What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-12 compared with 2022-05-16 · 298 added, 275 removed, 467 unchanged (55% of the section changed)

25 unchanged sentences

Current portion of long-term debts

premium financing

Insurance premium financing

Operating lease liabilities, current

13 unchanged sentences

Shareholders’ equity (deficit):

Preferred shares ($ 0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively)

Preferred shares ($ 0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of June 30, 2022 and December 31, 2021)

Common shares ($ 0.0001 par value, 200,000,000 shares authorized;

18,999,276 and 15,819,943 shares issued;

18,915,943 and 15,546,454 shares outstanding as of March 31, 2022 and December 31, 2021, respectively)

18,440,467 and 15,546,454 shares outstanding as of June 30, 2022 and December 31, 2021, respectively)

Additional paid-in capital

Treasury shares, at cost ( 558,809 and 0 shares as of June 30, 2022 and December 31, 2021, respectively)

( 1,336,762 )

Accumulated deficit

4 unchanged sentences

Total liabilities and shareholders’ equity (deficit)

accompanying footnotes are an integral part of these unaudited consolidated financial statements.

accompanying notes are an integral part of these unaudited consolidated financial statements.

ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE LOSS

For the Three Months Ended

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Three Months

For the Six Months

Cost of revenues

4 unchanged sentences

Total operating expenses

Loss from operations

Income (loss) from operations

( 1,663,378 )

( 3,225,843 )

Other income (expenses):

2 unchanged sentences

Other expenses

Total other expenses

Loss before income tax provision

Total other income (expenses)

Income (loss) before income tax provision

( 1,694,662 )

Income tax expense (benefit)

( 3,273,929 )

net loss attributable to non-controlling interest

Net loss attributable to HeartCore Enterprises, Inc.

Income tax expense

Net income (loss)

( 1,703,641 )

( 3,282,092 )

Other comprehensive income:

net income attributable to non-controlling interest

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

$ ( 1,703,641 )

$ ( 3,282,092 )

Other comprehensive income (loss):

Foreign currency translation adjustment

Total comprehensive loss

Total comprehensive income (loss)

( 1,484,281 )

comprehensive loss attributable to non-controlling interest

Comprehensive loss attributable to HeartCore Enterprises, Inc.

( 2,982,679 )

Net loss per common share attributable to HeartCore Enterprises, Inc.

comprehensive income attributable to non-controlling interest

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

$ ( 1,484,281 )

$ ( 2,982,679 )

Net earnings (loss) per common share attributable to HeartCore Enterprises, Inc.

Weighted average common shares outstanding *

Retrospectively restated for effect of share issuances on July 16, 2021.

accompanying footnotes are an integral part of these unaudited consolidated financial statements.

accompanying notes are an integral part of these unaudited consolidated financial statements.

ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

EQUITY (DEFICIT)

THE THREE MONTHS ENDED MARCH 31, 2022

comprehensive

shareholders’

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)

THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

Common shares*

10 unchanged sentences

$ ( 958,008 )

$ ( 604,183 )

Foreign currency translation adjustment

2 unchanged sentences

( 1,046,319 )

Foreign currency translation adjustment

Balance, June 30, 2021 *

$ 2,735,315 -

$ ( 3,340,416 )

$ ( 659,010 )

$ ( 297,032 )

Retrospectively restated for effect of share issuances on July 16, 2021.

Common shares

Number of shares

comprehensive

income (loss)

equity (deficit)

Common shares

Treasury shares

Accumulated other

shareholders’

Number of shares

paid-in capital

comprehensive

income (loss)

equity (deficit)

Balance, December 31, 2021

9 unchanged sentences

( 5,474,564 )

accompanying footnotes are an integral part of these unaudited consolidated financial statements.

( 1,703,641 )

Foreign currency translation adjustment

Share-based compensation

Repurchase of common shares

( 1,336,762 )

Balance, June 30, 2022

$ ( 558,809 )

$ ( 1,336,762 )

$ ( 7,178,205 )

accompanying notes are an integral part of these unaudited consolidated financial statements.

ENTERPRISES, INC.

UNAUDITED CONSOLIDATED

STATEMENTS OF CASH FLOWS

For the Three Months Ended

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

Cash flows from operating activities:

$ ( 1,578,451 )

Net income (loss)

$ ( 3,282,092 )

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation expenses

8 unchanged sentences

Accrued payroll and other employee costs

Due to related party

Operating lease liabilities

3 unchanged sentences

Other liabilities

Net cash flows used in operating activities

Net cash flows provided by (used in) operating activities

( 2,093,867 )

7 unchanged sentences

Proceeds from issuance of common shares prior to initial public offering

Repurchase of common shares

( 1,336,762 )

Payments for finance leases

2 unchanged sentences

Repayment of insurance premium financing

Repayment to related party

Payment of debt issuance costs

Payments for debt issuance costs

Payment for mandatorily redeemable financial interest

2 unchanged sentences

Net change in cash and cash equivalents

( 1,365,514 )

Cash and cash equivalents - beginning of the period

5 unchanged sentences

Payroll withheld as repayment of loan receivable from employees

Expense paid by related parties on behalf of the Company

Expense paid by related party on behalf of the Company

Liabilities assumed in connection with purchase of property and equipment

Share repurchase liability settled by issuance of common shares

1 unchanged sentence

Insurance premium financing

accompanying footnotes are an integral part of these unaudited consolidated financial statements.

