FORM 10-Q

0001493152-13-001489.txt : 20130812 0001493152-13-001489.hdr.sgml : 20130812 20130812075213 ACCESSION NUMBER: 0001493152-13-001489 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20130630 FILED AS OF DATE: 20130812 DATE AS OF CHANGE: 20130812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAWS Pet Company, Inc. CENTRAL INDEX KEY: 0001346973 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 203191557 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-130446 FILM NUMBER: 131028187 BUSINESS ADDRESS: STREET 1: 777 E ATLANTIC AVENUE STREET 2: #C2-264 CITY: DELRAY BEACH STATE: FL ZIP: 33483 BUSINESS PHONE: 561-886-7108 MAIL ADDRESS: STREET 1: 777 E ATLANTIC AVENUE STREET 2: #C2-264 CITY: DELRAY BEACH STATE: FL ZIP: 33483 FORMER COMPANY: FORMER CONFORMED NAME: Pet Airways Inc. DATE OF NAME CHANGE: 20101025 FORMER COMPANY: FORMER CONFORMED NAME: American Antiquities, Inc. DATE OF NAME CHANGE: 20051214 10-Q 1 form10q.htm QUARTERLY REPORT FORM 10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

(Mark One)

[X]		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2013

[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to ________

Commission file number: 333-130446

	THE PAWS PET COMPANY, INC.
	(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 Real, Suite 13A-184

Palo Alto, CA

94301

(Address of Principal Executive Offices)

(Zip Code)

	(561) 2746805
	(Registrant’s Telephone Number, Including Area Code)

455 N.E. 5^th Avenue, Suite D464, Delray Beach, Fl.

(Registrant’s former address)

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 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,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)	Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

The number of shares outstanding of the registrant’s common stock as June 30, 2013 was 87,567,678 shares.

THE PAWS PET COMPANY, INC.

TABLE OF CONTENTS TO FORM 10-Q

		Page
Part I FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)		F-1
Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012 (Audited)		F-1
Condensed Consolidated Statements of Operations for the three and six month periods ended June 30, 2013 and 2012, and for the period from inception of development stage (February 1, 2012) to June 30, 2013		F-2
Condensed Consolidated Statements of Cash Flows for the six month periods ended June 30, 2013 and 2012, and for the period from inception of development stage (February 1, 2012) to June 30, 2013		F-3
Notes to Condensed Consolidated Financial Statements		F-4

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		3

Item 3. Quantitative and Qualitative Disclosures About Market Risk		6

Item 4. Controls and Procedures		6

Part II OTHER INFORMATION

Item 6. Exhibits		7

SIGNATURE		8

Part 1. FINANCIAL INFORMATION

Item 1. Financial Statements

THE PAWS PET COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2013			December 31, 2012
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	4,095		$	81,755
Prepaid expenses		2,800			1,600
Total current assets		6,895			83,355

Property and equipment, at cost		169,136			169,136
Less: accumulated depreciation and amortization		(142,240	)		(116,753	)
Total property and equipment, net		26,896			52,383

Total assets	$	33,791		$	135,738

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts and accrued expenses payable	$	1,779,093		$	1,596,826
Convertible debentures, net of debt discount of $1,424 and $160,067 at June 30, 2013 and December 31, 2012, respectively		664,076			655,433
Litigation accrual, discontinued operations		329,220			87,491
Accounts and accrued expenses payable, discontinued operations		621,697			778,074
Total current liabilities		3,394,086			3,117,824

Non-current liabilities:
Warrant liability		2,317,942			248,368
Total liabilities		5,712,028			3,366,192

Commitments and contingencies

Stockholders’ deficit:
Preferred stock, no par value, 10 million shares authorized:
Series B, 80,000 and 0, respectively, outstanding at June 30, 2013 and December 31, 2012, respectively, (liquidation preference $2,400,000 and $0)		-			-
Series C, 2,740 and 0, respectively, outstanding at June 30, 2013 and December 31, 2012, respectively, (liquidation preference $2,740,000 and $0)		-			-
Series A, none issued and outstanding at June 30, 2013 and December 31, 2012, respectively		-			-
Common stock, no par value, 1.1 billion shares authorized, 87,567,678 and 86,509,928 issued and outstanding at June 30, 2013 and December 31, 2012, respectively		-			-
Additional paid-in capital		15,708,596			11,566,930
Accumulated deficit from inception until discontinuance of operations (January 31, 2012)		(13,954,063	)		(13,918,140	)
Accumulated deficit since inception of development stage (February 1, 2012) to June 30, 2013		(7,432,770	)		(879,244	)
Total stockholders’ deficit		(5,678,237	)		(3,230,454	)
Total liabilities and stockholders’ deficit	$	33,791		$	135,738

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

F-1

THE PAWS PET COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

													For the period from
													inception of
	Three month period ended						Six month period ended						development stage
	June 30,						June 30,						(February 1, 2012) to
	2013			2012			2013			2012			June 30, 2013
Operating expense:
Sales, general and administrative		191,844			1,263,825			368,127			1,525,923			2 ,104,668

Loss from operations		(191,844	)		(1,263,825	)		(368,127	)		(1,525,923	)		(2,104,668	)

Other income (expense):
Interest expense (including $75,962, $138,328, $158,643, $211,484 and $569,975 respectively, of amortization of debt discount)		(96,946	)		(141,479	)		(181,214	)		(219,388	)		(604,324	)
Financing fee		-			-			-			-			(427,073	)
Net (loss) gain on conversion of convertible notes		(2,214,611	)		70,000			(2,214,611	)		70,000			(2,152,950	)
Subsidiary acquisition costs		-			-			(1,720,000	)		-			(1,720,000	)
Impairment of goodwill		-			-			-			(1,035,168	)		(1,035,168	)
Warrant valuation adjustment, net		(1,390,770	)		981,255			(2,069,574	)		1,615,024			613,013
Other income (expense), net		(3,702,327	)		909,776			(6,185,399	)		430,468			(5,326,502	)

Loss before income taxes		(3,894,171	)		(354,049	)		(6,553,526	)		(1,095,455	)		(7,431,170	)
Provision for income taxes		-			(1,600	)		-			(1,600	)		(1,600	)

Loss from continuing operations		(3,894,171	)		(355,649	)		(6,553,526	)		(1,097,055	)		(7,429,570	)

Discontinued operations:
Loss from discontinued operations, net of tax		(35,923	)		-			(35,923	)		(252,079	)		-

Net loss	$	(3,930,094	)	$	(355,649	)	$	(6,589,449	)	$	(1,349,134	)	$	(7,429,570	)

Net loss per share, basic and diluted	$	(0.04	)	$	(0.01	)	$	(0.08	)	$	(0.02	)	$	(0.09	)

Weighted average shares used in calculation of basic and diluted net loss per share		87,540,715			59,372,452			86,698,816			56,367,426			78,294,476

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

F-2

THE PAWS PET COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

							For the period from
							inception of
							development stage
	Six month period ended June 30,						(February 1, 2012) to
	2013			2012			June 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(6,589,449	)	$	(1,349,134	)	$	(7,429,570	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		25,487			35,095			74,160
Equity based compensation		3,296			16,782			28,469
Warrant valuation adjustment, net		2,069,574			(1,615,024	)		(613,013	)
Accelerated amortization of debt discount from conversion of debenture		11,974			56,333			71,054
Amortization of debt discount		146,669			155,151			498,921
Net loss (gain) on conversion of convertible notes		2,214,611			(70,000	)		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		14,059			6,205			20,697
Common shares issued in lieu of cash for services rendered by non-employees		7,200			818,514			825,714
Common shares issued in lieu of cash compensation to employees		-			144,000			144,000
Financing fee		-			-			427,073
Changes in certain assets and liabilities:
Receivable due from credit card clearing house		-			59,418			-
Prepaid expenses		(1,200	)		(2,919	)		(1,263	)
Security deposits and other		-			-			39,689
Accounts payable and accrued expenses		182,267			318,538			543,317
Accounts payable and accrued expenses, discontinued operations		85,352			113,794			-
Net cash used in operating activities		(110,160	)		(219,870	)		(404,425	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		-			-			-
Net cash used in investing activities		-			-			-

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock		32,500			225,000			257,500
Proceeds from issuance of debt		-			75,000			102,500
Net cash provided by financing activities		32,500			300,000			360,000
Net change in cash and cash equivalents		(77,660	)		80,130			(44,425	)
Cash and cash equivalents at beginning of period		81,755			38,256			48,520
Cash and cash equivalents at end of period	$	4,095		$	118,386		$	4,095

Supplementary disclosure of cash flow information
Cash paid during the year for
Income taxes	$	-		$	-		$	-
Interest expense	$	-		$	-		$	-
Non-cash transactions:
Conversion of convertible debentures to 2,283,898 shares of common stock	$	-		$	30,000		$	42,000
Subsidiary acquisition costs	$	1,720,000		$	1,035,168		$	2,755,168
Issuance of Series C shares in exchange for warrants and interest	$	2,415,000		$	-		$	-

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

F-3

1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of The PAWS Pet Company, Inc. (the “Company”), formerly known as Pet Airways, Inc., and its wholly owned subsidiaries Pet Airways, Inc. (“Pet Airways”), Advanced Access Pharmacy Services, LLC (“AAPS”) and Impact Social Networking, Inc.(“ISN”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. In the opinion of the Company’s management, the accompanying condensed consolidation financial statements reflect all adjustments, consisting of normal, recurring adjustments, considered necessary for a fair presentation of the results for the interim periods ended June 30, 2013 and 2012 and for the period from the inception of the development stage (February 1, 2012) to June 30, 2013. Although management believes that the disclosures in these unaudited condensed consolidated financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in financial statements that have been prepared in accordance GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. The results for the six month period ended June 30, 2013 are not necessarily indicative of the results to be expected for the year ending December 31, 2013 and for the period from the inception of the development stage (February 1, 2012) to December 31, 2013. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2012.

Certain prior period amounts have been reclassified or adjusted to conform to the current presentation. These reclassifications and adjustments had no material impact on the consolidated financial position, results of operations and net cash flows from operations for all periods presented.

Going Concern Matters

The accompanying unaudited condensed 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. The Company does not presently have adequate cash from operations or financing activities to meet its long-term financing needs. For the six month period ended June 30, 2013 and the year ended December 31, 2012, the Company had $4,095 and $81,755, respectively, in cash and cash equivalents to use in executing its business plan at June 30, 2013 and December 31, 2012, respectively. As shown in the accompanying consolidated financial statements, the Company incurred a net loss of $6,589,449 for the six months ended June 30, 2013 and a net loss during the development stage from inception (February 1, 2012) through June 30, 2013 of $7,429,570. As a result of these and other factors, the Company’s independent registered public accounting firm has included an explanatory paragraph in their audited consolidated financial statements and footnotes in the Annual Report on Form 10-K for the year ended December 31, 2012 as to the substantial doubt about the Company’s ability to continue as a going concern.

The Company will require additional working capital to continue its operations during the next 12 months and to support its long-term growth strategies. Since the company was unable to meet the conditions permitted to make drawdowns under its financing arrangement with Socius, the Company needs to seek alternative funding required through one or more sources and credit facilities, if available, or through the sale of debt or issuance of additional equity securities. However, there is no assurance that funding of any type would be available to the Company, or that it would be available at rates or other terms and conditions that would be financially acceptable and viable to the Company in the long term. If the Company is unable to raise the necessary additional financing when needed, the Company may be required to stop developing technologies, sell assets or enter into a merger or other combination with a third party, any of which could adversely affect the value of its common stock, or render it worthless. If the Company issues 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 the Company’s common stock, thereby diluting the value of the Company’s common stock.

