Item
1.01. Entry into a Material Definitive Agreement.
9th
Stock Acquisition Rights Allotment Agreement
On
November 9, 2022, HeartCore Enterprises, Inc. (the “Company”) entered into the 9th Stock Acquisition Rights Allotment
Agreement (the “Rights Allotment Agreement”) by and between the Company and SYLA Technologies Co., Ltd. (“SYLA”).
Pursuant to the terms of the Rights Allotment Agreement, SYLA allotted 5,771 stock acquisition rights to the Company in exchange for
services rendered as a consultant in connection with SYLA’s proposed initial public offering in substitution for the common stock
purchase warrant agreement dated as of May 13, 2022 between the Company and SYLA. The stock acquisition right has an exercise price of
$0.01 per share and is fully vested. The number of shares underlying each stock acquisition right is calculated as the number of issued
and outstanding common shares on a fully diluted basis as of day prior to the listing date on a stock exchange, multiplied by 2% and
divided by 5,771, subject to adjustment as provided in the Rights Allotment Agreement.
The
foregoing description of the Rights Allotment Agreement is qualified in its entirety by reference to the Rights Allotment Agreement,
a copy of which is filed as Exhibit 10.1 hereto and which is incorporated herein by reference.
Amendment
No. 2 to SYLA Consulting Agreement
As
previously disclosed in the Current Report on Form 8-K filed on May 25, 2022 by the Company with the Securities and Exchange Commission
(the “SEC”), on May 13, 2022, the Company entered into a Consulting and Services Agreement (the “Consulting Agreement”)
by and between the Company and SYLA, pursuant to which the Company agreed to provide SYLA certain services.
Also
as previously disclosed in the Current Report on Form 8-K filed on August 18, 2022 by the Company with the SEC, on August 17, 2022, the
Company and SYLA entered into Amendment No. 1 to the Consulting Agreement (“Amendment No. 1”). In Amendment No. 1, the parties
acknowledged and agreed that pursuant to the terms of the Consulting Agreement, SYLA agreed to pay to the Company, among other things,
a cash “services fee” in the amount of $500,000, to be paid at certain times, including $150,000 on August 13, 2022 (the
“Second Payment”). Pursuant to the terms of Amendment No. 1, the parties agreed that in lieu of making the Second Payment,
SYLA would issue to the Company a warrant to acquire 37,500 shares of SYLA’s capital stock (the “New Warrant”). Upon
issuance of the New Warrant, the cash “services fee” will be deemed reduced to $350,000, of which $200,000 was paid on May
13, 2022, and of which the remaining $150,000 will remain due and payable on November 13, 2022.
On
November 15, 2022, the Company and SYLA entered into Amendment No. 2 to the Consulting Agreement (“Amendment No. 2”). Pursuant
to the terms of Amendment No. 2, the parties agreed to terminate the New Warrant in exchange for SYLA agreeing to make the Second Payment,
contingent upon completion of SYLA’s listing on the Nasdaq Capital Market or NYSE American.
The
foregoing description of Amendment No. 2 is qualified in its entirety by reference to Amendment No. 2, a copy of which is filed as Exhibits
10.2 hereto and which is incorporated herein by reference.
