|
|
Item 5.
|
Market for Registrant’s Common Equity, Related Stockholder
Matters and Registrant Purchases of Equity Securities.
|
Market information.
The Registrant’s Common Stock is traded over
the Pink Open Market under the trading symbol “PUGE”. Over-the-counter market quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. The current transfer agent
for the Registrant’s securities is Issuer Direct Corporation with offices at One Glenwood Ave, Suite 1001; Raleigh, North
Carolina 27603. Its telephone number is 1.919.481.4000; its fax number is +1.919.481.6222; and, its email address is info@issuerdirect.com.
Trading Market for the Registrant’s Securities
Due to the difficulties experienced by the Registrant during
the past five years with reference to compliance with its reporting requirements under the Exchange Act and the demise of its business
operations during 2015 (when prior management left it as a deeply indebted shell), the Registrant’s securities have only traded
over the Pink Open Market (operated by the OTC Markets Group), the lowest and most speculative tier of the three marketplaces for
the trading of over-the-counter stocks. As the Registrant becomes current in its securities reporting requirements, filing of tax
returns and elimination of existing debt, and as it begins implementation of its new business model, its management will endeavor
to move trading of its securities to more closely regulated and exigent markets, aspiring by the end of 2021 to have its securities
traded on the OTCQX®, the top tier over the counter marketplace where many of the biggest and best over the counter companies
trade. All issuers there are required to meet both financial and reporting criteria and undergo a management review. They must
also be sponsored by an accredited third-party investment bank or attorney adviser. Approximately 370 securities trade on this
marketplace. If the Registrant’s business plans prove as successful as management hopes, it subsequently aspires to list its securities
for trading in one of the major exchanges (i.e., the NYSE or NASDAQ). Aspirations, of course, are not always realized, despite
best efforts, and thus, no assurances can be provided that the Registrant will be successful in improving the markets on which
its securities trade.
Price Range of Common Stock
The following chart discloses the high and low closing transaction
reports the Registrant’s common stock, as reported in the Pink Open Market (operated by the OTC Markets Group) for the calendar
quarters indicated. These quotations were obtained from market makers, are between dealers and do not include retail mark-ups,
mark-downs or other fees and commissions.
|
Quarter ended
|
|
Low close
|
|
High close
|
|
|
|
|
|
|
|
January 31, 2019
|
|
|
|
0.0003
|
|
|
|
0.0009
|
|
|
April 30, 2019
|
|
|
|
0.0002
|
|
|
|
0.0006
|
|
|
July 31, 2019
|
|
|
|
0.0002
|
|
|
|
0.0004
|
|
|
October 31, 2019
|
|
|
|
0.0001
|
|
|
|
0.0003
|
|
|
January 31, 2020
|
|
|
|
0.0001
|
|
|
|
0.0002
|
|
|
April 30, 2020
|
|
|
|
0.0001
|
|
|
|
0.0002
|
|
|
July 31, 2020
|
|
|
|
0.0001
|
|
|
|
0.0003
|
|
|
October 31, 2020
|
|
|
|
0.0001
|
|
|
|
0.0008
|
|
Shares Eligible for Future Sale
Of the 4,990,000,000 shares of the Registrant’s Common Stock
authorized, there were 4,745,728,041 shares outstanding as of January 31, 2021 of which 4,029,562,810 are free trading shares,
10,515,472 are held in reserve accounts pending release, and the additional 233,756,487 are possibly eligible for sale as free
trading shares under the exemption from registration provided by Section 4(a)(1) of the Securities Act.
None of the shares of Class B Convertible Preferred Stock
heretofore issued have been registered under Section 5 of the Securities Act, rather, they were issued pursuant to the exemptive
provisions of Sections 3(a)(9) or 4(a)(2) thereof as either exchanges of securities of the same issuer without payment of any additional
compensation. Additionally, it is anticipated that some will be issued in an anticipated limited offering expected to be effected
in reliance on Rule 506(b) of Regulation D promulgated under authority of Section 4(a)(2) of the Securities Act. Consequently,
there is currently no public market for the Registrant’s Class B Convertible Preferred Stock. However, such shares are convertible
into Common Stock after December 31, 2021 on a one for ten basis (ten shares of Common Stock for every share of Class B Convertible
Preferred Stock) and such conversion rate will not be reduced without the consent of the holders of a majority of the Class B Convertible
Preferred Stock despite any recapitalization (e.g., reverse stock splits of the Common Stock). There are currently 3,001,904
shares of Class B Convertible Preferred Stock outstanding of 5,000,000 authorized which would, after one year following their issuance
but no earlier that January 1, 2022, be convertible into 30,000,000 shares of Common Stock. If all of the unit components of the
securities which it is currently anticipated may be offered pursuant to the contemplated limited offering described above were
sequentially converted into Common Stock, a right they all ultimately share, then up to an additional 9,796,875 shares of Common
Stock would be outstanding, although, because the conversion rights of the Class B Convertible Preferred Stock are subject to rights
limiting the effects of reverse splits of the Common Stock, in the event of a reverse split of the Common Stock the number of shares
of Common Stock into which the Class B Convertible Preferred Stock could be converted would remain constant and thus the percentage
ownership of Common Stock as a class would increase in favor of the Class B Convertible Preferred Stock subsequently exercised.
In conjunction with the contemplated limited offering discussed
above, the Registrant has authorized a class of two year, 5% convertible subordinated debentures denominated as the “Series
2021 Class B Preferred Convertible, Subordinated Debentures” as well as warrants to purchase shares of the Class B Convertible
Preferred Stock (Warrants”). The Series 2021 Class B Preferred Convertible, Subordinated Debentures are convertible into shares
of Class B Convertible Preferred Stock and the Warrants are, of course, exercisable for shares of the Class B Convertible Preferred
Stock and in both cases, that stock is in turn convertible into shares of the Registrant’s Common Stock as described above. Conversion
and exercise of all such securities could result in the issuance of up to an additional 958,334 shares of Class B Convertible Preferred
Stock, in turn convertible into an additional 9,583,334 shares of Common Stock (but unaffected by any reverse splits, etc.).
The Registrant is considering the issuance of a dividend to
the holders of the Registrant’s Common Stock in shares of the Class B Convertible Preferred Stock and in such event, provided the
Registrant complies with Commission Rule 10b-17 under the Exchange Act and related requirements of FINRA, it is possible but not
assured that a public market could develop for the Class B Convertible Preferred Stock. If a public market for the Class B Convertible
Preferred Stock should develop, holders could only sell their Shares of Class B Convertible Preferred Stock into such market if
they were first registered with the Commission pursuant to Section 5 of the Securities Act or an exemption from such registration
requirement were available.
