What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-22 compared with 2022-11-14 · 658 added, 443 removed, 106 unchanged (91% of the section changed)

24 unchanged sentences

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

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

statement is based.

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

on which any statement is based.

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

11 unchanged sentences

that supports the narrow needs of large enterprise customers.

On September 6, 2022, HeartCore Enterprises, Inc.

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

the outstanding shares of Sigmaways, a company incorporated under the laws of the State of California and is engaged in the business of

developing and sales of software in the United States.

The acquisition closed on February 1, 2023.

During 2022, we started

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

22, 2023, we have entered into consulting agreements with ten companies to assist them in their IPO process, whereby we are entitled

to receive from each company a consulting fee ranging from $350,000 to $900,000 and warrants or Japanese acquisition rights to purchase

1% to 4% of the fully-diluted share capital of such companies that is exercisable on certain dates at an exercise price of $0.01 per

The revenue from the GO IPO business helped to offset the decline in sales in the CX and DX divisions.

In the first quarter of

2023, we formed HeartCore Financial, Inc.

and HeartCore Capital Advisors, Inc.

as a part of our Go IPO consulting business.

have made significant investments in our sales and marketing efforts globally.

As of September 30, 2022, our sales and marketing organization

As of March 31, 2023, our sales and marketing organization

was comprised of 14 employees, including our field sales organization, which maintains a physical sales presence in the Japanese software

1 unchanged sentence

revenue and customer base.

As of September 30, 2022, our combined business units (customer experience management business unit and digital

transformation business unit) had a total of 889 customers in Japan .

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

We conduct business activities principally through our wholly-owned subsidiary,

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

Sumitaka Yamamoto, our

CEO, in 2009.

We acquired 97.5% of the equity interest of HeartCore Co in July 2021 and acquired the remaining interest in February 2022.

HeartCore Co started out with helping companies effectively managing content with its powerful content management system.

HeartCore Co has expanded offerings to help companies manage all forms of business processes .

acquisition of HeartCore Co in July 2021 was accounted for as a recapitalization among entities under common control since the same controlling

shareholders controlled all these 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

first period presented in the accompanying consolidated financial statements .

1 to SYLA Consulting and Services Agreement

previously disclosed in the Current Report on Form 8-K filed on May 25, 2022 with the SEC, on May 13, 2022, the Company entered into

a Consulting and Services Agreement (the “SYLA Consulting Agreement”) by and between the Company and Syla

Technologies Co., Ltd.

f/k/a SYLA Holdings Co.

(“SYLA”), pursuant to which the Company agreed to provide SYLA

certain services.

August 17, 2022, the Company and SYLA entered into Amendment No.

1 to the SYLA Consulting Agreement (“Amendment No.

In Amendment No.

1, the parties acknowledged and agreed that pursuant to the terms of the SYLA Consulting Agreement, SYLA agreed to

pay to the Company, among other things, a cash “services fee” in the amount of $500,000, to be paid at certain times,

including $150,000 on August 13, 2022 (the “Second Payment”).

As of March 31, 2023, our combined business units (customer experience management business unit and digital

transformation business unit) had 916 total customers in Japan.

We were incorporated in the State of Delaware on May

We conduct business activities principally through our majority-owned subsidiary, HeartCore Co., Ltd., a Japanese corporation

(“HeartCore Co.”), which was established in Japan by Mr.

Sumitaka Yamamoto, our Chairman of the Board, CEO, President and

major shareholder, in 2009 and acquired by us in July 2021.

HeartCore Co.

started out helping companies effectively managing content with

its powerful content management system.

Since then, HeartCore Co.

has expanded offerings to help companies manage all forms of business

acquisition of HeartCore Co.

was accounted for as a recapitalization among entities under common control since the same controlling shareholders

controlled all these 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 first period presented

in the accompanying consolidated financial statements.

Consulting Agreement

January 11, 2023 (the “BloomZ Effective Date”), the Company entered into a Consulting and Services Agreement (the “BloomZ

Consulting Agreement”) by and between the Company and kk.BloomZ, a Japanese corporation (“BloomZ”).

Pursuant to the

terms of the BloomZ Consulting Agreement, the Company agreed to provide BloomZ certain services, including the following (collectively,

the “BloomZ Services”):

Assistance with the selection and negotiation of terms for a law firm, underwriter and auditing firm for BloomZ;

Assisting in the preparation of documentation for internal controls required for an initial public offering of de-SPAC or other Fundamental

Transaction (as defined in the BloomZ Consulting Agreement) by BloomZ;

Providing support services to remove problematic accounting accounts upon listing;

Translation of requested documents into English;

Attend and, if requested by BloomZ, lead meetings with BloomZ’s management and employees;

Provide BloomZ with support services related to BloomZ’s NASDAQ listing;

Conversion of accounting data from Japanese standards to U.S.

Services to remove problematic accounting accounts upon listing;

Support for the BloomZ’s negotiations with the audit firm;

Assist in the preparation of S-1 or F-1 filings;

Creation of English web page;

Preparing an investor presentation/deck and executive summary of BloomZ’s operations.

providing the BloomZ Services, the Company will not render legal advice or perform accounting services, and will not act as an investment

advisor or broker/dealer.

Pursuant to the terms of the BloomZ Consulting Agreement, the parties agreed that the Company will not provide

the following services, among others:

negotiation of the sale of BloomZ’s securities;

participation in discussions between BloomZ

and potential investors;

assisting in structuring any transactions involving the sale of BloomZ’s securities;

pre-screening of

potential investors;

due diligence activities;

nor providing advice relating to valuation of or financial advisability of any investments

to the terms of the BloomZ Consulting Agreement, BloomZ agreed to compensate the Company as follows in return for the provision of the

BloomZ Services during the eight-month term:

$500,000, to be paid as follows:

(i) $200,000 on the BloomZ Effective Date;

(ii) $150,000 on the three-month anniversary of the BloomZ

Effective Date;

and (iii) $150,000 on the six-month anniversary of the BloomZ Effective Date;

Issuance by BloomZ to the Company of a warrant (the “BloomZ Warrant”), deemed fully earned and vested as of the BloomZ Effective

Date, to acquire a number of shares of capital stock of BloomZ, to initially be equal to 4% of the fully diluted share capital of BloomZ

as of the BloomZ Effective Date, subject to adjustment as set forth in the BloomZ Consulting Agreement.

any services performed by the Company beyond the BloomZ Term (as hereinafter defined), BloomZ will compensate the Company for BloomZ

Services at the rate of $150 per hour, based on the hours spent by personnel of the Company.

term of the BloomZ Consulting Agreement will continue until eight months after the Effective Date, unless sooner terminated in accordance

with the terms of the BloomZ Consulting Agreement (the “BloomZ Term”).

The BloomZ Consulting Agreement may be terminated

at any time by either party upon notice to the other party.

provided in the BloomZ Consulting Agreement, on the BloomZ Effective Date, BloomZ issued the BloomZ Warrant to the Company.

to the terms of the BloomZ Warrant, the Company may, at any time on or after the date (the “BloomZ IPO Date”) that BloomZ

completes its first initial public offering of stock in the U.S.

resulting in any class of BloomZ’s stock being listed for trading

on any tier of the Nasdaq Stock Market, the New York Stock Exchange or the NYSE American, or BloomZ consummates a merger or other transaction

with a special purpose acquisition company (“SPAC”) wherein BloomZ becomes a subsidiary of the SPAC, or BloomZ undertakes

any other Fundamental Transaction (the “IPO”) and on or prior to the close of business on the tenth anniversary of the BloomZ

IPO Date, exercise the BloomZ Warrant to purchase 4% of the fully diluted share capital of BloomZ as of the BloomZ IPO Date for an exercise

price per share of $0.01, subject to adjustment as provided in the BloomZ Warrant.

The number of shares for which the BloomZ Warrant

will be exercisable will be automatically adjusted on the IPO Date to be 4% of the fully diluted number and class of shares of capital

stock of BloomZ as of the BloomZ IPO Date that are listed for trading.

The BloomZ Warrant contains a 9.99% equity blocker.

Employment Agreements

previously disclosed, the Company entered into an Executive Employment Agreement (each, an “Employment Agreement” and collectively,

the “Employment Agreements”), dated as of February 9, 2022, by and between the Company and each of Qizhi Gao, the Company’s

Chief Financial Officer;

Kimio Hosaka, the Company’s Chief Operating Officer and a member of the Company’s Board of Directors;

Keisuke Kuno, the Company’s CX Division Vice President;

and Hidekazu Miyata, the Company’s Chief Technical Officer.

