UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)
|X|  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934
     FOR THE FISCAL YEAR ENDED MAY 31, 2001

|_|  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934
     For the transition period from __________________ to ______________

                         Commission file number: 0-28627

                           PRAXIS PHARMACEUTICALS INC.
                 (Name of small business issuer in its charter)

                 UTAH                                         87-0393257
     (State or other jurisdiction of                      (I.R.S. Employer
     incorporation or organization)                      Identification No.)


     856 HOMER STREET, SUITE 100, VANCOUVER, BRITISH COLUMBIA V6B 2W5 CANADA
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number: (604) 669-1040

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

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

                          COMMON STOCK, $.001 PAR VALUE
                                (Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 |_|

Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |_|

State issuer's revenues for its most recent fiscal year:  $-0-

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days: $1,183,827.50 AS OF AUGUST 29, 2001

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 13,362,069 as of July 15, 2001

Transitional Small Business Disclosure Format (Check one):  Yes  |_|; No |X|


Exhibit index on page 16.                                     Page 1 of 47 pages


<PAGE>


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

         Praxis  Pharmaceuticals  Inc. ("Praxis" or the "Company") was formed in
response to an apparent market  opportunity in the  pharmaceutical  industry for
small  molecular  agents  capable  of  moderating  inflammatory  responses.  The
founding  individuals   recognized  several  significant  diseases,   which  are
inadequately served by current therapies, as providing this opportunity.  Praxis
is a startup company, which commenced operations in July 1997. Its mission is to
develop a unique  panel of  therapeutics  based on  carbohydrate  chemistry.  To
achieve  that  mission,  Praxis  plans  to  acquire  licenses  for  products  or
intellectual property from other organizations or companies when and if there is
sufficient  evidence  that this would  facilitate  the expansion of the range of
therapeutics  that Praxis has in its product line.  Praxis also plans to develop
new drugs  internally.  The  drugs are  intended  to be used in the  control  of
inflammation  in a range of  indications,  such as skin conditions to autoimmune
diseases.   The  technology   also  has   applicability   in  the  cosmetic  and
nutraceutical  markets and agents for  wrinkles and other  conditions  are being
developed for these markets.

         Effective  September 30, 1999,  Praxis  granted a worldwide,  exclusive
license to Fairchild  International Inc.  ("Fairchild"),  an affiliate,  for all
products and processes developed, and to be developed, relating to arthritis and
dermal wrinkles, in consideration for 2,600,000 shares of Fairchild common stock
(valued at $26,000 initially,  but subsequently  written down to $1) and royalty
payments based upon revenues  earned by Fairchild from the sale of any developed
products.  In addition,  a research and  development  agreement was entered into
whereby  Praxis was  contracted  to  conduct a research  program to be funded by
Fairchild for a total amount of $250,000.  (This agreement,  including "Schedule
C", has been filed as Exhibit  10.1 to Praxis'  registration  statement  on Form
10-SB.) A first  installment  of $62,500 was paid on October 1, 1999.  Quarterly
payments  of $50,000  were to be made  beginning  January 1, 2000,  with a final
payment of $37,500  due  October 1, 2000.  The January 1, 2000 and April 1, 2000
installments were paid.

         As of February 28, 2001, as a result of Fairchild's uncertain financial
condition and lateness in  achievement  of  milestones by Praxis,  Fairchild and
Praxis  agreed to terminate  the Research,  Development  and Licence  Agreement.
Praxis had received  only  $162,500 of the funding and  Fairchild  had expressed
doubt about it ability to continue the funding. Under the termination agreement,
Praxis retained the 2,600,000  Fairchild  shares and has agreed to pay Fairchild
30% of the net revenues from sales of the two  applications  in the field of use
up to a maximum of $250,000 over the first three years of sales.

         At the time Praxis  entered into the  agreement  with  Fairchild in May
1999,  David Stadnyk,  an officer,  director,  and principal  shareholder of the
Company, owned approximately 16.4% of the outstanding stock of Fairchild and was
a promoter of Fairchild.  In addition,  in March 1999 Fairchild paid Mr. Stadnyk
consulting  compensation of $25,000,  500,000 shares of Fairchild  common stock,
and one-year options to purchase 1,000,000 shares of Fairchild common stock. The
options expired without having been exercised.  See "Company  Development" below
and Item 12. Certain Relationships and Related Transactions. The 16.4% ownership
disclosed  above  includes  the  500,000  shares  received  by  Mr.  Stadnyk  as
consulting compensation.

         In June 2001,  Praxis entered into an agreement with Clearcoll Pty Ltd.
of Annandale,  New South Wales, Australia (CAN 076 764 013), to jointly research
and develop  materials  for the  treatment  of wrinkles by  injection or topical
delivery  of novel  compounds  resulting  from the  joint  development  program.
Clearcoll  has the right to  negotiate a license to market the  materials  under
conditions to be determined after successful product development.

BACKGROUND AND CORPORATE STRUCTURE

         Praxis  Pharmaceuticals,  Inc. was  incorporated on June 20, 1997 under
the laws of the  State of  Nevada.  In June  1998,  Praxis-Nevada  engaged  in a
reverse acquisition  transaction with Micronetics,  Inc., a company incorporated
in Utah on December 31, 1981,  where the  shareholders of  Praxis-Nevada  gained
control  over   Micronetics.   Micronetics  then  changed  its  name  to  Praxis
Pharmaceuticals   Inc.   Praxis-Nevada   engaged  in  the  reverse   acquisition
transaction to achieve having its common stock quoted on the OTC Bulletin Board.
At the time of the  transaction,  the common stock of Micronetics  was quoted on
the OTC Bulletin Board under the symbol "MKRO" and had a shareholder base of 262
holders.  Praxis-Nevada  had a  shareholder  base of 13.  Immediately


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<PAGE>

after the reverse  acquisition  transaction,  the  shareholders of Praxis-Nevada
held approximately 98% of the outstanding shares of the Company.

         A wholly owned Australian subsidiary,  Praxis Pharmaceuticals Australia
Pty. Ltd. (ACN 082 811 630)  ("Praxis-Australia"),  was formed in June 1998 as a
private   company.   In  October   1999  an  equity   investment   was  made  in
Praxis-Australia  by Rothschild  Bioscience Managers Ltd., which reduced Praxis'
equity ownership to 35%.

         A second wholly owned  Australian  subsidiary,  Praxis  Pharmaceuticals
International Pty. Ltd. (ACN 092 654 870)  ("Praxis-International"),  was formed
on May 2, 2000.

PATENTS AND LICENSE RIGHTS

         The  Company  has  obtained  exclusive  licenses  to  exploit  and  use
intellectual  property  possessed by the Australian  National  University in the
area of phosphosugars and their analogues as anti-inflammatory  agents,  covered
by  the  University's  patents  (including  USA  5506210,  European  89909685.3,
International WO90/01938 and Australia PO3098/96).

         Anutech  Pty  Limited   ("Anutech"),   the  commercial   subsidiary  of
Australian National  University,  originally granted a license to the Company in
October  1997.  This earlier  agreement  was  superseded  by an agreement  dated
October 14, 1999. The Company's  exclusive worldwide license pertains to the use
of  phosphosugars  as  nutraceuticals  (foods that  provide  medicinal or health
benefits),  complementary  medicines,  or  cosmetics.  The license  specifically
excludes  the use of  phosphosugars  as  prescription  therapeutics  and topical
application  for wound care.  As  consideration  for the license,  Anutech is to
receive a 4% royalty on net sales of products,  50% of all royalty income on net
sales of products received from sublicensees, and 15% of all sublicense fees.

         Anutech  has also  granted  Praxis-Australia  the  exclusive  worldwide
license  to the  use of  phosphosugars  as  prescription  therapeutics,  and the
license  specifically  excludes the uses  granted to the Company.  Anutech is to
receive 2% of all amounts  received by  Praxis-Australia  or any  sublicensee in
connection with the licensed intellectual property or related products.

         In addition to the licenses  described  above,  Praxis owns two patents
that  relate to agents for use in  immunosuppression  and  transplant  rejection
(US5691346  and US  5837709).  Praxis  believes  that patent  protection  of its
technologies,  processes and products is important to its future operations. The
success of Praxis' proposed  products might depend,  in part, upon the Company's
ability to obtain  patent  protection.  Praxis  intends  to  enforce  its patent
position and  intellectual  property  rights  vigorously.  The cost of enforcing
Praxis' patent rights in lawsuits,  if necessary,  may be significant  and could
interfere with Praxis'  operations.  Although  Praxis intends to file additional
patent applications, as management believes appropriate, with respect to any new
products  or  technological  developments,  no  assurance  can be given that any
additional  patents will be issued or, if issued,  will be of commercial benefit
to Praxis. In addition,  it is impossible to anticipate the breadth or degree of
protection that any such patents may afford. To the extent that Praxis relies on
unpatented  proprietary  technology,  no assurance can be given that others will
not  independently  develop  or  obtain  substantially  equivalent  or  superior
technology  or  otherwise  gain  access  to  Praxis'  trade  secrets,  that  any
obligation  of  confidentiality  will be honored or that  Praxis will be able to
effectively protect its rights to proprietary technology.  Further, no assurance
can be given that any products  developed  by Praxis will not  infringe  patents
held by third  parties or that,  in such case,  licenses from such third parties
would be available on commercially acceptable terms, if at all.

COMPANY DEVELOPMENT

         It is envisioned that the Company will develop in stages:

         o   Research and Development
         o   Clinical Trials
         o   Commercialization


                                       3
<PAGE>

         Praxis'  business plan envisions the first two stages taking place over
the next three-year period. The Company has engaged in private placements of its
stock  to fund  research  and  development  activities.  Additional  funding  of
approximately  $6,000,000 is being sought by the Company to enable it to develop
its  intellectual  property  portfolio and to engage in early clinical trials of
its proposed  products.  Clinical trial activities will be necessary to generate
evidence  of  efficacy  in order to attract  alliance  partners.  An alliance in
pharmaceutical terms is the joint effort of a major pharmaceutical company and a
smaller  "junior"  drug  developer  who has the idea and the  research,  but not
sufficient  capital  to  continue  this to the  next and  most  critical  phase.
Management  believes that the future  viability of Praxis relies  greatly on the
opportunity  to gain the  support,  for  mutual  benefit,  of one of the  larger
worldwide drug houses.  This may be particularly  appropriate to the development
of  formulations  for  topical or ocular  delivery  of Praxis  drugs.  Strategic
alliances with such companies  will be  investigated  as a matter of priority by
Praxis.

