What changed in this filing

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Item 1. Financial Statements

2023-08-14 compared with 2023-05-22 · 433 added, 399 removed, 600 unchanged (58% of the section changed)

5 unchanged sentences

Accounts receivable

Short-term investment in warrants

Investments in marketable securities

Prepaid expenses

Note receivable

Due from related party

5 unchanged sentences

Intangible asset, net

Long-term investment in warrants

Long-term investments in warrants

Deferred tax assets

26 unchanged sentences

Shareholders’ equity:

Preferred shares ($ 0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively)

Preferred shares ($ 0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively)

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

20,842,690 and 17,649,886 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively)

20,842,690 and 17,649,886 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively)

Additional paid-in capital

11 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

Cost of revenues

6 unchanged sentences

( 1,467,122 )

( 1,663,378 )

( 3,225,843 )

Other income (expenses):

Changes in fair value of investments in marketable securities

Changes in fair value of investments in warrants

2 unchanged sentences

Other expenses

Total other income (expenses)

Total other expenses

Income (loss) before income tax provision

( 1,644,848 )

( 1,694,662 )

( 3,273,929 )

Income tax expense (benefit)

1 unchanged sentence

( 1,022,846 )

( 1,703,641 )

( 3,282,092 )

net loss attributable to non-controlling interest

Net income (loss) attributable to HeartCore Enterprises,

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

$ ( 911,800 )

Other comprehensive income (loss):

$ ( 1,703,641 )

$ ( 3,282,092 )

Other comprehensive income:

Foreign currency translation adjustment

1 unchanged sentence

( 1,484,281 )

( 2,982,679 )

comprehensive loss attributable to non-controlling interest

Comprehensive income (loss) attributable to HeartCore

Enterprises, Inc.

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

$ ( 881,597 )

$ ( 1,484,281 )

$ ( 2,982,679 )

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

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)

THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

Comprehensive

shareholders’

Income (Loss)

Common Shares

Treasury Shares

Accumulated Other

Total HeartCore

Enterprises, Inc.

Total Shareholders’

Comprehensive

Income (Loss)

shareholders’

equity (deficit)

shareholders’

equity (deficit)

Balance, December 31, 2021

3 unchanged sentences

( 1,578,451 )

Foreign currency translation adjustment

4 unchanged sentences

( 5,474,564 )

( 1,703,641 )

Foreign currency translation adjustment

Stock-based compensation

Repurchase of common shares

( 1,336,762 )

Balance, June 30, 2022

$ ( 1,336,762 )

$ ( 7,178,205 )

Comprehensive Income

Shareholders’ Equity

Non-controlling

Shareholders’ Equity

Common Shares

Accumulated Other

Total HeartCore

Enterprises, Inc.

Total HeartCore Enterprises, Inc.

Comprehensive Income

Shareholders’ Equity

Non-controlling

Shareholders’ Equity

1 unchanged sentence

$ ( 10,573,579 )

Beginning balance

$ ( 10,573,579 )

Net income (loss)

5 unchanged sentences

( 8,691,290 )

Ending balance

Beginning balance, value

( 8,691,290 )

( 1,022,846 )

Foreign currency translation adjustment

Stock-based compensation

Balance, June 30, 2023

$ ( 9,603,090 )

Ending balance, value

$ ( 9,603,090 )

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

For the Six Months Ended

Cash flows from operating activities:

1 unchanged sentence

$ ( 3,282,092 )

Adjustments to reconcile net income (loss) to net cash used in

operating activities:

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

Depreciation and amortization expenses

5 unchanged sentences

( 4,009,335 )

Changes in fair value of investments in marketable securities

Changes in fair value of investments in warrants

11 unchanged sentences

Net cash flows used in operating activities

( 1,368,562 )

( 2,093,867 )

Cash flows from investing activities:

Purchases of property and equipment

Advance and loan provided to related party

Advance on note receivable

Repayment of loan provided to related party

1 unchanged sentence

Net cash flows used in investing activities

( 1,181,646 )

Cash flows from financing activities:

1 unchanged sentence

Proceeds from issuance of common shares prior to initial public offering

Repurchase of common shares

( 1,336,762 )

Payments for finance leases

2 unchanged sentences

Repayment of insurance premium financing

Repayment to related party

Net proceeds from factoring arrangement

1 unchanged sentence

Payment for mandatorily redeemable financial interest

Net cash flows provided by (used in) financing

Net cash flows provided by (used in) financing activities

Effect of exchange rate changes

8 unchanged sentences

Payroll withheld as repayment of loan receivable from employees

Expense paid by related party on behalf of the Company

Liabilities assumed in connection with purchase of property and equipment

Share repurchase liability settled by issuance of common shares

1 unchanged sentence

Insurance premium financing

Liabilities assumed in connection with purchase of property and equipment

Common shares issued for acquisition of subsidiary

Investments in warrants converted to marketable securities

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

12 unchanged sentences

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.

