Notes to the Unaudited Financial Statements
July 31, 2021
Note
1 Description of Business and Going Concern
Puget Technologies, Inc. (the “Registrant”)
is a publicly held corporation incorporated in the State of Nevada on March 17, 2010, and, since May 25, 2012, when its registration
statement on Form S-1 pursuant to Section 5 of the Securities Act was declared effective by the Commission, has been subject to
reporting requirements pursuant to Sections 13 and 15(d) of the Exchange Act. It was initially organized to engage in the distribution
of luxury wool bedding products produced in Germany. Its principal executive offices, originally in Fort Lauderdale, Florida,
are currently located at 1200 North Federal Highway, Suite 200-A; Boca Raton, Florida 33432.
Description
of Business
Historical
The Registrant has never filed for bankruptcy,
receivership or similar proceedings nor, since the date of the last annual report on Form 10-K filed (for the fiscal year 2020),
has it been involved in any reclassification, merger, consolidation, or purchase or sale of a significant amount of assets not
in the ordinary course of business. From 2015 until July of 2020, the Registrant was inactive as its prior management resigned
leaving it indebted and without business operations. Consequently, during such period it lacked the funds required to comply with
its reporting obligations under the Exchange Act. Since July of 2020, with the assistance of its Parent (“a person that directly
or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified”,
Rule 405 of Commission Regulation C) and strategic consultant, Qest Consulting Group, Inc., a Colorado corporation (“Qest”),
the Registrant has eliminated its convertible debt and resumed filing of reports to the Commission. Most of the Registrant’s
efforts during the period from 2015 until July of 2020 involved first, repudiation of the series of 8% convertible notes issued
by prior management under terms which current management considered toxic (the “Convertible Notes”) but, after the
Registrant and its management were sued by two of the noteholders in the United States District Court for the Southern District
of New York (Case No. 15-cv-08860 entitled Adar Bays LLC v Puget Technologies Inc. and Hermann Burckhardt and Case
No. 15-cv-09542 entitled Union Capital LLC v Puget Technologies Inc. and Herman Burckhardt), lacking adequate funds
to defend such actions, the Registrant entered into settlement agreements and until July of 2020, was active only in conjunction
with seeking to discharge such liabilities. As a material subsequent event, all Convertible Note liabilities were discharged during
the period from July of 2020 through January of 2021.
On October 22, 2020, the Registrant
entered into a retainer and consulting agreement with Qest (the “Qest Agreement”) and in conjunction therewith, in
order to induce Qest to defer cash compensation, the Registrant’s officers and directors (who are also the principal stockholders,
officers and directors of Qest), contributed all of their securities in the Registrant, including rights to compensation in the
form of securities, to Qest. In conjunction with its role under the Qest Agreement, Qest advanced the Registrant funds used to
pay for auditing and legal fees in conjunction with its annual report, to pay balances due to the Registrant’s transfer agent
and to settle remaining obligations under the Convertible Notes and is temporarily providing it with office space, utilities and
the use of its personnel.
Current Strategic Business Plan
The Registrant’s current strategic business plan calls
for it to operate as a holding company operating in four diverse areas through subsidiaries. The four diverse areas in which the
Registrant intends to concentrate through subsidiaries are, in the order in which it is anticipated projects will be undertaken,
as follows:
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1.
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Through traditional acquisition of
development stage operating companies that the Registrant’s Board of Directors determines provide positive business
opportunities. In that regard, the Registrant is considering the acquisition of a consolidated company currently
engaged in the operation of behavioral health clinics in the State of Florida and is considering a joint venture in the solar energy
industry involving proprietary nanotechnologies with current members of its Board of Advisors;
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2.
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Through acquisition of promising privately held operating companies that eventually want to attain independent publicly traded status after a an incubation period as subsidiaries of the Registrant, during which time they would control most of their own operations but learn the intricacies of being regulated under state and federal securities regulation. The Registrant would control all legal and accounting operations and seek to generate savings and synergy by coordinating activities (e.g., purchases, marketing, warehousing, etc., among its subsidiaries);
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3.
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Through organization and operation of a Business Development Company under the limited exemptive provisions of Sections 54(a) through 65 of the Investment Company Act; and
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4.
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By formation of specialty acquisition vehicles for operating companies that desire to become public.
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In addition to the foregoing, given the experience that the
Registrant’s president has with tax related benefits of doing business in the Commonwealth of Puerto Rico, the Registrant
intends to explore opportunities for potential subsidiaries there.
The Registrant’s Proposed Program for Consolidated
Operating Subsidiaries
The Registrant proposes to seek out business opportunities
its management deems promising and which its Board of Directors feels it can supervise and develop. Initially, as described below,
this involves ownership and operation of healthcare related enterprises. Furthermore, the Registrant has formed a Board of Advisors
and believes that with the assistance of its Advisory Board, its strategic consultant, Qest, and the efforts of its officers, it
can find projects of interest that can be developed into diverse lines of business, with the Registrant itself serving as a resource
center for its diverse subsidiaries, providing savings in operational expenditures based on size and coordinated efforts and generating
synergy among its corporate family.