SBC
Medical Group Consulting Agreement
On
November 18, 2022 (the “Effective Date”), the Company entered into a Consulting and Services Agreement (the “SBC Consulting
Agreement”) by and between the Company and SBC Medical Group, Inc., a Japanese corporation (“SBC Medical”). Pursuant
to the terms of the SBC Consulting Agreement, the Company agreed to provide SBC Medical certain services, including the following (collectively,
the “Services”):
| (i) | Assistance
with the selection and negotiation of terms for a law firm, underwriter and auditing firm
for SBC Medical; |
| (ii) | Assisting
in the preparation of documentation for internal controls required for an initial public
offering of de-SPAC or other Fundamental Transaction (as defined SBC Warrant) by SBC Medical; |
| (iii) | Providing
support services to remove problematic accounting accounts upon listing; |
| (iv) | Translation
of requested documents into English; |
| (v) | Attend
and, if requested by SBC Medical, lead meetings with SBC Medical’s management and employees; |
| (vi) | Provide
SBC Medical with support services related to SBC Medical’s NASDAQ listing; |
| (vii) | Conversion
of accounting data from Japanese standards to U.S. GAAP; |
| (viii) | Services
to remove problematic accounting accounts upon listing; |
| (ix) | Support
for the SBC Medical’s negotiations with the audit firm; |
| (x) | Assist
in the preparation of S-1 or F-1 filings; |
| (xi) | Creation
of English web page; and |
| (xii) | Preparing
an investor presentation/deck and executive summary of SBC Medical’s operations. |
In
providing the 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 SBC Consulting Agreement, the parties agreed that the Company will not provide the following
services, among others: negotiation of the sale of SBC Medical’s securities; participation in discussions between SBC Medical and
potential investors; assisting in structuring any transactions involving the sale of SBC Medical’s securities; pre-screening of
potential investors; due diligence activities; nor providing advice relating to valuation of or financial advisability of any investments
in SBC Medical.
Pursuant
to the terms of the SBC Consulting Agreement, SBC Medical agreed to compensate the Company as follows in return for the provision of
Services during the six-month term:
| (a) | $900,000,
to be paid as follows: (i) $400,000 on the Effective Date; (ii) $250,000 on the three-month
anniversary of the Effective Date; and (iii) $250,000 on the six-month anniversary of the
Effective Date; and |
| | |
| (b) | Issuance
by SBC Medical to the Company of a warrant (the “SBC Warrant”), deemed fully
earned and vested as of the Effective Date, to acquire a number of shares of capital stock
of SBC Medical, to initially be equal to 2.7% of the fully diluted share capital of SBC Medical
as of the Effective Date, subject to adjustment as set forth in the SBC Warrant. |
For
any services performed by the Company beyond the Term (as hereinafter defined), SBC Medical will compensate the Company for Services
at the rate of $200 per hour, based on the hours spent by personnel of the Company.
The
term of the SBC Consulting Agreement will continue until the earlier of (i) six months after the Effective Date, and (ii) the date on
which SBC Medical’s stock begins trading in the U.S., unless sooner terminated and in accordance with the terms of the SBC Consulting
Agreement (the “Term”). The SBC Consulting Agreement may be terminated at any time by either party upon notice to the other
party.
The
foregoing description of the SBC Consulting Agreement is qualified in its entirety by reference to the SBC Consulting Agreement, a copy
of which is filed as Exhibit 10.3 hereto and which is incorporated herein by reference.
SBC
Medical Group Warrant
As
provided in the SBC Consulting Agreement, on the Effective Date, SBC Medical issued the SBC Warrant to the Company. Pursuant to the terms
of the SBC Warrant, the Company may, at any time on or after the date (the “IPO Date”) that SBC Medical completes its first
initial public offering of stock in the U.S. resulting in any class of SBC Medical’s stock being listed for trading on any tier
of the Nasdaq Stock Market, the New York Stock Exchange or the NYSE American, or SBC Medical consummates a merger or other transaction
with a special purpose acquisition company (“SPAC”) wherein SBC Medical becomes a subsidiary of the SPAC, or SBC Medical
undertakes any other Fundamental Transaction (the “IPO”) and on or prior to the close of business on the tenth anniversary
of the IPO Date, exercise the SBC Warrant to purchase 2.7% of the fully diluted share capital of SBC Medical as of the IPO Date for an
exercise price per share of $0.01, subject to adjustment as provided in the SBC Warrant. The number of shares for which the SBC Warrant
will be exercisable will be automatically adjusted on the IPO Date to be 2.7% of the fully diluted number and class of shares of capital
stock of SBC Medical as of the IPO Date that are listed for trading. The SBC Warrant contains a 9.99% equity blocker.
The
foregoing description of the SBC Warrant is qualified in its entirety by reference to the SBC Warrant, a copy of which is filed as Exhibit
10.4 hereto and which is incorporated herein by reference.