What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-15 compared with 2024-11-14 · 295 added, 430 removed, 37 unchanged (95% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”),

and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), provide a safe harbor for forward-looking

statements made by us or on our behalf.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Private Securities Litigation Reform Act

of 1995 and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities

Exchange Act of 1934, as amended (the “Exchange Act”), provide a safe harbor for forward-looking statements made by us or

on our behalf.

We and our representatives may from time to time make written or oral statements that are “forward-looking,”

1 unchanged sentence

our reports and presentations to stockholders or potential stockholders.

In some cases, forward-looking statements can be identified

by words such as “believe,” “expect,” “anticipate,” “plan,” “potential,”

“continue” or similar expressions.

Such forward-looking statements include risks and uncertainties and there are important

factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements.

factors, risks and uncertainties can be found in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the

fiscal year ended December 31, 2023, as the same may be updated from time to time, including in Part II, Item 1A, “Risk Factors,”

of this Quarterly Report on Form 10-Q.

we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, it is not possible to

foresee or identify all factors that could have a material effect on the future financial performance of the Company.

The forward-looking

statements in this report are made on the basis of management’s assumptions and analyses, as of the time the statements are made,

in light of their experience and perception of historical conditions, expected future developments and other factors believed to be appropriate

under the circumstances.

as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions

to any forward-looking statement contained in this Quarterly Report on Form 10-Q and the information incorporated by reference in this

Quarterly Report on Form 10-Q to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances

on which any statement is based.

are a leading software development company based in Tokyo, Japan.

In some cases, forward-looking statements can be identified by

words such as “believe,” “expect,” “anticipate,” “plan,” “potential,” “continue”

or similar expressions.

Such forward-looking statements include risks and uncertainties and there are important factors that could cause

actual results to differ materially from those expressed or implied by such forward-looking statements.

These factors, risks and uncertainties

can be found in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31,

2024, as the same may be updated from time to time, including in Part II, Item 1A, “Risk Factors,” of this Quarterly Report

on Form 10-Q.

Although we believe the expectations reflected

in our forward-looking statements are based upon reasonable assumptions, it is not possible to foresee or identify all factors that could

have a material effect on the future financial performance of the Company.

The forward-looking statements in this report are made on the

basis of management’s assumptions and analyses, as of the time the statements are made, in light of their experience and perception

of historical conditions, expected future developments and other factors believed to be appropriate under the circumstances.

Except as otherwise required by the federal

securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement

contained in this Quarterly Report on Form 10-Q and the information incorporated by reference in this Quarterly Report on Form 10-Q to

reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any statement

Business Overview

We are a leading software development company

based in Tokyo, Japan.

We provide software through two business units.

The first business

unit, our CX division, includes a customer experience management business (the “CXM Platform”) that has been in existence

for 15 years.

Our CXM Platform includes marketing, sales, service and content management systems, as well as other tools and integrations,

that enable companies to attract and engage customers throughout the customer experience.

We also provide education, services and support

to help customers be successful with our CXM Platform.

second business unit, our DX division, is a digital transformation business which provides customers with robotics process automation,

process mining and task mining to accelerate the digital transformation of enterprises.

We also have an ongoing technology innovation

team to develop software that supports the narrow needs of large enterprise customers.

2022, we started the GO IPO business, which supports Japanese companies listing on The Nasdaq Stock Market and the New York Stock Exchange

in the United States.

As of November 14, 2024, we have entered into consulting agreements with 14 companies to assist them in their IPO

process, pursuant to which we are entitled to receive from each company a consulting fee that ranges from $380,000 to $900,000 and warrants

or stock acquisition rights to purchase 1% to 4% of the fully-diluted share capital of such companies that is exercisable on certain

dates at an exercise price of $0.01 or JPY1 per share.

were incorporated in the State of Delaware on May 18, 2021.

We conduct business activities principally through our wholly owned subsidiary,

HeartCore Co., Ltd.

(“HeartCore Japan”), a Japanese corporation, which was established in Japan by Mr.

Sumitaka Yamamoto,

our CEO, in 2009.

September 6, 2022, the Company entered into a share exchange and purchase agreement (“Sigmaways Agreement”) to acquire 51%

of the outstanding shares of Sigmaways, a company incorporated under the laws of the State of California, and its wholly owned subsidiaries.

Sigmaways and its wholly owned subsidiaries are engaged in the business of developing and sales of software in the United States.

acquisition closed on February 1, 2023.

the first quarter of 2023, we formed HeartCore Financial, Inc.

The first business unit, our CX division, includes a customer experience

management business (the “CXM Platform”) that has been in existence for over 15 years.

Our CXM Platform includes marketing,

sales, service and content management systems, as well as other tools and integrations, that enable companies to attract and engage customers

throughout the customer experience.

We also provide education, services and support to help customers be successful with our CXM Platform.

The second business unit, our DX division, is

a digital transformation business which provides customers with robotics process automation, process mining and task mining to accelerate

the digital transformation of enterprises.

We also have an ongoing technology innovation team to develop software that supports the narrow

needs of large enterprise customers.

During 2022, we started the GO IPO business, which

supports Japanese companies listing on Nasdaq and NYSE in the United States.

As of March 31, 2025, we have entered into consulting agreements

with 14 companies to assist them in their IPO process, whereby we are entitled to receive from each company a consulting fee that ranges

from $380,000 to $900,000 and warrants or stock acquisition rights to purchase 1% to 4% of the fully-diluted share capital of such companies

that is exercisable on certain dates at an exercise price of $0.01 or JPY1 per share.

We were incorporated in the State of Delaware on May 18, 2021.

business activities principally through our wholly owned subsidiary, HeartCore Co.

(“HeartCore Japan”), which was established

in Japan by Sumitaka Yamamoto, our Chairman of Board, Chief Executive Officer and President and a significant stockholder of the Company,

On September 6, 2022, the Company entered into a share exchange and

purchase agreement to acquire 51% of the outstanding shares of Sigmaways, Inc.