The principle exemption from registration requirements for
resales of securities is provided by Section 4(a)(1) under the Securities Act for transactions made by persons who are not issuers,
underwriters or dealers and thus not involved in a “distribution”. That in turn requires a subjective determination that
when acquired, it was not the intent of the recipient to immediately resell the subject securities. Because significant uncertainty
existed as a result of Commission interpretations and judicial decisions, the Commission promulgated Rule 144, a specific, non-exclusive
rule concerning transactions in reliance on Section 4(a)(1) under the Securities Act in the form of a “safe harbor”.
Safe harbor means that although not mandatory, compliance with the conditions of the rule assure that the Section 4(a)(1) exemption
has been complied with. The requirements for compliance with Rule 144 differ substantially depending on whether or not the Seller
is an Affiliate and depending on the nature of the issuer. Rule 144 is not available for securities of issuers that have become
“shell” companies, such as the Registrant, until one year after they have ceased to be “shell” companies. Additionally,
they are not available for issuer’s such as the Registrant that are delinquent in their filing obligations with the Commission
until one year after they have become current. Because Rule 144 is not the exclusive method for complying with Section 4(a)(1)
of the Securities Act, holders in substantial compliance with such rule can still resell their securities relying on what has come
to be known as the Section 4(1½) exemption. However, broker dealers and market makers much prefer transaction in full compliance
with Rule 144 and Section 4(1½) transactions are more expensive and time consuming, generally requiring legal opinions based
on detailed affidavits concerning prior transactions and associations with the issuer.
Whether relying on Rule 144 or the Section 4(1½) exemption,
before restricted securities can be publicly sold, they must be held for a certain period of time now varying between six months
for non-Affiliates of a reporting issuer current in its reporting obligations, to one year. In either case, there must be adequate
current information about the issuing company publicly available before the sale can be made. For reporting companies, this generally
means that the companies have complied with the periodic reporting requirements of the Exchange Act. For non-reporting companies
or delinquent reporting companies, that means that certain company information, including information regarding the nature of its
business, the identity of its officers and directors, and its financial statements, is publicly available.
There are additional requirements for Affiliates of the issuer.
The quantity of securities that an affiliate can sell during any three-month period cannot exceed the greater of 1% of the outstanding
shares of the same class being sold, or if the class is listed on a stock exchange, the greater of 1% or the average reported weekly
trading volume during the four weeks preceding the filing of a notice of sale on Form 144. Over-the-counter stocks such as those
of the Registrant can only be sold using the 1% measurement. Furthermore, sales must be handled in all respects as routine trading
transactions, and brokers may not receive more than a normal commission. Neither the seller nor the broker can solicit orders to
buy the securities. Finally, a notice on Commission Form 144 must be filed for transactions relying on Rule 144 if the sale involves
more than 5,000 shares or the aggregate dollar amount is greater than $50,000 in any three-month period. It is not anticipated
that any of the Subscribers to this Limited Offering will be Affiliates of the Registrant unless all the Units are not subscribed
and become available for Affiliate purchases.
Penny Stock Rules
The Commission has adopted rules that regulate broker-dealer
practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than
$5.00 (other than securities registered on certain national securities exchanges). The Registrant’s currently trading shares of
Common Stock constitute a penny stock under the Exchange Act. The classification of penny stock makes it more difficult for a broker-dealer
to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his/her investment. Any broker-dealer
engaged by a purchaser for the purpose of selling his or her shares in the Registrant will be subject to Rules 15g-1 through 15g-10
of the Exchange Act. Rather than creating a need to comply with those rules, most broker-dealers will refuse to attempt to sell
penny stocks.
The penny stock rules require a broker-dealer, prior to a
transaction not otherwise exempt to deliver a standardized risk disclosure document which contains a description of the nature
and level of risk in the market for penny stock in both public offerings and secondary trading; contains a description of the broker’s
or dealer’s duties to customers and the rights and remedies available to customers with respect to a violation of such duties or
other requirements of the Exchange Act; contains a brief, clear, narrative description of a dealer market, including “bid”
and “ask” prices for penny stocks and the significance of the spread between the bid and ask price; contains a toll-free
telephone number for inquiries on disciplinary actions; defines significant terms in the disclosure document or in the conduct
of trading penny stocks; and, contains other information and is in such form (including language, type, size and format) as the
Commission requires by rule or regulation.
The broker-dealer must also provide potential purchasers prior
to effecting any transaction in a penny stock, its bid and offer quotations; the compensation to be paid to the broker-dealer in
the transaction; the number of shares to which such bid and ask prices apply, other comparable information relating to the depth
and liquidity of the market for such stock; and, monthly account statements showing the market value of each penny stock held in
the customer’s account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt
from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement
to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. Such disclosure requirements
reduce the trading activity in the secondary market for the Registrant’s stock because it is currently subject to the penny stock
rules.
Holders of the Registrant’s Equity Securities
Of the 4,990,000,000 shares of the Registrant’s Common Stock
authorized, there are 4,745,728,041 shares outstanding as of January 31, 2021 of which 4,029,562,810 are free trading shares, 10,515,472
are held in reserve accounts pending release, and the additional 233,756,487 are possibly eligible for sale as free trading shares
under the exemption from registration provided by Section 4(a)(1) of the Securities Act. In addition, there are 500,000 shares
of Series A Super Voting Preferred Stock authorized and outstanding all of which are held by Qest, and 3,001,904 shares of Class
B Convertible Preferred Stock outstanding of 5,000,000 shares authorized, all held by Qest and Alpere, Inc., a Colorado corporation,
and Alejandro Funes, Esquire. All shares held by Qest are attributable to the Registrant’s current officers and directors who control
Qest.
Dividend Policy
Cash Dividends
The Class B Convertible Preferred Stock includes among its
attributes a preference in payment of cash dividends as follows:
The holders of Class B Convertible Preferred Stock shall be
entitled to receive dividends or distributions on a pro rata basis according to their holdings of shares of Class B Convertible
Preferred Stock when and if declared by the Board of Directors of the Registrant in the sum of twenty (20%) percent of the Corporation’s
net, after tax profits per year. Dividends shall be paid in cash. Dividends shall be cumulative. No cash dividends or distributions
shall be declared or paid or set apart for payment on the Common Stock in any calendar year unless cash dividends or distributions
on the Class B Convertible Preferred Stock for such calendar year are likewise declared and paid or set apart for payment. No declared
and unpaid dividends shall bear or accrue interest.
Nonetheless, the Registrant has never paid any cash dividends
and there can be no assurance that funds for payment of dividends will ever be available, or that even if available. The payment
of dividends in the future will depend on the existence of substantial earnings, the Registrant’s financial requirements and other
factors.
