What changed in this filing

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Item 9A. Controls and Procedures

2023-03-31 compared with 2022-03-31 · 1210 added, 1008 removed, 1034 unchanged (68% of the section changed)

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under the Exchange Act, such as this annual report, is recorded, processed, summarized, and reported within the time period specified

in the SEC’s rules and forms.

Disclosure controls are also designed with the objective of ensuring that such information is accumulated

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Our management evaluated, with the participation of our current chief executive officer and

chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of December

31, 2022, pursuant to Rule 13a-15(b) under the Exchange Act.

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December 31, 2022, our disclosure controls and procedures were not effective.

The ineffectiveness of our disclosure controls

and procedures was due to the existence of the material weakness identified below.

of sufficient financial reporting and accounting personnel with appropriate knowledge of

U.S GAAP and the Securities and Exchange Commission (“SEC”) reporting and compliance requirements to design, implement and operate key

controls over financial reporting process to address complex technical accounting issues

and related disclosures in accordance with U.S.

GAAP and financial reporting requirements

set forth by the SEC.

The ineffectiveness of our disclosure controls and procedures

was due to the existence of the material weakness identified below.

Lack of sufficient financial

reporting and accounting personnel with appropriate knowledge of U.S GAAP and the Securities and Exchange Commission (“SEC”)

reporting and compliance requirements to design, implement and operate key controls over financial reporting process to address complex

technical accounting issues and related disclosures in accordance with U.S.

GAAP and financial reporting requirements set forth by

do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud.

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goals under all potential future conditions.

Management’s

Report on Internal Control Over Financial Reporting

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may deteriorate.

assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021.

assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022.

In making the assessment,

management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO –

2013) in Internal

management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO – 2013) in Internal

Control-Integrated Framework.

Based on its assessment, management concluded that, as of December 31, 2021, our Company’s internal

Based on its assessment, management concluded that, as of December 31, 2022, our Company’s internal

control over financial reporting was not effective.

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were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange

Act) during the period covered by this annual report on Form 10-K that have materially affected, or are reasonably likely to materially

Act) during the three months ended December 31, 2022 that have materially affected, or are reasonably likely to materially

affect, our internal control over financial reporting.

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following table sets forth the names and ages of the members of our Board of Directors and our executive officers and the positions held

Each director’s term continues until his or her successor is elected or qualified at the next annual meeting, unless such

director earlier resigns or is removed.

of Board, Chief Executive Officer and President

Operating Officer and Director

Technical Officer

Financial Officer

Division Vice President

Sumitaka Yamamoto

Chairman of Board, Chief

Executive Officer and President

Chief Operating Officer

Prakash Sadasivam

Chief Strategy Officer

Hidekazu Miyata

Chief Technical Officer

Chief Financial Officer

CX Division Vice President

Ferdinand Groenewald

Yoshitomo Yamano

Takeshi Omoto

information concerning our directors and executive officers listed above is set forth below.

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since June 2009.

is a seasoned information technology software programmer.

Yamamoto graduated with a bachelor’s degree in Spanish from Kansai

Gaidai University, Tokyo, Japan.

a seasoned information technology software programmer.

Yamamoto graduated with a bachelor’s degree in Spanish from Kansai Gaidai

University, Tokyo, Japan.

Yamamoto does not hold, and has not previously held, any directorships in any reporting companies.

We believe that Mr.

Yamamoto is qualified to serve on our Board of Directors due to his experience in all aspects of our business and

his ability to provide an insider’s perspective in board discussions about the business and strategic direction of the Company.

We believe that his experience gives him unique insights into our opportunities, challenges and operations.

Yamamoto is qualified to serve on our Board of Directors due to his experience in all aspects of our business and his ability

to provide an insider’s perspective in board discussions about the business and strategic direction of the Company.

that his experience gives him unique insights into our opportunities, challenges and operations.

Hosaka has served as our Chief Operating Officer and been a member of our Board of Directors since May 18, 2021.

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since August 2015.

Hosaka graduated with a bachelor’s degree in physics from Chuo University, Tokyo, Japan.

Hosaka does not hold, and has not

previously held, any directorships in any reporting companies.

graduated with a bachelor’s degree in physics from Chuo University, Tokyo, Japan.

Hosaka does not hold, and has not previously

held, any directorships in any reporting companies.

We believe that Mr.

Hosaka is qualified to serve on our Board of Directors

due to his experience in business and operations matters.

Miyata has served as our Chief Technical Officer since May 18, 2021.

Hosaka is qualified to serve on our Board of Directors due to

his experience in business and operations matters.

Sadasivam has served as our Chief Strategy Officer and been a member of our Board of Directors since February

Sadasivam is a technology entrepreneur and the founder of Sigmaways.

Under his leadership, Sigmaways has grown into a global

organization with a diverse team of experts in various technology fields.

Sadasivam completed his undergraduate studies in Computer

Science and Engineering from Vellore Institute of Technology in India.

He has also completed Management Development for Entrepreneurs

from UCLA, Anderson School of Management.

He has also been official member of Forbes Technology Council since 2020.

Miyata has served as our Chief Technical Officer since June 1, 2021.

Miyata has also served as the head of the

DX division of HeartCore Co.

since June 2009.

Miyata graduated with a bachelor’s degree in economics from Doshisha University,

Miyata does not hold, and has not previously held, any directorships in any reporting companies.

from October 1, 2019 to May 31, 2021.

Miyata graduated with a bachelor’s degree in

economics from Doshisha University, Japan.

Miyata does not hold, and has not previously held, any directorships in any reporting

Gao has served as our Chief Financial Officer since May 18, 2021.

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Department at Marubishi Corporation in Tokyo, Japan.

Gao graduated with a bachelor’s degree in computer accounting from Chuo

College of Information and Accounting, Japan.

Gao does not hold, and has not previously held, any directorships in any reporting

Kuno has served as our CX division Vice President since May 18, 2021.

Since March 2010, Mr.

Kuno has also served as

the head of the CX division and member of the Board of Directors of HeartCore Co.

Kuno graduated with a bachelor’s degree in

business administration from Hosei University, Tokyo, Japan.

Kuno does not hold, and has not previously held, any directorships in

any reporting companies.

Kuno has served as our CX division Vice President since October 1, 2019.

Since August 30, 2021, Mr.

has also served as the head of the CX division and member of the Board of Directors of HeartCore Co.

Kuno graduated with

a bachelor’s degree in business administration from Hosei University, Tokyo, Japan.

Kuno does not hold, and has not previously

held, any directorships in any reporting companies.

Groenewald has been an independent member of our Board of Directors since January 24, 2022.

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Since April 2016, Mr.

Yamano has served

as the Chief Executive Officer of Yamano Holdings Corporation.

Yamano graduated with a bachelor’s degree in commerce from Meiji

University, Tokyo, Japan.

Yamano has served as the

Chief Executive Officer of Yamano Holdings Corporation.

Yamano graduated with a bachelor’s degree in commerce from Meiji University,

Tokyo, Japan.

Yamano does not hold, and has not previously held, any directorships in any reporting companies.

We believe that Mr.

Yamano is qualified to serve on our Board of Directors due to his expertise in business and operations matters.

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Tan graduated from Keio University

in Tokyo with a bachelor’s degree in economics.

Tan does not hold, nor has he ever held, a directorship in any of the reporting

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From December 2008 through December 2017, he served as auditor at KPMG

Katai graduated with a bachelor’s degree in faculty of commerce from Doshisha University, Kyoto, Japan.

does not hold, and has not previously held, any directorships in any reporting companies.

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Board of Directors elects our executive officers annually by majority vote.

Each director’s term continues until his or her successor

is elected or qualified at the next annual meeting, unless such director earlier resigns or is removed.

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in Item 401(f) of Regulation S-K in the past 10 years.

Leadership Structure and Board’s Role in Risk Oversight

have not separated the positions of Chairman of the Board and Chief Executive Officer.

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Company and Director Independence

“controlled company”

exception to Nasdaq Capital Market’s rules provide that a company of which more than 50% of the

voting power is held by an individual, group or another company, a “controlled company,”

need not comply with certain requirements

of Nasdaq Capital Market’s corporate governance rules.

“controlled company” exception to Nasdaq Capital Market’s rules provide that a company of which more than 50% of the

voting power is held by an individual, group or another company, a “controlled company,” need not comply with certain requirements

of Nasdaq Capital Market’s corporate governance rules.

Sumitaka Yamamoto, the Chairman of Board, Chief Executive Officer and President

of the Company, beneficially owns 10,984,539 shares of our common stock, which represent approximately 58.07% of the voting power of

our outstanding capital stock.

As a result, the Company is a “controlled company”

under Nasdaq Capital Market corporate governance

As a controlled company, the Company does not have to comply with certain corporate governance requirements under Nasdaq Capital

Market rules, including the requirements that:

majority of the Company’s Board of Directors to consist of “independent directors”

as defined by the applicable rules and regulations of Nasdaq Capital Market;

compensation of the Company’s executive officers to be determined, or recommended to

the Board of Directors for determination, by independent directors constituting a majority

of the independent directors of the Board in a vote in which only independent directors participate

or by a Compensation Committee comprised solely of independent directors;

director nominees to be selected, or recommended to the Board of Directors for selection,

by independent directors constituting a majority of the independent directors of the Board

in a vote in which only independent directors participate or by a nomination committee comprised

solely of independent directors.

of the Company, beneficially owns 10,995,969 shares of our common stock, which represent approximately 52.8% of the voting power of our

outstanding capital stock.

As a result, the Company is a “controlled company” under Nasdaq Capital Market corporate

governance standards.

As a controlled company, the Company does not have to comply with certain corporate governance requirements under

Nasdaq Capital Market rules, including the requirements that:

a majority of the Company’s

Board of Directors to consist of “independent directors” as defined by the applicable rules and regulations of Nasdaq

Capital Market;

the compensation of the

Company’s executive officers to be determined, or recommended to the Board of Directors for determination, by independent directors

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

a Compensation Committee comprised solely of independent directors;

that director nominees

to be selected, or recommended to the Board of Directors for selection, by independent directors constituting a majority of the independent

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

independent directors.

Company has determined to avail itself of certain of these exemptions.

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or a nominating and corporate governance committee.

Therefore, for as long as the Company remains a “controlled company,”

the Company will not have the same protections afforded to shareholders of companies that are subject to all of these corporate governance

requirements.

If at any time the Company ceases to be a “controlled company”

under the rules of Nasdaq Capital Market, the

Company’s Board of Directors will take all action necessary to comply with the corporate governance rules of Nasdaq Capital Market,

including establishing certain committees composed entirely of independent directors, subject to a permitted “phase-in”

If at any time the Company ceases to be a “controlled company” under the rules of Nasdaq Capital Market, the

Company’s Board of Directors will take all action necessary to comply with the corporate governance rules of Nasdaq Capital Market,

including establishing certain committees composed entirely of independent directors, subject to a permitted “phase-in” period.

Notwithstanding

the Company’s status as a controlled company, the Company will remain subject to the corporate governance standards of Nasdaq Capital

Market that require the Company to have an audit committee with at least three independent directors, as well as to be composed entirely

of independent directors.

Company’s Board of Directors has affirmatively determined that five of its seven directors (Ferdinand Groenewald, Yoshitomo Yamano,

Yuki Tan, Takeshi Omoto, and Yuta Katai) are independent directors of the Company within the meaning of Nasdaq Capital Market’s

Company’s Board of Directors has affirmatively determined that five of its eight directors (Ferdinand Groenewald, Yoshitomo

Yamano, Yuki Tan, Takeshi Omoto, and Yuta Katai) are independent directors of the Company within the meaning of Nasdaq Capital Market’s

Therefore, a majority of the members of the Board of Director consists of independent directors.

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Katai qualifies as

an “audit committee financial expert”

under SEC rules.

an “audit committee financial expert” under SEC rules.

Our audit committee adopted a written charter, a copy of which is

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audit committee is authorized to:

and retain the independent auditors to conduct the annual audit of our financial statements;

the proposed scope and results of the audit;

and pre-approve audit and non-audit fees and services;

accounting and financial controls with the independent auditors and our financial and accounting

and approve transactions between us and our directors, officers and affiliates;

and prevent prohibited non-audit services;

procedures for complaints received by us regarding accounting matters;

internal audit functions, if any.

we are a “controlled company”

within the meaning of the corporate governance standards of Nasdaq Capital Market, we are not

approve and retain the independent auditors to conduct

the annual audit of our financial statements;

review the proposed scope and results of the audit;

review and pre-approve audit and non-audit fees and

review accounting and financial controls with the independent

auditors and our financial and accounting staff;

review and approve transactions between us and our

directors, officers and affiliates;

recognize and prevent prohibited non-audit services;

establish procedures for complaints received by us

regarding accounting matters;

oversee internal audit functions, if any.

we are a “controlled company” within the meaning of the corporate governance standards of Nasdaq Capital Market, we are not

required to, and do not, have a compensation committee.

If and when we are no longer a “controlled company”, we will be required

to establish a compensation committee.

We anticipate that such a compensation committee would consist of three directors who will be

“independent”

under the rules of the SEC, subject to the permitted “phase-in”

period pursuant to the rules of

“independent” under the rules of the SEC, subject to the permitted “phase-in” period pursuant to the rules of

Nasdaq Capital Market.

Upon formation of a compensation committee, we would expect to adopt a compensation committee charter defining

the committee’s primary duties in a manner consistent with the rules of the SEC and Nasdaq Capital Market standards.

and Corporate Governance Committee

we are a “controlled company”

within the meaning of the corporate governance standards of Nasdaq Capital Market, we are not

we are a “controlled company” within the meaning of the corporate governance standards of Nasdaq Capital Market, we are not

required to, and do not, have a nominating and corporate governance committee.

If and when we are no longer a “controlled company”,

we will be required to establish a nominating and corporate governance committee.

We anticipate that such a nominating and corporate

governance committee would consist of three directors who will be “independent”

under the rules of the SEC, subject to the

permitted “phase-in”

period pursuant to the rules of Nasdaq Capital Market.

governance committee would consist of three directors who will be “independent” under the rules of the SEC, subject to the

permitted “phase-in” period pursuant to the rules of Nasdaq Capital Market.