(“Sigmaways”), a company incorporated under

the laws of the State of California, and its wholly owned subsidiaries.

Sigmaways and its wholly owned subsidiaries are engaged in the

business of developing and sales of software in the United States.

The acquisition closed on February 1, 2023.

In the first quarter of 2023, we formed

HeartCore Financial, Inc.

(“HeartCore Financial”) in the U.S.

and HeartCore Capital

Advisors, Inc.

(“HeartCore Capital Advisors”) in Japan, as a part of our GO IPO consulting business.

In the fourth quarter

of 2023, we formed HeartCore Luvina Vietnam Company Limited in Vietnam (“HeartCore Luvina”), which is engaged in the business

of software development.

November 17, 2023, HeartCore Japan and HeartCore Capital Advisors entered into a merger agreement to merge the two entities into one

with HeartCore Japan being the surviving entity.

On January 1, 2024, the merger was completed and HeartCore Capital Advisors transferred

all of its assets and liabilities to HeartCore Japan.

The merger has been accounted for as a recapitalization between entities under

common control since the same controlling shareholders controlled the two entities before and after the transaction.

April 2024, HeartCore Financial incorporated a branch office, HeartCore Financial, Inc.

as part of our Go IPO consulting business.

In the fourth

quarter of 2023, we formed HeartCore Luvina Vietnam Company (“HeartCore Luvina”) in Vietnam, which is engaged in the

business of software development.

In April 2024, HeartCore Financial incorporated

a branch office, HeartCore Financial, Inc.

– Japan Branch Office, in Japan.

On February 29, 2024, the Company entered into a

warrants transfer agreement with a non-related company to sell partial of the warrants it received from a customer (“Consulting

Customer”) as noncash consideration from consulting services for $9,000,000 in cash.

The warrants to be transferred are exercisable

only upon its Consulting Customer’s consummation of the Merger with a special purpose acquisition company or the occurrence of

other fundamental events defined in the warrant agreement it had with the Consulting Customer.

The Company completed its sale of warrants

in September 2024 and recorded $3,970,628 in loss on sale of warrants from this transaction.

March 29, 2024, the Board of Directors of the Company declared a cash dividend of $0.02 per share of the Company’s common shares.

The dividend was paid on May 3, 2024 to shareholders of record as of April 26, 2024, resulting in an aggregate of $417,283 in total dividends

paid by the Company.

July 22, 2024, the Board of Directors of the Company declared a cash dividend of $0.02 per share of the Company’s common shares.

The dividend was paid on August 26, 2024 to shareholders of record as of August 19, 2024, resulting in an aggregate of $417,283 in

total dividends paid by the Company.

Company may continue to issue quarterly dividends going forward, contingent upon Board of Directors approval, following review of the

Company’s then-current financial results.

Future dividends, if any, may be less than, equal to or greater than recent dividends.

Noncompliance

with Nasdaq’s Minimum Bid Price Requirement

October 26, 2023, the Company received written notice (the “Bid Price Notice”) from the Nasdaq Listing Qualifications Department

(the “Nasdaq Staff”) indicating that the Company was not in compliance with the $1.00 minimum bid price requirement set forth

in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”) for continued listing on the Nasdaq Capital Market.

The notification of noncompliance had no immediate effect on the listing or trading of the Company’s common stock on the Nasdaq

Capital Market under the symbol “HTCR,” and the Company continued to monitor the closing bid price of its common stock and

evaluate its alternatives, if appropriate, to resolve the deficiency and regain compliance with this rule.

Nasdaq Listing Rules require listed securities to maintain a minimum bid price of $1.00 per share and, as of October 26, 2023, based

upon the closing bid price for the then-last 30 consecutive business days, the Company no longer met this requirement.

The Bid Price

Notice indicated that the Company would be provided 180 calendar days, or until April 23, 2024, in which to regain compliance.

any time during this period the closing bid price of the Company’s common stock is at least $1.00 per share for a minimum of 10

consecutive business days, the Nasdaq Staff would provide the Company with written confirmation of compliance and the matter will be

Alternatively,

if the Company failed to regain compliance with Rule 5550(a)(2) prior to the expiration of the 180 calendar day period, but met the continued

Recent Developments

Change in Controlled Company Status and Board Committee Formation

In the first quarter

of 2025, the Company announced that its Board of Directors (the “Board”) had formed a Compensation Committee and a Nominating

and Corporate Governance Committee.

The Compensation Committee is comprised of three independent directors:

Ferdinand Groenewald, Heather

Neville (Chair) and Koji Sato.

The Nominating and Corporate Governance Committee is comprised of three independent directors:

Groenewald, Heather Neville and Koji Sato (Chair).

In exchange for their

service on the Compensation Committee, the Chair of the Compensation Committee will receive an additional $7,000 annually, and the other

Compensation Committee members will receive an additional $4,000 annually.

In exchange for their

service on the Nominating and Corporate Governance Committee, the Chair of the Nominating and Corporate Governance Committee will receive

an additional $6,000 annually, and the other Nominating and Corporate Governance Committee members will receive an additional $3,000 annually.

Upon initially listing

with the Nasdaq Capital Market, the Company qualified as a “controlled company” because more than 50% of the voting power

for the election of directors was held by Mr.

As a result of certain sales under the Company’s previously announced at-the-market

offering, Mr.

Yamamoto no longer holds more than 50% of the voting power for the election of directors and therefore, the Company no longer

qualifies as a controlled company.

As a result, the Company is required, subject to phase-in rules, to comply with Nasdaq requirements

● a majority of the Board consist of independent directors

as defined by Nasdaq’s applicable rules and regulations;

● the compensation of the Company’s executive officers

be determined, or recommended to the Board for determination, by independent directors constituting a majority of the independent directors

of the Board in a vote in which only independent directors participate or by a compensation committee comprised solely of independent

● director nominees be selected, or recommended to the Board for selection, by independent directors constituting

a majority of the independent directors of the Board in a vote in which only independent directors participate or by a nomination committee

comprised solely of independent directors.

