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:
1.
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The stockholders of BCSF would become stockholders of the reorganized company;
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2.
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BCSF, as consolidated, would become a wholly owned subsidiary of the reorganized company; and
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3.
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The stockholders of BCSF involved in the reorganization would be entitled to nominate one member of the reorganized company’s board of directors, who in turn would participate in the selection of the Reorganized Company’s officers and the management of the reorganized company’s business.
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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.
Puget Technologies, Inc., current report on Commission Form 8-K, Page 3
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.
Puget Technologies, Inc., current report on Commission Form 8-K, Page 4
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.