10, 2023, the Company entered into Amendment No.

1 to each of the Employment Agreements (each, an “Amendment” and collectively,

the “Amendments”).

Pursuant to the terms of each of the Amendments, the executives’ annual base salaries were increased

as follows, effective January 1, 2023:

Hidekazu Miyata

as set forth in each Amendment, each of the Employment Agreements remained in full force and effect.

2 to Sigmaways Agreement

previously disclosed, on September 6, 2022, the Company entered into that certain Share Exchange and Purchase Agreement (the

“Sigmaways Agreement”), dated as of September 6, 2022, as thereafter amended, by and among the Company, Sigmaways, Inc.

(“Sigmaways”) and Prakash Sadasivam.

On February 1, 2023, the Company, Sigmaways and Mr.

Sadasivam entered into

Amendment No.

2 (“Amendment No.

2”) to the Sigmaways Agreement.

Pursuant to the terms of Amendment No.

1, the parties

agreed that in lieu of making the Second Payment, SYLA would issue to the Company a warrant to acquire 37,500 shares of SYLA’s

capital stock (the “New Warrant”).

Upon issuance of the New Warrant, the cash “services fee” will be deemed

reduced to $350,000, of which $200,000 was paid on May 13, 2022, and of which the remaining $150,000 will remain due and payable on

November 13, 2022.

August 17, 2022, SYLA issued the New Warrant to the Company.

Pursuant to the terms of the New Warrant, the Company may, at any time on

or after the date (the “IPO Date”) that SYLA completes its first initial public offering of stock in the United States resulting

in any class of SYLA’s stock being listed for trading on any tier of the Nasdaq Stock Market, the New York Stock Exchange or the

NYSE American (the “IPO”) and on or prior to the close of business on the tenth anniversary of the IPO Date, exercise the

New Warrant to purchase 37,500 shares of SYLA’s common stock for an exercise price per share of $0.01, subject to adjustment as

provided in the New Warrant.

The number of shares for which the New Warrant will be exercisable will be automatically adjusted on the

IPO Date to be 3% of the fully diluted number and class of shares of capital stock of SYLA as of the IPO Date that are listed for trading.

The New Warrant contains a 9.99% equity blocker.

Share Exchange and Purchase Agreement

September 6, 2022, the Company entered into a Share Exchange and Purchase Agreement (the “Sigmaways Agreement”), dated as

of September 6, 2022, by and among the Company, Sigmaways, Inc.

(“Sigmaways”) and Prakash Sadasivam (the “Seller”).

to the terms of the Sigmaways Agreement, the Company agreed to acquire from the Seller, and the Seller agreed to sell to the Company,

229,500 shares of stock of Sigmaways, representing 51% of Sigmaways’ outstanding shares (the “Acquisition”).

therefor, the Company agreed to (i) issue to the Seller 2,000,000 shares of the Company’s common stock;

(ii) pay to the Seller

cash consideration initially expected to be $1,000,000;

provided that the final number of shares of Company common stock and the final

cash consideration each will be jointly determined by the parties prior to the closing of the Acquisition (the “Closing”)

based on the valuation of Sigmaways as of the Closing;

and (iii) issue to the Seller a warrant to acquire 1,500,000 shares of the Company’s

common stock (the “Warrant”).

The per share exercise price of the Warrant will be the VWAP for the Company’s common

stock calculated as of the last trading day prior to the Closing date.

addition, at the Closing, the Company will acquire from Sigmaways additional shares of Sigmaways stock (the “Additional

Shares”) to be issued as newly issued shares, for a total investment of $2,000,000.

The parties will jointly determine and

agree to the following prior to Closing:

(i) the valuation of Sigmaways as of immediately prior to the Closing, and (ii) therefore,

the number of shares of Sigmaways stock which will constitute the Additional Shares.

Prior to Closing, Sigmaways will amend its articles of incorporation to increase the authorized number of

shares of Sigmaways stock to a number sufficient that the Additional Shares may be validly issued to the Company.

the Closing, two persons designated by the Company will be named to Sigmaways’ Board of Directors, and the sole other member of

the Sigmaways Board of Directors will be the Seller.

In addition, at the Closing, the Seller will be named to the Company’s Board

of Directors.

At the Closing, Sigmaways will enter into an employment agreement with the Seller and such other persons if agreed upon

by the parties.

Sigmaways Agreement contains certain covenants, representations and warranties customary for an agreement of this type.

the Closing is subject to the satisfaction or waiver of certain conditions, including, but not limited to, the following:

(i) the parties

shall have agreed, in each party’s sole discretion, on the valuation of Sigmaways as of the Closing, the resulting cash purchase

price and the number of Additional Shares to be acquired by the Company pursuant to the terms of the Sigmaways Agreement;

(ii) the Paycheck

Protection Program Loan received by Sigmaways shall have been forgiven.

Sigmaways Agreement may be terminated at any time prior to the Closing as follows:

● By mutual written

consent of all parties;

● By the Seller and

Sigmaways, acting jointly, or by the Company, if there shall be in effect a final non-appealable order, judgment, injunction or decree

entered by or with any governmental authority restraining, enjoining or otherwise prohibiting the consummation of the transactions that

are the subject of the Sigmaways Agreement;

● By the Company

if there shall have been a breach in any material respect of any representation, warranty, covenant or agreement on the part of Sigmaways

or the Seller and such breach has not been cured as set forth in the Sigmaways Agreement;

● By the Seller and

Sigmaways, acting jointly, if there shall have been a breach in any material respect of any representation, warranty, covenant or agreement

on the part of the Company and such breach has not been cured as set forth in the Sigmaways Agreement;

● By either the Seller

and Sigmaways, acting jointly, or by the Company, if the Closing has not occurred by December 31, 2022;

● By the Company

if, its sole discretion, at any time prior to the Closing, the Company determines that its due diligence review of Sigmaways is not satisfactory

to the Company.

As of the date of this filing, Sigmaways and the Company

were still undergoing the process of the share exchange transaction.

The transaction has not been closed yet.

Consulting and Services Agreement

October 20, 2022 (the “Effective Date”), the Company entered into a Consulting and Services Agreement (the “Metros

Consulting Agreement”) by and between the Company and Metros Development Co., Ltd., a Japanese corporation (“Metros”).

Pursuant to the terms of the Metros Consulting Agreement, the Company agreed to provide Metros certain services, including the following

(collectively, the “Company Services”):

(i) Assistance with

the selection and negotiation of terms for a law firm, underwriter and auditing firm for Metros;

(ii) Assisting in the

preparation of documentation for internal controls required for an initial public offering or de-SPAC transaction or other Fundamental

Transaction (as defined below) by Metros;

(iii) Attend and, if

requested by Metros, lead meetings with Metros’ management and employees;

(iv) Provide Metros

with support services related to Metros’ NASDAQ listing;

(v) Assist in the preparation

of S-1 or F-1 filings;

(vi) Preparing an investor

presentation/deck and executive summary of Metros’ business and operations.

providing the Company Services, the Company will not render legal advice or perform accounting services, and will not act as an investment

2, among other

things, the Company agreed, in exchange for the Sigmaways shares, to (i) issue to Mr.

Sadasivam 2,000,000 shares of the

Company’s common stock, (ii) pay to Mr.

Sadasivam $1,000,000 (the “Cash Purchase Price”);

and (iii) issue to Mr.

Sadasivam a common stock purchase warrant to acquire 1,900,000 shares of the Company’s common stock (the “Sigmaways

In addition, the Company agreed that following closing, it would deposit $2,000,000 into a dedicated account, which

amount will be used to expand Sigmaways’ business.

The Sigmaways Warrant issued

pursuant to the Sigmaways Agreement was exercisable until February 12, 2025, at an exercise price of $1.17 per share, subject to adjustment

as set forth in the Sigmaways Warrant.

The Sigmaways Warrant contained a 9.99% equity blocker.

and Restated Warrant

February 6, 2023, subsequent to the closing of the Acquisition, the parties to the Sigmaways Agreement determined that there was an error

in the Sigmaways Agreement and in the Sigmaways Warrant issued pursuant to the terms of the Sigmaways Agreement.

As executed, among other things,

the Sigmaways Agreement incorrectly provided that the Company would issue to Mr.

Sadasivam a warrant to acquire 1,900,000 shares of the

Company’s common stock.

The parties had agreed, however, that the Company would issue to Mr.

Sadasivam a warrant to acquire 737,500

shares of the Company’s common stock.

in order to correct the error, on February 6, 2023, the Company issued to Mr.