         The Company entered into a Research,  Development and Licence Agreement
with  Fairchild  International  Corporation,  an affiliate,  dated as of May 11,
1999,  which closed  September  30, 1999. At the time,  Praxis  entered into the
agreement, David Stadnyk, an officer, director, and principal shareholder of the
Company, owned approximately 16.4% of the outstanding stock of Fairchild and was
a promoter of Fairchild.  In addition,  in March 1999 Fairchild paid Mr. Stadnyk
consulting  compensation of $25,000,  500,000 shares of Fairchild  common stock,
and one-year options to purchase 1,000,000 shares of Fairchild common stock. The
options   expired   without  having  been   exercised.   See  Item  12.  Certain
Relationships and Related Transactions.

         Under  that  agreement,  Fairchild  obtained  an  exclusive,  worldwide
license to make,  use,  and sell  products  and  processes  developed  by Praxis
relating to arthritis and dermal wrinkles in consideration  for 2,600,000 shares
of Fairchild common stock (valued at $26,000 initially, but subsequently written
down to $1) and a research  engagement  for  $250,000.  A first  installment  of
$62,500 was paid on October 1, 1999.  Quarterly  payments of $50,000  were to be
made beginning  January 1, 2000,  with a final payment of $37,500 due October 1,
2000. The January 1, 2000 and April 1, 2000 installments were paid.

         As of February 28, 2001, as a result of Fairchild's uncertain financial
condition and lateness in  achievement  of  milestones by Praxis,  Fairchild and
Praxis  agreed to terminate  the Research,  Development  and Licence  Agreement.
Praxis had received  only  $162,500 of the funding and  Fairchild  had expressed
doubt about it ability to continue the funding. Under the termination agreement,
Praxis retained the 2,600,000  Fairchild  shares and has agreed to pay Fairchild
30% of the net revenues from sales of the two  applications  in the field of use
up to a maximum of $250,000 over the first three years of sales.

         In October  1999,  an  agreement  was entered  into  whereby the equity
investment made in Praxis-Australia would be reduced to 35% through research and
development  funding  invested by Rothschild  Bioscience  Managers  Limited,  of
Melbourne,  Victoria.  The  Rothschild  investment  is solely for the purpose of
research and development into  phosphosugar-based  anti-inflammatory  agents for
registered therapeutic use.

         In June  2001,  Praxis-International  entered  into an  agreement  with
Clearcoll Pty Ltd. of Annandale,  New South Wales,  Australia (CAN 076 764 013),
to jointly  research  and develop  materials  for the  treatment  of wrinkles by
injection  or  topical  delivery  of novel  compounds  resulting  from the joint
development  program.  Clearcoll  has the right to negotiate a license to market
the  materials  under  conditions  to be  determined  after  successful  product
development.

         It is expected that the  profitability  and financial  viability of the
Company will  ultimately  rest with the corporate  alliances that may be entered
into at this stage of fund raising.  As noted above, the benefits of a correctly
structured  alliance  can be enormous  for both  parties  involved.  The Company
expects  to incur  significant  operating  losses  over at least the next  three
years. There is every likelihood that these losses may increase in the future as
the research  and  development  and  clinical  trials  continue.  The  Company's
profitability  will ultimately  depend upon its ability to reach development and
obtain  regulatory  approval for its  products,  and to enter into  alliances to
develop,  manufacture  and market the products.  There is no guarantee  that the
Company will ever be profitable.

         Praxis'  near-term  goals are to raise the funds necessary for the next
five  years  of  company  research  and  development  activities  through  share
offerings  and cash flow  derived  from  sales and or  licensing  agreements  on



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<PAGE>
cosmetic products; invest in a dedicated research facility and personnel; and
generate pre-clinical and early clinical results for the lead compounds. Over
the long-term, its goal is to develop strategic alliances with established
pharmaceutical companies in order to conduct large scale, late stage clinical
trials and to market approved therapeutics.

RESEARCH AND DEVELOPMENT

         During the fiscal years ended May 31, 2001, 2000, and 1999, the Company
incurred $nil, $86,604, and $92,456 in research costs, respectively.

         In  general  terms  the  research  and  development   process  for  the
pharmaceutical  agents  is as  follows:

         o   Secure source of drug substance

         o   Development of validated analytical assays for purity and stability

         o   Development  of validated  analytical  assays for  detection of the
             drug substance in plasma

         o   Formulation studies to provide a stable formulation for human use

         o   Full  toxicology  program  in  accord  with  current  international
             guidelines

         o   Preparation of clinical trial material

         This process is expected to cost  approximately  $1,000,000 to complete
and allows  commencement  of clinical  trials.  The Company intends to focus its
efforts on the following  conditions/diseases:  psoriasis,  surgical  adhesions,
ocular  inflammation,  rheumatoid  arthritis,  and wrinkles.  Specific strategic
commercial  targets  are as  follows:

         o   Psoriasis  - Develop  optimal  dermal  formulation  and enter early
             stage  clinical  trials by third quarter 2002.  Following the early
             stage  trials  (early  Phase  II),  the  Company  plans  to  form a
             strategic  alliance  with large  pharmaceutical  company to advance
             clinical trials.

         o   Surgical  adhesions - Develop a data package  which will be used to
             enter into an agreement  with an appropriate  large  pharmaceutical
             company to receive  milestone  and  royalty  payments  for  further
             development. Data package is to be completed by the end of 2001 and
             negotiations with large pharmaceutical companies commenced in third
             quarter 2001.

         o   Ocular  inflammation - Develop a data package which will be used to
             enter  into an  agreement  with  an  appropriate  large  ophthalmic
             specialist  pharmaceutical company to receive milestone and royalty
             payments for further  development.  The goal is to have such a data
             package by the end of 2002.

         o   Rheumatoid  arthritis - Develop optimal oral  formulation and enter
             Phase I clinical trials by second quarter 2002. Following the early
             stage  trials  (early  Phase  II),  the  Company  plans  to  form a
             strategic alliance with a large  pharmaceutical  company to advance
             clinical trials.

         o   Wrinkles - A dermal  product is to be  finalized by the end of 2001
             and initial  trials will begin in first  quarter 2002. An agreement
             has been entered  into with a cosmetic  development  and  marketing
             company that will be  responsible  for  production and sales of the
             product in late 2002.

         o   Acne - Clinical  trials of a  potential  acne  treatment  developed
             internally  by Praxis  commenced in March 2000. A patent filing was
             completed  and a  suitable  alliance  partner  is being  sought for
             further development and marketing.

         Although  several drugs have been  developed by various  pharmaceutical
companies to treat the diseases targeted by Praxis,  relatively limited research
has been  conducted in the  development  of  carbohydrate  based on M6P receptor
targeted   pharmaceutical   products.   Although  Praxis  has   demonstrated  in
pre-clinical studies that its carbohydrate compounds may have applicability in a
broad range of  diseases,  clinical  studies are yet to be  performed to confirm
these findings.  The Company's  proposed  products are in the early  development
stage, require


                                       5

<PAGE>

significant further research, development, testing and regulatory clearances,
and are subject to the risks of failure inherent in the development of products
based on innovative technologies. These risks include the possibilities that any
or all of the proposed products may be found to be ineffective or toxic, or
otherwise may fail to receive necessary regulatory clearances; that the proposed
products, although effective, may be uneconomical to market; or that third
parties may market superior or equivalent products. Due to the extended testing
and regulatory review process required before marketing clearance can be
obtained, Praxis does not expect to be able to realize revenues from the sale to
consumers of any drugs within the next five years.

GOVERNMENT REGULATION

         The  production and marketing of Praxis's  pharmaceutical  products are
subject to  regulation  for  safety,  efficacy  and  quality.  The Food and Drug
Administration   (FDA)  approval  procedure   involves   completion  of  certain
pre-clinical  and  manufacturing/stability  studies  and the  submission  of the
results  of  these  studies  to the FDA in an  Investigational  New  Drug  (IND)
application  in support of  performing  clinical  trials.  IND allowance is then
followed by performance of human clinical trials and additional pre-clinical and
manufacturing   quality  control  studies   supporting   safety,   efficacy  and
manufacturing  quality  control.  The  information  developed  under  the IND is
compiled  into a New Drug  Application  and  submitted  to FDA for  approval  to
market. The sequence of events is as follows:

         o   PRE-CLINICAL  STUDIES  involve  laboratory  evaluation  of  product
             characteristics  and  animal  studies to assess  the  efficacy  and
             safety of the  product.  These tests take on the average  three and
             one-half years.
         o   AN IND IS FILED  with  the FDA to  begin  testing  the  product  on
             people. The IND becomes effective if the FDA does not disapprove it
             within 30 days.  However,  any FDA  comments or  questions  must be
             answered to the  satisfaction  of the FDA before  initial  clinical
             testing can begin. In some instances,  this process could result in
             substantial delay and expense.
         o   PHASE I trials  consist of testing of the product in a small number
             of normal  volunteers,  primarily for safety.  These trials take on
             the average one year.
         o   In PHASE II, in addition to safety,  the efficacy of the product is
             evaluated in a small patient population. This typically takes about
             two years.
         o   PHASE III trials typically involve  multicenter  testing for safety
             and  clinical  efficacy  in an expanded  population  of patients at
             geographically   dispersed   test  sites.   A  clinical   plan,  or
             "protocol,"   accompanied  by  the  approval  of  the  institutions
             participating in the trials,  must be submitted to the FDA prior to
             commencement  of  each  clinical  trial.  The  FDA  may  order  the
             temporary or permanent  discontinuation  of a clinical trial at any
             time if adverse  events  that  endanger  patients in the trials are
             observed. These trials take on the average three years.
         o   NEW DRUG  APPLICATION  (NDA) is  prepared  and filed  with the FDA,
             containing  an  analysis  of the  results of the  pre-clinical  and
             clinical studies on the new drug.  Following  extensive review, the
             FDA may grant marketing  approval,  require  additional  testing or
             information  or deny the  application.  The average NDA review time
             for new drugs is roughly two and one-half years.
         o   PHASE IV clinical  trials may be requested  to be  performed  after
             marketing approval to resolve any lingering questions.