Stock Dividends
The Registrant is considering the possibility of declaring
d a stock dividend to the holders of the Registrant’s Common Stock in shares of the Class B Convertible Preferred Stock and in
such event, provided the Registrant complies with Commission Rule 10b-17 under the Exchange Act and related requirements of FINRA,
it is likely but not assured that such a market could develop, provided the shares had been held for a period of at least one year
or were registered under the Exchange Act.
The Registrant’s current business plan includes a program
for promising privately held operating companies that eventually want to attain publicly traded status but realize that subjection
to regulation under federal and state securities laws as well as involvement with investors and the investment banking community
has as many pitfalls as benefits and thus justify a period of supervised mentoring. After a two-and-a-half year period as subsidiaries
of the Registrant during which time the subsidiary’s management would learn the intricacies of being regulated under state and
federal securities laws, 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 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. 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.
If the Registrant is successful in the foregoing, then periodic
stock dividends would be effected. However, there is no assurance that the Registrant’s proposed plans will come to fruition or
that, even if they did, the spun off subsidiaries would be successful as independent entities and even if they were, that such
success would result in favorable stock prices.
Dividends through Business Development Company Subsidiary
Additional current plans of the Registrant call for it to
form and operate a Business Development Company through a subsidiary. Because business development companies are regulated investment
companies, they must distribute over 90% of their profits to stockholders. While they don’t pay corporate income tax on profits
before they distribute them to shareholders, stockholders receiving dividends will pay taxes on them at their tax rate for ordinary
income. If the Registrant is successful in forming and operating a Business Development Company, then its stockholders would receive
periodic stock or cash dividends, however, there are no assurances that the Registrant will be successful in forming a Business
Development Company and even if it is, that such subsidiary would be successful.
Caveat
Notwithstanding the Registrant’s aspirations as disclosed
above, there is no assurance that they will be attained and thus, no assurances that the Registrant will ever pay any cash or stock
dividends, despite its current plans.
Securities authorized for issuance under equity compensation
plans.
As of October 31, 2020, the Registrant had no equity compensation
plans in place other than commitments under its employment agreement with its president, Hermann Burckhardt and with Qest (see
“Item 13, Certain Relationships and Related Transactions, and Director Independence - Agreement with Qest; Agreement with
Messrs. Burckhardt, Jaspers and Alpere, Inc.”).
The terms of Mr. Burckhardt’s employment agreement with the
Registrant (as reported on a current report filed with the Commission on October 1, 2015) call for him to retain a preemptive right
to 10% of the Registrant’s capital stock but, due to required reserves for the Conversion Notes discussed above and an inadequate
quantity of authorized capital stock, Mr. Burckhardt has never received the capital stock to which he is contractually entitled.
Mr. Burckhardt has assigned his rights to such compensation to Qest.
Pursuant to its consulting agreement with the Registrant,
as disclosed in a current report on Form 8-K filed with the Commission on October 15, 2020, during the initial three year term
of the Qest Agreement, Qest is entitled to receive:
“Incentive Non-Qualified Stock Options” (as that
term is defined for purposes of the Internal Revenue Code entitling Qest to purchase 4.9% of the Registrant’s outstanding and reserved
securities (measured assuming exercise of all of the Incentive Non-Qualified Stock Options) of every kind which the Registrant
is authorized to issue, at an exercise price equal to 110% of the fair market price of the underlying securities on the date of
grant and, if no trading market exists for the Registrant’s securities on such date, at an exercise price equal to 110% of the
book value of the applicable securities on such date, and, if no book value exists for the Registrant’s securities on such date,
at an exercise price equal to 110% of the par value of the applicable securities on such date. The Incentive Non-Qualified Stock
Options would be entitled to preemptive rights and thus, any time the Registrant issues additional securities during the term of
the Qest Agreement or renewals thereof, additional Incentive Non-Qualified Stock Options shall concurrently be issued to Qest in
an amount equal to 4.9% of the additional securities issued. The Incentive Non-Qualified Stock Options and the securities issuable
on exercise thereof shall be included in any registration or qualification statements filed by the Registrant with the Commission
or any state securities regulatory authorities, registering any of its securities for sale or distribution. The Registrant has
been informed by Qest that, subject to compliance with applicable legal requirements, a portion of the Incentive Non-Qualified
Stock Options to be issued to Qest would probably be transferred by Qest its officers, directors, employees or to third party independent
contractors, all of whom would assist Qest in the performance of its duties to the Registrant.
For the same reasons that securities due to the Registrant’s
president have not been issued, Qest has deferred its right to receipt of the foregoing until such time as the Registrant’s authorized
capitalization is adequate to both its current requirements and issuance of the subject securities.
Equity securities of the Registrant sold by the Registrant
during the period commencing on November 1, 2019 and ending on October 31, 2020
The only securities sold by the Registrant during the period
commencing on November 1, 2019 and ending on October 31, 2020 involved conversion of preexisting debt securities and debts in each
case in reliance on the exemptions from registration requirements provided by Section 3(a)(9) of the Securities Act. In conjunction
therewith, the Registrant designated 5,000,000 shares of its Preferred Stock, $0.001 par value as Class B Convertible Preferred
Stock and issued 3,000,000 of such shares to Qest and Alpere, Inc., in a debt to equity conversion involving $3,282,695.69. In
addition, 118,839,180 shares of its Common Stock were issued upon exercise of conversion rights pertaining to its 8% Convertible
Notes. The Registrant has never made repurchases of its securities although, subject to availability of funds, it may do so in
the future in order to obtain securities for equity compensation plans ratified by the shareholders. As a subsequent event, an
additional 1,904 shares of Class B Convertible Preferred Stock were issued during January of 2021 to Alejandro Funes, Esquire,
an attorney who had performed legal work for the Registrant.
|
|
Item 8.
|
Financial Statements and Supplementary Data.
|
Puget
Technologies, Inc.
INDEX TO AUDITED FINANCIAL STATEMENTS
FOR THE YEAR ENDED OCTOBER 31, 2020 AND
2019
Report of Independent Registered Public Accounting
Firm
To the shareholders and the board
of directors of Puget Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying
balance sheets of Puget Technologies, Inc. as of October 31, 2020 and 2019, the related statements of operations, stockholders’
equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position
of the Company as of October 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended,
in conformity with accounting principles generally accepted in the United States.
Basis for Opinion
These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance
with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides
a reasonable basis for our opinion.
Substantial Doubt about the Company’s
Ability to Continue as a Going Concern
The accompanying financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements,
the Company has suffered recurring losses from operations and has a significant accumulated deficit. In addition, the Company
continues to experience negative cash flows from operations. These factors raise substantial doubt about the Company’s ability
to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ BF Borgers CPA PC
BF Borgers CPA PC
We have served as the Company’s
auditor since 2015
Lakewood, CO
February 12, 2021
Puget
Technologies, Inc.