HEARTCORE ENTERPRISES, INC.

NOTES TO UNAUDITED

CONSOLIDATED FINANCIAL STATEMENTS

accompanying notes are an integral part of these unaudited consolidated financial statements.

ENTERPRISES, INC.

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

16 unchanged sentences

earliest period presented in the accompanying unaudited consolidated financial statements .

Company, via its wholly-owned operating subsidiary, HeartCore Japan, is mainly engaged in the business of developing and sales

of comprehensive software.

Company, via its wholly-owned operating subsidiary, HeartCore Japan, is mainly engaged in the business of developing and sales of comprehensive

HeartCore USA and HeartCore Japan are hereafter referred to as the Company .

5 unchanged sentences

of the Securities and Exchange Commission (“SEC”).

The unaudited consolidated financial statements include the accounts

of the Company and its subsidiary.

Prior to February 24, 2022, ownership interest of non-controlling party is presented as mandatorily

redeemable financial interest or non-controlling interest as applicable.

All significant intercompany accounts and transactions have

been eliminated.

The unaudited consolidated financial statements include the accounts of

the Company and its subsidiary.

Prior to February 24, 2022, ownership interest of non-controlling party is presented as mandatorily redeemable

financial interest or non-controlling interest as applicable.

All significant intercompany accounts and transactions have been eliminated.

unaudited interim consolidated financial statements do not include all of the information and disclosure required by the U.S.

17 unchanged sentences

Actual results could differ from those estimates.

HEARTCORE ENTERPRISES, INC.

NOTES TO UNAUDITED

CONSOLIDATED FINANCIAL STATEMENTS

the duration and extent of the COVID-19 pandemic depends on future developments that cannot be accurately predicted at this time, such

14 unchanged sentences

The Company recognizes an obligation related to these restorations as asset retirement obligation included in other

non-current liabilities in the consolidated balance sheets, in accordance with the Financial Accounting Standards Board’s (the

“FASB”) Accounting Standards Codification (“ASC”) 410, “Asset Retirement Obligation Accounting”.

The Company capitalizes the associated asset retirement cost by increasing the carrying amount of the related property and equipment.

non-current liabilities in the consolidated balance sheets, in accordance with Accounting Standards Codification (“ASC”)

410, “Asset Retirement Obligation Accounting”.

The Company capitalizes the associated asset retirement cost by increasing

the carrying amount of the related property and equipment.

The following table presents changes in asset retirement obligations:

13 unchanged sentences

feasibility have not been significant and all software development costs have been expensed as incurred.

the three months ended March 31, 2022 and 2021, software development costs expensed as incurred amounted to $ 108,259 and $ 52,146 , respectively.

the six months ended June 30, 2022 and 2021, software development costs expensed as incurred amounted to $ 525,487 and $ 132,171 , respectively.

These software development costs were included in the research and development expenses.

5 unchanged sentences

There were no

impairments of these assets during the three months ended March 31, 2022 and 2021.

impairments of these assets during the six months ended June 30, 2022 and 2021.

Currency Translation

6 unchanged sentences

The resulting exchange differences are recorded in the statements of

HEARTCORE ENTERPRISES, INC.

NOTES TO UNAUDITED

CONSOLIDATED FINANCIAL STATEMENTS

reporting currency of the Company is the United States Dollars (“US$”), and the accompanying unaudited consolidated

financial statements have been expressed in US$.

In accordance with ASC Topic 830-30, “Translation of Financial Statements”,

assets and liabilities of the Company whose functional currency is not US$ are translated into US$, using the exchange rate on the balance

reporting currency of the Company is the United States Dollars (“US$”), and the accompanying unaudited consolidated financial

statements have been expressed in US$.

In accordance with ASC Topic 830-30, “Translation of Financial Statements”, assets

and liabilities of the Company whose functional currency is not US$ are translated into US$, using the exchange rate on the balance sheet

Revenues and expenses are translated at average rates prevailing during the period.

The gains and losses resulting from the

translation of financial statements are recorded as a separate component of accumulated other comprehensive income (loss) within the

statements of changes in shareholders’ equity (deficit).

The gains and losses resulting from the translation

of financial statements are recorded as a separate component of accumulated other comprehensive income (loss) within the statements of

changes in shareholders’ equity (deficit).

of amounts from the local currency of the Company into US$1 has been made at the following exchange rates:

8 unchanged sentences

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

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

local government levies.

