PUGE Puget Technologies Inc (CE)

On March 2, 2021, at the suggestion of Qest Consulting Group, Inc., a Colorado corporation and the Registrant’s “parent” (as that term is defined in Rule 405 of Commission Regulation C) and strategic consultant, the Registrant and Behavioral Centers of South Florida LLC, currently a Florida limited liability company (hereinafter “BCSF”) signed a letter denominated “preliminary understandings and agreements pertaining to a proposed corporate reorganization” pursuant to Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended as a result of which:

The parties have tentatively agreed, subject to conducting required due diligence and confirmations, that Puget would acquire BCSF as part of its incubation program at an initial valuation, subject to verification, of $5,000,000 in exchange for shares of its common stock, currently par value $0.001 per share. In addition to the Puget shares received by the former BCSF equity holders, during the initial two years following the reorganization, the BCSF subsidiary would be entitled to receive up to an additional $1,000,000 in Puget securities to distribute as it deemed appropriate, based on attaining net pre-tax profit performance goals, currently envisioned to be $1,000,000 for the calendar year ended December 31, 2022 and $2,000,000 for the calendar year ended December 31, 2023. In both of the foregoing instances, the holders of such securities would be granted piggyback registration rights in the event that Puget filed a registration statement for any of its securities.

During the three year period following closing on the proposed reorganization, the former BCSF equity holders would hold a proxy to vote the shares of the BCSF subsidiary’s voting securities with respect to the election of all but one director (that director to be designated by Puget) and thus be in a position to control most aspects of the BCSF subsidiary’s affairs, subject to specified exceptions involving legal matters, audits and strategic transactions (which would have to be coordinated with Puget). Two and a half years after closing on the acquisition the former equity holders of BCSF would have the option of tendering back 75% of the Puget Common Stock received, both under the reorganization and based on performance, for 75% of the shares of the BCSF subsidiary’s shares held by Puget, with the commitment by Puget to register 15% of the remaining 25% of such shares with the Commission under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”) for distribution as a stock dividend to Puget’s shareholders, and to assign the remaining ten percent to a business development company organized under Sections 54 through 65 of the Investment Company Act of 1940, as amendment (the “Investment Act”). In such case the former equity holders of BCSF would retain 25% of the Puget common stock they had received in the reorganization and as performance bonuses to do with as they pleased. If the former equity holders of BCSF elected to retain all of the Puget common stock they had received in the reorganization and as performance bonuses rather than to exercise their spinout rights, then the BCSF subsidiary would remain a subsidiary of Puget which could either continue to operate it, sell it, or spin it out to its shareholders as it saw fit.

Based on information provided by BCSF to Puget:

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 Puget, 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, should the Parties enter into a reorganization agreement as proposed below, it would convert into a Florida corporation as permitted under Section 607.11933, Florida Statutes. It 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 reorganization through the acquisition of compatible and complementary businesses, as well as by establishing additional clinics, initially in the State of Florida. Its total revenues for the calendar years ended December 31, 2018 (nine months), 2019 and 2020 increased from $959,871 to $3,237,687 and then to $5,540,711.

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. 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.

There are no assurances that the parties will in fact negotiate a definitive agreement, that even if they do, such agreement will close, or even if it were to close, that the proposed association would be successful. The foregoing is forward-looking information. You can identify forward-looking statements as those that are not historical in nature, particularly those that use terminology such as “may”, “will”, “should”, “expects”, “anticipates”, “contemplates”, “estimates”, “believes”, “plans”, “projects”, “predicts”, “potential” or “continue” or the negative of these similar terms. In evaluating these forward-looking statements, you should consider various factors, including the following: (a) those risks and uncertainties related to general economic conditions, (b) whether the Registrant is able to manage its planned growth efficiently and operate profitably, (c) whether it is able to generate sufficient revenues or obtain financing to sustain and grow its operations, and (d) whether it is able to successfully fulfill its primary requirements for cash. The Registrant’s actual results may differ significantly from the results projected in the forward-looking statements.

A copy of the above described letter denominated “preliminary understandings and agreements pertaining to a proposed corporate reorganization” is included as an exhibit to this report which is qualified in its entirety by reference thereto.