Upon formation of a nominating and corporate

governance committee, we would expect to adopt a nominating and corporate governance committee charter defining the committee’s

primary duties in a manner consistent with the rules of the SEC and Nasdaq Capital Market standards.

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Such notice must be in writing to our company not less than 90 days

and not more than 120 days prior to the anniversary date of the preceding year’s annual meeting of stockholders or as otherwise

required by requirements of the Exchange Act.

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Committee Interlocks and Insider Participation

we are a “controlled company”

within the meaning of Nasdaq corporate governance standards, we are not required to have, and

we are a “controlled company” within the meaning of Nasdaq corporate governance standards, we are not required to have, and

do not currently have, a compensation committee.

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out of his or her actions, regardless of whether Delaware law would permit such indemnification.

We have purchased a policy of directors’

and officers’

liability insurance that insures our officers and directors against the cost of defense, settlement or payment of

We have purchased a policy of directors’

and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of

a judgment in some circumstances and insures us against our obligations to indemnify our officers and directors.

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if successful, might otherwise benefit us and our stockholders.

Furthermore, a stockholder’s investment may be adversely affected

to the extent we pay the costs of settlement and damage awards against officers and directors pursuant to these indemnification provisions.

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following summary compensation table provides information regarding the compensation paid during our fiscal years ended December 31,

2021 and 2020 to certain of our executive officers, who we collectively refer to as our “named executive officers”, or “NEOs”.

Executive Officer

2022 and 2021 to certain of our executive officers, who we collectively refer to as our “named executive officers”, or “NEOs”.

Name and Position

Sumitaka Yamamoto

Chief Executive Officer

Vice President

Employment Agreement with Sumitaka Yamamoto

entered into an Executive Employment Agreement dated as of February 9, 2022 with Sumitaka Yamamoto.

Yamamoto’s agreement provides

that he will serve as the Chief Executive Officer of HeartCore Enterprises, Inc.

and of our subsidiary, HeartCore Co., Ltd.

Yamamoto’s

agreement provides that he will be paid an annual salary of $381,000, and will be issued 45,720 shares of our common stock pursuant to

an Award Agreement and the Company’s 2021 Equity Incentive Plan, which is described below.

The shares of restricted stock vest

in four tranches, with 25% of the awarded shares vesting at the end of each year of the term of the employment agreement, subject to

earlier vesting or forfeiture as set forth below.

Yamamoto’s agreement provides that he is eligible to be paid bonuses as may

be determined by the Board of Directors of the Company.

Yamamoto’s agreement also has the terms and conditions which are described

below in the section entitled “

Provisions Applicable to All Executive Employment Agreements ”.

28, 2022, we entered in an Amendment Agreement to the Executive Employment Agreement dated as of February 9, 2022.

Pursuant to the Amendment

Agreement, Mr.

Yamamoto’s annual salary increased from $381,000 to $450,000, effective November 1, 2022.

Employment Agreement with Qizhi Gao

entered into an Executive Employment Agreement dated as of February 9, 2022 with Qizhi Gao.

Gao’s agreement provides that he

will serve as the Chief Financial Officer of HeartCore Enterprises, Inc.

and of our subsidiary, HeartCore Co., Ltd.

Gao’s agreement

provides that he will be paid an annual salary of $54,012, and will be issued 6,481 shares of our common stock pursuant to an Award Agreement

and the Company’s 2021 Equity Incentive Plan, which is described below.

The shares of restricted stock vest in four tranches, with

25% of the awarded shares vesting at the end of each year of the term of the employment agreement, subject to earlier vesting or forfeiture

as set forth below.

Gao’s agreement provides that he will be paid an annual bonus of $11,655 and will also be eligible to be

paid bonuses as may be determined by the Board of Directors of the Company.

Gao’s agreement also has the terms and conditions

which are described below in the section entitled “

Provisions Applicable to All Executive Employment Agreements ”.

On January 10, 2023, we entered

in an Amendment Agreement to the Executive Employment Agreement dated as of February 9, 2022.

Pursuant to the Amendment Agreement, Mr.

Gao’s annual salary increased from $54,012 to $120,222, effective January 1, 2023.

Employment Agreement with Kimio Hosaka

entered into an Executive Employment Agreement dated as of February 9, 2022 with Kimio Hosaka.

Hosaka’s agreement provides

that he will serve as the Chief Operating Officer of HeartCore Enterprises, Inc.

and of our subsidiary, HeartCore Co., Ltd.

Hosaka’s

agreement provides that he will be paid an annual salary of $95,459, and will be issued 11,455 shares of our common stock pursuant to

an Award Agreement and the Company’s 2021 Equity Incentive Plan, which is described below.

The shares of restricted stock vest

in four tranches, with 25% of the awarded shares vesting at the end of each year of the term of the employment agreement, subject to

earlier vesting or forfeiture as set forth below.

Hosaka’s agreement provides that he is eligible to be paid bonuses as may

be determined by the Board of Directors of the Company.

Hosaka’s agreement also has the terms and conditions which are described

below in the section entitled “

Provisions Applicable to All Executive Employment Agreements ”.

On January 10, 2023, we entered

in an Amendment Agreement to the Executive Employment Agreement dated as of February 9, 2022.

Pursuant to the Amendment Agreement, Mr.

Hosaka’s annual salary increased from $95,459 to $164,770, effective January 1, 2023.

Employment Agreement with Hidekazu Miyata

entered into an Executive Employment Agreement dated as of February 9, 2022 with Hidekazu Miyata.

Miyata’s agreement provides

that he will serve as the Chief Information Officer of HeartCore Enterprises, Inc.

and of our subsidiary, HeartCore Co., Ltd.

Miyata’s

agreement provides that he will be paid an annual salary of $75,600, and will be issued 9,072 shares of our common stock pursuant to

an Award Agreement and the Company’s 2021 Equity Incentive Plan, which is described below.

The shares of restricted stock vest

in four tranches, with 25% of the awarded shares vesting at the end of each year of the term of the employment agreement, subject to

earlier vesting or forfeiture as set forth below.

Miyata’s agreement provides that he is eligible to be paid bonuses as may

be determined by the Board of Directors of the Company.

Miyata’s agreement also has the terms and conditions which are described

below in the section entitled “

Provisions Applicable to All Executive Employment Agreements ”.

On January 10, 2023, we entered

in an Amendment Agreement to the Executive Employment Agreement dated as of February 9, 2022.

Pursuant to the Amendment Agreement, Mr.

Miyata’s annual salary increased from $75,600 to $112,616, effective January 1, 2023.

Employment Agreement with Keisuke Kuno

entered into an Executive Employment Agreement dated as of February 9, 2022 with Keisuke Kuno.

Kuno’s agreement provides that

he will serve as the Sales Director of HeartCore Enterprises, Inc.

and of our subsidiary, HeartCore Co., Ltd.

Kuno’s agreement

provides that he will be paid an annual salary of $109,000, and will be issued 13,092 shares of our common stock pursuant to an Award

Agreement and the Company’s 2021 Equity Incentive Plan, which is described below.

The shares of restricted stock vest in four tranches,

with 25% of the awarded shares vesting at the end of each year of the term of the employment agreement, subject to earlier vesting or

forfeiture as set forth below.

Kuno’s agreement provides that he is eligible to be paid bonuses as may be determined by the

Board of Directors of the Company.

Kuno’s agreement also has the terms and conditions which are described below in the section

entitled “

Provisions Applicable to All Executive Employment Agreements ”.

On January 10, 2023, we

entered in an Amendment Agreement to the Executive Employment Agreement dated as of February 9, 2022.

Pursuant to the Amendment Agreement,

Kuno’s annual salary increased from $109,000 to $152,308, effective January 1, 2023.

Applicable to All Executive Employment Agreements

of the Executive Employment Agreements as described above, has an initial term of 1 year, provided that the term of each agreement will

automatically be extended for one or more additional terms of one year each unless either the Company or applicable executive provides

of the Executive Employment Agreements as described above, has an initial term of one year, provided that the term of each agreement

will automatically be extended for one or more additional terms of one year each unless either the Company or applicable executive provides

notice to the other of their desire to not so renew the initial term or renewal term (as applicable) at least 30 days prior to the expiration

of then-current initial term or renewal term (as applicable).

Each of the agreements provide that the applicable executive’s employment

with the Company shall be “at will,”

meaning that either applicable executive or the Company may terminate the applicable

executive’s employment at any time and for any reason, subject to the other provisions of the agreement.

of the agreements may be terminated by the Company, either with or without “Cause”, or by the applicable executive, either

with or without “Good Reason”.

purposes of each agreement, “Cause”

violation of any material written rule or policy of the Company for which violation any employee

may be terminated pursuant to the written policies of the Company reasonably applicable to

an executive employee;

by the applicable executive to the material detriment of the Company;

applicable executive’s conviction (by a court of competent jurisdiction, not subject

to further appeal) of, or pleading guilty to, a felony;

applicable executive’s gross negligence in the performance of the applicable executive’s

duties and responsibilities to the Company as described in this Agreement;

applicable executive’s material failure to perform the applicable executive’s

duties and responsibilities to the Company as described in the agreement (other than any

such failure resulting from the applicable executive’s incapacity due to physical or

mental illness or any such failure subsequent to the applicable executive being delivered

a notice of termination without Cause by the Company or delivering a notice of termination

for Good Reason to the Company), in either case after written notice from the Board to the

applicable executive of the specific nature of such material failure and the applicable executive’s

failure to cure such material failure within 10 days following receipt of such notice.

purposes of each agreement, “Good Reason”

any time following a Change of Control (as defined below), a material diminution by the Company

of compensation and benefits (taken as a whole) provided to the applicable executive immediately

prior to a Change of Control;

reduction in base salary or target or maximum bonus, other than as part of an across-the-board

reduction in salaries of management personnel;

relocation of the applicable executive’s principal executive office to a location more

than 50 miles further from the applicable executive’s principal executive office immediately

prior to such relocation;

material breach by the Company of any of the terms and conditions of the agreement which

the Company fails to correct within 10 days after the Company receives written notice from

the applicable executive of such violation.

purposes of each agreement a “Change of Control”

of the Company will be deemed to have occurred if, after the effective date

Each of the agreements provide that the applicable executive’s employment

with the Company shall be “at will,” meaning that either applicable executive or the Company may terminate the applicable

executive’s employment at any time and for any reason, subject to the other provisions of the agreement.

of the agreements may be terminated by the Company, either with or without “Cause”, or by the applicable executive, either

with or without “Good Reason”.

purposes of each agreement, “Cause” means:

a violation of any material

written rule or policy of the Company for which violation any employee may be terminated pursuant to the written policies of the

Company reasonably applicable to an executive employee;

misconduct by the applicable

executive to the material detriment of the Company;

the applicable executive’s

conviction (by a court of competent jurisdiction, not subject to further appeal) of, or pleading guilty to, a felony;

the applicable executive’s

gross negligence in the performance of the applicable executive’s duties and responsibilities to the Company as described in

this Agreement;

the applicable executive’s

material failure to perform the applicable executive’s duties and responsibilities to the Company as described in the agreement

(other than any such failure resulting from the applicable executive’s incapacity due to physical or mental illness or any

such failure subsequent to the applicable executive being delivered a notice of termination without Cause by the Company or delivering

a notice of termination for Good Reason to the Company), in either case after written notice from the Board to the applicable executive

of the specific nature of such material failure and the applicable executive’s failure to cure such material failure within

10 days following receipt of such notice.

purposes of each agreement, “Good Reason” means:

at any time following a

Change of Control (as defined below), a material diminution by the Company of compensation and benefits (taken as a whole) provided

to the applicable executive immediately prior to a Change of Control;

a reduction in base salary

or target or maximum bonus, other than as part of an across-the-board reduction in salaries of management personnel;

the relocation of the applicable

executive’s principal executive office to a location more than 50 miles further from the applicable executive’s principal

executive office immediately prior to such relocation;

a material breach by the

Company of any of the terms and conditions of the agreement which the Company fails to correct within 10 days after the Company receives

written notice from the applicable executive of such violation.

purposes of each agreement a “Change of Control” of the Company will be deemed to have occurred if, after the effective date

of the applicable agreement, (i) the beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of securities representing

more than 50% of the combined voting power of the Company is acquired by any “person”

as defined in sections 13(d) and 14(d)

more than 50% of the combined voting power of the Company is acquired by any “person” as defined in sections 13(d) and 14(d)

of the Exchange Act (other than the Company, any subsidiary of the Company, or any trustee or other fiduciary holding securities under

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(or of its ultimate parent corporation, if any) in substantially the same proportion as their ownership of the Company immediately prior

to such merger or consolidation, or (iii) the sale or other disposition of all or substantially all of the Company’s assets to

an entity, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at

to such merger or consolidation, or (iii) the sale or other disposition of all or substantially all of the Company’s assets to

an entity, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at

least 50% of the combined voting power of the voting securities of which are owned directly or indirectly by shareholders of the Company,

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to such sale or disposition.

the event that the Company terminates the term of the applicable agreement or the applicable executive’s employment with Cause,

or if the applicable executive terminates their agreement without good reason, then, subject to any other agreements between the company

with respect to other equity grants made to such executive:

Company will pay to the applicable executive any unpaid base salary and benefits then owed

or accrued, and any unreimbursed expenses;

unvested portion of any equity granted to the applicable executive under the applicable agreement

or any other agreements with the Company will immediately be forfeited;

of the parties’

rights and obligations under the agreement will cease, other than those

rights or obligations which arose prior to the termination date or in connection with such

termination, and subject to the survival provisions of the agreements.

the event that the Company terminates the term of the applicable agreement or the applicable executive’s employment without Cause,

the Company will pay to

the applicable executive any unpaid base salary and benefits then owed or accrued, and any unreimbursed expenses;

any unvested portion of

any equity granted to the applicable executive under the applicable agreement or any other agreements with the Company will immediately

be forfeited;

all of the parties’

rights and obligations under the agreement will cease, other than those rights or obligations which arose prior to the termination

date or in connection with such termination, and subject to the survival provisions of the agreements.

the event that the Company terminates the term of the applicable agreement or the applicable executive’s employment without Cause,

or if the applicable executive terminates their agreement with good reason, then, subject to any other agreements between the company

with respect to other equity grants made to such executive:

Company will pay to the applicable executive any base salary, bonuses, and benefits then

owed or accrued, and any unreimbursed expenses;

Company will pay to the applicable executive, in one lump sum, an amount equal to the base

salary that would have been paid to the applicable executive for the remainder of the initial

term of the applicable agreement (if the termination occurs during the initial term of the

applicable agreement) or renewal term of the applicable agreement (if the termination occurs

during a renewal term of the applicable agreement);

unvested portion of any equity granted to the applicable executive under the applicable agreement

or any other agreements with the Company will, to the extent not already vested, be deemed

automatically vested;

of the parties’

rights and obligations under the agreement will cease, other than those

rights or obligations which arose prior to the termination date or in connection with such

termination, and subject to the survival provisions of the agreements.

the event of the applicable executive’s death or total disability during the term of the applicable agreement, the term of the

applicable agreement and the applicable executive’s employment shall terminate on the date of death or total disability.

event of such termination, the Company’s sole obligations hereunder to the applicable executive (or the applicable executive’s

the Company will pay to

the applicable executive any base salary, bonuses, and benefits then owed or accrued, and any unreimbursed expenses;

the Company will pay to

the applicable executive, in one lump sum, an amount equal to the base salary that would have been paid to the applicable executive

for the remainder of the initial term of the applicable agreement (if the termination occurs during the initial term of the applicable

agreement) or renewal term of the applicable agreement (if the termination occurs during a renewal term of the applicable agreement);

any unvested portion of

any equity granted to the applicable executive under the applicable agreement or any other agreements with the Company will, to the

extent not already vested, be deemed automatically vested;

all of the parties’

rights and obligations under the agreement will cease, other than those rights or obligations which arose prior to the termination

date or in connection with such termination, and subject to the survival provisions of the agreements.

the event of the applicable executive’s death or total disability during the term of the applicable agreement, the term of the

applicable agreement and the applicable executive’s employment shall terminate on the date of death or total disability.

event of such termination, the Company’s sole obligations hereunder to the applicable executive (or the applicable executive’s

estate) shall be for unpaid base salary, accrued but unpaid bonus and benefits (then owed or accrued and owed in the future), a pro-rata

bonus for the year of termination based on the applicable executive’s target bonus for such year and the portion of such year in

which the applicable executive was employed, and reimbursement of expenses pursuant to the terms hereon through the effective date of

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it is determined that any payment provided to the applicable executive under the applicable agreement or otherwise, whether or not in

connection with a Change of Control (a “Payment”), would constitute an “excess parachute payment”

meaning of section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), such that the Payment would be subject

to an excise tax under section 4999 of the Code (the “Excise Tax”), the Company will pay to the applicable executive an additional

amount (the “Gross-Up Payment”) such that the net amount of the Gross-Up Payment retained by the applicable executive after

connection with a Change of Control (a “Payment”), would constitute an “excess parachute payment” within the

meaning of section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), such that the Payment would be subject

to an excise tax under section 4999 of the Code (the “Excise Tax”), the Company will pay to the applicable executive an additional

amount (the “Gross-Up Payment”) such that the net amount of the Gross-Up Payment retained by the applicable executive after

the payment of any Excise Tax and any federal, state and local income and employment tax on the Gross-Up Payment, shall be equal to the

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the term of the applicable agreement, the applicable executive is entitled to fringe benefits consistent with the practices of the Company,

and to the extent the Company provides similar benefits to the Company’s executive officers, and is entitled to reimbursement for

all reasonable and necessary out-of-pocket business, entertainment and travel expenses incurred by the applicable executive in connection

with the performance of the applicable executive’s duties hereunder and in accordance with the Company’s expense reimbursement

policies and procedures.

of the agreements provides that, during the term of the applicable agreement, the applicable executive will be entitled to indemnification

and insurance coverage for officers’

liability, fiduciary liability and other liabilities arising out of the applicable executive’s

and insurance coverage for officers’ liability, fiduciary liability and other liabilities arising out of the applicable executive’s

position with the Company in any capacity, in an amount not less than the highest amount available to any other executive, and such coverage

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intellectual property conceived or made by the applicable executive in connection with the performance of their duties under the applicable

agreement (i.e., a “work-made-for-hire”

agreement (i.e., a “work-made-for-hire” provision).

of the agreements contains a non-compete provision which provides that, for the term of the applicable agreement and for a period of

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nor (ii) solicit or accept, or induce any person or entity to reduce goods or services

to Company, or in any manner assist others in the solicitation, acceptance, or inducement of, any business transactions with Company’s

existing and prospective clients, accounts, suppliers and/or other persons or entities with whom the Company has had business relationships

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such person or entity who responds to such general recruitment advertisement.

to the application of various states’

laws, there is no assurance that the non-compete provisions or the non-solicitation provisions

to the application of various states’ laws, there is no assurance that the non-compete provisions or the non-solicitation provisions

as set forth in each of the agreements will be enforced.

Each of the agreements contains a “blue pencil”

provision that,

Each of the agreements contains a “blue pencil” provision that,

in the event that a court determines that any of these restrictions are unenforceable, the parties to the agreement agreed that it is

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settled by arbitration.

noted above, each of the executives for whom an employment agreement was executed was issued a number of shares of restricted stock pursuant

to the Company’s 2021 Equity Incentive Plan.

These awards were made on the same date as the execution of the applicable employment

agreement, and were made pursuant to the form of restricted award agreement which is attached to the 2021 Equity Incentive Plan.

above, each of the award agreements provided that the shares will vest 25% a year, on each annual anniversary of the date of the employment

agreement, subject to earlier vesting and forfeiture as described in the employment agreements (as described above).

of February 9, 2022, each of the executives for whom an employment agreement was executed was issued a number of shares of restricted

stock pursuant to the Company’s 2021 Equity Incentive Plan.

On February 9, 2022, each of the executives for whom an employment agreement was executed was issued a number of shares of restricted

stock pursuant to the Company’s 2021 Equity Incentive Plan.

These awards were made pursuant to the form of restricted award agreement

which is attached to the 2021 Equity Incentive Plan.

Each of the award agreements provide that the shares vest 25% a year, on each annual

Each of the award agreements provides that the shares vest 25% a year, on each annual

anniversary of the date of the employment agreement, subject to earlier vesting and forfeiture as described in the employment agreements

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February 9, 2025 and February 9, 2026.

The first 25% shares of restricted stock of 21,454 shares were issued on February 16, 2023.

Number of Shares of

Restricted Stock

Sumitaka Yamamoto

Hidekazu Miyata

February 24, 2022, and effective February 22, 2022, the Audit Committee and the Board of Directors approved the payment by the Company

of a performance-linked executive bonus in the amount of 18,000,000 Japanese Yen (approximately $138,803), to Sumitaka Yamamoto, the

Company’s Chairman of Board, Chief Executive Officer, President and majority stockholder, in consideration of Mr.

Yamamoto’s

Company’s Chairman of Board, Chief Executive Officer, President and majority stockholder, in consideration of Mr.

prior performance for the benefit of the Company and its stockholders.

Equity Awards at Fiscal Year-End

following table sets forth information on outstanding options and stock awards held by the named executive officers as of December 31,

of Securities Underlying Unexercised Options (#) Exercisable

of Securities Underlying Unexercised Options (#) Unexercisable

Exercise Price ($)

Expiration Date

of Shares or Units Of Stock that Have Not Vested (#) (1)

Value Of Shares Or Units of Stock That Have Not

Vested ($) (1)

following table sets forth information on outstanding options and stock awards held by the executive officers as of December 31,

Option Awards

Unexercisable

Market Value Per Share Of

Sumitaka Yamamoto

Hidekazu Miyata

Narrative Disclosure

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Payments Upon Termination or Change in Control

described under “—

Employment Agreements”

above, each of the executives with whom the Company has entered into employment

agreements are entitled severance if their employment is terminated by the Company without “Cause”

or is terminated by the

applicable executive with “Good Reason”, in each case as described above.

described under “— Employment Agreements” above, each of the executives with whom the Company has entered into employment

agreements are entitled severance if their employment is terminated by the Company without “Cause” or is terminated by the

applicable executive with “Good Reason”, in each case as described above.

than as set forth in the table and described more fully below, we did not pay any compensation or make any equity awards or non-equity

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as directors.

During fiscal year 2021, Sumitaka Yamamoto and our Chief Executive Officer, Kimio Hosaka, our Chief Operating Officer were

each a member of our board of directors, as well as an employee, and received no additional compensation for their services as a director.

See the section titled “Executive Compensation”

for more information about the compensation for these individuals for fiscal

During fiscal year 2022, each of Sumitaka Yamamoto, our Chief Executive Officer, and Kimio Hosaka, our Chief Operating

Officer, was a member of our board of directors, as well as an employee, and received no additional compensation for their services as

See the section titled “Executive Compensation” for more information about the compensation for these individuals

for fiscal year 2022.

following table presents the total compensation for each person who served as a non-employee director of the Company during fiscal year

Earned or Paid in Cash

Other Compensation ($)

Fees Earned or

Compensation ($)

Takeshi Omoto

Yoshitomo Yamano

Ferdinand Groenewald

Director Agreements

Omoto, Yoshitomo Yamano, Yuki Tan and Yuta Katai entered into the Company’s form of Independent Director Agreement dated as of

February 9, 2022.

Previously, Ferdinand Groenewald entered into the Company’s form of Independent Director Agreement.

Independent Director Agreements provide that each non-employee director will be compensated as follows:

director will be paid the sum of $50,000 annually for director’s service as a director

of the Company, to be paid $12,500 each calendar quarter, payable within five business days

of the end of each calendar quarter, and with such amount for any partial calendar quarter

being appropriately prorated.

director shall be paid $4,000 annually for service as a member of the Audit Committee and

an additional sum of $3,000 annually for service as the Chairman of the Audit Committee,

with each of these payments to be paid quarterly in equal portions, within five business

days of the end of each calendar quarter, and with any amount for any partial calendar quarter

being appropriately prorated.

Each director will be paid

the sum of $50,000 annually for director’s service as a director of the Company, to be paid $12,500 each calendar quarter,

payable within five business days of the end of each calendar quarter, and with such amount for any partial calendar quarter being

appropriately prorated.

Each director shall be

paid $4,000 annually for service as a member of the Audit Committee and an additional sum of $3,000 annually for service as the Chairman

of the Audit Committee, with each of these payments to be paid quarterly in equal portions, within five business days of the end

of each calendar quarter, and with any amount for any partial calendar quarter being appropriately prorated.

the term of the applicable independent director agreement, the Company will reimburse the applicable director for all reasonable out-of-pocket

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property conceived or made by the applicable director in connection with the performance of their duties under the applicable agreement

(i.e., a “work-made-for-hire”

(i.e., a “work-made-for-hire” provision).

of the agreement provide that, during the term (which continues as long as the applicable director is serving as a director of the Company),

the applicable director is be entitled to indemnification and insurance coverage for officers’

liability, fiduciary liability and

other liabilities arising out of the applicable director’s position with the Company in any capacity, in an amount not less than

the applicable director is be entitled to indemnification and insurance coverage for officers’ liability, fiduciary liability and

other liabilities arising out of the applicable director’s position with the Company in any capacity, in an amount not less than

the highest amount available to any other director, and such coverage and protections, with respect to the various liabilities as to

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Equity Incentive Plan

Board of Directors and stockholders of the Company approved the 2021 Equity Incentive Plan (the “2021 Plan”) on August 6,

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

There were 865,500 shares available for

award as of March 31, 2022 under the 2021 Plan.

(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.

There were 6,330 shares available for award as of March 30, 2023 under the 2021

purpose of 2021 Plan is to promote the success of the Company and to increase stockholder value by providing an additional means through

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To the extent then required by applicable

law or any applicable stock exchange or required under the Internal Revenue Code of 1986, as amended (the “Code”), to preserve

the intended tax consequences of the 2021 Plan, or deemed necessary or advisable by the Board, the 2021 Plan and any amendment to the

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the date of adoption.

total of 2,400,000 shares of the Company’s common stock are authorized for issuance pursuant to the 2021 Plan.

Subject to adjustment

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if any award issued pursuant to the 2021 Plan expires or becomes unexercisable without having been exercised in full, is surrendered

pursuant to an exchange program, as provided in the 2021 Plan, or, with respect to restricted stock, restricted stock units (“RSUs”),

performance units or performance shares, is forfeited to or repurchased by the Company due to the failure to vest, the unpurchased shares

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has the power to administer the 2021 Plan and make all determinations deemed necessary or advisable for administering the 2021 Plan,

including the power to determine the fair market value of the Company’s common stock, select the service providers to whom awards

may be granted, determine the number of shares covered by each award, approve forms of award agreements for use under the 2021 Plan,

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terms, awards of a different type or cash, or by which the exercise price of an outstanding award is increased or reduced.

The administrator’s

decisions, interpretations and other actions are final and binding on all participants.

under the 2021 Plan, other than incentive stock options, may be granted to employees (including officers) of the Company or a subsidiary,

members of the Company’s Board, or consultants engaged to render bona fide services to the Company or a subsidiary.

Incentive stock

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The exercise price of options granted under the 2021 Plan generally must at least be equal

to the fair market value of the Company’s common stock on the date of grant.

The term of each option will be as stated in the applicable

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Stock appreciation rights allow the recipient to receive the appreciation in

the fair market value of the Company’s common stock between the exercise date and the date of grant.

Stock appreciation rights

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Subject to the provisions of the 2021 Plan, the administrator determines the other terms of stock appreciation rights, including

when such rights become exercisable and whether to pay any increased appreciation in cash or with shares of the Company’s common

stock, or a combination thereof, except that the per share exercise price for the shares to be issued pursuant to the exercise of a stock

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stock may be granted under the 2021 Plan.