Balance
Sheet
|
|
|
October 31, 2020
|
|
October 31, 2019
|
|
|
|
(Audited)
|
|
(Audited)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
55
|
|
|
$
|
97
|
|
|
Total current assets
|
|
|
55
|
|
|
|
97
|
|
|
Total assets
|
|
$
|
55
|
|
|
$
|
97
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
36,971
|
|
|
|
33,431
|
|
|
Accrued wages
|
|
|
—
|
|
|
|
1,332,000
|
|
|
Related party debt
|
|
|
120,964
|
|
|
|
475,314
|
|
|
Current portion of Notes Payable
|
|
|
99,674
|
|
|
|
813,180
|
|
|
Accrued interest on Current portion of Notes Payable
|
|
|
66,538
|
|
|
|
590,901
|
|
|
Total current liabilities
|
|
|
324,147
|
|
|
|
3,244,826
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
|
Notes payable
|
|
|
—
|
|
|
|
—
|
|
|
Total long-term liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
324,147
|
|
|
|
3,244,826
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
Common stock, $.001 par value;
|
|
|
|
|
|
|
|
|
|
Authorized - 2020 - 4,990,000,000, 2019 - 2,990,000,000; Issued - 2020 - 3,545,540,022, 2019 - 843,490,790
|
|
|
3,545,540
|
|
|
|
843,491
|
|
|
Preferred A - $.001 par value; Authorized and Issued - 500,000
|
|
|
500
|
|
|
|
500
|
|
|
Preferred B - $.001 par value; Authorized - 5,000,000;
|
|
|
|
|
|
|
|
|
|
Issued - 2020 - 3,001,904, 2019 - 0
|
|
|
3,000
|
|
|
|
—
|
|
|
Paid in Capital
|
|
|
2,193,434
|
|
|
|
599,736
|
|
|
Deficit accumulated during the development stage
|
|
|
(6,066,566
|
)
|
|
|
(4,688,456
|
)
|
|
Total stockholders’ equity/(deficit)
|
|
|
(324,092
|
)
|
|
|
(3,244,729
|
)
|
|
Total liabilities and stockholders’ equity
|
|
$
|
55
|
|
|
$
|
97
|
|
Puget
Technologies, Inc.
Statement of Operations
|
|
|
For the Year Ended
|
|
For the Year Ended
|
|
|
|
October 31, 2020
|
|
October 31, 2019
|
|
|
|
(Audited)
|
|
(Audited)
|
|
|
|
|
|
|
|
Sales
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
936,177
|
|
|
|
229,621
|
|
|
Wages accrued for officers
|
|
|
433,692
|
|
|
|
366,030
|
|
|
Legal and professional fees
|
|
|
7,940
|
|
|
|
9,690
|
|
|
Other general and administrative
|
|
|
301
|
|
|
|
326
|
|
|
Total expenses
|
|
$
|
1,378,110
|
|
|
$
|
605,667
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) from operations
|
|
$
|
(1,378,110
|
)
|
|
$
|
(605,667
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Provision (credit) for taxes on income
|
|
|
—
|
|
|
|
—
|
|
|
Net (loss)
|
|
$
|
(1,378,110
|
)
|
|
$
|
(605,667
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding
|
|
|
1,008,310,703
|
|
|
|
575,491,930
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share
|
|
$
|
(0.001367
|
)
|
|
$
|
(0.001052
|
)
|
Puget
Technologies, Inc.
Statement of Stockholders’ Equity (Deficiency)
|
|
|
|
|
|
|
Preferred
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
A
|
|
B
|
|
Additional Paid-In Capital
|
|
Accumulated Deficit
|
|
Total Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, October 31, 2018
|
|
|
240,462,687
|
|
|
$
|
240,463
|
|
|
$
|
500
|
|
|
|
|
|
|
$
|
1,030,901
|
|
|
$
|
(4,082,789
|
)
|
|
$
|
(2,810,925
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued for debt conversions
|
|
|
548,207,366
|
|
|
|
548,207
|
|
|
|
|
|
|
|
|
|
|
|
(382,375
|
)
|
|
|
|
|
|
|
165,832
|
|
|
Issued for stock compensation
|
|
|
54,820,737
|
|
|
|
54,821
|
|
|
|
|
|
|
|
|
|
|
|
(48,790
|
)
|
|
|
|
|
|
|
6,031
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(605,667
|
)
|
|
|
(605,667
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, October 31, 2019
|
|
|
843,490,790
|
|
|
|
843,491
|
|
|
|
500
|
|
|
|
|
|
|
|
599,736
|
|
|
|
(4,688,456
|
)
|
|
|
(3,244,729
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advance converted to Preferred B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
|
2,063,348
|
|
|
|
|
|
|
|
2,066,348
|
|
|
Issued for debt conversions
|
|
|
2,456,408,393
|
|
|
|
2,456,408
|
|
|
|
|
|
|
|
|
|
|
|
(297,701
|
)
|
|
|
|
|
|
|
2,158,707
|
|
|
Issued for stock compensation
|
|
|
245,640,839
|
|
|
|
245,641
|
|
|
|
|
|
|
|
|
|
|
|
(171,949
|
)
|
|
|
|
|
|
|
73,692
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,378,110
|
)
|
|
|
(1,378,110
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, October 31, 2020
|
|
|
3,545,540,022
|
|
|
$
|
3,545,540
|
|
|
$
|
500
|
|
|
$
|
3,000
|
|
|
$
|
2,193,434
|
|
|
$
|
(6,066,566
|
)
|
|
$
|
(324,092
|
)
|
Puget
Technologies, Inc.
Statement of Cash Flows
|
|
|
For the Year Ended
|
|
For the Year Ended
|
|
|
|
October 31, 2020
|
|
October 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operations:
|
|
|
|
|
|
|
|
|
|
Net (loss)
|
|
$
|
(1,378,110
|
)
|
|
$
|
(605,667
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net (loss) to cash provided (used) by activities:
|
|
|
|
|
|
|
|
|
|
Stock compensation
|
|
|
73,692
|
|
|
|
6,031
|
|
|
Conversion Interest Expense
|
|
|
795,322
|
|
|
|
88,901
|
|
|
Change in current assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Expenses paid by related parties
|
|
|
4,020
|
|
|
|
—
|
|
|
Accounts payable and accrued expenses
|
|
|
504,394
|
|
|
|
498,660
|
|
|
Net cash flows from operations:
|
|
|
(682
|
)
|
|
|
(12,075
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of common stock
|
|
|
|
|
|
|
—
|
|
|
Paid in capital
|
|
|
|
|
|
|
—
|
|
|
Advances from shareholders and related parties
|
|
|
640
|
|
|
|
11,776
|
|
|
Proceeds/(Payment) of notes payable
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from financing activities
|
|
|
640
|
|
|
|
11,776
|
|
|
Net cash flows
|
|
|
(42
|
)
|
|
|
(299
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents, beginning of period
|
|
|
97
|
|
|
|
396
|
|
|
Cash and equivalents, end of period
|
|
$
|
55
|
|
|
$
|
97
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow disclosures:
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Cash paid for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental non-cash transaction disclosures:
|
|
|
|
|
|
|
|
|
|
Shares issued for services
|
|
$
|
73,692
|
|
|
$
|
6,031
|
|
|
Debt converted to equity
|
|
$
|
3,429,733
|
|
|
$
|
76,931
|
|
Puget Technologies, Inc.