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

government levies.

The Consumption Tax on sales is calculated at 10% of gross sales.

Company currently generates its revenue from the following main sources:

from On-Premises Software

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

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

right for a specified term.

Revenue from on-premises licenses is recognized upfront at the point in time when the software is made available

from On-Premise Software

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

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.

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

to the customer.

Licenses for on-premises software are typically sold to the customer 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-premises

Licenses for on-premise software are typically sold to the customer 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.

1 unchanged sentence

when those services are sold on a standalone basis.

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

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

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

7 unchanged sentences

by the customers.

HEARTCORE ENTERPRISES, INC.

NOTES TO UNAUDITED

CONSOLIDATED FINANCIAL STATEMENTS

from Software as a Service (“SaaS”)

10 unchanged sentences

such as 3D Space photography.

The Company generally recognized revenue at a point in time when control is transferred to the customers

The Company generally recognizes revenue 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 Consulting Service

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 and supporting the listing process.

from consulting services are recognized over time as such services are performed.

The consulting service contracts are generally less

than one year in length.

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

5 unchanged sentences

The amount of revenues recognized

during the three months ended March 31, 2022 and 2021 that were included in the opening deferred revenues balance was approximately $0.8

during the six months ended June 30, 2022 and 2021 that were included in the opening deferred revenues balance was approximately $ 1.1

million and $ 1.2 million, respectively.

3 unchanged sentences

The Company’s disaggregation of revenues by type

for the three months ended March 31, 2022 and 2021 is as following:

for the three and six months ended June 30, 2022 and 2021 is as following:

SCHEDULE OF DISAGGREGATION OF REVENUES

For the Three Months Ended

For the Three Months

For the Six Months

Revenue from On-Premise Software

2 unchanged sentences

Revenue from Software Development and other Miscellaneous Services

Revenue from Consulting Service

Total Revenue

Company’s disaggregation of revenues by product is as following:

For the Three Months Ended

Company’s disaggregation of revenues by product/service is as following:

For the Three Months

For the Six Months

Revenue from Customer Experience Management Platform

2 unchanged sentences

Revenue from Task Mining

Revenue from Consulting Service

Revenue from Others

Total Revenue

of March 31, 2022 and 2021, and for the periods then ended, all long-lived assets and almost all of the revenue generated are

attributed to the Company’s operation in Japan.

HEARTCORE ENTERPRISES, INC.

NOTES TO UNAUDITED

CONSOLIDATED FINANCIAL STATEMENTS

of June 30, 2022 and 2021, and for the period then ended, all long-lived assets and the predominant portion of the revenue generated

are attributed to the Company’s operation in Japan.

Concentration

5 unchanged sentences

and payment practices of its customers to minimize collection risk on accounts receivable.

the three months ended March 31, 2022, customer A represents 13.3 % of the Company’s total revenues.

For the three months ended

March 31, 2021, customer B and C represents 11.9 % and 10.9 %, respectively, of the Company’s total revenues.

the three months ended March 31, 2022, vendor A, B and C represents 36.1 %, 29.4 % and 10.8 %, respectively, of the Company’s total

For the three months ended March 31, 2021, vendor A and B represents 59.4 % and 23.1 %, respectively, of the Company’s

total purchases.

the six months ended June 30, 2022, customer A and B represents 12.9 % and 10.4 %, respectively, of the Company’s total revenues.

For the six months ended June 30, 2021, customer B and C represents 11.5 % and 12.7 %, respectively, of the Company’s total revenues.

the six months ended June 30, 2022, vendor A and B represents 44.5 % and 29.8 %, respectively, of the Company’s total purchases.

For the six months ended June 30, 2021, vendor A, B, and C represents 40.2 %, 36.3 %, and 14.1 %, respectively, of the Company’s total

Company accounts for share-based compensation awards in accordance with ASC 718, “Compensation – Stock Compensation”.

The cost of services received from employees and non-employees in exchange for awards of equity instruments is recognized in the consolidated

statements of operations based on the estimated fair value of those awards on the grant date and amortized on a straight-line basis over

the requisite service period or vesting period.

The cost of services received from employees and non-employees in exchange for awards of equity instruments is recognized in the consolidated statements of operations based on the estimated fair value of those awards on the grant date and amortized on a straight-line

basis over the requisite service period or vesting period.

The Company records forfeitures as they occur.

13 unchanged sentences

Prepaid insurance premium

HEARTCORE ENTERPRISES, INC.

NOTES TO UNAUDITED

CONSOLIDATED FINANCIAL STATEMENTS

offering expenses, consisting of legal fees and road show expenses relating to the Company’s planned initial public

offering, are capitalized and recorded on the balance sheet.

The deferred offering expenses were reclassified to

shareholders’ equity and recorded against the proceeds received upon the closing of our initial public offering on

February 14, 2022.

offering expenses, consisting of legal fees and road show expenses relating to the Company’s planned initial public offering, are

capitalized and recorded on the balance sheet.