The Company previously

availed itself of certain of the controlled company exemptions.

More specifically, the Company did not have a compensation committee or

a nominating and corporate governance committee.

We no longer qualify

as a controlled company and accordingly, we have formed a Compensation Committee and a Nominating and Corporate Governance Committee;

however, we currently utilize and presently intend to continue to utilize, the exemption relating to a majority independent Board.

to Nasdaq’s phase-in rules, we have a period of one year from the date on which we ceased to be a controlled company to comply with

the majority independent Board requirement.

Three of six members

of the Company’s Board are independent directors within the meaning of Nasdaq Capital Market rules:

Ferdinand Groenewald, Heather

Neville, and Koji Sato.

Nasdaq Notice Regarding

Minimum Bid Price Requirement

On May 6, 2025, the Company

received written notice (the “Bid Price Notice”) from the Nasdaq Listing Qualification Department (the “Nasdaq Staff”)

indicating that the Company is not in compliance with the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2)

(the “Minimum Bid Price Requirement”) for continued listing on the Nasdaq Capital Market.

The notification of noncompliance

has no immediate effect on the listing or trading of the Company’s common stock on the Nasdaq Capital Market under the symbol “HTCR,”

and the Company is currently monitoring the closing bid price of its common stock and evaluating its alternatives, if appropriate, to

resolve the deficiency and regain compliance with this rule.

The Nasdaq Listing Rules

require listed securities to maintain a minimum bid price of $1.00 per share and, based upon the closing bid price for the last 30 consecutive

business days, the Company no longer meets this requirement.

The Bid Price Notice indicated that the Company will be provided 180 calendar

days, or until November 3, 2025, in which to regain compliance.

If at any time during this period the closing bid price of the Company’s

common stock is at least $1.00 per share for a minimum of 10 consecutive business days, the Nasdaq Staff will provide the Company with

written confirmation of compliance and the matter will be closed.

Alternatively, if the

Company fails to regain compliance with Rule 5550(a)(2) prior to the expiration of the 180 calendar day period, but meets the continued

listing requirement for market value of publicly held shares and all of the other applicable standards for initial listing on the Nasdaq

Capital Market, with the exception of the Minimum Bid Price Requirement, and provided written notice of its intention to cure the deficiency

Capital Market, with the exception of the Minimum Bid Price Requirement, and provides written notice of its intention to cure the deficiency

during the second compliance period by effecting a reverse stock split, if necessary, then the Company may be granted an additional 180

calendar days to regain compliance with Rule 5550(a)(2).

On April 24, 2024, the Company received written notice (the “April 2024 Nasdaq Letter”) from the

Nasdaq Staff indicating that although the Company was not in compliance with the Minimum Bid Price Requirement, the Nasdaq Staff determined

that the Company was eligible for an additional 180 calendar day period, or until October 21, 2024, to regain compliance.

Staff indicated that its determination was based on the Company meeting the continued listing requirement for market value of publicly

held shares and all of the other applicable requirements for initial listing on the Nasdaq Capital Market, with the exception of the

Minimum Bid Requirement, and the Company’s written notice of its intention to cure the deficiency during the second compliance

period by effectuating a reverse stock split, if necessary.

Accordingly, there was no immediate effect on the listing or trading of the

Company’s common stock on the Nasdaq Capital Market under the symbol “HTCR.”

at any time between April 24, 2024 and October 21, 2024, the closing bid price of the Company’s common stock was at least $1.00

per share for a minimum of 10 consecutive business days, the Nasdaq Staff would provide the Company with written confirmation of compliance

and the matter would be closed.

October 22, 2024, the Company received written notice (the “October 2024 Nasdaq Notice”) from the Nasdaq Staff indicating

that the Company was not in compliance with the Minimum Bid Price Requirement.

Pursuant to the October 2024 Nasdaq Notice, unless the

Company requests an appeal of the determination to delist the Company’s common stock by October 29, 2024, trading of the Company’s

common stock will be suspended at the opening of business on October 31, 2024, and a Form 25-NSE will be filed with the SEC which will

remove the Company’s securities from listing and registration on Nasdaq.

Company appealed the determination on October 29, 2024.

Submission of the hearing request stayed the suspension of the Company’s

securities and the filing of the Form 25-NSE pending the Panel’s decision.

On November 5, 2024, the Company received written

notice from the Nasdaq Staff that the Company demonstrated compliance with the $1.00 minimum bid price requirement set forth in Nasdaq

Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market.

As a result, the hearing appealed on October 29, 2024 has

now been cancelled as the Company regained compliance with the Nasdaq Capital Market’s listing requirements.

the three months ended September 30, 2024 and 2023, we generated revenues of $17,850,411 and $4,688,908, respectively, reported a net

income of $10,816,930 and a net loss of $2,541,133, respectively.

the nine months ended September 30, 2024 and 2023, we generated revenues of $26,963,531 and $18,518,431, respectively, reported a net

income of $7,127,810 and a net loss of $1,755,942, respectively, and had cash flows used in operating activities of $3,499,514 and $2,457,661,

respectively.

As noted in our unaudited consolidated financial statements, as of September 30, 2024, we had an accumulated deficit of

of Operations

of Results of Operations for the Three Months Ended September 30, 2024 and 2023

following table summarizes our operating results as reflected in our unaudited statements of operations during the three months ended

September 30, 2024 and 2023, respectively, and provides information regarding the dollar and percentage increase (or decrease) during

such periods.

For the Three Months Ended September 30,

There can be no assurance

that the Company will be able to regain compliance with the Minimum Bid Price Requirement, even if it maintains compliance with the other

listing requirements.

The Company is considering actions that it may take in response to the Bid Price Notice in order to regain compliance

with the continued listing requirements, but no decisions regarding a response have been made at this time.

Financial Overview

For the three months ended March 31, 2025 and

2024, we generated revenues of $3,587,026 and $5,046,732, respectively, and reported net loss of $3,137,381 and $1,478,002, respectively,

and cash flows used in operating activities of $2,000,791 and $898,619, respectively.