The Registrant’s Proposed Program for Operating
Incubator Subsidiaries
The Registrant proposes a program for promising privately
held operating companies that eventually want to attain independent publicly traded status but realize that subjection to regulation
under federal and state securities laws as well involvement with investors and the investment banking community has as many pitfalls
as benefits and thus justify a period of supervised mentoring. The former owners will be able to continue to grow and manage their
businesses on their own through the grant of a proxy to vote such subsidiary’s capital stock subject to the following conditions:
the Registrant will have the right to designate one member of the subsidiary’s board of directors, the Registrant will control,
with the advice and input of the subsidiary’s management, the subsidiary’s legal and auditing matters, and the subsidiary
will contribute along with all other subsidiaries, a proportional share of its net-after tax profits to the Registrant for payment
of administrative and overhead expenses. After a period as a subsidiary of the Registrant during which time the subsidiary’s
management would learn the intricacies of being regulated under state and federal securities regulation, the subsidiary’s
original stockholders or their successor’s in interest would, if they so elect, have the right to spin out as independent
public companies. That would be accomplished by having 15% of their common stock transferred as a stock dividend to the Registrant’s
stockholders, registered for such transfer with the Commission pursuant to Section 5 of the Securities Act, making them reporting
companies with the Commission pursuant to Sections 13 and 15(d) of the Exchange Act. Ten percent of the subsidiary’s securities
would be temporarily retained by the Registrant and either sold off or conveyed to the subsidiary operating as a Small Business
Development Company, and the rest would be returned to the operating subsidiary’s original stockholders in exchange for 75%
of the Registrant’s securities issued to acquire the operating subsidiary. To the extent the subsidiary’s original
stockholders had disposed of the Registrant stock received in the reorganization, they would have to either reacquire it for tender
to the Registrant, or forfeit their spinout options. In the event the original stockholders could not or did not elect to exercise
their spinout rights, the Registrant would elect to either retain the operating subsidiary as wholly owned, or, spin it out in
whole or in part to its stockholders through a registered dividend distribution procedure similar to the one described above anyway.
Business Development Companies
Assuming success in implanting the initial two stages of
its proposed plan of operation, the Registrant expects that it would next move on to the organization and operation of a business
development company under Sections 54 through 65 of the Investment Company Act (a “BDC”) which it believes would generate
significant synergy with the operating subsidiaries program described above. For example, the Registrant must not accumulate investment
securities or else it will be subject to regulation as an investment company. By having a BDC subsidiary, it can transfer the balance
of the securities remaining when it spins off a subsidiary to the business development company eliminating such risk as well as
helping capitalize the business development company. BDCs must concentrate on developing companies, must provide continuing management
assistance to the companies in which they invest but enjoy significant advantages in the form of limited regulation compared to
ordinary mutual funds and advantages in raising capital. It is anticipated that such project would not be initiated prior to 2023.
BDCs are similar to venture capital funds, they are. However, there are some key differences. One relates to the nature of the
investors each seeks. Venture capital funds are available mostly to large institutions and wealthy individuals through Limited
Offerings. In contrast, business development companies allow smaller, non- accredited investors to invest in them, and by extension,
in small growth companies.
Special Purpose Acquisition Companies (“SPAC”)
Subsequent to organization of a BDC subsidiary, assuming
success in doing so, the Registrant plans to organize a sequential series special purpose acquisition companies which its current
management and Qest believe will complement the other three proposed segments of its proposed business plans providing an additional,
more independent option for more seasoned companies that desire to attain publicly traded status. As in the foregoing case, the
Registrant would either distribute securities it retains in SPACs it organizes to its shareholders in the form of stock dividends,
or distribute them to its business development company subsidiary avoiding direct regulation as an investment company. A SPAC is
a “blank check” shell corporation designed to take companies public without going through the traditional IPO process.
SPACs allow retail investors to invest in private equity type transactions, particularly leveraged buyouts.
Caveat
The foregoing plans and business models are speculative,
totally reliant on the experience of the Registrant’s management and independent consultants and contractor’s to be
recruited and retained by the Registrant, and on market conditions beyond the Registrant’s control, and, on the Registrant’s
ability to obtain significant additional financing, as to which there can be no assurances. In addition, the Registrant is likely
to encounter significant competition in its quest for desirable acquisition candidates and thereafter, even if successful, in the
operations of the acquired companies. Consequently, no assurances can be provided that the Registrant’s ambitious current
business plans can or will be implemented as envisioned, or that even if implemented, they will prove successful.
Recent Acquisition Related Activities:
As material subsequent events, the Registrant has initiated
implementation of the initial two aspects of its strategic plan as follows:
BCSF
As disclosed in the recently executed Acquisition & Option
Agreement with Behavioral Centers of South Florida LLC (“BCSF”), a copy of which has been filed with the Commission
(see current report on Form 8-K dated August 25, 2021), BCSF is a centralized community behavioral health center providing its
clients/patients with mental health services ranging from psychiatry, individual therapy, psycho-social rehabilitation services
and case management in clinics located in the Florida Counties of Dade and Broward and, in collaboration with the Registrant, plans
to expand into Palm Beach County. It is currently organized under the laws of the State of Florida as a limited liability company
but, pursuant to the Acquisition & Option Agreement, it will convert into a Florida corporation as permitted under Section
607.11933, Florida Statutes.