The Company’s prospects must be considered in light of the risks, expenses and difficulties encountered by companies at an early stage of development, particularly given that the Company has limited financial resources. The Company may not be successful in addressing such risks and difficulties.

Critical Accounting Policies and Estimates

The preparation of the Company’s unaudited condensed consolidated financial statements requires management of the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. The Company based these estimates and assumptions on historical experience and evaluates them on an on-going basis to ensure they remain reasonable under current conditions. Actual results could differ from those estimates. Critical accounting policies and estimates are summarized below.

F-4

Revenue Recognition

The Company recognizes revenue when the earnings process is completed. The Company is not currently generating revenue.

Derivative Liabilities

The Company has 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 includes Accounting Standards Codification (“ASC”) 470-20 “Debt with Conversion and Other Options”. Accordingly, the Company has used the Black-Scholes option-pricing model as its 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 additional paid in capital (“APIC”) with an offset discount to the principal value of the convertible debenture. The Company has used the effective yield interest method for amortizing the discount to interest expense over the maturity term of the convertible debenture. The Company records to interest expense the unamortized discount value associated with a debenture converted in a period.

The Company accounts for certain of its warrants (see Note 2, Equity, Socius CG II, Ltd. Financing) as derivatives under the guidance of ASC 815-10, Accounting for Derivative Instruments and Hedging Activities, and ASC 815-40, Contracts in an Entity’s Own Stock.

Accruals for Contingent Liabilities

The Company makes 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 expenses, costs and awards involving legal settlements. 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 measureable, 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, corresponding entries to earnings may be required.

Equity Based Compensation

The Company applies ASC 718-10 Stock Compensation and ASC 505-50 Equity Based Payments to Non-Employees in accounting for stock options issued to employees and non-employees, respectively. For stock options and warrants issued to non-employees, the Company applies the same standard, which requires the recognition of compensation cost based upon the fair value of stock options and warrant at the grant date using the Black-Scholes option pricing model. The Company’s determination of fair value of share-based payment awards on the date of grant using the option-pricing model is affected by its equity price as well as assumptions regarding its 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, the Company may consider using its historical experience only, its experience plus that of a publicly trade index volatility experience, or a blended volatility experience for public peer companies. The Company also evaluates carefully the expected life term of an award though the vesting of awards to date have been immediate. Finally, the Company attempts to use a risk free rate that is widely quoted and pertinent across a broad range of transactions.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments and other short-term investments with maturity of three months or less, when purchased, to be cash equivalents. The Company maintains cash and cash equivalent balances at financial institutions that are insured by the Federal Deposit Insurance Corporation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

Reservation System and Development Costs

The Company accounts for its reservation system (“website”) and development costs in accordance with ASC 350-50 “Website Development Costs”. All costs incurred in the planning stage are expensed as incurred. Costs incurred in the website application and infrastructure development stage are accounted for in accordance with ASC 350-50, which requires the capitalization of certain costs that meet specific criteria. Costs incurred in the day to day operation of the website are expensed as incurred. Costs associated with the development of the Company’s social media application were expensed in the month when they incurred.

F-5

Fair Value Measurements

The Company has adopted a single definition of fair value, a framework for measuring fair value, and expanded disclosures concerning fair value. In this valuation, the exchange price is the price in an orderly transaction between market participants to sell an asset or transfer a liability at the measurement date and fair value is a market-based measurement and not an entity-specific measurement.

The Company utilizes the following hierarchy in fair value measurements:

	●	Level 1 – Inputs use quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

	●	Level 2 – Inputs use other inputs that are observable, either directly or indirectly. These inputs include quoted prices for similar assets and liabilities in active markets as well as other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

	●	Level 3 – Inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability.

Depreciation, Amortization and Capitalization

The Company records depreciation and amortization, when appropriate, using the straight-line method over the estimated useful life of the assets (three to five years). Expenditures for maintenance and repairs are charged to expense as incurred. Additions, major renewals and replacements that increase the property’s useful life are capitalized. Property sold or retired, together with the related accumulated depreciation is removed from the appropriate accounts and the resultant gain or loss is included in operating income or loss.

Long-Lived Assets

The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of its trademark costs. If and when such factors, events or circumstances indicate possible impairment to its trademark costs, the Company would make an estimate of undiscounted cash flows over the remaining lives of the respective assets in measuring recoverability from future operations. The Company incurred no impairment losses during the periods presented. The Company incurred $1,035,168 and $1,035,168, respectively; of impairment losses for the period from the inception of the development stage (February 1, 2012) to June 30, 2013 and for the six months ended June 30, 2012.

Income Taxes

The Company follows ASC 740, Income Taxes. Deferred tax assets or liabilities are recorded to reflect the future tax consequences of temporary differences between the financial reporting basis of assets and liabilities and their tax basis at each year-end. These amounts are adjusted, as appropriate, to reflect enacted changes in tax rates expected to be in effect when the temporary differences reverse.

The Company records deferred tax assets and liabilities based on the differences between the financial statement and tax bases of assets and liabilities and on operating loss carry forwards using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Recent Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed consolidated financial statements.

2. Business Overview and Organizational History

Business Overview

From inception until January 2012, the Company, through its wholly-owned subsidiary, Pet Airways, operated an airline designed specifically for the comfortable and safe transportation of pets by traveling in the main cabin of the aircraft. Pet owners booked their pets on flights online at the Company’s website or booked with its agents by phone. On the day of the scheduled flight, pet owners dropped off their pets at one of the Company’s facilities located at the departure airport. The Company placed the pet passengers into a pet-friendly carrier and then boarded the carrier into the main cabin of the aircraft. The Company ran a scheduled coast to coast service. By the end of January 2012, the Company suspended flight operations due to low bookings and insufficient funds.

F-6

On February 23, 2012, pursuant to a share exchange agreement the Company acquired the all 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.

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. Pawdoodle was presumed to be 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 discontinued the Pawdoodle application.

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 (the “B Preferred”) to the members of Advanced Access Pharmacy Services, LLC, a Nevada limited liability company (“AAPS”) in exchange for all of the outstanding units of limited liability company membership interests of AAPS. AAPS had neither assets nor liabilities at the time of the exchange and had generated no revenue nor incurred any costs. In connection with this transaction the Company recorded an expense of $1,720,000 based upon the March 9, 2013 fair market value of the B Preferred.

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 June 29, 2013 the Company increased its authorized number of shares of common stock to 1,100,000,000.

Organizational History

The Company was incorporated in the State of Illinois on June 6, 2005 as American Antiquities, Inc. In June 2010, the Company formed Pet Airways by the conversion of successor entity Panther Air Cargo, LLC (“Panther Air”) a limited liability company. Effective the date of the conversion, Panther Air began operating as Pet Airways, Inc. (Florida).

On August 13, 2010, the Company completed a reverse acquisition transaction through a share exchange with Pet Airways (the “Acquisition”), whereby the Company acquired all of the issued and outstanding capital stock of Pet Airways in exchange for 25,000,000 shares of the Company’s common stock, which constituted approximately 73% of its issued and outstanding capital stock on a post-acquisition basis as of and immediately after the consummation of the Acquisition.

Upon completion of the Acquisition, the Company changed its name from American Antiquities, Inc. 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 SEC. OTC QB securities are quoted on OTC Markets Group’s quotation and trading system. On July 27, 2011, the Company filed Articles of Amendment to amend its Articles of Incorporation to change its name to The PAWS Pet Company, Inc.

The share exchange transaction was treated as a reverse acquisition for accounting purposes, with Pet Airways as the acquirer and The PAWS Pet Company, Inc. as the acquired party. Unless the context suggests otherwise, references in this report to business and financial information for periods prior to the consummation of the reverse acquisition, refer 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 Company’s assets and liabilities.

In January 2012, the Company suspended flight operations and ceased airline operations.

On February 23, 2012, pursuant to the Agreement the Company acquired the all of the issued and outstanding capital of 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 care givers. In September the Company closed the social media application and is currently evaluating alternative business strategies.

F-7

On July 13, 2012 the Company increased its authorized number of shares of common stock to 350,000,000. On June 29, 2013 the Company increased its authorized number of shares of common stock to 1,100,000,000.

3. Equity

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.

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

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.

As of June 30, 2013, 80,000 shares of Series B Stock 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.

F-8

Dividends Series C 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 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.

As of June 30, 2013 2,740 shares of Series C Stock 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.

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 June 30, 2013, no shares of Series A Stock were outstanding.

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.

F-9

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^thday 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 June 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.

On December 29, 2011, an additional 458,678 warrants were issued to Socius with an exercise price of $0.20 per share to reflect an anti-dilution adjustment.

On February 23, 2012, an additional 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, an additional 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.

F-10

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.

The value of the derivative warrant liability was $2,317,942 and $248,368 at June 30, 2013 and December 31, 2012, respectively.

Common Stock Issued

On January 26, 2012 the Company issued 45,833 shares of common stock valued, using the closing stock price, at $5,500 as compensation for a license fee to non-employees.

On February 23, 2012 pursuant to the share exchange agreement by which the Company acquired ISN, the Company issued 7,394,056 shares of its common stock, no par value per share. These shares were issued pursuant to the exemption from registration provided under Section 4(2) of the Securities Act.

On February 26, 2012 the Company issued 45,833 shares of common stock valued at $6,417 using the closing stock price of the day, as compensation for a license fee to non-employees.

On March 26, 2012 the Company issued 45,833 shares of common stock valued at $4,583 using the closing stock price of the day, as compensation for a license fee to non-employees

On March 31, 2012 the Company elected to issue 49,354 shares of common stock valued, using the closing stock price of the day, at $4,442 in lieu of cash to satisfy interest payable at March 31, 2012 to the convertible debentures holders.

On April 2, 2012 the Company sold 200,000 shares of common stock for cash consideration of $10,000.

On April 10, 2012 the Company issued 6,170,950 shares of common stock valued at $740,514 using the closing stock price of the day, as compensation for services rendered to employees and non-employees.

On April 20, 2012 the Company issued 1,500,000 shares of common stock valued at $180,000 using the closing stock price of the day, as compensation for services rendered to non-employees.

On April 27, 2012 the Company issued 350,000 shares of common stock valued at $42,000, using the closing stock price of the day, as compensation for services rendered to non-employees.

On April 30, 2012 the Company issued 250,000 shares of common stock following the conversion of $100,000 of a $350,000 14% convertible debenture.

On May 1, 2012 the Company issued 595,836 shares of common stock valued at $41,709 using the closing stock price of the day, as compensation for a license fee to non-employees

On June 7, 2012 the Company sold 1,500,000 shares of common stock for cash consideration of $15,000.

On June 15, 2012 the Company sold 10,000,000 shares of common stock for cash consideration of $100,000.

On June 30, 2012 the Company sold 10,000,000 shares of common stock for cash consideration of $100,000.

On June 30, 2012 the Company elected to issue 44,063 shares of common stock valued, using the closing stock price of the day, at $1,763 in lieu of cash to satisfy interest payable at June 30, 2012 to the convertible debenture holders.

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.

On September 30, 2012 the Company elected to issue 41,545 shares of common stock valued, using the closing stock price of the day, at $228 in lieu of cash to satisfy interest payable at September 30, 2012 to the convertible debenture holders.

On December 31, 2012 the Company elected to issue 41,545 shares of common stock valued at $206 using the closing stock of the day, in lieu of cash to satisfy interest payable at December 31, 2012 to the convertible debenture holders.

On March 31, 2013 the Company elected to issue 40,875 shares of common stock valued at $1,145 using the closing stock of the day, in lieu of cash to satisfy interest payable at March 31, 2013 to the convertible debenture holders.

F-11

On May 10, 2013 the Company reversed issuance of 18,000 shares of common stock valued at $234 previously issued in lieu of issuance of Series C Stock.

