What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-03-31 compared with 2022-03-31 · 318 added, 327 removed, 1287 unchanged (33% of the section changed)

Business section, along with other sections of this annual report on Form 10-K, includes statistical and other industry and market data

that we obtained from industry publications and research, surveys and studies conducted by third parties.

Industry publications and third-party

research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although

they do not guarantee the accuracy or completeness of such information.

While we believe that these industry publications and third-party

research, surveys and studies are reliable, we have not independently verified such data and we do not make any representation as to

the accuracy of the information.

Unless the context

otherwise requires, “HeartCore,”

“we,”

“us,”

“our,”

or the “Company”

to HeartCore Enterprises, Inc.

and its consolidated subsidiary, including, but not limited to, HeartCore Co., Ltd.

Business section, along with other sections of this annual report on Form 10-K, includes statistical and other industry and market

data that we obtained from industry publications and research, surveys and studies conducted by third parties.

Industry publications

and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to

be reliable, although they do not guarantee the accuracy or completeness of such information.

While we believe that these industry

publications and third-party research, surveys and studies are reliable, we have not independently verified such data and we do not

make any representation as to the accuracy of the information.

Unless the context otherwise requires, “HeartCore,”

“we,” “us,” “our,” or the “Company” refers to HeartCore Enterprises, Inc.

consolidated subsidiaries, including, but not limited to, HeartCore Co., Ltd.

(“HeartCore Co.”), HeartCore Capital

Advisors, Inc.

(“HeartCore Capital Advisors”), HeartCore Financial, Inc.

(HeartCore Financial”), and Sigmaways,

(“Sigmaways”).

HeartCore Financial was incorporated in January 2023.

HeartCore Capital Advisors was

incorporated in February 2023.

The acquisition of Sigmaways was closed in February 2023.

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

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again if and when they start utilizing our paid services again.

On September 6, 2022, HeartCore

Enterprises, Inc.

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 is engaged in the business of developing and

sales of software in the United States.

The acquisition closed on February 1, 2023.

During 2022, we started the GO IPO business,

which supports Japanese companies to list on Nasdaq and NYSE in the United States.

As of March 30, 2023, we have entered into consulting agreements with nine companies to assist

them in their IPO process, whereby we are entitled to receive from each company a consulting fee ranges from $350,000 to $900,000 and

warrants or Japanese acquisition rights to purchase one to four percent of the fully-diluted share capital of such companies that is exercisable

on certain dates at an exercise price of $0.01 per share.

The revenue in the GO IPO business helped to offset the decline in sales in

the CX and DX divisions.

In the first quarter of 2023, we formed HeartCore Financial and HeartCore Capital Advisors as

a part of our Go IPO consulting business.

Experience Management Business

must manage a huge amount of content, collaborate with other kinds of business processes, and build infrastructure to fulfill customers’

To make it happen, companies need a content management system that allows easy implementation of a wide range of features including

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A customer experience management system is also becoming essential for companies to manage

customers and deliver personalized content based on the users’

behavior, device, location and context.

customers and deliver personalized content based on the users’ behavior, device, location and context.

A customer experience management

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Content management systems and customer experience management systems need

to provide rich features to fill the new generation of customers’

to provide rich features to fill the new generation of customers’ needs.

Transformation Business

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processes that would be good candidates for automation and having fundamental metrics about those processes (via task mining and process

mining technology) at their disposal –

like utilization and the specific steps in the process if it is not already documented –

mining technology) at their disposal – like utilization and the specific steps in the process if it is not already documented –

to aid them in their decision.

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Task mining software works by monitoring the actions users take.

A recorder is installed on an employee’s

computer to capture their interactions in the different applications they use, recording data like keystrokes, clicks, data entry, etc.,

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Event logs are essentially banks of data that store different information.

benefit of process mining software is that it presents the process it successfully mined, along with the process’

benefit of process mining software is that it presents the process it successfully mined, along with the process’ variants and

suggestions on how to optimize and improve that process.

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movement across the supply chain.

However, despite massive functional advancement, the true promise and potential of digital transformation—reallocating

human capital towards cognitive, higher-value activities—remains elusive, which is limiting improvements in productivity.

However, despite massive functional advancement, the true promise and potential of digital transformation—reallocating

human capital towards cognitive, higher-value activities—remains elusive, which is limiting improvements in productivity.

in the United States, non-farm real output per hour grew 31% during the decade ended December 31, 2009, but only 13% in the subsequent

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Many existing offerings do not effectively integrate AI computer

vision and machine learning (“ML”) capabilities needed to accurately identify and emulate human actions in conjunction with

Without these capabilities, organizations are limited to pursuing automation only within the narrow pathways permitted by existing

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to Link AI Capabilities to Execution.

AI and ML (“AI/ML”) capabilities are needed to automate cognitive, high-value tasks.

In recent years, enterprises have made significant investments in developing AI/ML models.

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to deploy models that are necessary to automate complex processes.

to Change an Enterprise’s Underlying Infrastructure.

Existing offerings generally are unable to emulate the human’s role

to Change an Enterprise’s Underlying Infrastructure.

Existing offerings generally are unable to emulate the human’s role

in executing a business process, requiring organizations to make significant changes either to their applications and infrastructure

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and lead flow, web analytics reporting, calls-to-action, and digital asset management and product information management file manager.

Application (“App”) Partners .

Businesses that use software outside of our software can leverage our ecosystem of

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assistance on a one-time or ongoing basis for an additional fee.

Our customers have access to a customer success manager or customer success team which are responsible for our customers’

long term success, retention and growth on the CXM Platform.