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

2 unchanged sentences

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.

On September 6, 2022, HeartCore USA entered into a share exchange and purchase

agreement (“Sigmaways Agreement”) to acquire

earliest period presented in the accompanying unaudited consolidated financial statements.

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

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 in April

2006, and its wholly-owned subsidiaries, Sigmaways B.V.

Sigmaways Technologies Ltd.

(“Sigmaways”), a company incorporated under the laws of the State of California

in April 2006, and its wholly-owned subsidiaries, Sigmaways B.V.

and Sigmaways Technologies Ltd.

(“Sigmaways Technologies”).

1 unchanged sentence

was incorporated in Netherlands in November 2019.

Sigmaways Technologies

was incorporated in Canada in August 2020.

Sigmaways and its wholly-owned subsidiaries are primarily engaged in the business

of developing and sales of software in the United States.

The acquisition was closed on February 1, 2023.

Sigmaways Technologies was incorporated in Canada in August 2020.

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

acquisition was closed on February 1, 2023.

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

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of Presentation and Principles of Consolidation

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

accepted in the United States of America (“U.S.

GAAP”) for interim financial information and pursuant to the rules and

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

The unaudited consolidated financial statements include

the accounts of the Company and its subsidiaries.

All significant intercompany accounts and transactions have been

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

in the United States of America (“U.S.

GAAP”) for interim financial information and pursuant to the rules and regulations

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

The unaudited consolidated financial statements include the accounts of

the Company and its subsidiaries.

All significant intercompany accounts and transactions have been eliminated.

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

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Actual results could differ from those estimates.

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

such as the extent and effectiveness of containment actions, it has already had an adverse effect on the global economy and the

lasting effects of the pandemic continue to be unknown.

The Company may experience customer losses, including due to bankruptcy or

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

The extent 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 unaudited consolidated financial statements as soon as they become known.

Actual results

could differ from those estimates, and any such differences may be material to the Company’s unaudited consolidated financial

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

as the extent and effectiveness of containment actions, it has already had an adverse effect on the global economy and the lasting effects

of the pandemic continue to be unknown.

The Company may experience customer losses, including due to bankruptcy or customers ceasing

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 unaudited consolidated

financial statements as soon as they become known.

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

material to the Company’s unaudited consolidated financial statements.

Retirement Obligations

4 unchanged sentences

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

The Company capitalizes the associated asset retirement cost by increasing

the carrying amount of the related property and equipment.

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

The following table presents changes in asset retirement obligations:

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

the three months ended March 31, 2023 and 2022, software development costs expensed as incurred amounted to $ 79,624 and $ 108,259 , respectively.

the six months ended June 30, 2023 and 2022, software development costs expensed as incurred amounted to $ 119,232 and $ 525,487 , respectively.

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

Investments in Warrants

Investments in warrants represent stock warrants of

its consulting service customers and are not registered for public sale.

The warrants are measured at fair value and any changes in fair

value are recognized in other income (expenses).

Investment in warrants is classified as short-term if the maturity is within one year,

and as long-term if the maturity is over one year.

in warrants represent stock warrants of its consulting service customers and are not registered for public sale.

The warrants are measured

at fair value and any changes in fair value are recognized in other income (expenses).

Investments in warrants are classified as long-term

if the maturity is over one year.

in Marketable Securities

in marketable securities represent equity securities registered for public sale with readily determinable fair value.

The marketable

securities as of June 30, 2023 were obtained through exercise of stock warrants of its consulting service customers and measured at

fair value with changes in fair value recognized in other income (expenses).

asset represents the customer relationship acquired from business acquisition of Sigmaways and its subsidiaries.

The acquired intangible asset is recognized and measured

at fair value at the time of acquisition and is amortized on a straight-line basis over the estimated economic useful life of the respective

The acquired intangible

asset is recognized and measured at fair value at the time of acquisition and is amortized on a straight-line basis over the estimated

economic useful life of the respective assets.

The estimated useful life of the customer relationship is 8 years.

5 unchanged sentences

to be impaired and written down to its fair value.

There were no impairments of these assets during the three months ended March 31,

2023 and 2022.

There were no impairments of these assets during the six months ended June 30, 2023

represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination.

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in the unaudited consolidated statements of operations.

The reporting currency of the Company is the

US$, and the accompanying unaudited consolidated financial statements have been expressed in US$.

In accordance with ASC Topic 830-30,

“Translation of Financial Statements”, assets and liabilities of the Company whose functional currency is not US$ are translated

into US$, using the exchange rate on the balance sheet date.

Revenues and expenses are translated at average rates prevailing during the

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.

reporting currency of the Company is the US$, and the accompanying unaudited consolidated financial statements have been expressed in

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 income (loss) within the statements of changes in shareholders’

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.