Sadasivam an amended and restated warrant (the “Amended

and Restated Warrant”) that reflected the correct number of shares (737,500) underlying the warrant, and Mr.

Sadasivam agreed and

accepted the Amended and Restated Warrant.

The Amended and Restated Warrant is exercisable until February 12, 2025, at an exercise price

of $1.17 per share, subject to adjustment as set forth in the Amended and Restated Warrant.

The Amended and Restated Warrant contains

a 9.99% equity blocker.

February 8, 2023, the parties to the Sigmaways Agreement entered into an addendum to the Sigmaways Agreement pursuant to which the parties

acknowledged and agreed that (i) the references in the Sigmaways Agreement to a warrant to acquire 1,900,000 shares of common stock was

in error, and (ii) the warrant was intended to be for 737,500 shares of common stock.

Except as set forth in the Addendum, the terms

of the Sigmaways Agreement remain in full force and effect.

of Sigmaways Acquisition

February 1, 2023, the acquisition of 51% of Sigmaways’ outstanding shares by the Company (the “Acquisition”)

In exchange for the 229,500 shares of Sigmaways stock acquired by the Company from Mr.

Sadasivam, the Company (i) issued to

Sadasivam 2,500,000 shares of the Company’s common stock;

(ii) paid to Mr.

Sadasivam cash consideration of $1,000,000.

At the closing, two persons designated by the Company were named

to Sigmaways’ Board of Directors, and the sole other member of the Sigmaways Board of Directors is Mr.

the closing, there were 20,149,886 shares of the Company’s common stock outstanding.

February 1, 2023, Mr.

Sadasivam was appointed to serve as the Company’s Chief Strategy Officer.

In addition, on February 1, 2023,

the Board expanded the size of the Board from seven persons to eight persons, and named Mr.

Sadasivam to serve as a member of the Board,

to fill the vacancy created by the increase in the size of the Board.

February 1, 2023, the Company and Mr.

Sadasivam entered into an Employment Agreement (the “Sadasivam Employment Agreement”).

The Sadasivam Employment Agreement provides that he will serve as the Company’s Chief Strategy Officer, and that he will be paid

an annual salary of $96,000.

In addition, on each annual anniversary of the effective date of the Sadasivam Employment Agreement during

the term, the Company will issue to Mr.

Sadasivam a number of shares of common stock equal to (i) 30% of the base salary as of such date,

divided by (ii) the volume weighted average closing of the Company’s common stock for the five trading days immediately preceding

Sadasivam is also eligible to receive discretionary bonuses as determined by the Board.

Sadasivam Employment Agreement has an initial term of one year, provided that the term of the agreement will automatically be extended

for one or more additional terms of one year each unless either the Company or Mr.

Sadasivam 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).

The Sadasivam Employment Agreement provides that the employment with the Company shall be “at

will,” meaning that either Mr.

Sadasivam or the Company may terminate employment at any time and for any reason, subject to the

other provisions of the Sadasivam Employment Agreement.

Sadasivam Employment Agreement may be terminated by the Company, either with or without “Cause” (as defined in the Sadasivam

Employment Agreement), or by Mr.

Sadasivam, either with or without “Good Reason” (as defined in the Sadasivam Employment

the event that the Company terminates the term of the Sadasivam Employment Agreement or employment with Cause, or if Mr.

Sadasivam terminates

his Sadasivam Employment Agreement without Good Reason, then, subject to any other relevant agreements:

the Company will pay to Mr.

Sadasivam any unpaid base salary and benefits then owed or accrued, and any unreimbursed expenses;

any unvested portion of any equity granted to Mr.

Sadasivam under the Sadasivam Employment Agreement or any other agreements with the

Company will immediately be forfeited;

all of the parties’ rights and obligations under the Sadasivam Employment 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 Sadasivam

Employment Agreement.

the event that the Company terminates the term of the Sadasivam Employment Agreement or employment without Cause, or if Mr.

terminates the Sadasivam Employment Agreement with Good Reason, then, subject to any other relevant agreements:

the Company will pay to Mr.

Sadasivam any base salary, bonuses, and benefits then owed or accrued, and any unreimbursed expenses;

the Company will pay to Mr.

Sadasivam, in one lump sum, an amount equal to the base salary that would have been paid to Mr.

for the remainder of the initial term of the Sadasivam Employment Agreement (if the termination occurs during the initial term of the

Sadasivam Employment Agreement) or renewal term of the Sadasivam Employment Agreement (if the termination occurs during a renewal term

of the Sadasivam Employment Agreement);

any unvested portion of any equity granted to Mr.

Sadasivam under the Sadasivam Employment 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 Sadasivam Employment 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 Sadasivam

Employment Agreement.

the event of Mr.

Sadasivam’s death or total disability during the term of the Sadasivam Employment Agreement, the term of the applicable

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

In the event of such

termination, the Company’s sole obligations hereunder to Mr.

Sadasivam 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 target bonus for

such year and the portion of such year in which Mr.

Sadasivam was employed, and reimbursement of expenses pursuant to the terms hereon

through the effective date of termination, and any unvested portion of any equity grant will immediately be forfeited as of the termination

the event that the term of the Sadasivam Employment Agreement is not renewed by either party, any unvested portion of any equity granted

will immediately be forfeited as of the expiration of the term of the Sadasivam Employment Agreement without any further action of the

Sadasivam Employment Agreement contains customary representations and warranties.

Gaming Operations, Inc.

Consulting Agreement

March 13, 2023 (the “Libera Effective Date”), the Company entered into a Consulting and Services Agreement (the “Libera

Consulting Agreement”) by and between the Company and Libera Gaming Operations, Inc., a Japanese corporation (“Libera”).

Pursuant to the terms of the Libera Consulting Agreement, the Company agreed to provide Libera certain services, including the following

(collectively, the “Libera Services”):

Assistance with the selection and negotiation of terms for a law firm, underwriter and auditing firm for Libera;

Assisting in the preparation of documentation for internal controls required for an initial public offering of de-SPAC or other Libera Fundamental Transaction (as defined in the Libera Consulting Agreement) by Libera;

Providing support services to remove problematic accounting accounts upon listing;

Translation of requested documents into English;

Attend and, if requested by Libera, lead meetings with Libera’s management and employees;

Provide Libera with support services related to Libera’s NASDAQ listing;

Conversion of accounting data from Japanese standards to U.S.

Services to remove problematic accounting accounts upon listing;

Support for Libera’s negotiations with the audit firm;

Assist in the preparation of S-1 or F-1 filings;

Creation of English web page;

Preparing an investor presentation/deck and executive summary of Libera’s operations.

providing the Libera Services, the Company will not render legal advice or perform accounting services, and will not act as an investment

advisor or broker/dealer.

Pursuant to the terms of the Metros Consulting Agreement, the parties agreed that the Company will

not provide the following services, among others:

negotiation of the sale of Metros’ securities;

participation in discussions between

Metros and potential investors;

assisting in structuring any transactions involving the sale of Metros’ securities;

pre-screening

of potential investors;

discuss details of the nature of the securities sold or whether recommendations were made concerning the sale

of securities;

Pursuant to the terms of the Libera Consulting Agreement, the parties agreed that the Company will not provide

the following services, among others:

negotiation of the sale of Libera’s securities;

participation in discussions between Libera

and potential investors;

assisting in structuring any transactions involving the sale of Libera’s securities;

pre-screening of

potential investors;

due diligence activities;

nor providing advice relating to valuation of or financial advisability of any investments in

to the terms of the Metros Consulting Agreement, Metros agreed to compensate the Company as follows in return for the provision

of the Company Services during the nine-month term (the “Term”):

(a) $300,000, to be

paid as follows:

(i) $100,000 on the Effective Date;

(ii) $100,000 on the three-month anniversary of the Effective Date;

and (iii) $100,000

on the six-month anniversary of the Effective Date;

(b) Issuance by Metros

to the Company of a warrant (the “Company Warrant”), deemed fully earned and vested as of the Effective Date, to acquire

a number of shares of capital stock of Metros, to initially be equal to 2% of the fully diluted share capital of Metros as of the Effective

Date (980 shares), subject to adjustment as set forth in the Company Warrant.

any services performed by the Company beyond the Term, Metros will compensate the Company for such Company Services at the rate of $150

per hour, based on the hours spent by personnel of the Company.