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This dynamic forces workers to constantly execute manual, time-consuming, and repetitive tasks to get their work done.

faced by workers often results in lost productivity that can have a direct impact on a company’s bottom line.

Traditional automation

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moving folders, filling in forms, and updating information fields and databases.

Our robots’

ability to learn from and replicate

workers’

steps in executing business processes drives continuous improvements in operational efficiencies and enables companies

Our robots’ ability to learn from and replicate

workers’ steps in executing business processes drives continuous improvements in operational efficiencies and enables companies

to deliver on key digital initiatives with greater speed, agility, and accuracy.

software is designed to interact with and automate processes across a company’s existing enterprise stack.

As a result, our customers

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increases the number of robots deployed and the number of users interacting with our robots.

Our ability to expand within our customer

base is demonstrated by our net retention rate, which represents the rate of net expansion of annualized renewal run-rate from existing

customers over the last 12 months.

Our net retention rate for our paying customers of our digital transformation business unit (RPA business)

was 45%, 52% and 75% as of December 31, 2021, December 31, 2020 and December 31, 2019, respectively.

The reduction in the net retention

rate was due to a number of small and medium-sized customers cancelling their contracts due to the COVID-19 pandemic.

of our Solutions

mission is to be at the forefront of innovation and thought leadership in enterprise business automation, analyzing enterprise users’

desktops and mission-critical systems, and creating end-to-end software that provides business automation based on the results of that

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allows employees to focus on higher value-added tasks, and also allows them to seamlessly automate business processes, from legacy IT

systems and on-premise applications to new cloud-native infrastructure and applications, without making significant changes to the organization’s

underlying technology infrastructure.

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to operate under ever-changing conditions.

A company’s operations change over time.

If companies have to modify their robots each

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We believe that this will improve the overall experience of

our customers’

employees and allow them to focus on developing higher value-added skill sets.

our customers’ employees and allow them to focus on developing higher value-added skill sets.

As a result, our clients will be

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Our robots improve the overall speed, accuracy,

and effectiveness of a company’s customer service, increasing customer retention and loyalty.

Benefits to Employees

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We believe that this, in turn, causes employees to feel empowered and be more valuable in contributing to broader organizational

“Robotics Engineer”

is one of the fastest emerging job roles globally, with LinkedIn reporting a 40% compound annual

“Robotics Engineer” is one of the fastest emerging job roles globally, with LinkedIn reporting a 40% compound annual

growth rate in job postings from 2015 to 2019.

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Additionally, according to a survey published

in UiPath, Inc.’s 2020 “State of the RPA Developer Report,”

84% of respondents believe that having RPA skills would

in UiPath, Inc.’s 2020 “State of the RPA Developer Report,” 84% of respondents believe that having RPA skills would

positively impact their future career moves.

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We offer powerful, centralized governance capabilities designed to help businesses ensure compliance with business standards.

software is powered by the following key differentiating elements that are necessary for end-to-end automation within today’s enterprise:

Computer Vision .

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Task mining is a method of analyzing individual PC operations of staff engaged in various tasks, i.e., detailed PC operation

log data such as “application launch,”

“screen launch,”

“file open,”

“mouse click,”

input,”

“copy and paste,”

etc., to discover issues and problems.

log data such as “application launch,” “screen launch,” “file open,” “mouse click,” “text

input,” “copy and paste,” etc., to discover issues and problems.

Task mining can highlight task-level issues such as,

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and partner portal.

This ‘try-before-you-buy’

strategy has been a key driver of developer education and future customer purchases

This ‘try-before-you-buy’ strategy has been a key driver of developer education and future customer purchases

of our products and software.

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have a large and diversified customer base.

One customer accounted for more than 10% of our revenue for the

year ended December 31, 2021.

As of December 31, 2021, our combined business units (customer experience management business unit and

digital transformation business unit) had 839 total customers of varying sizes.

We pride ourselves in providing what we believe to be

a great experience to every single customer and user of our software.

Our customers span a variety of industries and across various departments

within an organization and include:

No single customer accounted for more than 10% of our revenue for the year ended December 31, 2022.

As of December 31, 2022, our combined business units (customer experience management business unit and digital transformation business

unit) had 903 total customers of varying sizes.

We pride ourselves in providing what we believe to be a great experience to every single

customer and user of our software.

Our customers span a variety of industries and across various departments within an organization and

Electric Power Co

The Kansai Electric Power Co., Inc.

AEON Bank, Ltd

Kansai Electric Power Co., Inc.

Jibun Bank Corporation

Securities Co., Ltd

Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.

UFJ Morgan Stanley Securities Co., Ltd.

/ Pharmaceuticals

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Telecommunications

customers are representative of the Company’s overall customer base, but that are also particularly well-known customers and often

appear in the Company’s case studies.

customers are representative of the Company’s overall customer base, but that are also particularly well-known customers and often

appear in the Company’s case studies.

The objective criteria the Company used to determine which customers to highlight above are

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(iii) have sales in excess of $1 billion;

and (iv) must be well-known through commercials.

(iv) must be well-known through commercials.

develop and maintain business and technology partnerships that help us seamlessly integrate the latest technology into our software and

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to value and total cost of ownership;

● integration

with third-party applications and data sources;

recognition and brand reputation;

● “free

products to paid services”

go-to-market motion.

products to paid services” go-to-market motion.

believe we compete favorably with respect to all of these factors.

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offer various point applications that provide certain functions and features that we provide, including:

● cloud-based

marketing automation providers;

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service platform vendors;

● large-scale

enterprise suites.

