Item 1.01 Entry into a Material Definitive Agreement.
Agreement to Acquire Behavioral Centers of South Florida LLC
On August 23, 2021, the Registrant entered into a definitive acquisition and
option agreement with Ms. Yipsi Martin (the "Acquisition Agreement" and "Ms.
Martin", respectively) pursuant to which it will, subject to appropriate due
diligence investigations, acquire a 50% interest in Behavioral Centers of South
Florida LLC, a Florida limited liability company ("BCSF"), with an option to
acquire the remaining 50%, in which case BCSF would become a wholly owned
subsidiary of the Registrant. The Registrant and Ms. Martin are hereinafter
collectively referred to as the "Parties" and generically as a "Party"). The
Acquisition Agreement is filed herewith as exhibit 10.01 and the following
discussion relating thereto is qualified in its entirety by the information
contained therein.
Puget Technologies, Inc., current report on Commission Form 8-K, Page 2
(excluding exhibits)
As indicated in the Registrant's current report on Form 8-K filed with the
Commission on March 9, 2021, BCSF is a centralized community behavioral health
center providing its clients/patients with mental health services ranging from
psychiatry, individual therapy, psycho-social rehabilitation services and case
management in clinics located in the Florida Counties of Dade and Broward and,
in collaboration with 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 pursuant to the terms of the Acquisition Agreement, prior
to the initial closing, it will convert into a Florida corporation as permitted
under Section 607.11933, Florida Statutes. The Acquisition Agreement values BCSF
at $5,000,000 reflecting the Parties' belief as to the fair value of BCSF and
consequently calls for an initial purchase of a 50% interest by the Registrant
in exchange for $1,000,000 in cash and 750,000 shares of the Registrant's Class
B Convertible Preferred Stock valued by the Parties at $2.00 per share, with an
option to acquire the remaining 50% (the "Option") for an additional $1,000,000
in cash and $1,500,000 shares of the Registrant's Class B Convertible Preferred
Stock valued by the parties at the price to be paid therefore by investors to a
limited offering of the Registrant's securities in reliance on Rule 506(b) of
Commission Regulation D (the "Limited Offering"). It is currently anticipated
that the Limited Offering will involve 2,000,000 shares of the Registrant's
Class B Convertible Preferred Stock offered to Accredited Investors, as that
term is defined in Rule 501 of Commission Regulation D and up to 35 qualified
non-Accredited Investors, at an offering price of $5.00 per share for an
aggregate of $10,000,000. Based on the foregoing, the equity portion of the
option exercise price would be 300,000 shares. The difference in the price of
the Class B Convertible Preferred Stock calculated by the Parties for the
initial part of the proposed acquisition and the price to be paid investors in
the Limited Offering is based on the fact that the $5.00 price reflects a
company that will have assets, operations and profits theretofore lacking.
However, such calculations are based on the perceptions of the Parties rather
than on an objective valuation by an independent party. Closing on the initial
stage of the acquisition will, subject to a successful due diligence
investigation, take place following closing on the minimum offering of the
proposed Limited Offering ($3,000,000) and closing on the Option would take
place within ten days after the Parties have determined that acquisition of the
remaining 50% interest in BCSF by the Registrant would satisfy all applicant
regulatory and contractual requirements involving a change in control of BCSF,
unless within such ten day period, the Registrant notifies Ms. Martin in writing
of its intent not to exercise the Option. In the event that the Option was not
exercised, BCSF would be operated as an equal joint venture among the Parties.
In either case, the Registrant believes that as a result of the acquisition it
will no longer be classified as a shell for purposes of applicable securities
laws. Assuming the option is exercised, then, in addition to the shares of Class
B Convertible Preferred Stock issued in conjunction with the acquisition, the
Registrant would reserve shares of its Common Stock (the "Performance Shares")
for potential future issuance to BCSF for redistribution among its employees
based on their contributions to development of BCSF's Business, in annual
installments as follows:
1. The total number of Performance Shares would be based on the sum of $300,000
divided by the average closing actual sales price for the Registrant's Common
Stock reported at the close of business during the ten business days preceding
the end of the applicable year set forth below.
2. For the year ended December 31, 2022, an amount equal to one half of the
Performance Shares would be issued if BCSF together with its consolidated
subsidiaries, if any has earned, on an accrual basis in accordance with GAAP,
Net, Post-Tax Profits of not less than $1,000,000; and
3. For the year ended December 31, 2023, an amount equal to one half of the
Performance Shares if BCSF together with its consolidated subsidiaries, if
any, has earned, on an accrual basis in accordance with GAAP, Net, Post-Tax
Profits of not less than $2,000,000.
4. In the event that the foregoing Net, Post-Tax Profits (determined under the
cash method of accounting in compliance with GAAP) are not attained during the
time periods set, then:
a. If the Net, Post-Tax Profits (determined under the cash method of accounting
in compliance with GAAP) are less than 33% of the required threshold during
any subject 12 month period, the Performance Shares for such period would be
forfeited;
b. If the Net, Post-Tax Profits (determined under the cash method of accounting
in compliance with GAAP) are between 33% and 80% of the required threshold
during any subject 12 month period, the Performance Shares for such period and
the required threshold would be carried over to the next year, increasing both
the aggregate threshold and the aggregate shares attainable for such year; and
c. If the Net, Post-Tax Profits (determined under the cash method of accounting
in compliance with GAAP) are between 80% and 100% of the required threshold
during the subject 12 month period, the Performance Shares for such period
would be prorated.