As noted in our unaudited consolidated financial

statements, as of March 31, 2025, we had an accumulated deficit of $19,331,835.

Results of Operations

Comparison of Results of Operations for the

Three Months Ended March 31, 2025 and 2024

The following table summarizes our operating results

as reflected in our unaudited statements of operations for the three months ended March 31, 2025 and 2024, respectively, and provides

information regarding the dollar and percentage increase (or decrease) during such periods.

For the Three Months Ended March 31,

$ (1,459,706 )

Cost of revenues

4 unchanged sentences

Total operating expenses

Income (loss) from operations

Loss from operations

Other expenses

Income (loss) before income tax provision

Income tax expense

Net income (loss)

Loss before income tax expense (benefit)

Income tax expense (benefit)

net loss attributable to non-controlling interests

Net income (loss) attributable to HeartCore Enterprises, Inc.

Net loss attributable to HeartCore Enterprises, Inc.

$ (3,086,992 )

total revenues increased by $13,161,503, or 280.7%, to $17,850,411 for the three months ended September 30, 2024 from $4,688,908 for

the three months ended September 30, 2023, mainly attributable to the increased revenues of $13,272,315 from GO IPO consulting services

as two of the Company’s GO IPO customers successfully listed on the Nasdaq in the third quarter of 2024 and the Company recognized

revenues from noncash consideration in the form of warrants and ordinary shares from the consulting services customers.

total costs of revenues decreased by $427,217, or 11.1%, to $3,433,024 for the three months ended September 30, 2024 from $3,860,241

for the three months ended September 30, 2023, primarily attributable to (i) a decrease of $238,701 in the costs of GO IPO consulting

services in line with the decrease in revenues of GO IPO consulting services by excluding th e amount recognized from noncash consideration;

(ii) a decrease of $219,058 in the costs of customized software development and services in light of the decrease in sales.

total gross profit increased by $13,588,720, or 1,639.8%, to $14,417,387 for the three months ended September 30, 2024 from $828,667

for the three months ended September 30, 2023, mainly attributable to an increase in gross profit of $13,511,016 from GO IPO consulting

services as the Company recognized revenues from noncash consideration in the form of warrants and ordinary shares from two of IPO customers

upon their IPO effectiveness with no associated costs in the three months ended September 30, 2024, while there was no such event during

the three months ended September 30, 2023 .

the reason discussed above, our overall gross profit margin increased by 63.1% to 80.8% for the three months ended September 30, 2024

from 17.7% for the three months ended September 30, 2023.

selling expenses decreased by $30,933, or 11.3%, to $243,110 for the three months ended September 30, 2024 from $274,043 in the three

months ended September 30, 2023, primarily attributable to a decrease of $41,224 in stock-based compensation as the Company granted shares

of common stock to employees and service providers of Sigmaways in 2023, and there was no such event in the current period.

a percentage of revenues, our selling expenses accounted for 1.4% and 5.9% of our total revenues for the three months ended September

30, 2024 and 2023, respectively.

and Administrative Expenses

general and administrative expenses decreased by $205,581, or 9.5%, to $1,966,717 for the three months ended September 30, 2024 from

$2,172,298 in the three months ended September 30, 2023, primarily attributable to a decrease of $230,045 in salaries and welfare due

to the retirement of certain employees.

a percentage of revenues, our general and administrative expenses were 11.0% and 46.3% of our total revenues for the three months ended

September 30, 2024 and 2023, respectively.

and Development Expenses

research and development expenses decreased by $62,542, or 36.8%, to $107,529 in the three months ended September 30, 2024 from $170,071

in the three months ended September 30, 2023, primarily attributable to a decrease of $61,986 in outsourcing expenses relating to the

development of new CMS management screen features which will be completed soon.

a percentage of revenues, our research and development expenses were 0.6% and 3.6% of our total revenues for the three months ended September

30, 2024 and 2023, respectively.

Income (Expenses), Net

other income (expenses) primarily includes changes in fair value of investments in marketable securities, changes in fair value of investment

in warrants, loss on sale of warrants, interest income generated from bank deposits, interest expense for bank loans and bond, other

income, and other expenses.

Other expenses, net, of $733,975 for the three months ended September 30, 2023 increased by $323,851, or

44.1%, to other expenses, net, of $1,057,826 for the three months ended September 30, 2024, primarily attributable to (i) a loss of $3,970,628

on sale of warrants, offset (ii) by an increase of $3,330,079 in changes in fair value of investment in warrants and (iii) an increase

of $394,012 in changes in fair value of investments in marketable securities.

tax expense was $225,275 in the three months ended September 30, 2024, an increase of $205,862, or 1,060.4%, from income tax expense

of $19,413 in the three months ended September 30, 2023, primarily due to a net income before income tax provision in the current period,

while we recorded a net loss before income tax provision in the three months ended September 30, 2023.

Income (Loss)

a result of the foregoing, we reported a net income of $10,816,930 for the three months ended September 30, 2024, representing a $13,358,063,

or 525.7%, increase from a net loss of $2,541,133 for the three months ended September 30, 2023.

Loss Attributable to Non-controlling Interests

owned 51% equity interest in Sigmaways and its subsidiaries and 51% equity interest in HeartCore Luvina.

Accordingly, we recorded net

loss attributable to non-controlling interests of $240,876 and $233,913 for the three months ended September 30, 2024 and 2023, respectively.

Income (Loss) Attributable to HeartCore Enterprises, Inc.

a result of the foregoing, we reported a net income attributable to HeartCore Enterprises, Inc.

of $11,057,806 for the three months ended

September 30, 2024, representing a $13,365,026, or 579.3%, increase from a net loss attributable to HeartCore Enterprises, Inc.

of $2,307,220

for the three months ended September 30, 2023.

of Results of Operations for the Nine Months Ended September 30, 2024 and 2023

following table summarizes our operating results as reflected in our unaudited statements of operations during the nine months ended

September 30, 2024 and 2023, respectively, and provides information regarding the dollar and percentage increase (or decrease) during

such periods.