Term of the Metros Consulting Agreement will expire unless renewed upon mutual written agreement of the parties.

provided in the Metros Consulting Agreement, on the Effective Date, Metros issued the Company Warrant to the Company.

to the terms of the Company Warrant, the Company may, at any time on or after the date (the “Metros IPO Date”)

that either (i) Metros completes its first initial public offering of stock in the United States resulting in any class of Metros’

stock being listed for trading on any tier of the Nasdaq Stock Market, the New York Stock Exchange or the NYSE American (the “Metros

IPO”), or (ii) Metros undertakes any other Fundamental Transaction, and on or prior to the close of business on the

tenth anniversary of the Metros IPO Date, exercise the Company Warrant to purchase 980 shares of capital stock of Metros

for an exercise price per share of $0.01, subject to adjustment as provided in the Company Warrant.

The Company Warrant contains a 9.99%

equity blocker.

1 to Metros Consulting and Services Agreement

October 26, 2022, the Company entered into Amendment No.

1 to Consulting and Services Agreement by and between the Company and Metros

(“Metros Amendment No.

Pursuant to the terms of Metros Amendment No.

1, the Company and Metros agreed to amend

the Metros Consulting Agreement such that Metros agreed to compensate the Company as follows in return for the provision

of the Company Services during the nine-month Term:

(a) $500,000, to be

paid as follows:

(i) $200,000 on the Effective Date;

(ii) $150,000 on the three-month anniversary of the Effective Date;

and (iii) $150,000

on the six-month anniversary of the Effective Date;

(b) Issuance by Metros

to the Company of a warrant (the “New Company Warrant”), deemed fully earned and vested as of the Effective Date, to acquire

a number of shares of capital stock of Metros, to initially be equal to 3% of the fully diluted share capital of Metros as of the Effective

Date (1,440 shares), subject to adjustment as set forth in the New Company Warrant.

addition, pursuant to the terms of Metros Amendment No.

1, the Company Warrant was terminated as of October 26, 2022.

as set forth in Metros Amendment No.

1, the Metros Consulting Agreement remains in full force and effect.

provided in Metros Amendment No.

1, on October 26, 2022, Metros issued the New Company Warrant to the Company.

the terms of the New Company Warrant, the Company may, at any time on or after the Metros IPO Date, and on or prior to the

close of business on the tenth anniversary of the Metros IPO Date, exercise the New Company Warrant to purchase 1,440 shares

of capital stock of Metros for an exercise price per share of $0.01, subject to adjustment as provided in the New Company Warrant.

New Company Warrant contains a 9.99% equity blocker.

Repurchase Program

Company’s Board of Directors (the “Board”) authorized a share repurchase program, pursuant to which the Company may

repurchase up to $3.5 million of its outstanding shares of common stock (the “Repurchase Program”).

The Board authorized

the Company to purchase its common stock from time to time on a discretionary basis through open market purchases, privately negotiated

transactions or other means, including trading plans intended to qualify under Rule 10b5-1 promulgated under the Securities Exchange

Act of 1934, as amended (the “Exchange Act”), in accordance with applicable federal securities laws and other applicable

legal requirements.

The Company funded these repurchases through existing cash balances.

Decisions regarding the amount and the timing

of purchases under the program were influenced by the Company’s cash on hand, cash flows from operations, general market conditions

and other factors.

HeartCore was not obligated to acquire any particular amount of its common stock.

This program had no set termination

date and could be suspended or discontinued by the Board at any time.

Repurchase Program was terminated on September 23, 2022.

The Company has repurchased an aggregate of 1,349,390 shares of its common stock

pursuant to the Repurchase Program.

the three months ended September 30, 2022 and 2021, we generated revenues of $1,872,476 and $3,470,510, respectively, and reported net

losses of $1,970,934 and net income of $191,349, respectively.

For the nine months ended September 30, 2022 and 2021, we generated revenues

of $6,818,774 and $8,446,011, respectively, and reported net losses of $5,253,026 and net income of $414,826, respectively, and cash

out flow used in operating activities of $4,206,370 and cash in flow provided by operating activities of $1,239,250, respectively.

noted in our unaudited consolidated financial statements, as of September 30, 2022, we had an accumulated deficit of $9,149,139.

nor providing advice relating to valuation of or financial advisability of any investments

to the terms of the Libera Consulting Agreement, Libera agreed to compensate the Company as follows in return for the provision of the

Libera Services during the eight-month term:

$600,000, to be paid as follows:

(i) $300,000 on the Libera Effective Date;

(ii) $150,000 on the three-month anniversary of the Libera

Effective Date;

and (iii) $150,000 on the date that Libera first files a Form S-1, Form F-1, Form S-4, Form F-4 or any similar or replacement

form with the SEC with respect to any transaction which is reasonably expected to result in the Libera Trigger Date (as defined in the

Libera Warrant);

Issuance by Libera to the Company of a warrant (the “Libera Warrant”), deemed fully earned and vested as of the Libera Effective

Date, to acquire a number of shares of capital stock of Libera, to initially be equal to 3% of the fully diluted share capital of Libera

as of the Libera Effective Date, subject to adjustment as set forth in the Libera Consulting Agreement and the Libera Warrant.

any services performed by the Company beyond the Libera Term (as hereinafter defined), Libera will compensate the Company for Libera

Services at the rate of $150 per hour, based on the hours spent by personnel of the Company.

term of the Libera Consulting Agreement will continue until eight months after the Libera Effective Date, unless sooner terminated in

accordance with the terms of the Libera Consulting Agreement (the “Libera Term”).

The Libera Consulting Agreement may be

terminated at any time by either party upon notice to the other party.

provided in the Libera Consulting Agreement, on the Libera Effective Date, Libera issued the Libera Warrant to the Company.

to the terms of the Libera Warrant, the Company may, at any time (i) on or after the earlier of the date that either (a) Libera completes

its first initial public offering of stock in the U.S.

resulting in any class of Libera’s stock being listed for trading on any

tier of Nasdaq, NYSE or the NYSE American;

(b) Libera consummates a merger or other transaction with a SPAC wherein Libera becomes a

subsidiary of the SPAC;

or (c) Libera undertakes any other Libera Fundamental Transaction (the “Libera Trigger Date”);

(ii) on or prior to the close of business on the tenth anniversary of the Libera Trigger Date, exercise the Libera Warrant to purchase

2,970 shares of Libera’s common stock, which represents 3% of Libera’s issued and outstanding common stock as of the Libera

Trigger Date, for an exercise price per share of $0.01, subject to adjustment as provided in the Libera Warrant.

The number of shares

for which the Libera Warrant will be exercisable will be automatically adjusted on the Libera Trigger Date to be 3% of the fully diluted

number and class of shares of capital stock of Libera as of the Libera Trigger Date, following completion of the transactions which caused

the Libera Trigger Date to be achieved.

The Libera Warrant contains a 9.99% equity blocker.

Consulting Agreement

March 13, 2023 (the “ICheck Effective Date”), the Company entered into a Consulting and Services Agreement (the “ICheck

Consulting Agreement”) by and between the Company and ICheck Co., Ltd., a Japanese corporation (“ICheck”).

to the terms of the ICheck Consulting Agreement, the Company agreed to provide ICheck certain services, including the following (collectively,

the “ICheck Services”):

Assistance with the selection and negotiation of terms for a law firm, underwriter and auditing firm for ICheck;

Assisting in the preparation of documentation for internal controls required for an initial public offering of de-SPAC or other ICheck Fundamental Transaction (as defined in the ICheck Consulting Agreement) by ICheck;

Providing support services to remove problematic accounting accounts upon listing;

Translation of requested documents into English;

Attend and, if requested by ICheck, lead meetings with ICheck’s management and employees;

Provide ICheck with support services related to ICheck’s NASDAQ listing;

Conversion of accounting data from Japanese standards to U.S.

Services to remove problematic accounting accounts upon listing;

Support for ICheck’s negotiations with the audit firm;

Assist in the preparation of S-1 or F-1 filings;

Creation of English web page;

Preparing an investor presentation/deck and executive summary of ICheck’s operations.

providing the ICheck Services, the Company will not render legal advice or perform accounting services, and will not act as an investment

advisor or broker/dealer.