Restricted stock awards are grants of shares of the Company’s common stock that vest

in accordance with terms and conditions established by the administrator.

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unless the administrator provides otherwise.

Shares of restricted stock that do not vest are subject to the Company’s right of

repurchase or forfeiture.

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RSUs are bookkeeping entries representing an amount equal to the fair market value of one share of

the Company’s common stock.

Subject to the provisions of the 2021 Plan, the administrator determines the terms and conditions of

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The administrator, in its sole discretion, may

pay earned RSUs in the form of cash, in shares of the Company’s common stock or in some combination thereof.

Notwithstanding the

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Performance shares shall have an initial

value equal to the fair market value of the Company’s common stock on the grant date.

The administrator, in its sole discretion,

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The maximum limit does not reflect the intended size

of any potential compensation or equity awards to the Company’s non-employee directors.

Non-transferability

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terms and conditions as the administrator deems appropriate.

the event of certain changes in the Company’s capitalization, to prevent diminution or enlargement of the benefits or potential

benefits available under the 2021 Plan, the administrator will adjust the number and class of shares that may be delivered under the

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or Liquidation

the event of the Company’s proposed liquidation or dissolution, the administrator will notify participants as soon as practicable

and all awards will terminate immediately prior to the consummation of such proposed transaction.

or Change in Control

2021 Plan provides that in the event of the Company’s merger with or into another corporation or entity or a “change in control”

(as defined in the 2021 Plan), each outstanding award will be treated as the administrator determines, including, without limitation,

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(ii) upon written notice to a participant,

that the participant’s awards will terminate upon or immediately prior to the consummation of such merger or change in control;

(iii) outstanding awards will vest and become exercisable, realizable or payable, or restrictions applicable to an award will lapse,

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exchange for an amount of cash or property, if any, equal to the amount that would have been attained upon the exercise of such award

or realization of the participant’s rights as of the date of the occurrence of the transaction (and, for the avoidance of doubt,

if as of the date of the occurrence of the transaction the administrator determines in good faith that no amount would have been attained

upon the exercise of such award or realization of the participant’s rights, then such award may be terminated by the Company without

payment) or (B) the replacement of such award with other rights or property selected by the administrator in its sole discretion;

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criteria will be deemed achieved at 100% of target levels and all other terms and conditions met, in all cases, unless specifically provided

otherwise under the applicable award agreement or other written agreement between the participant and the Company or any of the Company’s

subsidiary or parents, as applicable.

If an option or stock appreciation right is not assumed or substituted in the event of a

merger or change in control, the administrator will notify the participant in writing or electronically that the option or stock appreciation

If an option or stock appreciation right is not assumed or substituted in the event of a merger

or change in control, the administrator will notify the participant in writing or electronically that the option or stock appreciation

right will be exercisable for a period of time determined by the administrator in its sole discretion and the vested option or stock

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will be subject to any Company clawback policy that the Company is required to adopt pursuant to the listing standards of any national

securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall

Street Reform and Consumer Protection Act or other applicable laws.

The administrator also may specify in an award agreement that the

participant’s rights, payments or benefits with respect to an award will be subject to reduction, cancellation, forfeiture or recoupment

upon the occurrence of certain specified events.

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following table sets forth information regarding the beneficial ownership of our common stock as of March 31, 2023 by:

person known by us to be the beneficial owner of more than 5% of our outstanding shares of

common stock;

of our executive officers and directors that beneficially owns shares of our common stock;

our executive officers and directors as a group.

each person known by us to be the beneficial owner

of more than 5% of our outstanding shares of common stock;

each of our executive officers and directors that beneficially

owns shares of our common stock;

all our executive officers and directors as a group.

the table below, percentage ownership is based on 20,842,690 shares of our common stock issued and outstanding as of March 31, 2023.

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to all shares of common stock that they beneficially own, subject to applicable community property laws.

and Address of Beneficial Owner

and Nature of

Shares Beneficially Owned (1)

of Outstanding Common Stock

and Executive Officers:

executive officers and directors as a group (10 persons) (2)

5% Stockholders:

percentages in the table have been calculated based on 18,915,943 shares of our common stock

outstanding on March 31, 2022.

To calculate a stockholder’s percentage of beneficial

ownership, we include in the numerator and denominator the common stock outstanding and all

shares of our common stock issuable to that person in the event of the exercise of outstanding

options and other derivative securities owned by that person which are exercisable within

60 days of March 31, 2022.

Common stock options and derivative securities held by other stockholders

are disregarded in this calculation.

Therefore, the denominator used in calculating beneficial

ownership among our stockholders may differ.

Unless we have indicated otherwise, each person

named in the table has sole voting power and sole investment power for the shares listed

opposite such person’s name.

the directors and named executive officers listed above, as well as (i) 69,780 shares beneficially

owned by Hidekazu Miyata, our Chief Technical Officer, and (ii) 20,000 shares beneficially

owned by Qizhi Gao, our Chief Financial Officer.

Name and Address of Beneficial Owner

Percentage of

Directors and Executive Officers:

Sumitaka Yamamoto

Prakash Sadasivam

Ferdinand Groenewald

Yoshitomo Yamano

Takeshi Omoto

All executive officers and directors as a group (11 persons) (2)

Other 5% Stockholders:

Daishin Yasui

less than 1%.

The percentages in the

table have been calculated based on 20,842,690 shares of our common stock outstanding on March 31, 2023.

a stockholder’s percentage of beneficial ownership, we include in the numerator and denominator the common stock outstanding

and all shares of our common stock issuable to that person in the event of the exercise of outstanding options and other derivative

securities owned by that person which are exercisable within 60 days of March 31, 2023.

Common stock options and

derivative securities held by other stockholders are disregarded in this calculation.

Therefore, the denominator used in calculating

beneficial ownership among our stockholders may differ.

Unless we have indicated otherwise, each person named in the table has sole

voting power and sole investment power for the shares listed opposite such person’s name.

Includes the directors

and named executive officers listed above, as well as (i) 72,048 shares beneficially owned by Hidekazu Miyata, our Chief Technical

Officer, and (ii) 21,620 shares beneficially owned by Qizhi Gao, our Chief Financial Officer.

Authorized for Issuance under Equity Compensation Plans

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for issuance:

of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average

exercise price of outstanding options, warrants and rights

of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

compensation plans approved by security holders

compensation plans not approved by security holders

This represents 865,500 shares of common stock issuable pursuant to the 2021 Equity Incentive Plan (the “2021 Plan”).

Board of Directors and stockholders of the Company approved the 2021 Equity Incentive Plan (the “2021 Plan”) on August 6,

Plan Category

Securities to be

Exercise Price of

Available for

Future Issuance

Equity compensation plans approved by security holders

Equity compensation plans not approved by security holders

This represents shares of common stock issuable pursuant to the 2021 Equity Incentive Plan (the “2021 Plan”).

Board of Directors and stockholders of the Company approved the 2021 Equity Incentive Plan (the “2021 Plan”) on August 6,

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

There were 865,500 shares available for

award as of December 31, 2021 under the 2021 Plan.

As of March 31, 2022, there were 2,400,000 shares authorized for issuance under the

(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.

were 6,330 and 777,680 shares available for award under the 2021 Plan as of March 30, 2023 and December 31, 2022,

respectively.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

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of similar transactions, arrangements or relationships, including those involving indebtedness not in the ordinary course of business,

to which we or our subsidiary were or are a party, or in which we or our subsidiary were or are a participant, in which

the amount involved exceeded or exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two

completed fiscal years and in which any of our directors, nominees for director, executive officers, beneficial owners of more than 5%

of any class of our voting securities (a “significant shareholder”), or any member of the immediate family of any of the

foregoing persons, had or will have a direct or indirect material interest.

to which we or our subsidiary were or are a party, or in which we or our subsidiary were or are a participant, in which the amount involved

exceeded or exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years

and in which any of our directors, nominees for director, executive officers, beneficial owners of more than 5% of any class of our voting

securities (a “significant shareholder”), or any member of the immediate family of any of the foregoing persons, had or will

have a direct or indirect material interest.

recognize that transactions between us and any of our directors or executives or with a third party in which one of our officers, directors

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We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described

below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.

Party Transactions

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 for $1 and settled the share repurchase payable to him of

$28 (also see NOTE 11).

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.

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.

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 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.

Company’s Board of Directors has affirmatively determined that five of its seven directors, including Ferdinand Groenewald, Yoshitomo

Yamano, Yuki Tan, Takeshi Omoto, and Yuta Katai are independent directors of the Company within the meaning of Nasdaq Capital Market’s

We are a “controlled company”

under Nasdaq Capital Market rules and are not required to have a majority of independent

directors on the Board.

See “Management—Controlled Company and Director Independence”

for additional information.

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.

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.

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

common shares at a purchase price of $2.50 per share to the officers of the Company for an aggregate amount of $75,000.

During the period

from October 27, 2021 through December 31, 2021, the Company completed a private placement, in which, it issued 30,000 shares of common

shares at a purchase price of $2.50 per share to the officers of the Company for an aggregate amount of $75,000.

Company’s Board of Directors has affirmatively determined that five of its eight directors, including Ferdinand Groenewald,

Yoshitomo Yamano, Yuki Tan, Takeshi Omoto, and Yuta Katai are independent directors of the Company within the meaning of Nasdaq Capital

Market’s rules.

We are a “controlled company” under Nasdaq Capital Market rules and are not required to have a majority

of independent directors on the Board.

See “Management—Controlled Company and Director Independence” for additional

PRINCIPAL ACCOUNTING FEES AND SERVICES

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years ended December 31, 2022 and 2021.

Ended December 31,

Years Ended December 31,

Audit Related Fees

All Other Fees

Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements and

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Audit-related services consist of fees billed for assurance and related services that are reasonably related to performance

of the audit or review of our financial statements and are not reported under “Audit Fees.”

These services include attest

of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest

services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards.

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EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

following documents are filed as part of this annual report:

The following documents

are filed as part of this annual report:

Financial Statements

Index to Financial Statements on page F-1.

of Independent Registered Public Accounting Firm (PCAOB ID 206)

Balance Sheets as of December 31, 2021 and 2020

Statements of Operations and Comprehensive Income (Loss) for the Years Ended December 31, 2021 and 2020

Statements of Changes in Shareholders’

Deficit for the Years Ended December 31, 2021 and 2020

Statements of Cash Flows for the Years Ended December 31, 2021 and 2020

to Consolidated Financial Statements

Statements Schedules

financial statements schedules are omitted because they are not applicable or the amounts are immaterial and not required, or the

required information is presented in the financial statements and notes thereto beginning on page F-1 of this annual report.

hereby file as part of this annual report the exhibits listed in the Exhibit Index immediately before the signature page to this

Annual Report on Form 10-K.

Exhibits which are incorporated herein by reference can be inspected and copied at the public reference

facilities maintained by the SEC, 100 F Street, N.E., Room 1580, Washington, D.C.

Copies of such material can also be obtained

from the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C.

20549, at prescribed rates or on the SEC website

at www.sec.gov.

Financial Statements Schedules

All financial statements

schedules are omitted because they are not applicable or the amounts are immaterial and not required, or the required information

is presented in the financial statements and notes thereto beginning on page F-1 of this annual report.

We hereby file as part

of this annual report the exhibits listed in the Exhibit Index immediately before the signature page to this Annual Report on Form

Exhibits which are incorporated herein by reference can be inspected and copied at the public reference facilities maintained

by the SEC, 100 F Street, N.E., Room 1580, Washington, D.C.

Copies of such material can also be obtained from the Public Reference

Section of the SEC, 100 F Street, N.E., Washington, D.C.

20549, at prescribed rates or on the SEC website at www.sec.gov.

Form 10-K Summary

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TO FINANCIAL STATEMENTS

of Independent Registered Public Accounting Firm (PCAOB ID 206)

Balance Sheets as of December 31, 2021 and 2020

Statements of Operations and Comprehensive Income (Loss) for the Years Ended December 31, 2021 and 2020

Statements of Changes in Shareholders’

Deficit for the Years Ended December 31, 2021 and 2020

Statements of Cash Flows for the Years Ended December 31, 2021 and 2020

to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID 206 )

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2022 and 2021

Consolidated Statements of Changes in Shareholders’ Equity (Deficit) for the Years Ended December 31, 2022 and 2021

Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021

Notes to Consolidated Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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on the Financial Statements

have audited the accompanying consolidated balance sheet of HeartCore Enterprises, Inc.

and its subsidiary (the “Company”)

as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive income (loss), stockholders’

deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).

have audited the accompanying consolidated balance sheets of HeartCore Enterprises, Inc.

and its subsidiary (the “Company”)

as of December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, changes in shareholders’

equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December

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generally accepted in the United States of America.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

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provide a reasonable basis for our opinion.

MaloneBailey, LLP

/s/ MaloneBailey, LLP

www.malonebailey.com

have served as the Company’s auditor since 2021.

We have served as the Company’s auditor since

March 31, 2023

ENTERPRISES, INC.

BALANCE SHEETS

and cash equivalents

receivable, net

related parties

Loan receivable

from employees

Current assets:

Total current

and equipment, net

lease right-of-use assets

loan receivable from related party

Loan receivable

from employees, non-current

Cash and cash equivalents

Accounts receivable

Prepaid expenses

Due from related party

Loan receivable from employee

Other current assets

Total current assets

Non-current assets:

Total non-current

AND SHAREHOLDERS’

payable and accrued expenses

payroll and other employee costs

related party

portion of long-term debts

lease liabilities, current

redeemable financial interest

Property and equipment, net

Operating lease right-of-use assets

Deferred tax assets

Security deposits

Long-term loan receivable from related party

Loan receivable from employee, non-current

Other non-current assets

Total non-current assets

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

Current liabilities:

Total current

lease liabilities, non-current

Accounts payable and accrued expenses

Accrued payroll and other employee costs

Due to related party

Current portion of long-term debts

Operating lease liabilities, current

Finance lease liabilities, current

Income tax payables

Deferred revenue

Mandatorily redeemable financial interest

Other current liabilities

Total current liabilities

Non-current liabilities:

Total non-current

Long-term debts

Operating lease liabilities, non-current

Finance lease liabilities, non-current

Other non-current liabilities

Total non-current liabilities

Total liabilities:

Shareholders’

Preferred shares ($0.0001

par value, 20,000,000 shares authorized, no shares issued and outstanding as of December 31, 2021 and 2020)

Common shares ($0.0001 par

value, 200,000,000 shares authorized;

Shareholders’ equity (deficit):

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

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

17,649,886 and 15,819,943 shares issued;

15,546,454 and 15,242,454 shares outstanding

as of December 31, 2021 and 2020, respectively) *

paid-in capital *

other comprehensive loss

Total HeartCore

Enterprises, Inc.’s shareholders’

Non-controlling

Total shareholders’

Total liabilities

and shareholders’

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

17,649,886 and 15,546,454 shares outstanding as of December 31, 2022 and 2021, respectively)

Additional paid-in capital

Accumulated deficit

( 10,573,579 )

( 3,896,113 )

Accumulated other comprehensive income (loss)

Total shareholders’ equity (deficit)

Total liabilities and shareholders’ equity (deficit)

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

ENTERPRISES, INC.

STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

the Years Ended December 31,

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the Years Ended December 31,

Cost of revenues

Selling expenses

General and administrative

and development expenses

Operating expenses:

from operations

Selling expenses

General and administrative expenses

Research and development expenses

Total operating expenses

Income (loss) from operations

( 6,696,079 )

Other income (expenses):

Interest income

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Other expenses

before income tax provision

Total other income (expenses)

Income (loss) before income tax provision

( 6,683,384 )

Income tax expense (benefit)

( 6,677,466 )

net income attributable to non-controlling interest

income (loss) attributable to HeartCore Enterprises, Inc.

Other comprehensive

income (loss):

currency translation adjustment

Total comprehensive

income (loss)

Net loss attributable to HeartCore Enterprises, Inc.

$ ( 6,677,466 )

$ ( 338,156 )

Other comprehensive income:

Foreign currency translation adjustment

Total comprehensive loss

( 6,297,457 )

comprehensive income attributable to non-controlling interest

Comprehensive

income (loss) attributable to HeartCore Enterprises, Inc.

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

Weighted average common shares

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

Comprehensive loss attributable to HeartCore Enterprises, Inc.

$ ( 6,297,457 )

$ ( 216,438 )

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

Weighted average common shares outstanding

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

ENTERPRISES, INC.

STATEMENTS OF CHANGES IN SHAREHOLDERS’

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)

THE YEARS ENDED DECEMBER 31, 2022 AND 2021

paid-in capital *

comprehensive

income (loss)

Common shares*

Treasury shares

Accumulated other

Total HeartCore

Enterprises, Inc.

shareholders’

Shareholders’

comprehensive

shareholders’

income (loss)

Balance, December 31, 2020 *

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$ ( 958,008 )

$ ( 604,183 )

Foreign currency translation adjustment

Issuance of common shares

currency translation adjustment

Stock-based compensation

Reclassification of non-controlling interest to mandatorily redeemable financial interest

Balance, December 31, 2021

$ ( 3,896,113 )

Foreign currency translation

Issuance of common shares

Reclassification

of non-controlling interest to mandatorily redeemable financial interest

December 31, 2021

$ ( 558,952 )

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

$ ( 558,952 )

$ ( 3,896,113 )

$ ( 558,952 )

( 6,677,466 )

Foreign currency translation adjustment

Issuance of common shares for cash

Issuance of common shares from exercise of share options

Stock-based compensation

Repurchase of common shares

( 3,500,000 )

Retirement of treasury shares

( 1,349,390 )

( 3,499,865 )

Balance, December 31, 2022

$ ( 10,573,579 )

* Retrospectively

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

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

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STATEMENTS OF CASH FLOWS

the Years Ended December 31,

from operating activities:

income (loss)

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

of debt issuance costs

lease expense

For the Years Ended December 31,

Cash flows from operating activities:

$ ( 6,677,466 )

$ ( 327,044 )

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

Depreciation expenses

Amortization of debt issuance costs

Non-cash lease expense

Deferred income taxes

Stock-based compensation

Gain on shares redemption

in operating assets and liabilities:

receivable, net

payable and accrued expenses

payroll and other employee costs

lease liabilities

cash flows provided by operating activities

from investing activities:

of property and equipment

Loan provided

and loan provided to related parties

cash flows used in investing activities

from financing activities:

from issuance of common shares

for finance leases

from long-term debts

of long-term debts

for debt issuance costs

cash flows provided by (used in) financing activities

of exchange rate changes

Net change in cash and cash

and cash equivalents - beginning of the year

and cash equivalents - end of the year

cash flow disclosure:

investing and financing transactions

Remeasurement

of the lease liability and right-of-use asset due to lease modification

withheld as repayment of loan receivable from employees

paid by related parties on behalf of the Company

Reclassification

of non-controlling interest to mandatorily redeemable financial interest

Changes in assets and liabilities:

Accounts receivable

Prepaid expenses

Accounts payable and accrued expenses

Accrued payroll and other employee costs

Due to related party

Operating lease liabilities

Finance lease liabilities

Income tax payables

Deferred revenue

Other liabilities

Net cash flows provided by (used in) operating activities

( 4,808,547 )

Cash flows from investing activities:

Purchases of property and equipment

Advance and loan provided to related parties

Repayment of loan provided to related party

Net cash flows used in investing activities

Cash flows from financing activities:

Proceeds from initial public offering, net of issuance cost

Proceeds from issuance of common shares prior to initial public offering

Repurchase of common shares

( 3,500,000 )

Payments for finance leases

Proceeds from long-term debt

Repayment of long-term debts

Repayment of insurance premium financing

Payments for debt issuance costs

Payment for mandatorily redeemable financial interest

Net cash flows provided by (used in) financing activities

Effect of exchange rate changes

Net change in cash and cash equivalents

Cash and cash equivalents - beginning of the year

Cash and cash equivalents - end of the year

Supplemental cash flow disclosure:

Interest paid

Income taxes paid

Non-cash investing and financing transactions

Remeasurement of the lease liability and right-of-use asset due to lease modification

Payroll withheld as repayment of loan receivable from employees

Expenses paid by related parties on behalf of the Company

Reclassification of non-controlling interest to mandatorily redeemable financial interest

Share repurchase liability settled by issuance of common shares

Deferred offering costs recognized against the proceeds from the offering

Insurance premium financing

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

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Enterprises, Inc.

(“HeartCore USA”

or the “Company”), a holding company, was incorporated under the laws of the

(“HeartCore USA” or the “Company”), a holding company, was incorporated under the laws of the

State of Delaware on May 18, 2021.

July 16, 2021, the Company executed a Share Exchange Agreement with certain shareholders of HeartCore Co.

(“HeartCore Japan”),

July 16, 2021, the Company executed a Share Exchange Agreement with certain shareholders of HeartCore Co., Ltd.

(“HeartCore Japan”),

a company that was incorporated in Japan on June 12, 2009.

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15,999,994 shares of its common shares to the shareholders of HeartCore Japan in exchange for 10,706 shares out of 10,984 shares of common

shares issued by HeartCore Japan, representing approximately 97.5% of HeartCore Japan’s outstanding common shares.

HeartCore Japan becomes a majority-owned operating subsidiary of the Company.

share exchange has been accounted for as a recapitalization between entities under common control since the same controlling shareholders

controlled these two entities before and after the transaction.

The consolidation of the Company and its subsidiary has been accounted

for at historical cost and prepared on the basis as if the transaction had become effective as of the beginning of the earliest period

presented in the accompanying consolidated financial statements.

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

software in Japan.

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

shares issued by HeartCore Japan, representing approximately 97.5 % of HeartCore Japan’s outstanding common shares.

24, 2022, the Company purchased the remaining 278 shares of common shares of HeartCore Japan.

As a result, HeartCore Japan became a wholly

owned operating subsidiary of the Company.

share exchange on July 16, 2021 has been accounted for as a recapitalization between entities under common control since the same controlling

shareholders controlled these two entities before and after the transaction.

The consolidation of the Company and its subsidiary has

been accounted for at historical cost and prepared on the basis as if the transaction had become effective as of the beginning of the

earliest period presented in the accompanying 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.

Beginning from early 2022, HeartCore USA is engaged in business of providing consulting services to Japanese

companies with intention to go public in the United States capital market.

September 6, 2022, HeartCore USA entered into a share exchange and purchase agreement (“Sigmaways Agreement”) to acquire

51 % of the outstanding shares of Sigmaways, Inc.

(“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.

January 2023, HeartCore USA incorporated a wholly owned subsidiary, HeartCore Financial, Inc.

Financial”) , under the laws of the State of Delaware.

HeartCore Financial is engaged in the

business of providing financial consulting services.

February 2023, HeartCore USA incorporated a wholly owned subsidiary, HeartCore Capital Advisors, Inc.

(“HeartCore Capital

Advisors”), in Japan.

HeartCore Capital Advisors is engaged in the business of providing financial consulting services to

Japanese companies.

USA, HeartCore Japan, Sigmaways, HeartCore Financial, and HeartCore Capital Advisors are hereafter referred to as the Company.

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the

United States of America (“U.S.

GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission

(“SEC”).

The consolidated financial statements include the accounts of the Company and its majority-owned subsidiary.

interest of non-controlling party is presented as mandatorily redeemable financial interest or non-controlling interest as applicable.

United States of America (“U.S.

GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission

The 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.

Non-controlling

interest in the consolidated balance sheets represents the portion of the equity in the subsidiary not attributable, directly or indirectly,

to the Company.

The portion of the income or loss applicable to the non-controlling interest in subsidiary is also separately reflected

in the consolidated statements of operations and comprehensive income (loss).

portion of the income applicable to the non-controlling interest in subsidiary is separately reflected in the consolidated statements

of operations and comprehensive loss.

preparing the consolidated financial statements in conformity U.S.

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limited to, the allowance for doubtful accounts, useful lives of property and equipment, the impairment of long-lived assets, valuation

of share-based compensation, valuation allowance of deferred tax assets, implicit interest rate of operating and finance leases,

valuation of asset retirement obligations and revenue recognition.

of stock-based compensation, valuation allowance of deferred tax assets, implicit interest rate of operating and financing leases, valuation

of asset retirement obligations and revenue recognition.

Actual results could differ from those estimates.

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operations, which may result in delays in collections or an inability to collect accounts receivable from these customers.

to which COVID-19 may continue to impact the Company’s financial condition, results of operations, or liquidity continues to remain

uncertain, and as of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance

that would require an update to its estimates or judgments or an adjustment to the carrying value of the Company’s assets or liabilities.

These estimates may change, as new events occur and additional information is obtained, which will be recognized in the consolidated

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Actual results could differ from those estimates, and any such differences may be

material to the Company’s financial statements.

Reclassification

Certain prior year amounts have been reclassified to conform to the

current year presentation.

These reclassifications had no impact on the reported results of operations and cash flows.

material to the Company’s financial statements.

and Cash Equivalents

and cash equivalents include cash on hand and deposits in banks that are unrestricted as to withdrawal or use, and which have original

maturities of three months or less.

receivable, net represent the amounts that the Company has an unconditional right to consideration, which are stated at the original

and cash equivalents include cash on hand and deposits in banks that are unrestricted as to withdrawal or use.

receivable represent the amounts that the Company has an unconditional right to consideration, which are stated at the original

amount less an allowance for doubtful receivables.

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The allowance is based

on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections.

The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the consolidated statements

of operations and comprehensive income (loss).

Delinquent account balances are written off against the allowance for doubtful

accounts after management has determined that the likelihood of collection is remote.

In circumstances in which the Company receives

payment for accounts receivable that have previously been written off, the Company reverses the allowance and bad debt.

of operations and comprehensive loss.

Delinquent account balances are written off against the allowance for doubtful accounts after management

has determined that the likelihood of collection is remote.

In circumstances in which the Company receives payment for accounts receivable

that have previously been written off, the Company reverses the allowance and bad debt.

and Equipment, Net

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over the estimated useful lives, as more details follow:

Leasehold improvement

OF PROPERTY AND EQUIPMENT USEFUL LIVES

Leasehold improvements

Straight-line

Shorter of estimated

useful life and lease term

of estimated useful life or lease term

Machinery and equipment

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depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated

statements of operations and comprehensive income (loss).

statements of operations and comprehensive loss.

Retirement Obligations

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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 Accounting Standards Codification (“ASC”)

410, “Asset Retirement Obligation Accounting”.

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

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The following table presents changes in asset retirement obligations:

OF CHANGES IN ASSET RETIREMENT OBLIGATIONS

Beginning balance

Accretion expense

currency translation adjustment

Foreign currency translation adjustment

Ending balance

Company adopted the Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) on January 1, 2019 using a modified retrospective

The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets

7 unchanged sentences

for all leases on the commencement date:

(i) lease liability, which is a lessee’s obligation to make lease payments arising from

a lease, measured on a discounted basis;

and (ii) right-of-use asset, which is an asset that represents the lessee’s right to use,

or control the use of, a specified asset for the lease term.

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lease liabilities, current, and operating lease liabilities, non-current, and finance leases are included in property and equipment,

finance lease liabilities, current, and finance lease liabilities, non-current in the consolidated balance sheet.

most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information

net, finance lease liabilities, current, and finance lease liabilities, non-current in the consolidated balance sheets.

most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information

available at commencement date in determining the present value of future payments.

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over the economic life of the related products.

The Company’s software development costs incurred subsequent to achieving technological

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

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of Long-Lived Assets

assets with finite lives, primarily property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate

that the carrying amount of an asset may not be recoverable.

If the estimated cash flows from the use of the asset and its eventual disposition

are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value.

There were no

impairments of these assets during the years ended December 31, 2021 and 2020.

assets with finite lives, primarily property and equipment and operating lease right-of-use assets, are reviewed for impairment whenever

events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

If the estimated cash flows

from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed to be impaired

and written down to its fair value.

There were no impairments of these assets during the years ended December 31, 2022 and 2021.

Currency Translation

Company maintains its books and record in its local currency, Japanese YEN (“JPY”), which is a functional currency as being

the primary currency of the economic environment in which its operation is conducted.

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The resulting exchange differences are recorded in the statements of

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

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 loss

within the statements of changes in shareholders’

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

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).

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

exchange rate

US$1 exchange

Company recognizes revenue under ASC Topic 606, “Revenue from Contracts with customers”.

OF FOREIGN CURRENCY TRANSLATION

US$1 exchange rate

Company recognizes revenue under ASC Topic 606, “Revenue from Contracts with Customers”.

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

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

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:

The Consumption Tax on sales are calculated at 10% and nil of gross sales in Japan and in the U.S., respectively.

Company currently generates its revenues from the following main sources:

from On-Premise Software

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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 price (“SSP”) of on-premise

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

software and maintenance and support service.

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by the customers.

from Software as a Service (“SaaS”)

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

from Software as a Service (“SaaS”)

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

the rights of the software to the customers.

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

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

The subscription contracts

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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 related to the initial

public offering and supporting the listing process.

The consulting service contracts are generally less than one year in length.

Revenues from consulting services are recognized over the period of the contract by reference to progress toward complete

satisfaction of that performance obligation.

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

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The Company records

deferred revenues on the consolidated balance sheets when revenues are recognized subsequent to cash collection for an invoice.

revenues are reported net of related uncollected deferred revenues in the consolidated balance sheets.

deferred revenue on the consolidated balance sheets when revenues are recognized subsequent to cash collection for an invoice.

revenue is reported net of related uncollected deferred revenue in the consolidated balance sheets.

The amount of revenues recognized

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Company disaggregates its revenues from contracts by service types, as the Company believes it best depicts how the nature, amount, timing

and uncertainty of the revenue and cash flows are affected by economic factors.

The Company’s disaggregation of revenues for the

and uncertainty of the revenues and cash flows are affected by economic factors.

The Company’s disaggregation of revenues for the

years ended December 31, 2022 and 2021 is as following:

the Years Ended

Revenue from On-Premise

Revenue from Maintenance and

Support service

Revenue from Software as a

Service (“SaaS”)

from Software Development and other Miscellaneous Services

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

the Years Ended

Revenue from Customer

Experience Management Platform

OF DISAGGREGATION OF REVENUES

For the Years Ended

Revenue from On-Premise Software

Revenue from Maintenance and Support Service

Revenue from Software as a Service (“SaaS”)

Revenue from Software Development and other Miscellaneous Services

Revenue from Consulting Service

Total Revenues

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

For the Years Ended

Revenue from Customer Experience Management Platform

Revenue from Process Mining

Revenue from Robotic Process

Revenue from Robotic Process Automation

Revenue from Task Mining

of December 31, 2021 and 2020, and for the years then ended, all long-lived assets and almost all of the revenue generated are attributed

to the Company’s operation in Japan.

of revenues primarily consists of salaries and related expenses (e.g.

bonuses, employee benefits, and payroll taxes) for personnel directly

involved in the delivery of services and products directly to customers.

Cost of revenues also includes royal/license payments to vendors,

and hosting and infrastructure costs related to the delivery of the Company’s products and services.

expenses consist primarily of costs of promotion and marketing for the Company’s image and products, and costs of direct advertising,

and are included in selling expenses.

The Company expenses advertising costs as incurred or the first time the advertising takes place,

whichever is earlier, in accordance with the ASC 720-35, “Advertising Costs”.

The advertising expenses were $195,916 and

$97,943 for the years ended December 31, 2021 and 2020, respectively.

Revenue from Consulting Service

Revenue from Others

Total Revenues

of December 31, 2022 and 2021, and for the years then ended, all long-lived assets and almost all of the revenues generated

are attributed to the Company’s operation in Japan.

of revenues primarily consists of salaries and outsourcing expenses (e.g., bonuses, employee benefits, payroll taxes, outsourcing professional

fees) for personnel and parties directly involved in the delivery of services and products directly to customers.

Cost of revenues also

includes royal/license payments to vendors, and hosting and infrastructure costs related to the delivery of the Company’s products

and services.

expenses consist primarily of costs of promotion and marketing for the Company’s image and products/services, and costs of direct

advertising, and are included in selling expenses.

The Company expenses advertising costs as incurred or the first time the advertising

takes place, whichever is earlier, in accordance with the ASC 720-35, “Advertising Costs”.

The advertising expenses were

$ 1,902,942 and $ 195,916 for the years ended December 31, 2022 and 2021, respectively.

Concentration

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

the year ended December 31, 2021, customer A represents 15.2% of the Company’s total revenues.

the year ended December 31, 2022, no customer accounts for more than 10 % of the Company’s total revenues.

For the year ended December

2020, no customer accounts for more than 10% of the Company’s total revenues.

the year ended December 31, 2021, vendor A, B, C and D represents 31%, 24%, 20% and 11%, respectively, of the Company’s total purchases.

For the year ended December 31, 2020, vendor A, B, C and E represents 38%, 24%, 19% and 11%, respectively, of the Company’s total

280, “Segment Reporting,”

requires use of the “management approach”

model for segment reporting.

31, 2021, customer A represents 15.2 % of the Company’s total revenues.

the year ended December 31, 2022, vendor A, B, and C represent 37.5 %, 23.6 % and 20.9 %, respectively, of the Company’s total purchases.

For the year ended December 31, 2021, vendor A, B, C and D represent 31.1 %, 24.4 %, 20.4 % and 11.1 %, respectively, of the Company’s

total purchases.

280, “Segment Reporting,” requires use of the “management approach” model for segment reporting.

The management

approach model is based on the way a company’s chief operating decision maker organizes segments within the Company for making

operating decisions assessing performance and allocating resources.

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legal structure, management structure, or any other manner in which management disaggregates a company.

determined the Company’s operations constitute a single reportable segment in accordance with ASC 280.

The Company operates exclusively

in one business and industry segment:

sales and development of software.

determined the Company’s operations constitute a single reportable segment in accordance with ASC 280.

Comprehensive

Income or Loss

220, “Comprehensive Income,”

establishes standards for reporting and display of comprehensive income or loss, its components

220, “Comprehensive Income,” establishes standards for reporting and display of comprehensive income or loss, its components

and accumulated balances.

Comprehensive income or loss as defined includes all changes in equity during a period from non-owner sources.

Accumulated other comprehensive loss, as presented in the accompanying consolidated statements of changes in shareholders’

Accumulated comprehensive income (loss), as presented in the accompanying consolidated statements of changes in shareholders’ equity

(deficit), consists of changes in unrealized gains and losses on foreign currency translation.

(Loss) Per Share

Company computes basic and diluted earnings (loss) per share in accordance with ASC 260, Earnings per Share .

Basic earnings (loss)

per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the reporting

Diluted earnings (loss) per share reflects the potential dilution that could occur if stock options and other commitments to

issue common shares were exercised or equity awards vest resulting in the issuance of common shares that could share in the earnings

(loss) of the Company.

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

Stock Compensation”.

Company computes basic and diluted loss per share in accordance with ASC 260, Earnings per Share .

Basic loss per share is computed

by dividing net loss by the weighted average number of common shares outstanding during the reporting period.

Diluted loss per share

is computed by dividing net loss by the weighted average number of common shares, common share equivalents and potentially dilutive securities

outstanding during each period.

Common share equivalents are not included in the calculation of diluted loss per share if their effect

would be anti-dilutive.

Company accounts for stock-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.

statement 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.

Repurchase and Retirement of Treasury Shares

shares repurchased by the Company are held as treasury shares.

The Company accounts for treasury shares using the cost method.

this method, the cost incurred to purchase the shares is recorded in the treasury shares account.

At retirement, the common shares account

is charged only for the aggregate par value of the shares.

The excess of the acquisition cost of treasury shares over the aggregate par

value is recorded entirely in additional paid-in capital (up to the amount credited to the additional paid-in capital upon original issuance

of the shares).

Parties and Transactions

Company identifies related parties, and accounts for, discloses related party transactions in accordance with ASC 850, “Related

Party Disclosures”

and other relevant ASC standards.

Company identifies related parties, and accounts for, discloses related party transactions in accordance with ASC 850, “Related

Party Disclosures” and other relevant ASC standards.

which can be an entity or individual, are considered to be related if they have the ability, directly or indirectly, to control the Company

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related if they are subject to common control or common significant influence.

involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive,

free market dealings may not exist.

Representations about transactions with related parties, if made, shall not imply that the related

party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations

can be substantiated.

taxes are accounted for using an asset and liability method of accounting for income taxes in accordance with ASC 740, “Income

Taxes.”

Under this method, income tax expense is recognized for the amount of:

taxes are accounted for using an asset and liability method of accounting for income taxes in accordance with ASC 740, “Income

Taxes.” Under this method, income tax expense is recognized for the amount of:

(i) taxes payable or refundable for the current

period and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s

financial statements or tax returns.

Deferred tax assets also include the prior years’

net operating losses carried forward.

Deferred tax assets also include the prior years’ net operating losses carried forward.

tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary

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measuring fair value.

An asset’s or a liability’s categorization within the fair value hierarchy is based upon the lowest

level of input that is significant to the fair value measurement.

ASC 820 establishes three levels of inputs that may be used to measure

quoted prices in active markets for identical assets or liabilities;

inputs other than Level 1 that are observable, either directly or indirectly;

unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets

or liabilities.

of December 31, 2021 and 2020, the carrying values of cash and cash equivalents, accounts receivable, prepaid expenses, current portion

of loan receivable from employees, other current assets, accounts payable and accrued expenses, accrued payroll and other employee costs,

current portion of long-term debts, current operating and finance lease liabilities, income tax payables, deferred

revenue, mandatorily redeemable financial interest and other current liabilities approximated their fair values reported in the consolidated

balance sheets due to the short-term maturities of these instruments.

quoted prices

in active markets for identical assets or liabilities;

inputs other than

Level 1 that are observable, either directly or indirectly;

unobservable inputs

that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities.

of December 31, 2022 and 2021, the carrying values of cash and cash equivalents, accounts receivable, prepaid expenses, due from

related party, current portion of loan receivable from employee, other current assets, accounts payable and accrued expenses, accrued

payroll and other employee costs, due to related party, current portion of long-term debts, current portion of operating and finance

lease liabilities, income tax payables, deferred revenue, mandatorily redeemable financial interest and other current liabilities approximated

their fair values reported in the consolidated balance sheets due to the short-term maturities of these instruments.

Accounting Pronouncements

December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes.

is intended to simplify accounting for income taxes.

It removes certain exceptions to the general principles in Topic 740 and amends

existing guidance to improve consistent application.

The Company adopted this guidance on January 1, 2021, and the adoption of this guidance

did not have a material impact on the Company’s consolidated financial statements.

ACCOUNTS RECEIVABLE, NET

receivable, net consists of the following:

June 2016, the FASB issued Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments – Credit Losses (Topic

326), Measurement of Credit Losses on Financial Instruments.

2016-13 was further amended in November 2020 by ASU No.

Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842).

As a result, ASC

Topic 326, Financial Instruments – Credit Losses is effective for public companies for annual reporting periods, and interim periods

within those years beginning after December 15, 2020.

For all other entities, it is effective for fiscal years beginning after December

15, 2022, including interim periods within those fiscal years.

As the Company is an “emerging growth company” and elects

to apply for the new and revised accounting standards at the effective date for a private company, the Company adopted ASU No.

on January 1, 2023 and the adoption did not have a material impact on the Company’s consolidated financial statements.

3 — ACCOUNTS RECEIVABLE

receivable consists of the following:

OF ACCOUNTS RECEIVABLE NET

Accounts receivable, gross

allowance for doubtful accounts

receivable, net

Accounts receivable

for doubtful accounts movement is as follows:

OF ALLOWANCE FOR DOUBTFUL ACCOUNTS

Beginning balance

Additions to allowance

currency translation adjustment

Foreign currency translation adjustment

Ending balance

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expenses consist of the following:

Prepayments to

software vendors

Prepaid selling expenses

OF PREPAID EXPENSES

Prepayments to software vendors

Prepaid marketing and consulting fees

Prepaid subscription fees

Deferred offering expenses

Deferred offering expenses, consisting of legal

fees and road show expenses relating to the Company’s planned IPO, are capitalized and recorded on the balance sheet.

offering expenses will be offset against the proceeds received upon the closing of the planned IPO.

Prepaid insurance premium

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

and recorded on the balance sheet.

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

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

5 — RELATED PARTY TRANSACTIONS

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

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 (also see NOTE 11).

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.

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 $ 575 .

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.

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 (also see NOTE 13).

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

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.

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.

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.

During the period from October 27, 2021 through December 31, 2021,

the Company completed a private placement, in which, it issued 30,000 shares of common shares at a purchase price of $2.50 per share

to the officers of the Company for an aggregate amount of $75,000.

LOAN RECEIVABLE FROM EMPLOYEES

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.

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

shares of common shares at a purchase price of $ 2.50

per share to the officers of the Company for an aggregate amount of $ 75,000 .

During the period from October 27, 2021 through December 31, 2021, the Company completed a private placement, in which, it issued 30,000 shares of common shares at a purchase price of $ 2.50 per share to the officers of the Company for an aggregate amount of $ 75,000 .

6 — LOAN RECEIVABLE FROM EMPLOYEE

Company occasionally made loans to its employees to assist their life.

The annual interest rate for these loans ranges from 1.600% to

1.975%, and the term ranges from two to three years.

Repayments are deducted from the monthly salary of these employees.

The Company has a loan receivable from an employee as of December

31, 2021, the annual interest rate for this loan is 1.975 % and the term of this loan is three years .

Repayments are deducted from the

monthly salary of this employee.

The loan was fully repaid during the year ended December 31, 2022.

7 — PROPERTY AND EQUIPMENT, NET

and equipment consist of the following:

and equipment

and equipment, net

and equipment, net consist of the following:

OF PROPERTY AND EQUIPMENT NET

Leasehold improvements

Machinery and equipment

Accumulated depreciation

Property and equipment, net

expense was $ 83,333 and $ 105,394 for the years ended December 31, 2022 and 2021, respectively.

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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 $57,167 and $120,144 are included in property and equipment as of December 31, 2021 and December 31, 2020, respectively.

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

Right-of-use assets of these finance leases in the amount of $ 18,335 and $ 57,167 are included in property and equipment, net

as of December 31, 2022 and 2021, respectively.

components of lease costs are as follows:

the Years Ended

OF LEASE COSTS

For the Years Ended

Finance lease costs

of right-of-use assets

on lease liabilities

Amortization of right-of-use assets

Interest on lease liabilities

Total finance lease costs

following table presents supplemental information related to the Company’s leases:

the Years Ended

Cash paid for amounts included in the measurement of

lease liabilities:

Operating cash

flows from finance leases

Operating cash flows from

operating leases

Financing cash flows from

finance leases

Remeasurement of operating

lease liability and right-of-use asset due to lease modification

Weighted average remaining

lease term (years)

Operating lease costs

Total lease costs

following table presents supplemental information related to the Company’s leases:

OF SUPPLEMENTAL INFORMATION RELATED TO THE COMPANY’S LEASES

For the Years Ended

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

Operating cash flows from finance leases

Operating cash flows from operating leases

Financing cash flows from finance leases

Remeasurement of operating lease liability and right-of-use asset due to lease modification

Weighted average remaining lease term (years)

Finance leases

Operating leases

Weighted-average discount

Weighted-average discount rate:

Finance leases

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

ending December 31,

OF FINANCE LEASE AND OPERATING LEASE FUTURE MATURITY OF LEASE LIABILITIES

Year Ended December 31,

Finance Lease

Operating Lease

Total lease payments

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current portion

lease liabilities

Non-current lease liabilities

to the operating lease agreements, the Company made security deposits to the lessors.

2 unchanged sentences

9 — LONG-TERM DEBTS

Company’s long-term debts included bond payable and loans borrowed from banks and other financial institutions, which consist of

the following:

of Financial Institutions

Amount Borrowed (JPY)

SCHEDULE OF LONG-TERM DEBTS

Interest Rate

Corporate bond

issued through Resona Bank

1/10/2019—1/10/2024

banks and other financial institutions

Loan Duration

Annual Interest Rate

Corporate bond issued through Resona

Bank, Limited

1/10/2019—1/10/2024

Loans with banks and other financial institutions

Resona Bank, Limited

30,000,000 (a)

12/29/2017—12/30/2022

Resona Bank, Limited

12/29/2017—12/29/2024

Resona Bank, Limited

9/30/2020—9/30/2027

Resona Bank, Limited

9/30//2020—9/30/2027

Resona Bank, Limited

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

10,000,000 (a)(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

Finance Corporation

11/17/2020—11/30/2027

Aggregate outstanding principal

unamortized debt issuance

12/15/2017—11/30/2022

Japan Finance Corporation

11/17/2020—11/30/2027

Higashi-Nippon Bank

3/31/2022—3/31/2025

Aggregate outstanding principal balances

unamortized debt issuance costs

current portion

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

debts are guaranteed by Tokyo Credit Guarantee Association, and the Company has paid guarantee expenses for these debts.

Company’s bond payable balance represents a corporate bond issued through Resona Bank with a principal of JPY100,000,000 (approximately

$909,000) in January 2019 with a term of five years payable semi-annually.

The bond is guaranteed by Resona Bank and the

CEO of the Company.

Company entered into several loan agreements with banks and other financial institutions during the year ended December 31, 2020 with

a term ranges from five to seven years payable monthly.

These loans are unsecured unless otherwise specified in the table above.

Non-current portion

These debts are guaranteed

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

These debts are guaranteed

by Tokyo Credit Guarantee Association, and the Company has paid guarantee expenses for these debts.

The bond is guaranteed

by Resona Bank, Limited.

expense for long-term debts was $ 20,523 and $ 32,700 for the years ended December 31, 2022 and 2021, respectively.

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

ending December 31,

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

federal income tax rate is 21%.

SCHEDULE OF FUTURE MINIMUM LOAN PAYMENTS

Year Ended December 31,

10 — 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.

December 31, 2022, the insurance premium financing was fully repaid.

During the year ended December 31, 2022, the interest incurred was

11 — INCOME TAXES

USA is a company registered in the State of Delaware incorporated in May 2021 and subjects to federal income tax at 21 % statutory

tax rate with respect to the profit generated from the United States.

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

During the years ended December 31, 2021 and

2020, all taxable income (loss) of the Company is generated in Japan.

As a result of its business activities, the Company files tax returns

that are subject to examination by the local tax authority.

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

years ended December 31, 2021 and 2020.

the years ended December 31, 2021 and 2020, the Company’s income tax expenses are as follows:

the Years Ended

As a result of its business activities, the

Company files tax returns that are subject to examination by the local tax authority.

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 34.59 % and 30.62 % for the years ended December 31, 2022 and 2021, respectively.

the years ended December 31, 2022 and 2021, the Company’s income tax expense (benefit) are as follows:

SCHEDULE OF INCOME TAX EXPENSES

For the Years Ended

Income tax expense (benefit)

reconciliation of the effective income tax rates reflected in the accompanying consolidated statements of operations to the Japanese

statutory tax rate for the years ended December 31, 2022 and 2021 is as follows:

the Years Ended

Japanese statutory

Entertainment expenses not

SCHEDULE OF EFFECTIVE INCOME TAX RATES RECONCILIATION

For the Years Ended

Japanese statutory tax rate

Effect of income tax difference under different tax jurisdictions

Effect of change in income tax rate for deferred tax assets

Effect of expenses not deductible for tax purpose

Change in valuation allowance

tax effects of temporary differences that give rise to the deferred tax assets at December 31, 2021 and

2020 are presented below:

Other adjustments

Effective tax rate

tax effects of temporary differences that give rise to the deferred tax assets at December 31, 2022 and 2021 are presented below:

SCHEDULE OF DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES

Deferred tax assets

Revenue adjustments

Cost adjustments

Expense adjustments

Research and development –

costs capitalized for tax purposes

Bad debt allowance

operating losses carried forward

Research and development – costs capitalized for tax purposes

Net operating losses carried forward

valuation allowance

deferred tax assets

( 2,511,846 )

( 1,058,222 )

Total deferred tax assets

realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the appropriate character in future

The Company regularly assesses the ability to realize its deferred tax assets and establish a valuation allowance if it is more-likely-than-not

The Company regularly assesses the ability to realize its deferred tax assets and establishes a valuation allowance if it is more-likely-than-not

that some portion of the deferred tax assets will not be realized.

3 unchanged sentences

period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional

weight may be given to subjective evidence such as the Company’s projections for growth.

The adjustments of a valuation allowance

9 unchanged sentences

tax benefits in the next twelve months from December 31, 2022.

The Company’s Japan subsidiary income tax return filed for the tax

years ending from May 31, 2017 through May 31, 2021 are subject to examination by the relevant taxing authorities.

The Company’s Japan subsidiary income tax return filed for the tax

years ending from May 31, 2018 through December 31, 2022 are subject to examination by the relevant taxing authorities.

12 – STOCK-BASED COMPENSATION

2 unchanged sentences

All options are

exercisable upon issuance with a repurchase provision which serves as a vesting condition.

All employees that were granted these stock

options had early exercised their stock options in 2016 prior to the vesting of the related stock options.

As of November 3, 2021

and December 31, 2020, 324 and 313 units, respectively, 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.

On November 3, 2021, the Company

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

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 sheets with JPY1,830 (approximately $16) and JPY1,940 (approximately $19) as

of December 31, 2021 and 2020, respectively.

The shares issued related to the early exercise of the above-mentioned stock options were

not considered outstanding during the years ended December 31, 2021 and 2020.

following summarized the Company’s stock option activity for the stock options issued in 2016 for the years ended December 31,

2021 and 2020:

of stock options

and unvested as of January 1, 2020

and unvested as of December 31, 2020

and unvested as of December 31, 2021

August 6, 2021, the Board of directors and stockholders of the Company approved a 2021 Equity Incentive Plan (the “2021

Plan”), under which 2,400,000 of common shares are authorized for issuance.

On December 25, 2021, the Company awarded options to

purchase 1,534,500 shares of common shares pursuant to the 2021 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 shares, with the expiration date on December 25,

exercisable upon issuance with a repurchase provision before the completion of the Company’s initial public offering, which serves

as a vesting condition.

All employees that were granted these stock options had early exercised their stock options in 2016 prior to

the vesting of the related stock options.

As of November 3, 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.

3, 2021, the Company redeemed 484,056 shares (equivalent to 324 shares of common shares of HeartCore Japan) from the CEO of the Company.

consideration received for the remaining early exercised options was 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.

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 stock-based compensation of $ 11,005 during the year ended December 31, 2022.

following table summarizes the share option activity and related information for the year ended December 31, 2021:

average exercise price

average remaining contractual term

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 years ended December 31,

2022 and 2021:

SCHEDULE OF UNVESTED STOCK OPTION

Stock Options

Issued and unvested as of January 1, 2021

Issued and unvested balance

Issued and unvested as of December 31, 2021

Issued and unvested balance

Vested and exercised

Exercisable of December 31, 2022

Exercisable balance

August 6, 2021, the Board of directors and stockholders of the Company approved a 2021 Equity Incentive Plan (the “2021 Plan”),

under which 2,400,000 of common shares are authorized for issuance.

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 .

August 2, 2022, the Company awarded options to purchase 2,000 shares of common shares at an exercise price of $ 2.94 per share to an employee

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 August 2, 2032 .

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,

As of December 31, 2022, none of the options were exercised.

following table summarizes the share options activity and related information for the years ended December 31, 2022 and 2021:

SCHEDULE OF STOCK OPTION ACTIVITY

As of January 1, 2021

As of December 31, 2021

and exercisable at December 31, 2021

fair value of the options is estimated as of the date of grant at December 25, 2021 using the binomial model with the

assistance of an independent valuation specialist.

The following table summarizes the inputs to the model used to estimate the fair

value of the options for the year ended December 31, 2021:

For the year ended

December 31, 2021

As of December 31, 2022

Vested and exercisable as of December 31, 2022

granted before January 1, 2022 were valued using the binomial model with the assistance of an independent valuation specialist.

calculated the fair value of options granted in the year ended December 31, 2022 using the Black-Scholes model.

The following table summarizes

the inputs to the models used to estimate the fair value of the options granted during the years ended December 31, 2022 and 2021.

SCHEDULE OF ESTIMATE FAIR VALUE ASSUMPTIONS OF STOCK OPTIONS

For the Years Ended

Expected volatility

Risk-free interest rate

2.82 % - 2.97 %

Dividend yield

Exercise term

SHAREHOLDERS’

4 - 6.25 years

Company recognized stock-based compensation related to options of $ 1,097,130 and $ 18,787 during the years ended December 31, 2022 and

2021, respectively.

The outstanding unamortized stock-based compensation related to options was $ 986,899 (which will be recognized through

August 2026) as of December 31, 2022.

Stock Units (“RSUs”)

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

The RSUs 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.

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

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

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

following table summarizes the RSUs activity for the year ended December 31, 2022:

SCHEDULE OF RESTRICTED STOCK UNITS

Number of RSUs

Weighted Average

Grant Date Fair

Value per Share

Unvested as of January 1, 2022

Unvested as of December 31, 2022

Company recognized RSU-related stock-based compensation of $ 422,613 and nil during the years ended December 31, 2022 and 2021, respectively.

The outstanding unamortized stock-based compensation related to RSUs was $ 227,195 (which will be recognized through February 2026) as

of December 31, 2022.

13 – SHAREHOLDERS’ EQUITY (DEFICIT)

Company was authorized to issue 200,000,000 shares of common shares, par value of $ 0.0001 per share, and 20,000,000 shares of preferred

shares, par value of $ 0.0001 per share.

June 17, 2020, the Company issued 1,112 shares of common shares of HeartCore Japan (an equivalent of 1,661,889 shares of common shares

of HeartCore USA) to a third party company for cash of JPY100,080,000 (approximately $932,000).

November 3, 2021, the Company redeemed 484,056 shares issued of HeartCore Enterprises, Inc.

4 unchanged sentences

the period from October 27, 2021 through December 31, 2021, the Company issued 304,000 shares of common shares at a purchase price of

$2.50 per share for an aggregate of $760,000 of proceeds in a private placement.

December 25, 2021, the Company awarded options to purchase 1,534,500 shares of common shares pursuant to the 2021 Plan at an exercise

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

The Company recognized stock-based

compensation of $18,787 during the year ended December 31, 2021 (also see NOTE 11).

$ 2.50 per share for an aggregate net proceeds of $ 677,945 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 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

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

costs were 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 12).

May 15, 2022, 83,333 shares of restricted shares were issued to a marketing company as compensation for 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.

has no set termination date and may be suspended or discontinued at any time.

the 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.

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 retired.

of December 31, 2022 and 2021, there were 17,649,886 and 15,819,943 shares, respectively, of common shares issued, 17,649,886 and 15,546,454

4 unchanged sentences

14 - 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, equal to 2.65% of the total shares of HeartCore Japan, for JPY50,040,000 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 JPY50,040,000 (approximately $448,000) in the consolidated balance sheet as of December

The Company has completed the share purchase in February 2022.

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.

common shares are determined by applying the treasury stock method to the assumed conversion of share repurchase liability to common

shares related to the early exercised stock options (also see NOTE 11).

computation of basic and diluted earnings (loss) per share for the years ended December 31, 2021 and 2020 is as follows:

the Years Ended

(loss) per share –

of net income (loss) attributable to HeartCore Enterprises, Inc.’s common shareholders used in calculating earnings (loss)

per common share-basic

(loss) attributable to common shareholders

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

used for earnings (loss) per share

Earnings (loss) per share-

the Years Ended

(loss) per share –

of net income (loss) attributable to HeartCore Enterprises, Inc.’s common shareholders used in calculating earnings (loss)

per common share- diluted

Net income (loss) attributable

to common shareholders

Weighted average number of

common shares outstanding used in calculating diluted earnings (loss) per share

of share repurchase liability to common shares *

used for earnings (loss) per share

Earnings (loss) per share-

The share repurchase liability is related to the early exercised stock options that are issued and unvested as of December 31, 2020,

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 year ended December 31, 2021, the weighted average number of shares outstanding is the same for basic and diluted loss

per share calculations, as the inclusion of common shares equivalents of 273,489 would have an anti-dilutive effect.

15 - SUBSEQUENT EVENTS

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 of $240,000 of proceeds in a private placement.

On February 9, 2022, the Company entered into

executive employment agreements with five executives and issued 85,820 shares of restricted stock pursuant to the 2021 Plan.

will vest 25% a year, on each annual anniversary of the date of the employment agreement.

February 14, 2022, the Company closed 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 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.

February 24, 2022, the Company purchased 278 shares of HeartCore Japan from Dentsu Digital for JPY50,040,000 (approximately $435,500

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.

On March 31, 2022, the Company obtained a three-year term loan in the amount of JPY30,000,000 (approximately $261,000) from Higashi-Nippon Bank, with a fixed interest rate of 1.400% per annum.

15 – 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.

Common share equivalents are not included in the calculation of diluted loss per share if their effect would

be anti-dilutive.

computation of basic and diluted loss per share for the years ended December 31, 2022 and 2021 is as follows:

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

For the Years Ended

Loss per share – basic and diluted

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

$ ( 6,677,466 )

$ ( 338,156 )

Net loss attributable to common shareholders

( 6,677,466 )

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

Denominator used for loss per share

Loss per share – basic and diluted

the years ended December 31, 2022 and 2021, the weighted average shares outstanding are the same for basic and diluted loss per share

calculations, as the inclusion of common share equivalents would have an anti-dilutive effect.

16 - SUBSEQUENT EVENTS

6, 2022, the Company entered into a share exchange and purchase agreement to acquire 51 % of the outstanding shares of Sigmaways, a company

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

1, 2023, the Company closed the acquisition for a total consideration of $ 4,150,000 , including $ 1,000,000 in cash and 2,500,000 shares

of common shares of the Company with fair value of $ 3,150,000 at the closing date.

As a result, Sigmaways became a subsidiary of the Company.

Due to the limited

time since the acquisition date and the effort required to conform the financial statements to the Company’s practices and policies, the

initial accounting for the business combination is incomplete at the time of this filing.

As a result, the Company is unable to provide

the amounts recognized as of the acquisition date for the major classes of assets acquired and liabilities assumed , intangible assets and goodwill, if any.

This information will be included in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023.

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 5 0% on the grant date and February 1, 2024, respectively .

March 12, 2023, Signature Bank was closed by its state chartering authority, the New York State Department of Financial Services.

the same date the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver and transferred all customer deposits

and substantially all of the assets of Signature Bank to Signature Bridge Bank, N.A., a full-service bank that is being operated by the

The Company automatically became a customer of Signature Bridge Bank, N.A.

as part of this action.

The Company held approximately

$ 4.7 million cash deposits at Signature Bridge Bank, N.A.

as of March 12, 2023.

Normal banking activities resumed on Monday, March 13,

March 22, 2023, the Company granted 671,350 shares of common shares to the employees and service providers of Sigmaways.

Certificate of Incorporation of HeartCore Enterprises, Inc.

(incorporated by reference to Exhibit 3.1 to the registrant’s Registration Statement on Form S-1 (File No.

333-261984) filed with the SEC on January 3, 2022).

Bylaws of HeartCore Enterprises, Inc.

(incorporated by reference to Exhibit 3.2 to the registrant’s Registration Statement on Form S-1 (File No.

333-261984) filed with the SEC on January 3, 2022).

to Share Exchange Agreement dated July 15, 2021, among HeartCore Co., Sumitaka.

Yamamoto, and Information Services International-Dentsu

(incorporated by reference to Exhibit 10.1 to the registrant’s Registration Statement on Form S-1 (File No.

Memorandum to Share Exchange Agreement dated July 15, 2021, among HeartCore Co., Sumitaka.

Yamamoto, and Information Services International-Dentsu Ltd.

(incorporated by reference to Exhibit 10.1 to the registrant’s Registration Statement on Form S-1 (File No.

333-261984) filed with the SEC on January 3, 2022).

Share Exchange Agreement dated July 16, 2021, among HeartCore Enterprises, Inc., all shareholders of HeartCore Co., Ltd., and Sumitaka Yamamoto as representative of the shareholders of HeartCore Co., Ltd.

(incorporated by reference to Exhibit 10.2 to the registrant’s Registration Statement on Form S-1 (File No.

333-261984) filed with the SEC on January 3, 2022).

Stock Purchase Agreement dated August 10, 2021, between HeartCore Enterprises, Inc.

and Dentsu Digital Investment Limited (incorporated by reference to Exhibit 10.3 to the registrant’s Registration Statement on Form S-1 (File No.

333-261984) filed with the SEC on January 3, 2022).

Enterprises, Inc.

2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to the registrant’s Registration Statement

on Form S-1 (File No.

HeartCore Enterprises, Inc.

2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to the registrant’s Registration Statement on Form S-1 (File No.

333-261984) filed with the SEC on January 3, 2022).

Employment Agreement, dated February 9, 2022, between the Company and Sumitaka Yamamoto (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on February 14, 2022).

Employment Agreement, dated February 9, 2022, between the Company and Kimio Hosaka (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on February 14, 2022).).

Employment Agreement, dated February 9, 2022, between the Company and Keisuke Kuno (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the SEC on February 14, 2022).

Employment Agreement, dated February 9, 2022, between the Company and Qizhi Gao (incorporated by reference to Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed with the SEC on February 14, 2022).

Employment Agreement, dated February 9, 2022, between the Company and Hidekazu Miyata (incorporated by reference to Exhibit 10.5 to the registrant’s Current Report on Form 8-K filed with the SEC on February 14, 2022).

Form of Independent Director Agreement between HeartCore Enterprises, Inc.

and each independent director (incorporated by reference to Exhibit 10.10 to the registrant’s Registration Statement on Form S-1 (File No.

333-261984) filed with the SEC on January 3, 2022).

Form of Indemnification Agreement between HeartCore Enterprises, Inc.

and each independent director (incorporated by reference to Exhibit 10.11 to the registrant’s Registration Statement on Form S-1 (File No.

333-261984) filed with the SEC on January 3, 2022).

of Subsidiary

Consulting and Services Agreement, dated as of March 31, 2022, by and between the registrant and Moveaction Co., Ltd.

(incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on April 6, 2022).

Common Stock Purchase Warrant issued by Moveaction Co., Ltd.

to the registrant.

(incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on April 6, 2022).

Consulting and Services Agreement, dated as of April 13, 2022, by and between the registrant and A.L.I.

Technologies Inc.

(incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on May 11, 2022).

Common Stock Purchase Warrant issued by A.L.I.

Technologies Inc.

to the registrant (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on May 11, 2022).

Consulting and Services Agreement, dated as of May 13, 2022, by and between the registrant and SYLA Holdings Co.

(incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on May 25, 2022).

Common Stock Purchase Warrant issued by SYLA Holdings Co.

to the registrant (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on May 25, 2022).

Amendment No.

1 to Consulting and Services Agreement, dated as of August 17, 2022, by and between the registrant and Syla Technologies Co.

(incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on August 18, 2022).

Common Stock Purchase Warrant issued on August 17, 2022 by Syla Technologies Co.

to the registrant (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on August 18, 2022).

Share Exchange and Purchase Agreement, dated as of September 6, 2022, by and among the registrant, Sigmaways, Inc.

and Prakash Sadasivam (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on September 8, 2022).

Consulting and Services Agreement, dated as of October 20, 2022, by and between HeartCore Enterprises, Inc.

and Metros Development Co., Ltd.

(incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on October 26, 2022).

Common Stock Purchase Warrant, issued on October 20, 2022, by Metros Development Co., Ltd.

in favor of HeartCore Enterprises, Inc.

(incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on October 26, 2022).

Consulting and Services Agreement, dated as of October 20, 2022, by and between HeartCore Inc.

and Metros Development Co., Ltd.

(incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the SEC on October 26, 2022).

Common Stock Purchase Warrant, issued on October 20, 2022, by Metros Development Co., Ltd.

in favor of HeartCore Inc.

(incorporated by reference to Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed with the SEC on October 26, 2022).

Termination of Consulting and Services Agreement and Warrant, dated as of October 26, 2022, by and between HeartCore Inc.

and Metros Development Co., Ltd.

(incorporated by reference to Exhibit 10.5 to the registrant’s Current Report on Form 8-K filed with the SEC on October 26, 2022).

Amendment No.

1 to Consulting and Services Agreement, dated as of October 26, 2022, by and between HeartCore Enterprises, Inc.

and Metros Development Co., Ltd.

(incorporated by reference to Exhibit 10.6 to the registrant’s Current Report on Form 8-K filed with the SEC on October 26, 2022).

Common Stock Purchase Warrant, issued on October 26, 2022, by Metros Development Co., Ltd.

in favor of HeartCore Enterprises, Inc.

(incorporated by reference to Exhibit 10.7 to the registrant’s Current Report on Form 8-K filed with the SEC on October 26, 2022).

Amendment No.

1 to Executive Employment Agreement, dated as of October 28, 2022, by and between the registrant and Sumitaka Yamamoto (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on November 4, 2022).

9th Stock Acquisition Rights Allotment Agreement, dated as of November 9, 2022, by and between the registrant and SYLA Technologies Co., Ltd.

(incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on November 23, 2022).

Amendment No.

2 to Consulting and Services Agreement, dated as of November 15, 2022, by and between the registrant and SYLA Technologies Co., Ltd.

(incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on November 23, 2022).

Consulting and Services Agreement, dated as of November 18, 2022, by and between the registrant and SBC Medical Group, Inc.

(incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the SEC on November 23, 2022).

Common Stock Purchase Warrant, issued on November 18, 2022, by SBC Medical Group, Inc.

in favor of the registrant (incorporated by reference to Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed with the SEC on November 23, 2022).

Consulting and Services Agreement, dated as of January 11, 2023, by and between the registrant and kk.BloomZ (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on January 17, 2023).

Common Stock Purchase Warrant, issued on January 11, 2023, by kk.BloomZ in favor of the registrant (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on January 17, 2023).

Amendment No.

2 to Share Exchange and Purchase Agreement, dated as of February 1, 2023, by and among the registrant, Sigmaways, Inc.

and Prakash Sadasivam (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on February 6, 2023).

Common Stock Purchase Warrant, dated February 1, 2023 (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on February 6, 2023).

Employment Agreement, dated February 1, 2023, by and between the registrant and Prakash Sadasivam (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the SEC on February 6, 2023).

Amended and Restated Common Stock Purchase Warrant, dated February 6, 2023 (incorporated by reference to Exhibit 10.4 to the registrant’s Current Report on Form 8-K/A (Amendment No.

1) filed with the SEC on February 9, 2023).

Addendum to Share Exchange and Purchase Agreement, dated as of February 8, 2023, by and among the registrant, Sigmaways, Inc.

and Prakash Sadasivam.

(incorporated by reference to Exhibit 10.5 to the registrant’s Current Report on Form 8-K/A (Amendment No.

1) filed with the SEC on February 10, 2023)

Consulting and Services Agreement, dated as of March 13, 2023, by and between the registrant and Libera Gaming Operations, Inc.

(incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on March 16, 2023).

Common Stock Purchase Warrant, dated March 13, 2023, issued by Libera Gaming Operations, Inc.

to the registrant (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on March 16, 2023).

Consulting and Services Agreement, dated as of March 13, 2023, by and between the registrant and ICheck Co., Ltd.

(incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the SEC on March 16, 2023).

Common Stock Purchase Warrant, dated March 13, 2023, issued by ICheck Co., Ltd.

to the registrant (incorporated by reference to Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed with the SEC on March 16, 2023).

List of Subsidiaries

Consent of independent registered public accounting firm.

Power of Attorney (included on the signature page)

3 unchanged sentences

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

XBRL INSTANCE DOCUMENT

XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT

XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT

XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT

XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT

XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT

Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

INLINE XBRL INSTANCE DOCUMENT

INLINE XBRL TAXONOMY EXTENSION

SCHEMA DOCUMENT

INLINE XBRL TAXONOMY EXTENSION

CALCULATION LINKBASE DOCUMENT

INLINE XBRL TAXONOMY EXTENSION

DEFINITION LINKBASE DOCUMENT

INLINE XBRL TAXONOMY EXTENSION

LABEL LINKBASE DOCUMENT

INLINE XBRL TAXONOMY EXTENSION

PRESENTATION LINKBASE DOCUMENT

Cover Page Interactive

Data File (formatted as Inline XBRL and contained in Exhibit 101).

Filed herewith

2 unchanged sentences

on its behalf by the undersigned, thereunto duly authorized.

ENTERPRISES, INC.

HEARTCORE ENTERPRISES, INC.

March 31, 2023

Sumitaka Yamamoto

Executive Officer and President

Chief Executive Officer and President

person whose signature appears below hereby appoints Sumitaka Yamamoto and Qizhi Gao, and each of them, as attorneys-in-fact with full

7 unchanged sentences

Sumitaka Yamamoto

of Board, Chief Executive Officer and President

Executive Officer)

Chairman of Board, Chief

Executive Officer and President

March 31, 2023

Sumitaka Yamamoto

(Principal Executive

Financial Officer (Principal Financial Officer and Principal Accounting Officer)

March 31, 2023

/s/ Ferdinand

March 31, 2023

Ferdinand Groenewald

/s/ Yoshitomo

March 31, 2023

Yoshitomo Yamano

March 31, 2023

Takeshi Omoto

March 31, 2023

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 9A. Controls and Procedures