What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-14 compared with 2023-05-22 · 400 added, 570 removed, 194 unchanged (83% of the section changed)

39 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.

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.

2022, we started the GO IPO consulting business, which supports Japanese companies seeking to list on Nasdaq and NYSE in the United

As of August 14, 2023, we have entered into consulting agreements with 10 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 or JPY1 per share.

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.

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 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

As of June 30, 2023, our sales and marketing organization

was comprised of 16 employees, including our field sales organization, which maintains a physical sales presence in the Japanese

software market.

Using our go-to-market strategy, we believe we have made significant contributions in Japan and have established a diversified

revenue and customer base.

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

As of June 30, 2023, our combined business units (customer experience management business unit and digital

transformation business unit) had 923 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.

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 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

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

2 unchanged sentences

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.

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

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;

support services to remove problematic accounting accounts upon listing;

of requested documents into English;

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

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

of accounting data from Japanese standards to U.S.

for rYojbaba’s negotiations with the audit firm;

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

of English web page;

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

43 unchanged sentences

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

Note Purchase Agreement

May 2, 2023, the Company entered into a 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”).

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.

“ZEROSPO Maturity Date” means the earlier of:

The date 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;

The 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;

The date which is 180 days following May 2, 2023.

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, until paid.

May 29, 2023, the Company entered into a Common Stock Sales Agreement (the “Sutter Agreement”) by and between the

Company and Sutter Securities, Inc.

(the “Sales Agent”).

Pursuant to the terms of the Sutter Agreement, the parties agreed

that, from time to time during the term of the Sutter Agreement, the Company would issue and sell through the Sales Agent common stock

of the Company having an aggregate offering price of up to $5,000,000 (the “Placement Shares”).

The issuance and sale of

the Placement Shares to or through the Sales Agent will be effected pursuant to the Company’s effective shelf registration statement

333-270503), which was declared effective on April 12, 2023 (the “Registration Statement”).

The Company filed a

prospectus supplement to the Registration Statement relating to the offering of the Placement Shares pursuant to the Agreement.

notification by the Company that it wishes to issue and sell the Placement Shares through the Sales Agent, as provided in the Sutter

Agreement, the Sales Agent will use its commercially reasonable efforts consistent with its normal trading and sales practices and applicable

laws, rules and regulations, including rules of The Nasdaq Stock Market (“Nasdaq”), for the period specified in the notice,

to sell such shares up to the amount specified by the Company and otherwise in accordance with the terms of the notice.

Subject to the

terms of the notice, the Sales Agent may sell such shares by any method permitted by law deemed to be an “at the market”

offering as defined in Rule 415 under the Securities Act of 1933, as amended.

Sales Agent has the right by giving notice as specified in the Sutter Agreement at any time to terminate the Sutter Agreement if (i)

any Material Adverse Change (as defined in the Sutter Agreement), or any development that could reasonably be expected to result in a

Material Adverse Change has occurred that, in the reasonable judgment of the Sales Agent, may materially impair the ability of the Sales

Agent to sell the shares under the Sutter Agreement, (ii) the Company shall have failed, refused or been unable to perform any agreement

on its part to be performed hereunder;

provided, however, in the case of any failure of the Company to deliver (or cause another person

to deliver) certain certifications, opinions, or letters, the Sales Agent’s right to terminate shall not arise unless such failure

to deliver (or cause to be delivered) continues for more than 30 days from the date such delivery was required, (iii) any other condition

of the Sales Agent’s obligations under the Sutter Agreement is not fulfilled, or (iv) any suspension or limitation of trading in

the shares under the Sutter Agreement or in securities generally on Nasdaq shall have occurred (including automatic halt in trading pursuant

to market-decline triggers, other than those in which solely program trading is temporarily halted), or a major disruption of securities

settlements or clearing services in the United States shall have occurred, or minimum prices for trading have been fixed on Nasdaq.

addition, each of the Company and the Sales Agent has the right, by giving 10 days’ notice as specified in the Sutter Agreement,

to terminate the Sutter Agreement in its sole discretion at any time after the date of the Sutter Agreement.

earlier terminated, the Sutter Agreement will automatically terminate upon the earlier to occur of (i) issuance and sale of all of the

Placement Shares to or through the Sales Agent on the terms and subject to the conditions set forth in the Sutter Agreement, and (ii)

the expiration of the Registration Statement on the third anniversary of the initial effective date of the Registration Statement pursuant

to Rule 415(a)(5) under the Securities Act.

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

The Company has not received any fund from Sutter Agreement as of the date of this filing.

of Heather Neville as a Director

May 30, 2023, the Board of Directors (the “Board”) of HeartCore Enterprises, Inc.

(the “Company”) expanded

the size of the Board from eight persons to nine persons, and named Heather Marie Neville to serve as a member of the Board, to fill

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

Director Agreement

June 1, 2023, the Company and Ms.

Neville entered into a Director Agreement.

The Director Agreement provides that Ms.

Neville will be

compensated as follows:

Neville will be paid the sum of $60,000 annually for her service as a director of the Company, to be paid $15,000 each calendar quarter,

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

appropriately prorated.

the term of the Director Agreement, the Company will reimburse Ms.

Neville for all reasonable out-of-pocket expenses incurred by her

in attending any in-person meetings, provided that Ms.

Neville complies with the generally applicable policies, practices and procedures

of the Company for submission of expense reports, receipts or similar documentation of such expenses.

Any reimbursements for allocated

expenses (as compared to out-of-pocket expenses in excess of $500) must be approved in advance by the Company.

Director Agreement contains customary confidentiality provisions, and customary provisions related to Company ownership of intellectual

property conceived or made by Ms.

Neville in connection with the performance of her duties under the Director Agreement (i.e., a “work-made-for-hire”

Director Agreement provides that, during the term (which continues as long as Ms.

Neville is serving as a director of the Company), Ms.

Neville is entitled to indemnification and insurance coverage for officers’ liability, fiduciary liability and other liabilities

arising out of her position with the Company in any capacity, in an amount not less than the highest amount available to any other director,

and such coverage and protections, with respect to the various liabilities as to which Ms.

Neville has been customarily indemnified prior

to termination of employment, shall continue for at least six years following the end of the term.

Any indemnification agreement entered

into between the Company and Ms.

Neville will continue in full force and effect in accordance with its terms following the termination

of the applicable agreement.

Director Agreement contains customary representations and warranties by Ms.

Neville, relating to the Director Agreement, and contains

other customary miscellaneous provisions relating to waivers, assignments, third party rights, survival of provisions following termination,

severability, notices, waiver of jury trials and other provisions.

the three months ended June 30, 2023 and 2022, we generated revenues of $5,095,373 and $2,670,297, respectively, and reported net loss

of $1,022,846 and $1,703,641, respectively.

the six months ended June 30, 2023 and 2022, we generated revenues of $13,829,523 and $4,946,298, respectively, and reported net income

of $785,191 and net loss of $3,282,092, respectively, and cash flows used in operating activities of $1,368,562 and $2,093,867, respectively.

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

noted in our unaudited consolidated financial statements, as of June 30, 2023, we had an accumulated deficit of $9,603,090.

of Operations

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.

the Three Months Ended March 31,

and administrative expenses

and development expenses

of Results of Operations for the Three Months Ended June 30, 2023 and 2022

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

ended June 30, 2023 and 2022, respectively, and provides information regarding the dollar and percentage increase (or decrease)

during such periods.

For the Three Months Ended June 30,

Cost of Revenues

Operating expenses:

Selling expenses

General and administrative expenses

Research and development expenses

Total operating expenses

Loss from operations

income (expenses)

Other expenses

Loss before income tax provision

tax expense (benefit)

income (loss)

Income tax expense (benefit)

net loss attributable to non-controlling interest

income (loss) attributable to HeartCore Enterprises, Inc.

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

Net loss attributable to HeartCore Enterprises, Inc.

$ (1,703,641 )

Our total revenues increased by $2,425,076, or 90.8%, to $5,095,373 for

the three months ended June 30, 2023 from $2,670,297 for the three months ended June 30, 2022, mainly attributable to (i) an increased

revenue of $2,294,953 from customized software development and services as a result of acquisition of Sigmaways and its subsidiaries on

February 1, 2023;

(ii) an increased revenue of $189,088 from GO IPO consulting services as the Company obtained more IPO consulting customers

Our total costs of revenues increased by $2,249,642, or 168.2%, to $3,586,938

for the three months ended June 30, 2023 from $1,337,296 for the three months ended June 30, 2022, in light of the increase in sales in

GO IPO consulting services and customized software development and services.