Pursuant to the terms of the ICheck Consulting Agreement, the parties agreed that the Company will not provide

the following services, among others:

negotiation of the sale of ICheck’s securities;

participation in discussions between ICheck

and potential investors;

assisting in structuring any transactions involving the sale of ICheck’s securities;

pre-screening of

potential investors;

due diligence activities;

nor providing advice relating to valuation of or financial advisability of any investments

to the terms of the ICheck Consulting Agreement, ICheck agreed to compensate the Company as follows in return for the provision of the

ICheck Services during the nine-month term:

$600,000, to be paid as follows:

(i) $300,000 on the ICheck Effective Date;

(ii) $150,000 on the three-month anniversary of the ICheck

Effective Date;

and (iii) $150,000 on the date that ICheck first files a Form S-1, Form F-1, Form S-4, Form F-4 or any similar or replacement

form with the SEC with respect to any transaction which is reasonably expected to result in the ICheck Trigger Date (as defined in the

ICheck Warrant);

Issuance by ICheck to the Company of a warrant (the “ICheck Warrant”), deemed fully earned and vested as of the ICheck Effective

Date, to acquire a number of shares of capital stock of ICheck, to initially be equal to 3% of the fully diluted share capital of ICheck

as of the ICheck Effective Date, subject to adjustment as set forth in the ICheck Consulting Agreement and the ICheck Warrant.

any services performed by the Company beyond the ICheck Term (as hereinafter defined), ICheck will compensate the Company for ICheck

Services at the rate of $150 per hour, based on the hours spent by personnel of the Company.

term of the ICheck Consulting Agreement will continue until nine months after the ICheck Effective Date, unless sooner terminated in

accordance with the terms of the ICheck Consulting Agreement (the “ICheck Term”).

The ICheck Consulting Agreement may be

terminated at any time by either party upon notice to the other party.

provided in the ICheck Consulting Agreement, on the ICheck Effective Date, ICheck issued the ICheck Warrant to the Company.

to the terms of the ICheck Warrant, the Company may, at any time (i) on or after the earlier of the date that either (a) ICheck completes

its first initial public offering of stock in the U.S.

resulting in any class of ICheck’s stock being listed for trading on any

tier of Nasdaq, NYSE or the NYSE American;

(b) ICheck consummates a merger or other transaction with a SPAC wherein ICheck becomes a

subsidiary of the SPAC;

or (c) ICheck undertakes any other ICheck Fundamental Transaction (the “ICheck Trigger Date”);

(ii) on or prior to the close of business on the tenth anniversary of the ICheck Trigger Date, exercise the ICheck Warrant to purchase

39,446 shares of ICheck’s common stock, which represents 3% of ICheck’s issued and outstanding common stock as of the ICheck

Trigger Date, for an exercise price per share of $0.01, subject to adjustment as provided in the ICheck Warrant.

The number of shares

for which the ICheck Warrant will be exercisable will be automatically adjusted on the ICheck Trigger Date to be 3% of the fully diluted

number and class of shares of capital stock of ICheck as of the ICheck Trigger Date, following completion of the transactions which caused

the ICheck Trigger Date to be achieved.

The ICheck Warrant contains a 9.99% equity blocker.

Exchange and Termination Agreement

March 22, 2023, the Company entered into a Warrant Exchange and Termination Agreement pursuant to which Mr.

Sadasivam agreed to transfer

the Amended and Restated Warrant to the Company in exchange for the issuance by the Company to Mr.

Sadasivam of 500,000 shares of the

Company’s common stock.

On March 22, 2023, the Company issued 500,000 shares of the Company’s common stock to Mr.

As a result, the Amended and Restated Warrant is terminated, null and void, and of no further force or effect.

Consulting Agreement

April 4, 2023 (the “rYojbaba Effective Date”), the Company entered into a Consulting and Services Agreement (the “rYojbaba

Consulting Agreement”) by and between the Company and rYojbaba Inc., a Japanese corporation (“rYojbaba”).

to the terms of the rYojbaba Consulting Agreement, the Company agreed to provide rYojbaba certain services, including the following (collectively,

the “rYojbaba Services”):

Assistance with the selection and negotiation of terms for a law firm, underwriter and auditing firm for rYojbaba;

Assisting in the preparation of documentation for internal controls required for an initial public offering of de-SPAC or other rYojbaba Fundamental Transaction (as defined in the rYojbaba Consulting Agreement) by rYojbaba;

Providing support services to remove problematic accounting accounts upon listing;

Translation of requested documents into English;

Attend and, if requested by rYojbaba, lead meetings with rYojbaba’s management and employees;

Provide rYojbaba with support services related to rYojbaba’s NASDAQ listing;

Conversion of accounting data from Japanese standards to U.S.

Support for rYojbaba’s negotiations with the audit firm;

Assist in the preparation of S-1 or F-1 filings;

Creation of English web page;

Preparing an investor presentation/deck and executive summary of rYojbaba’s operations.

providing the rYojbaba Services, the Company will not render legal advice or perform accounting services, and will not act as an investment

advisor or broker/dealer.

Pursuant to the terms of the rYojbaba Consulting Agreement, the parties agreed that the Company will not provide

the following services, among others:

negotiation of the sale of rYojbaba’s securities;

participation in discussions between rYojbaba

and potential investors;

assisting in structuring any transactions involving the sale of rYojbaba’s securities;

pre-screening of

potential investors;

due diligence activities;

nor providing advice relating to valuation of or financial advisability of any investments

to the terms of the rYojbaba Consulting Agreement, rYojbaba agreed to compensate the Company as follows in return for the provision of

the rYojbaba Services during the eight-month term:

$500,000, to be paid as follows:

(i) $200,000 on the rYojbaba Effective Date;

(ii) $150,000 on the three-month anniversary of the rYojbaba

Effective Date;

and (iii) $150,000 on the date that rYojbaba first files a Form S-1, Form F-1, Form S-4, Form F-4 or any similar or replacement

form with the SEC with respect to any transaction which is reasonably expected to result in the rYojbaba Trigger Date (as defined in

the rYojbaba Warrant);

Issuance by rYojbaba to the Company of a warrant (the “rYojbaba Warrant”), deemed fully earned and vested as of the rYojbaba

Effective Date, to acquire a number of shares of capital stock of rYojbaba, to initially be equal to 3% of the fully diluted share capital

of rYojbaba as of the rYojbaba Effective Date, subject to adjustment as set forth in the rYojbaba Consulting Agreement and the rYojbaba

any services performed by the Company beyond the rYojbaba Term (as hereinafter defined), rYojbaba will compensate the Company for rYojbaba

Services at the rate of $150 per hour, based on the hours spent by personnel of the Company.

term of the rYojbaba Consulting Agreement will continue until eight months after the rYojbaba Effective Date, unless sooner terminated

in accordance with the terms of the rYojbaba Consulting Agreement (the “rYojbaba Term”).

The rYojbaba Consulting Agreement

may be terminated at any time by either party upon notice to the other party.

provided in the rYojbaba Consulting Agreement, on the rYojbaba Effective Date, rYojbaba issued the rYojbaba Warrant to the Company.

to the terms of the rYojbaba Warrant, the Company may, at any time (i) on or after the earlier of the date that either (a) rYojbaba completes

its first initial public offering of stock in the U.S.

resulting in any class of rYojbaba’s stock being listed for trading on any

tier of Nasdaq, the NYSE or the NYSE American;

(b) rYojbaba consummates a merger or other transaction with a SPAC wherein rYojbaba becomes

a subsidiary of the SPAC;

or (c) rYojbaba undertakes any other rYojbaba Fundamental Transaction (the “rYojbaba Trigger Date”);

and (ii) on or prior to the close of business on the tenth anniversary of the rYojbaba Trigger Date, exercise the rYojbaba Warrant to

purchase 3,000 shares of rYojbaba’s common stock, which represents 3% of rYojbaba’s issued and outstanding common stock as

of the rYojbaba Trigger Date, for an exercise price per share of $0.01, subject to adjustment as provided in the rYojbaba Warrant.

number of shares for which the rYojbaba Warrant will be exercisable will be automatically adjusted on the rYojbaba Trigger Date to be

3% of the fully diluted number and class of shares of capital stock of rYojbaba as of the rYojbaba Trigger Date, following completion

of the transactions which caused the rYojbaba Trigger Date to be achieved.

The rYojbaba Warrant contains a 9.99% equity blocker.

ZEROSPO Note Purchase

On May 2, 2023, the Company

entered into that certain Note Purchase Agreement by and between the Company and ZEROSPO.

Pursuant to the terms of the Note Purchase Agreement,

ZEROSPO agreed to issue and sell to the Company, and the Company agreed to purchase, a promissory note in the principal amount of $300,000

(the “ZEROSPO Note”).

Pursuant to the terms of

the ZEROSPO Note, ZEROSPO agreed to pay to the Company $300,000 and to pay interest on the outstanding principal amount at the rate of

8% per annum.