On June 30, 2013 the Company elected to issue 34,875 shares of common stock valued at $1,774 using the closing stock of the day, in lieu of cash to satisfy interest payable at June 30, 2013 to the convertible debenture holders.

Preferred Stock Issued

On March 9, 2013 the Company issued 80,000 shares Series B Stock in exchange for all of the shares of AAPS.

On May 10, 2013 the Company issued 2,740 shares Series C Stock in exchange for cash, debenture, interest and warrants issued.

Warrants

On December 29, 2011, an additional 458,678 warrants were issued to Socius with an exercise price of $0.20 per share to reflect an anti-dilution adjustment.

On February 23, 2012,an additional 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, an additional 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 828,089warrants 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.

Stock Incentive Plan

In 2010, the Company adopted its Stock Incentive Plan (the “Plan”). Under the Plan, at June 30, 2013 we had 4,000,000 shares approved and 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 common stock at fair market value at the date of grant.

At June 30, 2013 and December 31, 2012 the Company had 367,000 and 722,000 option shares outstanding, respectively, and 3,633,000 and 3,278,000 available for issuance at June 30, 2013 and December 31, 2012, respectively.

F-12

On February 9, 2012 the Company adopted the 2012 Stock Incentive Plan (the “2012 Plan”). Under the 2012 Plan the Company had 10,000,000 shares and shares underlying stock options approved and reserved for the issuance to employees, officers, directors and outside advisors. At June 30, 2013 the Company had 6,170,950 shares issued under the 2012 Plan and 3,829,050 available for issuance.

4. Debt Obligations

Convertible Debentures

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. 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. Interest on the above debentures is 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 aggregate $525,000 principal amount of 8% convertible debentures elected to convert their debentures into 1,300,000 shares of common stock.

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.

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.

On April 30, 2012, the debenture holder of $350,000 principal amount of 14% convertible debenture elected to convert $100,000 of the debenture into 250,000 shares of common stock.

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.

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.

On May 10, 2013, the Company issued 1,615 shares of Series C Stock in exchange for a $150,000 8% convertible debenture and accrued interest.

At June 30, 2013, an aggregate of $415,500 and $250,000 principal amount 8% and 14% convertible debentures, respectively, were outstanding.

Debt Discount

On February 23, 2012, the Company issued an 8% convertible debenture that was subject to derivative liability accounting. Using the Black-Scholes option pricing model, a fair value of the debenture’s beneficial conversion feature was determined to be $34,397 and has been recorded as debt discount.

On April 25, 2012 the Company issued an 8% convertible debenture that was subject to derivative liability accounting. Using the Black-Scholes option pricing model, the fair value of the debenture’s beneficial conversion feature was determined to be $27,500 and has been recorded as debt discount.

On April 30, 2012 following the conversion of $100,000 principal amount 14% debenture, the Company amortized $56,333 of debt discount to interest expense.

On July 24, 2012 the Company issued an 8% convertible debenture that was subject to derivative liability accounting. Using the Black-Scholes option pricing model, the fair value of the debenture’s beneficial conversion feature was determined to be $27,500 and has been recorded as debt discount.

For the six month periods ended June 30, 2013 and 2012, the Company amortized to interest expense using the effective interest method $158,643 and $73,156 of the debt discount related to the convertible debentures that included $11,974 and $56,333 of accelerated debt discount amortization, respectively, due to converted debenture amounts.

F-13

At June 30, 2013 and December 31, 2012, the aggregate unamortized debt discount was $1,424 and $160,067, respectively. The unamortized debt discount at June 30, 2013 is being amortized to interest expense using the effective interest method through the earlier of the conversion date or the maturity dates of the convertible debentures.

The following table summarizes the principal, unamortized debt discount and equity components of the Company’s convertible debentures derivative liability net carrying amount:

	June 30, 2013			December 31, 2012
Principal amount 8% convertible debenture short term	$	415,500		$	565,500
Principal amount 14% convertible debenture		250,000			250,000
Unamortized debt discount		(1,424	)		(160,067	)
Net carrying amount	$	664,076		$	655,433

Equity component (recognized in Additional paid-in capital)	$	879,528		$	879,528

5. Commitments and Contingencies

The Company leased space for certain of its offices and airport facilities under leases expiring from one month to two years after June 30, 2013. In 2012, the Company abandoned the leased properties but remain still liable for unpaid rent which has been accrued.

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 our subsidiary, Pet Airways, Inc., in Circuit Court in and for Palm Beach County, Florida by Sky Way Enterprises, Inc. in the sum of $180,827 for services rendered, damages, including costs, statutory interest and attorneys’ fees.

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.

On March 6, 2013, an order was issued a 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.

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.

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.

6. Net loss per share

Basic earnings per share are calculated by dividing income available to common stockholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share are computed using the weighted average number of common and dilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of shares issuable upon conversion of preferred shares, exercise of stock options and warrants (calculated using the reverse treasury stock method). As of June 30, 2013 there were warrants and options outstanding to purchase 36.0 million shares, which exercise price averaged $0.68. The dilutive common shares equivalents, including convertible notes, preferred stock, options and warrants, of 405.7 million shares were not included in the computation of diluted earnings per share, because the inclusion would be anti-dilutive.

If all dilutive instruments were exercised using the reverse treasury stock method, then the total number of shares outstanding would be 493.2 million shares.

7. Subsequent Events

On July 5, 2013 the Company issued 200 Series C Stock to an advisor for his services and lack of payment thereto. These shares are convertible into 4 million shares of common stock.

F-14

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statements Regarding Forward-Looking Statements

This Management’s Discussion and Analysis of Financial Condition and Results Of Operation and other parts of this Form 10-Q contain forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this Form 10-Q 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, including those set forth under the caption “Risk Factors” in the Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 28, 2013 and other filings with the SEC. The following should be read in conjunction with our condensed 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 tenth of one percent.

Business Summary

From inception until January 2012, the Company through its wholly-owned subsidiary, Pet Airways operated an airline designed specifically for the comfortable and safe transportation of pets by traveling in the main cabin of the aircraft. Pet owners booked their pets on flights online at the Company’s website, or with its agents by phone. Flights could be booked up to three months before the scheduled departure date. Payment for the flights was made with a credit card. On the day of the scheduled flight, pet owners dropped off their pets at one of the Company’s airport facilities located at the departure airport. The Company’s airport facilities were for the pets delivered for a flight and functions foremost as a staging, inspection, exchange and observation area for the Company’s staff and the pets under its care pending there flight departure or scheduled layover. The Company placed the pet passengers into a pet-friendly carrier and then boarded the carrier into the main cabin of the aircraft. Pet passengers flew in the main cabin of the specially-outfitted aircraft rather than, as is the case for a traditional commercial airline, flying in the cargo bay or flying as carry-on baggage placed under a passenger’s seat. The Company carried domesticated animals. The Company had a pet attendant on each flight that was responsible for monitoring the pet passengers during the flight. Upon arrival at the destination airport, pet passengers were unloaded from the plane directly into one of the Company’s airport facilities for pick up.

The Company did not own its own aircraft. The Company had a relationship with Suburban Air Freight, Inc. based in Omaha, Nebraska which had two Beechcraft 1900 aircraft configured to carry a maximum weight limit of approximately 5,400 lbs. The Company relied on Suburban Air to provide the aircraft, pilot and ensure that the aircraft complied with all appropriate FAA regulations. The Company did not have a written agreement with Suburban Air however under the oral agreement, Suburban Air provided the aircraft, pilot, ensured that the aircraft complied with all appropriate FAA regulations and operated the flights according to the Company’s schedule. The Company flew one aircraft on its coast-to-coast service. The Company has ceased these flight operations.

In February, the Company acquired Impact Social Networking, Inc. (“ISN”), a GA corporation. 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. Following the acquisition, the Company commenced a new strategy of developing technologies for pet owners and pet caregivers.

In September 2012, the Company discontinued the Pawdoodle application.

Outlook

The Company is evaluating alternatives given it has limited financial resources, and continues to face an uncertain economic environment.

Critical Accounting Policies

The preparation of interim financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the amounts of revenue and expenses. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In preparing the interim financial statements, the Company utilized available information, including its past history, industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving appropriate consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of the Company’s results of operations to other companies in its industry. The Company believes that of its significant accounting policies, the following may involve a higher degree of judgment and estimation, or are fundamentally important to its business.

There have been no material changes during the six month period ended June 30, 2013 to the items that the Company disclosed as its critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in its Annual Report on Form 10-K for the year ended December 31, 2012.

Results of Operations

Comparison of the six month periods ended June 30, 2013 and 2012, respectively.

Revenue and Cost of revenue

No revenue or cost of revenue was generated or incurred in the six month periods ended June 30, 2013 or 2012.

Operating expenses

Operating expenses decreased $1.2 million or 75.9%, to $368,000 for the six month period ended June 30, 2013 compared to $1.5 million for the six month period ended June 30, 2012. The operating expense decrease is primarily due reduction of consulting fees, $613,000; reduction of website development expense, $341,000, and reduction of one executive related compensation, $257,000.

Other income (expense), net

Other income (expense), net increased to a net expense of $6.2 million for the six month period ended June 30, 2013 from a net income of $430,000 for the same period in 2012, primarily due to the increased derivative warrant valuation expense, $3.7 million; an increased expense in connection with the purchase of AAPS in March 2013, $1.7 million; an increase of debt conversion losses $2.3 million; offset to a lesser extent by impairment of good will during the six month period ended June 30, 2012, $1.0 million.

Provision for income taxes

We have provided a full valuation allowance on net deferred tax assets as net operating losses are anticipated for the year ended December 31, 2013.

Discontinued operations

We discontinued our airline operations during the first quarter of 2012 and we incurred expenses for the discontinued operations of $252,000 in the six month period ended June 30, 2012 as compared to $36,000 related expense for the same period in 2013.

Net loss

Net loss for the six month period ended June 30, 2013 was $6.6 million or $5.3 million increase in loss as compared to the loss of $1.3 million for the six months ended June 30, 2012. The increase in net loss is primarily due to an increased other income (expense) net of $6.6 million, offset to a lesser extent due to a reduction of operating expenses of $1.2 million.

Comparison of the three month periods ended June 30, 2013 and 2012, respectively.

Revenue and Cost of revenue

No revenue or cost of revenue was generated in the three month periods ended June 30, 2012 or 2013.

Operating expenses

Operating expenses decreased $1.1 million or 84.8%, to $192,000 for the three month period ended June 30, 2013 compared to $1.3 million for the three month period ended June 30, 2012. The operating expense decrease is primarily due reduction of consulting fees, $483,000; reduction of website development expense, $295,000; and reduction of one executive related compensation, $199,000.

Other income (expense), net

Other income (expense), net increased to a net expense of $5.4 million for the three month period ended June 30, 2013 from a net income of $910,000 for the same period in 2012, primarily due to the increased derivative warrant valuation expense, $2.4 million; an increased expense in connection with the purchase of AAPS in March 2013, $1.7 million and an increase of debt conversion losses, $2.3 million.

Provision for income taxes

We have provided a full valuation allowance on its net deferred tax assets as net operating losses are anticipated for the year ended December 31, 2013.

Discontinued operations

We discontinued our airline operations during the first quarter of 2012 and we incurred expenses for the discontinued operations of $252,000 in the three month period ended June 30, 2012 as compared to $36,000 related expense for the same period in 2013.

Net Loss

Net loss for the three month period ended June 30, 2013 was $3.9 million or $3.6 million increase in loss as compared to the loss of $356,000 for the three months ended June 30, 2012. The increase in net loss is primarily due to an increased other income (expense) net of $2.8 million, offset to a lesser extent due to a reduction of operating expenses of $1.1 million.