         Continued compliance with all FDA requirements and the conditions in an
approved application,  including product  specifications,  manufacturing process
and labeling requirements, are necessary for all products. Failure to comply, or
the  occurrence of  unanticipated  adverse events during  commercial  marketing,
could  lead  to  the  need  for  labeling  changes,   product  recall,  seizure,
injunctions  against  distribution or other  FDA-initiated  action,  which could
delay further marketing until the products are brought into compliance.

         The NDA itself is a complicated and detailed  document and must include
the results of extensive animal,  clinical and other testing,  the cost of which
is substantial.  Although the FDA is required to review  applications within 180
days of filing,  in the process of  reviewing  applications  the FDA  frequently
requests  that  additional  information  be  submitted  and  starts  the 180 day
regulatory  review  period anew when the  requested  additional  information  is
submitted.   The  effect  of  such  requests  and  subsequent   submissions  can
significantly  extend  the  time


                                       6

<PAGE>
for the NDA review process. Until an NDA is actually approved, no assurance can
be given that the information requested and submitted will be considered
adequate by the FDA to justify approval.

         Whether or not FDA approval has been obtained, approval of a product by
a comparable  regulatory  authority  must be obtained in most foreign  countries
prior to the  commencement  of  marketing  of the product in that  country.  The
approval  procedure  varies from  country to country and may involve  additional
testing,  and the time  required may differ from that required for FDA approval.
Although  some  procedures  for  unified  filings  exist  for  certain  European
countries, in general each country has its own procedure and requirements,  many
of which are time consuming and expensive. Thus, substantial delays in obtaining
required approvals from foreign regulatory  authorities may be encountered after
the relevant applications are filed. After such approvals are obtained,  further
delays may be encountered before the products become commercially available.

         No assurance  can be given that any required FDA or other  governmental
approval  will be granted or, if granted,  will not be  withdrawn.  Governmental
regulation may prevent or substantially delay the marketing of Praxis's proposed
products  and cause Praxis to undertake  costly  procedures.  This may furnish a
competitive advantage to the more substantially capitalized companies with which
Praxis  plans to  compete.  In  addition,  the  extent  of  potentially  adverse
government  regulations  that may arise  from  future  administrative  action or
legislation cannot be predicted.

COMPETITION

         Praxis  faces  significant  competition  in the area of  pharmaceutical
research.  Due to the  Company's  small size, it can be assumed that most if not
all of its competitors have  significantly  greater  financial,  technical,  and
other resources. These competitors may be able to respond more quickly to new or
emerging  technologies  than Praxis can.  Also,  the Company's  competitors  and
potential  competitors  have greater name  recognition and ability to enter into
strategic  partnerships  to engage in new research and development  efforts.  To
compete,  Praxis may be forced to narrow its  research  and  development  focus,
reducing its likelihood for success.

EMPLOYEES

         As of May 31, 2001, the Company had 3 full-time  employees,  1 of which
was an officer of the Company, Dr. William Cowden.

         The Company's opportunity for success depends largely upon the efforts,
abilities,  and decision-making of its executive  officers.  The loss any of the
Company's key personnel could, to varying degrees, have an adverse effect on its
operations  and research and  development  efforts.  The loss of any one of them
would have a material adverse affect on the Company.

         The Company does not currently maintain "key-man" life insurance on any
of its  executive  officers,  and there is no contract in place  assuring  their
services  for any  length of time.  Within a  reasonable  period  of time  after
sufficient funds are available,  it is the Company's intention to develop a plan
to purchase key-man life insurance for one or more key persons, with the Company
designated as the beneficiary,  and enter into employment  contacts with its key
executives.  There is no assurance that the services of any member of management
will remain  available  to the Company for any period of time,  that the Company
will be able to enter into employment  contracts with any of its management,  or
that any of the Company's plans to reduce  dependency upon key personnel will be
successfully   implemented.   The  Company  plans  to  have  industry   standard
non-compete and non-disclosure agreements with all of its employees.


ITEM 2.  DESCRIPTION OF PROPERTY.

         The  Company  does not own real  property.  The Company  shares  office
facilities in Vancouver,  British Columbia,  for its executive  offices,  and is
charged for office and rent and  administrative  services on a proportional cost
basis  by  an  affiliate.   See  Item  12.  Certain  Relationships  and  Related
Transactions.



                                       7

<PAGE>

         Praxis accesses its research  facilities through academic  appointments
of the directors with the Australian  National  University and the payment of an
overhead fee to the university for the use of the facilities.  These  facilities
include  laboratory  and  animal  facilities,  which are  already in use for the
purpose of  producing  carbohydrate-based  therapeutic  compounds  to be used in
pre-clinical  and  clinical  trials  and  meet  all  the  necessary   regulatory
requirements.  Praxis also has access to purpose  built and equipped  laboratory
facilities,  which  are  dedicated  to all  aspects  of  carbohydrate  chemistry
including synthesis, purification and analysis of compounds. The facilities also
allow the performance of most other aspects of chemistry that might be required.
Animal research  facilities for all  pre-clinical  studies are available and are
being used by Praxis as a result of Dr.  Cowden's  appointment at the Australian
National  University.  These facilities meet all national standards for care and
use of laboratory  animals.  Animals and associated services are provided by the
University at a per animal charge which includes a component for  infrastructure
costs. Magnetic resonance imaging and mass spectroscopy are freely accessible. A
Silicon Graphics  workstation is operated and owned by Praxis.  Full information
technology  services are in place  enabling high speed  Internet  connection and
computerized  data  handling.  Other  John  Curtin  School of  Medical  Research
laboratories  and  scientists  are also  accessible  by  Praxis  in the event of
needing technology that is not directly available.


ITEM 3.  LEGAL PROCEEDINGS.

         None.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         None.







                                       8

<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         Praxis'  common stock has been traded on the OTC  Bulletin  Board under
the symbol "PRXX" since November 21, 2000. It was traded  over-the-counter  from
July 23,  1998 to March 8,  2000 on the OTC  Bulletin  Board,  and on the  "Pink
Sheets" from March 9, 2000 to November 21, 2000. The following  table sets forth
the range of high and low bid quotations for each fiscal quarter since the stock
began  trading.  These  quotations  reflect  inter-dealer  prices without retail
mark-up,  markdown,  or commissions  and may not  necessarily  represent  actual
transactions.

                                              BID PRICES
2000 FISCAL YEAR                   HIGH                         LOW

Quarter ending 08/31/99           $1.84                        $0.39
Quarter ending 11/30/99           $1.10                        $0.38
Quarter ending 02/29/00           $1.00                        $0.30
Quarter ending 05/31/00           $1.25                        $0.32
2001 FISCAL YEAR
Quarter ending 08/31/00           $0.50                        $0.26
Quarter ending 11/30/00           $0.36                        $0.18
Quarter ending 02/28/01           $0.52                        $0.13
Quarter ending 05/31/01           $0.20                        $0.10

         On August 29,  2001,  the  closing  bid price for the common  stock was
$0.11. The number of record holders of the common stock as of July 15, 2001, was
318 according to the Company's transfer agent. Holders of shares of common stock
are entitled to dividends  when, and if,  declared by the board of directors out
of funds legally available therefor.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

         The  following  discussion  of the  financial  condition and results of
operations  for  Praxis  should  be read in  conjunction  with the  accompanying
financial statements and related footnotes.

GENERAL

         The Company's  business is the  development  and  commercialization  of
drugs and  nutraceuticals  designed to prevent  inflammation and their sequelae,
and the development of cosmetics for skin  conditions.  To date,  Praxis has not
generated any revenues  from product  sales,  royalties or license fees.  Praxis
plans to develop novel drugs and cosmetics,  and to commercialize these products
through  the  formation  of  partnerships,   strategic   alliances  and  license
agreements with pharmaceutical and cosmetic companies.

         It is expected that the  profitability  and financial  viability of the
Company will  ultimately  rest with the corporate  alliances it can obtain.  The
Company  expects to incur  significant  operating  losses over at least the next
three  years.  It is likely that these  losses may increase in the future as the
research  and   development  and  clinical   trials   continue.   The  Company's
profitability  will ultimately  depend upon its ability to reach development and
obtain  regulatory  approval for its  products,  and to enter into  alliances to
develop,  manufacture  and market the products.  There is no guarantee  that the
Company will ever be profitable.

         Praxis'  near-term  goals are to raise the funds necessary for the next
five  years  of  company  research  and  development  activities  through  share
offerings  and cash flow  derived  from  sales and or  licensing  agreements  on
cosmetic products;  invest in a dedicated  research facility and personnel;  and
generate  pre-clinical and early clinical  results for the lead compounds.  Over
the long  term,  its goal is to develop  strategic  alliances  with  established


                                        9

<PAGE>

pharmaceutical  companies in order to conduct large scale,  late stage  clinical
trials and to market approved therapeutics.

RESULTS OF OPERATIONS

         YEAR  ENDED MAY 31,  2001  COMPARED  TO YEAR  ENDED MAY 31,  2000.  The
Company  continues to incur losses from  operations.  The Company incurred a net
loss of  $185,064  for the year ended May 31,  2001,  as  compared  to a loss of
$230,173  for the  prior  fiscal  year.  The  decrease  in the  net  loss is due
primarily to a decreased level of activity.  Project  expenses (net of recovered
costs) were  $25,078 for the 2001 fiscal  year,  as compared to $152,142 for the
prior year.

         Administration  expenses  decreased  by almost  25%,  from  $212,627 to
$159,986.  The following expenses decreased:  consulting by $16,500,  office and
secretarial  by $4,601,  professional  fees by $8,680,  promotion  and travel by
$10,310,  and related party  administration  by $30,321.  These  decreases  were
offset by an increase in bank charges and exchange costs of $17,771.

         YEAR ENDED MAY 31, 2000  COMPARED TO YEAR ENDED MAY 31,  1999.  The net
loss for the year ended May 31, 2000 was $230,173 as compared to $535,241 during
the 1999 fiscal  year.  The decrease in the net loss is due in large part to the
recovery of research  advances  from  Fairchild in the amount of $135,594.  As a
result,  project  expenses were $(9,452) for the 2000 fiscal year as compared to
$137,456 for the 1999 fiscal year.

         Administration  expenses  also  decreased  by  almost  47% for the 2000
fiscal year as compared to the 1999 fiscal year.  The decrease was due primarily
to a decrease in consulting fees of $224,858.  Also, the Company during the 2000
fiscal year did not incur interest expenses on convertible  debentures ($16,667)
and finders  fees  ($7,500)  that were  incurred  during the 1999  fiscal  year.
Promotion  and travel  expenses in 2000  ($98,616)  increased by 23.9% over 1999
amounts ($79,594), as did professional fees ($54,942 in 2000 compared to $24,337
in 1999) and related party  administration  charges ($30,321 in 2000 compared to
$14,874 in 1999).