For the Nine Months Ended September 30,

$ (1,333,350 )

$ (1,753,642 )

Our total revenues decreased by $1,459,706, or 28.9%, to $3,587,026

for the three months ended March 31, 2025 from $5,046,732 for the three months ended March 31, 2024, primarily attributable to (i) a decreased

revenue of $743,854 from sale on-premise software, mainly because the Company obtained several large orders of CMS license during the

first quarter of 2024, while only one such comparable large order was obtained in the current period;

(ii) a decreased revenue of $336,812

from customized software development and services in connection with the intense competition of the software market in the U.S.;

a decreased revenue of $329,938 from GO IPO consulting services, as no new IPO consulting orders were entered this quarter mainly as heightened

uncertainty in the U.S.

stock market caused by rising tariffs.

Cost of Revenues

Operating expenses:

Our total cost of revenues decreased by $527,801,

or 17.5%, to $2,486,742 for the three months ended March 31, 2025 from $3,014,543 for the three months ended March 31, 2024, mainly attributable

to the decrease of $374,939 and $226,468 in the cost of customized software development and services and GO IPO consulting services, respectively,

in light of the decreases in sales.

Our total gross profit decreased by $931,905, or 45.9%, to $1,100,284

for the three months ended March 31, 2025 from $2,032,189 for the three months ended March 31, 2024, mainly attributable to (i) a decrease

of $751,215 in gross profit from sale of on-premises software, as the sale decreased dramatically while there was not much change in the

corresponding costs as the product was developed independently and fixed, which were not proportional

to sales, and (ii) a decrease of $103,470 in gross profit from GO IPO consulting services, in light of the decrease in sale.

For the reasons discussed above, our overall gross

profit margin decreased by 9.6% to 30.7% for the three months ended March 31, 2025 from 40.3% for the three months ended March 31, 2024.

Selling Expenses

Our selling expenses increased by $71,453, or 32.5%, to $291,160 for

the three months ended March 31, 2025 from $219,707 in the three months ended March 31, 2024, primarily attributable to an increase of

$97,622 in sales salaries, commissions and welfare, resulting from the employee restructuring in late 2024 by transferring certain administrative

and management department employees to sales department to promote selling activities for software business in Japan.

As a percentage of revenues, our selling expenses

accounted for 8.1% and 4.4% of our total revenues for the three months ended March 31, 2025 and 2024, respectively.

General and Administrative Expenses

Our general and administrative expenses decreased by $476,915 or 19.8%,

to $1,929,388 for the three months ended March 31, 2025 from $2,406,303 in the three months ended March 31, 2024, primarily attributable

to (i) a decrease of $153,770 in salaries and welfare expenses, mainly resulting from the employee restructuring in late 2024 as mentioned

(ii) a decrease of $159,874 in depreciation and amortization expenses, primarily because we fully impaired intangible asset arose

from acquisition of Sigmaways at the end of last fiscal year, resulting in no amortization expenses were recorded in current quarter;

and (iii) a decrease of $113,477 in office, utility and other expenses, reflecting from our continued efforts to save operating expenses.

As a percentage of revenues, general and administrative

expenses were 53.8% and 47.6% of our revenues for the three months ended March 31, 2025 and 2024, respectively.

Research and Development Expenses

Total operating expenses

Income (loss) from operations

Other expenses

Income (loss) before income tax provision

Income tax expense

Net income (loss)

net loss attributable to non-controlling interests

Net income (loss) attributable to HeartCore Enterprises, Inc.

$ (1,336,731 )

total revenues increased by $8,445,100, or 45.6%, to $26,963,531 for the nine months ended September 30, 2024 from $18,518,431 for

the nine months ended September 30, 2023, mainly attributable to the increased revenues of $8,168,414 from GO IPO consulting

services as two of the Company’s GO IPO customers successfully listed on the Nasdaq in the third quarter of 2024 and the

Company recognized revenues from noncash consideration in the form of warrants and ordinary shares from the consulting services

customers of $13.5 million, while only $4 million of revenue recognized from noncash consideration in the form of warrants in the

nine months ended September 30, 2023.

total cost of revenues decreased by $840,171, or 8.0%, to $9,708,074 for the nine months ended September 30, 2024 from $10,548,245 for

the nine months ended September 30, 2023, mainly attributable to (i) a decrease of $975,454 in the costs of GO IPO consulting services

in line with the decrease in revenues of GO IPO consulting services by excluding th e amount recognized from noncash consideration, offset

by (ii) an increase of $259,917 in customized software development and services as the sales increased.

total gross profit increased by $9,285,271, or 116.5%, to $17,255,457 for the nine months ended September 30, 2024 from $7,970,186 for

the nine months ended September 30, 2023, mainly attributable to an increase in gross profit of $9,143,868 from GO IPO consulting services,

as the Company recognized greater revenues from noncash consideration from IPO customers upon their IPO effectiveness with no associated

costs in the nine months ended September 30, 2024 than that recognized in the same period in 2023.

the reason discussed above, our overall gross profit margin increased by 21.0% to 64.0% for the nine months ended September 30, 2024

from 43.0% in the nine months ended September 30, 2023.

selling expenses decreased by $688,522, or 51.7%, to $642,225 for the nine months ended September 30, 2024 from $1,330,747 in the nine

months ended September 30, 2023, primarily attributable to (i) a decrease of $380,087 in stock-based compensation, as the Company granted

shares of common stock to employees and service providers of Sigmaways in 2023, and there was no such event in the current period;

(ii) a decrease of $337,882 in advertising expense due to less advertising activities in the current period.

a percentage of revenues, our selling expenses accounted for 2.4% and 7.2% of our total revenues for the nine months ended September

30, 2024 and 2023, respectively.

and Administrative Expenses

general and administrative expenses decreased by $909,963, or 12.5%, to $6,395,429 for the nine months ended September 30, 2024 from