The deferred offering expenses were reclassified to shareholders’ equity and recorded

against the proceeds received upon the closing of our initial public offering on February 14, 2022.

5 — RELATED PARTY TRANSACTIONS

of March 31, 2022 and December 31, 2021, the Company has a due to related party balance of $ 185

of June 30, 2022 and December 31, 2021, the Company has a due to related party balance of $ 5,885

and $ 1,110 ,

respectively, from Sumitaka Yamamoto, the CEO and major shareholder of the Company.

The balance is unsecured, non-interest bearing and

due on demand.

During the three months ended March 31, 2022 and 2021, the Company advanced $ 25,480

and $ 3,075 ,

respectively, to this related party, and the related party paid expenses of $ 25,480

and $ 10,695 ,

respectively, on behalf of the Company.

The Company also repaid $ 903 to the related party during the three months ended March 31,

of March 31, 2022 and December 31, 2021, the Company has a loan receivable balance of $ 356,268

and $ 386,315 ,

respectively, from Heartcore Technology Inc., a company controlled by the CEO of the Company.

The loan was made to the related party

to support its operation.

The balance is unsecured, bears an annual interest of 1.475 %,

and requires repayments in installments starting from February 2022.

During the three months ended March 31, 2022 and 2021, the Company

and $ 57,195 ,

respectively, to this related party, and the related party paid expenses of nil

and $ 14,197 ,

respectively, on behalf of the Company.

During the three months ended March 31, 2022 and 2021, the Company received repayments of $ 9,102

respectively, from this related party.

The balance is unsecured, non-interest bearing

and due on demand.

During the six months ended June 30, 2022, the related party paid operating expenses on behalf of the Company and

received the payments in a net amount of $ 5,448 .

During the six months ended June 30, 2021, the Company advanced $ 26,603

to this related party, and the related party paid expenses of $ 25,482

on behalf of the Company.

of June 30, 2022 and December 31, 2021, the Company has a loan receivable balance of $ 307,231 and $ 386,315 , respectively, from Heartcore

Technology Inc., a company controlled by the CEO of the Company.

The loan was made to the related party to support its operation.

balance is unsecured, bears an annual interest of 1.475 %, and requires repayments in installments starting from February 2022.

the six months ended June 30, 2022 and 2021, the Company loaned nil and $ 57,195 , respectively, to this related party, and the related

party paid expenses of nil and $ 14,197 , respectively, on behalf of the Company.

During the six months ended June 30, 2022 and 2021, the

Company received repayments of $ 21,508 and nil , respectively, from this related party.

June 2020, Suzuyo Shinwart Corporation became an over 10 % shareholder of the Company.

During the three months ended March 31, 2021, the

During the six months ended June 30, 2021, the

Company has revenue from this related party of $ 146,083 from software sales and incurred cost with this related party of $ 338,029 for

software development services provided.

As of March 31, 2021, the Company has deferred revenue and other payable with this related party

of $ 36,012 and $ 181,328 , respectively.

In July 2021, Suzuyo Shinwart Corporation sold all its shares of the Company to the Company’s

CEO and ceased to be the Company’s related party.

As of June 30, 2021, the Company has deferred revenue with this related party of $ 57,593 .

July 2021, Suzuyo Shinwart Corporation sold all its shares of the Company to the Company’s CEO and ceased to be the Company’s

related party.

the period from January 1, 2022 through January 13, 2022, the Company completed a private placement, in which, it issued 30,000 shares

7 unchanged sentences

Property and equipment, net

expense was $ 24,889 and $ 28,070 for the three months ended March 31, 2022 and 2021, respectively.

expense was $ 46,688 and $ 55,458 for the six months ended June 30, 2022 and 2021, respectively.

Company has entered into two leases for its office space, which were classified as operating leases.

It has also entered into two leases

for office equipment and a lease for a vehicle, and these leases were classified as finance leases.

Right-of-use assets of these finance

leases in the amount of $ 42,054 and $ 57,167 are included in property and equipment as of March 31, 2022 and December 31, 2021, respectively.

HEARTCORE ENTERPRISES, INC.

NOTES TO UNAUDITED

CONSOLIDATED FINANCIAL STATEMENTS

for office equipment, one of which was terminated in June 2022, and a lease for a vehicle, and these leases were

classified as finance leases.