         The decreased  loss from  operations  ($535,241 for 1999 as compared to
$203,175 for 2000) was offset only slightly by a loss of $26,998  resulting from
the  write-down  of  the  Company's  investment  in  the  Fairchild  shares  and
Praxis-Australia  to reflect the Company's  equity share of losses  sustained by
these entities.

LIQUIDITY AND CAPITAL RESOURCES

         Since inception,  the primary source of funding for Praxis'  operations
has been the private  sale of its  securities.  For years ended May 31, 2001 and
2000,  the  Company  issued  common  stock for cash of  $299,917  and  $180,000,
respectively.  Through May 31, 1999, the Company issued common stock for cash of
$302,725 and services of $237,208, and sold $50,000 of convertible debentures.

         At May 31, 2001, the Company's working capital was $18,281, as compared
to $123,928  at May 31, 2000 and a  deficiency  of $16,397 at May 31,  1999.  Of
$84,043 in current  liabilities  at May 31,  2001,  $11,558  was owed to related
parties, as compared to $71,426 owed to related parties at May 31, 2000.

         At May 31, 2000,  the Company had received  subscriptions  of $220,500,
net of commissions payable of $24,500,  for the sale of 612,500 shares of common
stock and 612,500  common stock purchase  warrants.  Each warrant is exercisable
for one year to purchase one share at $0.50 per share.

         Until such time as the  Company  obtains  agreements  with  third-party
licensees or partners to provide funding for the Company's  anticipated research
and development activities, the Company will be dependent upon proceeds from the
sale of  securities.  Further,  substantial  funds will be  required  before the
Company is able to generate revenues sufficient to support its operations. There
is no assurance that the Company will be able to obtain such additional funds on
favorable  terms, if at all. The Company's  inability to raise  sufficient funds
could  require  it to  delay,  scale  back or  eliminate  certain  research  and
development programs.



                                       10

<PAGE>

         The  report of the  Company's  independent  auditors  on the  financial
statements for the year ended May 31, 2001,  includes an  explanatory  paragraph
relating  to the  uncertainty  of the  Company's  ability to continue as a going
concern.  Praxis  has  suffered  losses  from  operations,  requires  additional
financing, and needs to continue the development of its products. Ultimately the
Company  needs  to  generate   revenues  and  successfully   attain   profitable
operations. These factors raise substantial doubt about the Company's ability to
continue as a going  concern.  There can be no assurance that it will be able to
develop a commercially viable product.  Even if the Company were able to develop
a commercially  viable  product,  there is no assurance that it would be able to
attain profitable operations.

PLAN OF OPERATION

         The  Company  currently  has cash and cash  commitments  to support the
pre-clinical research program into anti-inflammatory drugs, anti-adhesion drugs,
and  anti-wrinkle  compounds for at least the next 15 months.  Additional  funds
will be needed to support  any  further  operations  at that  time.  In order to
increase  the value of the  intellectual  property  to enhance  the value of the
Company,  further funding will be required in the next 12 months to increase the
size of the research and development  operations and to conduct clinical trials.
Pre-clinical  research and development can be accomplished  without an injection
of capital in the next 12 months.  Sale of  Fairchild  common  stock may provide
additional proceeds to fund operational costs. Unless extra capital is raised in
the next 12 months there will be no change in the number of employees or rate of
research and development.  It is the intention of management to seek an alliance
with a larger  pharmaceutical  company  to  provide  continued  support  for the
development  of the  anti-adhesion  drugs and  device  technology.  There are no
anticipated purchases of plant or equipment or sale of same.

         If  Clearcoll  can obtain the capital  necessary  to fund the costs for
manufacturing,   production,   marketing,   selling,  and  obtaining  regulatory
approvals,  it is possible that sales of products for wrinkles could commence in
one to two years.  Praxis would obtain  revenues from the sale of such products.
This  differs  from  prescription  drugs or devices,  for which  Praxis does not
expect to be able to realize revenues from the sale to consumers within the next
five  years due to  extended  testing  and  regulatory  review.  The  regulatory
requirements are much less stringent for cosmetic products than for prescription
drugs.


ITEM 7.  FINANCIAL STATEMENTS.

         See pages beginning with page F-1.


ITEM 8.  CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON ACCOUNTING  AND
         FINANCIAL DISCLOSURE.

         None.






                                       11

<PAGE>

                                                                        PART III

ITEM 9.  DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS  AND  CONTROL  PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

         The officers and directors of the Company are as follows:
<TABLE>
<CAPTION>

NAME                               AGE      POSITION
<S>                                <C>      <C>
Dr. Brett Charlton                 45       President, Medical Director, and director

Dr. William B. Cowden              46       Vice President, Scientific Director, and director

Robert Smart                       50       Secretary and director
</TABLE>


         The term of office of each director ends at the next annual  meeting of
Praxis' stockholders or when such director's successor is elected and qualifies.
The term of  office  of each  officer  ends at the next  annual  meeting  of the
Praxis' board of directors,  expected to take place  immediately  after the next
annual meeting of stockholders,  or when such officer's successor is elected and
qualifies.

         The last annual  meeting  was held on August 30,  1999,  in  Vancouver,
British Columbia.

         DR. BRETT CHARLTON,  President and a director of the Company since June
19, 1998, is also responsible for the institution and management of all clinical
trials as the medical  director of the Company.  He has basic clinical  training
and  clinical  involvement,  particularly  in  diabetes.  He has  held  academic
appointments  at the Walter and Eliza Hall  Institute  (January  1986 to January
1988) and Stanford  University  (February 1992 to January 1995), and has been at
the John Curtin School of Medical Research, Australian National University since
January 1995. Dr. Charlton has been the Medical Director of the Clinical Studies
Unit of the National Health Sciences Center since June 1997. The National Health
Sciences  Center,  located  in  Deakin,   Australian  Capital  Territory,  is  a
commercially funded non-profit organization that has government-based  principal
shareholders of the Australian National University,  the University of Canberra,
and the Australian  Capital  Territory.  Funding is derived from fee for service
conduct of clinical  trials and fee for service  provision  of graduate  courses
through the University of Canberra.  Revenues are used for funding of scientific
research  activities in the government  sector.  Dr.  Charlton spent three years
with Baxter  Healthcare  (January 1988 to January  1991),  as research  manager,
where he was involved with new  technology  assessment,  strategic  planning and
clinical  trial  management.  He has  been  consulting  for the  biomedical  and
pharmaceutical  industry  since 1984.  Dr.  Charlton has published  more than 50
scientific  papers in medical and biomedical  journals.  He is a graduate of the
University of New South Wales, Sydney,  Australia,  receiving his M.D. degree in
1979 and Ph.D. in 1985.

         DR.  WILLIAM B. COWDEN,  Vice  President  and a director of the Company
since  June 19,  1998,  is also chief  scientist  and  responsible  for all drug
development  programs and pre-clinical  testing. He has been the Senior Research
Fellow at the John Curtin School of Medical Research,  and Principal  Scientific
Advisor to ANUTech Pty Ltd., Canberra,  Australia,  since April 1994. Dr. Cowden
was previously Senior Scientist at Peptide  Technology Ltd., an  Australia-based
company,  from April 1994 to May 1998. As part of his work within the commercial
sector,  Dr.  Cowden has been  involved  in drug  development  studies  from the
earliest stages of  identification  of drug candidates,  including  pre-clinical
assessment,   up  to  the  early  clinical  trial  stage.  Major  pharmaceutical
companies, such as Johnson & Johnson Medical Corp., Cypros Pharmaceuticals Inc.,
and Progen  Industries  Inc.,  currently  license some agents  discovered in his
laboratory. He has published over 100 papers in peer-reviewed scientific medical
journals.  He is the inventor and co-inventor on seven patents. He is a graduate
of the University of  Queensland,  Brisbane,  Australia,  and received his Ph.D.
degree in 1979.

         ROBERT SMART, Secretary and a director of the Company since October 20,
2000,  has over 20 years of senior  management  experience  in various  industry
sectors.  He has been the corporate  secretary,  chief financial officer,  and a
director of A.C. Global Capital Corp., a British Columbia corporation, since its
inception.  A.C.  Global  Capital  Corp.  is a capital pool  company  located in
Vancouver,  British  Columbia,  which is traded on the Canadian Venture Exchange
(CDNX:  ACG). Since August 1999, he has also been a director of  CityXpress.com,
Corp., a publicly-



                                       12

<PAGE>


held Florida  corporation based in Vancouver,  British  Columbia,  that supplies
special sections to newspapers. (OTCBB: CYXP). He has also been a partner in the
consulting  firm of  Radford  & Smart  since  February  1999.  From June 1998 to
February  1999, he served as executive  vice president and a director of Bargain
Castle  International  Discount  Centres,  Ltd., a wholesale and retail products
liquidator.  From December  1997 to June 1998,  Mr. Smart served as president of
Webcastsystems,  Inc., a software developer. From October 1996 to December 1997,
he served as president of Action View Advertising  Ltd., an outdoor  advertising
media  company.  From  October  1994 to October  1996,  Mr. Smart served as vice
president corporate  development of Imperial Ginseng Products Ltd., a grower and
distributor  of ginseng and  ginseng  products.  Mr.  Smart is a graduate of the
University  of Western  Ontario in London,  Ontario,  Canada,  receiving his MBA
degree in 1976 and his BA degree in mathematics in 1974.

         No other  directorships are held by each director in any company with a
class of securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934 or any  company  registered  as an  investment  company,  under  the
Investment Company Act of 1940.

         Drs.  Charlton and Cowden and Mr. Smart may be deemed to be "promoters"
and "control persons" of the Company,  as that term in defined in the Securities
Act of 1933. There are no other control persons.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         During the fiscal year ended May 31, 2001, Mr. Smart failed to file his
report on Form 3 (Initial Statement of Beneficial  Ownership of Securities) on a
timely basis.  There were no other known  failures to file a report  required by
Section 16(a) of the Securities Exchange Act of 1934.


ITEM 10. EXECUTIVE COMPENSATION.

         The Company is not presently paying any executive  compensation  except
for  consulting  fees  to  Drs.  Charlton  and  Cowden.  See  Item  12.  Certain
Relationships and Related Transactions. It has no long-term incentive plans. The
Company does not pay  directors  for their  services as such nor does it pay any
director's  fees for  attendance at meetings.  Directors are  reimbursed for any
expenses incurred by them in their performance as directors.

         There are no employment  agreements with any of the Company's executive
officers.

STOCK OPTION PLAN

         On August 30, 1999,  the  Company's  shareholders  adopted a 1999 Stock
Option Plan under which a total of 1,698,330 shares were reserved  initially for
grant to provide  incentive  compensation  to officers  and key  employees.  The
number of shares available for grant adjusts  annually,  commencing on the first
day of the next  fiscal  year to a number  equal to 15% of the  number of shares
outstanding on last day of the fiscal year just completed.

         The board of directors  administers the Stock Option Plan.  Options may
be granted for up to 10 years at not less than the fair market value at the time
of grant,  except  that the term may not exceed five years and the price must be
110% of fair market value for any person who at the time of grant owns more than
10% of the total voting power of the Company.  Unless otherwise  specified in an
optionee's   agreement,   options   granted   under   the   plan  to   officers,
officer/directors,  and employees will become vested with the optionee after six
months.  The Plan will remain in effect until the board of directors  terminates
it,  except that no  incentive  stock  option,  as defined in Section 422 of the
Internal Revenue Code, may be granted after July 8, 2009.

         Options may be  exercised  by payment of the option  price (i) in cash,
(ii) by tender of shares of Company  common stock which have a fair market value
equal to the option price, or (iii) by such other  consideration as the board of
directors may approve at the time the option is granted.

         Options have been granted under this plan as follows:


                                       13

<PAGE>

         Granted........................................ 1,698,330
         Exercised......................................         0
         Cancelled/expired..............................         0
                                                         ---------
         Balance, May 31, 2000. ........................ 1,698,330
                                                         ---------
         Granted........................................ 1,150,000
         Exercised......................................  (366,110)
         Cancelled/expired/relinquished.................  (350,000)
                                                         ---------
         Balance, May 31, 2001.......................... 2,132,220
                                                         =========


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The following table provides certain information as to the officers and
directors  individually  and as a group,  and the holders of more than 5% of the
Company's common stock, as of July 15, 2001. Except as otherwise indicated,  the
persons named in the table have sole voting and investing  power with respect to
all shares of common stock owned by them.

<TABLE>
<CAPTION>
            NAME AND ADDRESS OF OWNER                   NUMBER OF SHARES OWNED             PERCENT OF CLASS (1)<F1>

<S>                                                       <C>                                     <C>
Dr. Brett Charlton                                        1,666,110 (2)<F2>(3)<F3>                11.96%
24/1-9 Totterdell Street
Belconnen, 2617 Australia

Dr. William Cowden                                          1,566,110 (3)<F3>                     11.24%
56 Urambi Village
Darlington, NSW 2008 Australia

Neysa Investments Pty. Ltd.                                    800,000                             5.99%
24/1-0 Totterdell Street
Belconnen, 2617 Australia

David Stadnyk                                                800,000 (4)<F4>                       5.86%
430 - 744 Hastings Street
Vancouver, BC V6C 1A5 Canada

Robert Smart                                                 200,000 (5)<F5>                       1.47%
100 - 856 Homer Street
Vancouver, BC V6B 2W5 Canada

Officers and directors as a group (3 persons)               3,432,220 (6)<F6>                     23.36%
------------
<FN>
(1)<F1>  Where persons listed on this table have the right to obtain  additional
         shares of common stock through the exercise of  outstanding  options or
         warrants or the  conversion of  convertible  securities  within 60 days
         from  July  15,  2001,  these  additional   shares  are  deemed  to  be
         outstanding for the purpose of computing the percentage of common stock
         owned by such  persons,  but are not deemed to be  outstanding  for the
         purpose  of  computing  the  percentage  owned  by  any  other  person.
         Percentages are based on 13,362,069 shares outstanding.

(2)<F2>  Includes  800,000 shares held in the name of Neysa  Investment  Ltd., a
         company owned and controlled by Dr. Charlton.

(3)<F3>  Includes  566,110 shares  issuable upon exercise of stock options.  See
         Item 10. Executive Compensation.

(4)<F4>  Includes 300,000 shares issuable upon the exercise of stock options.

(5)<F5>  Includes  200,000 shares  issuable upon exercise of stock options.  See
         Item 10. Executive Compensation.


                                       14

<PAGE>

(6)<F6>  Includes 1,332,220 shares issuable upon exercise of stock options.  See
         Item 10. Executive Compensation.
</FN>
</TABLE>

CHANGES IN CONTROL

         We are not  aware of any  arrangements  that may  result in a change in
control of Praxis.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         ALEXANDER COX & CO. Alexander Cox & Co., a company owned and controlled
by David Stadnyk, has advanced sums to the Company from time to time for working
capital needs. At May 31, 1999, 2000, and 2001, $113,082,  $71,426, and $11,558,
respectively,  were  owed to  Alexander  Cox & Co.  Cumulative  amounts  owed to
Alexander  Cox & Co. from the  Company's  inception  to May 31,  2001,  totaling
$143,696,  have  been  for the  following:  administration  and  office  charges
($48,814)  and  expenses  paid on behalf of the  Company,  such as research  and
development  ($34,234);  reorganization  costs ($57,500);  and professional fees
($3,148).  As of May 31, 2001, the Company had repaid $132,138,  leaving $11,558
owing at that date.  Interest  does not accrue and there is no date  established
for repayment.  In addition,  the Company formerly shared office facilities with
Alexander  Cox & Co.  and was  charged  for its  proportional  share of rent and
administrative  services.  During the years ended May 31, 1999 and 2000, $14,874
and $30,321, respectively, were paid for rent and services.

         FAIRCHILD  INTERNATIONAL  INC.  The  Company  entered  into a Research,
Development   and  Licence   Agreement   with   Fairchild   International   Inc.
("Fairchild"),  an affiliate,  dated as of May 11, 1999,  which closed September
30, 1999.  Under that  agreement,  Fairchild  obtained an  exclusive,  worldwide
license to make,  use,  and sell  products  and  processes  developed  by Praxis
relating to arthritis and dermal wrinkles in consideration  for 2,600,000 shares
of Fairchild common stock (valued at $26,000 initially, but subsequently written
down to $1) and royalty  payments  based upon revenues  earned by Fairchild from
the sale of any  developed  products.  In addition,  a research and  development
agreement was entered into whereby  Praxis was  contracted to conduct a research
program  to be  funded  by  Fairchild  for a total  amount  of  $250,000.  (This
agreement,  including  "Schedule  C", has been filed as Exhibit  10.1 to Praxis'
registration  statement on Form 10-SB.) A first  installment of $62,500 was paid
on October 1, 1999.  Quarterly  payments  of $50,000  were to be made  beginning
January  1, 2000,  with a final  payment of  $37,500  due  October 1, 2000.  The
January 1, 2000 and April 1, 2000 installments were paid.

         As of February 28, 2001, as a result of Fairchild's uncertain financial
condition and lateness in  achievement  of  milestones by Praxis,  Fairchild and
Praxis  agreed to terminate  the Research,  Development  and Licence  Agreement.
Praxis had received  only  $162,500 of the funding and  Fairchild  had expressed
doubt  about  its  ability  to  continue  the  funding.  Under  the  termination
agreement,  Praxis retained the 2,600,000 Fairchild shares and has agreed to pay
Fairchild  30% of the net  revenues  from sales of the two  applications  in the
field of use up to a maximum of $250,000 over the first three years of sales.

         At the time Praxis  entered into the  agreement  with  Fairchild in May
1999, David Stadnyk, an officer and director of the Company, owned approximately
16.4% of the outstanding shares of Fairchild and was a promoter of Fairchild. In
addition,  in March 1999 Fairchild paid Mr. Stadnyk  consulting  compensation of
$25,000,  500,000  shares of Fairchild  common  stock,  and one-year  options to
purchase 1,000,000 shares of Fairchild common stock. The options expired without
having been  exercised.  The 2,600,000  shares of Fairchild owned by the Company
represented  approximately  24% of the outstanding  shares on the issuance date.
According to Fairchild's  amended Form 10-SB  registration  statement filed July
20, 2000,  Praxis and David Stadnyk were the largest  shareholders of Fairchild,
owning 23.7% and 19.8%,  respectively,  of the outstanding  shares as of January
25,  2000.  Winston  Cabell and David Lane were  reported  to own 6.7% and 6.9%,
respectively.  The 16.4%  ownership  disclosed above includes the 500,000 shares
received by Mr. Stadnyk as consulting compensation.

         Drs.  Charlton and Cowden negotiated the terms of the license agreement
on behalf of the Company and Byron Cox, the President of  Fairchild,  negotiated
on behalf of Fairchild.  Since  Fairchild's  common stock was not widely traded,
the amount of Fairchild  shares  sought by the Company was not  determined  by a
dollar value  assigned to the stock.  Also,  the license was difficult to value.
Instead, the Company sought to have a significant  financial stake in Fairchild,
based on the premise  that if the  Company's  research and  development  efforts
proved to be


                                       15

<PAGE>

successful,  the Company should benefit through the receipt of royalty  payments
and through an ownership interest in Fairchild.

         PAYMENTS TO OTHER RELATED PARTIES. During the years ended May 31, 1999,
2000,  and 2001,  $14,869,  $50,463,  and $nil,  respectively,  were paid to Dr.
William Cowden for consulting fees for services  rendered in connection with the
scientific  conduct of research and development.  During the years ended May 31,
2000 and 2001, the following were also paid by the Company for services rendered
in connection with the scientific conduct of research and development: Dr. Brett
Charlton (an officer and  director) - $7,331 and $nil;  Neysa  Investments  Pty.
Ltd. (a company owned and controlled by Dr.  Charlton) - $9,430 and $9,723;  and
Sciworks (a company of which Dr. Cowden is a director) - $14,104 and $10,510.