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 value-added taxes and applicable local government levies.

Company currently generates its revenues from the following main sources:

from On-Premise Software

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.

Revenues from on-premise

licenses are 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.

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.

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.

Revenues from on-premise licenses are 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 Services

Maintenance and support services provided with software

licenses consist of trouble shooting, technical support and the right to receive unspecified software updates when and if available during

the subscription.

Revenues from maintenance and support services are recognized over time as such services are performed.

consumption-based services are generally recognized as the services are performed and accepted by the customers.

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

software updates when and if available during the subscription.

Revenues from maintenance and support services are recognized over time

as such services are performed.

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

by the customers.

from Software as a Service (“SaaS”)

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from Customized Software Development and Services

The Company’s customized software development

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

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 contract 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.

These contracts are

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

For services provided under the contract that result in the

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

an asset with an alternative use to the Company.

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

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 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.

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

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 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

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

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balance sheets.

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

The amount of revenues recognized during the six months ended June 30, 2023 and 2022 that were included in the opening

deferred revenues balance was approximately $ 1.3 million and $ 1.1 million, respectively.

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The Company’s disaggregation of revenues for the

three months ended March 31, 2023 and 2022 is as following:

three and six months ended June 30, 2023 and 2022 is as following:

OF DISAGGREGATION OF REVENUES

For the Three Months Ended

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

Revenues from on-premise software

6 unchanged sentences

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

For the Three Months Ended

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

Revenues from customer experience management platform

6 unchanged sentences

Total revenues

As of March 31, 2023 and 2022, and for the periods then ended, substantially all of the long-lived assets (excluding intangible asset) and the majority of revenues generated were attributed to the Company’s operation in

of June 30, 2023 and 2022, and for the periods then ended, substantially all of the long-lived assets (excluding intangible asset) and

the majority of revenues generated were attributed to the Company’s operation in Japan.

Concentration

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

For the three months ended March 31, 2023, customer B and C represent 28.9 % and 18.8 % , respectively, of the Company’s total revenues.

For the three months

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

For the three months ended March 31, 2023, vendor

A, B and D represent 38.5 % ,

respectively, of the Company’s total purchases.

For the three months ended March 31, 2022, vendor A, B and C represent 36.1 % ,

respectively, of the Company’s total purchases.

the six months ended June 30, 2023, customer C, D and E represent 18.2 %, 12.8 % and 11.8 %, respectively, of the Company’s total

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

the six months ended June 30, 2023, vendor A and B represent 22.7 % and 60.9 %, respectively, of the Company’s total purchases.

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

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

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or liabilities.

of March 31, 2023 and December 31, 2022, the carrying values of current assets, except for short-term investment in warrants, and current

of June 30, 2023 and December 31, 2022, the carrying values of current assets, except for investments in marketable securities, and current

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

The Company received warrants from its

customers as noncash consideration from consulting services.

The warrants are not registered for public sale and are measured at

fair value at contract inception.

The Company’s investments in warrants are measured on a recurring basis and are

carried on the balance sheet at an estimated fair value at the end of the period.

Company received warrants from its customers as noncash consideration from consulting services.

The warrants are not registered for public

sale and are measured at fair value at contract inception.

The Company’s investments in warrants are measured on a recurring basis

and carried on the balance sheet at an estimated fair value at the end of the period.

The valuation of investments in warrants was

determined using a Black-Scholes model of value based upon the stock price, exercise price, expected volatility, time to maturity,

and a risk-free interest rate for the term of the warrants exercise.

Such valuations are classified within Level 3 of the fair

value hierarchy.

following table summarizes the Company’s investments in warrants activity for the three months ended March 31, 2023 and 2022:

determined using a Black-Scholes model of value based upon the stock price, exercise price, expected volatility, time to maturity, and

a risk-free interest rate for the term of the warrants exercise.

Such valuations are classified within Level 3 of the fair value hierarchy.

following table summarizes the Company’s investments in warrants activity for the six months ended June 30, 2023 and 2022:

OF INVESTMENTS IN WARRANTS

For the Three Months Ended

For the Six Months Ended

Fair value of investments in warrants at beginning of the period

1 unchanged sentence

Changes in fair value of investments in warrants

Investments in warrants converted to securities

Investments in warrants converted to marketable securities

( 1,257,868 )

Fair value of investments in warrants at end of the period

in Marketable Securities

Company’s investments in marketable securities registered for public sale with readily determinable fair value are measured at

quoted prices on a recurring basis at the end of the period.

Marketable securities are classified within Level 1

of the fair value hierarchy.

following table summarizes the Company’s investments in marketable securities activity for the six months ended June 30, 2023 and

OF INVESTMENTS IN MARKETABLE SECURITIES

For the Six Months Ended

Fair value of investments in marketable securities at beginning of the period

Investments in warrants converted to marketable securities

Changes in fair value of investments in marketable securities

Marketable securities sold

Fair value of investments in marketable securities at end of the period

Accounting Pronouncements

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Accounts receivable – non-factored

receivable – factored with recourse

receivable, gross

Accounts receivable – factored with recourse

Accounts receivable, gross

allowance for credit losses

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Prepaid insurance premium

5 — NOTE RECEIVABLE

May 2, 2023, the Company purchased a $ 300,000 promissory note from a non-related company.

The note bears an interest rate of 8 % per annum

and matures on the earlier of 1) the date of the closing of capital-raising transactions in the amount of $ 300,000 or more consummated

by the promissory note issuer, 2) the date on which the promissory note issuer completes its initial public offering on the Nasdaq Capital

Market or New York Stock Exchange, or 3) 180 days following the note issuance.

The interest rate would be 12 % per annum for any amount

that is unpaid when due.

6 — RELATED PARTY TRANSACTIONS

As of March 31, 2023 and December 31, 2022, the

Company has a due to related

party balance of $ 2,923 and $ 402 ,

respectively, from Sumitaka Yamamoto, the Chief Executive Officer (“CEO”) and major shareholder of the Company.

is unsecured, non-interest bearing and due on demand.

During the three months ended March 31, 2023, the related party paid operating expenses on behalf of the Company and received the payments in a net amount of $ 2,544 .

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

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

on behalf of the Company.

The Company also repaid $ 903

to the related party during the same period.

As of March 31, 2023 and December 31, 2022, the Company has a loan receivable

balance of $ 277,491 and $ 294,919 , respectively, from Heartcore

of June 30, 2023 and December 31, 2022, the Company has a due to related party balance of $ 4,250 and $ 402 , respectively, from Sumitaka

Yamamoto, the Chief Executive Officer (“CEO”) and major shareholder of the Company.

The balance is unsecured, non-interest

bearing and due on demand.

During the six months ended June 30, 2023, the related party paid operating expenses on behalf of the Company

and received the payments in a net amount of $ 4,214 .

During the six months ended June 30, 2022, the related party paid operating expenses

on behalf of the Company and received the payments in a net amount of $ 5,448 .

of June 30, 2023 and December 31, 2022, the Company has a loan receivable balance of $ 244,631 and $ 294,919 , respectively, from Heartcore

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

1 unchanged sentence

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

the three months ended March 31, 2023 and 2022, the Company received repayments of $ 11,955 and $ 9,102 , respectively, from this related

During 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 .

the six months ended June 30, 2023 and 2022, the Company received repayments of $ 23,715 and $ 21,508 , respectively, from this related

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 .

7 — PROPERTY AND EQUIPMENT, NET

5 unchanged sentences

Property and equipment, net

expenses were $ 17,062 and $ 24,889 for the three months ended March 31, 2023 and 2022, respectively.

expenses were $ 40,472 and $ 46,688 for the six months ended June 30, 2023 and 2022, respectively.

8 — INTANGIBLE ASSET, NET

Intangible asset, net is as follows:

asset, net is as follows:

OF INTANGIBLE ASSETS

Customer relationship

accumulated amortization

of March 31, 2023, the future estimated amortization cost for intangible asset is as follows:

Intangible asset, net

expenses were $ 265,625 and nil for the six months ended June 30, 2023 and 2022, respectively.

of June 30, 2023, the future estimated amortization cost for intangible asset is as follows:

OF AMORTIZATION INTANGIBLE ASSET

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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 $ 12,497

are included in property and equipment, net as

of March 31, 2023 and December 31, 2022, respectively.

Right-of-use assets of these finance leases in the amount of $ 6,506 and $ 18,335 are included in property and equipment, net as

of June 30, 2023 and December 31, 2022, respectively.

lease expenses for lease payments are recognized on a straight-line basis over the lease term.

Finance lease costs include amortization,

which are recognized on a straight-line basis over the expected life of the leased assets, and interest expenses, which are recognized

following an effective interest rate method.

Leases with initial term of twelve months or less are not recorded on the consolidated balance

components of lease costs are as follows:

OF LEASE COSTS

For the Three Months Ended

For the Six Months Ended

Finance lease costs

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OF SUPPLEMENTAL INFORMATION RELATED TO THE COMPANY’S LEASES

For the Three Months Ended

For the Six Months Ended

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

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Operating leases

of March 31, 2023, the future maturity of lease liabilities is as follows:

of June 30, 2023, the future maturity of lease liabilities is as follows:

OF FINANCE LEASE AND OPERATING LEASE FUTURE MATURITY OF LEASE LIABILITIES

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The security deposits amounted to $ 339,052 and

$ 244,395 as of March 31, 2023 and December 31, 2022, respectively.

$ 244,395 as of June 30, 2023 and December 31, 2022, respectively.