total gross profit increased by $175,434, or 13.2%, to $1,508,435 for the three months ended June 30, 2023 from $1,333,001 for the three

months ended June 30, 2022, mainly attributable to (i) the increased gross profit of $336,870 from maintenance and support services,

as we terminated some subcontractors in supporting service, as part of our effect to reduce costs;

(ii) the increased gross profit of

$485,731 from customized software development and services as a result of acquisition of Sigmaways and its subsidiaries on February 1,

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,

offset by (iii) the decreased gross profit of $387,651 from sales of on-premise software, as we incurred costs of approximately

$184,000 to purchase third-party software to be included in the CMS sale, per certain customers’ request in the current period;

and (iv) the decreased gross profit of $236,103 from GO IPO consulting

Our overall gross profit margin decreased by 20.3% to 29.6% for the three months ended June 30, 2023, from 49.9% for the three months

ended June 30, 2022.

selling expenses decreased by $240,774, or 33.0%, to $488,062 for the three months ended June 30, 2023 from $728,836 for the three

months ended June 30, 2022, primarily attributable to a decrease of $371,413 in advertising expense, as the company spent heavily on IR and

PR in the U.S.

immediately after listing in Nasdaq in early 2022;

offset by an increase of $82,002 in stock-based compensation for

a percentage of revenues, our selling expenses accounted for 9.6% and 27.3% of our total revenues for the three months ended June 30,

2023 and 2022, respectively.

and Administrative Expenses

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.

Our general and administrative expenses increased by $597,572, or 32.3%,

to $2,447,887 for the three months ended June 30, 2023 from $1,850,315 for the three months ended June 30, 2022, primarily attributable

to (i) an increase of $546,302 in salaries and welfare due to a company-wide wage increase and additional staffs employed by Sigmaways

and its subsidiaries;

(ii) an increase of $114,129 in office, utility and other expenses, an increase of $154,542 in depreciation and

amortization expenses, and an increase of $65,125 in rent expenses, mostly due to the acquisition of Sigmaways and its subsidiaries as

well as the overall business expansion;

offset by (iii) a decrease of $383,879 in stock-based compensation as the Company awarded options

and RSUs to employees and service providers in early 2022 when the Company finished going public.

a percentage of revenues, general and administrative expenses were 48.0% and 69.3% of our revenues for the three months ended June 30,

2023 and 2022, respectively.

and Development Expenses

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 .

research and development expenses decreased by $377,620, or 90.5%, to $39,608 for the three months ended June 30, 2023 from $417,228

for the three months ended June 30, 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.

a percentage of revenues, research and development expenses were 0.8% and 15.6% of our revenues for the three months ended June 30, 2023

and 2022, respectively.

Our other expenses primarily include changes in fair value of investments

in marketable securities, 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 expenses increased by $146,442, or 468.1%, to $177,726 in the three

months ended June 30, 2023 from $31,284 in the three months ended June 30, 2022, primarily attributable to a decrease of $229,022 in changes

in fair value of investments in marketable securities and a decrease of $27,258 in changes in fair value of investments in warrants, offset

by an increase of $101,023 in other income, primarily attributable to the CMS development subsidy granted by the Japanese government.

Tax Expense (Benefit)

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)

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.

income tax benefit was $622,002 in the three months ended June 30, 2023, as compared to the income tax expense of $8,979 in the

three months ended June 30, 2022, as the Company started to consider net operating losses carried forward from previous years in the

current period income tax calculation and recognized an income tax benefit in the current period to offset the income tax expense

recognized in the prior quarter.

a result of the foregoing, we reported a net loss of $1,022,846 for the three months ended June 30, 2023, representing a $680,795, or

40.0%, decreased from a net loss of $1,703,641 for the three months ended June 30, 2022.

Loss Attributable to Non-controlling Interest

We owned 51% equity ownership interest of Sigmaways and its subsidiaries

as of June 30, 2023.

Accordingly, we recorded net loss attributable to the non-controlling interest of $111,046 in the three months ended

June 30, 2023.

Loss Attributable to HeartCore Enterprises, Inc.

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

of $911,800 for the three months ended

June 30, 2023, representing a $791,841 or 46.5%, decreased from a net loss attributable to HeartCore Enterprises, Inc.

of $1,703,641

for the three months ended June 30, 2022.

of Results of Operations for the Six Months Ended June 30, 2023 and 2022

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

June 30, 2023 and 2022, respectively, and provides information regarding the dollar and percentage increase (or decrease) during

such periods.

For the Six Months Ended June 30,

Cost of Revenues

Operating expenses:

Selling expenses

General and administrative expenses

Research and development expenses

Total operating expenses

Income (loss) from operations

Other expenses

Income (loss) before income tax provision

Income tax expense

Net income (loss)

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.

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

$ (3,282,092 )

Our total revenues increased by $8,883,225, or 179.6%, to $13,829,523 for

the six months ended June 30, 2023 from $4,946,298 for the six months ended June 30, 2022, mainly attributable to (i) the increased revenue

of $5,381,839 from GO IPO consulting services as the Company obtained more IPO consulting customers in 2023 and received warrants from

its customers as noncash consideration from consulting services;

(ii) the increased revenue of $3,926,572 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

$456,944 in revenue from sales of on-premise software, primarily due to the weak perform of a significant distributor in the current period.

total costs of revenues increased by $4,295,352, or 179.5%, to $6,688,004 for the six months ended June 30, 2023 from $2,392,652 for

the six months ended June 30, 2022, in light of the increase in sales in GO IPO consulting services and customized software development

and services.

total gross profit increased by $4,587,873, or 179.7%, to $7,141,519 for the six months ended June 30, 2023 from $2,553,646 for the

six months ended June 30, 2022, mainly attributable to (i) the increased gross profit of $4,282,835 from GO IPO consulting services

as the Company obtained more IPO consulting customers in 2023 and received warrants from its customers as noncash consideration from

consulting services;

(ii) the increased gross profit of $709,607 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 gross

profit of $914,590 from sales of on-premise software due to the overall market competition.

Our overall gross profit margin remained 51.6%

for the six months ended June 30, 2023 and 2022.

selling expenses increased by $121,950 or 13.0%, to $1,056,704 for the six months ended June 30, 2023 from $934,754 for the six

months ended June 30, 2022, primarily attributable to an increase of $403,378 in stock-based compensation for sales staff, offset by

the decrease of $340,712 in advertising expenses, as the company spent heavily on IR and PR in the U.S.

immediately after listing in Nasdaq in early 2022.

a percentage of revenues, our selling expenses accounted for 7.6% and 18.9% of our total revenues for the six months ended June 30, 2023

and 2022, respectively.

and Administrative Expenses

Our general and administrative expenses increased by $813,846, or 18.8%,

to $5,133,094 for the six months ended June 30, 2023 from $4,319,248 for the six months ended June 30, 2022, primarily attributable to

(i) an increase of $576,859 in salaries and welfare, an increase of $310,796 in office, utility and other expenses, an increase of $250,646

in depreciation and amortization expenses, and an increase of $115,807 in rent expenses, mostly due to the acquisition of Sigmaways and

its subsidiaries as well as the overall business expansion;

offset by (ii) a decrease of $271,771 in listing-related expenses as we finished

the process of going public in early 2022;

and (iii) a decrease of $281,522 in stock-based compensation as the Company awarded options

and RSUs to employees and service providers in early 2022 when the Company finished going public.

a percentage of revenues, general and administrative expenses were 37.1% and 87.3% of our revenues for the six months ended June 30,

2023 and 2022, respectively.

and Development Expenses

Our research and development expenses decreased by $406,255, or 77.3%, to

$119,232 for the six months ended June 30, 2023 from $525,487 for the six months ended June 30, 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, offset by an increase of $57,839 in stock-based compensation for research and development staff.

a percentage of revenues, research and development expenses were 0.9% and 10.6% of our revenues for the six months ended June 30, 2023

and 2022, respectively.

Other Expenses

other expenses primarily include changes in fair value of investments in marketable securities and 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 expenses decreased by $40,234, or 83.7%, to $7,852 in the six months ended June 30, 2023 from $48,086 in the six months ended

June 30, 2022, primarily attributable to (i) an increase of $166,107 in changes in fair value of investments in warrants;

increase of $98,551 in other income, primarily attributable to the CMS development subsidy granted by the Japanese government;

by (iii) a decrease of $229,022 in changes in fair value of investments in marketable securities.

income tax expense was $39,446 in the six months ended June 30, 2023, as compared to $8,163 in the six months

ended June 30, 2022, mainly due to the net income before income tax of $824,637 in the current period, as compared to a net loss before

income tax of $3,273,929 in the prior period.

Income (Loss)

a result of the foregoing, we reported a net income of $785,191 for the six months ended June 30, 2023, representing a $4,067,283, or

123.9%, increase from a net loss of $3,282,092 for the six months ended June 30, 2022.

Loss Attributable to Non-controlling Interest

owned 51% equity ownership interest of Sigmaways and its subsidiaries as of June 30, 2023.

Accordingly, we recorded net loss

attributable to the non-controlling interest of $185,298 in the six months ended June 30, 2023.

Income (Loss) Attributable to HeartCore Enterprises, Inc.

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

of $970,489 for the six months ended

June 30, 2023, representing a $4,252,581, or 129.6%, increase from a net loss attributable to HeartCore Enterprises, Inc.

of $3,282,092

for the six months ended June 30, 2022.

and Capital Resources

of June 30, 2023, we had $4,238,741 in cash, as compared to $7,177,326 as of December 31, 2022.

As of June 30, 2023, our working capital

was $3,487,961, as compared to $4,887,444 as of December 31, 2022.

We also had $2,812,337 in accounts receivable as of June 30, 2023.

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

by customers, as well as Sigmaways’s accounts receivable related to customized

software development and services.

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

the Three Months Ended

Net cash used in operating activities

For the Six Months Ended

Net cash flows used in operating activities

$ (1,368,562 )

$ (2,093,867 )

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.

Net cash flows used in investing activities

Net cash flows provided by (used in) financing activities

Effect of exchange rate changes

Net change in cash and cash equivalents

Cash and cash equivalents, beginning of the period

Cash and cash equivalents, end of the period

cash flows used in operating activities was $1,368,562 for the six months ended June 30, 2023, as compared to $2,093,867 net cash flows

used in operating activities for the six months ended June 30, 2022, primarily consisting of the following:

income of $785,191 for the six months ended June 30, 2023.

Changes in fair value of investments in warrants of $166,107 and warrants

received as non-cash consideration of $4,009,335 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.

An increase of $596,312 in accounts receivable in light of the increase

Offset by an increase of $810,639 in deferred revenue, due to the upfront

payment received for long-term service contracts.

by stock-based compensation of $1,094,393 for the six months ended June 30, 2023, as we granted equity rewards to our employees and service

providers in the first quarter of 2023.

Offset by depreciation and amortization expenses of $360,097, mainly because

we acquired Sigmaways and its subsidiaries on February 1, 2023 and recognized amortization expense for the intangible asset identified

through the acquisition.

Offset by the loss from changes in fair value of investments in marketable

securities of $229,022 due to the decrease in customers’ stock price from the warrant exercise date to the balance sheet date.

by an increase of $106,625 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.

cash flows used in investing activities amounted to $1,181,646 for the six months ended June 30, 2023, as compared to net cash flows

used in investing activities of $9,455 for the six months ended June 30, 2022 .

Net cash flows used in investing activities for the six months ended June 30, 2023 primarily consisted of (i) payment for acquisition

of Sigmaways and its subsidiaries, net of cash acquired, of $724,910;

(ii) advance on notes receivable of $300,000;

and (iii) purchases

of property and equipment of $180,451.

cash flows used in financing activities amounted to $243,897 for the six months ended June 30, 2023, as compared to net cash flows provided

by financing activities of $11,651,622 for the six months ended June 30, 2022.

Net cash flows used in financing activities primarily

consisted of repayment of $411,923 for long-term debts, and repayment of $149,250 for insurance premium financing, offset by the net

proceeds of $328,967 from the factoring arrangement.

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

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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

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

Ended December 31,

of June 30, 2023, future minimum lease payments under the non-cancelable lease agreements are as follows:

Year Ended December 31,

Finance Leases

Operating Leases

Remaining of 2023

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current portion

lease liabilities

Long-Term Debts

Non-current lease liabilities

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

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

Ended December 31,

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

Year Ended December 31,

Remaining of 2023

Sheet Arrangements

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

did not have any off-balance sheet arrangements as of June 30, 2023.

Accounting Policies and Estimates

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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.

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.

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.

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

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

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from Software Development and Other Miscellaneous Services

Company provides customers with software development and support service pursuant to their specific requirements, which primarily compose

Company provides customers with software development and support services pursuant to their specific requirements, which primarily compose

of consulting, integration, training, custom application, and workflow development.

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

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.

from Customized Software Development and Services

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.

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 contracts 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

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.

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

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

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.

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