BCSF currently operates a multi-location clinic employing
or independently contracting with 119 individuals, including two psychiatrists, one licensed mental health counselor supervisor,
one licensed clinical social worker supervisor and one licensed marriage and family therapy supervisor who supervise seventeen
therapists in the mental health department; one board certified behavior analyst, one board certified assistant behavior analyst
and two registered behavior technicians; and, five advanced registered nurse practitioners in the field of psychiatry. In the area
of case management four licensed clinical social worker supervisors supervise forty-nine licensed clinical social workers. The
clinic has provided services to approximately 2,150 patient/clients who remain in the system of which they have an active patient
base of approximately 1,100 at any one time but anticipate material expansion after the proposed Acquisition through the acquisition
of compatible and complementary businesses, as well as by establishing additional clinics, initially in the State of Florida. Its
major areas of concentration involve group therapy, psycho-social rehabilitation and comprehensive behavioral assessment but BCSF
is also highly involved in individual therapy, development of management skills, speech therapy, physical therapy, occupational
therapy, targeted case management, mental health treatment plans and medication management. Its activities are licensed by the
State of Florida through the Agency for Health Care Administration and are subject to conditions imposed by major insurance carriers
as well as government insurance programs such as Medicaid with which it coordinates its activities.
BCSF’s total revenues for the calendar years ended
December 31, 2018 (nine months), 2019 and 2020 (all unaudited and thus subject to material adjustments) increased from $959,871
to $3,237,687 and then to $5,540,711. Such numbers are currently unaudited but BCSF acknowledged that its financial statements
must be audited in accordance with requirements of Commission Regulation S-X and filed with the Commission no longer than 74 days
after closing (see SEC Adopts New Financial Statement Disclosure Requirements For Acquisitions And Dispositions).
The proposed acquisition will take place in two stages. First,
the acquisition of 50% of all of BCSF’s securities and equity interests plus an irrevocable option to purchase the balance
of BCSF, in each case the price being $2,500,000 payable in cash ($1,000,000) and in shares of the Registrant’s Class B Convertible
Preferred Stock. The Class B Convertible Preferred Stock issuable in conjunction with the initial part of the acquisition will
be valued at $2.00 per share, reflecting the Registrant’s lack of assets, income and operations and shell status under the
Exchange Act at such time, but at $5.00 per share for the exercise of the option to acquire the balance of BCSF’s securities,
reflecting the fact that at such time, the Registrant will have already become a company with assets, operations, income and profits,
and will no longer be classified as a “shell” for purposes of the Exchange Act.
D & D
On August 5, 2021, the Registrant entered into a letter of
intent to acquire D & D Rehab Center, Inc., a Florida corporation organized on February 5, 2010 (“D & D”).
D & D is a health care provider which trains or retrains individuals disabled by disease or injury to help them attain their
maximum functional capacity. It is registered in Centers for Medicare & Medicaid Services (CMS), National Plan and Provider
Enumeration System (NPPES). Its NPI number is 1952748709, assigned on June 2013. Its primary taxonomy code is 225400000X. It currently
uses 92 persons to provide services to its client/patients, six of whom are administrative employees and 86 are independent contractors
comprised of the following:
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Twenty-five persons implement various therapeutic modalities to children and adults at D & D’s clinic in Hialeah, nine of whom are occupational therapists, seven are physical therapists and nine are speech therapists.
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An additional sixty-one people provide applied behavioral analysis therapy for children with autism spectrum and other issues that impede their proper quotidian function at their homes, the latter being comprised of 45 registered behavioral technicians supervised by eleven board certified behavioral analysts (each with at least a master’s degree) assisted by five board certified assistant behavioral analysts.
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D & D’s total revenues for the calendar years
ended December 31, 2019 and 2020 were $3,595,291 and $3,635,240, respectively, with profits of $221,252 and $252,242 and D &
D anticipates income of approximately $5,000,000 for calendar 2021 with anticipated profits of $1,000,000. Such numbers are currently
unaudited but D & D acknowledged that its financial statements must be audited in accordance with requirements of Commission
Regulation S-X and filed with the Commission no longer than 74 days after closing (see SEC Adopts New Financial Statement Disclosure
Requirements For Acquisitions And Dispositions). D & D’s activities are licensed by the State of Florida through the
Agency for Health Care Administration and are also subject to contractual conditions imposed by major insurance carriers as well
as government insurance programs such as Medicaid with which it coordinates its activities. While its client/patient base is currently
centered on the Hispanic market in Dade County, it plans to incrementally increase its area of service throughout the State of
Florida, as permitted by its current license, and to all demographic groups.
