6,170,950 
April 20, 2012  Common Stock issued for services  $180,000    1,500,000 
April 27, 2012  Common Stock issued for services  $42,000    350,000 
April 30, 2012  Common stock issued in conversion of debenture  $100,000    250,000 
May 1, 2012  Common Stock issued for license agreement  $41,709    595,836 
June 7, 2012  Common Stock issued for cash  $15,000    1,500,000 
June 15, 2012  Common Stock issued for cash  $100,000    10,000,000 
June 30, 2012  Common Stock issued for cash  $100,000    10,000,000 
June 30, 2012  Common Stock issued for debenture interest  $1,763    44,063 
September 4, 2012  Common stock issued as partial conversion of debenture  $12,000    2,033,898 
September 30, 2012  Common Stock issued for debenture interest  $228    41,545 
December 31, 2012  Common Stock issued for debenture interest  $206    41,545 
   Total 2012        40,308,746 
              
March 14, 2013  Common Stock issued for services  $7,200    1,000,000 
March 31, 2013  Common Stock issued for debenture interest  $1,145    40,875 
May 10, 2013  Reverse issuance of common stock in lieu of debenture interest and issued Series C preferred stock instead  $(234)   (18,000)
June 30, 2013  Common Stock issued for debenture interest  $1,774    34,875 
August 2, 2013  Common stock issued as partial conversion of debenture  $15,000    815,217 
August 6, 2013  Common Stock issued as conversion of Series C Stock  $56,000    11,200,000 
August 20, 2013  Common stock issued as partial conversion of debenture  $15,000    574,713 
August 20, 2013  Common Stock issued as conversion of Series C Stock  $11,500    2,300,000 
August 23, 2013  Common stock issued as partial conversion of debenture  $8,250    316,092 
August 26, 2013  Common Stock issued as conversion of Series C Stock  $10,000    2,000,000 
September 3, 2013  Common stock issued in conversion of debenture  $16,900    744,493 
September 16, 2013  Common stock issued as partial conversion of debenture  $12,000    1,061,947 
September 17, 2013  Common Stock issued as conversion of Series C Stock  $16,000    3,200,000 
September 23, 2013  Common stock issued as partial conversion of debenture  $20,000    1,980,198 
September 27, 2013  Common stock issued in conversion of debenture  $10,350    1,162,921 
September 30, 2013  Common Stock issued for debenture interest  $645    34,875 
October 8, 2013  Common stock issued as partial conversion of debenture  $8,000    1,481,481 
October 10, 2013  Common stock issued as partial conversion of debenture  $23,500    4,351,852 
October 16, 2013  Common Stock issued as conversion of Series B Stock  $4,250    850,000 
November 13, 2013  Common Stock issued as conversion of Series B Stock  $15,000    3,000,000 
November 26, 2013  Common Stock issued as conversion of Series C Stock  $20,000    4,000,000 
December 11, 2013  Common Stock issued as conversion of Series C Stock  $25,000    5,000,000 
December 11, 2013  Common Stock issued as conversion of Series C Stock  $11,000    2,200,000 
December 31, 2013  Common Stock issued for debenture interest  $516    34,875 
              
   Total 2013        47,366,414 

 

Preferred Stock

 

Series D Preferred Stock

 

On December 30, 2013, the Company filed an amended and restated Certificate of Designations of Preferences, Rights and Limitations of Series D Preferred Stock (the “Certificate of Designations D”) with the Secretary of State of the State of Illinois that designated 500,000 such shares as Series D Preferred Stock (the “Series D Stock”). A summary of the Certificate of Designations is set forth below:

 

Ranking The Series D Stock ranks, with respect to rights upon liquidation, winding-up or dissolution, (i) senior to the Common A Stock, (ii) equal to the Series B Convertible Preferred Stock, (iii) senior to any and all other classes or series of preferred stock of the Company whether authorized now, or at any time in the future, unless any such subordination to any other class or series of Preferred Stock, is expressly agreed to, pursuant to an affirmative vote or written consent of Holders of at least sixty-seven percent (67%) of the Series D Stock issued and outstanding at the time of any such vote or written consent. and (iv) junior to any and all existing and future indebtedness of the Company.

 

Right of Conversion Any Holder of Series D Stock shall have the right to convert any or all of the Holder’s Series D Stock into a number of fully paid and non-assessable shares of Common Stock for each share of Series D Stock so converted. The number of shares of Common Stock to be issued shall be 1,000 Common shares for each Series D Stock share converted. In no event, shall a Holder of any Series D Stock be allowed to convert such shares of Series D Stock into Common Stock which, upon giving effect to such conversion, would cause the aggregate number of shares of Common Stock beneficially owned by the Holder, and/or its affiliates, to exceed four and nine tenths percent (4.9%) of the currently issued and outstanding shares of the Corporation. 

 

Dividends Series D Stock shall not be entitled to dividends.

 

Liquidation In the event of any liquidation, dissolution or winding-up of the affairs of the Corporation (collectively, a “Liquidation”), the sole participation to which the Holders of shares of Series D Stock then issued and outstanding (the “Series D Stockholders”) shall be entitled, out of the assets of the Corporation legally available for distribution to its stockholders, whether from capital, surplus or earnings, to receive, before any payment shall be made to the holders of the Common Stock or any other class or series of preferred stock ranking on Liquidation junior to such Series D Stock, an amount per share equal to $40 (forty dollars). If upon any such Liquidation, the remaining assets of the Corporation available for distribution to its shareholders shall be insufficient to pay the Holders of shares of Series D Stock the full amount to which they shall be entitled, the Holders of shares of Series D Stock, and of any class or series of stock ranking upon liquidation on a parity with the Series D Stock, shall share pari passu in any distribution of the remaining assets and funds of the Corporation in proportion to the respective liquidation amounts that would otherwise be payable to the Holders of preferred stock with respect to the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. Liquidation preference at December 31, 2013 and 2012 is $0 and $0, respectively.

 

At December 31, 2013 the Company had not issued any Series D Stock.

 

Series B Preferred Stock

 

On May 15, 2013, the Company filed an amended and restated Certificate of Designations of Preferences, Rights and Limitations of Series B Preferred Stock (the “Certificate of Designations B”) with the Secretary of State of the State of Illinois that designated 80,000 such shares as Series B Preferred Stock (the “Series B Stock”). A summary of the Certificate of Designations is set forth below:

 

Ranking The Series B Stock ranks, with respect to rights upon liquidation, winding-up or dissolution, (i) senior to the Common Stock, Series A and B Preferred Stock, and any other classes of stock or series of preferred stock of the Company whether authorized now, or at any time in the future, unless any such subordination to any other class or series of Preferred Stock, is expressly agreed to, pursuant to an affirmative vote or written consent of Holders of at least sixty-seven percent (67%) of the Series B Stock issued and outstanding at the time of any such vote or written consent. and (ii) junior to any and all existing and future indebtedness of the Company.

 

F-13
 

 

PRAXSYN CORPORATION AND SUBSIDIARIES

(FORMERLY KNOWN AS THE PAWS PET COMPANY, INC.)

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

Right of Conversion Any Holder of Series B Stock shall have the right to convert any or all of the Holder’s Series B Stock into a number of fully paid and non-assessable shares of Common Stock for each share of Series B Stock so converted. The number of shares of Common Stock to be issued shall be the number that is equal to 0.001% of the number of shares of the Common Stock that would be issued and outstanding after the hypothetical conversion and issuance of all of the outstanding shares of any and all classes of convertible stock and/or any and all other convertible debt instruments, options and/or warrants outstanding at the time of conversion (the “Conversion Ratio”). In no event shall the Conversion Ratio be less than four thousand, three hundred (4,300) shares of Common Stock and in no event shall the Conversion Ratio be more than ten thousand (10,000) shares of Common Stock. Also, in no event shall a Holder of any Series B Stock be allowed to convert such shares of Series B Stock into Common Stock which, upon giving effect to such conversion, would cause the aggregate number of shares of Common Stock beneficially owned by the Holder, and/or its affiliates, to exceed four and nine tenths percent (4.9%) of the currently issued and outstanding shares of the Corporation.

 

Dividends Series B Stock shall not be entitled to dividends.

 

Liquidation In the event of any liquidation, dissolution or winding-up of the affairs of the Corporation (collectively, a “Liquidation”), the sole participation to which the Holders of shares of Series B Stock then issued and outstanding (the “Series B Stockholders”) shall be entitled, out of the assets of the Corporation legally available for distribution to its stockholders, whether from capital, surplus or earnings, to receive, before any payment shall be made to the holders of the Common Stock or any other class or series of preferred stock ranking on Liquidation junior to such Series B Stock, an amount per share equal to $30 (thirty dollars). If upon any such Liquidation, the remaining assets of the Corporation available for distribution to its shareholders shall be insufficient to pay the Holders of shares of Series B Stock the full amount to which they shall be entitled, the Holders of shares of Series B Stock, and of any class or series of stock ranking upon liquidation on a parity with the Series B Stock, shall share pari passu in any distribution of the remaining assets and funds of the Corporation in proportion to the respective liquidation amounts that would otherwise be payable to the Holders of preferred stock with respect to the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. Liquidation preference at December 31, 2013 and 2012 is $2,388,450 and $0, respectively.

 

On March 9, 2013 the Company issued 80,000 shares Series B Stock in exchange for all of the shares of AAPS. As of December 31, 2013, 385 shares of Series B had been converted and 79,615 were outstanding.

 

Series C Preferred Stock

 

On May 15, 2013, the Company filed a Certificate of Designations of Preferences, Rights and Limitations of Series C Preferred Stock (the “Certificate of Designations C”) with the Secretary of State of the State of Illinois that designated 50,000 such shares as Series C Preferred Stock (the “Series C Stock”). A summary of the Certificate of Designations is set forth below:

 

Ranking The Series C Stock ranks, with respect to rights upon liquidation, winding-up or dissolution, (i) senior to the Common Stock, Series A Preferred Stock, and any other classes of stock or series of preferred stock of the Company whether authorized now, or at any time in the future, unless any such subordination to any other class or series of Preferred Stock, is expressly agreed to, pursuant to an affirmative vote or written consent of Holders of at least sixty-seven percent (67%) of the Series C Stock issued and outstanding at the time of any such vote or written consent. and (ii) junior to Series C Preferred Stock, and any and all existing and future indebtedness of the Company.

 

Right of Conversion Any Holder of Series C Stock shall have the right to convert any or all of the Holder’s Series C Stock into a number of fully paid and non-assessable shares of Common Stock for each share of Series C Stock so converted. The number of shares of Common Stock shares that is equal to sixty-six percent (66%) of the lowest closing price of the Common Stock, as quoted on any exchange or market upon which the Common Stock is traded over the sixty (60) calendar days preceding the date the Corporation and the Holder enter into an agreement to issue for shares of Series C Stock, for each share of Class C Stock being converted, provided, however, such ratio shall not be less than $0.005 nor more than $.01. In no event shall a Holder of any Series C Stock be allowed to convert such shares of Series C Stock into Common Stock which, upon giving effect to such conversion, would cause the aggregate number of shares of Common Stock beneficially owned by the Holder, and/or its affiliates, to exceed four and nine tenths percent (4.9%) of the currently issued and outstanding shares of the Corporation.

 

Dividends Series C Stock shall not be entitled to dividends.

 

F-14
 

 

PRAXSYN CORPORATION AND SUBSIDIARIES

(FORMERLY KNOWN AS THE PAWS PET COMPANY, INC.)

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

Liquidation In the event of any liquidation, dissolution or winding-up of the affairs of the Corporation (collectively, a “Liquidation”), the sole participation to which the Holders of shares of Series C Stock then issued and outstanding (the “Series C Stockholders”) shall be entitled, out of the assets of the Corporation legally available for distribution to its stockholders, whether from capital, surplus or earnings, to receive, before any payment shall be made to the holders of the Common Stock or any other class or series of preferred stock ranking on Liquidation junior to such Series C Stock, an amount per share equal to $100 (one hundred). If upon any such Liquidation, the remaining assets of the Corporation available for distribution to its shareholders shall be insufficient to pay the Holders of shares of Series C Stock the full amount to which they shall be entitled, the Holders of shares of Series C Stock, and of any class or series of stock ranking upon liquidation on a parity with the Series C Stock, shall share pari passu in any distribution of the remaining assets and funds of the Corporation in proportion to the respective liquidation amounts that would otherwise be payable to the Holders of preferred stock with respect to the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. Liquidation preference at December 31, 2013 and 2012 is $1,645,000 and $0, respectively. 

 

On May 10, 2013 the Company issued 2,740 shares Series C Stock in exchange for multiple transactions involving cash purchases, conversions of debentures and related interest, and conversions of warrants issued.

 

On July 3, 2013 the Company issued 200 Series C Stock in exchange for services.

 

On October 15, 2013 the Company issued 150 Series C Stock in exchange for $10,000.

 

On October 17, 2013 the Company issued 50 Series C Stock in exchange for $3,333.

  

As of December 31, 2013 1,495 shares of Series C Stock had been converted to common shares and 1,645 were outstanding.

 

Series A Preferred Stock

 

On May 27, 2011, the Company filed an amended and restated Certificate of Designations of Preferences, Rights and Limitations of Series A Preferred Stock (the “Certificate of Designations”) with the Secretary of State of the State of Illinois that designated 500 such shares as Series A Preferred Stock (the “Series A Stock”). A summary of the Certificate of Designations is set forth below:

 

Ranking The Series A Stock ranks, with respect to rights upon liquidation, winding-up or dissolution, (i) senior to the Common Stock and (ii) junior to Series B and C Stock and any other series of preferred stock, and any and all existing and future indebtedness of the Company.

 

No right of Conversion Series A Stock is not convertible into Common Stock.

 

Dividends and Other Distributions Commencing on the date of issuance of any such shares of Series A Stock, holders of Series A Stock shall be entitled to receive dividends on each outstanding share of Series A Stock, which shall accrue at a rate equal to 10% per annum from the date of issuance. Accrued dividends shall be payable upon redemption of the Series A Stock. So long as any shares of Series A Stock are outstanding, no dividends or other distributions may be paid, declared or set apart with respect to any junior securities other than dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock. After payment of dividends at the annual rates set forth above, any additional dividends declared shall be distributed ratably among all holders of Series A Stock and Common Stock in proportion to the number of shares of Common Stock that would be held by each such holder of Series A Stock as if the Series A Stock were converted into Common Stock by taking the Series A Liquidation Value (as defined below) divided by the market price of one share of Common Stock on the date of distribution.

 

Liquidation Upon any liquidation, dissolution or winding up of the Company after payment or provision for payment of debts and other liabilities of the Company and any liquidation preferences to the senior securities. Series B Stock and Series C Stock has liquidation preference to the Series A Stock., before any distribution or payment is made to the holders of any junior securities, the holders of Series A Stock shall first be entitled to be paid out of the assets of the Company available for distribution to its stockholders an amount with respect to the Series A Liquidation Value, after which any remaining assets of the Company shall be distributed ratably among the holders of the Series A Stock and the holders of junior securities, as if the Series A Stock were converted into Common Stock by taking the Series A Liquidation Value divided by the market price of one share of Common Stock on the date of distribution. Liquidation preference at December 31, 2013 and 2012 is $0 and $0, respectively.

 

F-15
 

 

PRAXSYN CORPORATION AND SUBSIDIARIES

(FORMERLY KNOWN AS THE PAWS PET COMPANY, INC.)

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

  

Redemption The Company may redeem, for cash or by an offset against any outstanding note payable from Socius to the Company that was issued by Socius CG II, Ltd. (“Socius”), any or all of the Series A Stock at any time at a redemption price per share equal to $10,000 per share of Series A Stock, plus any accrued but unpaid dividends with respect to such share of Series A Stock (the “Series A Liquidation Value”).

 

On June 2, 2011, the Company’s Board of Directors designated 1,200,000 shares as Series A Stock. As of December 31, 2013, no shares of Series A Stock were outstanding.

 

6. Private Placements

 

On June 3, 2011, the Company entered into a securities purchase agreement with Socius, pursuant to which it secured $500,000 of immediate funding through the issuance and sale of 2,253,470 shares of common stock and a warrant to purchase up to 20,476,707 shares of common stock at an initial exercise price of $1.02 (subject to anti-dilution adjustments). In addition, Socius agreed to purchase up to an additional $5 million in non-convertible shares of Preferred Stock from the Company over the next two years, subject to the Company meeting certain conditions.

 

Subject to the terms and conditions of the securities purchase agreement, beginning 75 days after the closing of the initial purchase, at the Company’s sole discretion, the Company may submit to Socius a tranche notice to purchase a certain dollar amount of the Company’s Preferred Stock at $10,000 per share. The maximum amount that may be funded under any tranche cannot exceed 20% of the cumulative trading volume of the common stock for the 10 trading day-period prior to the applicable tranche notice date.

 

In connection with the securities purchase agreement, the Company agreed to issue on the 75 th day anniversary of the initial purchase by Socius, 1,126,735 shares of common stock to Socius as consideration for executing the securities purchase agreement. The fair value of the consideration was $371,823 using the August 18, 2011 common stock closing price of $0.33 per share and was recorded as a deferred financing fee.

 

In addition, with the closing of the Socius financing, the Company approved the issuance of an aggregate of 1,800,000 shares of common stock as contingent consideration valued at $1,260,000 using the June 3, 2011 common stock closing price of $0.70 per share to two non-employee consultants. The share issuance was recorded as a financing cost charged against APIC.

 

In connection with the issuance of the warrant to purchase up to 20,476,707 shares of common stock at an initial exercise price of $1.02 (subject to full ratchet, anti-dilution adjustment), using the Black Scholes option pricing model that valued the warrants at $0.70 and $0.65 per share at June 3 and September 30, 2011 respectively, the Company recorded a charge to operations of $12,839,860 and a credit to additional paid in capital of $470,000. In connection with the Socius transaction we recorded total deferred financing fees of $427,073 during the year ended December 31, 2011. As of March 31, 2012, the deferred financing fee balance was $427,073, however, because access to the $5 million financing is based on a percentage formula of the dollar value of stock traded, the Company determined that it is unlikely that sufficient stock volume will be reached over the balance of the term of the financing and has expensed the deferred financing fees of $427,073 during the quarter ended September 30, 2012.

 

The warrant agreement has an anti-dilution clause included and therefore the Company has had to issue additional warrants at the same time as new shares were sold to third parties. If the new third party shares are issued or sold for a consideration per share less than a price equal to the exercise price in effect immediately prior to such issue or sale or deemed issuance or sale, then immediately after such dilutive issuance, the exercise price then in effect shall be reduced to an amount equal to the new issuance. As such, the Company recognizes a derivative liability in accordance with ASC 815. The value of the derivative warrant liability was $492,781 and $248,368 at December 31, 2013 and December 31, 2012, respectively.

 

7. Stock Option Plan

 

The Company has a Stock Incentive Plan (the “Plan”). Under the Plan, at December 31, 2013 and 2012, the Company had 4,000,000, reserved for the issuance of stock options to employees, officers, directors and outside advisors. Under the Plan, the options may be granted to purchase shares of the Company’s common equity at fair market value, as determined by the Company’s Board of Directors, at the date of grant.

 

F-16
 

 

PRAXSYN CORPORATION AND SUBSIDIARIES

(FORMERLY KNOWN AS THE PAWS PET COMPANY, INC.)

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

As of December 31, 2013, the Company had granted 1,222,000 options to purchase shares of our common stock to officers and employees with an exercise price of $0.17 per share, the fair market value at the date of grant. The options vest from zero to three years. There were 50,000 shares, 450,000 shares, and 355,000 shares forfeited and cancelled in 2011, 2012, and 2013, respectively. The option compensation value will be expensed to operations over the option’s vesting schedule. Using the Black-Scholes option pricing model and on an estimated forfeiture rate, the fair value of options granted is $187,640. The expense amortized during the years 2013 and 2012 was $7,107 and $25,173, respectively.

 

   Shares   Weighted Average   Weighted Average 
   (in   Exercise   Fair   Remaining Contractual 
Options  thousands)   Price   Value   Term (in years) 
At December 31, 2011   1,172   $0.17   $0.10    9.7 
Granted                 
Exercised                 
Forfeiture and cancelled   (450)   0.17    0.10      
At December 31, 2012   722   $0.16   $0.10    8.7 
Granted                 
Exercised                 
Forfeiture and cancelled   (355)   0.17          
At December 31, 2013   367   $0.16   $0.09    8.7 
Exercisable at December 31, 2013   367   $0.16   $0.09    8.7 
Available for future grant   3,633                

 

The following table summarizes information about options outstanding at December 31, 2013 and 2012:

 

        Outstanding Options   Vested Options 
          Weighted   Weighted      Weighted   Weighted 
    Range of   Number   Average   Average   Number   Average   Average 
    Exercise   Outstanding   Remaining   Exercise   Exercisable   Remaining   Exercise 
    Price   (000s)   Life in years   Price   (000s)   Life in years   Price 
At December 31, 2013    $0.14 - $0.17    367    8.7   $0.16    289    8.7   $0.16 
At December 31, 2012    $0.14 - $0.17    722    8.7   $0.16    566    8.6   $0.17 

 

The following table summarizes information about non-vested options outstanding:

 

Total Non-vested options  Number of   Weighted Average
Grant
 
   shares (000s)   Date Fair Value 
At December 31, 2011   835    0.10 
Granted        
Vested   (229)   0.10 
Forfeited   (450)   0.10 
At December 31, 2012   156   $0.09 
Granted        
Vested        
Forfeited   (78)   0.10 
At December 31, 2013   78   $0.08 

 

F-17
 

 

PRAXSYN CORPORATION AND SUBSIDIARIES

(FORMERLY KNOWN AS THE PAWS PET COMPANY, INC.)

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

8. Debt Obligations

 

Convertible Debentures

 

In June 2010, Pet Airways, Inc. (Florida) issued a $250,000 principal amount unsecured debenture, with an interest rate of 14% per annum and a maturity date of June 18, 2011 (“14% debenture”). Interest on the 14% debenture is payable quarterly starting January 1, 2011. At the Company’s option, interest due may be settled in cash or shares of Company common stock.

 

In August 2010, in a series of transactions, the Company issued five unsecured, convertible debentures, with an aggregate principal balance of $500,000, with interest rates of 8% per annum and a maturity date of August 2013. The debentures are convertible into shares of the Company’s stock at a conversion price of $0.50 per share or 1,000,000 shares. Also, in August 2010, the Company issued an unsecured, convertible debenture in the principal amount of $500,000 with an interest rate of 8% and a maturity date of August 2013. The debenture is convertible into shares of the Company’s stock at a conversion price of $0.40 per share or 1,250,000 shares. Interest on the above debentures was payable quarterly. At the Company’s option, interest due may be settled in cash or shares of Company common stock.

 

In January 2011, the debenture holders of an aggregate of $525,000 principal amount of 8% convertible debentures elected to convert their debentures into 1,300,000 shares of common stock at a conversion rate of $0.40 per share.

 

On June 3, 2011, the Company extinguished a $250,000 principal amount 14% unsecured debenture in exchange for a $350,000 principal amount convertible debenture with a coupon interest rate of 14% per annum, a conversion price of $0.40 per share, or 875,000 shares, of common stock and a maturity date of August 14, 2013 (“14% convertible debenture”) and a detached warrant for the purchase of 875,000 shares of common stock at an exercise price of $0.r share with an expiration date of June 3, 2016. The extinguishment of the $250,000 principal amount 14% debenture resulted in a in a total loss on the extinguishment of debt of $571,122 including $10,128 of accrued interest payable.

 

The 14% convertible debenture and detached warrant issued above is subject to derivative liability accounting. Using the Black-Scholes option pricing model, a fair value of the debenture’s beneficial conversion feature and warrant component derivative was determined to be $342,632 and has been recorded as APIC and debt discount. Using the Black-Scholes option pricing model, a fair value of the detached warrant was determined to be $481,250 and has been recorded as APIC and element of the total loss on the extinguishment of debt.

 

On March 2, 2012, the Company issued an 8% convertible debenture, with a principal balance of $47,500, and a maturity date of November 29, 2012. The debenture is convertible into shares using a conversion rate equal to 58% multiplied by the average of the lowest 3 trading prices for the common stock during the 10 trading day period ending on the latest complete trading day prior to the conversion date.

 

On April 25, 2012, the Company issued an 8% convertible debenture, with a principal balance of $27,500, and a maturity date of January 18, 2013. The debenture is convertible into shares using a conversion rate equal to 45% multiplied by the average of the lowest 2 trading prices for the common stock during the 30 trading day period ending on the latest complete trading day prior to the conversion date.

 

On April 30, 2012, the debenture holder of $350,000 principal amount of 14% convertible debentures elected to convert $100,000 of the debenture into 250,000 shares of common stock at a conversion rate of $0.40 per share.

 

On July 24, 2012, the Company issued an 8% convertible debenture, with a principal balance of $27,500, and a maturity date of April 19, 2013. The debenture is convertible into shares using a conversion rate equal to 51% multiplied by the average of the lowest 2 trading prices for the common stock during the 30 trading day period ending on the latest complete trading day prior to the conversion date.

 

On September 4, 2012, the Company issued 2,033,898 shares of common stock following the conversion of $12,000 of a $47,500 8% convertible debenture at a conversion rate of $0.0059 per share.

 

On May 10, 2013, the Company issued 2,415 shares of Series C Stock in exchange for a $150,000 8% convertible debenture and accrued interest at a conversion rate of $62.11 per share.

 

On September 9, 2013, the Company issued an 8% convertible debenture, with a principal balance of $27,500, and a maturity date of June 9, 2013. The debenture is convertible into shares using a conversion rate equal to 51% multiplied by the average of the lowest 2 trading prices for the common stock during the 30 trading day period ending on the latest complete trading day prior to the conversion date.

 

In August and September 2013, the Company issued 6,655,581 shares of common stock following various conversions totaling $97,500 of 8% convertible debentures at a conversion rate of $0.0146 per share.

 

A loan default fee was assessed by a lender and added to the principal amount of certain debentures totaling $45,250, due to failure to meet debenture agreement requirements in filing SEC reports timely. The fee was charged to operations during the period ending September 30, 2013.

 

In October 2013, the Company issued 5,833,333 shares of common stock following two conversions totaling $31,500 of 8% convertible debentures at a conversion rate of $0.0054 per share.

 

On October 11, 2013, the Company paid $9,750 in cash to pay off the remaining balance of an 8% convertible debenture.

 

At December 31, 2013, an aggregate of $352,500 and $250,000 principal amount 8% and 14% convertible debentures, respectively, were outstanding. At December 31, 2012, an aggregate of $565,500 and $250,000 principal amount 8% and 14% convertible debentures, respectively, were outstanding.

 

F-18
 

  

PRAXSYN CORPORATION AND SUBSIDIARIES

(FORMERLY KNOWN AS THE PAWS PET COMPANY, INC.)

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

Convertible debentures, net of unamortized discounts, consist of the following:

 

   December 31, 2013   December 31, 2012 
Principal amount 8% convertible debenture  $352,500   $565,500 
Principal amount 14% convertible debenture   250,000    250,000 
Unamortized debt discount   (15,486)   (160,067)
Net carrying amount  $587,014   $655,433 
Equity component (recognized in additional paid-in capital)  $1,043,821   $879,528 

 

The discount is amortized as interest expense over the period of the debentures term. Interest expense of $160,683, $352,252, and $512,935 was recorded to operations related to the amortization of debenture debt discounts during the years ended December 31, 2013 and 2012 and for the period from inception of development stage (February 1, 2012) to December 31, 2013, respectively. This included $0 of accelerated amortization due to the conversion of $12,000 of 8% convertible debentures, in addition to $11,974 due to the conversion of $100,000 of 14% convertible debentures.

 

Warrants

 

On February 23, 2012, 4,336,503 warrants were issued to Socius with an exercise price of $0.14 per share to reflect an anti-dilution adjustment.

 

On March 2, 2012, 252,449 warrants were issued to Socius with an exercise price of $0.14 per share to reflect an anti-dilution adjustment.

 

On April 2, 2012, an additional 53,811 warrants were issued to Socius with an exercise price of $0.05 per share to reflect an anti-dilution adjustment.

 

On April 10, 2012, an additional 3,995,247 warrants were issued to Socius with an exercise price of $0.12 per share to reflect an anti-dilution adjustment.

 

On April 20, 2012, an additional 405,839 warrants were issued to Socius with an exercise price of $0.12 per share to reflect an anti-dilution adjustment.

 

On April 20, 2012, an additional 828,089 warrants were issued to Socius with an exercise price of $0.12 per share to reflect an anti-dilution adjustment.

 

On April 25, 2012, an additional 184,335 warrants were issued to Socius with an exercise price of $0.12 per share to reflect an anti-dilution adjustment.

 

On April 27, 2012, an additional 302,046 warrants were issued to Socius with an exercise price of $0.12 per share to reflect an anti-dilution adjustment.

 

On June 7, 2012, an additional 109,489 warrants were issued to Socius with an exercise price of $0.01 per share to reflect an anti-dilution adjustment.

 

On June 15, 2012, an additional 733,848 warrants were issued to Socius with an exercise price of $0.01 per share to reflect an anti-dilution adjustment.

 

On June 30, 2012, an additional 761,126 warrants were issued to Socius with an exercise price of $0.01 per share to reflect an anti-dilution adjustment.

 

On July 24, 2012, an additional 217,390 warrants were issued to Socius with an exercise price of $0.01 per share to reflect an anti-dilution adjustment.

 

F-19
 

 

PRAXSYN CORPORATION AND SUBSIDIARIES

(FORMERLY KNOWN AS THE PAWS PET COMPANY, INC.)

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

A summary of the warrant activity for the year ended December 31, 2013 is as follows:

 

    Number of Warrants   Weighted Average Exercise Price   Weighted Average Remaining Contracted Term (Years)   Aggregate Intrinsic Value 
    Equity and Services   8% Convertible Debentures   14% Convertible Debentures             
Outstanding at December 31, 2012    33,812,132    1,400,000    875,000   $0.68    3.45   $- 
Granted    -    -    -    -    -    - 
Exercised/Expired/Cancelled    (200,000)   (300,000)   -    -    -    - 
Outstanding at December 31, 2013    33,612,132    1,100,000    875,000   $0.68    2.52   $8,745 
Exercisable at December 31, 2013    33,612,132    1,100,000    875,000   $0.68    2.52   $8,745 
                                
Weighted Average Grant Date Fair Value                  $0.47           

 

9. Segment Information

 

The Company originally operated as a single segment company; however, effective February 1, 2012 the Company became a development stage company and is no longer operating as a segment. Effective March 31, 2014, the Company focuses on providing custom compounded non-narcotic, transdermal topical pain medications that are marketed to industrial health physicians and clinics.

 

10. Income Taxes

 

As of December 31, 2013, the Company had deferred tax assets primarily consisting of its net operating loss carry forwards, accrued expenses and capitalized start-up costs for tax purposes. However, because the cumulative losses in several consecutive years, the Company has recorded a full valuation allowance such that its net deferred tax asset is zero.

 

With respect to tax years prior to 2010, the Company was taxed as a partnership. Accordingly, all of the losses of the Company flow through to the members of the partnership and the Company has no deferred tax assets or loss carry forwards from this period.

 

We must also make judgments whether the deferred tax assets will be recovered from future taxable income. To the extent that we believe that recovery is not likely, we must establish a valuation allowance. A valuation allowance has been established for deferred tax assets which we do not believe meet the “more likely than not” criteria. Our judgments regarding future taxable income may change due to changes in market conditions, changes in tax laws, tax planning strategies or other factors. If our assumptions and consequently our estimates change in the future, the valuation allowances we have established may be increased or decreased, resulting in a respective increase or decrease in income tax expense.

 

The Company accounts for income taxes using the asset and liability approach in accordance with ASC 740, “Accounting for Income Taxes”., by prescribing a more-likely-than-not (i.e., greater than 50% likelihood of receiving a benefit) threshold to recognize any benefit of a tax position taken or expected to be taken in a tax return. Tax positions that meet the recognition threshold are reported in the consolidated financial statements. The guidance further provides the benefit to be realized assuming a review by tax authorities having all relevant information and applying current conventions. The interpretation also clarifies the consolidated financial statements classification of tax related penalties and interest and set forth new disclosures regarding unrecognized tax benefits. The adoption of ASC 740-10 did not have a material impact on our consolidated financial results.

 

F-20
 

  

PRAXSYN CORPORATION AND SUBSIDIARIES

(FORMERLY KNOWN AS THE PAWS PET COMPANY, INC.)

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

At December 31, 2013 and 2012, the Company had available net operating loss carry forwards of approximately $7,289,847 and $7,169,146, respectively, for federal income tax purposes. Such carry forwards may be used to reduce consolidated taxable income, if any, in future years through their expiration in 2032 subject to limitations of Section 382 of the Internal Revenue Code, as amended. Utilization of net operating loss carry forwards may be limited due to the ownership changes and the Company’s acquisitions.

 

At December 31, 2013, the Company had not filed the federal tax return for the years ended December 31, 2013, 2012, 2011 and 2010.

 

Deferred tax assets are comprised of the following components:

 

   Years Ended December 31, 
   2013   2012 
Current:          
Deferred state taxes  $(64,300)  $(50,645)
Accruals and reserves   1,085,915    874,248 
    1,021,615    823,603 
           
 Non-current:          
Property, equipment and capitalized startup costs   104,893   $103,377 
Net operating loss carry forward   3,001,467    2,951,774 
Deferred state taxes   (182,777)   (177,483)
Beneficial conversion feature discount amortization   (20,708)   (58,917)
    2,902,874    2,818,752 
           
Total deferred tax asset   3,924,489    3,642,355 
           
 Deferred tax asset valuation allowance   (3,924,489)   (3,642,355)
           
Net deferred tax asset  $-   $- 

 

    Years Ended December 31,
    2013    2012 
Reconciliation roll:          
Book loss  $(5,437,025)  $(1,218,814)
Income tax expense   800   $1,600 
Subtotal  $(5,436,225)  $(1,217,214)
           
Permanent differences  $4,704,904   $(2,151,965)
Temporary differences   610,620   $1,884,648 
           
Tax loss  $(120,701)  $(1,484,531)
           
Net operating loss carry forward  $(120,701)  $(1,484,531)

 

F-21
 

 

PRAXSYN CORPORATION AND SUBSIDIARIES

(FORMERLY KNOWN AS THE PAWS PET COMPANY, INC.)

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

11. Commitments and Contingencies

 

Operating Lease Commitments

 

Rent expense charged to operations were $930, $252,040, and $229,706 for the years ended December 31, 2013 and 2012 and for the period from inception of the development stage (February 1, 2012) to December 31, 2013, respectively. The entire amount of rent incurred during 2012 was related to discontinued operations. The Company had no lease agreements with a term in excess of one year at December 31, 2013 and 2012.

 

Employment Agreements

 

The Company had no employment agreements at December 31, 2013 and 2012.

 

12. Legal Proceedings

 

The Company has, from time to time, been involved in legal proceedings, claims, and litigation that have occurred in the normal course of business. The Company routinely assesses its liabilities and contingencies in connection with these matters based upon the latest available information and, when necessary, seeks input from its third-party advisors when making these assessments. Described below are material pending legal proceedings (other than ordinary routine litigation incidental to the Company’s business), material proceedings known to be contemplated by governmental authorities, other proceedings arising under federal, state, or local environmental laws and regulations (including governmental proceedings involving potential fines, penalties, or other monetary sanctions in excess of $10,000) and such other pending matters that we may determine to be appropriate.

 

On April 26, 2012, a judgment was entered against the Company in Circuit Court in and for Palm Beach County, Florida by Sky Way Enterprises, Inc. in the sum of $187,827 for services rendered, damages, including costs, statutory interest and attorneys’ fees. The balance due at December 31, 2013 inclusive of accrued interest is $196,544.

 

On March 4, 2013, a judgment was entered against our subsidiary, Pet Airways, Inc., in District Court of Douglas County, Nebraska by Suburban Air Freight in the sum of $87,491 for services rendered, including statutory interest and attorneys’ fees. The balance due at December 31, 2013 inclusive of accrued interest is $89,579.

 

On March 6, 2013, an order was issued by the labor commissioner of the State of California for our subsidiary, Pet Airways, Inc., to pay a former employee Alyce Tognotti wages and penalties in the sum of $17,611 for services rendered, including penalties, statutory interest and liquidated damages. The balance due at December 31, 2013 inclusive of accrued interest is $18,576.

 

On May 31, 2013, a motion for final judgment was filed against our subsidiary, Pet Airways, Inc., in Circuit Court in and for Broward County, Florida by AFCO Cargo BWI, LLC in the sum of $31,120 for services rendered, including statutory interest and attorneys’ fees. The balance due at December 31, 2013 inclusive of accrued interest is $31,987.

 

Other than the foregoing, there were no claims, actions, or lawsuits which to our knowledge are pending or threatened that could reasonably be expected to have a material effect on the results of our operations. The Company is self-insured and has not accrued a reserve against potential losses from unknown risks and liabilities.

 

F-22
 

 

PRAXSYN CORPORATION AND SUBSIDIARIES

(FORMERLY KNOWN AS THE PAWS PET COMPANY, INC.)

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

13. Discontinued Operations

 

In January, 2012, the Company decided to discontinue its Pet Airways business. The remaining liabilities are presented on the balance sheet under the caption “Accounts and accrued expenses payable, discontinued operations.” Liabilities related to discontinued operations were as follows:

 

   Year Ended December 31, 
   2013   2012 
Airways lease accruals  $375,090   $375,090 
Liability to merchant card processor   224,228    224,228 
Other liabilities and accruals   266,247    266,247 
          
Accounts and accrued expenses payable, discontinued operations   $865,565   $865,565 

 

The following table sets forth the years ended December 31, 2013 and 2012 selected financial data of the Company’s discontinued operations of its pet airways business.

 

           For the period from 
           inception of 
           development stage 
           (February 1, 2012) to 
   Year Ended December 31,   December 31, 2013 
   2013   2012     
Revenue  $-   $-   $- 
Cost of sales   -    -    - 
Gross profit (loss)   -    -    - 
Operating expenses   -    339,570    - 
Loss on abandonment of equipment   -    -    - 
Loss from discontinued operations  $-   $339,570   $- 

 

14. Going Concern Matters

 

The accompanying audited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. For the years ended December 31, 2013 and 2012, the Company incurred net losses of $(5,437,025) and $(1,218,814), respectively, of which $(5,437,025) and $(879,244), in losses was derived from continuing operations respectively, and $0 and $(339,570), related to losses from discontinued operations, respectively. As of December 31, 2013 the Company had an accumulated deficit of $(20,234,409) of which $(13,918,140) pertained to accumulated deficit from inception until discontinuance of operations (January, 31, 2012) and $(6,316,269) related to deficits accumulated during the development stage (February 1, 2012) to December 31, 2013, compared to a deficit of $(13,918,140) from accumulated deficit from inception until discontinuance of operations (January 31, 2012), and $(879,244) related to deficits accumulated during the development stage (February 1, 2012) to December 31, 2012. We do not presently have adequate cash from operations or financing activities to meet our long-term financing needs. As of December 31, 2013, we had $1,272 in cash on hand to use in executing our business plan. We will require additional working capital to continue our operations during the next 12 months and to support our long-term growth strategies, so as to enhance our service offerings and benefit from economies of scale. Our working capital requirements and the cash flow provided by future operating activities, if any, will vary greatly from quarter to quarter, depending on the volume of business and competition in the markets we serve. We may seek any necessary funding through one or more credit facilities, if available, or through the sale of debt or additional equity securities. However, there is no assurance that funding of any type would be available to us, or that it would be available at rates and on terms and conditions that would be financially acceptable and viable to us in the long term. If we are unable to raise any necessary additional financing when needed, we may be required to suspend operations, sell assets or enter into a merger or other combination with a third party, any of which could adversely affect the value of our common stock, or render it worthless. If we issue additional debt or equity securities, such securities may enjoy rights, privileges and priorities (including but not limited to coupon rates, conversion rights, rights to fixed or preferential dividends, anti-dilution rights or preference as to the distribution of assets upon a liquidation) superior to those enjoyed by holders of our common stock, thereby diluting the value of our common stock.

 

15. Subsequent Events

 

On December 31, 2013 the Company agreed to acquire Mesa Pharmacy, Inc. (“Mesa”) from Pharmacy Development Corporation (“PDC-CA”) in the form of a First Amended Securities Exchange Agreement (“FA-SEA”), in exchange for 500,000 shares of Series D Convertible Preferred Stock. However, on March 20, 2014, the Company and PDC-CA agreed to amend, supersede and replace the FS-SEA with an Agreement and Plan of Merger Agreement (“APMA”) whereby PDC-CA would merge into the Company’s wholly-owned subsidiary, PDC, INC (“PDC”). The same 500,000 shares are due under this agreement and the Company will take on an additional $646,500 in PDC-CA convertible notes and amend such notes so that they are convertible at a rate of one share of Series D preferred stock of the Company per $100 of PDC-CA convertible notes. The Company and the holders of Series D preferred stock intend to amend the Certificate of Designation to add, at a minimum, the necessary 6,465 shares to the already authorized 500,000 shares. This transaction closed on March 31, 2014. PDC-CA and/or Mesa primarily operate as Mesa and focuses on providing custom compounded non-narcotic, transdermal topical pain medications that are marketed to industrial health physicians and clinics. MESA has developed a series of topical ointments, in different strengths, that provide the pain relief doctors seek. The Company accounted for the transaction in accordance with ASC 805 “Business Combinations.”

 

F-23
 

 

PRAXSYN CORPORATION AND SUBSIDIARIES

(FORMERLY KNOWN AS THE PAWS PET COMPANY, INC.)

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

Subsequent to December 31, 2013, the Company issued a total of 40,256,933 and 15,000,000 shares of Common Stock upon conversion of Series B shares and Series C shares, respectively.

 

On March 26, 2014 the Company sold all of its interest in Pet Airways, Inc. to The Watermark Company, Inc., a corporation controlled by Daniel Wiesel and Alysa Binder, both officers and directors of the Company. The consideration for the sale of Pet Airways, Inc. was the relief gained through the sale from debts of Pet Airways, Inc. totaling approximately $1,000,000. The Company retains the ownership of the flight reservation system developed by the Company; however, Pet Airways, Inc. retains a royalty free license to utilize the system in perpetuity. A sale of the flight reservation system is being considered.

 

On March 31, 2014, the Board of Directors voted to elect John Garbino and Edward Kurtz as members of the Board of Directors.

 

On March 26, 2014, the Company issued 60,000,000 Common Stock shares to Daniel Wiesel and Alysa Binder, both officers and directors of the Company, pursuant to the exemption provided by Section 4(2) of the Securities Act of 1933. The shares were issued in consideration of the cancellation of accrued, yet unpaid wages through December 31, 2013 and the agreement by The Watermark Company, Inc., a corporation controlled by the Daniel Wiesel and Alysa Binder, to purchase the Company’s interest in Pet Airways, Inc., a subsidiary through which the Company formerly operated its discontinued pet airline. The sale of Pet Airways, Inc. relieves the Company of debts totaling approximately $1,000,000. The Company had agreed, in principle, to allow Mr. Wiesel and Ms. Binder to reacquire Pet Airways and settle their outstanding unpaid wages as soon as the acquisition of PDC/MESA was complete. The Company retains the ownership of the flight reservation system developed by the Company; however, Pet Airways, Inc. retains a royalty free license to utilize the system in perpetuity. A sale of the flight reservation system is being considered.

 

The following table summarizes the unaudited pro forma consolidated results of operations as though the Company and PDC-CA acquisition had occurred on January 1, 2012 as well as the disposition of Pet Airways, Inc. in March 2014:

 

   For the Year Ended
December 31, 2013
   For the Year Ended
December 31, 2012
 
       (UNAUDITED)       (UNAUDITED) 
   As Reported   Pro Forma   As Reported   Pro Forma 
Net revenues  $-   $8,246,609   $-   $9,944,039 
                     
Loss from operations   (5,437,025)   (97,705)   (879,244)   (8,258,103)
                     
Loss per common share:                    
Basic and Diluted  $(0.05)  $(0.00)  $(0.01)  $(0.12)

  

The unaudited pro forma consolidated income statements are for informational purposes only and should not be considered indicative of actual results that would have been achieved if the Company’s PDC-CA acquisition, and disposition of Pet Airways, Inc. in March 2014 had been completed at the beginning of 2012, or results that may be obtained in any future period.

 

On March 26, 2014, the Company issued 7,441,584 Common Stock shares to the Daniel T Zagorin Family Trust in exchange for $500,000 in cash.

 

On March 26, 2014, the Company changed its name to “Praxsyn Corporation” and increased the number of authorized shares of common stock to 1,400,000,000 shares.

 

F-24
 

 

ITEM 9A. CONTROLS AND PROCEDURES.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

 

Disclosure Controls and Procedures

 

Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15(d)-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report pursuant to Rule 13a-15(b) under the Exchange Act. Based on this evaluation, our Chief Executive Officer and acting Chief Financial Officer concluded that, as of December 31, 2013, subject to the inherent limitations noted in this Part II, Item 9Aas of December 31, 2013 our disclosure controls and procedures were not effective due to the existence of material weaknesses in our internal controls over financial reporting, as discussed below.

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(e) and 15d – 15(e) under the Exchange Act as amended. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Our management assessed the effectiveness of our internal controls over financial reporting as of December 31, 2013 using criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Our management has concluded that our internal control over financial reporting was not effective as of December 31, 2013 due to material weaknesses in our internal controls.

 

A material weakness is a control deficiency, or a combination of control deficiencies, that results in a more than remote likelihood that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Our management, in consultation with our independent registered public accounting firm, concluded that material weaknesses existed in the following areas as of December 31, 2013:

 

(1) We do not have in-house personnel with the technical knowledge to identify and address some of the reporting issues surrounding certain complex or non-routine transactions. With material, complex and non-routine transactions, management has and will continue to seek guidance from third-party experts and/or consultants to gain a thorough understanding of these transactions;

 

(2) We have inadequate segregation of duties consistent with the control objectives including but not limited to the disbursement process, transaction or account changes, account reconciliations and approval and the performance of bank reconciliations;

 

(3) We have ineffective controls over the period end financial disclosure and reporting process caused by reliance on third-party experts and/or consultants and insufficient accounting staff;

 

(4) We do not have a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls, approvals and procedures.

 

Management believes the material weaknesses set forth in items 1 to 3 above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and a lack of a majority of outside directors on our board of directors results in a lack of oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our consolidated financial statements in future periods.

 

13
 

 

Management’s Remediation Initiatives

 

In order to remedy the identified material weaknesses and other deficiencies and enhance our internal controls, management would initiate, when funding permits, the following series of measures: 1) create a financial position that adequately segregates financial duties consistent with control objectives; 2) hire staff technically proficient at applying U.S. GAAP to financial transactions and reporting; and 3) appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will perform the oversight in the establishment and monitoring of required internal controls and procedures including but not limited to a) review and approval of significant transactions; b) selection and approval of the services of the independent registered public accounting firm; and c) review and approval of the report of the registered independent certified public accountants on the required periodic external reports.

 

This annual report does not include an attestation report of our registered independent certified public accountants regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered independent certified public accounting firm pursuant to rules adopted under the Dodd-Frank Wall Street Reform and Consumer Protection Act that permit us to provide only management’s report in this annual report.

 

Changes in Internal Control over Financial Reporting

 

There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the calendar quarter and for the year ended December 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

14
 

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

 

The following table sets forth the name, age and position of each of our executive officers and directors:

 

Name   Age   Position
         
Dan Wiesel   58   Chairman, Chief Executive Officer and Director
         
Alysa Binder   50   Executive Vice President and Chief Development Officer and Director
         
Evon L. Midei   63   Director
         
Jonathan Renkas, M.D.   46   Director
         
Edward F. Kurtz   51   Director
         
John Garbino   43   Director

 

Business Experience

 

We believe that our board should be composed of individuals with sophistication and experience in many substantive areas that impact our business. We believe the experience, qualifications, or skills in the following areas are most important: sales and marketing; strategic planning; human resources and development practices; and board practices from other corporations. These areas are in addition to the personal qualifications described in this section. We believe that all of our current board members possess the professional and personal qualifications necessary for board service, and have highlighted particularly noteworthy attributes of each Board member in the individual biographies below. The principal occupation and business experience, for at least the past five years, of each current director is as follows;

 

Dan Wiesel co-founded Pet Airways in 2005 and has served as our Chairman of the board of directors and Chief Executive Officer since August 2009. Mr. Wiesel has also served as our President and Chief Financial Officer until January 2011. From 1983 to 1985, Mr. Wiesel served as Vice President of Acquisitions for a national real estate investment company, where Mr. Wiesel was responsible for the negotiation and purchase of over $300 million in commercial real estate. Subsequently, in 1985 Mr. Wiesel founded The Wendemere Group, a real estate development firm, which built custom homes with a total value of more than $20 million. In 1990, Mr. Wiesel founded StitchIt Corporation, a manufacturer of women’s swimwear. In 1995, as principal of Interlink Recruiting, Mr. Wiesel was responsible for the creation of this boutique executive recruiting firm. Mr. Wiesel holds an MBA in Entrepreneurship from the University of Southern California and holds a private pilot’s license. As a result of these and other professional experiences, Mr. Wiesel possesses particular knowledge and experience in business development, sales strategy and management that strengthen the board’s collective qualifications, skills, and experience.

 

Alysa Binder co-founded Pet Airways in 2005 and has served as our Executive Vice President and Chief Development Officer since August 2009. Ms. Binder began her career in the premium incentive industry, responsible for marketing and sales to large corporate customers. Ms. Binder later founded a retail jewelry operation, expanding the business to include custom creations for high-profile clients. In 1995, Ms. Binder founded Interlink Recruiting. Ms. Binder is Dan Wiesel’s wife. In 2005, Ms. Binder joined Dan in founding Pet Airways. As a result of these and other professional experiences, Ms. Binder possesses particular knowledge and experience in business development, strategic planning and marketing that strengthen the board’s collective qualifications, skills, and experience.

 

Evon L. Midei is a registered pharmacist with over 35 years’ experience in pharmacy operations, pharmacy management and executive level hospital administration. Since 2011, Mr. Midei has served as independent consultant with Empire Pharmacy Consultations in Miami, Florida, providing management and other operational consulting services to various pharmacy and healthcare organizations. From 1995 to 2010, he was a pharmacist with CVS in Allentown, Pennsylvania. In 1996, he was Director of Operations for Raytel Medical Corporation in Windsor, Canada. From 1982 to 1995, he was employed by St. Luke’s Hospital in Allentown, Pennsylvania, where he initially was Risk Manager/Special Projects Administrator. During his tenure at the hospital, he rose to become Senior Vice President and Chief Operating Officer, serving in such position from 1993 to 1995. In such capacity, he was responsible for day to day operations of the hospital and its affiliated businesses. He also negotiated managed care contracts of all types with manage care organizations, physicians, employers and government agencies. Prior to joining St. Luke’s, Mr. Midei occupied various positions in the healthcare and pharmacy industry, including Pharmacist Manager of Thrift Drugs, in Bethlehem, Pennsylvania from 1973 to 1979, where he managed all aspects of the operation of this multi-million dollar community pharmacy.

 

15
 

 

Jonathan Renkas, M.D., is a practicing emergency room physician in the Chicago, Illinois area, where he has been affiliated with West Suburban Medical Center since March 2013 and Ingalls Community Hospital since 2011. Prior thereto, he was affiliated with various hospitals in Wisconsin and Indiana since 2006. From 2004 to 2006, he served as Senior Vice President and Chief Medical Officer of U.S. Asthma Care, based in Fort Worth, Texas and contemporaneously as Utilization Management Medical Director of Midland Management Company. Since 2006, he has also served on a consulting basis as Senior Quality Management Analyst for Sterling HealthCare Initiatives in Chicago, Illinois.

 

Edward F. Kurtz has been a business executive for over 25, years working as a General Manager and then a CEO of two successful companies in the Orange County area of California. After selling his business in late 2007, a group of investors presented Mr. Kurtz the opportunity to build a chain of pharmacies. Over the next two years, as Chief Operating Officer, he created and executed a plan that acquired two existing pharmacies and built three new stores. In all, five retail pharmacies were under his control and management. The eventual result was the merger of Pharmacy Development Corporation (“PDC-CA”) into PDC, INC., a wholly owned subsidiary of the Company on March 31, 2014. Today the Pharmacy Development Corp. employs over 25 people, and Mr. Kurtz is planning the next phase of growth.

 

John Garbino is one of the country’s leading experts in pharmaceutical sales. Over the last 14 years, he has held leadership roles in the sales and marketing of pharmaceuticals to medical practitioners achieving unpatrolled success in sales volumes and market penetration. After several similar positions, he was named Director of Sales and Marketing for Southwood Pharmaceuticals where he directed the growth from $2,000,000 to over $40,000,0000 annually and expanded sales to a nationwide client base. In 2005 he was made President of Comp Billing & Funding Inc., a new division of Southwood Pharmaceuticals, with the responsibility to build the new Workers Compensation program, building it to $5,000,000 with the first 10 months. In conjunction with this program, he built, trained and managed the sales team that grew the program to upwards of $20,000,000. He is currently the CEO of Trestles Pain Management (“Trestles”) that acts as a pharmaceutical management consultant to the industry.

 

Directors serve at the discretion of the board of directors. Executive officers are appointed by and serve at the discretion of the board of directors.

 

Family Relationships

 

Mr. Wiesel, our Chief Executive Officer and Chairman of our board of directors, and Ms. Binder, our Executive Vice President and a director, are married.

 

Compliance with Section 16(a) of the Exchange Act

 

The SEC has adopted rules relating to the filing of ownership reports under Section 16 (a) of the Exchange Ac. Section 16(a) of the Exchange Act requires our directors, officers and stockholders who beneficially own more than 10% of any class of our equity securities registered pursuant to Section 12 of the Exchange Act to file initial reports of ownership and reports of changes in ownership with respect to our equity securities with the SEC. All reporting persons are required by SEC regulations to furnish us with copies of all reports that such reporting persons file with the SEC pursuant to Section 16(a). Based solely on our review of the copies of such forms received by us and upon written representations of such reporting persons, we believe that all reporting persons are in compliance with all Section 16(a) filing requirements applicable to such reporting persons, except that the Daniel T. Zagorin Trust, Ms. Binder and Mr. Wiesel failed to timely file a Form 3 and Mr. Warner failed to file a Form 3 and Form 4.

 

Audit Committee and Audit Committee Financial Expert

 

Due to the size of our operation, members of the board of directors serve collectively as the Audit Committee and have primary responsibility for monitoring the quality of internal financial controls and ensuring that the financial performance of our company is properly measured and reported on. It receives and reviews reports from management and auditors relating to the annual, periodic and interim accounts and the accounting and internal control systems in use throughout our company.

 

Our Audit Committee also consults with our independent registered public accounting firm prior to the presentation of financial statements to stockholders and, as appropriate, initiates’ inquiries into aspects of our financial affairs. Our Audit Committee is responsible for establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, and for the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters. The Audit Committee meets not less than quarterly and has unrestricted access to our auditors.

 

16
 

 

Code of Business Conduct and Ethics

 

Due to our small size and limited number of persons comprising our management, we have not adopted a code of ethics that applies to our principal executive officer, principal accounting officer, or persons performing similar functions.

 

Shareholder Communications

 

We have not implemented any formal procedures for shareholder communication with our board of directors. Any matter intended for our board of directors, or for any individual member or members of our board of directors, should be directed to our corporate secretary at Praxsyn Corporation (formerly known as The PAWS Pet Company, Inc.), 855 El Camino Real, Suite 13A - 184, Palo Alto, CA 94301. In general, all shareholder communications delivered to the corporate secretary for forwarding to the board of directors or specified members of the board of directors will be forwarded in accordance with shareholder’s instructions. However the corporate secretary reserves the right to not forward to members of the board of directors any abusive, threatening or otherwise inappropriate materials.

 

ITEM 11. EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The following Summary Compensation Table shows the compensation for years 2013 and 2012 awarded to or earned by our Chairman and Chief Executive Officer, President and former Chief Financial Officer and Executive Vice President and Chief Development Officer as of December 31, 2013. There were no other highly compensated executive officers serving in such capacities as of December 31, 2013. The persons listed in the following Summary Compensation Table are referred to herein as the “Named Executive Officers or NEOs.”

 

               Stock   All Other     
       Salary   Bonus   Awards   Compensation   Total 
Name and Principal Position  Year   ($)(2)   ($)   ($)(3)   ($)   ($) 
Dan Wiesel   2013   $250,000   $-   $-   $-   $250,000 
Chairman of the Board and Chief Executive   2012   $245,000   $-   $48,000   $-   $293,000 
Officer and Acting Chief Financial Officer                              
                               
Andrew Warner (1)   2013   $-   $-   $-   $-   $- 
Former President and Chief Financial   2012   $175,000   $-   $48,000   $-   $223,000 
Officer                              
                               
Alysa Binder   2013   $200,000   $-   $-   $-   $200,000 
Executive Vice President and   2012   $200,000   $-   $48,000   $-   $248,000 
Chief Development Officer                              

 

(1) Mr. Warner resigned from his position with the Company on October 29, 2012.
(2) Includes accrued salary $143,294 $113,750 and $113,333 to Mr. Wiesel, Mr. Warner and Ms. Binder at December 31, 2013, No salary was paid during 2013.
(3) In April 2012 we granted Mr. Wiesel, Mr. Warner and Ms. Binder 400,000 shares each of restricted stock at a fair value of $48,000 each. All shares were fully vested on the grant date. On March 26, 2014, the Company issued 60,000,000 Common Stock shares to Daniel Wiesel and Alysa Binder for payment of accrued salaries through December, 31 2013.

 

We have not entered into any employment agreements with our named executive officers.

 

17
 

 

Outstanding Equity Awards at Year-End

 

As of December 31, 2013, there were no outstanding vested awards owned by a former executive officer.

 

Director Compensation

 

Effective March 2011, the Company pays each non-employee director a fee of $1,500 for each “in-person” board or committee meeting and $500 for every telephonic board or committee meeting. All directors are reimbursed for all reasonable expenses incurred in connection with the performance of their respective duties as a director. No payments were made to directors during the year ended December 31, 2013.

 

ITEM 12   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

 

The following table sets forth information regarding beneficial ownership of our common stock as of April 12, 2014 (i) by each person who is known by us to beneficially own more than 5% of our common stock; (ii) by each of our officers and directors; and (iii) by all of our officers and directors as a group. Unless otherwise specified, the address of each of the persons set forth below is in care of Praxsyn Corporation (formerly known as The PAWS Pet Company, Inc.), 855 El Camino, Suite 13A - 184, Palo Alto, CA 94301.