Item
1.01. Entry into a Material Definitive Agreement.
HeartCore
Enterprises/Metros Consulting Agreement and Warrant
On
October 20, 2022 (the “Effective Date”), HeartCore Enterprises, Inc. (the “Company”) entered into a Consulting
and Services Agreement (the “Company Consulting Agreement”) by and between the Company and Metros Development Co., Ltd.,
a Japanese corporation (“Metros”). Pursuant to the terms of the Company Consulting Agreement, the Company agreed to provide
Metros certain services, including the following (collectively, the “Company Services”):
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(i) |
Assistance
with the selection and negotiation of terms for a law firm, underwriter and auditing firm for Metros; |
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(ii) |
Assisting
in the preparation of documentation for internal controls required for an initial public offering or de-SPAC transaction or other
Fundamental Transaction (as defined below) by Metros; |
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(iii) |
Attend
and, if requested by Metros, lead meetings with Metros’ management and employees; |
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(iv) |
Provide
Metros with support services related to Metros’ NASDAQ listing; |
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(v) |
Assist
in the preparation of S-1 or F-1 filings; and |
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(vi) |
Preparing
an investor presentation/deck and executive summary of Metros’ business and operations. |
In
providing the Company Services, the Company will not render legal advice or perform accounting services, and will not act as an investment
advisor or broker/dealer. Pursuant to the terms of the Company Consulting Agreement, the parties agreed that the Company will not provide
the following services, among others: negotiation of the sale of Metros’ securities; participation in discussions between Metros
and potential investors; assisting in structuring any transactions involving the sale of Metros’ securities; pre-screening of potential
investors; discuss details of the nature of the securities sold or whether recommendations were made concerning the sale of securities;
due diligence activities; nor providing advice relating to valuation of or financial advisability of any investments in Metros.
Pursuant
to the terms of the Company Consulting Agreement, Metros agreed to compensate the Company as follows in return for the provision of the
Company Services during the nine-month term (the “Term”):
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(a) |
$300,000,
to be paid as follows: (i) $100,000 on the Effective Date; (ii) $100,000 on the three-month anniversary of the Effective Date; and
(iii) $100,000 on the six-month anniversary of the Effective Date; and |
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|
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(b) |
Issuance
by Metros to the Company of a warrant (the “Company Warrant”), deemed fully earned and vested as of the Effective Date,
to acquire a number of shares of capital stock of Metros, to initially be equal to 2% of the fully diluted share capital of Metros
as of the Effective Date (980 shares), subject to adjustment as set forth in the Company Warrant. |
For
any services performed by the Company beyond the Term, Metros will compensate the Company for such Company Services at the rate of $150
per hour, based on the hours spent by personnel of the Company.
The
Term of the Company Consulting Agreement will expire unless renewed upon mutual written agreement of the parties.
As
provided in the Company Consulting Agreement, on the Effective Date, Metros issued the Company Warrant to the Company. Pursuant to the
terms of the Company Warrant, the Company may, at any time on or after the date (the “IPO Date”) that either (i) Metros completes
its first initial public offering of stock in the United States resulting in any class of Metros’ stock being listed for trading
on any tier of the Nasdaq Stock Market, the New York Stock Exchange or the NYSE American (the “IPO”), or (ii) Metros undertakes
any other Fundamental Transaction, and on or prior to the close of business on the tenth anniversary of the IPO Date, exercise the Company
Warrant to purchase 980 shares of capital stock of Metros for an exercise price per share of $0.01, subject to adjustment as provided
in the Company Warrant. The Company Warrant contains a 9.99% equity blocker.
The
foregoing description of the Company Consulting Agreement and the Company Warrant is qualified in its entirety by reference to the Company
Consulting Agreement and the Company Warrant, copies of which are filed as Exhibits 10.1 and 10.2 hereto, respectively, and which are
incorporated herein by reference.
HeartCore
Inc./Metros Consulting Agreement and Warrant
Also
on the Effective Date, HeartCore Inc., a wholly owned subsidiary of the Company (“HeartCore Inc.”) entered into a Consulting
and Services Agreement (the “HeartCore Inc. Consulting Agreement”) by and between HeartCore Inc. and Metros. Pursuant to
the terms of the HeartCore Inc. Consulting Agreement, HeartCore Inc. agreed to provide Metros certain services, including the following
(collectively, the “HeartCore Inc. Services”):
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(i) |
Provide
support services to remove problematic accounting accounts upon listing support; |
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(ii) |
Translation
of requested documents into English; |
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(iii) |
Conversion
of accounting data from Japanese standards to U.S. GAAP; |
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(iv) |
Support
for Metros’ negotiations with the audit firm; and |
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(v) |
Creation
of English web page. |
In
providing the HeartCore Inc. Services, HeartCore Inc. will not render legal advice or perform accounting services, and will not act as
an investment advisor or broker/dealer. Pursuant to the terms of the HeartCore Inc. Consulting Agreement, the parties agreed that HeartCore
Inc. will not provide the following services, among others: negotiation of the sale of Metros’ securities; participation in discussions
between Metros and potential investors; assisting in structuring any transactions involving the sale of Metros’ securities; pre-screening
of potential investors; discuss details of the nature of the securities sold or whether recommendations were made concerning the sale
of securities; due diligence activities; nor providing advice relating to valuation of or financial advisability of any investments in
Metros.