Liquidity and Capital Resources

At June 30, 2013, we had $4,000 in cash and cash equivalents as compared to $82,000 in cash and cash equivalents at December 31, 2012.

Net cash used in operating activities was $110,000 and $220,000 for the six month periods ended June 30, 2013 and 2012, respectively. The cash used in the 2013 period is primarily due to the net loss, offset by the increase of accrued expenses and the non-cash charges from the derivative valuation expense, expense for conversion of debenture and subsidiary acquisition costs.

There was no cash used in investing activities during the six month periods ended June 30, 2013 and 2012, respectively.

Net cash provided by financing activities was $33,000 and $300,000 during the six month periods ended June 30, 2013 and 2012, respectively reflecting the sale of 325 Series C Stock in May 2013 and sale of common stock and issuance of convertible debenture during the six months ended June 30, 2012.

We did not have any material non-cancelable purchase commitments for capital expenditures or contingencies out of the ordinary course of business accrued at June 30, 2013.

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. Financing transactions, if any, may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. Even if the Company is able to raise the funds required, it is possible that it could incur unexpected costs and expenses, fail to generate sufficient revenue, or experience unexpected cash requirements that would force the Company to seek alternative financing. Further, if the Company issues additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of the Company’s common stock. If additional financing is not available or is not available on acceptable terms, the Company may have to significantly curtail or suspend its operations.

Effective May 10, 2013, The PAWS Pet Company Inc. (“PAWS”) entered into (i) Settlement Agreements with Bellevue Holdings, Inc and Fantasy Funding, Inc; (ii) a Securities Exchange Agreement with Bellevue Holdings, Inc. and (iii) Securities Exchange Agreements with Fantasy Funding, Inc. and Destiny Diversification Holdings Corp., whereby the parties exchanged PAWS convertible notes and common stock purchase warrants for an aggregate of 2,415 shares of PAWS Series C preferred stock (the “Series C Stock”).

Each share of Series C Stock is convertible into 20,000 shares of PAWS common stock, with a conversion ratio of $0.005. All the 2,415 shares of Series C Stock issued in the foregoing exchange are convertible into a total of 48,300,000 shares of PAWS common stock. The exchanges were effective pursuant to the exemption from registration under Section 3 (a) (9) of the Securities Act of 1933, as amended (the “Securities Act”).

On May 10, 2013 PAWS also entered into an agreement to sell 325 shares of Series C Stock to Destiny Diversification Holdings Corp for a cash payment of $25,000 and an additional payment in June 2013 of $7,500. The 325 shares of Series C Stock issued in that transaction are convertible into a total of 6,500,000 shares of PAWS common stock. The foregoing transaction was effective pursuant to the exemption from registration under Section 4 (a) (2) of the Securities Act and Rule 506 of Regulation D thereunder.

Non-Cash Expense Items

During the three month period ended June 30, 2013, the Company continued to minimize cash usage and seek additional equity financings for working capital purposes while using equity for the settlement of services rendered in lieu of cash and general corporate purposes. The Company also issued shares of common stock in lieu of cash for interest payments on debentures. A significant portion of the equity issuances resulted in non-cash settlements of liabilities that are included in the net loss for the three month period ended June 30, 2013. Additionally, other transactions and events occurred in which significant non-cash expense arose due to the nature of those occurrences, as can be further reviewed in our condensed consolidated statement of cash flows.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Acting 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 June 30, 2013 our disclosure controls and procedures were not effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. As reported in our Annual Report on Form 10-K for the year ended December 31, 2012, our management has identified certain material weaknesses in our internal control over financial reporting.

Our management, in consultation with our independent registered public accounting firm, concluded that material weaknesses existed in the following areas as of June 30, 2013:

(1) we do not employ full time 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.

Due to the material weaknesses that management identified, it was unable to conclude that our disclosure controls and procedures were effective as of June 30, 2013.

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 ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

In the three months ended June 30, 2010 we issued a total of 2,740 Series C Shares. The securities were issued in transactions that were exempt from the registration requirements of the Securities Act pursuant to Section 4(2) of the Securities Act, which exempts transactions by an issuer not involving a public offering.

Item 6. Exhibits

Exhibit No.		Description

31.1*		Certification of Chief Executive Officer and Acting Chief Financial Officer pursuant to Section 302, of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Chief Executive Officer and Acting Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

* Filed Herewith.

SIGNATURE

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: August 12, 2013

	THE PAWS PET COMPANY, INC.

	/s/ Dan Wiesel
	Dan Wiesel
	Chief Executive Officer

EX-31.1 2 ex31-1.htm EX-31.1 Exhibit 31.1

Exhibit 31.1

SECTION 302 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECURITIES EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dan Wiesel, Chief Executive Officer and Acting Chief Financial Officer, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of The PAWS Pet Company, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: August 12, 2013

/s/ Dan Wiesel
Dan Wiesel
Chief Executive Officer and Acting Chief Financial Officer

EX-32.1 3 ex32-1.htm EX-32.1 Exhibit 32.1

Exhibit 32.1

THE PAWS PET COMPANY, INC.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of The PAWS Pet Company, Inc. (the “Company”) for the period ended June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dan Wiesel, the Chief Executive Officer and Acting Chief Financial Officer of the Company, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that, to my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)	The information contained in this Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

IN WITNESS WHEREOF, I have executed this certificate as of this 12th day of August, 2013.

/s/ Dan Wiesel
Dan Wiesel
Chief Executive Officer and Acting Chief Financial Officer

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Revenue Recognition   The Company recognizes revenue when the earnings process is completed. The Company is not currently generating revenue.

Derivative Liabilities   The Company has 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 includes Accounting Standards Codification (ASC) 470-20 Debt with Conversion and Other Options. Accordingly, the Company has used the Black-Scholes option-pricing model as its 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 additional paid in capital (APIC) with an offset discount to the principal value of the convertible debenture. The Company has used the effective yield interest method for amortizing the discount to interest expense over the maturity term of the convertible debenture. The Company records to interest expense the unamortized discount value associated with a debenture converted in a period.   The Company accounts for certain of its warrants (see Note 2, Equity, Socius CG II, Ltd. Financing) as derivatives under the guidance of ASC 815-10, Accounting for Derivative Instruments and Hedging Activities, and ASC 815-40, Contracts in an Entitys Own Stock.

Equity Based Compensation   The Company applies ASC 718-10 Stock Compensation and ASC 505-50 Equity Based Payments to Non-Employees in accounting for stock options issued to employees and non-employees, respectively. For stock options and warrants issued to non-employees, the Company applies the same standard, which requires the recognition of compensation cost based upon the fair value of stock options and warrant at the grant date using the Black-Scholes option pricing model. The Companys determination of fair value of share-based payment awards on the date of grant using the option-pricing model is affected by its equity price as well as assumptions regarding its 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, the Company may consider using its historical experience only, its experience plus that of a publicly trade index volatility experience, or a blended volatility experience for public peer companies. The Company also evaluates carefully the expected life term of an award though the vesting of awards to date have been immediate. Finally, the Company attempts to use a risk free rate that is widely quoted and pertinent across a broad range of transactions.

Cash and Cash Equivalents   The Company considers all highly liquid debt instruments and other short-term investments with maturity of three months or less, when purchased, to be cash equivalents. The Company maintains cash and cash equivalent balances at financial institutions that are insured by the Federal Deposit Insurance Corporation.

Use of Estimates   The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

Reservation System and Development Costs   The Company accounts for its reservation system (website) and development costs in accordance with ASC 350-50 Website Development Costs. All costs incurred in the planning stage are expensed as incurred. Costs incurred in the website application and infrastructure development stage are accounted for in accordance with ASC 350-50, which requires the capitalization of certain costs that meet specific criteria. Costs incurred in the day to day operation of the website are expensed as incurred. Costs associated with the development of the Companys social media application were expensed in the month when they incurred.

Fair Value Measurements   The Company has adopted a single definition of fair value, a framework for measuring fair value, and expanded disclosures concerning fair value. In this valuation, the exchange price is the price in an orderly transaction between market participants to sell an asset or transfer a liability at the measurement date and fair value is a market-based measurement and not an entity-specific measurement.   The Company utilizes the following hierarchy in fair value measurements:   <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 24px; text-align: justify"> </td> <td style="width: 24px; text-align: justify">●</td> <td style="text-align: justify">Level 1 Inputs use quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.</td></tr> <tr style="vertical-align: top"> <td style="text-align: justify"> </td> <td style="text-align: justify"> </td> <td style="text-align: justify"> </td></tr> <tr style="vertical-align: top"> <td style="text-align: justify"> </td> <td style="text-align: justify">●</td> <td style="text-align: justify">Level 2 Inputs use other inputs that are observable, either directly or indirectly. These inputs include quoted prices for similar assets and liabilities in active markets as well as other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.</td></tr> <tr style="vertical-align: top"> <td style="text-align: justify"> </td> <td style="text-align: justify"> </td> <td style="text-align: justify"> </td></tr> <tr style="vertical-align: top"> <td style="text-align: justify"> </td> <td style="text-align: justify">●</td> <td style="text-align: justify">Level 3 Inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability.</td></tr> </table>

Income Taxes   The Company follows ASC 740, Income Taxes. Deferred tax assets or liabilities are recorded to reflect the future tax consequences of temporary differences between the financial reporting basis of assets and liabilities and their tax basis at each year-end. These amounts are adjusted, as appropriate, to reflect enacted changes in tax rates expected to be in effect when the temporary differences reverse.   The Company records deferred tax assets and liabilities based on the differences between the financial statement and tax bases of assets and liabilities and on operating loss carry forwards using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Recent Accounting Pronouncements   Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed consolidated financial statements.

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Going Concern Matters   The accompanying unaudited condensed 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. The Company does not presently have adequate cash from operations or financing activities to meet its long-term financing needs. For the six month period ended June 30, 2013 and the year ended December 31, 2012, the Company had $4,095 and $81,755, respectively, in cash and cash equivalents to use in executing its business plan at June 30, 2013 and December 31, 2012, respectively. As shown in the accompanying consolidated financial statements, the Company incurred a net loss of $6,589,449 for the six months ended June 30, 2013 and a net loss during the development stage from inception (February 1, 2012) through June 30, 2013 of $7,429,570. As a result of these and other factors, the Companys independent registered public accounting firm has included an explanatory paragraph in their audited consolidated financial statements and footnotes in the Annual Report on Form 10-K for the year ended December 31, 2012 as to the substantial doubt about the Companys ability to continue as a going concern.   The Company will require additional working capital to continue its operations during the next 12 months and to support its long-term growth strategies. Since the company was unable to meet the conditions permitted to make drawdowns under its financing arrangement with Socius, the Company needs to seek alternative funding required through one or more sources and credit facilities, if available, or through the sale of debt or issuance of additional equity securities. However, there is no assurance that funding of any type would be available to the Company, or that it would be available at rates or other terms and conditions that would be financially acceptable and viable to the Company in the long term. If the Company is unable to raise the necessary additional financing when needed, the Company may be required to stop developing technologies, sell assets or enter into a merger or other combination with a third party, any of which could adversely affect the value of its common stock, or render it worthless. If the Company issues 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 the Companys common stock, thereby diluting the value of the Companys common stock.   The Companys prospects must be considered in light of the risks, expenses and difficulties encountered by companies at an early stage of development, particularly given that the Company has limited financial resources. The Company may not be successful in addressing such risks and difficulties.

