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.