Notes to Financial Statements
October 31, 2020
|
1. Organization
and Business Operations
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.
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 calendar year 2014), nor 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
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 most of its 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 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 to pay for auditing and legal fees in conjunction with this 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.
The Registrant is accounting for transactions related to its
prior business activities as Discontinued Operations in the financial statements. The Registrant has generated limited revenue
to date and consequently its operations are subject to all risks inherent in the establishment of a new business enterprise. For
the period from inception on March 17, 2010 through October 31, 2020 the Registrant has an accumulated deficit of $6,066,566.
Going Concern
The financial statements have been prepared on a going concern
basis which assumes the Registrant will be able to realize its assets and discharge its liabilities in the normal course of business
for the foreseeable future. The Registrant has incurred losses since inception resulting in an accumulated deficit of $6,066,566
as of October 31, 2020 and further losses are anticipated in the development of its business raising substantial doubt about the
Registrant’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon the Registrant
generating profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities
arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve
months with existing cash on hand and loans from directors or third parties and or private placement of common stock.
2. Summary of
Significant Accounting Policies
Basis of Presentation
The financial statements of the Registrant have been prepared
in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.
Principles of Consolidation
The Registrant does
not currently have any subsidiaries.
Cash and Cash Equivalents
The Registrant considers all highly liquid instruments with
a maturity of three months or less at the time of issuance to be cash equivalents. The Registrant had $55 and $97 cash and cash
equivalents as of October 31, 2020 and 2019.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amount of revenues and expenses during the reporting period. Actual results could differ from
those estimates.
Foreign Currency Translation
The Registrant’s functional currency and its reporting currency
is the United States dollar.
Fair Value of Financial Instruments
The Registrant’s financial statements consist primarily of
cash, accounts payable, related party loans, and notes payable. The carrying amounts of such financial instruments approximate
their respective estimated fair value due to the short-term maturities and approximate market interest rates of those instruments.
Concentrations of Credit Risks
The Registrant’s financial instruments that are exposed to
concentrations of credit risk primarily consist of its cash and cash equivalents. The Registrant places its cash and cash equivalents
with financial institutions of high creditworthiness. The Registrant’s management plans to assess the financial strength and credit
worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
Share-Based Expense
ASC 718, “Compensation – Stock Compensation,”
prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired.
Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such
as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee
stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized
over the period during which an employee is required to provide services in exchange for the award, known as the requisite service
period (usually the vesting period).
The Registrant accounts for stock-based compensation issued
to non-employees and consultants in accordance with the provisions of ASC 505-50, “Equity – Based Payments to Non-Employees.”
Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable:
(a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction
is determined at the earlier of performance commitment date or performance completion date.
Related Parties
The Registrant follows subtopic 850-10 of the FASB Accounting
Standards Codification for the identification of related parties and disclosure of related party transactions. Pursuant to Section
850-10-20 the related parties include: a. affiliates of the Registrant; b. entities for which investments in their equity
securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15,
to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension
and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Registrant; e. management
of the Registrant; f. other parties with which the Registrant may deal if one party controls or can significantly influence
the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully
pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies
of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence
the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The financial statements will include disclosures of material
related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course
of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements
is not required in those statements. The disclosures will include: a. the nature of the relationship(s) involved; b. description
of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which
income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions
on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are
presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d.
amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the
terms and manner of settlement.
Income Taxes
The Registrant accounts for income taxes using
the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The asset and
liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of
temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit
carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in
effect when the differences are expected to reverse. The Registrant records a valuation allowance to reduce deferred tax assets
to the amount that is believed more likely than not to be realized. As at October 31, 2020 and 2019, the Registrant
did not have any amounts recorded pertaining to uncertain tax positions.
Earnings (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.
Fiscal Periods
The Registrant’s fiscal year end is October 31.
Recently Issued Accounting Pronouncements
The Registrant has reviewed all recently issued, but not yet
effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause
a material impact on its financial statements.
3. Notes Payable
A summary of notes payable for the years ended October 31,
2020, 2019 and 2018, excluding related party transactions (see note 7), is as follows:
|
Notes Payable
|
|
Adar
|
|
LG
|
|
Union
|
|
Vis Vires
|
|
Shield
|
|
Total
|
|
Balance 10/31/2018
|
|
$
|
118,000
|
|
|
$
|
21,256
|
|
|
$
|
128,600
|
|
|
$
|
14,460
|
|
|
$
|
600,000
|
|
|
$
|
882,316
|
|
|
Conversions
|
|
|
(8,736
|
)
|
|
|
|
|
|
|
(60,400
|
)
|
|
|
|
|
|
|
|
|
|
|
(69,136
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance 10/31/2019
|
|
|
109,264
|
|
|
|
21,256
|
|
|
|
68,200
|
|
|
|
14,460
|
|
|
|
600,000
|
|
|
|
813,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversions
|
|
|
(100,165
|
)
|
|
|
|
|
|
|
(13,341
|
)
|
|
|
|
|
|
|
(600,000
|
)
|
|
|
(713,506
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance 10/31/2020
|
|
$
|
9,099
|
|
|
$
|
21,256
|
|
|
$
|
54,859
|
|
|
$
|
14,460
|
|
|
$
|
—
|
|
|
$
|
99,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued Interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance 10/31/2018
|
|
$
|
21,217
|
|
|
$
|
19,594
|
|
|
$
|
26,624
|
|
|
$
|
3,040
|
|
|
$
|
400,981
|
|
|
$
|
471,456
|
|
|
Accruals
|
|
|
5,600
|
|
|
|
5,840
|
|
|
|
7,800
|
|
|
|
|
|
|
|
108,000
|
|
|
|
127,240
|
|
|
Conversions
|
|
|
—
|
|
|
|
|
|
|
|
(7,795
|
)
|
|
|
|
|
|
|
|
|
|
|
(7,795
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance 10/31/2019
|
|
|
26,817
|
|
|
|
25,434
|
|
|
|
26,629
|
|
|
|
3,040
|
|
|
|
508,981
|
|
|
|
590,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruals
|
|
|
5,600
|
|
|
|
5,840
|
|
|
|
6,710
|
|
|
|
|
|
|
|
108,000
|
|
|
|
126,150
|
|
|
Conversions
|
|
|
(27,122
|
)
|
|
|
|
|
|
|
(6,410
|
)
|
|
|
|
|
|
|
(616,981
|
)
|
|
|
(650,513
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance 10/31/2020
|
|
$
|
5,295
|
|
|
$
|
31,274
|
|
|
$
|
26,929
|
|
|
$
|
3,040
|
|
|
$
|
—
|
|
|
$
|
66,538
|
|
Note Payable Adar
On February 2, 2015, the Registrant issued an unsecured 8%
Convertible Redeemable Note # 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, 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 was 57.5% multiplied by the Market Price (as defined therein) representing a discount rate of 42.5%. 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 because successor
management had repudiated the note as an invalid “toxic note”. The Registrant was unable to contest the litigation due
to lack of funds and the case was settled during 2017 with the Registrant’s allegations formally withdrawn, subject to the courts’
continuing jurisdiction to enforce the terms of the settlement agreement. The Registrant recognized an additional $64,600 in debt
related to the settlement. Pursuant to the terms of the settlement the Registrant was deprived of the ability to contest the validity
of conversions and subsequent sales of Common Stock due to irrevocable written instructions issued by prior management to its transfer
agent.