The proposed transaction with D & D has been structured
in a manner similar to that reflected in the BCSF Acquisition Agreement. The D & D parties have tentatively agreed, subject
to conducting required due diligence and confirmations, that the Registrant will acquire D & D in two stages, first, a 50%
interest in exchange for $1,500,000 in cash equivalents and $1,500,000 in unregistered shares of the Registrant’s Class B
Convertible Preferred Stock, with an option to acquire the balance of D & D’s securities at the same price and comparable
terms within one year after the initial closing, although it is anticipated that the Registrant will exercise such option considerably
sooner. The Class B Convertible Preferred Stock would be valued based on the most recent price therefore paid to the Registrant
by investors or in conjunction with exercise of the Option for the BCSF acquisition unless a trading market had developed for shares
of the Registrant’s Class B Convertible Preferred Stock (unlikely at that time), in which case the mean between the high
offered and low bit price therefore on the fifth trading day prior to closing will be used as the valuation. In addition to the
Registrant`s shares received by the former D & D equity holders, during the initial two years following the acquisition the
D & D subsidiary would be entitled to receive up to an additional $100,000 in the Registrant Common Stock, $0.001 par value,
based on attaining net pre-tax profit performance goals, currently envisioned to be $2,000,000 for the calendar year ended December
31, 2022 and $3,000,000 for the calendar year ended December 31, 2023.
Transactions under Negotiation
The Registrant has entered into two additional letters of
intent to acquire companies in the health care industry but prices and terms have yet to be negotiated:
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The first, Florida Behavioral Center,
Inc. (dba “Florida Healthcare System” and referred to as “FHS”), organized in 2015 and based in Doral,
Florida, is a healthcare organization that provides mental health services through an experienced team of psychiatrists, mental
health counselors, case managers, and administrative staff. Common mental health concerns treated include anxiety, substance
abuse, depression, suicide risk, trauma, bipolar disorder, and attention deficit disorder; and targeted case management services
are offered for mental illness in patients of all ages.
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The second, Glades Medical Centers of
Florida LLC (“Glades”), a Florida limited liability company is the successor in interest to Glades Medical Centers
LLC, a Florida limited liability company organized on May 28, 2014 after its entry into a joint venture with Primary Medical
Physicians, LLC, also a Florida limited liability company (all collectively referred to as “The Glades Group”).
Its services focus on primary care diagnosis of and treatments for illnesses such as colds, flu, stomach aches or ear infections;
minor injury care such as less severe bumps, cuts, abrasions or sprains; pediatrics from common childhood illnesses like influenza,
bronchitis, rashes or infections, to minor injury care for cuts, lacerations, sprains or breaks; x-rays and in-house lab testing,
and occupational medicine.
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In each case, the companies have granted the Registrant a
90 day exclusive right to negotiate specific terms after it conducts required due diligence and the parties determine the most
appropriate valuations and form of acquisition. In each case, the acquired companies would become consolidated subsidiaries of
the Registrant and incorporated into the Registrant’s health care division, along with Behavioral Centers of South Florida,
LLC and D & D Rehab Center Inc., in order to generate synergy and attain significant operational savings. FHS’s total
revenues for the calendar years ended December 31, 2019, and 2020 (currently unaudited) were approximately $3.9 million and $4.1
million, respectively; and, revenues for the Glades Group for the calendar years ended December 31, 2019, and 2020 (currently unaudited)
were $700,000 and $500,000, respectively. While it is anticipated that the FHS transaction will involve a traditional acquisition,
the Glades Group acquisition would probably be part of the Registrant’s incubator program for companies that are interested
in potential future spinouts as independent public companies. In all three cases, the Registrant intends to conclude related negotiations
on or before November 30, 2021 with closings occurring by December 31, 2021.
Comments
The Registrant feels that the acquisition of D & D and
the additional transactions currently under negotiation will complement its proposed acquisition of BCSF generating significant
synergy and savings and looks forward to the possibility of acquiring other healthcare related businesses in the near future. As
in the case of BCSF, the foregoing constitute forward looking statements and the proposed transaction is reliant on successful
completion of this Limited Offering.
Caveat
The foregoing plans and business models
are speculative, totally reliant on the experience of the Registrant’s management and independent consultants and contractor’s
to be recruited and retained by the Registrant, and on market conditions beyond the Registrant’s control, and, on the Registrant’s
ability to obtain significant additional financing, as to which there can be no assurances. In addition, the Registrant is likely
to encounter significant competition in its quest for desirable acquisition candidates and thereafter, even if successful, in the
operations of the acquired companies. Consequently, no assurances can be provided that the Registrant’s ambitious current
business plans can or will be implemented as envisioned, or that even if implemented, they will prove successful.
Going
concern and Liquidity Considerations
The accompanying financial statements
have been prepared assuming that Registrant will continue as a going concern which contemplates the realization of assets and the
liquidation of liabilities in the normal course of business. As of July 31, 2021, the Registrant had recurring losses from operations,
an accumulated deficit of $6,737,606 and had earned no revenues. The Registrant intends to fund operations through equity
financing arrangements which may be insufficient to fund its capital expenditures, working capital and other cash requirements
for the year ending October 31, 2021.
The ability of the Registrant to emerge
from the development stage is dependent upon, among other things, obtaining additional financing to continue operations, and development
of its business plan. In response to these problems, management intends to raise additional funds through public or private placement
offerings and to acquire one or more operating companies. These factors, among others, raise substantial doubt about the Registrant’s
ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Note 2 Summary
of Significant Accounting Policies
Basis of Presentation of Unaudited Interim Financial Statements
The accompanying unaudited interim financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim
financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and
Exchange Commission (“Commission”). Accordingly, they do not contain all information and footnotes required by accounting
principles generally accepted in the United States of America for annual financial statements. In the opinion of the Registrant’s
management, the accompanying unaudited financial statements contain all the adjustments necessary (consisting only of normal recurring
accruals) to present the financial position of the Registrant as of July 31, 2021 and the results of operations and cash flows
for the periods presented. The results of operations for the quarterly period ended July 31, 2021 are not necessarily indicative
of the operating results for the full fiscal year or any future period. These unaudited interim financial statements should be
read in conjunction with the financial statements and related notes thereto included in the Registrant’s Annual Report on
Form 10-K for the year ended October 31, 2020 filed with the Commission on February 12, 2021.