To the extent not earlier paid, the principal amount and all accrued interest will be due and payable on the ZEROSPO Maturity

Date (as hereinafter defined) or earlier in the event of an event of default as provided in the ZEROSPO Note.

The “ZEROSPO Maturity

Date” means the earlier of:

of the closing of capital-raising transactions consummated by ZEROSPO via the issuance of any debt securities or equity securities of

ZEROSPO or any of its affiliates which results in gross proceeds to ZEROSPO or any of its affiliates of $300,000 or more;

date on which ZEROSPO completes a transaction pursuant to which its ordinary shares are listed for trading on The Nasdaq Capital Market,

or any related exchange, including the NASDAQ Global Market, or on the New York Stock Exchange or any related securities exchange, including

the NYSE American;

date which is 180 days following May 2, 2023.

ZEROSPO may, at its sole

option, prepay the ZEROSPO Note and any accrued interest thereunder in whole or in part at any time.

In the event that any amount due

under the ZEROSPO Note is not paid as and when due, such amounts will accrue interest at the rate of 12% per year, simple interest, non-compounding,

the three months ended March 31, 2023 and 2022, we generated revenues of $8,734,150 and $2,276,001, respectively, and reported net income

of $1,808,037 and net loss of $1,578,451, respectively, and cash flows used in operating activities of $1,048,059 and $2,393,853, respectively.

As noted in our unaudited consolidated financial statements, as of March 31, 2023, we had an accumulated deficit of $8,691,290.

of Operations

of Results of Operations for the Three Months ended September 30, 2022 and 2021

following table summarizes our operating results as reflected in our statements of income during the three months ended September 30,

of Results of Operations for the Three Months ended March 31, 2023 and 2022

following table summarizes our operating results as reflected in our statements of operations during the three months ended March 31, 2023

and 2022, respectively, and provides information regarding the dollar and percentage increase (or decrease) during such periods.

For the Three Months ended September 30,

$ (1,598,034 )

COST OF REVENUES

Operating expenses

Selling expenses

General and administrative expenses

Research and development expenses

Total operating expenses

Income (loss) from operations

Other income (expenses), net

Income (loss) before income tax provision

Income taxes expense (benefit)

Net income (loss)

net income attributable to non-controlling interest

NET INCOME (LOSS) ATTRIBUTABLE TO HEARTCORE ENTERPRISES, INC.

$ (1,970,934 )

$ (2,157,107 )

total revenues decreased by $1,598,034, or 46.0%, to $1,872,476 for the three months ended September 30, 2022 from $3,470,510 for the

three months ended September 30, 2021, mainly attributable to the decrease in revenue from sales of on-premise software, because an important

customer renewed its software license in July 2021, and decrease in revenue from software development, offset by revenue from newly established

consulting services.

total costs of revenues decreased by $242,869, or 13.6%, to $1,543,256 for the three months ended September 30, 2022 from $1,786,125

for the three months ended September 30, 2021, in light of the decrease in sales of on-promise software and software development, offset

by the costs related to the consulting services.

total gross profit decreased by $1,355,165, or 80.5%, to $329,220 for the three months ended September 30, 2022 from $1,684,385 for the

three months ended September 30, 2021.

O ur overall gross

profit margin decreased by 30.9% to 17.6% in the three months ended September 30, 2022 from 48.5% in the three months ended September

selling expenses increased by $692,058, or 871.2%, to $771,496 in the three months ended September 30, 2022 from $79,438 in the three

months ended September 30, 2021, primarily attributable to an increase in advertising expenses, as t he

parent company launched advertising activities to increase its visibility in the U.S.

after the Company went public in the U.S.

In addition, the Company increased advertising expenses for its newly established consulting services in Japan.

a percentage of revenues, our selling expenses accounted for 41.2% and 2.3% of our total revenue for the three months ended September

30, 2022 and 2021 , respectively.

the Three Months Ended March 31,

and administrative expenses

general and administrative expenses increased by $310,327 or 25.8%, to $1,513,028 in the three months ended September 30, 2022 from $1,202,701

in the three months ended September 30, 2021, primarily attributable to the increase in stock-based compensation, the U.S.

parent company’s

office expenses, and D&O indemnity insurance premiums, offset by the decrease in consulting and professional

fees as we finished the process of going public in early 2022.

a percentage of revenues, general and administrative expenses were 80.8% and 34.6% of our revenue for the three months ended September

30, 2022 and 2021, respectively.

and development expenses

research and development expenses decreased by $131,411 or 69.3%, to $58,275 in the three months ended September 30, 2022 from $189,686

in the three months ended September 30, 2021, primarily attributable to the decrease in outsourcing expenses relating

to the development of a high quality 12K VR camera and related data compression system, which was completed in June 2022.

a percentage of revenues, research and development expenses were 3.1% and 5.5% of our revenue for the three months ended September 30,

2022 and 2021, respectively .

Income (Expenses), net

other income (expenses) primarily includes interest income generated from bank deposits and loan to a related-party, interest expenses

for bank loans, bonds, and leases, other incomes, and other expenses.

We recorded other income, net of $23,576 in the three months ended

September 30, 2022, as compared to other expense, net of $7,689 in the three months ended September 30, 2021, primarily attributable

to the increase in interest income and other income .

operating expenses

(loss) from operations

income (expenses)

(loss) before income tax provision

tax expense (benefit)

income taxes benefit was $19,069 in the three months ended September 30, 2022, as compared to the income taxes expense of $13,522 in

the three months ended September 30, 2021, mainly due to the increase in the net loss and the decrease in deferred tax expense.

income (loss)

a result of the foregoing, we reported a net loss of $1,970,934 for the three months ended September 30, 2022, representing a $2,162,283

or 1,130.0% decrease from a net income of $191,349 for the three months ended September 30, 2021.

Income attributable to Non-controlling Interest

owned 97.35% of the outstanding shares of the operation subsidiary, HeartCore Co, which located in Japan, as of September 30, 2021.

we recorded net income attributable to the non-controlling interest.

The net income attributable to non-controlling interest was $5,176

in the three months ended September 30, 2021 .

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

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

held by Dentsu Digital in accordance with certain terms and conditions in the stock purchase agreement for 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.

February 24, 2022, the Company purchased 278 shares of HeartCore Co from Dentsu Digital for JPY50,040,000 (approximately $435,500 when

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

Accordingly, we did not record non-controlling interest

income in the three months ended September 30, 2022.

net loss attributable to non-controlling interest

income (loss) attributable to HeartCore Enterprises, Inc.

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

of $1,970,934 for the three months ended

September 30, 2022, representing a $2,157,107 or 1,158.7% decrease from a net income attributable to HeartCore Enterprises, Inc.

for the three months ended September 30, 2021 .

of Results of Operations for the Nine Months ended September 30, 2022 and 2021

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

September 30, 2022 and 2021, respectively, and provides information regarding the dollar and percentage increase (or decrease) during

such periods.

For the Nine Months ended September 30,

$ (1,627,237 )

COST OF REVENUES

Operating expenses

Selling expenses

General and administrative expenses

Research and development expenses

Total operating expenses

Income (loss) from operations

Other expenses, net

Income (loss) before income tax provision

Income taxes expense (benefit)

Net income (loss)

net income attributable to non-controlling interest

NET INCOME (LOSS) ATTRIBUTABLE TO HEARTCORE ENTERPRISES, INC.

$ (5,253,026 )

$ (5,656,740 )

total revenues decreased by $1,627,237, or 19.3%, to $6,818,774 for the nine months ended September 30, 2022 from $8,446,011 for the

nine months ended September 30, 2021, primarily attributable to the decrease in revenue from sales of on-premise software, because an

important customer renewed its software license in July 2021, and the decrease in revenue from software development, offset by revenue

from newly established consulting services.

In addition, the ongoing depreciation of Japanese Yen in 2022 also caused the decrease in

total costs of revenues decreased by $433,236 or 9.9%, to $3,935,908 for the nine months ended September 30, 2022 from $4,369,144 for

the nine months ended September 30, 2021, in light of the decrease in sales of on-promise software and software development, offset by

the costs related to the consulting services.

total gross profit decreased by $1,194,001, or 29.3%, to $2,882,866 for the nine months ended September 30, 2022 from $4,076,867 for

the nine months ended September 30, 2021.

gross profit margin decreased by 6.0% to 42.3% in the nine months ended September 30, 2022 from 48.3% in the nine months ended September

selling expenses increased by $1,479,347, or 652.0%, to $1,706,250 in the nine months ended September 30, 2022 from $226,903 in the nine

months ended September 30, 2021, primarily attributable to an increase in advertising expenses, as t he

parent company launched advertising activities to increase its visibility in the U.S.

after the Company went public in the U.S.