At October 31, 2018 the Registrant had a principal balance
owed of $118,000 and accrued interest of $21,217. During fiscal 2019, 141,927,829 shares were issued to Adar 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 Adar 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 Adar to convert $9,099 in principal and $5,295 in accrued interest and a cash
payment was made of $132.54. 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 and a cash payment of $132.54. Over the course of this note, a
total of 2,447,366,770 shares were issued and $132.54 was paid to cover $139,600 in principal and $32,417 of interest.
Note Payable LG
On February 2, 2015, the Registrant finalized a
second 8% Convertible Note 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 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 was 54% multiplied by the Market Price (as defined therein) representing a discount rate of 46%. 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 $5,840 was recognized. At October 31, 2020, the Registrant had a balance
principal balance owed of $21,256 and accrued interest of $31,274. As a material subsequent event, during January of 2021, 52,530,000
shares were issued to LG to convert $21,256 in principal and $31,274 in accrued interest. At January 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.
Note Payable Union
On February 2, 2015, the Registrant finalized a third 8% Convertible
Note 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 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 was 57.5% multiplied
by the Market Price (as defined therein) representing a discount rate of 42.5%.
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 Union because, as in the case
of Adar, successor management had repudiated the note as an invalid “toxic note”. The Registrant was unable to
contest the litigation due to lack of funds and the case was settled during 2017 with the Registrant’s allegations
formally withdrawn, subject to the courts’ continuing jurisdiction to enforce the terms of the settlement agreement.
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 Qest. Pursuant to the terms of the settlement the Registrant was deprived of the
ability to contest the validity of conversions and subsequent sales of Common Stock due to irrevocable written instructions
issued by prior management to its transfer agent.
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 Union
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 Union 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 $26,929. During
January of 2021, 733,192,576 shares were issued to Union to convert $54,859 in principal and $26,929 in accrued interest. As a
material subsequent event, by January 31 of 2021, all of the Registrant’s obligations pertaining to Union had been discharged
through conversions or payments. 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.
Note Payable Vis Vires
On February 27, 2015, the Registrant finalized a fourth 8%
Convertible Note 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 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
was 58% multiplied by the Market Price (as defined therein) representing a discount rate of 42%. 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. During January of 2021, $17,500 was paid in cash to the Holder to convert $14,460
in principal and $3,040 in accrued interest. At January 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 Payable Shield
During 2013, the Registrant’s prior management entered into
a Master Credit Agreement under which $775,000 was advanced to the Registrant. Funds advanced under the terms of that note bear
interest at 12% for the first year from advancement and 18% thereafter. The note was subsequently acquired by an unaffiliated party.
In February 2015, the note was amended to allow for conversion of balances from time to time into shares of the Registrant’s common
stock as follows:
The conversion price (the “Conversion Price”) shall
equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or
rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations,
recapitalization, reclassifications, extraordinary distributions and similar events). The “Variable Conversion Price”
shall mean 58% multiplied by the Market Price (as defined herein) (representing a discount rate of 42%). “Market Price”
means the average of the lowest three (3) Trading Prices (as defined below) for the Common Stock during the ten (10) Trading Day
period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security
as of any date, the price at which trades occurred on the Over-the-Counter Bulletin Board, Pink Sheets electronic quotation system
or applicable trading market (the “OTC”) as reported by OTC Markets on their website or, if the OTC is not the principal
trading market for such security, the closing bid price of such security on the principal securities exchange or trading market
where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners,
the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets”. If
the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be
the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted
for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. “Trading
Day” shall mean any day on which the Common Stock is tradable for any period on the OTC, or on the principal securities exchange
or other securities market on which the Common Stock is then being traded. In all cases, the Conversion Price cannot be below a
floor price of $.0005 per share.
At October 31, 2018 the Registrant had a balance
principal balance owed of $600,000 and accrued interest of $400,981. During fiscal 2019, interest expense of $108,000 was recognized.
At October 31, 2019, the Registrant had a balance principal balance owed of $600,000 and accrued interest of $508,981.
During fiscal 2020, interest expense of $108,000 was recognized. On October 31, 2020, $600,000 in principal and $616,981 in accrued
interest was converted by the Holder into 633,518 Preferred B shares thus as of October 31, 2020 the Registrant had a balance
principal balance owed of $0 and accrued interest of $0.
Over the course of this note, a total
of 9,822,607 common shares were issued to cover $175,000 in principal, and $38,251 of interest and 633,518 Preferred B shares were
issued to cover $600,000 in principal and $616,981.
4. Capital Stock
Common Stock:
The authorized common stock capital par value $0.001 per share
of the Registrant was 4,990,000,000 as of October 31, 2020 and 2,990,000,000 as of October 31, 2019. Shares issued during 2020
and 2019 were as follows: 2020: For debt conversions - 2,456,408,393 shares; for executive compensation - 245,640,839 shares. 2019:
For debt conversions - 548,207,366 shares; for executive compensation - 54,820,737 shares. There were 240,462,687 shares outstanding
at October 31, 2018, 843,490,790 shares outstanding at October 31, 2019 and 3,545,540,022 shares outstanding at October 31, 2020.
Preferred Stock:
The Registrant has 10,000,000 shares
of Preferred Stock, $0.001 par value, authorized with attributes to be designated from time to time by its Board of Directors.