10 — FACTORING LIABILITY

the newly acquired subsidiary of the Company, entered into a Factoring and Security Agreement ( the

“Factoring Agreement”) with The Southern Bank Company, an unrelated factor (the “Factor”), in 2017, for

the purpose of factoring certain accounts receivable.

Under the terms of the Factoring Agreement, the Company may offer for sale, and

the Factor may purchase in its sole discretion, certain accounts receivable of the Company (the “Purchased Receivable”).

The Factoring Agreement provided for a maximum of $ 850,000 in Purchased Receivable.

the newly acquired subsidiary of the Company, entered into a Factoring and Security Agreement (the “Factoring Agreement”)

with The Southern Bank Company, an unrelated factor (the “Factor”), in 2017, for the purpose of factoring certain accounts

Under the terms of the Factoring Agreement, the Company may offer for sale, and the Factor may purchase in its sole discretion,

certain accounts receivable of the Company (the “Purchased Receivable”).

The Factoring Agreement provided for a maximum of

$ 850,000 in Purchased Receivable.

accounts receivable is submitted to the Factor, and the Company receives 90 % of the face value of the accounts receivable by wire transfer.

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Factoring Agreement specifies that eligible accounts receivable is factored with recourse.

Under the terms of the recourse

provision, the Company is required to reimburse the Factor, upon demand, for Purchased Receivable that is not paid on time by the

The performance of all obligations and payments to the Factor is personally guaranteed by Prakash Sadasivam, CEO of

Sigmaways and Chief Strategy Officer (“CSO”) of the Company, and secured by all Sigmaways’ now owned and

hereafter assets and any sums maintained by the Factor that are identified as payable to the Company.

Under the terms of the recourse provision,

the Company is required to reimburse the Factor, upon demand, for Purchased Receivable that is not paid on time by the customers.

performance of all obligations and payments to the Factor is personally guaranteed by Prakash Sadasivam, CEO of Sigmaways and Chief Strategy

Officer (“CSO”) of the Company, and secured by all Sigmaways’ now owned and hereafter assets and any sums maintained

by the Factor that are identified as payable to the Company.

Factoring Agreement has an initial term of twelve months and automatically renews for successive twelve-month renewal periods unless

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relating to events of default that are customary for agreements of this type.

of March 31, 2023, there was $ 173,582 borrowed and outstanding under the Factoring Agreement .

There are various fees charged by the Factor, including initial discount purchase fee, factoring fee and interest expense.

three months ended March 31, 2023, the Company recorded approximately $ 22,695 in interest expense related to the Factoring

of June 30, 2023, there was $ 328,967 borrowed and outstanding under the Factoring Agreement.

There are various fees charged by the Factor,

including initial discount purchase fee, factoring fee and interest expense.

During the six months ended June 30, 2023, the Company recorded

$ 41,611 in interest expense related to the Factoring Agreement.

11 — INSURANCE PREMIUM FINANCING

January 2023, the Company entered into an insurance premium financing agreement with BankDirect Capital Finance for $ 389,035

at an annual interest rate of 16.04 %

for ten months from February 1, 2023, payable in ten monthly installments of principal and interest.

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

at an annual interest rate of 12.80 %

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

As of March 31, 2023 and December 31, 2022, the balance of the insurance

premium financing was $ 352,518 and nil , respectively.

During the three months ended March 31, 2023 and 2022, the interest incurred was

$ 5,304 and $ 4,255 , respectively.

January 2023, the Company entered into an insurance premium financing agreement with BankDirect Capital Finance for $ 389,035 at an annual

interest rate of 16.04 % for ten months from February 1, 2023, payable in ten monthly installments of principal and interest.

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.

of June 30, 2023 and December 31, 2022, the balance of the insurance premium financing was $ 239,785 and nil , respectively.

six months ended June 30, 2023 and 2022, the interest incurred was $ 18,033 and $ 14,185 , respectively.

12 — LONG-TERM DEBTS

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Sumitomo Mitsui Banking Corporation

JPY 100,000,000 (a)

JPY 100,000,000

12/28/2018 – 12/28/2023

Sumitomo Mitsui Banking Corporation

JPY 10,000,000 (a)(b)

JPY 10,000,000

12/30/2019 – 12/30/2026

9 unchanged sentences

Higashi-Nippon Bank

JPY 30,000,000 (a)

JPY 30,000,000

3/31/2022 – 3/31/2025

First Home Bank

$ 350,000 (d)

4/18/2019 – 4/18/2029

2 unchanged sentences

Small Business Administration

$ 350,000 (d)

5/30/2020 – 5/30/2050

4 unchanged sentences

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.

The bond is guaranteed by Resona Bank, Limited.

These debts are guaranteed by Prakash Sadasivam, CEO of Sigmaways and CSO of the Company, and secured by all assets of Sigmaways.

expense for long-term debts was $ 11,841 and $ 7,016 for the three months ended March 31, 2023 and 2022, respectively.