Basis of Presentation   The accompanying unaudited condensed consolidated financial statements of The PAWS Pet Company, Inc. (the Company), formerly known as Pet Airways, Inc., and its wholly owned subsidiaries Pet Airways, Inc. (Pet Airways), Advanced Access Pharmacy Services, LLC (AAPS) and Impact Social Networking, Inc.(ISN) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the SEC) for interim financial information. In the opinion of the Companys management, the accompanying condensed consolidation financial statements reflect all adjustments, consisting of normal, recurring adjustments, considered necessary for a fair presentation of the results for the interim periods ended June 30, 2013 and 2012 and for the period from the inception of the development stage (February 1, 2012) to June 30, 2013. Although management believes that the disclosures in these unaudited condensed consolidated financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in financial statements that have been prepared in accordance GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. The results for the six month period ended June 30, 2013 are not necessarily indicative of the results to be expected for the year ending December 31, 2013 and for the period from the inception of the development stage (February 1, 2012) to December 31, 2013. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2012.   Certain prior period amounts have been reclassified or adjusted to conform to the current presentation. These reclassifications and adjustments had no material impact on the consolidated financial position, results of operations and net cash flows from operations for all periods presented.

Critical Accounting Policies and Estimates   The preparation of the Companys unaudited condensed consolidated financial statements requires management of the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. The Company based these estimates and assumptions on historical experience and evaluates them on an on-going basis to ensure they remain reasonable under current conditions. Actual results could differ from those estimates. Critical accounting policies and estimates are summarized below. Accruals for Contingent Liabilities   The Company makes 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 expenses, costs and awards involving legal settlements. 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 measureable, of these occurrences and charges them to expense in the appropriate periods. If the ultimate resolution of any event is different than managements estimate caused by a change in facts or material operating assumptions, corresponding entries to earnings may be required.

Long-Lived Assets   The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of its trademark costs. If and when such factors, events or circumstances indicate possible impairment to its trademark costs, the Company would make an estimate of undiscounted cash flows over the remaining lives of the respective assets in measuring recoverability from future operations. The Company incurred no impairment losses during the periods presented. The Company incurred $1,035,168 and $1,035,168, respectively; of impairment losses for the period from the inception of the development stage (February 1, 2012) to June 30, 2013 and for the six months ended June 30, 2012.

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2. Business Overview and Organizational History   Business Overview   From inception until January 2012, the Company, through its wholly-owned subsidiary, Pet Airways, operated an airline designed specifically for the comfortable and safe transportation of pets by traveling in the main cabin of the aircraft. Pet owners booked their pets on flights online at the Companys website or booked with its agents by phone. On the day of the scheduled flight, pet owners dropped off their pets at one of the Companys facilities located at the departure airport. The Company placed the pet passengers into a pet-friendly carrier and then boarded the carrier into the main cabin of the aircraft. The Company ran a scheduled coast to coast service. By the end of January 2012, the Company suspended flight operations due to low bookings and insufficient funds.   On February 23, 2012, pursuant to a share exchange agreement the Company acquired the all 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 Companys 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.   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. Pawdoodle was presumed to be 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 discontinued the Pawdoodle application.   On March 9, 2013 the Company entered into a Securities Exchange Agreement whereby the Company issued 80,000 shares of the Companys Series B Convertible Preferred Stock (the B Preferred) to the members of Advanced Access Pharmacy Services, LLC, a Nevada limited liability company (AAPS) in exchange for all of the outstanding units of limited liability company membership interests of AAPS. AAPS had neither assets nor liabilities at the time of the exchange and had generated no revenue nor incurred any costs. In connection with this transaction the Company recorded an expense of $1,720,000 based upon the March 9, 2013 fair market value of the B Preferred.   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 June 29, 2013 the Company increased its authorized number of shares of common stock to 1,100,000,000.   Organizational History   The Company was incorporated in the State of Illinois on June 6, 2005 as American Antiquities, Inc. In June 2010, the Company formed Pet Airways by the conversion of successor entity Panther Air Cargo, LLC (Panther Air) a limited liability company. Effective the date of the conversion, Panther Air began operating as Pet Airways, Inc. (Florida).   On August 13, 2010, the Company completed a reverse acquisition transaction through a share exchange with Pet Airways (the Acquisition), whereby the Company acquired all of the issued and outstanding capital stock of Pet Airways in exchange for 25,000,000 shares of the Companys common stock, which constituted approximately 73% of its issued and outstanding capital stock on a post-acquisition basis as of and immediately after the consummation of the Acquisition.   Upon completion of the Acquisition, the Company changed its name from American Antiquities, Inc. 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 SEC. OTC QB securities are quoted on OTC Markets Groups quotation and trading system. On July 27, 2011, the Company filed Articles of Amendment to amend its Articles of Incorporation to change its name to The PAWS Pet Company, Inc.   The share exchange transaction was treated as a reverse acquisition for accounting purposes, with Pet Airways as the acquirer and The PAWS Pet Company, Inc. as the acquired party. Unless the context suggests otherwise, references in this report to business and financial information for periods prior to the consummation of the reverse acquisition, refer 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 Companys assets and liabilities.   In January 2012, the Company suspended flight operations and ceased airline operations.   On February 23, 2012, pursuant to the Agreement the Company acquired the all of the issued and outstanding capital of ISN, a Georgia corporation in exchange for 7,394,056 shares of the Companys 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 care givers. In September the Company closed the social media application and is currently evaluating alternative business strategies.   On July 13, 2012 the Company increased its authorized number of shares of common stock to 350,000,000. On June 29, 2013 the Company increased its authorized number of shares of common stock to 1,100,000,000

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3. Equity   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.   Right of Conversion Any Holder of Series B Stock shall have the right to convert any or all of the Holders 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   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.   As of June 30, 2013, 80,000 shares of Series B Stock 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 Holders 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.   Dividends Series C 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 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.   As of June 30, 2013 2,740 shares of Series C Stock 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.   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 Companys Board of Directors designated 1,200,000 shares as Series A Stock. As of June 30, 2013, no shares of Series A Stock were outstanding.   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 Companys sole discretion, the Company may submit to Socius a tranche notice to purchase a certain dollar amount of the Companys 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 75thday 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 June 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.   On December 29, 2011, an additional 458,678 warrants were issued to Socius with an exercise price of $0.20 per share to reflect an anti-dilution adjustment.   On February 23, 2012, an additional 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, an additional 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.   The value of the derivative warrant liability was $2,317,942 and $248,368 at June 30, 2013 and December 31, 2012, respectively.   Common Stock Issued   On January 26, 2012 the Company issued 45,833 shares of common stock valued, using the closing stock price, at $5,500 as compensation for a license fee to non-employees.   On February 23, 2012 pursuant to the share exchange agreement by which the Company acquired ISN, the Company issued 7,394,056 shares of its common stock, no par value per share. These shares were issued pursuant to the exemption from registration provided under Section 4(2) of the Securities Act.   On February 26, 2012 the Company issued 45,833 shares of common stock valued at $6,417 using the closing stock price of the day, as compensation for a license fee to non-employees.   On March 26, 2012 the Company issued 45,833 shares of common stock valued at $4,583 using the closing stock price of the day, as compensation for a license fee to non-employees   On March 31, 2012 the Company elected to issue 49,354 shares of common stock valued, using the closing stock price of the day, at $4,442 in lieu of cash to satisfy interest payable at March 31, 2012 to the convertible debentures holders.   On April 2, 2012 the Company sold 200,000 shares of common stock for cash consideration of $10,000.   On April 10, 2012 the Company issued 6,170,950 shares of common stock valued at $740,514 using the closing stock price of the day, as compensation for services rendered to employees and non-employees.   On April 20, 2012 the Company issued 1,500,000 shares of common stock valued at $180,000 using the closing stock price of the day, as compensation for services rendered to non-employees.   On April 27, 2012 the Company issued 350,000 shares of common stock valued at $42,000, using the closing stock price of the day, as compensation for services rendered to non-employees.   On April 30, 2012 the Company issued 250,000 shares of common stock following the conversion of $100,000 of a $350,000 14% convertible debenture.   On May 1, 2012 the Company issued 595,836 shares of common stock valued at $41,709 using the closing stock price of the day, as compensation for a license fee to non-employees   On June 7, 2012 the Company sold 1,500,000 shares of common stock for cash consideration of $15,000.   On June 15, 2012 the Company sold 10,000,000 shares of common stock for cash consideration of $100,000.   On June 30, 2012 the Company sold 10,000,000 shares of common stock for cash consideration of $100,000.   On June 30, 2012 the Company elected to issue 44,063 shares of common stock valued, using the closing stock price of the day, at $1,763 in lieu of cash to satisfy interest payable at June 30, 2012 to the convertible debenture holders.   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.   On September 30, 2012 the Company elected to issue 41,545 shares of common stock valued, using the closing stock price of the day, at $228 in lieu of cash to satisfy interest payable at September 30, 2012 to the convertible debenture holders.   On December 31, 2012 the Company elected to issue 41,545 shares of common stock valued at $206 using the closing stock of the day, in lieu of cash to satisfy interest payable at December 31, 2012 to the convertible debenture holders.   On March 31, 2013 the Company elected to issue 40,875 shares of common stock valued at $1,145 using the closing stock of the day, in lieu of cash to satisfy interest payable at March 31, 2013 to the convertible debenture holders.   On May 10, 2013 the Company reversed issuance of 18,000 shares of common stock valued at $234 previously issued in lieu of issuance of Series C Stock.   On June 30, 2013 the Company elected to issue 34,875 shares of common stock valued at $1,774 using the closing stock of the day, in lieu of cash to satisfy interest payable at June 30, 2013 to the convertible debenture holders.   Preferred Stock Issued   On March 9, 2013 the Company issued 80,000 shares Series B Stock in exchange for all of the shares of AAPS.   On May 10, 2013 the Company issued 2,740 shares Series C Stock in exchange for cash, debenture, interest and warrants issued.   Warrants   On December 29, 2011, an additional 458,678 warrants were issued to Socius with an exercise price of $0.20 per share to reflect an anti-dilution adjustment.   On February 23, 2012,an additional 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, an additional 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 828,089warrants 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.   Stock Incentive Plan   In 2010, the Company adopted its Stock Incentive Plan (the Plan). Under the Plan, at June 30, 2013 we had 4,000,000 shares approved and 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 common stock at fair market value at the date of grant.   At June 30, 2013 and December 31, 2012 the Company had 367,000 and 722,000 option shares outstanding, respectively, and 3,633,000 and 3,278,000 available for issuance at June 30, 2013 and December 31, 2012, respectively.   On February 9, 2012 the Company adopted the 2012 Stock Incentive Plan (the 2012 Plan). Under the 2012 Plan the Company had 10,000,000 shares and shares underlying stock options approved and reserved for the issuance to employees, officers, directors and outside advisors. At June 30, 2013 the Company had 6,170,950 shares issued under the 2012 Plan and 3,829,050 available for issuance.