Right-of-use assets of these finance leases in the amount of $ 28,487 and $ 57,167 are included in property

and equipment as of June 30, 2022 and December 31, 2021, respectively.

components of lease costs are as follows:

SCHEDULE OF LEASE COSTS

For the Three Months Ended

For the Six Months Ended

Finance lease costs

6 unchanged sentences

SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO THE COMPANY'S LEASES

For the Three Months Ended

For the Six Months Ended

Cash paid for amounts included in the measurement of lease liabilities:

8 unchanged sentences

Operating leases

of March 31, 2022, the future maturity of lease liabilities is as follows:

of June 30, 2022, the future maturity of lease liabilities is as follows:

SCHEDULE OF FINANCE LEASE AND OPERATING LEASE FUTURE MATURITY OF LEASE LIABILITIES

Year ending December 31,

Finance lease

Operating lease

Remaining of 2022

6 unchanged sentences

The security deposits amounted to $ 235,274 and

$ 278,237 as of March 31, 2022 and December 31, 2021, respectively.

HEARTCORE ENTERPRISES, INC.

NOTES TO UNAUDITED

CONSOLIDATED FINANCIAL STATEMENTS

$ 278,237 as of June 30, 2022 and December 31, 2021, respectively.

8 — LONG-TERM DEBTS

5 unchanged sentences

Interest Rate

Balance as of

December 31, 2021

Corporate bond issued through Resona Bank

100,000,000 (a)(b)

1/10/2019—1/10/2024

Loans with banks and other financial institutions

1 unchanged sentence

30,000,000 (a)

12/29/2017—12/30/2022

Resona Bank, Limited.

50,000,000 (a)(b)

12/29/2017—12/29/2024

Resona Bank, Limited.

10,000,000 (a)(b)

9/30/2020—9/30/2027

Resona Bank, Limited.

40,000,000 (a)(b)

9/30//2020—9/30/2027

Resona Bank, Limited.

20,000,000 (a)(b)

11/13/2020—10/31/2027

Sumitomo Mitsui Banking Corporation

12/28/2018—12/28/2023

Sumitomo Mitsui Banking Corporation

10,000,000 (b)

12/30/2019—12/30/2026

The Shoko Chukin Bank, Ltd.

9/28/2018—8/31/2023

The Shoko Chukin Bank, Ltd.

7/27/2020—6/30/2027

Japan Finance Corporation

12/15/2017—11/30/2022

Japan Finance Corporation

11/17/2020—11/30/2027

Higashi-Nippon Bank

9 unchanged sentences

guaranteed by Sumitaka Yamamoto, the Company’s CEO and major shareholder .

expense for long-term debts was $ 7,016 and $ 10,828 for the three months ended March 31, 2022 and 2021, respectively.

HEARTCORE ENTERPRISES, INC.

NOTES TO UNAUDITED

CONSOLIDATED FINANCIAL STATEMENTS

of March 31, 2022, future minimum loan payments are as follows:

expense for long-term debts was $ 14,676 and $ 23,232 for the six months ended June 30, 2022 and 2021, respectively.

of June 30, 2022, future minimum loan payments are as follows:

SCHEDULE OF FUTURE MINIMUM LOAN PAYMENTS

1 unchanged sentence

Remaining of 2022

9 — INSURANCE

PREMIUM FINANCING

February 2022, the Company entered into an insurance premium financing agreement with BankDirect Capital Finance for $ 388,538

at an annual interest rate of 12.80 %

for nine months from February 1, 2022, payable in nine monthly installments of principal and interest.

As of March 31, 2022, the

balance of the insurance premium financing was $ 347,258 .

During the three months ended March 31, 2022, the interest incurred was $ 4,255 .

9 — INSURANCE PREMIUM FINANCING

February 2022, the Company entered into an insurance premium financing agreement with BankDirect Capital Finance for $ 388,538 at an annual

interest rate of 12.80 % for nine months from February 1, 2022, payable in nine monthly installments of principal and interest.

June 30, 2022, the balance of the insurance premium financing was $ 220,583 .

During the six months ended June 30, 2022, the interest incurred

was $ 14,185 .

10 — INCOME TAXES

States (U.S.)

USA is a holding company registered in the State of Delaware incorporated in May 2021.

federal income tax rate is 21 %.

for income taxes in the U.S.

has been made as the Company has no U.S.

taxable income for the six months ended June 30, 2022 and 2021.

Company conducts its major businesses in Japan and is subject to tax in this jurisdiction.

2 unchanged sentences

Income taxes in Japan applicable to the Company

are imposed by the national, prefectural, and municipal governments, and in the aggregate resulted in an effective statutory rate of

approximately 30.62 % for the three months ended March 31, 2022 and 2021.

the three months ended March 31, 2022 and 2021, the Company’s income tax expenses (benefits) are as follows:

are imposed by the national, prefectural, and municipal governments and in the aggregate resulted in an effective statutory rate of approximately

30.62 % for the six months ended June 30, 2022 and 2021.

the six months ended June 30, 2022 and 2021, the Company’s income tax expenses are as follows:

SCHEDULE OF INCOME TAX EXPENSES

For the Three Months Ended

Income tax expense (benefits)

effective tax rate was 0.05 %

and ( 4.26 ) %

for the three months ended March 31, 2022 and 2021,

respectively.