Basic and Diluted Loss per Share
The Registrant computes loss per share
in accordance with “ASC-260”, “Earnings per Share” which requires presentation of both basic and diluted
earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net loss available
to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives
effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common
shares if their effect is anti-dilutive.
Registrant has shares of Class B Convertible
Preferred Stock (“Class B”) which can convert to common shares at a rate 10 shares common for each Preferred B share.
However since the inclusion of the effects of these potential conversions on the net loss per share would be anti-dilutive, loss
and diluted loss per share are equal. The total potential shares not included in the calculation are 30,019,040 as of July 31,
2021.
Recently Issued Accounting Pronouncements
Management has considered all recent
accounting pronouncements issued. The Registrant’s management believes that these recent pronouncements will not have a material
effect on the Registrant’s unaudited interim financial statements.
Note 3. Related
Party Transactions
During the nine-month period ended July
31, 2021, the Registrant entered into the following transactions with related parties:
Qest converted $46,844 of principal
and $71,995 of accrued interest owed to it by the Registrant into 118,839,180 common shares.
109,108,002 common shares were issued
to Qest as compensation under the Registrant’s employment agreement with its president, the rights to which have been assigned
to Qest.
Qest advanced $105,297 in cash and Registrant
accrued $90,000 in contract fees in the nine- month period ended July 31, 2021.
As of July 31, 2021 and October 31,
2020, there were $195,297 and $120,964 due to related parties, respectively.
The employment agreements for the Registrant’s
officers as of July 31, 2021, expired on October 31, 2021 and were orally renewed without compensation, as the Registrant seeks
their eventual replacements. As a material subsequent event, on August 19, 2021 the Registrant hired Ms. Karen Lynn Fordham as
its new president and chief executive officer with Hermann Burckhardt, its president and chief executive officer until that point
remaining as the chairman of the Registrant’s board of directors. Details concerning Ms. Forbes compensation are disclosed
in Note 1.
Note 4. Notes
Payable
A summary of notes payable and accrued interest for nine
months ended July 31, 2021 is as follows:
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Schedule of debt
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Adar
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LG
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Union
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Vis Vires
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TOTAL
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Notes Payable
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Balance 10/31/2020
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|
$
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9,099
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|
|
$
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21,256
|
|
|
$
|
54,859
|
|
|
$
|
14,460
|
|
|
$
|
99,674
|
|
|
|
|
|
|
|
|
|
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|
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Conversions
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|
|
(8,966
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)
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|
(21,256
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)
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(54,859
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)
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—
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|
|
|
(85,081
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)
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Payments
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|
|
(133
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)
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|
|
—
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|
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—
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|
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|
(14,460
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)
|
|
|
(14,593
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)
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Balance 7/31/2021
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|
$
|
—
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|
|
$
|
—
|
|
|
$
|
—
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|
|
$
|
—
|
|
|
$
|
—
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Accrued Interest
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|
|
|
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|
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|
|
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Balance 10/31/2020
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|
$
|
5,295
|
|
|
$
|
31,274
|
|
|
$
|
26,929
|
|
|
$
|
3,040
|
|
|
$
|
66,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversions
|
|
|
(5,295
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)
|
|
|
(31,274
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)
|
|
|
(26,929
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)
|
|
|
—
|
|
|
|
(63,498
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)
|
|
Payments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,040
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)
|
|
|
(3,040
|
)
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
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|
|
Balance 7/31/2021
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|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
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Convertible Note Payable – Number 1 Adar
On February 2, 2015, the Registrant
issued an unsecured 8% Convertible Redeemable Note to Adar Bays LLC (Note Number 1), in the amount of $75,000, which was due January
30, 2016 with interest on the unpaid principal balance thereof at the rate of eight percent (8%) per annum until the same became
due and payable, whether at maturity or upon acceleration or by prepayment or otherwise (Adar). The principal and any accrued interest
was convertible into shares of common stock at the discretion of the note holder. The conversion price (the “Conversion Price”)
was equal to 57.5% multiplied by the Market Price (as defined therein) (representing a discount rate of 42.5%). The Registrant
had the right to prepay the note only during the initial 180 days.
During 2015 a law suit was filed in
the United States District Court for the Southern District of New York (Case No. 15-cv-08860 entitled Adar Bays LLC v Puget
Technologies Inc. and Hermann Burckhardt against the Registrant and its management by Adar Bays LLC after the note (issued
by prior management) was repudiated by the Registrant’s current president as an invalid “toxic note”. Registrant
was unable to contest the litigation and the case was settled with the Registrant’s allegations formally withdrawn and the
cases settled during 2017, subject to the courts’ continuing jurisdiction to enforce the terms of the settlement agreement.