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3278000

3829050

4. Debt Obligations   Convertible Debentures   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 Companys stock at a conversion price of $0.50 per share. 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 Companys stock at a conversion price of $0.40 per share. Interest on the above debentures is payable quarterly. At the Companys option, interest due may be settled in cash or shares of Company common stock.   In January 2011, the debenture holders of aggregate $525,000 principal amount of 8% convertible debentures elected to convert their debentures into 1,300,000 shares of common stock.   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.   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.   On April 30, 2012, the debenture holder of $350,000 principal amount of 14% convertible debenture elected to convert $100,000 of the debenture into 250,000 shares of common stock.   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.   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.   On May 10, 2013, the Company issued 1,615 shares of Series C Stock in exchange for a $150,000 8% convertible debenture and accrued interest.   At June 30, 2013, an aggregate of $415,500 and $250,000 principal amount 8% and 14% convertible debentures, respectively, were outstanding.   Debt Discount   On February 23, 2012, the Company issued an 8% convertible debenture that was subject to derivative liability accounting. Using the Black-Scholes option pricing model, a fair value of the debentures beneficial conversion feature was determined to be $34,397 and has been recorded as debt discount.   On April 25, 2012 the Company issued an 8% convertible debenture that was subject to derivative liability accounting. Using the Black-Scholes option pricing model, the fair value of the debentures beneficial conversion feature was determined to be $27,500 and has been recorded as debt discount.   On April 30, 2012 following the conversion of $100,000 principal amount 14% debenture, the Company amortized $56,333 of debt discount to interest expense.   On July 24, 2012 the Company issued an 8% convertible debenture that was subject to derivative liability accounting. Using the Black-Scholes option pricing model, the fair value of the debentures beneficial conversion feature was determined to be $27,500 and has been recorded as debt discount.   For the six month periods ended June 30, 2013 and 2012, the Company amortized to interest expense using the effective interest method $158,643 and $73,156 of the debt discount related to the convertible debentures that included $11,974 and $56,333 of accelerated debt discount amortization, respectively, due to converted debenture amounts.   At June 30, 2013 and December 31, 2012, the aggregate unamortized debt discount was $1,424 and $160,067, respectively. The unamortized debt discount at June 30, 2013 is being amortized to interest expense using the effective interest method through the earlier of the conversion date or the maturity dates of the convertible debentures.   The following table summarizes the principal, unamortized debt discount and equity components of the Companys convertible debentures derivative liability net carrying amount:   <table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="text-align: center; line-height: 115%"> </td> <td style="text-align: center; line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%">June 30, 2013</td> <td style="text-align: center; line-height: 115%"> </td> <td style="text-align: center; line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%">December 31, 2012</td> <td style="text-align: center; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 62%; text-align: justify; line-height: 115%">Principal amount 8% convertible debenture short term</td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%">$</td> <td style="width: 16%; text-align: right; line-height: 115%">415,500</td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%">$</td> <td style="width: 16%; text-align: right; line-height: 115%">565,500</td> <td style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify; line-height: 115%">Principal amount 14% convertible debenture</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%">250,000</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%">250,000</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: justify; line-height: 115%">Unamortized debt discount</td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%">(1,424</td> <td style="line-height: 115%">)</td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%">(160,067</td> <td style="line-height: 115%">)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt; text-align: justify; line-height: 115%">Net carrying amount</td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">664,076</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">655,433</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify; line-height: 115%">Equity component (recognized in Additional paid-in capital)</td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">879,528</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">879,528</td> <td style="line-height: 115%"> </td></tr> </table>

The following table summarizes the principal, unamortized debt discount and equity components of the Companys convertible debentures derivative liability net carrying amount:   <table cellspacing="0" cellpadding="0" style="font: 10pt Calibri, Helvetica, Sans-Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="text-align: center; line-height: 115%"> </td> <td style="text-align: center; line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%">June 30, 2013</td> <td style="text-align: center; line-height: 115%"> </td> <td style="text-align: center; line-height: 115%"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; line-height: 115%">December 31, 2012</td> <td style="text-align: center; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 62%; text-align: justify; line-height: 115%">Principal amount 8% convertible debenture short term</td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%">$</td> <td style="width: 16%; text-align: right; line-height: 115%">415,500</td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%"> </td> <td style="width: 1%; line-height: 115%">$</td> <td style="width: 16%; text-align: right; line-height: 115%">565,500</td> <td style="width: 1%; line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify; line-height: 115%">Principal amount 14% convertible debenture</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%">250,000</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%">250,000</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: justify; line-height: 115%">Unamortized debt discount</td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%">(1,424</td> <td style="line-height: 115%">)</td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right; line-height: 115%">(160,067</td> <td style="line-height: 115%">)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-left: 10pt; text-align: justify; line-height: 115%">Net carrying amount</td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">664,076</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">655,433</td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="text-align: right; line-height: 115%"> </td> <td style="line-height: 115%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-align: justify; line-height: 115%">Equity component (recognized in Additional paid-in capital)</td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">879,528</td> <td style="line-height: 115%"> </td> <td style="line-height: 115%"> </td> <td style="border-bottom: black 2.25pt double; line-height: 115%">$</td> <td style="border-bottom: black 2.25pt double; text-align: right; line-height: 115%">879,528</td> <td style="line-height: 115%"> </td></tr> </table>

500000

0.50

0.40

2013-01-18

2012-11-29

2013-04-19

2013-08-31

1424

160067

34397

27500

415500

250000

879528

5. Commitments and Contingencies   The Company leased space for certain of its offices and airport facilities under leases expiring from one month to two years after June 30, 2013. In 2012, the Company abandoned the leased properties but remain still liable for unpaid rent which has been accrued.   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 Companys 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 our subsidiary, Pet Airways, Inc., in Circuit Court in and for Palm Beach County, Florida by Sky Way Enterprises, Inc. in the sum of $180,827 for services rendered, damages, including costs, statutory interest and attorneys fees.   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.   On March 6, 2013, an order was issued a 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.   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.   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.

10000

6. Net loss per share   Basic earnings per share are calculated by dividing income available to common stockholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share are computed using the weighted average number of common and dilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of shares issuable upon conversion of preferred shares, exercise of stock options and warrants (calculated using the reverse treasury stock method). As of June 30, 2013 there were warrants and options outstanding to purchase 36.0 million shares, which exercise price averaged $0.68. The dilutive common shares equivalents, including convertible notes, preferred stock, options and warrants, of 405.7 million shares were not included in the computation of diluted earnings per share, because the inclusion would be anti-dilutive.   If all dilutive instruments were exercised using the reverse treasury stock method, then the total number of shares outstanding would be 493.2 million shares.

7. Subsequent Events   On July 5, 2013 the Company issued 200 Series C Stock to an advisor for his services and lack of payment thereto. These shares are convertible into 4 million shares of common stock.

10000

34875

200000

1500000

10000000

10000

15000

100000

26896

52383

142240

116753

169136

6895

83355

2800

1600

33791

135738

5712028

3366192

2317942

248368

3394086

3117824

621697 778074 329220 87491

1779093

1596826

-5678237

-3230454

7432770

879244

-13954063

-13918140

33791

135738

10000000

11974

56333

71054

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

100

367000

722000

180827 87491 17611 31120 2013-06-30

1720000

-1720000

4000000

1. Summary of Significant Accounting Policies   Basis of Presentation   The accompanying unaudited condensed consolidated financial statements of The PAWS Pet Company, Inc. (the Company), formerly known as Pet Airways, Inc., and its wholly owned subsidiaries Pet Airways, Inc. (Pet Airways), Advanced Access Pharmacy Services, LLC (AAPS) and Impact Social Networking, Inc.(ISN) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the SEC) for interim financial information. In the opinion of the Companys management, the accompanying condensed consolidation financial statements reflect all adjustments, consisting of normal, recurring adjustments, considered necessary for a fair presentation of the results for the interim periods ended June 30, 2013 and 2012 and for the period from the inception of the development stage (February 1, 2012) to June 30, 2013. Although management believes that the disclosures in these unaudited condensed consolidated financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in financial statements that have been prepared in accordance GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC. The results for the six month period ended June 30, 2013 are not necessarily indicative of the results to be expected for the year ending December 31, 2013 and for the period from the inception of the development stage (February 1, 2012) to December 31, 2013. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2012.   Certain prior period amounts have been reclassified or adjusted to conform to the current presentation. These reclassifications and adjustments had no material impact on the consolidated financial position, results of operations and net cash flows from operations for all periods presented.   Going Concern Matters   The accompanying unaudited condensed 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. The Company does not presently have adequate cash from operations or financing activities to meet its long-term financing needs. For the six month period ended June 30, 2013 and the year ended December 31, 2012, the Company had $4,095 and $81,755, respectively, in cash and cash equivalents to use in executing its business plan at June 30, 2013 and December 31, 2012, respectively. As shown in the accompanying consolidated financial statements, the Company incurred a net loss of $6,589,449 for the six months ended June 30, 2013 and a net loss during the development stage from inception (February 1, 2012) through June 30, 2013 of $7,429,570. As a result of these and other factors, the Companys independent registered public accounting firm has included an explanatory paragraph in their audited consolidated financial statements and footnotes in the Annual Report on Form 10-K for the year ended December 31, 2012 as to the substantial doubt about the Companys ability to continue as a going concern.   The Company will require additional working capital to continue its operations during the next 12 months and to support its long-term growth strategies. Since the company was unable to meet the conditions permitted to make drawdowns under its financing arrangement with Socius, the Company needs to seek alternative funding required through one or more sources and credit facilities, if available, or through the sale of debt or issuance of additional equity securities. However, there is no assurance that funding of any type would be available to the Company, or that it would be available at rates or other terms and conditions that would be financially acceptable and viable to the Company in the long term. If the Company is unable to raise the necessary additional financing when needed, the Company may be required to stop developing technologies, sell assets or enter into a merger or other combination with a third party, any of which could adversely affect the value of its common stock, or render it worthless. If the Company issues 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 the Companys common stock, thereby diluting the value of the Companys common stock.   The Companys prospects must be considered in light of the risks, expenses and difficulties encountered by companies at an early stage of development, particularly given that the Company has limited financial resources. The Company may not be successful in addressing such risks and difficulties.   Critical Accounting Policies and Estimates   The preparation of the Companys unaudited condensed consolidated financial statements requires management of the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. The Company based these estimates and assumptions on historical experience and evaluates them on an on-going basis to ensure they remain reasonable under current conditions. Actual results could differ from those estimates. Critical accounting policies and estimates are summarized below.   Revenue Recognition   The Company recognizes revenue when the earnings process is completed. The Company is not currently generating revenue.   Derivative Liabilities   The Company has 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 includes Accounting Standards Codification (ASC) 470-20 Debt with Conversion and Other Options. Accordingly, the Company has used the Black-Scholes option-pricing model as its 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 additional paid in capital (APIC) with an offset discount to the principal value of the convertible debenture. The Company has used the effective yield interest method for amortizing the discount to interest expense over the maturity term of the convertible debenture. The Company records to interest expense the unamortized discount value associated with a debenture converted in a period.   The Company accounts for certain of its warrants (see Note 2, Equity, Socius CG II, Ltd. Financing) as derivatives under the guidance of ASC 815-10, Accounting for Derivative Instruments and Hedging Activities, and ASC 815-40, Contracts in an Entitys Own Stock.   Accruals for Contingent Liabilities   The Company makes 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 expenses, costs and awards involving legal settlements. 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 measureable, of these occurrences and charges them to expense in the appropriate periods. If the ultimate resolution of any event is different than managements estimate caused by a change in facts or material operating assumptions, corresponding entries to earnings may be required.   Equity Based Compensation   The Company applies ASC 718-10 Stock Compensation and ASC 505-50 Equity Based Payments to Non-Employees in accounting for stock options issued to employees and non-employees, respectively. For stock options and warrants issued to non-employees, the Company applies the same standard, which requires the recognition of compensation cost based upon the fair value of stock options and warrant at the grant date using the Black-Scholes option pricing model. The Companys determination of fair value of share-based payment awards on the date of grant using the option-pricing model is affected by its equity price as well as assumptions regarding its 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, the Company may consider using its historical experience only, its experience plus that of a publicly trade index volatility experience, or a blended volatility experience for public peer companies. The Company also evaluates carefully the expected life term of an award though the vesting of awards to date have been immediate. Finally, the Company attempts to use a risk free rate that is widely quoted and pertinent across a broad range of transactions.   Cash and Cash Equivalents   The Company considers all highly liquid debt instruments and other short-term investments with maturity of three months or less, when purchased, to be cash equivalents. The Company maintains cash and cash equivalent balances at financial institutions that are insured by the Federal Deposit Insurance Corporation.   Use of Estimates   The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.   Reservation System and Development Costs   The Company accounts for its reservation system (website) and development costs in accordance with ASC 350-50 Website Development Costs. All costs incurred in the planning stage are expensed as incurred. Costs incurred in the website application and infrastructure development stage are accounted for in accordance with ASC 350-50, which requires the capitalization of certain costs that meet specific criteria. Costs incurred in the day to day operation of the website are expensed as incurred. Costs associated with the development of the Companys social media application were expensed in the month when they incurred.   Fair Value Measurements   The Company has adopted a single definition of fair value, a framework for measuring fair value, and expanded disclosures concerning fair value. In this valuation, the exchange price is the price in an orderly transaction between market participants to sell an asset or transfer a liability at the measurement date and fair value is a market-based measurement and not an entity-specific measurement.   The Company utilizes the following hierarchy in fair value measurements:   <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 24px; text-align: justify"> </td> <td style="width: 24px; text-align: justify">●</td> <td style="text-align: justify">Level 1 Inputs use quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.</td></tr> <tr style="vertical-align: top"> <td style="text-align: justify"> </td> <td style="text-align: justify"> </td> <td style="text-align: justify"> </td></tr> <tr style="vertical-align: top"> <td style="text-align: justify"> </td> <td style="text-align: justify">●</td> <td style="text-align: justify">Level 2 Inputs use other inputs that are observable, either directly or indirectly. These inputs include quoted prices for similar assets and liabilities in active markets as well as other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.</td></tr> <tr style="vertical-align: top"> <td style="text-align: justify"> </td> <td style="text-align: justify"> </td> <td style="text-align: justify"> </td></tr> <tr style="vertical-align: top"> <td style="text-align: justify"> </td> <td style="text-align: justify">●</td> <td style="text-align: justify">Level 3 Inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability.</td></tr> </table>   Depreciation, Amortization and Capitalization   The Company records depreciation and amortization, when appropriate, using the straight-line method over the estimated useful life of the assets (three to five years). Expenditures for maintenance and repairs are charged to expense as incurred. Additions, major renewals and replacements that increase the propertys useful life are capitalized. Property sold or retired, together with the related accumulated depreciation is removed from the appropriate accounts and the resultant gain or loss is included in operating income or loss.   Long-Lived Assets   The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of its trademark costs. If and when such factors, events or circumstances indicate possible impairment to its trademark costs, the Company would make an estimate of undiscounted cash flows over the remaining lives of the respective assets in measuring recoverability from future operations. The Company incurred no impairment losses during the periods presented. The Company incurred $1,035,168 and $1,035,168, respectively; of impairment losses for the period from the inception of the development stage (February 1, 2012) to June 30, 2013 and for the six months ended June 30, 2012.   Income Taxes   The Company follows ASC 740, Income Taxes. Deferred tax assets or liabilities are recorded to reflect the future tax consequences of temporary differences between the financial reporting basis of assets and liabilities and their tax basis at each year-end. These amounts are adjusted, as appropriate, to reflect enacted changes in tax rates expected to be in effect when the temporary differences reverse.   The Company records deferred tax assets and liabilities based on the differences between the financial statement and tax bases of assets and liabilities and on operating loss carry forwards using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.   Recent Accounting Pronouncements   Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying condensed consolidated financial statements.

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Business Overview and Organizational History   Business Overview   From inception until January 2012, the Company, through its wholly-owned subsidiary, Pet Airways, operated an airline designed specifically for the comfortable and safe transportation of pets by traveling in the main cabin of the aircraft. Pet owners booked their pets on flights online at the Companys website or booked with its agents by phone. On the day of the scheduled flight, pet owners dropped off their pets at one of the Companys facilities located at the departure airport. The Company placed the pet passengers into a pet-friendly carrier and then boarded the carrier into the main cabin of the aircraft. The Company ran a scheduled coast to coast service. By the end of January 2012, the Company suspended flight operations due to low bookings and insufficient funds.   On February 23, 2012, pursuant to a share exchange agreement the Company acquired the all 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 Companys 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.   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. Pawdoodle was presumed to be 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 discontinued the Pawdoodle application.   On March 9, 2013 the Company entered into a Securities Exchange Agreement whereby the Company issued 80,000 shares of the Companys Series B Convertible Preferred Stock (the B Preferred) to the members of Advanced Access Pharmacy Services, LLC, a Nevada limited liability company (AAPS) in exchange for all of the outstanding units of limited liability company membership interests of AAPS. AAPS had neither assets nor liabilities at the time of the exchange and had generated no revenue nor incurred any costs. In connection with this transaction the Company recorded an expense of $1,720,000 based upon the March 9, 2013 fair market value of the B Preferred.   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 June 29, 2013 the Company increased its authorized number of shares of common stock to 1,100,000,000.   Organizational History   The Company was incorporated in the State of Illinois on June 6, 2005 as American Antiquities, Inc. In June 2010, the Company formed Pet Airways by the conversion of successor entity Panther Air Cargo, LLC (Panther Air) a limited liability company. Effective the date of the conversion, Panther Air began operating as Pet Airways, Inc. (Florida).   On August 13, 2010, the Company completed a reverse acquisition transaction through a share exchange with Pet Airways (the Acquisition), whereby the Company acquired all of the issued and outstanding capital stock of Pet Airways in exchange for 25,000,000 shares of the Companys common stock, which constituted approximately 73% of its issued and outstanding capital stock on a post-acquisition basis as of and immediately after the consummation of the Acquisition.   Upon completion of the Acquisition, the Company changed its name from American Antiquities, Inc. 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 SEC. OTC QB securities are quoted on OTC Markets Groups quotation and trading system. On July 27, 2011, the Company filed Articles of Amendment to amend its Articles of Incorporation to change its name to The PAWS Pet Company, Inc.   The share exchange transaction was treated as a reverse acquisition for accounting purposes, with Pet Airways as the acquirer and The PAWS Pet Company, Inc. as the acquired party. Unless the context suggests otherwise, references in this report to business and financial information for periods prior to the consummation of the reverse acquisition, refer 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 Companys assets and liabilities.   In January 2012, the Company suspended flight operations and ceased airline operations.   On February 23, 2012, pursuant to the Agreement the Company acquired the all of the issued and outstanding capital of ISN, a Georgia corporation in exchange for 7,394,056 shares of the Companys 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. 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Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 225 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SX 210.5-03.8) -URI http://asc.fasb.org/extlink&oid=6880815&loc=d3e20235-122688 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 91 -Paragraph 18 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. false2Accelerated amortization of debt discount from conversion of debenture8false 4us-gaap_AmortizationOfDebtDiscountPremiumus-gaap_truedebitdurationfalsefalsefalsefalsefalsefalsefalsefalseverboseLabel1truefalsefalse146669146669falsefalsefalse2truefalsefalse155151155151falsefalsefalse3truefalsefalse498921498921falsefalsefalsexbrli:monetaryItemTypemonetaryAmount of noncash expense included in interest expense to amortize debt discount and premium associated with the related debt instruments. Excludes amortization of financing costs. Alternate captions include noncash interest expense.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 835 -SubTopic 30 -Section 45 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=6451184&loc=d3e28541-108399 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 21 -Paragraph 16 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 230 -SubTopic 10 -Section 45 -Paragraph 28 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=6943989&loc=d3e3602-108585 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 225 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SX 210.5-03.8) -URI http://asc.fasb.org/extlink&oid=6880815&loc=d3e20235-122688 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 8 -Article 5 false2Amortization of debt discount9false 4paws_GainLossOnConversionOfDebtpaws_falsecreditdurationfalsefalsefalsefalsefalsefalsefalsetruenegatedLabel1truefalsefalse22146112214611falsefalsefalse2truefalsefalse-70000-70000falsefalsefalse3truefalsefalse21529502152950falsefalsefalsexbrli:monetaryItemTypemonetaryGain Loss On Conversion Of DebtNo definition available.false2Net loss (gain) on conversion of convertible notes10false 4us-gaap_BusinessCombinationAcquisitionRelatedCostsus-gaap_truedebitdurationfalsefalsefalsefalsefalsefalsefalsefalse1truefalsefalse17200001720000falsefalsefalse2falsefalsefalse00  falsefalsefalse3truefalsefalse17200001720000falsefalsefalsexbrli:monetaryItemTypemonetaryThis element represents acquisition-related costs incurred to effect a business combination which costs have been expensed during the period. 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Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 2 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=14024403&loc=d3e13854-109267 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 142 -Paragraph 47 -Subparagraph b -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 45 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6388280&loc=d3e13777-109266 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 1 -Subparagraph (e) -URI http://asc.fasb.org/extlink&oid=14024403&loc=d3e13816-109267 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 142 -Paragraph 20 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 142 -Paragraph 45 -Subparagraph e -Clause 5 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. false2Impairment of goodwill12false 4us-gaap_IssuanceOfStockAndWarrantsForServicesOrClaimsus-gaap_truedebitdurationfalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00  falsefalsefalse2truefalsefalse5820958209falsefalsefalse3truefalsefalse5820958209falsefalsefalsexbrli:monetaryItemTypemonetaryThe fair value of restricted stock or stock options granted to nonemployees as payment for services rendered or acknowledged claims.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 95 -Paragraph 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 230 -SubTopic 10 -Section 45 -Paragraph 28 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=6943989&loc=d3e3602-108585 false2Common shares issued in lieu of cash to Intellicell for license fee13false 4paws_CommonSharesIssuedInLieuOfCashForInterestToNonEmployeespaws_falsedebitdurationfalsefalsefalsefalsefalsefalsefalsefalse1truefalsefalse1405914059falsefalsefalse2truefalsefalse62056205falsefalsefalse3truefalsefalse2069720697falsefalsefalsexbrli:monetaryItemTypemonetaryCommon Shares Issued In Lieu Of Cash For Interest To Non EmployeesNo definition available.false2Common shares issued in lieu of cash for interest and penalty interest14false 4paws_CommonSharesIssuedInLieuOfCashForServicesRenderedByNonEmployeespaws_falsedebitdurationfalsefalsefalsefalsefalsefalsefalsefalse1truefalsefalse72007200falsefalsefalse2truefalsefalse818514818514falsefalsefalse3truefalsefalse825714825714falsefalsefalsexbrli:monetaryItemTypemonetaryCommon Shares Issued In Lieu Of Cash For Services Rendered By Non EmployeesNo definition available.false2Common shares issued in lieu of cash for services rendered by non-employees15false 4paws_StockBasedCompensationExpensepaws_falsedebitdurationfalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00  falsefalsefalse2truefalsefalse144000144000falsefalsefalse3truefalsefalse144000144000falsefalsefalsexbrli:monetaryItemTypemonetaryStock Based Compensation ExpenseNo definition available.false2Common shares issued in lieu of cash compensation to employees16false 4paws_DeferredFinancingFeespaws_falsedebitdurationfalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00  falsefalsefalse2falsefalsefalse00  falsefalsefalse3truefalsefalse427073427073falsefalsefalsexbrli:monetaryItemTypemonetaryDeferred Financing Fees.No definition available.false2Financing fee17true 3us-gaap_IncreaseDecreaseInOperatingCapitalAbstractus-gaap_truenadurationfalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalse2falsefalsefalse00falsefalsefalse3falsefalsefalse00falsefalsefalsexbrli:stringItemTypestringfalse0Changes in certain assets and liabilities:18false 4us-gaap_IncreaseDecreaseInReceivablesus-gaap_truecreditdurationfalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00  falsefalsefalse2truefalsefalse5941859418falsefalsefalse3falsefalsefalse00  falsefalsefalsexbrli:monetaryItemTypemonetaryThe increase (decrease) during the reporting period in the total amount due within one year (or one operating cycle) from all parties, associated with underlying transactions that are classified as operating activities.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 95 -Paragraph 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 230 -SubTopic 10 -Section 45 -Paragraph 28 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6943989&loc=d3e3602-108585 false2Receivable due from credit card clearing house19false 4us-gaap_IncreaseDecreaseInPrepaidExpenseus-gaap_truecreditdurationfalsefalsefalsefalsefalsefalsefalsefalseverboseLabel1truefalsefalse-1200-1200falsefalsefalse2truefalsefalse-2919-2919falsefalsefalse3truefalsefalse-1263-1263falsefalsefalsexbrli:monetaryItemTypemonetaryThe increase (decrease) during the reporting period in the amount of outstanding money paid in advance for goods or services that bring economic benefits for future periods.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 95 -Paragraph 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 230 -SubTopic 10 -Section 45 -Paragraph 28 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6943989&loc=d3e3602-108585 false2Prepaid expenses20false 4us-gaap_IncreaseDecreaseInDepositOtherAssetsus-gaap_truecreditdurationfalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00  falsefalsefalse2falsefalsefalse00  falsefalsefalse3truefalsefalse3968939689falsefalsefalsexbrli:monetaryItemTypemonetaryThe increase (decrease) during the reporting period in moneys or securities given as security including, but not limited to, contract, escrow, or earnest money deposits, retainage (if applicable), deposits with clearing organizations and others, collateral, or margin deposits.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 95 -Paragraph 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 230 -SubTopic 10 -Section 45 -Paragraph 28 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6943989&loc=d3e3602-108585 false2Security deposits and other21false 4us-gaap_IncreaseDecreaseInAccountsPayableAndAccruedLiabilitiesus-gaap_truedebitdurationfalsefalsefalsefalsefalsefalsefalsefalse1truefalsefalse182267182267falsefalsefalse2truefalsefalse318538318538falsefalsefalse3truefalsefalse543317543317falsefalsefalsexbrli:monetaryItemTypemonetaryThe increase (decrease) during the reporting period in the amounts payable to vendors for goods and services received and the amount of obligations and expenses incurred but not paid.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 95 -Paragraph 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 230 -SubTopic 10 -Section 45 -Paragraph 28 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6943989&loc=d3e3602-108585 false2Accounts payable and accrued expenses22false 4paws_IncreaseDecreaseInAccountsPayableAndAccruedExpensesDiscontinuedOperationspaws_falsedebitdurationfalsefalsefalsefalsefalsefalsefalsefalse1truefalsefalse8535285352falsefalsefalse2truefalsefalse113794113794falsefalsefalse3falsefalsefalse00  falsefalsefalsexbrli:monetaryItemTypemonetaryIncrease Decrease In Accounts Payable And Accrued Expenses Discontinued Operations.No definition available.false2Accounts payable and accrued expenses, discontinued operations23false 4us-gaap_NetCashProvidedByUsedInOperatingActivitiesus-gaap_truenadurationfalsefalsefalsefalsefalsefalsefalsefalsetotalLabel1truefalsefalse-110160-110160falsefalsefalse2truefalsefalse-219870-219870falsefalsefalse3truefalsefalse-404425-404425falsefalsefalsexbrli:monetaryItemTypemonetaryThe net cash from (used in) all of the entity's operating activities, including those of discontinued operations, of the reporting entity. Operating activities generally involve producing and delivering goods and providing services. Operating activity cash flows include transactions, adjustments, and changes in value that are not defined as investing or financing activities. While for technical reasons this element has no balance attribute, the default assumption is a debit balance consistent with its label.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 230 -SubTopic 10 -Section 45 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6943989&loc=d3e3602-108585 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 95 -Paragraph 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 230 -SubTopic 10 -Section 45 -Paragraph 25 -URI http://asc.fasb.org/extlink&oid=6943989&loc=d3e3536-108585 true2Net cash used in operating activities24true 2us-gaap_NetCashProvidedByUsedInInvestingActivitiesAbstractus-gaap_truenadurationfalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalse2falsefalsefalse00falsefalsefalse3falsefalsefalse00falsefalsefalsexbrli:stringItemTypestringfalse0CASH FLOWS FROM INVESTING ACTIVITIES:25false 3us-gaap_PaymentsToAcquireOtherPropertyPlantAndEquipmentus-gaap_truecreditdurationfalsefalsefalsefalsefalsefalsefalsetruenegatedLabel1falsefalsefalse00  falsefalsefalse2falsefalsefalse00  falsefalsefalse3falsefalsefalse00  falsefalsefalsexbrli:monetaryItemTypemonetaryThe cash outflow for acquisition of or capital improvements of property, plant and equipment, used to produce goods or deliver services, and not otherwise defined in the taxonomy.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Glossary Investing Activities -URI http://asc.fasb.org/extlink&oid=6516133 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 230 -SubTopic 10 -Section 45 -Paragraph 13 -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=6943989&loc=d3e3213-108585 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 95 -Paragraph 17 -Subparagraph c -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 95 -Paragraph 15 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. false2Purchases of property and equipment26false 3us-gaap_NetCashProvidedByUsedInInvestingActivitiesus-gaap_truedebitdurationfalsefalsefalsefalsefalsefalsefalsefalsetotalLabel1falsefalsefalse00  falsefalsefalse2falsefalsefalse00  falsefalsefalse3falsefalsefalse00  falsefalsefalsexbrli:monetaryItemTypemonetaryThe net cash inflow or outflow from investing activity.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 230 -SubTopic 10 -Section 45 -Paragraph 24 -URI http://asc.fasb.org/extlink&oid=6943989&loc=d3e3521-108585 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 230 -SubTopic 10 -Section 45 -Paragraph 26 -URI http://asc.fasb.org/extlink&oid=6943989&loc=d3e3574-108585 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 95 -Paragraph 26 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. true2Net cash used in investing activities27true 2us-gaap_NetCashProvidedByUsedInFinancingActivitiesAbstractus-gaap_truenadurationfalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalse2falsefalsefalse00falsefalsefalse3falsefalsefalse00falsefalsefalsexbrli:stringItemTypestringfalse0CASH FLOWS FROM FINANCING ACTIVITIES:28false 3us-gaap_ProceedsFromIssuanceOfCommonStockus-gaap_truedebitdurationfalsefalsefalsefalsefalsefalsefalsefalse1truefalsefalse3250032500falsefalsefalse2truefalsefalse225000225000falsefalsefalse3truefalsefalse257500257500falsefalsefalsexbrli:monetaryItemTypemonetaryThe cash inflow from the additional capital contribution to the entity.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Glossary Financing Activities -URI http://asc.fasb.org/extlink&oid=6513228 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 95 -Paragraph 18 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 230 -SubTopic 10 -Section 45 -Paragraph 14 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6943989&loc=d3e3255-108585 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 95 -Paragraph 19 -Subparagraph a -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. false2Proceeds from sale of common stock29false 3us-gaap_ProceedsFromIssuanceOfDebtus-gaap_truedebitdurationfalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00  falsefalsefalse2truefalsefalse7500075000falsefalsefalse3truefalsefalse102500102500falsefalsefalsexbrli:monetaryItemTypemonetaryThe cash inflow during the period from additional borrowings in aggregate debt. Includes proceeds from short-term and long-term debt.No definition available.false2Proceeds from issuance of debt30false 3us-gaap_NetCashProvidedByUsedInFinancingActivitiesus-gaap_truedebitdurationfalsefalsefalsefalsefalsefalsefalsefalsetotalLabel1truefalsefalse3250032500falsefalsefalse2truefalsefalse300000300000falsefalsefalse3truefalsefalse360000360000falsefalsefalsexbrli:monetaryItemTypemonetaryThe net cash inflow or outflow from financing activity for the period.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 230 -SubTopic 10 -Section 45 -Paragraph 24 -URI http://asc.fasb.org/extlink&oid=6943989&loc=d3e3521-108585 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 230 -SubTopic 10 -Section 45 -Paragraph 26 -URI http://asc.fasb.org/extlink&oid=6943989&loc=d3e3574-108585 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 95 -Paragraph 26 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. true2Net cash provided by financing activities31false 3us-gaap_CashAndCashEquivalentsPeriodIncreaseDecreaseus-gaap_truedebitdurationfalsefalsefalsefalsefalsefalsefalsefalsetotalLabel1truefalsefalse-77660-77660falsefalsefalse2truefalsefalse8013080130falsefalsefalse3truefalsefalse-44425-44425falsefalsefalsexbrli:monetaryItemTypemonetaryAmount of increase (decrease) in cash and cash equivalents. Cash and cash equivalents are the amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Excludes cash and cash equivalents within disposal group and discontinued operation.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 230 -SubTopic 10 -Section 45 -Paragraph 24 -URI http://asc.fasb.org/extlink&oid=6943989&loc=d3e3521-108585 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 95 -Paragraph 26 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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Business Overview and Organizational History (Details Narrative) (USD $)	0 Months Ended	3 Months Ended		6 Months Ended		17 Months Ended					0 Months Ended
	Feb. 23, 2012	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 29, 2013	Dec. 31, 2012	Jul. 13, 2012	Mar. 09, 2013 Advanced Access Pharmacy Services, LLC [Mmeber]	Feb. 23, 2012 Impact Social Networking Inc [Member]	Mar. 09, 2013 Advanced Access Pharmacy Services, LLC [Mmeber]	Aug. 13, 2010 Pet Airways [Member]
Issuance of shares in business acquisition	7,394,056										7,394,056		25,000,000
Value of shares exchanged in business acquisition											$ 1,035,168
Issuance of Series B Comvertible Preferred Stock										80,000
Busainess acquisition, transaction expense				$ (1,720,000)		$ (1,720,000)						$ 1,720,000
Common stock, shares authorized		110,000,000		110,000,000		110,000,000	1,100,000,000	110,000,000	350,000,000
Issuance of capital stock on exchange of ownership is equal to percentage of post acquisition issued and outstanding capital stock													73.00%