11 – SHARE-BASED COMPENSATION

For the Six Months Ended

Income tax expense

effective tax rate was ( 0.25 )% and 27.30 % for the six months ended June 30, 2022 and 2021, respectively.

11 – STOCK BASED COMPENSATION

May 2016, the Company granted 507 units stock options to its employees each to acquire one share of common shares of HeartCore Japan

5 unchanged sentences

the vesting of the related stock options.

As of March 31, 2021, 324 units of the options were forfeited, and the CEO of the Company has

As of June 30, 2021, 324 units of the options were forfeited, and the CEO of the Company has

repurchased and held the shares issued related to the early exercise of such stock options on behalf of the Company.

1 unchanged sentence

the Company redeemed 484,056 shares (equivalent to 324 shares of common shares of HeartCore Japan) from the CEO of the Company.

HEARTCORE ENTERPRISES, INC.

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

consideration received for the remaining early exercised options were recorded by the Company as a share repurchase liability included

in other current liabilities in the consolidated balance sheet with JPY 1,830 (approximately $ 16 ) as of December 31, 2021.

in other current liabilities in the consolidated balance sheets with JPY 1,830 (approximately $ 16 ) as of December 31, 2021.

issued related to the early exercise of the above-mentioned stock options were not considered outstanding as of December 31, 2021.

February 14, 2022, the 183 units of stock options were vested upon the completion of the Company’s initial public offering and

the Company recognized share-based compensation of $ 11,005 during the three months ended March 31, 2022.

In the same period, the share

repurchase liability of $ 16 was settled by issuance of 273,489 shares of common shares (equivalent to 183 shares of common shares of

HeartCore Japan) from exercise of stock options.

following summarized the Company’s stock option activity for the stock options issued in 2016 for the three months ended March

the Company recognized share-based compensation of $ 11,005 during the six months ended June 30, 2022.

In the same period, the share repurchase

liability of $ 16 was settled by issuance of 273,489 shares of common shares (equivalent to 183 shares of common shares of HeartCore Japan)

from exercise of stock options.

following summarized the Company’s stock options activity for the stock option issued in 2016 for the six months ended June 30,

2022 and 2021:

SCHEDULE OF UNVESTED STOCK OPTION

Number of stock options

stock options

Issued and unvested as of January 1, 2021

Issued and unvested as of March 31, 2021

Vested and exercised

Issued and unvested as of June 30, 2021

Issued and unvested as of January 1, 2022

Vested and exercised

Issued and unvested as of March 31, 2022

following table summarizes the share options activity and related information for the three months ended March 31, 2022:

Exercisable as of June 30, 2022

On December 25, 2021, the Company awarded options

to purchase 1,534,500 shares of common shares at an exercise price of $ 2.50 per share to various officers, directors, employees and consultants

of the Company.

The options vest on each annual anniversary of the date of issuance, in an amount equal to 25 % of the applicable shares

of common shares, with the expiration date on December 25, 2031 .

following table summarizes the share options activity and related information for the six months ended June 30, 2022:

SCHEDULE OF STOCK OPTION ACTIVITY

Number of Options/ Warrants

Weighted Average Exercise Price

Weighted Average Remaining Term

Intrinsic Value

As of January 1, 2022

As of March 31, 2022

Vested and exercisable as of March 31, 2022

As of June 30, 2022

Vested and exercisable as of June 30, 2022

granted historically were valued using the binomial model with the assistance of an independent valuation specialist.

1 unchanged sentence

used in the valuation include expected volatility, risk-free interest rate, dividend yield and expected exercise term.

the three months ended March 31, 2022 and 2021, share-based compensation related to the options totaled $ 292,812 and nil, respectively.

The outstanding unamortized share-based compensation related to options was $ 1,912,528 (which will be recognized through December 2025)

as of March 31, 2022.

ENTERPRISES, INC.

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

the three and six months ended June 30, 2022, share-based compensation related to the options totaled $ 284,938 and $ 577,750 , respectively.

For the three and six months ended June 30, 2021, share-based compensation related to the options was nil .

The outstanding unamortized

share-based compensation related to options was $ 1,608,803 (which will be recognized through December 2025) as of June 30, 2022.

Stock Units (“RSUs”)

following table summarizes the RSUs activity for the three months ended March 31, 2022:

Schedule Of Restricted Stock units

Issued as of January 1, 2022

Issued as of March 31, 2022

Vested as of March 31, 2022

following table summarizes the RSUs activity for the six months ended June 30, 2022:

OF RESTRICTED STOCK UNITS

Number of RSUs

Weighted Average

Grant Date Fair

Value per Share

Unvested as of January 1, 2022

Unvested as of June 30, 2022

February 9, 2022, the Company entered into executive employment agreements with five executives and granted 85,820 RSUs pursuant to the

3 unchanged sentences

The fair value of the RSUs at grant date was $ 424,809 .