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primarily exist across the across the following three categories:

software providers ¸

which provide RPA software, but lack end-to-end automation

capabilities.

lifecycle enhancing technology providers, such as low-code, iBPMS, iPaaS, process mining,

and test automation vendors , which provide additional features that can be

useful for automations.

We have alliances and integrate with the key vendors in each category,

but they often develop and market automation capabilities as extensions of their core software.

software vendors , which provide horizontal applications and productivity tools and

are acquiring, building, or investing in RPA functionality or partnering with RPA providers.

software providers ¸ which provide RPA software, but lack end-to-end automation capabilities.

lifecycle enhancing technology providers, such as low-code, iBPMS, iPaaS, process mining, and test automation vendors ,

which provide additional features that can be useful for automations.

We have alliances and integrate with the key vendors in

each category, but they often develop and market automation capabilities as extensions of their core software.

software vendors , which provide horizontal applications and productivity tools and are acquiring, building, or investing

in RPA functionality or partnering with RPA providers.

Competitive Strengths

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While we sell to

organizations of all sizes and across a broad range of industries, our go-to-market team’s key focus is on the largest organizations,

including large enterprises and governments.

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through our continued democratization of automation and enablement of citizen developers.

The power of our strategy is evidenced by our

net retention rate of our customers of our RPA business, which was 45%, 52% and 75% as of December 31, 2021, December 31, 2020 and December

31, 2019, respectively.

The reduction in the net retention rate was due to a number of small and medium-sized customers cancelling their

contracts due to the COVID-19 pandemic.

and Cultivate Our Partner and Channel Network .

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and will continue to make significant investments in research and development to bolster our existing technology and enhance usability

to improve our customers’

productivity.

to improve our customers’ productivity.

the Next Generation of Workers and Grow Our Community .

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software, know-how, and brand.

of December 31, 2021, we held one issued patent in Japan.

Our issued patent is scheduled to expire between October 2028 and January 2030.

As of December 31, 2022, we held one issued patent in Japan.

Our issued patent is scheduled to expire between October

2028 and January 2030.

As of December 31, 2022, we held one pending U.S.

trademark application, and more than two active foreign trademark filings.

As of December

31, 2021, we held two domain names in the United States and in foreign jurisdictions.

We continually review our development

efforts to assess and identify the existence and patentability of new intellectual property.

trademark application, and more than two active foreign trademark

As of December 31, 2022, we held two domain names in the United States and in foreign jurisdictions.

We continually review our

development efforts to assess and identify the existence and patentability of new intellectual property.

terms of individual patents extend for varying periods of time, depending upon the date of filing of the patent application, the date

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of the COVID-19 Pandemic

December 2019, a novel coronavirus disease (“COVID-19”) was reported to have surfaced in Wuhan, China, and on March 11, 2020,

the World Health Organization characterized COVID-19 as a pandemic.

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employees were required to work from home for several months during the height of the pandemic.

We cancelled or

shifted our customer and industry events to virtual-only experiences.

Although we have begun to slowly re-open our offices on a staggered,

region-by-region basis in accordance with local authority guidelines, we may deem it advisable to similarly alter, postpone or cancel

entirely additional customer, employee or industry events in the future.

We cancelled or shifted

our customer and industry events to virtual-only experiences.

Although we have begun to slowly re-open our offices on a staggered, region-by-region

basis in accordance with local authority guidelines, we may deem it advisable to similarly alter, postpone or cancel entirely additional

customer, employee or industry events in the future.

All of these changes may disrupt the way we operate our business.

In addition, our management team has, and will likely continue, to spend significant time, attention and resources monitoring the pandemic

and seeking to minimize the risk of the virus and manage its effects on our business and workforce.

we were recently formed, our wholly owned operating subsidiary, HeartCore Co., has been operating through the pandemic.

The operations

of HeartCore Co.

have been impacted by a range of external factors related to the pandemic that are not within our control.

for existing customers, the pandemic has not affected their use our software.

As for new customers in the travel, hotel, airline, railroad,

and restaurant industry for the CX division, the pandemic has resulted in a reduction in new orders.

However, as for new customers in

the retail and finance industry for the CX division, orders have increased despite the pandemic, resulting in an overall increase in

sales for the CX division of $2,159,372 for the year ended December 31, 2021 as compared to the year ended December 31, 2020.

the impact of the pandemic on the DX division, large companies were forced to change the way they operate, as employees were forced to

work remotely, which increased the demand for our DX software, but due to the delay in the sales cycle by the pandemic, realization of

sales were delayed resulting in reduction of sales of $363,321 for the year ended December 31, 2021 as compared to the year ended December

We have also lost customers due to the impact of the pandemic.

Our net retention rate of our customers in our digital transformation

business (RPA business) was 45%, 52% and 75% as of December 31, 2021, December 31, 2020 and December 31, 2019, respectively.

The reduction

in the net retention rate was due to a number of small and medium-sized customers cancelling their contracts due to the COVID-19 pandemic.

In addition, our

management team has, and will likely continue, to spend significant time, attention and resources monitoring the pandemic and seeking

to minimize the risk of the virus and manage its effects on our business and workforce.

Although our company has been

in existence for less than two years, our wholly owned operating subsidiary, HeartCore Co.

operated throughout the pandemic and continues

to operate after the pandemic.

HeartCore Co.’s business is affected by a variety of external factors related to the pandemic and

post-pandemic that are beyond our control.

For existing customers, the pandemic had no impact on the use of our software;

for new customers

in the travel, hotel, airline, rail, and food service industries in the CX division, the pandemic resulted in a decrease in new orders.

However, although the pandemic is coming to an end, it will take some time before the economy is fully normalized.

This results in even

lower sales in 2022 than in 2021.

Regarding the impact of the pandemic on the DX sector, demand for our DX software increased as large

companies were forced to change their work patterns, forcing employees to work remotely.

In 2022, after the pandemic, a number of employees

left the company, forcing the company to downsize its operations and resulted in a decline in sales.

During 2022, we started the GO IPO

business, which supports Japanese companies to list on Nasdaq and NYSE in the United States.

As of March 30, 2023, we have entered into

consulting agreements with nine companies to assist them in their IPO process, whereby we are entitled to receive from each company a

consulting fee ranges from $350,000 to $900,000 and warrants or Japanese acquisition rights to purchase one to four percent of the fully-diluted

share capital of such companies that is exercisable on certain dates at an exercise price of $0.01 per share.

The revenue in the GO IPO

business helped to offset the decline in sales in the CX and DX divisions.

duration and extent of the impact from the pandemic depends on future developments that cannot be accurately predicted at this time,

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the extent the pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the

other risks described in the “Risk Factors”

section, including, in particular, risks related to our dependence on customer

other risks described in the “Risk Factors” section, including, in particular, risks related to our dependence on customer

renewals, the addition of new customers and increased revenue from existing customer, risks that our operating results could be negatively

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Exchange Agreement

July 16, 2021, pursuant to the terms of a share exchange agreement among the Company, HeartCore Co., the shareholders of HeartCore

(excluding Dentsu Digital Investment Limited) and Sumitaka Yamamoto, as the representative of the shareholders of HeartCore

Co., we issued 15,999,994 shares of our common stock to the shareholders of HeartCore Co.

in exchange for 10,706 shares HeartCore

Co.’s common stock, representing 97.5% of the issued and outstanding capital stock of HeartCore Co.

As a result of

this transaction, HeartCore Co.

July 16, 2021, pursuant to the terms of a share exchange agreement among the Company, HeartCore Co., the shareholders of HeartCore Co.

(excluding Dentsu Digital Investment Limited) and Sumitaka Yamamoto, as the representative of the shareholders of HeartCore Co., we issued

15,999,994 shares of our common stock to the shareholders of HeartCore Co.

in exchange for 10,706 shares HeartCore Co.’s common

stock, representing 97.5% of the issued and outstanding capital stock of HeartCore Co.

As a result of this transaction, HeartCore Co.

became our 97.5%-owned subsidiary and the former shareholders of HeartCore Co.

owners of 100% of our outstanding common stock as of July 16, 2021.

became the owners of 100% of our outstanding common stock

as of July 16, 2021.

February 24, 2022, the Company purchased 278 shares of HeartCore Co.

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is a wholly owned subsidiary of the Company.

September 6, 2022, HeartCore Enterprises , Inc.

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

The acquisition was closed on February 1, 2023.

In the first quarter

of 2023, we formed HeartCore Financial and HeartCore Capital Advisors as a part of our Go IPO consulting business.

to Share Exchange Agreement - Information Services International-Dentsu Ltd.

July 15, 2021, the Company, HeartCore Co.

Yamamoto entered into a memorandum regarding share exchange agreement (the “Memorandum”)

with Information Services International-Dentsu Ltd.

(“ISI-Dentsu”), a shareholder of HeartCore Co., which became a

stockholder of the Company pursuant to the share exchange agreement.

to the Memorandum, the parties agreed on certain matters related to the operations of the Company and HeartCore Co., which would

remain in place until the earlier of (1) the parties unanimous agreement to terminate the Memorandum;

(“ISI-Dentsu”), a shareholder of HeartCore Co., which became a stockholder

of the Company pursuant to the share exchange agreement.

to the Memorandum, the parties agreed on certain matters related to the operations of the Company and HeartCore Co., which would remain

in place until the earlier of (1) the parties unanimous agreement to terminate the Memorandum;

(2) if Dentsu ceases to be a stockholder

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to the Memorandum, the Company and HeartCore Co.

agreed to give advance notice to Dentsu when decisions are made with respect

to any of the following matters pertaining to the Company or HeartCore Co.:

to the certificate of incorporation or articles of incorporation, limited to the creation

of class shares, changes in the features of common shares as class shares, establishment

of or changes in share units, and other changes that may affect the position of common shareholders;

● Dissolution,

a petition for commencement of bankruptcy proceedings, civil rehabilitation proceedings or

corporate reorganization proceedings filed by the Company, HeartCore Co.

agreed to give advance notice to Dentsu when decisions are made with respect to any

of the following matters pertaining to the Company or HeartCore Co.:

to the certificate of incorporation or articles of incorporation, limited to the creation of class shares, changes in the features

of common shares as class shares, establishment of or changes in share units, and other changes that may affect the position of common

shareholders;

a petition for commencement of bankruptcy proceedings, civil rehabilitation proceedings or corporate reorganization proceedings filed

by the Company, HeartCore Co.

or its directors;

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of new shares, stock options, convertible bonds or debentures;

● Acquisition,

disposition or cancellation of treasury shares, acquisition, disposition or cancellation

of treasury stock acquisition rights, or redemption, purchase, cancellation or acquisition

of options or other rights;

disposition or cancellation of treasury shares, acquisition, disposition or cancellation of treasury stock acquisition rights, or

redemption, purchase, cancellation or acquisition of options or other rights;

split or reverse stock split;

company split, share exchange, share transfer or share delivery;

acquisition, suspension or abolition of all or a part of a business, consolidation of branch

offices or commencement of new business;

● Significant

acquisition, suspension or abolition of all or a part of a business, consolidation of branch offices or commencement of new business;

business alliances or their dissolution;

of transfer of shares of the Company or HeartCore Co.

(including sales by the Company

of HeartCore Co.’s shares);

● Acquisition

(including sales by the Company of HeartCore Co.’s shares);

or disposition of shares of any related party of the Company or HeartCore Co.;

● Appointment

and dismissal of directors, executive officers, auditors, managers and other important employees;

transaction between HeartCore Co.

and its director which requires approval by the

board of directors under the Japanese Companies Act and any equivalent transaction between

the Company and its director;

and its director which requires approval by the board of directors under the Japanese Companies

Act and any equivalent transaction between the Company and its director;

or change of important contracts or other legally significant juridical acts;

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to the Memorandum, to the extent not in conflict with the laws of the United States or the State of Delaware or the rules and regulations

of any securities exchange or securities market on which the Company’s securities are traded or listed for trading, Mr.

agreed to notify Dentsu in advance when making a decision on the following matters pertaining to Mr.

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debt guarantees or collateral;

filing of a lawsuit, settlement or conclusion of a suit not based on a judicial decision

Yamamoto pertaining to a claim on property rights;

filing of a lawsuit, settlement or conclusion of a suit not based on a judicial decision by Mr.

Yamamoto pertaining to a claim on

property rights;

or change of important contracts or other important juridical act;

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the extent not in conflict with the laws of the United States or the State of Delaware or the rules and regulations of any securities

exchange or securities market on which the Company’s securities are traded or listed for trading, and provided that legal counsel

to the Company does not advise the Company that any such notification is inadvisable due to such information being material non-public

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arising from disasters or operations;

of a lawsuit by a third party which may affect its financial condition, or becoming subject

to a judgment, or any order or award equivalent thereto which may affect its financial condition;

for an injunction of the business or a provisional disposition order equivalent thereto,

or conclusion of legal proceedings not based on an order or a judgement by the court;

of license, suspension of business or other equivalent dispositions by an administrative

agency based on laws and regulations, or accusation by an administrative agency for violation

or other reorganization involving the Company, HeartCore Co., or any of their related

of a petition for commencement of bankruptcy proceedings, commencement of civil rehabilitation

proceedings, commencement of corporate reorganization proceedings, commencement of special

liquidation or enforcement of the corporate security interest by a third party, suspension

of payments or dishonor of bills or checks with regard to HeartCore Co.

of a lawsuit by a third party which may affect its financial condition, or becoming subject to a judgment, or any order or award

equivalent thereto which may affect its financial condition;

for an injunction of the business or a provisional disposition order equivalent thereto, or conclusion of legal proceedings not based

on an order or a judgement by the court;

of license, suspension of business or other equivalent dispositions by an administrative agency based on laws and regulations, or

accusation by an administrative agency for violation of the laws;

or other reorganization involving the Company, HeartCore Co., or any of their related parties;

of a petition for commencement of bankruptcy proceedings, commencement of civil rehabilitation proceedings, commencement of corporate

reorganization proceedings, commencement of special liquidation or enforcement of the corporate security interest by a third party,

suspension of payments or dishonor of bills or checks with regard to HeartCore Co.

or the Company;

● Commencement

of bankruptcy proceedings, commencement of civil rehabilitation proceedings, commencement

of corporate reorganization proceedings, commencement of special liquidation or petition

for exercise of corporate security interest, suspension of payments or dishonor of bills

or checks pertaining to the Company, HeartCore Co.

of bankruptcy proceedings, commencement of civil rehabilitation proceedings, commencement of corporate reorganization proceedings,

commencement of special liquidation or petition for exercise of corporate security interest, suspension of payments or dishonor of

bills or checks pertaining to the Company, HeartCore Co.

or any of its related parties;

of transactions with material customers, suppliers, distributors, agents, or other business

occurrence of risk of default by an obligor of the Company or HeartCore Co., or a

principal obligor of a guarantee obligation of which the Company or HeartCore Co.

of transactions with material customers, suppliers, distributors, agents, or other business partners;

occurrence of risk of default by an obligor of the Company or HeartCore Co., or a principal obligor of a guarantee obligation of

which the Company or HeartCore Co.

is a guarantor;

● Cancellation

of debts by creditors, reduction or extension of interest or assumption or repayment of debts

by third parties.

of debts by creditors, reduction or extension of interest or assumption or repayment of debts by third parties.

addition, to the extent permitted by applicable law, and provided that legal counsel to the Company does not advise the Company that

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of a lawsuit by a third party which may affect the financial condition of Mr.

becoming subject to a judgement or any order or award equivalent thereto which may affect

the financial condition of Mr.

for commencement of bankruptcy or civil rehabilitation proceedings, suspension of payment

or dishonor of bill or check by a third party.

Yamamoto, or becoming subject to a judgement or any

order or award equivalent thereto which may affect the financial condition of Mr.

for commencement of bankruptcy or civil rehabilitation proceedings, suspension of payment or dishonor of bill or check by a third

to the Memorandum, Dentsu has the right to demand that Mr.

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option rights to acquire shares), in the event that the Company, HeartCore Co.

Yamamoto breaches any of its obligations

under the Memorandum and fails to remedy such breach within 30 days, if the representations and warranties in the Memorandum are not

true or accurate, or where it is subsequently found that the preconditions for the execution of the Memorandum were not been satisfied.

Yamamoto may cause a third party to acquire such shares with the approval of Dentsu.

Yamamoto breaches any of its obligations under

the Memorandum and fails to remedy such breach within 30 days, if the representations and warranties in the Memorandum are not true or

accurate, or where it is subsequently found that the preconditions for the execution of the Memorandum were not been satisfied.

may cause a third party to acquire such shares with the approval of Dentsu.

per share-transfer price for the shares in this case shall be the purchase price paid by Dentsu for the acquisition of shares of HeartCore

Co., subject to appropriate adjustments for stock splits, stock consolidations, and similar events involving the shares.

event any withholding tax is imposed upon the transfer price of the shares the amount equivalent to such withholding tax will be borne

by the purchaser and the purchaser is required to pay Dentsu the entire amount of the transfer amount so that the amount Dentsu receives

after withholding is the transfer price set forth in the Memorandum.

any withholding tax is imposed upon the transfer price of the shares the amount equivalent to such withholding tax will be borne by the

purchaser and the purchaser is required to pay Dentsu the entire amount of the transfer amount so that the amount Dentsu receives after

withholding is the transfer price set forth in the Memorandum.

Company and HeartCore Co.

also agreed to hold regular business briefings at least once a quarter and to provide Dentsu with reports

on the business execution of the Company and HeartCore Co.

also agreed to hold regular business briefings at least once a quarter and to provide Dentsu with reports on

the business execution of the Company and HeartCore Co.

and monthly trial balances of the Company and HeartCore Co.

(including balance sheets, profit and loss statements, and cash flow statements).

(including balance

sheets, profit and loss statements, and cash flow statements).

Yamamoto agreed that if he wished to transfer all or part of the shares of the Company that he held to a third party, he will notify

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Yamamoto voluntary resigns as a director of the Company or HeartCore Co.

his term of office expires, the Company or HeartCore Co.

shall immediately add another person who shall be concurrently responsible

for the obligations incurred by Mr.

of office expires, the Company or HeartCore Co.

shall immediately add another person who shall be concurrently responsible for the obligations

incurred by Mr.

Yamamoto in connection with the Memorandum, upon approval of Dentsu.

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laws of Japan.

Purchase Agreement –

Dentsu Digital Investment Limited

August 10, 2021, the Company and Dentsu Digital Investment Limited (“Dentsu Digital”)”) entered into a Stock Purchase

Purchase Agreement – Dentsu Digital Investment Limited

August 10, 2021, the Company and Dentsu Digital Investment Limited (“Dentsu Digital”) entered into a Stock Purchase

Agreement, pursuant to which the Company agreed to purchase the 278 shares of HeartCore Co.

from Dentsu Digital in accordance

with certain terms and conditions in the Stock Purchase Agreement.

from Dentsu Digital in accordance with

certain terms and conditions in the Stock Purchase Agreement.

In accordance with the terms of the Stock Purchase Agreement, the

Company agreed to purchase the 278 shares of HeartCore Co.

from Dentsu Digital for JP¥50,040,000 (approximately $435,500)

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

from Dentsu Digital for 50,040,000 Japanese Yen (approximately $435,500)

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

February 24, 2022, the Company purchased 278 shares of HeartCore Co.

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is a wholly owned subsidiary of the Company.

Common Equity Transactions

May 18, 2021, we issued five shares of common stock to Sumitaka Yamamoto, Chief Executive Officer of the Company, for $1.00 per share

for a total subscription of $5.00.

July 16, 2021, pursuant to the terms of a share exchange agreement among the Company, HeartCore Co., the shareholders of HeartCore

(excluding Dentsu Digital Investment Limited) and Sumitaka Yamamoto, as the representative of the shareholders of HeartCore

Co., we issued 15,999,994 shares of our common stock to the shareholders of HeartCore Co.

in exchange for 10,706 shares HeartCore

Co.’s common stock, representing 97.5% of the issued and outstanding capital stock of HeartCore Co.

On February 24, 2022,

the Company purchased 278 shares of HeartCore Co.

from Dentsu Digital for 50,040,000 Japanese Yen (approximately $435,500).

effective February 24, 2022, HeartCore Co.

is a wholly owned subsidiary of the Company.

November 3, 2021, the Company redeemed 484,056 shares of common stock held by Sumitaka Yamamoto, Chief Executive Officer of the Company,

the period from October 27, 2021 through January 13, 2022, the Company issued 400,000 shares of common stock at a purchase price of $2.50

per share (for an aggregate of $1,000,000 of proceeds) to accredited investors in a private placement under Rule 506(b) of Regulation

D of the Securities Act.

December 25, 2021, the Company awarded options to purchase 1,534,500 shares of common stock pursuant to our 2021 Equity Incentive Plan

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 stock, subject to the terms

and conditions of the 2021 Equity Incentive Plan and the option award agreements pursuant to which the options were awarded.

above issuances/sales were made pursuant to an exemption from registration as set forth in Section 4(a)(2) of the Securities Act and/or

Rule 506 of Regulation D promulgated under the Securities Act.

of December 31, 2021 and 2020, the Company has a due to related party balance of $1,110 and due from related party balance of $23,926,

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 years ended December 31, 2021 and 2020, the Company advanced $87,664 and $73,997, respectively, to this related

party, and the related party paid expenses of $111,350 and $59,345, respectively, on behalf of the Company.

As of December 31, 2020,

Sumitaka Yamamoto held 467,622 shares issued with repurchase provision in relation to the stock options the Company granted in May 2016

that he repurchased on behalf of the Company.

On November 3, 2021, the Company redeemed 484,056 shares that Sumitaka Yamamoto held on

behalf of the Company with $1 in total.

of December 31, 2021 and 2020, the Company has a loan receivable balance of $386,315 and $386,516, 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 years

ended December 31, 2021 and 2020, the Company loaned $55,212 and $285,931, respectively, to this related party, and the related party

paid expenses of $13,705 and $0, respectively, on behalf of the Company.

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

During the year ended December 31, 2020, the Company

has revenue from this related party of $411,823 from software sales and incurred cost with this related party of $453,600 for software

development services provided.

As of December 31, 2020, the Company has deferred revenue with this related party of $49,967.

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.

During the period ended July 12, 2021, the Company has revenue from this related party of $157,791 from software sales

and incurred cost with this related party of $332,669 for software development services provided.

Party Transactions

of December 31, 2021, the Company has a due from balance of approximately $386,315 from Heartcore Technology Inc., a company controlled

As of December

31, 2022 and 2021, the Company has a due to related party balance of $402 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 year ended December 31,

2022, the Company repaid to the related party for operating expenses the related party paid on behalf of the Company in a net amount of

During the year ended December 31, 2021, the Company advanced $87,664 to this related party, and the related party paid expenses

of $111,350 on behalf of the Company.

As of December 31, 2020, Sumitaka Yamamoto held 467,622 shares issued with repurchase provision

in relation to the stock options the Company granted in May 2016 that he repurchased on behalf of the Company.

On November 3, 2021, the

Company redeemed 484,056 shares that Sumitaka Yamamoto held on behalf of the Company for $1 and settled the share repurchase payable to

him of $28, resulting in a gain on shares redemption of $27.

As of December 31, 2022 and 2021,

the Company has a loan receivable balance of $294,919 and $386,315, respectively, from Heartcore Technology Inc., a company controlled

by the CEO of the Company.

August 10, 2021, the Company and Dentsu Digital Investment Limited (“Dentsu Digital”) entered into a Stock Purchase Agreement,

pursuant to which the Company has agreed to purchase the 278 shares of HeartCore Co.

from Dentsu Digital in accordance with certain

terms and conditions in the Stock Purchase Agreement.

In accordance with the terms of the Stock Purchase Agreement, the Company shall

purchase the 278 shares of HeartCore Co.

from Dentsu Digital for JP¥50,040,000 (approximately $435,500) 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 stock, filed by the Company with the SEC or (ii) December 20, 2022.

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 year ended December 31, 2021, the

Company loaned $55,212 to this related party, and the related party paid expenses of $13,704 on behalf of the Company.

During the year

ended December 31, 2022, the Company received repayments of $44,871 from this related party.

In June 2020, Suzuyo Shinwart

Corporation became an over 10% shareholder of the Company.

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.

During the period from January 1, 2021 to July 12, 2021,

when Suzuyo Shinwart Corporation was a related party of the Company, the Company has revenues from this related party of $157,791 from

software sales and incurred cost with this related party of $332,669 for software development services provided.

August 10, 2021, the Company and Dentsu Digital Investment Limited (“Dentsu Digital”) entered into a Stock Purchase

Agreement, pursuant to which the Company has agreed to purchase the 278 shares of HeartCore Co.

from Dentsu Digital in accordance

with certain terms and conditions in the Stock Purchase Agreement.

In accordance with the terms of the Stock Purchase Agreement, the

Company shall purchase the 278 shares of HeartCore Co.

from Dentsu Digital for 50,040,000 Japanese Yen (approximately $435,500) 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 stock, filed by the Company with the SEC or (ii) December 20, 2022.

February 24, 2022, the Company purchased 278 shares of HeartCore Co.

8 unchanged sentences

D of the Securities Act.

December 25, 2021, the Company awarded options to purchase 1,534,500 shares of common stock pursuant to our 2021 Equity Incentive Plan

Our Board of Directors and stockholders approved the 2021 Equity Incentive

Plan (the “2021 Plan”) on August 6, 2021.

Under the 2021 Plan, 2,400,000 shares of common stock are authorized for issuance

to employees, directors and independent contractors (except those performing services in connection with the offer or sale of the Company’s

securities in a capital raising transaction, or promoting or maintaining a market for the Company’s securities) of the Company or

its subsidiary.

The 2021 Plan authorizes equity-based and cash-based incentives for participants.

December 25, 2021, the Company awarded options to purchase 1,534,500 shares of common stock pursuant to our 2021 Plan

at an exercise price of $2.50 per share to various officers, directors, employees and consultants of the Company.

1 unchanged sentence

each annual anniversary of the date of issuance, in an amount equal to 25% of the applicable shares of common stock, subject to the terms

and conditions of the 2021 Equity Incentive Plan and the option award agreements pursuant to which the options were awarded.

and conditions of the 2021 Plan and the option award agreements pursuant to which the options were awarded.

9, 2022, the Company entered into executive employment agreements with five executives and granted 85,820 restricted stock units pursuant

to the 2021 Plan.

These common stock vest on each annual anniversary of the date of the employment agreement, in an amount equal to 25%

of the applicable shares of common shares.

On February 25, 2022, the Company

entered into a service agreement with a marketing company to purchase 6-month marketing services and granted 83,333 restricted stock units.

The restricted stock units were issued and vested on May 15, 2022.

On August 2, 2022, the Company

awarded options to purchase 2,000 shares of common stock pursuant to our 2021 Plan at an exercise price of $2.94 per

share to an employee.

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

shares of common stock, subject to the terms and conditions of the 2021 Plan and the option award agreements pursuant

to which the options were awarded.

On August 9, 2022, the Company

awarded options to purchase 14,500 shares of common shares at an exercise price of $2.48 per share to three prior employees of the Company.

The options are fully vested and exercisable on the grant date, with the expiration date on August 9, 2026.

February 3, 2023, the Company granted stock options to an employee to purchase 100,000 common shares at an exercise price of $1.17 per

share throughout a period of ten years from the grant date.

The stock options will vest 50% on the grant date and February 1, 2024, respectively.

On March 22, 2023, the Company granted

671,350 shares of common shares to the employees and service providers of Sigmaways.

Public Offering

February 14, 2022, we closed our initial public offering of 3,000,000 shares of common stock at a public

offering price of $5.00 per share, for aggregate gross proceeds of $15.0 million, before deducting underwriting discounts, commissions,

and other offering expenses.

Our common stock began trading on the Nasdaq Capital Market on February 10, 2022, under the symbol

“HTCR”.

Boustead Securities, LLC acted as the sole managing underwriter and bookrunner for the

February 14, 2022, we closed our initial public offering of 3,000,000 shares of common stock at a public offering price of $5.00 per

share, for aggregate gross proceeds of $15.0 million, before deducting underwriting discounts, commissions, and other offering expenses.

Our common stock began trading on the Nasdaq Capital Market on February 10, 2022, under the symbol “HTCR”.

Boustead Securities,

LLC acted as the sole managing underwriter and bookrunner for the offering.

Share Repurchase Program

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.

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 at any time.

period from June 1, 2022 through September 30, 2022, the Company repurchased 1,349,390 shares

of common shares at an average price of $2.59 per share totaling approximately $3.5 million (including commissions) under the 2022 Share

Repurchase Program.

As of September 30, 2022, the Company has used up the entire balance authorized under the 2022 Share Repurchase Program.

On October 18, 2022, the Board

of Directors approved to retire all the repurchased shares.

As of December 31, 2022, all of the 1,349,390 treasury shares have been

corporate headquarters are located at 1-2-33, Higashigotanda, Shinagawa-ku, Tokyo, Japan, where we lease approximately 7,863 rentable

6 unchanged sentences

feet of office space from an unaffiliated third party.

This lease has an original term ending in June 2022 with automatic annual renewal

This lease has an original term ending in August 2023 with automatic annual renewal

Terms of the Okinawa office lease provide for a base rent payment of $1,370 per month and a share of sales taxes of $137 per

6 unchanged sentences

2009, we have expanded beyond our Japanese headquarters to several offices globally and have built a large remote community.

we are operating only from our office in Japan.

we are operating primarily from our office in Japan.

As of December 31, 2022, we had 49 full-time employees.

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We consider our relations with our employees to be good.

Our culture is built on the firm belief that personal and professional

growth is just as important as business growth.

We believe the best people do not only fit

our culture, they further it.

Our culture is built on the firm belief that personal and professional growth is just as important as business

We believe the best people do not only fit our culture, they further it.

Inclusion, and Belonging.

We have launched various initiatives to further our goal

of being a more diverse, inclusive, and equitable workplace.

We have a team dedicated to

diversity, inclusion, and belonging initiatives, including but not limited to, hiring goals

focused on increasing black, indigenous and people of color representation company-wide,

anti-racism training for employees and managers, key external partnerships, and our annual

diversity report.

● Compensation

We have launched various initiatives to further our goal of being a more diverse, inclusive, and

equitable workplace.

We have a team dedicated to diversity, inclusion, and belonging initiatives, including but not limited to, hiring

goals focused on increasing black, indigenous and people of color representation company-wide, anti-racism training for employees

and managers, key external partnerships, and our annual diversity report.

and Benefits.

We provide competitive compensation and benefits for our employees

Our compensation packages may include base salary, commission or semi-annual bonuses,

and stock-based compensation.

We evaluate both compensation and benefit offerings on an annual

basis to ensure competitiveness of both programs and we make adjustments as needed.

We are proud to be named a Best Place to Work in 2020 and 2021 by Ministry

of Economy, Trade and Industry Japan.

We provide competitive compensation and benefits for our employees globally.

Our compensation packages may

include base salary, commission or semi-annual bonuses, and stock-based compensation.

We evaluate both compensation and benefit offerings

on an annual basis to ensure competitiveness of both programs and we make adjustments as needed.

We are proud to be named a Best Place to Work in 2020 and 2021 by Ministry of Economy, Trade and Industry Japan.

Culture and COVID-19.

Like other companies, we have learned to adapt during the pandemic.

We have prioritized employee safety and transparency during the pandemic and continue to

do so, ensuring all employees are set up to work remotely and providing clarity on office

closures and evolving guidelines, where possible.

In the third quarter of 2020, we made the

decision to permanently move to a hybrid workplace model, which means that as of January

1, 2021, our employees have the option to be fully remote, work full-time from one of our

offices, or have the flexibility to work between office and remotely.

This move provides

our employees with continued flexibility, following the pandemic, to work in person, remotely,

or in a hybrid model.

This will enable us to grow better in serving our customers.

We have prioritized employee safety

and transparency during the pandemic and continue to do so, ensuring all employees are set up to work remotely and providing clarity

on office closures and evolving guidelines, where possible.

In the third quarter of 2020, we made the decision to permanently move

to a hybrid workplace model, which means that as of January 1, 2021, our employees have the option to be fully remote, work full-time

from one of our offices, or have the flexibility to work between office and remotely.

This move provides our employees with continued

flexibility, following the pandemic, to work in person, remotely, or in a hybrid model.

This will enable us to grow better in serving

our customers.

business is and will continue to be subject to extensive U.S.

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Commission, the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the California Consumer Privacy Act of 2018

(the “CCPA”), and other state and federal laws relating to privacy and data security.

The CCPA requires covered businesses

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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-K

Item 1. Business