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

<TABLE>
<CAPTION>
    REGULATION                                                                                        SEQUENTIAL
    S-B NUMBER                                         EXHIBIT                                       PAGE NUMBER

<S>                 <C>                                                                                  <C>
       2.1          Stock Exchange Agreement with Micronetics, Inc. (1)<F1>                              N/A

       3.1          Articles of Incorporation, as amended and restated (1)<F1>                           N/A

       3.2          Bylaws (1)                                                                           N/A

       10.1         Research,  Development  and  Licence  Agreement  dated May 11,  1999  between        N/A
                    Praxis Pharmaceuticals, Inc. and Fairchild International Inc. (1)<F1>(2)<F2>

       10.2         Exclusive  Licence  Agreement dated October 14, 1999 between Anutech Pty Ltd.        N/A
                    and Praxis Pharmaceuticals Australia Pty Ltd. (1)<F1>

       10.3         Licence  Agreement dated October 14, 1999 between Anutech Pty Ltd. and Praxis        N/A
                    Pharmaceuticals Inc (1)<F1>

       10.4         Shareholders   Agreement  dated  as  of  October  15,  1999,  between  Praxis        N/A
                    Pharmaceuticals  Australia Pty Ltd., Praxis  Pharmaceuticals  Inc., Perpetual
                    Trustees Nominees Limited, and Rothschild Bioscience Managers Limited (1)<F1>

       10.5         1999 Stock Option Plan (1)<F1>                                                       N/A

       10.6         Termination of License and Research & Development Agreement dated February           N/A
                    28, 2001 between Praxis Pharmaceuticals, Inc. and Fairchild International
                    Inc. (3)<F3>

       10.7         Agreement dated June 6, 2001 between Clearcoll Pty Ltd and Praxis
                    Pharmaceuticals International Pty Ltd                                                30

        21          Subsidiaries of the registrant (1)<F1>                                               N/A
---------------
<FN>

(1)<F1>  Filed previously

(2)<F2>  Although a "Schedule B" was referenced in this  document,  it was never
         made a part of the document and therefore has not been filed.

(3)<F3>  Incorporated  by  reference  to the exhibit  filed to the  registrant's
         current report on Form 8-K dated February 28, 2001.
</FN>
</TABLE>

         A report on Form 8-K,  dated  February 28, 2001, was filed on March 16,
2001,  reporting  under Item 5 the  termination  of the license  agreement  with
Fairchild International Corporation.


                                       16

<PAGE>


                                   SIGNATURES

         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.

                                        PRAXIS PHARMACEUTICALS, INC.



Date:  September 10, 2001               By: /s/ BRETT CHARLTON
                                           -------------------------------------
                                           Dr. Brett Charlton, President

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
                   SIGNATURE                                      TITLE                              DATE
<S>                                               <C>                                         <C>
                                                  President, Medical Director and
/s/ BRETT CHARLTON                                director (Principal Executive Officer)      September 10, 2001
--------------------------------------------
Dr. Brett Charlton

                                                  Vice President, Scientific Director
/s/ WILLIAM B. COWDEN                             and director                                September 10, 2001
--------------------------------------------
Dr. William B. Cowden

                                                  Secretary and director (Principal
/s/ ROBERT SMART                                  Financial and Accounting Officer)           September 13, 2001
--------------------------------------------
Robert Smart

</TABLE>




                                       17

<PAGE>
                           PRAXIS PHARMACEUTICALS INC.
                          (A DEVELOPMENT STAGE COMPANY)

                        CONSOLIDATED FINANCIAL STATEMENTS

                                  MAY 31, 2001


                           (EXPRESSED IN U.S. DOLLARS)







                                       F-1

<PAGE>


STEELE & CO.*
CHARTERED ACCOUNTANTS
*Representing incorporated professionals

                         SUITE 808         TELEPHONE:     (604) 687-8808
          808 WEST HASTINGS STREET         TELEFAX:       (604) 687-2702
   VANCOUVER, B.C., CANADA V6C 1C8         EMAIL:         EMAIL@STEELE-CO.CA










                          INDEPENDENT AUDITORS' REPORT


TO THE SHAREHOLDERS OF
PRAXIS PHARMACEUTICALS INC.



WE  HAVE  AUDITED  THE  ACCOMPANYING   CONSOLIDATED  BALANCE  SHEETS  OF  PRAXIS
PHARMACEUTICALS  INC. (A DEVELOPMENT  STAGE COMPANY) AS OF MAY 31, 2001 AND 2000
AND THE RELATED  CONSOLIDATED  STATEMENTS OF OPERATIONS AND DEFICIT,  CHANGES IN
STOCKHOLDERS' EQUITY AND CASH FLOWS FOR THE PERIODS ENDED MAY 31, 2001, 2000 AND
1999  AND  CUMULATIVE  TO MAY  31,  2001.  THESE  FINANCIAL  STATEMENTS  ARE THE
RESPONSIBILITY OF THE COMPANY'S MANAGEMENT.  OUR RESPONSIBILITY IS TO EXPRESS AN
OPINION ON THESE FINANCIAL STATEMENTS BASED ON OUR AUDIT.

WE CONDUCTED OUR AUDIT IN ACCORDANCE WITH GENERALLY ACCEPTED AUDITING STANDARDS.
THOSE STANDARDS  REQUIRE THAT WE PLAN AND PERFORM THE AUDIT TO OBTAIN REASONABLE
ASSURANCE   ABOUT  WHETHER  THE  FINANCIAL   STATEMENTS  ARE  FREE  OF  MATERIAL
MISSTATEMENT.  AN AUDIT INCLUDES EXAMINING, ON A TEST BASIS, EVIDENCE SUPPORTING
THE AMOUNTS AND DISCLOSURES IN THE FINANCIAL STATEMENTS.  AN AUDIT ALSO INCLUDES
ASSESSING THE  ACCOUNTING  PRINCIPLES  USED AND  SIGNIFICANT  ESTIMATES  MADE BY
MANAGEMENT,  AS WELL AS EVALUATING THE OVERALL FINANCIAL STATEMENT PRESENTATION.
WE BELIEVE THAT OUR AUDIT PROVIDES A REASONABLE BASIS FOR OUR OPINION.

IN OUR OPINION, THE CONSOLIDATED  FINANCIAL STATEMENTS REFERRED TO ABOVE PRESENT
FAIRLY,   IN  ALL  MATERIAL   RESPECTS,   THE   FINANCIAL   POSITION  OF  PRAXIS
PHARMACEUTICALS  INC.  AS OF MAY  31,  2001  AND  2000  AND THE  RESULTS  OF ITS
OPERATIONS  AND ITS CASH  FLOWS FOR EACH OF THE YEARS IN THE THREE  YEAR  PERIOD
ENDED MAY 31, 2001 AND  CUMULATIVE  TO MAY 31,  2001,  IN  CONFORMITY  WITH U.S.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.

THE ACCOMPANYING  CONSOLIDATED  FINANCIAL STATEMENTS HAVE BEEN PREPARED ASSUMING
THAT THE COMPANY WILL CONTINUE AS A GOING CONCERN. AS DISCUSSED IN NOTE 2 TO THE
FINANCIAL STATEMENTS,  THE COMPANY HAS SUFFERED LOSSES FROM OPERATIONS AND THERE
IS NO REVENUE STREAM FROM OPERATIONS.  AS A RESULT,  THERE IS UNCERTAINTY  ABOUT
ITS ABILITY TO CONTINUE AS A GOING  CONCERN.  THE  FINANCIAL  STATEMENTS  DO NOT
INCLUDE ANY ADJUSTMENTS THAT MIGHT RESULT FROM THE OUTCOME OF THIS UNCERTAINTY.


                                                          /s/ STEELE & CO.

VANCOUVER, CANADA
JULY 30, 2001                                             CHARTERED ACCOUNTANTS

                                       F-2

<PAGE>




                           PRAXIS PHARMACEUTICALS INC.
                          (A DEVELOPMENT STAGE COMPANY)
                           CONSOLIDATED BALANCE SHEETS
                              MAY 31, 2001 AND 2000
                           (EXPRESSED IN U.S. DOLLARS)


<TABLE>
<CAPTION>
                                                                  2001            2000
                                                              ------------     ----------
<S>                                                           <C>              <C>
ASSETS

       CURRENT
         CASH (NOTE 7)                                        $   100,779      $ 197,124
         OTHER RECEIVABLE                                           1,545         48,748
                                                              ------------     ----------

                                                                  102,324        245,872
       INVESTMENTS (NOTE 3)                                             2              2
                                                              ------------     ----------

                                                              $   102,326      $ 245,874
                                                              ============     ==========

LIABILITIES

       CURRENT
         ACCOUNTS PAYABLE                                     $    72,485      $  50,518
         OWING TO RELATED PARTIES (NOTE 4)                         11,558         71,426
                                                              ------------     ----------

                                                                   84,043        121,944
                                                              ------------     ----------
STOCKHOLDERS' EQUITY

       SHARE CAPITAL (NOTE 5)
         AUTHORIZED
             10,000,000 PREFERRED SHARES WITH A PAR VALUE
                         OF $.001 PER SHARE
             50,000,000 COMMON SHARES WITH A PAR VALUE
                         OF $.001 PER SHARE
         ISSUED AND PAID IN CAPITAL
             12,862,069 COMMON SHARES
              (2000 - 11,822,209 COMMON SHARES)                 1,162,057        862,140
       SHARE SUBSCRIPTIONS                                              -        220,500
       DEFICIT ACCUMULATED DURING
        THE DEVELOPMENT STAGE                                  (1,143,774)      (958,710)
                                                              ------------     ----------
TOTAL STOCKHOLDERS' EQUITY                                         18,283        123,930

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                    $   102,326      $ 245,874
                                                              ============     ==========
</TABLE>

APPROVED BY THE DIRECTORS

----------------------------------------------

----------------------------------------------
   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                       F-3

<PAGE>

                           PRAXIS PHARMACEUTICALS INC.
                          (A DEVELOPMENT STAGE COMPANY)
                CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
                 FOR THE YEARS ENDED MAY 31, 2001, 2000 AND 1999
                           (EXPRESSED IN U.S. DOLLARS)


<TABLE>
<CAPTION>
                                   CUMULATIVE
                                       TO
                                     MAY 31,                     YEARS ENDED MAY 31,
                                      2001               2001             2000           1999
                                  ------------       --------------------------------------------

<S>                               <C>                <C>              <C>            <C>
PROJECT EXPENSES
       RESEARCH AGREEMENT
       AMENDMENT                  $    45,000                  -                -         45,000
       RESEARCH ADVANCES              229,076                  -           86,604         92,456
       PATENT COSTS                     7,665              4,845                -              -
       RECOVERED COSTS
         CASH                        (135,594)                 -         (135,594)             -
         INVESTMENT
          CONSIDERATION               (26,000)                 -          (26,000)             -
       RELATED PARTY
        CONSULTING FEES                85,771             20,233           65,538              -
                                  ------------       ------------     ------------   ------------
                                      205,918             25,078           (9,452)       137,456
                                  ------------       ------------     ------------   ------------

ADMINISTRATION EXPENSES
       BANK CHARGES AND
       EXCHANGE                        22,031             18,676              905          2,450
       CONSULTING                     257,858                  -           16,500        241,358
       FINDERS FEES                     7,500                  -                -          7,500
       INTEREST ON CONVERTIBLE
        DEBENTURES                     16,667                  -                -         16,667
       OFFICE AND SECRETARIAL          32,782              6,742           11,343         11,005
       PROFESSIONAL FEES              133,690             46,262           54,942         24,337
       PROMOTION AND TRAVEL           266,516             88,306           98,616         79,594
       RELATED PARTY
        ADMINISTRATION                 48,814                  -           30,321         14,874
                                  ------------       ------------     ------------   ------------

                                      785,858            159,986          212,627        397,785
                                  ------------       ------------     ------------   ------------

LOSS FROM OPERATIONS                  991,776            185,064          203,175        535,241
EQUITY SHARE IN LOSS OF
 INVESTEES (NOTE 2)                    26,998                  -           26,998              -
                                  ------------       ------------     ------------   ------------
NET LOSS FOR THE PERIOD             1,018,774            185,064          230,173        535,241
DEFICIT BEGINNING OF THE
 PERIOD                                     -            958,710          728,537        193,296
REORGANIZATION COSTS                  125,000                  -                -              -
                                  ------------       ------------     ------------   ------------

DEFICIT END OF THE PERIOD         $ 1,143,774        $ 1,143,774      $   958,710    $   728,537
                                  ============       ============     ============   ============

BASIC LOSS PER SHARE                                 $       .01      $       .02    $       .07
                                                     ============     ============   ============

WEIGHTED AVERAGE NUMBER
 OF COMMON SHARES
 OUTSTANDING                                          12,587,486       11,555,542      7,158,594
                                                     ============     ============   ============

</TABLE>

   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                       F-4

<PAGE>




                           PRAXIS PHARMACEUTICALS INC.
                          (A DEVELOPMENT STAGE COMPANY)

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                 FOR THE YEARS ENDED MAY 31, 2001, 2000 AND 1999

                           (EXPRESSED IN U.S. DOLLARS)

<TABLE>
<CAPTION>
                                                                                                                         TOTAL
                                              COMMON SHARES            CAPITAL IN        SHARE                           STOCK-
                                                                        EXCESS OF       SUBSCRIP-                        HOLDERS
                                          SHARES          AMOUNT        PAR VALUE         TIONS         DEFICIT          EQUITY
                                      -------------     ---------     ------------     ----------     ------------     ----------
<S>                                   <C>               <C>           <C>              <C>            <C>              <C>
Stockholders' equity
 (deficiency) at May 31, 1998                    -      $      -                -      $  74,000      $  (193,296)     $(119,296)

Common shares
  Issued for cash
    @ $.001 per share                    5,000,000         5,000                -         (5,000)               -              -
    @ $.05 per share                       800,000           800           39,200              -                -         40,000
    @ $.12 per share                       833,333           833           99,167              -                -        100,000
    @ $.20 per share                       250,000           250           49,750              -                -         50,000
    @ $.50 per share                       215,450           215          107,510        (69,000)               -         38,725

  Issued for services
    @ $.05 per share                     1,400,000         1,400           68,600              -                -         70,000
    @ $.10 per share                       383,000           383           37,617              -                -         38,000
    @ $.25 per share                       516,832           517          128,691              -                -        129,208

  Issued for conversion of
   debentures
    @ $.03 per share                       325,926           326           10,674              -                -         11,000
    @ $.11 per share                       124,444           124           13,876              -                -         14,000
    @ $.14 per share                       106,667           107           14,893              -                -         15,000
    @ $.16 per share                        60,952            61            9,939              -                -         10,000

  Additional paid in capital                     -             -           16,667              -                -         16,667

  Issued for reorganization
   costs @ $.10 per share                  305,403           305           30,235              -                -         30,540

  Issued for research
   agreement amendment                     300,000           300           44,700              -                -         45,000

  Acquired on reorganization
   acquisition                             100,202           100             (100)             -                -              -

Share subscriptions                              -             -                -         30,000                -         30,000

Net loss for the year                            -             -                -              -         (535,241)      (535,241)
                                      -------------     ---------     ------------     ----------     ------------     ----------
Stockholders' equity
(deficiency) at May 31, 1999            10,722,209      $ 10,721      $   671,419      $  30,000      $  (728,537)     $ (16,397)
                                      =============     =========     ============     ==========     ============     ==========
</TABLE>



   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                       F-5

<PAGE>

                           PRAXIS PHARMACEUTICALS INC.
                          (A DEVELOPMENT STAGE COMPANY)

     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)

                 FOR THE YEARS ENDED MAY 31, 2001, 2000 AND 1999

                           (EXPRESSED IN U.S. DOLLARS)



<TABLE>
<CAPTION>
                                                                                                                         TOTAL
                                              COMMON SHARES            CAPITAL IN        SHARE                           STOCK-
                                                                        EXCESS OF       SUBSCRIP-                        HOLDERS
                                          SHARES          AMOUNT        PAR VALUE         TIONS         DEFICIT          EQUITY
                                      -------------     ---------     ------------     ----------     ------------     ----------
<S>                                   <C>               <C>           <C>              <C>            <C>              <C>
Stockholders' equity
(deficiency) at May 31, 1999            10,722,209      $ 10,721      $   671,419      $  30,000      $  (728,537)     $ (16,397)

Common shares
 Issued for cash
    @ $.05 per share                       600,000           600           29,400        (30,000)               -              -
    @ $.20 per share                       250,000           250           49,750              -                -         50,000
    @ $.40 per share                       250,000           250           99,750              -                -        100,000

Share subscriptions                              -             -                -        220,500                -        220,500

Net loss for the year                            -             -                -              -         (230,173)      (230,173)
                                      -------------     ---------     ------------     ----------     ------------     ----------
Stockholders' equity
(deficiency) at May 31, 2000            11,822,209        11,821          850,319        220,500          958,710)       123,930

Common shares
 Issued for cash
    @ $.40 per share                       612,500           612          244,388       (220,500)               -         24,500)
    @ $.15 per share                       366,110           366           54,551              -                -         54,917

    Finders Fee                                  -             -          (24,500)             -                -        (24,500)

 Issued for finders fee                     61,250            61           24,439              -                -         24,500

Net loss for the year                            -             -                -              -         (185,064)      (185,064)

                                      -------------     ---------     ------------     ----------     ------------     ----------
Stockholders' equity
(deficiency) at May 31, 2001            12,862,069      $ 12,860      $ 1,149,197      $       -      $(1,143,774)     $  18,283
                                      =============     =========     ============     ==========     ============     ==========
</TABLE>









   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                       F-6

<PAGE>


                           PRAXIS PHARMACEUTICALS INC.
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED MAY 31, 2001, 2000 AND 1999

                           (EXPRESSED IN U.S. DOLLARS)


<TABLE>
<CAPTION>
                                   CUMULATIVE
                                       TO
                                     MAY 31,                     YEARS ENDED MAY 31,
                                      2001               2001             2000           1999
                                  ------------       --------------------------------------------

<S>                               <C>                <C>              <C>            <C>
CASH PROVIDED (USED) BY
  OPERATING ACTIVITIES
    NET LOSS FOR THE
     PERIOD                       $(1,018,774)       $  (185,064)     $  (230,173)   $  (535,241)
    NON-CASH ITEMS
      INVESTMENT
       CONSIDERATION FOR
        RECOVERED COSTS               (26,000)                 -          (26,000)             -
      ISSUE OF SHARES FOR
        SERVICES                      237,208                  -                -        237,208
        RESEARCH AGREEMENT             45,000                  -                -         45,000
      INTEREST ON
       CONVERTIBLE
       DEBENTURES                      16,667                  -                -         16,667
      EQUITY SHARE IN LOSS
      OF INVESTEES                     26,998                  -           26,998              -
    CHANGE IN NON-CASH
     OPERATING ITEM
      OTHER RECEIVABLE                 (1,545)            47,203          (48,748)             -
      ACCOUNTS PAYABLE                 72,485             21,967           43,690          6,828
                                  ------------       ------------     ------------   ------------
                                     (647,961)          (115,894)        (234,233)      (229,538)
                                  ------------       ------------     ------------   ------------

  INVESTING ACTIVITIES
    INVESTMENT IN EQUITY
     AFFILIATE                         (1,000)                 -           (1,000)             -
                                  ------------       ------------     ------------   ------------

  FINANCING ACTIVITIES
    OWING TO RELATED PARTIES           11,558            (59,868)         (41,656)        70,531
    SHARE CAPITAL ISSUED
      FOR CASH                        782,642            299,917          180,000        302,725
      FOR CONVERSION OF
       DEBENTURES                      50,000                  -                -         50,000
    SHARE SUBSCRIPTIONS                     -            220,500          190,500        (44,000)
    REORGANIZATION COSTS              (94,460)                 -                -        (69,460)
                                  ------------       ------------     ------------   ------------
                                      749,740             19,549          328,844        309,796
                                  ------------       ------------     ------------   ------------

CHANGE IN CASH FOR
 THE PERIOD                           100,779            (96,345)          93,611         80,258
CASH BEGINNING OF
 THE PERIOD                                 -            197,124          103,513         23,255
                                  ------------       ------------     ------------   ------------

CASH END OF THE PERIOD            $   100,779        $   100,779      $   197,124    $   103,513
                                  ============       ============     ============   ============
</TABLE>

   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                       F-7

<PAGE>

                           PRAXIS PHARMACEUTICALS INC.
                          (A DEVELOPMENT STAGE COMPANY)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                  MAY 31, 2001
                           (EXPRESSED IN U.S. DOLLARS)



1.   ACCOUNTING POLICIES

     a.  Investments and Basis of Presentation

         i.   These  consolidated  financial  statements include the accounts of
              the   company   and  its  wholly-   owned   subsidiaries,   Praxis
              Pharmaceuticals   International   Pty.  Ltd.,  a  private  company
              registered in Australia and Praxis  Pharmaceuticals Inc. (a Nevada
              corporation).

         ii.  The Company accounts for its investment in Praxis  Pharmaceuticals
              Australia  Pty.   Limited,   a  private  company,   and  Fairchild
              International  Corporation,  a listed  company,  using the  equity
              method  of  accounting.   Effective  June  1,  2000,  the  Company
              discontinued   consolidation  of  these  investee  companies.  The
              investee  companies are currently in the development stage and the
              equity in these  companies  is  represented  by  unexpended  funds
              committed  for  research  and  development.  The net assets of the
              investees  are  unlikely  to  accrue  to the  Company  during  the
              development stage. Accordingly,  management is of the opinion that
              additional  recognition  is  not  required  or  meaningful  in the
              accounts for the  Company's  equity  share of earnings,  losses or
              change in share  capital  until  the  investees  advance  past the
              development stage.

     b.  Pharmaceutical Research and Development

         The   Company  is  engaged  in  the   research   and   development   of
         pharmaceutical  products  and  expenses  all costs  incurred  as period
         costs. The underlying value of the pharmaceutical  products is entirely
         dependent upon the development of marketable  products,  the ability of
         the Company to obtain the necessary  financing to complete  development
         and upon future profitable production.

     c.  Use of Estimates

         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  requires management to make estimates
         and  assumptions  that  affect the amounts  reported  in the  financial
         statements and accompanying  disclosures.  Although these estimates are
         based on management's  best knowledge of current events and actions the
         Company may undertake in the future, actual results may differ from the
         estimates.

     d.  Foreign Currency

         Transactions in foreign  currencies are translated at rates  prevailing
         on the  dates of the  transactions.  Monetary  assets  and  liabilities
         denominated  in  foreign  currencies  have  been  translated  into U.S.
         dollars at a rate of exchange  prevailing at year end.  Exchange  gains
         and losses from foreign currency  translation  adjustments are included
         in current costs.


                                       F-8

<PAGE>

                           PRAXIS PHARMACEUTICALS INC.
                          (A DEVELOPMENT STAGE COMPANY)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                  MAY 31, 2001
                           (EXPRESSED IN U.S. DOLLARS)



1.   ACCOUNTING POLICIES (CONTINUED)

     e.  Income Taxes

         The Company  accounts  for income taxes  whereby the cost  (benefit) of
         current and future  income taxes is recognized as income tax expense in
         the  determination  of results of  operations  for the  period.  Future
         income tax liabilities  (assets) are the amount of income taxes arising
         from taxable temporary differences between the tax basis of an asset or
         liability  and its  carrying  amount in the balance  sheet.  Income tax
         liabilities  and assets are  recognized  when they are more likely than
         not to be realized and are measured using the income tax rates and laws
         that are expected to apply at the time of settlement or realization.

     f.  Incentive Stock Options

         The Company  grants to its directors and  consultants  incentive  stock
         options to acquire a fixed number of shares in the Company,  subject to
         regulatory guidelines.  The options are exercisable upon issue and have
         fixed  exercise  prices and expiry dates.  Compensation  expense is not
         recognized  unless  the  exercise  price of an  option is less than the
         quoted market value of the stock on the grant date.  Any  consideration
         received on the exercise of options is credited to share capital.

2.   GOING CONCERN CONSIDERATIONS

     As at May 31, 2001, the Company had not reached a level of operations which
     would finance day to day activities.  These financial  statements have been
     prepared on the assumption that the Company is a going concern,  meaning it
     will continue in operation for the  foreseeable  future and will be able to
     realize  assets  and  discharge  liabilities  in  the  ordinary  course  of
     operations.  Different  bases  of  measurement  may be  appropriate  when a
     company is not expected to continue  operations for the foreseeable future.
     The Company's continuation as a going concern is dependent upon its ability
     to attain  profitable  operations and generate funds therefrom and/or raise
     equity  capital  or  borrowings  sufficient  to  meet  current  and  future
     obligations.  The Company  suffered  losses from  operations  of  $185,064,
     $230,173 and $535,241 for the years ended May 31, 2001, 2000 and 1999.

3.   INVESTMENTS AND RESEARCH AND DEVELOPMENT

     a.  Praxis Pharmaceuticals Australia Pty. Limited - $1

         The Company's investment in 1,400,000 ordinary shares has been adjusted
         to  reflect   losses   sustained  by  the  investee  and  represents  a
         potentially diluted interest of 35%.

         The  Company's   ownership  interest  is  subject  to  a  shareholders'
         agreement  dated  October 15, 1999 which  prescribes  the terms whereby
         research  funding by the  preferred  shareholder  and  employee  equity
         participation will reduce the Company's  ownership interest to 35%. The
         Company  expenses  its share of research and  development  funding when
         advanced.


                                       F-9

<PAGE>

                           PRAXIS PHARMACEUTICALS INC.
                          (A DEVELOPMENT STAGE COMPANY)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                  MAY 31, 2001
                           (EXPRESSED IN U.S. DOLLARS)



3.   INVESTMENTS AND RESEARCH AND DEVELOPMENT (CONTINUED)

     b.  Fairchild International Corp. - $1

         The Company's  investment in 2,600,000  common shares has been adjusted
         to reflect losses  sustained by the investee and represents an interest
         of 20%. The Company licensed certain rights to Fairchild  International
         Corp., a listed company with common shareholders and, as consideration,
         received 2,600,000 common shares and a commitment for the reimbursement
         of research and development funding.

         The parties  terminated  the  agreement in 2001. As  consideration  for
         efforts made, shares and cash received, the Company is obligated to pay
         a 30% net revenue  royalty  from  licensed  production  to a maximum of
         $250,000 during the first three years of product sale.

4.   OWING TO RELATED PARTIES

     The  Company  shares  office  facilities  and  has  common  management  and
     directorships  with a  number  of  public  and  private  corporate  related
     parties.  The  Company is charged  for office  rentals  and  administrative
     services on a proportional cost basis. Management believes that the methods
     of cost  allocations  and  resultant  costs are  reasonable.  Accounts with
     companies  with  common  management  and   directorships,   management  and
     directors are unsecured with no fixed terms of interest or repayment.

<TABLE>
<CAPTION>

                                    CUMULATIVE
                                       TO
                                     MAY 31,                     YEARS ENDED MAY 31,
                                      2001               2001             2000           1999
                                    ----------         ------------------------------------------
<S>                                 <C>                <C>               <C>             <C>
Administration and
 office charges                     $  48,814          $      -          $ 30,321        $14,874
Payments on behalf of
  Reorganization costs                 57,500                 -                 -         57,500
  Professional fees                     3,148                 -                 -              -
  Research and development
  advances                             34,234                 -                 -              -
  Cash repayments                    (132,138)          (59,868)          (71,977)        (1,843)
                                    ----------         ---------         ---------       --------
                                    $  11,558          $(59,868)         $(41,656)       $70,531
                                    ==========         =========         =========       ========
</TABLE>

5.   SHARE CAPITAL

     a.  Authorized

             50,000,000 Common shares with a par value of $.001 per share
             10,000,000 Preferred shares with a par value of $.001 per share

                                      F-10

<PAGE>

                           PRAXIS PHARMACEUTICALS INC.
                          (A DEVELOPMENT STAGE COMPANY)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                  MAY 31, 2001
                           (EXPRESSED IN U.S. DOLLARS)



5.   SHARE CAPITAL (CONTINUED)

<TABLE>
<CAPTION>
     b.  Common Shares Issued                                                       SHARES           CONSIDERATION
                                                                                    ------           -------------

<S>                                                                                <C>             <C>
              Shares of Praxis Pharmaceuticals Inc. (a Nevada
              corporation) issued for cash and exchanged for shares of
              Micronetics, Inc.                                                     5,000,000      $    5,000
              Outstanding shares of  Micronetics, Inc. at date of
              acquisition with a nominal value                                        100,202               -
              For reorganization costs                                                305,403          30,540
                                                                                   ----------      ----------

              Balance at completion of business re-organization                     5,405,605          35,540
              For cash                                                              1,298,783         297,725
              For services                                                          3,099,832         237,208
              For debenture conversion                                                617,989          50,000
              Additional paid in capital                                                    -          16,667
              For research agreement amendment                                        300,000          45,000
                                                                                   ----------      ----------

              Balance at May 31, 1999                                              10,722,209         682,140
              For cash                                                              1,100,000         180,000
                                                                                   ----------      ----------

              Balance at May 31, 2000                                              11,822,209         862,140

              For cash                                                                978,610         299,917
              For finders fees                                                         61,250               -
                                                                                   ----------      ----------

              Balance at May 31, 2001                                              12,862,069      $1,162,057
                                                                                   ==========      ==========
</TABLE>


     c.  Incentive Stock Options

<TABLE>
<CAPTION>

        OUTSTANDING                   ISSUED                              OUTSTANDING
        MAY 31, 2000                 (LAPSED)          EXERCISED         MAY 31,  2001
        ------------                 --------          ---------         -------------

<S>        <C>                     <C>                 <C>                 <C>           <C>
           1,698,330               (1,698,330)                -                    -     $.14 to December 9, 2004
                   -                1,698,330          (366,110)           1,332,220     $.15 to January 9, 2006
                   -                  800,000                 -              800,000     $.10 to May 24, 2006
           ---------               ----------          ---------           ---------     (500,000 subsequently
                                                                                         exercised)
           1,698,330                  800,000          (366,110)           2,132,220
           =========               ===========         =========           =========
</TABLE>

6.   INCOME TAXES

     The Company has incurred  operating  losses in multiple  tax  jurisdictions
     which are  available to reduce  future  years'  taxable  income.  No future
     benefits have been recognized in the accounts.


                                      F-11

<PAGE>

                           PRAXIS PHARMACEUTICALS INC.
                          (A DEVELOPMENT STAGE COMPANY)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

                                  MAY 31, 2001
                           (EXPRESSED IN U.S. DOLLARS)



7.   SEGMENTED INFORMATION

     a.  Cash

         The Company maintains its cash balance in U.S. and other currencies. At
         the year end, the U.S. dollar equivalents were as follows.

<TABLE>
<CAPTION>
                                         2001        2000
                                         ----        ----
<S>                                    <C>         <C>
              U.S. dollars             $  1,420    $ 97,117
              Australian dollars         99,359      99,995
              Canadian dollars                -          12
                                       --------    --------

                                       $100,779    $197,124
                                       ========    ========
</TABLE>

     b.  Geographic Segments

         The  Company's  activities  are all in the one industry  segment of the
         research and development of pharmaceutical  products.  The research and
         development is carried out in Australia.


                                      F-12