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Condensed Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended		6 Months Ended		17 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013
Operating expense:
Sales, general and administration	$ 191,844	$ 1,263,825	$ 368,127	$ 1,525,923	$ 2,104,668
Loss from operations	(191,844)	(1,263,825)	(368,127)	(1,525,923)	(2,104,668)
Other income (expense):
Interest expense (including $75,962, $138,328, $158,643, $211,484 and $569,975 respectively, of amortization of debt discount)	(96,946)	(141,479)	(181,214)	(219,388)	(604,324)
Financing fee					(427,073)
Net (loss) gain on conversion of convertible notes	(2,214,611)	70,000	(2,214,611)	70,000	(2,152,950)
Subsidiary acquisition costs			(1,720,000)		(1,720,000)
Impairment of goodwill				(1,035,168)	(1,035,168)
Warrant liability valuation adjustment, net	(1,390,770)	981,255	(2,069,574)	1,615,024	613,013
Other income (expense), net	(3,702,327)	909,776	(6,185,399)	430,468	(5,326,502)
Loss before income taxes	(3,894,171)	(354,049)	(6,553,526)	(1,095,455)	(7,431,170)
Provision for income taxes		(1,600)		(1,600)	(1,600)
Loss from continuing operations	(3,894,171)	(355,649)	(6,553,526)	(1,097,055)	(7,429,570)
Discontinued operations:
Loss from discontinued operations, net of tax	(35,923)		(35,923)	(252,079)
Net loss	$ (3,930,094)	$ (355,649)	$ (6,589,449)	$ (1,349,134)	$ (7,429,570)
Net loss per share, basic and diluted	$ (0.04)	$ (0.01)	$ (0.08)	$ (0.02)	$ (0.09)
Weighted average shares used in calculation of basic and diluted net loss per share	87,540,715	59,372,452	86,698,816	56,367,426	78,294,476

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Debt Obligations

6 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

Debt Obligations