$7,305,392 in the nine months ended September 30, 2023, primarily attributable to (i) a decrease of $566,923 in stock-based compensation,

as the Company granted shares of common stock to employees and service providers of Sigmaways in 2023, and there was no such event in

the current period;

and (ii) a decrease of $314,119 in salaries welfare mainly due to the retirement of certain employees.

a percentage of revenues, our general and administrative expenses were 23.8% and 39.4% of our total revenues for the nine months ended

September 30, 2024 and 2023, respectively.

and Development Expenses

research and development expenses slightly increased by $18,628, or 6.4%, to $307,931 in the nine months ended September 30, 2024 from

$289,303 in the nine months ended September 30, 2023, primarily attributable to (i) an increase of $75,981 in outsourcing expenses relating

to the development of new CMS management screen features in the current period;

offset by (ii) a decrease of $57,353 in stock-based compensation,

as the Company granted shares of common stock to employees and service providers of Sigmaways in 2023, and there was no such event in

the current period.

a percentage of revenues, our research and development expenses were 1.1% and 1.6% of our total revenues for the nine months ended September

30, 2024 and 2023, respectively.

Income (Expenses), Net

other income (expenses) primarily includes changes in fair value of investments in marketable securities, changes in fair value of investment

in warrants, loss on sale of warrants, interest income generated from bank deposits, interest expense for bank loans and bond, other

income, and other expenses.

Other expenses, net, of $741,827 for the nine months ended September 30, 2023 increased by $1,967,290, or

265.2%, to other expenses, net, of $2,709,117 for the nine months ended September 30, 2024, primarily attributable to a loss of $3,970,628

on sale of warrants, offset by an increase of $192,703 in changes in fair value of investments in marketable securities and an increase

of $1,926,265 in changes in fair value of investment in warrants.

tax expense was $72,945 for the nine months ended September 30, 2024, an increase of $14,086, or 23.9%, from income tax expense of $58,859

in the nine months ended September 30, 2023, primarily due to an income before income tax provision in the current period, while we recorded

a loss before income tax provision in the nine months ended September 30, 2023.

Income (Loss)

a result of the foregoing, we reported a net income of $7,127,810 for the nine months ended September 30, 2024, representing a $8,883,752,

or 505.9%, increase from a loss of $1,755,942 for the nine months ended September 30, 2023.

Loss Attributable to Non-controlling Interests

owned 51% equity interest in Sigmaways and its subsidiaries and 51% equity interest of HeartCore Luvina.

Accordingly, we recorded net

loss attributable to non-controlling interests of $645,546 and $419,211 for the nine months ended September 30, 2024 and 2023, respectively.

Income (Loss) Attributable to HeartCore Enterprises, Inc.

a result of the foregoing, we reported a net income attributable to HeartCore Enterprises, Inc.

of $7,773,356 for the nine months ended

September 30, 2024, representing a $9,110,087, or 681.5%, increase from a net loss attributable to HeartCore Enterprises, Inc.

of $1,336,731

for the nine months ended September 30, 2023.

and Capital Resources

of September 30, 2024, we had $1,232,117 in cash and cash equivalents, as compared to $1,012,479 as of December 31, 2023.

$2,578,855 in accounts receivable, current as of September 30, 2024.

Our accounts receivable primarily include balance due from customers

for our on-premise software sold and services provided and accepted by customers, as well as amounts billable to the customers for customized

software development and services.

following table sets forth a summary of our cash flows for the periods indicated:

For the Nine Months Ended September 30,

Our research and development expenses increased by $34,759 or 39.0%,

to $123,893 in the three months ended March 31, 2025 from $89,134 in the three months ended March 31, 2024, primarily attributable to

an increase of $79,348 in salaries and welfare expenses for the employees assigned to the development of a new product, Global CMS, which

started in late 2024;

offset by a decrease of $44,250 in outsourcing costs due to the expiration of certain outsourcing contracts in the

current period.

As a percentage of revenues, research and development

expenses were 3.5% and 1.8% of our revenues for the three months ended March 31, 2025 and 2024, respectively.

Other Income (Expenses), Net

Our other income (expenses) primarily includes changes in fair value

of investments in marketable securities, changes in fair value of investment in warrants, interest income generated from bank deposits,

interest expenses for bank loans, other income, and other expenses.

Total other expenses, net, of $875,214 for the three months ended

March 31, 2024 increased by $961,374 or 109.8% to total other expenses, net, of $1,836,588 for the three months ended March 31, 2025,

primarily attributable to an increase of $1,547,582 in loss on fair value changes in investments in marketable securities due to decreased

stock price of investees, partially offset by a decrease of $627,266 in loss on fair value changes in investment in warrants.

Income Tax Expense (Benefit)

Income tax expense was $56,636 for the three months ended March 31,

2025, representing a decrease of $136,803, or 170.6% from income tax benefit of $80,167 in the three months ended March 31, 2024, mainly

because we recognized deferred income tax benefit in connection with amortization expense for intangible asset raised from acquisition

of Sigmaways in the three months ended March 31, 2024, whereas, the intangible asset was fully impaired in the fourth quarter of 2024,

and thus no such deferred income tax benefit recorded in current quarter.

Meanwhile, the income tax expenses incurred in the current quarter

mainly attributable to the decrease of deferred tax assets due to various revenue and expenses adjustments.

As a result of the foregoing, we reported a net

loss of $3,137,381 for the three months ended March 31, 2025, representing a $1,659,379 or 112.3% increase from a net loss of $1,478,002

for the three months ended March 31, 2024.

Net Loss Attributable to Non-controlling

We owned 51% equity interest of Sigmaways and

its subsidiaries and 51% equity interest of HeartCore Luvina.

Accordingly, we recorded net loss attributable to the non-controlling interests

of $50,389 and $144,652 in the three months ended March 31, 2025 and 2024, respectively.

Net Loss Attributable to HeartCore Enterprises,

As a result of the foregoing, we reported a net loss attributable to

HeartCore Enterprises, Inc.

of $3,086,992 for the three months ended March 31, 2025, representing a $1,753,642 or 131.5% increase from

a net loss attributable to HeartCore Enterprises, Inc.

of $1,333,350 for the three months ended March 31, 2024.