February 25, 2022, the Company entered into a service agreement with a marketing company to purchase 6-month marketing services

and granted 83,333

The RSUs were issued and vested

on May 15, 2022.

February 25, 2022, the Company entered into a service agreement with a marketing company to purchase 6-month marketing services and granted

The RSUs were issued and vested on May 15, 2022.

The fair value of the RSUs at grant date was $ 224,999 .

the three months ended March 31, 2022, the Company recognized RSU-related share-based compensation of $ 129,352 .

The outstanding unamortized share-based compensation related to RSUs was $ 520,456

(which will through February 2026) as of March

the three and six months ended June 30, 2022, the Company recognized RSU-related share-based compensation of $ 181,724 and $ 311,076 , respectively.

The outstanding unamortized share-based compensation related to RSUs was $ 338,732 (which will through February 2026) as of June 30, 2022.

12 – SHAREHOLDERS’ EQUITY (DEFICIT)

1 unchanged sentence

shares, par value of $ 0.0001 per share.

the period from January 1, 2022 through January 13, 2022, the Company issued 96,000

shares of common shares at a purchase price of

share for an aggregate net proceeds of $ 220,572

in a private placement, including 30,000

shares of common shares issued to the officers of the Company.

the period from January 1, 2022 through January 13, 2022, the Company issued 96,000 shares of common shares at a purchase price of $ 2.50

per share for an aggregate net proceeds of $ 220,572 in a private placement, including 30,000 shares of common shares issued to the officers

of the Company.

February 14, 2022, the Company completed its initial public offering on the NASDAQ Capital Market under the symbol of “HTCR”.

The Company offered 3,000,000

common shares at $ 5.00

Net proceeds raised by the Company

from the initial public offering amounted to $ 13,724,167

after deducting underwriting discounts and commissions

and other offering expenses.

The Company offered 3,000,000 common shares at $ 5.00 per share.

Net proceeds raised by the Company from the initial public offering amounted

to $ 13,724,167 after deducting underwriting discounts and commissions and other offering expenses.

The Company has deferred costs of

directly attributed to the offering, among

which $ 178,847 offering costs were paid and deferred as of December 31, 2021.

Those costs were also charged against the proceeds

from the offering.

$ 300,460 directly attributed to the offering, among which $ 178,847 offering costs were paid and deferred as of December 31, 2021.

costs were also charged against the proceeds from the offering.

February 14, 2022, 273,489 shares of common shares were issued from exercise of stock options by settling share repurchase liability

of $ 16 (also see NOTE 11).

of March 31, 2022 and December 31, 2021, there were 18,915,943 and 15,819,943 shares, respectively, of common shares issued;

May 15, 2022, 83,333 shares of restricted shares were issued to a marketing company as compensation of services received (also see NOTE

Repurchase Program

June 1, 2022, the Board of Directors approved a share repurchase program (“2022 Share Repurchase Program”), pursuant to

which the Company is authorized to repurchase up to $ 3.5

million of its outstanding common shares.

The timing and amount of repurchases under the program are determined by the

Company’s management based on its evaluation of market conditions and other factors.

This program has no set termination date

and may be suspended or discontinued by at any time.

the period from June 1, 2022 through June 30, 2022, the Company repurchased 558,809 shares of common shares at an average price of $ 2.39

per share totaling approximately $ 1.3 million (including commissions) under the 2022 Share Repurchase Program.

As of June 30, 2022, approximately

$ 2.2 million remained available under the 2022 Share Repurchase Program.

of June 30, 2022 and December 31, 2021, there were 18,999,276 and 15,819,943 shares, respectively, of common shares issued;

and 18,440,467

and 15,546,454 shares, respectively, of common shares outstanding.

preferred shares were issued and outstanding as of March 31, 2022 and December 31, 2021.

preferred shares were issued and outstanding as of June 30, 2022 and December 31, 2021.

13 – MANDATORILY REDEEMABLE FINANCIAL INTEREST

August 10, 2021, the Company and Dentsu Digital Investment Limited (“Dentsu Digital”), a non-controlling shareholder of HeartCore

Japan, entered into a stock purchase agreement, pursuant to which the Company has agreed to purchase the 278

shares of HeartCore Japan held by Dentsu Digital

in accordance with certain terms and conditions in the stock purchase agreement for JPY 50,040,000

on the earlier of the (i) the date the SEC declares

effective a registration statement on Form S-1, for a firm commitment underwritten initial public offering of common shares, filed by

the Company with the SEC or (ii) December 20, 2022.

The Company has determined such shares to be a mandatorily redeemable financial instrument

and is recorded as a liability of JPY 50,040,000

(approximately $ 448,000 )

in the consolidated balance sheet as of December 31, 2021.

On February 24, 2022, the Company purchased the 278

shares of HeartCore Japan from Dentsu Digital

for JPY 50,040,000

(approximately $ 430,000 ) .

Japan, entered into a stock purchase agreement, pursuant to which the Company has agreed to purchase the 278 shares of HeartCore Japan

held by Dentsu Digital in accordance with certain terms and conditions in the stock purchase agreement for JPY 50,040,000 on the earlier

of the (i) the date the SEC declares effective a registration statement on Form S-1, for a firm commitment underwritten initial public

offering of common shares, filed by the Company with the SEC or (ii) December 20, 2022.

The Company has determined such shares to be

a mandatorily redeemable financial instrument and is recorded as a liability of JPY 50,040,000 (approximately $ 448,000 ) in the consolidated

balance sheet as of December 31, 2021.

On February 24, 2022, the Company purchased the 278 shares of HeartCore Japan from Dentsu Digital

for JPY 50,040,000 (approximately $ 430,000 ).

As a result, HeartCore Japan became a wholly-owned subsidiary of the Company.

ENTERPRISES, INC.

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

14 – LOSS PER SHARE

loss per share is calculated on the basis of weighted-average outstanding common shares.

Diluted loss per share is computed on the basis

of basic weighted-average outstanding common shares adjusted for the dilutive effect of stock options, restricted stock unit awards and

other dilutive securities.

computation of basic and diluted loss per share for the three months ended March 31, 2022 and 2021 is as follows:

14 – EARNINGS (LOSS) PER SHARE

earnings (loss) per share is calculated on the basis of weighted-average outstanding common shares.

Diluted earnings (loss) per share

is computed on the basis of basic weighted-average outstanding common shares adjusted for the dilutive effect of stock options, restricted

stock unit awards and other dilutive securities.

computation of basic and diluted earnings (loss) per share for the three and six months ended June 30, 2022 and 2021 is as follows:

SCHEDULE OF COMPUTATION OF BASIC AND DILUTED EARNINGS (LOSS) PER SHARE

For the Three Months Ended

per share – basic

Allocation of net loss attributable to HeartCore Enterprises, Inc.’s common shareholders used in calculating loss per common share — basic

For the Three Months

For the Six Months

Earnings (loss) per share – basic Numerator:

Allocation of net income (loss) attributable to HeartCore

Enterprises, Inc.’s common shareholders used in calculating earnings (loss) per common share — basic

$ ( 1,703,641 )

$ ( 3,282,092 )

Net loss attributable to common shareholders

Net income (loss) attributable to common shareholders

( 1,703,641 )

Weighted average number of common shares outstanding used in calculating basic loss per share

Denominator used for loss per share

Loss per share — basic

For the Three Months Ended

Loss per share – diluted

Allocation of net loss attributable to HeartCore Enterprises, Inc.’s common shareholders used in calculating loss per common share — diluted

$ ( 3,282,092 )

Weighted average number of common shares outstanding used in calculating basic earnings (loss) per share

Denominator used for earnings (loss) per share

Earnings (loss) per share — basic

For the Three Months

For the Six Months

Earnings (loss) per share – diluted Numerator:

Allocation of net income (loss) attributable to HeartCore

Enterprises, Inc.’s common shareholders used in calculating earnings (loss) per common share — diluted

$ ( 1,703,641 )

Net loss attributable to common shareholders

$ ( 3,282,092 )

Weighted average number of common shares outstanding used in calculating diluted loss per share

Denominator used for loss per share

Loss per share — diluted

the three months ended March 31, 2022 and 2021, the weighted average shares outstanding is the same for basic and diluted loss per share

calculations, as the inclusion of common shares equivalents of 273,489 and 1,703,653 , respectively, would have an anti-dilutive effect.

Net income (loss) attributable to common shareholders

( 1,703,641 )

( 3,282,092 )

Weighted average number of common shares outstanding used in calculating diluted earnings (loss) per share

Conversion of share repurchase liability to common shares *

Denominator used for earnings (loss) per share

Earnings (loss) per share — diluted

The share repurchase liability is related to the early exercised

stock options that are issued and unvested as of June 30, 2021, see NOTE 11.

Each option is convertible into one share of common stock

of HeartCore Japan, which is an equivalent of approximately 1,494 shares of common shares of the Company.

the three and six months ended June 30, 2022, the weighted average shares outstanding are the same for basic and diluted loss per share

calculations, as the inclusion of common shares equivalents of 1,620,320 would have an anti-dilutive effect.

15 - SUBSEQUENT EVENTS

On February 25, 2022, the Company entered into

a service agreement with a marketing company pursuant to which the Company agreed to issue 83,333 RSUs for 6-month marketing services

to be provided from February 25, 2022 to August 26, 2022.

The RSUs were issued on May 15, 2022.

the period from July 1, 2022 through August 9, 2022, the Company paid approximately $ 1.9 million

(including commissions) in connection with the repurchase of 651,251 shares

of its common shares under the 2022 Share Repurchase Program.

As of the filing date of this report, approximately $ 0.3 million

remained available under the 2022 Share Repurchase Program.

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 1. Financial Statements