In addition, the Company increased advertising expenses for its newly established consulting services in Japan.

a percentage of revenues, our selling expenses accounted for 25.0% and 2.7% of our total revenue for the nine months ended September

Our total revenues increased by $6,458,149, or

283.7%, to $8,734,150 for the three months ended March 31, 2023 from $2,276,001 for the three months ended March 31, 2022, mainly

attributable to (i) the increased revenue of $5,192,751 from GO IPO consulting services;

(ii) the increased revenue of $1,631,619

from customized software development and services as a result of acquisition of Sigmaways and its subsidiaries on February 1, 2023;

offset by (iii) the decreased revenue of

$444,680 in revenue from sales of on-premise software, primarily due to the loss of a significant CMS customer in the current

Our total costs

of revenues increased by $2,045,710, or 193.8%, to $3,101,066 for the three months ended March 31, 2023 from $1,055,356 for the three

months ended March 31, 2022, in light of the increase in sales in GO IPO consulting services and customized software development and services,

offset by the decrease in the costs related to maintenance and support services.

gross profit increased by $4,412,439, or 361.5%, to $5,633,084 for the three months ended March 31, 2023 from $1,220,645 for the

three months ended March 31, 2022, mainly attributable to (i) the increased gross profit of $4,518,938 from GO IPO consulting

(ii) the increased gross profit of $223,876 from customized software development and services;

offset by (iii) the

decreased gross profit of $526,939 from sales of on-premise software .

gross profit margin increased by 10.9% to 64.5% for the three months ended March 31, 2023, from 53.6% for the three months ended

March 31, 2022.

Our selling expenses increased by $362,724, or 176.1%,

to $568,642 for the three months ended March 31, 2023 from $205,918 for the three months ended March 31, 2022, primarily attributable

to an increase of $321,376 in stock-based compensation for sales staff.

a percentage of revenues, our selling expenses accounted for 6.5% and 9.0% of our total revenues for the three months ended March 31,

2023 and 2022 , respectively.

and Administrative Expenses

general and administrative expenses increased by $2,845,985 or 95.3%, to $5,832,276 in the nine months ended September 30, 2022 from

$2,986,291 in the nine months ended September 30, 2021, primarily attributable to the increase in stock-based compensation, salaries

and welfare, the U.S.

parent company’s office expenses, and D&O indemnity insurance premiums.

a percentage of revenues, general and administrative expenses were 85.5% and 35.4% of our revenue for the nine months ended September

30, 2022 and 2021, respectively.

general and administrative expenses increased by $216,274, or 8.8%, to $2,685,207 for the three months ended March 31, 2023 from

$2,468,933 for the three months ended March 31, 2022, primarily attributable to (i) an increase of $102,357 in stock-based

compensation as the Company awarded options and RSUs to employees and service providers in 2023;

(ii) an increase of $196,667 in

office, utility and other expenses, an increase of $96,104 in depreciation and amortization expenses, and an increase of $50,682 in

rent expenses, mostly due to the acquisition of Sigmaways and its subsidiaries;

offset by (iii) a decrease of $283,468 in listing-related expenses as we

finished the process of going public in early 2022.

As a percentage of revenues, general and administrative expenses were 30.8%

and 108.5% of our revenues for the three months ended March 31, 2023 and 2022, respectively.

and Development Expenses

research and development expenses increased by $261,905 or 81.4%, to $583,762 in the nine months ended September 30, 2022 from $321,857

in the nine months ended September 30, 2021, primarily attributable to an increase in outsourcing expenses relating

to development of a high quality 12K VR camera and related data compression system in the nine months ended September 30, 2022.

a percentage of revenues, research and development expenses were 8.6% and 3.8% of our revenue for the nine months ended September 30,

2022 and 2021, respectively .

Expenses, net

other income (expenses) primarily includes interest income generated from bank deposits and loan to a related-party, interest expenses

for bank loans, bonds, and leases, other incomes, and other expenses.

Total other expenses, net, decreased by $5,043 or 17.1%, from $29,553

in the nine months ended September 30, 2021 to $24,510 in the nine months ended September 30, 2022 .

Our research and development expenses decreased by

$28,635, or 26.5%, to $79,624 for the three months ended March 31, 2023 from $108,259 for the three months ended March 31, 2022, primarily

attributable to the decrease in outsourcing expenses relating to the development of a high quality

12K VR camera and related data compression system, which was completed in June 2022.

As a percentage

of revenues, research and development expenses were 0.9% and 4.8% of our revenues for the three months ended March 31, 2023 and 2022,

respectively .

Other Income (Expenses), Net

income (expenses) primarily includes changes in fair value of investments in warrants, interest income generated from bank deposits,

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

Our other income (expenses), net increased by $186,676,

or -1, 111.0%, to other income, net of

$169,874 in the three months ended March 31, 2023 from other expense s , net of $16,802 in the three months ended March 31, 2022,

primarily attributable to the increase of $193,365 in the changes in fair value of investments in warrants .

Tax Expense (Benefit)

income taxes benefit was $10,906 in the nine months ended September 30, 2022, as compared to the income taxes expense of $97,437 in the

nine months ended September 30, 2021, mainly due to the increase in net loss and the decrease in deferred tax expense .

Our income tax expense was $661,448

in the three months ended March 31, 2023, as compared to the income tax benefit of $816 in the three months ended March 31, 2022, mainly

due to the net income before income tax of $2,469,485 in the current period, as compared to a net loss before income tax of $1,579,267

in the prior period.

Income (Loss)

a result of the foregoing, we reported a net loss of $5,253,026 for the nine months ended September 30, 2022, representing a $5,667,852

or 1,366.3% decrease from a net income of $414,826 for the nine months ended September 30, 2021.

Income attributable to Non-controlling Interest

owned 97.35% of the outstanding shares of the operation subsidiary, HeartCore Co, which located in Japan, as of September 30, 2021.

we recorded net income attributable to the non-controlling interest.

The net income attributable to non-controlling interest was $11,112

in the nine months ended September 30, 2021 .

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

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

held by Dentsu Digital in accordance with certain terms and conditions in the stock purchase agreement for 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.

February 24, 2022, the Company purchased 278 shares of HeartCore Co from Dentsu Digital for JPY50,040,000 (approximately $435,500 when

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

Accordingly, we did not record non-controlling interest

income in the nine months ended September 30, 2022.

Income (Loss) attributable to HeartCore Enterprises, Inc.

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

of $5,253,026 for the nine months ended

September 30, 2022, representing a $5,656,740 or 1,401.2% decrease from a net income attributable to HeartCore Enterprises, Inc.

for the nine months ended September 30, 2021 .

and Capital Resources

of September 30, 2022, we had $7,843,208 in cash as compared to $3,136,839 as of December 31, 2021.

As of September 30, 2022, our working

capital was $6,149,541 as compared to $62,919 as of December 31, 2021.

We also had $621,345 in accounts receivable as of September 30,

Our accounts receivable primarily include balance due from customers for our on-premise software sold and services provided to

and accepted by customers.

As a result of the foregoing, we reported a net income

of $1,808,037 for the three months ended March 31, 2023, representing a $3,386,488, or -214.5%, increase from a net loss of $1,578,451

for the three months ended March 31, 2022.

Net Loss Attributable to Non-controlling Interest

We owned 51% equity

ownership interest of Sigmaways as of March 31, 2023.

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

$74,252 in the three months ended March 31, 2023 .

Net Income (Loss) Attributable to HeartCore

Enterprises, Inc.

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

of $1,882,289 for the three months ended March

31, 2023, representing a $3,460,740, or - 219.2%, increase from a net loss attributable to HeartCore Enterprises, Inc.

of $1,578,451 for

the three months ended March 31, 2022 .

Liquidity and Capital Resources

31, 2023, we had $5,209,915 in cash, as compared to $7,177,326 as of December 31, 2022.

As of March 31, 2023, our working capital was

$3,540,983 as compared to $4,887,444 as of December 31, 2022.

We also had $2,380,128 in accounts receivable as of March 31, 2023.

accounts receivable primarily include balance due from customers for our on-premise software sold and services provided to and accepted

by customers.