To date, attributes have been designated for 500,000 shares of Series A-Super Voting Preferred
Stock and 5,000,000 shares of Class B Convertible Preferred Stock.
All
of the Series A-Super Voting Preferred Stock authorized was issued and outstanding during the fiscal years ended October 31, 2018,
2019 1nd 2020. Each share is entitled to 10,000 votes (5,000,000,000 in the aggregate). There are no provisions with respect to
redemption or dividends.
The shares of Class B Convertible Preferred Stock
were designated during 2020 and consequently, none were issued during 2018 or 2019. 3,000,000 were issued and outstanding at October
31, 2020. The shares of Class B Convertible Preferred Stock have the following attributes:
|
1.
|
Voting. Each share of the Class B Convertible Preferred Stock shall have 1,000 times the number of votes on all matters submitted to the shareholders than do shares of the Corporation’s common stock, $0.001 par value (the “Common Stock”), 4,990,000,000 shares of which are currently authorized and into which shares of Class B Convertible Preferred Stock are convertible, as provided in Section 4, at the record date for the determination of the shareholders entitled to vote on such matters or, if no such record date is established, at the date such vote is taken or any written consent of such shareholders is effected.
|
|
|
|
|
2.
|
Dividends. The holders of Class B Convertible Preferred Stock shall be entitled to receive dividends or distributions on a pro rata basis according to their holdings of shares of Class B Convertible Preferred Stock when and if declared by the Board of Directors of the Registrant in the sum of twenty (20%) percent of the Corporation’s net, after tax profits per year. Dividends shall be paid in cash. Dividends shall be cumulative. No cash dividends or distributions shall be declared or paid or set apart for payment on the Common Stock in any calendar year unless cash dividends or distributions on the Class B Convertible Preferred Stock for such calendar year are likewise declared and paid or set apart for payment. No declared and unpaid dividends shall bear or accrue interest.
|
|
|
|
|
3.
|
Liquidation Preference. Upon the liquidation, dissolution and winding up of the Corporation, whether voluntary or involuntary, the holders of the Class B Convertible Preferred Stock then outstanding shall be entitled to receive out of the assets of the Corporation, whether from capital or from earnings available for distribution to its shareholders, before any amount shall be paid to the holders of Common Stock, ten times that sum available for distribution to Common Stock holders.
|
|
|
|
|
4.
|
Conversion. The holders of shares of Class B Convertible Preferred
Stock shall, on and after January 1, 2022, have the right to convert each share of Class B Convertible Preferred Stock into fully-paid
and nonassessable shares of Common Stock. Each share of Class B Convertible Preferred Stock shall be convertible at a Conversion
Rate of 10 shares of Common Stock, subject to the terms set forth in this Section 4.
|
|
|
(a)
|
Certain Adjustments for Stock Splits, Mergers,
Reorganizations, Etc.
|
|
|
(1)
|
In the event the outstanding shares of Common
Stock shall, after the filing of this Resolution, be combined (reverse split) by reclassification
or otherwise, or in the event of a reclassification, reorganization or exchange or any
merger, acquisition, consolidation or reorganization of the Corporation with another
Corporation, no such event which shall have the effect of reducing the number of shares
of the Corporation’s Common Stock or increasing their par value or otherwise reducing
the number of shares of Common Stock into which the shares of Class B Convertible Preferred
Stock are or would be convertible shall negatively impact the conversion ratio of ten
shares of Common Stock for each share of Class B Convertible Preferred Stock converted
(e.g., for purposes of illustration, should the Company’s Common Stock be
combined [reverse split] so that each current share becomes a fraction of a share, the
conversion ratio will remain ten for one whole share of Common Stock) shall be effected
without the prior consent of the holders of a majority of the Class B Convertible Preferred
Stock.
|
|
|
(2)
|
However, should the shares of Common Stock
be multiplied in any such case, e.g., each Share of Common Stock converted into
multiple shares, then the conversion rights of the holders of the Class B Convertible
Preferred Stock shall be correspondingly multiplied (e.g., for purposes of illustration,
should the Company’s Common Stock be multiplied [forward split] so that each share
becomes ten, then the conversion ratio will be multiplied so that each share of Class
B Convertible Preferred Stock shall be convertible for one hundred shares of Common Stock.
|
|
|
(3)
|
In addition to the foregoing, no reduction
in the authorized shares of the Class B Convertible Preferred Stock (for example, pursuant
to a reverse stock split) may be affected without the prior consent of the holders of
a majority of the Class B Convertible Preferred Stock.
|
|
|
(b)
|
Conversion Notice. The Holder of a share
of Class B Convertible Preferred Stock may exercise its conversion right after December
31, 2021 by giving a written conversion notice in the form of Exhibit A hereto (the “Conversion
Notice”) (1) by electronic mail to the Corporation’s transfer agent for its
Common Stock, as designated by the Corporation from time to time (the “Transfer
Agent”), confirmed by a telephone call and (2) by overnight delivery service, with
a copy by electronic mail to the Corporation and to its counsel, as designated by the
Corporation from time to time. The Holder must also surrender the certificate for the
Class B Convertible Preferred Stock to the Corporation at its principal office (or such
other office or agency of the Corporation may designate by notice in writing to the Holder)
at any time during its usual business hours on the date set forth in the Conversion Notice.
|
5. Income
Taxes
The Registrant did not have any current
or deferred United States federal income tax provision or benefit for any of the periods presented because the Registrant has experienced
losses since inception. Accounting for Uncertainty in Income Taxes when it is more likely than not that a tax asset cannot be realized
through future income thus the Registrant must allow for this future tax benefit.
The Registrant provided a full valuation
allowance on the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that
it is more likely than not that the Registrant will not earn income sufficient to realize the deferred tax assets during the carry
forward period.
The components of the Registrant’s deferred
tax asset and reconciliation of income taxes computed at the statutory rate to the income tax amount recorded as of October 31,
2020 and 2019 are as follows:
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
(6,066,566
|
)
|
|
$
|
(4,688,456
|
)
|
|
Effective tax rate
|
|
|
21
|
%
|
|
|
21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Tax Asset
|
|
|
1,273,979
|
|
|
|
984,576
|
|
|
Valuation Allowance
|
|
|
(1,273,979
|
)
|
|
|
(984,576
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Deferred Tax Asset
|
|
$
|
—
|
|
|
$
|
—
|
|
As of October 31, 2020, the Registrant
had approximately $6,066,566 in net operating losses that may be available to offset future taxable income, which begin to expire
2037. Net operating losses generated in tax years prior to July 31, 2018 can be carryforward for twenty years whereas net operating
losses generated after July 31, 2018 can be carryforward indefinitely. In accordance with Section 382 of the United States Internal
Revenue Code, the usage of the Registrant’s net operating loss carry forwards are subject to annual limitations following greater
than 50% ownership changes.