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

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

bond is guaranteed by Resona Bank, Limited.

debts are guaranteed by Prakash Sadasivam, CEO of Sigmaways and CSO of the Company, and secured by all assets of Sigmaways.

expense for long-term debts was $ 22,810 and $ 14,676 for the six months ended June 30, 2023 and 2022, respectively.

of June 30, 2023, future minimum loan payments are as follows:

SCHEDULE OF FUTURE MINIMUM LOAN PAYMENTS

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Remaining of 2023

NOTE 12 — INCOME

HeartCore USA, Sigmaways and HeartCore Financial, incorporated in the United

States, are subject to federal income tax at 21 % statutory tax

rate with respect to the profit generated from the United States.

13 — INCOME TAXES

USA, Sigmaways and HeartCore Financial, incorporated in the United States, are subject to federal income tax at 21 % statutory tax rate

with respect to the profit generated from the United States.

is a company incorporated in Amsterdam in Netherlands in November 2019.

7 unchanged sentences

After the general tax reduction, the net federal tax rate is 15 %.

The provincial and territorial lower and higher tax rates in British Columbia are 2 %

respectively.

The Company conducts its major businesses in Japan and is subject to tax

in this jurisdiction.

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 tax rate of approximately 34.59 % and 30.62 % for the three months ended March 31, 2023 and 2022, respectively.

the three months ended March 31, 2023 and 2022, the Company’s income tax expense (benefit) are as follows:

The provincial and territorial lower

and higher tax rates in British Columbia are 2 % and 12 %, respectively.

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

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 tax rate

of approximately 34.59 % and 30.62 % for the six months ended June 30, 2023 and 2022, respectively.

the six months ended June 30, 2023 and 2022, the Company’s income tax expense are as follows:

SCHEDULE OF INCOME TAX EXPENSES

For the Three Months Ended

Income tax expense (benefit)

effective tax rate was 26.78 % and 0.05 % for the three months ended March 31, 2023 and 2022, respectively.

For the Six Months Ended

Income tax expense

effective tax rate was 4.78 % and ( 0.25 ) % for the six months ended June 30, 2023 and 2022, respectively.

14 – STOCK-BASED COMPENSATION

May 2016, the Company granted 507

units stock options to its employees each to acquire one share of common shares of HeartCore Japan (an equivalent of approximately 1,494

shares of common shares of HeartCore USA) at JPY 10

(approximately $ 0.09 )

All options are 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.

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.

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

(an equivalent of approximately 1,494 shares of common shares of HeartCore USA) at JPY 10 (approximately $ 0.09 ) each.

All options are

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

2 unchanged sentences

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 three months ended March 31, 2022 .

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

In the same period, the share repurchase

1 unchanged sentence

from exercise of stock options.

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

March 31, 2022:

following table summarizes the Company’s stock option activity for the stock options issued in 2016 for the six months ended June

SCHEDULE OF UNVESTED STOCK OPTION

1 unchanged sentence

Vested and exercised

Issued and unvested as of March 31, 2022

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

shares of common shares are authorized for issuance.

Issued and unvested as of June 30, 2022

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 shares of common shares are authorized for issuance.

On December 25, 2021, the Company awarded options to purchase

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

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

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

February 3, 2023, the Company awarded options to purchase 100,000 shares

of common shares at an exercise price of $ 1.17

per share to an employee of the Company .

The options vest 50 %

on the grant date and February 1, 2024, respectively, with the expiration date on February 3, 2033.

following table summarizes the stock options activity and related information for the three months ended March 31, 2023 and 2022:

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 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,

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

an employee of the Company.

The options vest 50 % on the grant date and February 1, 2024, respectively, with the expiration date on February

following table summarizes the stock options activity and related information for the six months ended June 30, 2023 and 2022:

SCHEDULE OF STOCK OPTION ACTIVITY

As of January 1, 2022

As of March 31, 2022

As of June 30, 2022

As of January 1, 2023

As of March 31, 2023

Vested and exercisable as of March 31, 2023

The Company calculated the fair value of options granted

in the three months ended March 31, 2023 using the Black-Scholes model.

Significant assumptions used in the valuation include expected

volatility, risk-free interest rate, dividend yield and expected exercise term.

For the three months ended March 31, 2023 and 2022,

the Company recognized stock-based compensation related to options of $ 184,335 and $ 292,812 , respectively.

The outstanding unamortized stock-based

compensation related to options was $ 881,378 (which will be recognized through August 2026) as of March 31, 2023.

As of June 30, 2023

Vested and exercisable as of June 30, 2023

Company calculated the fair value of options granted in the six months ended June 30, 2023 using the Black-Scholes model.

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

the three and six months ended June 30, 2023, the Company recognized stock-based compensation related to options of $ 150,481 and $ 334,816 ,

respectively.

For the three and six months ended June 30, 2022, the Company recognized stock-based compensation related to options of

$ 284,938 and $ 577,750 , respectively.

The outstanding unamortized stock-based compensation related to options was $ 730,897 (which will

be recognized through August 2026) as of June 30, 2023.

Stock Units (“RSUs”)

3 unchanged sentences

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

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

granted 83,333

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 .

On March 22, 2023, the Company entered into

agreements with employees and service providers of Sigmaways and granted 671,350

RSUs pursuant to the 2021 Plan.

March 22, 2023, the Company entered into agreements with employees and service providers of Sigmaways and granted 671,350 RSUs pursuant

to the 2021 Plan.

The RSUs were fully vested upon issuance.

The fair value of the RSUs at grant date was $ 691,491 .

following table summarizes the RSUs activity for the three months ended March 31, 2023 and 2022:

following table summarizes the RSUs activity for the six months ended June 30, 2023 and 2022:

SCHEDULE OF RESTRICTED STOCK UNITS

4 unchanged sentences

Unvested as of January 1, 2022

Unvested as of March 31, 2022

Unvested as of June 30, 2022

Unvested as of January 1, 2023

Unvested as of March 31, 2023

the three months ended March 31, 2023 and 2022, the Company recognized stock-based compensation related to RSUs of $ 730,893 and $ 129,352 ,

Unvested as of June 30, 2023

the three and six months ended June 30, 2023, the Company recognized stock-based compensation related to RSUs of $ 28,684 and $ 759,577 ,

respectively.

The outstanding unamortized stock-based compensation related to RSUs was $ 187,794 (which will be recognized through February

2026) as of March 31, 2023.

For the three and six months ended June 30, 2022, the Company recognized stock-based compensation related to RSUs of $ 181,724

and $ 311,076 , respectively.

The outstanding unamortized stock-based compensation related to RSUs was $ 159,110 (which will be recognized

through February 2026) as of June 30, 2023.

15 – SHAREHOLDERS’ EQUITY

1 unchanged sentence

shares, par value of $ 0.0001 per share.

During 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 aggregate net proceeds of $ 220,572

in a private placement, including 30,000

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

On 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.

Those costs were charged against the proceeds from the offering.

On 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 13).

On February 1, 2023, 2,500,000

shares of common shares were issued for the acquisition of 51 %

of the outstanding shares of Sigmaways and its subsidiaries with fair value of $ 3,150,000

(also see NOTE 16).

As of March 31, 2023 and December 31, 2022,

there were 20,842,690

and 17,649,886

shares of common shares issued and outstanding, respectively.

preferred shares were issued and outstanding as of March 31, 2023 and December 31, 2022.

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 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 14).

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

Repurchase Program

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

the Company is authorized to repurchase up to $ 3.5 million of its outstanding common shares.

The timing and amount of repurchases under

the program are determined by the Company’s management based on its evaluation of market conditions and other factors.

has no set termination date and may be suspended or discontinued by at any time.

the period from June 1, 2022 through June 30, 2022, the Company repurchased 558,809

shares of common shares at an average price of

per share totaling approximately $ 1.3

million (including commissions) under the 2022

Share Repurchase Program.

February 1, 2023, 2,500,000 shares of common shares were issued for the acquisition of 51 % of the outstanding shares of Sigmaways and

its subsidiaries with fair value of $ 3,150,000 (also see NOTE 17).

of June 30, 2023 and December 31, 2022, there were 20,842,690 and 17,649,886 shares of common shares issued and outstanding, respectively.

preferred shares were issued and outstanding as of June 30, 2023 and December 31, 2022.

16 – NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is calculated on

the basis of weighted average outstanding common shares.

Diluted net income (loss) per share is computed on the basis of basic weighted

average outstanding common shares adjusted for the dilutive effect of stock options, RSUs and other dilutive securities.

Common shares

equivalents 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 and unvested RSUs, and are not included in the calculation of diluted income (loss) per share

if their effect would be anti-dilutive.

computation of basic and diluted net income (loss) per share for the three months ended March 31, 2023 and 2022 is as follows:

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

Diluted net income (loss) per share

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

and other dilutive securities.

Common shares equivalents 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 and unvested RSUs, and are not included in

the calculation of diluted income (loss) per share if their effect would be anti-dilutive.

computation of basic and diluted net income (loss) per share for the three and six months ended June 30, 2023 and 2022 is as follows:

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

For the Three Months Ended

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

Net income (loss) per share - basic and diluted:

Allocation of net income (loss) attributable to HeartCore Enterprises, Inc.

common shareholders used in calculating net income

(loss) per common share

common shareholders used in calculating net income (loss) per common share

$ ( 911,800 )

$ ( 1,703,641 )

$ ( 3,282,092 )

Net income (loss) attributable to common shareholders

( 1,703,641 )

( 3,282,092 )

Weighted average number of common shares outstanding used in calculating net income (loss) per share

1 unchanged sentence

Net income (loss) per share - basic and diluted

For the three months ended March 31, 2023 and 2022,

the weighted average common shares outstanding are the same for basic and diluted net income (loss) per share calculations, as the inclusion

of common share equivalents would have an anti-dilutive effect.

the three and six months ended June 30, 2023 and 2022, the weighted average common shares outstanding are the same for basic and diluted

net income (loss) per share calculations, as the inclusion of common share equivalents would have an anti-dilutive effect.

17 – BUSINESS COMBINATION

1 unchanged sentence

51 % of the outstanding shares of Sigmaways, Inc.

(“Sigmaways”), a company incorporated under the laws of the State of

California, and its subsidiaries.

The Sigmaways Agreement was further amended on December 23, 2022 and February 1, 2023,

respectively, and the transaction was closed on February 1, 2023.

Sigmaways and its

subsidiaries are primarily engaged in the business of developing and sales of software in the United States.

The Company aimed to

expand the business of software development and sales in the United States through this acquisition.

The purchase consideration was

$ 4,150,000 , consisted of $ 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.

The total purchase price

was allocated to the tangible and identifiable intangible assets acquired and liabilities and non-controlling interest based on their

estimated fair values as of the acquisition date.

The excess of the purchase price over those fair values is recorded as goodwill.

recorded in the business combination may change during the measurement period, which is a period not to exceed one year from the date

of acquisition, as additional information about conditions existing at the acquisition date becomes available.

The purchase price was allocated on the acquisition date as follows:

(“Sigmaways”), a company incorporated under the laws of the State of California,

and its subsidiaries.

The Sigmaways Agreement was further amended on December 23, 2022 and February 1, 2023, respectively, and the transaction

was closed on February 1, 2023.

Sigmaways and its subsidiaries are primarily engaged in the business of developing and sales of software

in the United States.

The Company aimed to expand the business of software development and sales in the United States through this acquisition.

The purchase consideration was $ 4,150,000 , consisted of $ 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.

total purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities and non-controlling interest

based on their estimated fair values as of the acquisition date.

The excess of the purchase price over those fair values is recorded

Amounts recorded in the business combination may change during the measurement period, which is a period not to exceed one

year from the date of acquisition, as additional information about conditions existing at the acquisition date becomes available.

purchase price was allocated on the acquisition date as follows:

OF BUSINESS PURCHASE PRICE ALLOCATION

intangible asset

tax liabilities

Current assets

Acquired intangible asset

Non-current assets

Current liabilities

( 1,146,900 )

Non-controlling

Deferred tax liabilities

( 1,428,000 )

purchase consideration

The results of operations, financial position and

cash flows of Sigmaways and its subsidiaries have been included in the Company’s unaudited consolidated financial statements since

the date of acquisition.

Sigmaways and its subsidiaries contributed revenues and net loss of $ 1,631,619 and $ 151,534 , respectively, to

the Company from February 1, 2023 to March 31, 2023.

Pro forma results of operations for the business combination

have not been presented because they are not material to the unaudited consolidated statements of operations and comprehensive income

(loss) for the three months ended March 31, 2023 and 2022.

The Company’s policy is to perform its annual

impairment testing on goodwill for its reporting unit on December 31 of each fiscal year or more frequently if events or changes in circumstances

indicate that an impairment may exist.

The Company did not recognize any impairment loss on goodwill during the three months ended March

Non-current liabilities

Non-controlling interest

( 3,190,000 )

Total purchase consideration

results of operations, financial position and cash flows of Sigmaways and its subsidiaries have been included in the Company’s

unaudited consolidated financial statements since the date of acquisition.

Sigmaways and its subsidiaries contributed revenues and net

loss of $ 3,926,572 and $ 378,159 , respectively, to the Company from February 1, 2023 to June 30, 2023.

forma results of operations for the business combination have not been presented because they are not material to the unaudited consolidated

statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2023 and 2022.

Company’s policy is to perform its annual impairment testing on goodwill for its reporting unit on December 31 of each fiscal year

or more frequently if events or changes in circumstances indicate that an impairment may exist.

The Company did not recognize any impairment

loss on goodwill during the six months ended June 30, 2023.

18 - SUBSEQUENT EVENTS

On May 2, 2023, the Company entered into a

promissory note with a third party in the amount of $ 300,000 .

Pursuant to the terms of the note, the note is bearing interest at 8 %

per annum, unsecured and due 180 days from the date of issuance.

Upon default, the note is bearing default interest at 12 %

July 25, 2023, the Company obtained a five-year term loan in the amount of JPY 30,000,000 (approximately $ 207,000 ) from the Shoko Chukin

Bank, Ltd., with a floating interest rate of Tokyo Interbank Offered Rate plus 1.950 % per annum.

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

What changed 10-Q

Item 1. Financial Statements