Liquidity and Capital Resources

As of March 31, 2025, we had $738,984 in cash and cash equivalents

as compared to $2,121,089 as of December 31, 2024.

We also had $2,114,655 in accounts receivable as of March 31, 2025.

Our accounts receivable

primarily include balance due from customers for our on-premise software sold and services provided and accepted by customers, as well

as amounts billable to the customers for customized software development and services.

The following table sets forth summary of our

cash flows for the periods indicated:

For the Three Months Ended March 31,

Net cash flows used in operating activities

$ (2,000,791 )

$ (2,457,661 )

Net cash flows provided by (used in) investing activities

Net cash flows used in financing activities

Net cash flows provided by investing activities

Net cash flows provided by (used in) financing activities

Effect of exchange rate changes

2 unchanged sentences

Cash and cash equivalents, end of the period

cash flows used in operating activities was $3,499,514 for the nine months ended September 30, 2024, primarily consisting of the following:

income of $7,127,810 for the nine months ended September 30, 2024.

securities and warrants received as noncash consideration in total of $13,541,693 as two of our IPO consulting customers completed

the IPO during the current period.

gain of $1,631,700 on fair value changes in investment in warrants.

increase of $685,531 in accounts receivable due to increased sale of on-premise software in the current period.

by loss of $3,970,628 recognized on sale of warrants to a third party.

by depreciation and amortization expenses of $561,659.

by an increase of $540,008 in other liabilities, mainly because we terminated the consulting service agreement with a GO IPO

customer and will refund $500,000 to the customer.

cash flows provided by investing activities amounted to $5,317,323 for the nine months ended September 30, 2024, primarily attributable

to net proceeds from sale of warrants of $5,640,000, offset by payment of $350,000 to purchase long-term investment in SAFE.

cash flows used in financing activities amounted to $1,529,441 for the nine months ended September 30, 2024, primarily consisting of

repayment of $453,048 for short-term and long-term debts, net repayment of $257,295 for factoring arrangement, and dividend distribution

Company has entered into six leases for its office space, one of which was terminated in February 2024, and these leases were classified

as operating leases.

It has also entered into a lease for office equipment and it was terminated in March 2024, and two leases for vehicles,

one of which was terminated in September 2023, and these leases were classified as finance leases.

of September 30, 2024, future minimum lease payments under the non-cancelable lease agreements are as follows:

Operating Activities

Net cash flows used in operating activities was $2,000,791 for the

three months ended March 31, 2025, primarily consisting of the following:

Net loss of $3,137,381 for the three months ended March 31, 2025.

A decrease of $496,079 in deferred revenue, due to decreased upfront payment received for sales of on-premise software revenue as we obtained fewer orders.

A decrease of $219,830 in accounts payable and accrued expenses, as we continuously paid off such liabilities and decreased purchases to save operating expenses.

A decrease of $178,339 in accrued payroll and other employee costs, resulting from payment for accrued bonus and sales commission during the period.

Offset by a loss of $1,781,664 on fair value changes in investments in marketable securities.

Offset by a loss of $117,305 on disposal of property and equipment brought by early termination of an operating lease.

Offset by non-cash lease expense of $90,508.

Investing Activities

Net cash flows provided by investing activities

amounted to $473,061 for the three months ended March 31, 2025, primarily attributable to the proceeds of $462,763 from sale of marketable

Financing Activities

Net cash flows provided by financing activities amounted to $142,940

for the three months ended March 31, 2025, primarily consisting of (i) proceeds of $134,689 from short-term debt borrowing;

(ii) proceeds

of $117,000 from exercise of stock options;

(iii) collection of subscription receivable of $103,942;

and offset by (iv) repayment of $165,165

for long-term debts.

Contractual Obligations

Lease Commitment

The Company has entered into

operating leases for office space with terms ranging from two to fifteen years, and a finance lease for vehicle with the term of five

As of March 31, 2025, future minimum lease payments

under the non-cancelable lease agreements are as follows:

Year Ended December 31,

Finance Leases

Finance Lease

Operating Leases

5 unchanged sentences

Non-current lease liabilities

Company’s debts included long-term debts borrowed from banks and financial institutions.

of September 30, 2024, future minimum principal payments for long-term debts are as follows:

The Company’s debts included short-term

debt and long-term debts borrowed from banks and financial institutions.

As of March 31, 2025, future minimum principal

payments for long-term debts are as follows:

Year Ended December 31,

Remaining of 2025

Sheet Arrangements

did not have any off-balance sheet arrangements as of September 30, 2024.

Accounting Policies and Estimates

discussion and analysis of our financial condition and results of operations are based upon our unaudited consolidated financial statements.

These financial statements are prepared in accordance with the generally accepted accounting principles in the United States (“U.S.

GAAP”), which requires us to make estimates and assumptions that affect the reported amounts of our assets and liabilities and

revenues and expenses, to disclose contingent assets and liabilities on the date of the unaudited consolidated financial statements,

and to disclose the reported amounts of revenues and expenses incurred during the financial reporting period.

We continue to evaluate

the estimates and assumptions that we believe to be reasonable under the circumstances.

We rely on these evaluations as the basis for

making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Since the use

of estimates is an integral component of the financial reporting process, actual results could differ from those estimates.

accounting policies require higher degrees of judgment than others in their application.

We believe critical accounting policies as disclosed

herein reflect the more significant judgments and estimates used in preparation of our unaudited consolidated financial statements.

Company recognizes revenues under the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”)

Topic 606, “Revenue from Contracts with Customers”.

determine revenue recognition for contracts with customers, the Company performs the following five steps:

(i) identify the contract(s)

with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable

consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price

to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance

Revenues amount represents the invoiced value, net of a value-added tax (“Consumption Tax”) and applicable local

government levies.