The Registrant’s tax returns are subject
to examination by tax authorities for the years ended October 31, 2015 through October 31, 2020.
6. Stock
Compensation
The employment contract for the Registrant’s
CEO includes a provision that he is to receive 10% of the common stock in the Registrant and that the position will not be diluted
by subsequent issuances. The following shares were issued during 2020 and 2019:
2020 - 245,640,839 shares,
valued at $73,692
2019 - 54,820,737 shares, valued at $6,031
7. Related Party
Transactions
As of October 31, 2018, 2019 and 2020, the Registrant was
indebted to its officers and Parent company as follows:
|
|
|
Qest
|
|
Advances
|
|
|
|
|
|
Notes
|
|
Account
|
|
Accrued
|
|
From
|
|
|
|
|
|
Payable
|
|
Payable
|
|
Interest
|
|
Officers
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance October 31, 2018
|
|
$
|
41,845
|
|
|
$
|
4,999
|
|
|
$
|
43,810
|
|
|
$
|
359,405
|
|
|
$
|
450,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 Additions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued Interest
|
|
|
|
|
|
|
|
|
|
|
13,480
|
|
|
|
|
|
|
|
13,480
|
|
|
Cash Advanced
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,775
|
|
|
|
11,775
|
|
|
Balance October 31, 2019
|
|
|
41,845
|
|
|
|
4,999
|
|
|
|
57,290
|
|
|
|
371,180
|
|
|
|
475,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 Additions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued Interest
|
|
|
|
|
|
|
|
|
|
|
14,705
|
|
|
|
|
|
|
|
14,705
|
|
|
Cash Advanced
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,660
|
|
|
|
4,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 Reductions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Converted To Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(373,715
|
)
|
|
|
(373,715
|
)
|
|
Balance October 31, 2020
|
|
$
|
41,845
|
|
|
$
|
4,999
|
|
|
$
|
71,995
|
|
|
$
|
2,125
|
|
|
$
|
120,964
|
|
On June 26, 2015, the Registrant finalized an 8% Convertible
Note to Qest in the amount of $21,845.07, which was due June 25, 2016 with interest on the unpaid principal balance thereof at
the rate of eight percent (8%) per annum 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
was 57.5% multiplied by the Market Price (as defined therein) representing a discount rate of 42.5%. At October 31, 2018 the Registrant
had a balance principal balance owed of $21,845.07 and accrued interest of $21,360.00. During fiscal 2019, interest expense of
$6,280.00 was recognized. At October 31, 2019, the Registrant had a balance principal balance owed of $21,845.07 and accrued interest
of $27,460.00. During fiscal 2020, interest expense of $6,852.88 was recognized. At October 31, 2020, the Registrant had a balance
principal balance owed of $21,845.07 and accrued interest of $34,492.88. As a material subsequent event, during November of 2020,
56,337,950 common shares were issued to Qest to convert $21,845.07 in principal and $34,492.88 in accrued interest. At January
31, 2021, the Registrant had a balance principal balance owed of $0 and accrued interest of $0.
On July 31, 2015, the Registrant finalized a second 8% Convertible
Note to Qest in the amount of $20,000, which was due June 25, 2016 with interest on the unpaid principal balance thereof at the
rate of eight percent (8%) per annum 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 was
57.5% multiplied by the Market Price (as defined therein) representing a discount rate of 42.5%. At October 31, 2018 the Registrant
had a balance principal balance owed of $20,000.00 and accrued interest of $19,570.00. During fiscal 2019, interest expense of
$5,760.00 was recognized. At October 31, 2019, the Registrant had a balance principal balance owed of $20,000.00 and accrued interest
of $25,330.00. During fiscal 2020, interest expense of $6,281.88 was recognized. At October 31, 2020, the Registrant had a balance
principal balance owed of $20,000.00 and accrued interest of $31,611.88. As a material subsequent event, during November of 2020,
51,611,880 shares were issued to Qest to convert $20,000.00 in principal and $31,611.88 in accrued interest. At January 31, 2021,
the Registrant had a balance principal balance owed of $0 and accrued interest of $0.
The account payable resulted from Qest returning 4,998,973
common shares in 2016 in furtherance of Registrants obligation to deliver 5,000,000 common shares to Union Capital, LLC as a forbearance
payment at the conclusion of the litigation related to that note payable. The return of the shares was valued at .001 per share
(par value), the account payable of $4,998.97 resulted therefrom. Interest was calculated at the same rate as the prior two notes.
At October 31, 2018 the Registrant had a balance principal balance owed of $4,998.97 and accrued interest of $2,880.00. During
fiscal 2019, interest expense of $1,440.00 was recognized. At October 31, 2019, the Registrant had a balance principal balance
owed of $4,998.97 and accrued interest of $4,320.00. During fiscal 2020, interest expense of $1,570.38 was recognized. At October
31, 2020, the Registrant had a balance principal balance owed of $4,998.97 and accrued interest of $5,890.38. As a material subsequent
event, during November of 2020, 10,889,350 shares were issued to Qest to convert $4,998.97 in principal and $5,890.38 in accrued
interest. At January 31, 2021, the Registrant had a balance principal balance owed of $0 and accrued interest of $0.
Advances from Officers are short term advances from Registrant’s
officers, interest has not been calculated thereon. On October 31, 2020, $373,715 was converted into 428,128 Class B Preferred
shares. At October 31, 2020, $2,125 remained unpaid.
8. 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 February 12, 2021 which needed to be disclosed in the accompanying
financial statements other than the following:
The 8% Convertible Notes payable have
been either converted, paid or otherwise resolved, consequently, the Registrant is no longer indebted under the terms of any of
the aforementioned notes nor is there is any outstanding or threatened related litigation.
Qest Consulting Corporation, the Registrant’s
Parent, converted $46,844 of principal and $71,995 of accrued interest owed to it by the Registrant into 118,839,180 common shares
on November 30, 2020. The Registrant received $57,000 of advances from its Parent subsequent to October 31, 2020.
As a material subsequent event, in contemplation
of a limited offering in reliance on Rule 506(b) of Commission Regulation D, the Registrant has authorized two indentures, one
authorizing $250,000 in 5%, two year subordinated debentures convertible into shares of the Registrant’s Class B Convertible Preferred
Stock at a conversion price of $1.75 per share; and, one authorizing warrants for the purchase of up to 500,000 shares of the Registrant’s
Class B Convertible Preferred Stock at a conversion price of $1.75 per share. In the event such limited offering is undertaken,
the Registrant will file an electronic Form D with the Commission within 15 days after the initial sale thereunder. Copies of the
two indentures are filed as exhibits to this annual report.