Puget Technologies, Inc., current report on Commission Form 8-K,
Page 3 (excluding exhibits)
As indicated in the Registrant's current report filed with the Commission on
March 9, 2021, BCSF currently operates a multi-location clinic employing or
independently contracting with 119 individuals, including two psychiatrists, one
licensed mental health counselor supervisor, one licensed clinical social worker
supervisor and one licensed marriage and family therapy supervisor who supervise
seventeen therapists in the mental health department; one board certified
behavior analyst, one board certified assistant behavior analyst and two
registered behavior technicians; and, five advanced registered nurse
practitioners in the field of psychiatry. In the area of case management four
licensed clinical social worker supervisors supervise forty-nine licensed
clinical social workers. The clinic has provided services to approximately 2,150
patient/clients who remain in the system of which they have an active patient
base of approximately 1,100 at any one time but anticipate material expansion
after the proposed 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.
The attributes of the Class B Convertible Preferred Stock to be used in
conjunction with both the proposed acquisition and the Limited Offering are
described in Article IV of the Registrant's amended and restated articles of
incorporation filed by the Registrant with the Department of State of the State
of Nevada on or about December 9, 2021, a copy of which is filed as exhibit 3(i)
to this current report. The closing on the Acquisition Agreement is based on the
assumption that the Registrant will successfully close on the minimum offering
of the proposed Limited Offering, currently expected to occur prior to September
30, 2021. However, that involves a forward looking projection and thus, no
assurances can be provided that the events will unfold as anticipated by the
Parties.
Item 8.01 Other Events.
A. Letter of Intent to Acquire D & D Rehab Center, Inc.
On August 5, 2021, the Registrant entered into a letter of intent to acquire D &
D Rehab Center, Inc., a Florida corporation organized on February 5, 2010 ("D &
D"). A copy of such letter of intent is filed herewith as exhibit 99.01.
D & D is a health care provider which trains or retrains individuals disabled by
disease or injury to help them attain their maximum functional capacity. It is
registered in Centers for Medicare & Medicaid Services (CMS), National Plan and
Provider Enumeration System (NPPES). Its NPI number is 1952748709, assigned on
June 2013. Its primary taxonomy code is 225400000X. It currently uses 92 persons
to provide services to its client/patients, six of whom are administrative
employees and 86 are independent contractors comprised of the following:
? Twenty-five persons implement various therapeutic modalities to children and
adults at D & D's clinic in Hialeah, nine of whom are occupational therapists,
seven are physical therapists and nine are speech therapists.
? An additional sixty-one people provide applied behavioral analysis therapy for
children with autism spectrum and other issues that impede their proper
quotidian function at their homes, the latter being comprised of 45 registered
behavioral technicians supervised by eleven board certified behavioral analysts
(each with at least a master's degree) assisted by five board certified
assistant behavioral analysts.
D & D's total revenues for the calendar years ended December 31, 2019 and 2020
were $3,595,291 and $3,635,240, respectively, with profits of $221,252 and
$252,242 and D & D anticipates income of approximately $5,000,000 for calendar
2021 with anticipated profits of $1,000,000. Such numbers are currently
unaudited but D & D acknowledged that its financial statements must be audited
in accordance with requirements of Commission Regulation S-X and filed with the
Commission no longer than 74 days after closing (see SEC Adopts New Financial
Statement Disclosure Requirements For Acquisitions And Dispositions).
Puget Technologies, Inc., current report on Commission Form 8-K, Page 4
(excluding exhibits)
D & D's activities are licensed by the State of Florida through the Agency for
Health Care Administration and are also subject to contractual conditions
imposed by major insurance carriers as well as government insurance programs
such as Medicaid with which it coordinates its activities. While its
client/patient base is currently centered on the Hispanic market in Dade County,
it plans to incrementally increase its area of service throughout the State of
Florida, as permitted by its current license, and to all demographic groups.
The proposed transaction has been structured in a manner similar to that
reflected in the BCSF Acquisition Agreement. The D & D parties have tentatively
agreed, subject to conducting required due diligence and confirmations, that the
Registrant will acquire D & D in two stages, first, a 50% interest in exchange
for $1,500,000 in cash equivalents and $1,500,000 in unregistered shares of the
Registrant's Class B Convertible Preferred Stock, with an option to acquire the
balance of D & D's securities at the same price and comparable terms within one
year after the initial closing, although it is anticipated that the Registrant
will exercise such option considerably sooner. The Class B Convertible Preferred
Stock would be valued based on the most recent price therefore paid to the
Registrant by investors or in conjunction with exercise of the Option for the
BCSF acquisition unless a trading market has developed for shares of the
Registrant's Class B Convertible Preferred Stock (unlikely at that time), in
which case the mean between the high offered and low bit price therefore on the
fifth trading day prior to closing will be used as the valuation. In addition to
the Registrant`s shares received by the former D & D equity holders, during the
initial two years following the acquisition the D & D subsidiary would be
entitled to receive up to an additional $100,000 in the Registrant Common Stock,
$0.001 par value, based on attaining net pre-tax profit performance goals,
currently envisioned to be $2,000,000 for the calendar year ended December 31,
2022 and $3,000,000 for the calendar year ended December 31, 2023.
The Registrant feels that the acquisition of D & D complements its proposed
acquisition of BCSF generating significant synergy and savings and looks forward
to the possibility of acquiring other healthcare related businesses in the near
future. As in the case of BCSF, the foregoing constitute forward looking
statements and the proposed transaction is reliant on successful completion of
the proposed Limited Offering.
Item 9.01 Financial Statements and Exhibits.
Exhibits
Exhibit No. Description
3(i) The Registrant's Amended and Restated Articles of
Incorporation
10.01 Acquisition & Option Agreement between the Registrant, Ms.
Yipsi Martin and Behavioral Centers of South Florida LLC
99.01 Letter of Intent with D & D
Puget Technologies, Inc., current report on Commission Form 8-K, Page 5
(excluding exhibits)
© Edgar Online, source Glimpses