As a result. The Registrant recognized an additional $64,600 in debt related to the settlement. The Registrant was contractually
and judicially deprived of the ability to contest the validity of subsequent conversions and sales of Common Stock by being required
to honor irrevocable written instructions to its transfer agent issued by prior management. As a material subsequent event, by
January of 2021, all of the Registrant’s obligations pertaining to the note had been discharged through conversions and a
cash payment of $132.54, thus, as of the date of this quarterly report, the Registrant is subject to no legal proceedings nor does
its management know of any basis for any material legal proceedings against the Registrant.
At October 31, 2018 the Registrant had
a balance principal balance owed under the note of $118,000 and accrued interest of $21,217.
During fiscal 2019, 141,927,826 shares
were issued to the holder to convert $8,736 in principal and $0.00 in accrued interest. Interest expense of $5,600 was recognized.
At October 31, 2019, the Registrant had a balance principal balance owed of $9,099 and accrued interest of $5,295.
During fiscal 2020, 2,112,921,739 shares
were issued to the holder to convert $100,165 in principal and $27,122 in accrued interest. Interest expense of $5,600 was recognized.
At October 31, 2020, the Registrant had a balance principal balance owed of $109,264 and accrued interest of $26,817.
In the first quarter of fiscal 2021,
186,518,261 shares were issued to the holder to convert $9,099 in principal and $5,295 in accrued interest and a cash payment was
made of $132.54. At July 31, 2021, the Registrant had a balance principal balance owed of $0 and accrued interest of $0.
Over the course of this note, a total
of 2,441,367,826 shares were issued and $132.54 was paid to cover $139,600 in principal and $32,417 of interest.
Convertible Note Payable – Number 2 LG
On February 2, 2015, the Registrant
finalized a Convertible Redeemable Note with LG Capital Funding LLC (Note Number 2) in the amount of $53,500, which was due January
28, 2016 with interest on the unpaid principal balance thereof at the rate of eight percent (8%) per annum until the same became
due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The principal and any accrued interest
was convertible into shares of common stock at the discretion of the note holder. The conversion price (the “Conversion Price”)
was equal to 54% multiplied by the Market Price (as defined therein) (representing a discount rate of 46%). The Registrant had
the right to prepay the note only during the initial 180 days.
At October 31, 2018 the Registrant had a balance principal
balance owed of $21,256 and accrued interest of $19,594.
During fiscal 2019, interest expense
of $5,840 was recognized. At October 31, 2019, the Registrant had a balance principal balance owed of $21,256 and accrued interest
of $25,434.
During fiscal 2020, interest expense
of $5,600 was recognized. At October 31, 2020, the Registrant had a balance principal balance owed of $21,256 and accrued interest
of $31,274.
In the first quarter of fiscal 2021,
52,530,000 shares were issued to the holder to convert $21,256 in principal and $31,274 in accrued interest. At July 31, 2021,
the Registrant had a balance principal balance owed of $0 and accrued interest of $0.
Over the course of this note, a total
of 64,142,007 shares were issued to cover $53,500 in principal and $32,746 of interest.
Convertible note payable – Number 4 Union
The Registrant finalized an 8% Convertible
Redeemable Note with Union Capital LLC (Note Number 4) in the amount of $75,000, which was due January 30, 2016 with interest on
the unpaid principal balance thereof at the rate of eight percent (8%) per annum until the same became due and payable, whether
at maturity or upon acceleration or by prepayment or otherwise. The principal and any accrued interest was convertible into shares
of common stock at the discretion of the note holder. The conversion price (the “Conversion Price”) was equal to 57.5%
multiplied by the Market Price (as defined in the note) representing a discount rate of 42.5%. The Registrant could only prepay
the note during its initial 180 days.
During 2015 a law suit was filed in
the United States District Court for the Southern District of New York Case No. 15-cv-09542 entitled Union Capital LLC v
Puget Technologies Inc. and Herman Burckhardt) against the Registrant and its management by the holder after the Registrant’s
current president repudiated the notes issued to Union Capital LLC as invalid “toxic notes” (the “Convertible
Notes”). Because the Registrant had been left by prior management without funds, the Registrant was unable to contest the
litigation and both cases were settled with the Registrant’s allegations formally withdrawn and the cases settled during
2017, subject to the courts’ continuing jurisdiction to enforce the terms of the settlement agreement. As a result, the Registrant
recognized an additional $81,980 in debt related to the settlement, paid a forbearance payment of $8,000 in cash and transferred
5,000,000 common shares as an additional forbearance payment, of which 1,027 shares were from the Registrant and 4,998,973 were
borrowed from a shareholder (Qest). The Registrant was contractually and judicially deprived of the ability to contest the validity
of conversions and subsequent sales of Common Stock by being required to honor irrevocable written instructions to its transfer
agent issued by prior management. As a material subsequent event, by January of 2021, all of the Registrant’s obligations
pertaining to the Convertible Notes had been discharged through conversions or payments, thus, as of the date of this quarterly
report, the Registrant is subject to no legal proceedings nor does its management know of any basis for any material legal proceedings
against the Registrant.
At October 31, 2018 the Registrant had a balance principal
balance owed of $128,600 and accrued interest of $26,624.
During fiscal 2019, 406,279,540 shares
were issued to the holder to convert $60,400 in principal and $7,795 in accrued interest. Interest expense of $7,800 was recognized.
At October 31, 2019, the Registrant had a balance principal balance owed of $68,200 and accrued interest of $26,629.
During fiscal 2020, 343,486,654 shares
were issued to the holder to convert $13,341 in principal and $6,410 in accrued interest. Interest expense of $6,710 was recognized.
At October 31, 2020, the Registrant had a balance principal balance owed of $54,859 and accrued interest of $26,629.
In the first quarter of fiscal 2021,
733,192,576 shares were issued to the holder to convert $54,859 in principal and $26,929 in accrued interest. At July 31, the Registrant
had a balance principal balance owed of $0 and accrued interest of $0.
Over the course of this note, a total of 1,515,989,330 shares
were issued to cover $156,980 in principal and $42,741 of interest.
Convertible note payable – Number 5 Vis Vires
On February 27, 2015, the Registrant
finalized a Convertible Promissory Note with Vis Vires Group, Inc. (Note Number 5) in the amount of $50,000, which was due December
3, 2015 with interest on the unpaid principal balance thereof at the rate of eight percent (8%) per annum until the same became
due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The principal and any accrued interest
was convertible into shares of common stock at the discretion of the note holder. The conversion price (the “Conversion Price”)
was equal to 58% multiplied by the Market Price (as defined therein) representing a discount rate of 42%. The Registrant had the
right to prepay the note only during the initial 180 days.
At October 31, 2018 the Registrant had a balance principal
balance owed of $14,460 and accrued interest of $3,040.
During fiscal 2019, interest expense
of $0 was recognized. At October 31, 2019, the Registrant had a balance principal balance owed of $14,460 and accrued interest
of $3,040.
During fiscal 2020, interest expense
of $0 was recognized. At October 31, 2020, the Registrant had a balance principal balance owed of $14,460 and accrued interest
of $3,040.
In the first quarter of fiscal 2021,
$17,500 was paid in cash to the holder to convert $14,460 in principal and $3,040 in accrued interest. At July 31, 2021, the Registrant
had a balance principal balance owed of $0 and accrued interest of $0.
Over the course of this note, a total
of 12,087,383 shares were issued to cover $20,540 in principal, and $32,500 was paid in cash to cover $29,460 in principal and
$3,040 of interest.
Note
5. Subsequent Events
The Registrant has evaluated all events
that occurred after the balance sheet date through the date when the financial statements were issued to determine if they must
be reported. There were no material subsequent events through September 14, 2021 which needed to be disclosed in the accompanying
financial statements, except as disclosed in Note 1 and as follows.
In conjunction with the Registrant’s plan to revise
and improve its management disclosed in the Registrant’s annual report on Form 10-K for the fiscal year ended October 31,
2020 and in order to provide the leadership the Registrant’s board of directors believes the Registrant requires as it enters
into the healthcare field with the proposed acquisitions of Behavioral Centers of South Florida LLC and D & D Rehab Center,
Inc., etc., the Registrant has replaced Herman Burckhardt as its president and chief executive officer with Ms. Karen Lynn
Fordham, MBA. Mr. Burckhardt, first elected as the Registrant’s president and chief executive officer in October of 2015,
will remain as a member of and the chairman of the Registrant’s board of directors.
Pursuant to the terms of the Registrant’s employment
agreement with Ms. Fordham entered into on August 19, 2021, a copy of which was filed as exhibit 10.01 to a current report on
Form 8-K filed with the Commission on August 25, 2021 (the “Employment Agreement” and the “August 25 Current
Report”), Ms. Fordham will serve as the Registrant’s principal executive officer to whom all other executive officers
will be subordinate, subject to the directions of the Registrant’s board of directors. She will supervise all of the Registrant’s
affairs and be responsible for implementation of the business plans approved by the board of directors and for assuring compliance
by the Registrant and the Registrant personnel with all applicable laws. She will be subject to all duties and responsibilities
associated with the position of chief executive officer, subject to such limitations or specifications imposed by the Registrant’s
board of directors, including, serving as the Registrant’s general agent and spokesperson, subject to compliance with the
directions of its board of directors. Subject to ratification by the Registrant’s board of directors, Ms. Fordham will be
permitted to serve as a director of other public, private or governmental corporations, with or without compensation therefrom,
and is in fact, urged to do so provided that in the event of any conflicts of interest with her duties to the Registrant, her
duties to the Registrant will prevail, absent specific waiver on a case by case basis by the Registrant’s board of directors.
The term of the employment agreement is five years with automatic annual renewals thereafter unless one of the parties notifies
the other on a timely basis of its intention not to renew. It contains strict confidentiality and non-competition provisions requiring
Ms. Fordham to devote her full time to the Registrant unless otherwise permitted by the Registrant’s board of directors.