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

For the Nine Months Ended

September 30,

Net cash provided by (used in) operating activities

the Three Months Ended

Net cash used in operating activities

$ (1,048,059 )

Net cash used in investing activities

Net cash provided by (used in) financing activities

Effect of exchange rate changes

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of the period

Cash and cash equivalents, end of the period

cash used in operating activities was $4,206,370 for the nine months ended September 30, 2022, as compared to the amount of $1,239,250

net cash provided by operating activities for the nine months ended September 30, 2021, primarily consisting of the following:

loss of $5,253,026 for the nine months ended September 30, 2022.

decrease of $213,691 in operating lease liabilities, due to the rent payment made.

decrease of $206,569 in other liabilities, primarily due to the decrease in sales tax payable.

by non-cash lease expense of $207,549.

by share-based compensation of $1,225,477.

cash used in investing activities amounted to $8,630 for the nine months ended September 30, 2022, as compared to net cash used in investing

activities amounted to $151,065 for the nine months ended September 30, 2021.

cash provided by financing activities amounted to $9,122,350 for the nine months ended September 30, 2022, as compared to net cash used

in financing activities amounted to $816,155 for the nine months ended September 30, 2021, primarily consisting of net proceeds of $13,823,126

from the initial public offering and issuance of common shares prior to the initial public offering, and offset by payment for mandatorily

redeemable financial interest of $430,489, payment for repurchase of common stocks of $3,500,000, and repayment of long-term debts of

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

$ (2,393,853 )

Net cash used in investing

cash provided by (used in) financing activities

of exchange rate changes

Net change in cash and cash

and cash equivalents, beginning of the period

and cash equivalents, end of the period

cash used in operating activities was $1,048,059 for the three months ended March 31, 2023, as compared to the amount of $2,393,853 net

cash used in operating activities for the three months ended March 31, 2022, primarily consisting of the following:

income of $1,808,037 for the three months ended March 31, 2023.

in fair value of investments in warrants of $193,365 and an increase of $4,009,335 in warrants received as noncash consideration as

two of our IPO consulting customers completed the IPO during the current period and we recognized investments in warrants and

remeasured the fair value at the period end.

A decrease of $178,733 in accrued payroll and other employee

costs due to payment made for bonus during the three months ended March 31, 2023.

decrease of $167,873 in deferred revenue, due to amortization of upfront payment received for long-term service contracts.

by stock-based compensation of $915,228 for the three months ended March 31, 2023, as we granted equity rewards to our employees

and service providers in 2023.

by an increase of $678,725 in income tax payables as we generated more taxable income in the current period.

Net cash used in investing activities amounted to $722,364 for the three

months ended March 31, 2023, as compared to net cash used in investing activities amounted to $35,281 for the three months ended March

31, 2023, primarily consisting of net payment of $724,910 for acquisition of subsidiary, net of

cash acquired .

Net cash used in financing activities amounted to $134,296 for the three

months ended March 31, 2023, as compared to net cash provided by financing activities amounted to $13,284,474 for the three months ended

March 31, 2022, primarily consisting of repayment of $265,255 for long-term debts, and repayment of $36,517 for insurance premium financing,

offset by the net proceeds of $173,582 from factoring arrangement.

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

It has also entered into two leases

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

of September 30, 2022, future minimum lease payments under the non-cancelable lease agreements are as follows:

Year ending December 31,

Finance leases

of March 31, 2023, future minimum lease payments under the non-cancelable lease agreements are as follows:

Ended December 31,

Remaining of 2023

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current portion

Non-current lease liabilities

lease liabilities

Long-Term Debts

Company’s long-term debts included bond payable and loans borrowed from banks and other financial institutions.

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

Year ending December 31,

of March 31, 2023, future minimum loan payments are as follows:

Ended December 31,

Remaining of 2023

Sheet Arrangements

did not have any off-balance sheet arrangements as of September 30, 2022.

did not have any off-balance sheet arrangements as of March 31, 2023.

Accounting Policies and Estimates

2 unchanged sentences

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

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

the reported amounts of revenue and expenses incurred during the financial reporting period.

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

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

We continue to evaluate the estimates and

8 unchanged sentences

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

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:

(i) identify the contract(s)

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

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

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

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:

account for business combinations using the acquisition method, which requires management to estimate the fair value of the tangible

assets, liabilities, identifiable intangible asset and non-controlling interest, and to properly allocate purchase price consideration

to the individual assets acquired, liabilities assumed and non-controlling interest.

Goodwill is measured as the excess amount of consideration

The allocation of the purchase price utilizes significant estimates and assumptions in determining the fair values of identifiable

assets acquired, liabilities assumed and non-controlling interest, especially with respect to intangible asset.

These estimates are based

on all available information and in some cases assumptions with respect to the timing and amount of future revenues and expenses associated

with an asset and are reviewed by consulting with third-party valuation appraisers.

The purchase price allocation for business acquisitions

contains uncertainties because it requires management’s judgment.

fair value of the intangible asset is estimated using the income approach using the multi-period excess earnings method.

Management applies

significant judgement related to this fair value method, which included the selection of an expected EBITDA margin assumption for the

forecast period, and discount rate assumptions.

These significant assumptions are based on company specific information and projections,

which are not observable in the market (except for the discount rate assumption) and, therefore, are considered Level 2 and Level 3 measurements.

These significant assumptions are forward-looking and could be affected by future changes in economic and market conditions.

The accounting for business combinations is a critical

accounting estimate because it requires estimates and judgement in assessing the future cash flows of the acquired business, the fair

value of non-controlling interest, and the allocation of the future cash flows to identifiable intangible assets, in determining the fair

value for assets and liabilities.

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

To determine revenue recognition for contracts

with customers, the Company performs the following five steps:

(i) identify the contract(s) with the customer, (ii) identify the performance

obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable

that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the

contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.

Revenue amount represents the invoiced

value, net of value-added taxes and applicable local government levies.

Company currently generates its revenues from the following main sources:

from On-Premise Software

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

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

for a specified term.

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

to the customer.

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

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

software and maintenance and support service.

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

when those services are sold on a standalone basis.

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

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

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

or other observable evidence.

from Maintenance and Support Service

Licenses for on-premise software provide the

customer with a right to use the software as it exists when made available to the customer.

The Company provides on-premise software

in the form of both perpetual licenses and term-based licenses which grant the customers with the right for a specified term.

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

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

Revenues under the bundled

arrangements are allocated based on the relative standalone selling prices (“SSP”) of on-premise software and maintenance

and support service.

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

are sold on a standalone basis.

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

to establish the SSP for on-premise licenses based on observable prices given the same products are sold for a broad range of amounts

(that is, the selling price is highly variable) and a representative SSP is not discernible from past transactions or other observable

from Maintenance and Support Services

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

18 unchanged sentences

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

from Consulting Service

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

which primarily include communicating with intermediary parties, preparing required documents and supporting the listing process.

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

The consulting service contracts are generally less

than one year in length.

Revenues from Customized Software Development

The Company’s customized software development

and services revenues primarily include revenues from providing software development solutions and other support services to its customers.

The contract pricing is at stated billing rates per hour.

These contracts are generally short-term in nature and not longer than one year

For services provided under the contract that result in the transfer of control over time, the underlying deliverable in

the contracts is owned and controlled by the customer and does not create an asset with an alternative use to the Company.

recognizes revenue on rate per hour contracts based on the amount billable to the customer, as the Company has the right to invoice the

customer in an amount that directly corresponds with the value to the customer of the Company’s performance to date.

from Consulting Services

The 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

The consulting service contracts are generally less than one year in length and normally include both cash and noncash consideration.

Cash consideration is paid in installment payments and is recognized in revenue over the period of the contract by reference to progress

toward complete satisfaction of that performance obligation.

Noncash consideration is in the form of warrants of the customers and is

measured at fair value at contract inception.

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

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

The Company assesses the estimated amount

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

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

consideration is subsequently resolved.

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

consideration be included in revenues.

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

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

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

The Company records a contract asset, which is

included in accounts receivable on the consolidated balance sheets, when revenue is recognized prior to invoicing.

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.

The amount of revenues recognized

during the nine months ended September 30, 2022 and 2021 that were included in the opening deferred revenues balance was approximately

$1.2 million and $2.0 million, respectively.

The Company has determined that its contracts

do not include a significant financing component.

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

consolidated balance sheets, when revenue is recognized prior to invoicing.

The Company factors certain accounts receivable upon or after

the performance obligation is being met.

The Company records deferred revenue on the consolidated balance sheets when revenues are recognized

subsequent to cash collection for an invoice.

Deferred revenue is reported net of related uncollected deferred revenue in the consolidated

balance sheets.

The amount of revenues recognized during the three months ended March 31, 2023 and 2022 that were included in the opening

deferred revenues balance was approximately $0.9 million and $0.8 million, respectively.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis