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:
The accompanying notes are an integral
part of these consolidated financial statements
The accompanying notes are an integral
part of these consolidated financial statements.
The accompanying notes are an integral
part of these consolidated financial statements.
The accompanying notes are an integral
part of these consolidated financial statements.
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.
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.
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:
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.
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.
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.
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.
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.
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, i
n 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. I
n
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.
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.
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.
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
|
|
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.
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.
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.
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
|
)
|
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.
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
O
n
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.”
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.