Pursuant to the terms of the Employment Agreement, Ms. Fordham will be entitled to compensation as follows:
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Ms. Fordham will be entitled to a signing bonus of $100,000 from proceeds
of the Limited Offering of the Registrant securities being effected in reliance on Commission Rule 506(b), payable within 15 business
days following initial closing on such Limited Offering;
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Ms. Fordham will be entitled to a base monthly salary, payable in arrears,
of $30,000 accruing until initial closing on the Limited Offering of the Registrant securities being effected in reliance on Commission
Rule 506(b);
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Ms. Fordham will be entitled to share with the Registrant’s other
senior executives approved by the board of directors in an annual cash bonus plan in an aggregate amount equal to 3% of the Registrant’s
net, after tax profits, payable within 15 business days following the filing of the Registrant’s annual report on Commission
Form 10-K, based on the audited financial disclosure contained therein, to be allocated among such officers in accordance with
criteria established by Ms. Fordham and ratified by the Board of Directors;
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Ms. Fordham will be entitled to participate in the Registrant’s
qualified incentive equity compensation stock option plans with other senior executives entitling them, in the aggregate, to options
to acquire designated Registrant securities with an aggregate market value on the grant date (which will coincide with the end
of the Registrant’s fiscal year but will be determined on the date of filing of the Registrant’s annual report on
Commission Form 10-K, based on the audited financial disclosure contained therein), equal to 10% percent of the Registrant’s
after tax profits for the subject year, to be allocated among such officers in accordance with criteria established by Ms. Fordham
and ratified by the Board of Directors; and
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Ms. Fordham will be entitled to expense reimbursement, including reimbursement
for the use of her personal automobile, or, at her option to a company vehicle, and for itemized eligible business expenses including
travel, lodging and entertainment, subject to ratification by the board of directors.
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The foregoing information is qualified in its entirety
by the information contained in the Employment Agreement.
As of the date of this quarterly report, Ms. Fordham does
not, directly or indirectly, own any of the Registrant’s securities, a situation which is expected to change soon. Her initial
priority will be closing on the BCSF acquisition and the Limited Offering; negotiating the definitive agreement with D & D;
seeking additional healthcare related acquisitions; and, recruiting a complete management team including a new secretary, a new
treasurer and chief financial officer, a chief compliance officer and an operational team. In addition, she will supervise the
preparation of a business plan seeking to consolidate healthcare related acquisitions in order to maximize synergy and minimize
costs. Acquisitions outside of the healthcare field will, unless an unusual opportunity arises, be given a lower priority until
the 2022 fiscal year.
The following information is summarized from Ms. Fordham
most recent bio provided to the Registrant:
Ms. Fordham, age 46, was born and raised in Grosse Pointe,
Michigan. She earned a master’s degree in business administration and a bachelor’s degree in science with minors in
business, social work and criminal justice from Western Michigan University. She is an accomplished healthcare executive with more
than 20 years of diverse experience specializing in operations, service line development, strategic planning, physician recruitment,
process improvement and financial management for large healthcare organizations. Her experience includes managing behavioral health
divisions in various large hospital settings, expertise valuable to Puget as it concentrates its emerging health care acquisition
strategy towards acquiring and developing integrated health care delivery systems that fuse behavioral and traditional primary
care. Analyzing her background disclosed below, the Registrant’s board of directors has determined that she is the ideal
candidate to implement its healthcare related acquisition strategy as well as to consolidate and supervise healthcare related operations
and determined that her management and leadership skills would work well in other areas as well.
For much of the past decade, Ms. Fordham has served in executive
roles as chief operating officer and then chief executive officer with the Detroit Medical Center (DMC) system where from 2015
to 2017 she was president and chief executive officer of Huron Valley-Sinai Hospital, a 158-bed full-service community teaching
hospital near downtown Detroit and Detroit Surgery Hospital, a behavioral health and acute care hospital, in the same market. Ms.
Fordham was also the service line leader for two of the Detroit Medical Center’s largest service lines, Orthopedics and Sports
Medicine and Imaging Services. In 2017 she founded Topside Strategies, a consulting firm working with physicians and healthcare
companies across the country. Ms. Fordham served as chief executive officer of Venice Regional Bayfront Health and Gulf Coast Medical
Group based in Venice, Florida from 2018 to 2020. Venice Regional Bayfront Health is a 313-bed facility and while
in this role, Ms. Fordham increased the operating margin by focusing on surgical growth in orthopedics, neurosurgery, and gynecology,
along with enhancing the organization’s quality scores to the highest level achievable as defined by the Leapfrog Group.
Gulf Coast Medical Group was comprised of seventy-one multidisciplinary physicians across. Ms. Fordham also served as the president
and chief executive officer of St. Joseph Hospital and St. Joseph Medical Group in Fort Wayne, Indiana where she increased earnings
by 40% year over year in the first quarter under her management and increased operating margin by 28%. From 2020-2021 Ms. Fordham
also served as the market chief executive officer for the East Coast Division for Wellvana Health based out of Nashville, Tennessee.
In that role she acted as the primary architect and executor of the revenue strategy for that division, identifying and executing
on new market and new product opportunities. She was also responsible for identifying and forming strategic partnerships that would
advance the company’s growth agenda and market position.
Ms. Fordham sits on the boards of Tidewell Hospice, Avidity
Home Health Care, and the Venice Chamber of Commerce, and has received many honors and awards, including inclusion in Detroit Crain’s
Business Top 40 under 40 in 2014 and the 2014 Esteemed Women of Michigan. In addition, in 2019, Ms. Fordham was recognized as a
Top 40 Business Professional by the Venice Gondolier and by SRQ Media as a Women in Business nominee.