Pursuant
to the terms of the HeartCore Inc. Consulting Agreement, Metros agreed to compensate HeartCore Inc. as follows in return for the provision
of the HeartCore Inc. Services during the nine-month Term:
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(a) |
$200,000,
to be paid as follows: (i) $100,000 on the Effective Date; (ii) $50,000 on the three-month anniversary of the Effective Date; and
(iii) $50,000 on the six-month anniversary of the Effective Date; and |
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|
|
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(b) |
Issuance
by Metros to HeartCore Inc. of a warrant (the “HeartCore Inc. Warrant”), deemed fully earned and vested as of the Effective
Date, to acquire a number of shares of capital stock of Metros, to initially be equal to 1% of the fully diluted share capital of
Metros as of the Effective Date (490 shares), subject to adjustment as set forth in the HeartCore Inc. Warrant. |
For
any services performed by HeartCore Inc. beyond the Term, Metros will compensate HeartCore for Services at the rate of $150 per hour,
based on the hours spent by personnel of HeartCore Inc.
The
Term of the HeartCore Inc. Consulting Agreement will expire unless renewed upon mutual written agreement of the parties.
As
provided in the HeartCore Inc. Consulting Agreement, on the Effective Date, Metros issued the HeartCore Inc. Warrant to HeartCore Inc.
Pursuant to the terms of the HeartCore Inc. Warrant, HeartCore Inc. may, at any time on or after the IPO Date, and on or prior to the
close of business on the tenth anniversary of the IPO Date, exercise the HeartCore Inc. Warrant to purchase 490 shares of capital stock
of Metros for an exercise price per share of $0.01, subject to adjustment as provided in the HeartCore Inc. Warrant. The HeartCore Inc.
Warrant contains a 9.99% equity blocker.
The
foregoing description of the HeartCore Inc. Consulting Agreement and the HeartCore Inc. Warrant is qualified in its entirety by reference
to the HeartCore Inc. Consulting Agreement and the HeartCore Inc. Warrant, copies of which are filed as Exhibits 10.3 and 10.4 hereto,
respectively, and which are incorporated herein by reference.
Termination
of HeartCore Inc. Consulting Agreement and HeartCore Inc. Warrant
On
October 26, 2022, HeartCore Inc. entered into a Termination of Consulting and Services Agreement and Warrant, dated as of October 26,
2022, by and between HeartCore Inc. and Metros (the “Termination”). Pursuant to the terms of the Termination, HeartCore Inc.
and Metros agreed to terminate the HeartCore Inc. Consulting Agreement and the HeartCore Inc. Warrant, effective October 26, 2022.
The
foregoing description of the Termination is qualified in its entirety by reference to the Termination, a copy of which is filed as Exhibit
10.5 hereto, and which is incorporated herein by reference.
Amendment
No. 1 to HeartCore Enterprises Consulting Agreement; New HeartCore Enterprises Warrant
On
October 26, 2022, the Company entered into Amendment No. 1 to Consulting and Services Agreement, dated as of October 26, 2022, by and
between the Company and Metros (“Amendment No. 1”). Pursuant to the terms of Amendment No. 1, the Company and Metros agreed
to amend the Company Consulting Agreement such that Metros agreed to compensate the Company as follows in return for the provision of
the Company Services during the nine-month Term:
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(a) |
$500,000,
to be paid as follows: (i) $200,000 on the Effective Date; (ii) $150,000 on the three-month anniversary of the Effective Date; and
(iii) $150,000 on the six-month anniversary of the Effective Date; and |
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|
|
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(b) |
Issuance
by Metros to the Company of a warrant (the “New Company Warrant”), deemed fully earned and vested as of the Effective
Date, to acquire a number of shares of capital stock of Metros, to initially be equal to 3% of the fully diluted share capital of
Metros as of the Effective Date (1,440 shares), subject to adjustment as set forth in the New Company Warrant. |
In
addition, pursuant to the terms of Amendment No. 1, the Company Warrant was terminated as of October 26, 2022.
Except
as set forth in Amendment No. 1, the Company Consulting Agreement remains in full force and effect.
As
provided in Amendment No. 1, on October 26, 2022, Metros issued the New Company Warrant to the Company. Pursuant to the terms of the
New Company Warrant, the Company may, at any time on or after the IPO Date, and on or prior to the close of business on the tenth anniversary
of the IPO Date, exercise the New Company Warrant to purchase 1,440 shares of capital stock of Metros for an exercise price per share
of $0.01, subject to adjustment as provided in the New Company Warrant. The New Company Warrant contains a 9.99% equity blocker.
The
foregoing description of Amendment No. 1 and the New Company Warrant is qualified in its entirety by reference to Amendment No. 1 and
the New Company Warrant, copies of which are filed as Exhibits 10.6 and 10.7 hereto, respectively, and which are incorporated herein
by reference.