The Consumption Tax on sales are calculated at 10% of gross sales in Japan and Vietnam, 5% of gross sales in Canada,

21% of gross sales in Netherlands and nil of gross sales in the United States.

Company currently generates its revenue from the following main sources:

from On-Premise Software

for on-premise software provide the customers with a right to use the software as it exists when made available to the customers.

Company provides on-premise software in the form of both perpetual licenses and term-based licenses which grant the customers with the

right for a specified term.

Revenues from on-premise licenses are recognized upfront at the point in time when the software is made available

to the customers.

Licenses for on-premise software are typically sold to the customers with maintenance and support services in a bundle.

Revenues under the bundled arrangements are allocated based on the relative standalone selling prices (“SSP”) of on-premise

software and maintenance and support service.

The SSP for maintenance and support services is estimated based upon observable transactions

when those services are sold on a standalone basis.

The SSP of on-premise software is typically estimated using the residual approach

as the Company is unable to establish the SSP for on-premise licenses based on observable prices given the same products are sold for

a broad range of amounts (that is, the selling price is highly variable) and a representative SSP is not discernible from past transactions

or other observable evidence.

from Maintenance and Support Services

and support services provided with software licenses consist of trouble shooting, technical support and the right to receive unspecified

software updates when and if available during the subscription.

Revenues from maintenance and support services are recognized over time

as such services are performed.

Revenues for consumption-based services are generally recognized as the services are performed and accepted

by the customers.

from Software as a Service (“SaaS”)

Company’s software is available for use as hosted application arrangements under subscription fee agreements without licensing

the rights of the software to the customers.

Subscription fees from these applications are recognized over time on a ratable basis over

the customer agreement term beginning on the date the Company’s solution is made available to the customers.

The subscription contracts

are generally one year or less in length.

from Software Development and Other Miscellaneous Services

Company provides customers with software development and support services pursuant to their specific requirements, which are primarily

composed of consulting, integration, training, custom application, and workflow development.

The Company also provides other miscellaneous

services, such as 3D space photography.

The Company generally recognizes revenues at a point in time when control is transferred to the

customers and the Company is entitled to the payment, which is when the promised services are delivered and accepted by the customers.

from Customized Software Development and Services

Company’s customized software development and services revenues primarily include revenues from providing software development

solutions and other support services to its customers.

The contract pricing is at stated billing rates per hour.

These contracts are

generally short-term in nature and not longer than one year in duration.

For services provided under the contracts that result in the

transfer of control over time, the underlying deliverable in the contracts is owned and controlled by the customers and does not create

an asset with an alternative use to the Company.

The Company recognizes revenues on rate per hour contracts based on the amount billable

to the customers, as the Company has the right to invoice the customers in an amount that directly corresponds with the value to the

customers of the Company’s performance to date.

from Consulting Services

Company provides public listing related consulting services to customers pursuant to the specific requirements prescribed in the contracts,

which primarily include communicating with intermediary parties, preparing required documents related to the initial public offering

and supporting the listing process.

The consulting service contracts normally include both cash and noncash considerations.

Cash consideration

is paid in installment payments and is recognized in revenues over the period of the contract by reference to progress toward complete

satisfaction of that performance obligation.

Noncash consideration is in the form of warrants of the customers and is measured at fair

value at contract inception.

Noncash consideration that is variable for reasons other than only the form of the consideration is included

in the transaction price, but is subject to the constraint on variable consideration.

The Company assesses the estimated amount of the

variable noncash consideration at contract inception and subsequently, to determine when and to what extent it is probable that a significant

reversal in the amount of cumulative revenues recognized will not occur once the uncertainty associated with the variable consideration

is subsequently resolved.

Only when the significant revenues reversal is concluded probable of not occurring can variable consideration

be included in revenues.

Based on evaluation of likelihood and magnitude of a reversal in applying the constraint, the variable noncash

consideration is recognized in revenues until the underlying uncertainties have been resolved.

Company records reduction to revenues for estimated customer returns and allowances.

The Company bases its estimates on historical rates

of customer returns and allowances as well as the specific identification of outstanding returns.

The actual amount of customer returns

and allowances, which is inherently uncertain, may differ from the Company’s estimates.

If the Company determines that actual or

expected returns or allowances are significantly higher or lower than the reserves it established, it would record a reduction or increase,

as appropriate, to revenues in the period in which it makes such a determination.

Reserves for customer refunds are included within other

current liabilities on the consolidated balance sheets.

At a minimum, the Company reviews and refines these estimates on a quarterly

timing of revenue recognition may differ from the timing of invoicing to the customers.

The Company has determined that its contracts

do not include a significant financing component.

The Company records a contract asset, which is included in accounts receivable, current

and non-current, in the consolidated balance sheets, when revenues are recognized prior to invoicing.

The Company factors certain accounts

receivable upon or after the performance obligation is being met.

The Company records deferred revenue in the consolidated balance sheets

when revenues are recognized subsequent to cash collection for an invoice.

Deferred revenue is reported net of related uncollected deferred

revenue in the consolidated balance sheets.

The amount of revenues recognized during the nine months ended September 30, 2024 and 2023

that were included in the opening deferred revenue balance was approximately $1.8 million and $1.5 million, respectively.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements

as of March 31, 2025.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results

of operations are based upon our unaudited consolidated financial statements.

These financial statements are prepared in accordance with

the generally accepted accounting principles in the United States (“U.S.

GAAP”), which requires us to make estimates and assumptions

that affect the reported amounts of our assets and liabilities and revenues and expenses, to disclose contingent assets and liabilities

on the date of the unaudited consolidated financial statements, and to disclose the reported amounts of revenues and expenses incurred

during the financial reporting period.

We continue to evaluate the estimates and assumptions that we believe to be reasonable under the

circumstances.

We rely on these evaluations as the basis for making judgments about the carrying values of assets and liabilities that

are not readily apparent from other sources.

Since the use of estimates is an integral component of the financial reporting process, actual

results could differ from those estimates.

We believe there are no critical accounting policies and estimates for the three months ended

March 31, 2025.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis