What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-13 compared with 2023-08-14 · 280 added, 196 removed, 837 unchanged (36% of the section changed)

2 unchanged sentences

BALANCE SHEETS

September 30,

Current assets:

4 unchanged sentences

Note receivable

Current portion of long-term note receivable

Due from related party

6 unchanged sentences

Long-term investments in warrants

Long-term note receivable

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 June 30, 2023 and December 31, 2022, respectively)

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

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

Additional paid-in capital

10 unchanged sentences

ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

Ended September 30,

For the Nine Months

Ended September 30,

Cost of revenues

4 unchanged sentences

Total operating expenses

Income (loss) from operations

Loss from operations

( 1,787,745 )

7 unchanged sentences

Other expenses

Total other expenses

Income (loss) before income tax provision

Total other income (expenses)

Loss before income tax provision

( 2,521,720 )

1 unchanged sentence

( 1,697,083 )

( 5,263,932 )

Income tax expense (benefit)

Net income (loss)

( 2,541,133 )

1 unchanged sentence

( 1,755,942 )

( 5,253,026 )

net loss attributable to non-controlling interest

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

Net loss attributable to HeartCore Enterprises, Inc.

$ ( 2,307,220 )

1 unchanged sentence

$ ( 1,336,731 )

Other comprehensive income:

$ ( 5,253,026 )

Other comprehensive income (loss):

Foreign currency translation adjustment

Total comprehensive income (loss)

Total comprehensive loss

( 2,631,876 )

( 1,842,229 )

( 1,841,186 )

( 4,824,908 )

comprehensive loss attributable to non-controlling interest

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

Comprehensive loss attributable to HeartCore Enterprises, Inc.

$ ( 2,396,782 )

1 unchanged sentence

$ ( 1,418,834 )

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

$ ( 4,824,908 )

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

Weighted average common shares outstanding

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)

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

Comprehensive

Income (Loss)

Common Shares

Treasury Shares

THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

Accumulated Other

Total Shareholders’

Number of Shares

Comprehensive

Income (Loss)

Equity (Deficit)

Balance, December 31, 2021

$ ( 3,896,113 )

$ ( 558,952 )

( 1,578,451 )

Foreign currency translation adjustment

3 unchanged sentences

Balance, March 31, 2022

( 5,474,564 )

( 1,703,641 )

Foreign currency translation adjustment

1 unchanged sentence

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

Foreign currency translation adjustment

Stock-based compensation

Repurchase of common shares

Balance, September 30, 2022

Accumulated Other

Total HeartCore Enterprises, Inc.

Comprehensive Income

Shareholders’ Equity

Non-controlling

Shareholders’ Equity

Comprehensive

Shareholders’

Balance, December 31, 2022

$ ( 10,573,579 )

Net income (loss)

4 unchanged sentences

Balance, March 31, 2023

( 8,691,290 )

Beginning balance, value

( 8,691,290 )

( 1,022,846 )

Foreign currency translation adjustment

1 unchanged sentence

Balance, June 30, 2023

$ ( 9,603,090 )

Ending balance, value

$ ( 9,603,090 )

Foreign currency translation adjustment

Stock-based compensation

Balance, September 30, 2023

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

For the Nine Months Ended

September 30,

Cash flows from operating activities:

Net income (loss)

$ ( 1,755,942 )

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

$ ( 5,253,026 )

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization expenses

Gain on disposal of property and equipment

Amortization of debt issuance costs

Non-cash lease expense

Loss on termination of lease

Deferred income taxes

20 unchanged sentences

Purchases of property and equipment

Advance on note receivable

Proceeds from disposal of property and equipment

Advances on note receivable

Repayment of loan provided to related party

31 unchanged sentences

Investments in warrants converted to marketable securities

Finance lease right-of-use asset obtained in exchange for finance lease liability

Operating lease right-of-use asset obtained in exchange for operating lease liability

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

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

ENTERPRISES, INC.

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

39 unchanged sentences

referred to as the Company.

ENTERPRISES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

39 unchanged sentences

material to the Company’s unaudited consolidated financial statements.

ENTERPRISES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Retirement Obligations

7 unchanged sentences

OF CHANGES IN ASSET RETIREMENT OBLIGATIONS

September 30,

Beginning balance

Liabilities incurred

Accretion expense

10 unchanged sentences

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

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

the nine months ended September 30, 2023 and 2022, software development costs expensed as incurred amounted to $ 289,303 and $ 583,762 ,

respectively.

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

3 unchanged sentences

Investments in warrants are classified as long-term

if the maturity is over one year.

if the warrants are exercisable over one year after the date of receipt.

in Marketable Securities

1 unchanged sentence

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).

securities as of September 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.

9 unchanged sentences

to be impaired and written down to its fair value.

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

There were no impairments of these assets during the nine months ended September 30,

2023 and 2022.

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

15 unchanged sentences

in the unaudited consolidated statements of operations.

ENTERPRISES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

4 unchanged sentences

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’

are recorded as a separate component of accumulated other comprehensive income (loss) within the unaudited statements of changes in shareholders’

equity (deficit).

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

35 unchanged sentences

are generally one year or less in length.

ENTERPRISES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

from Software Development and Other Miscellaneous Services

47 unchanged sentences

balance sheets.

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.

The amount of revenues recognized during the nine months ended September 30, 2023 and 2022 that were included in the

opening deferred revenues balance was approximately $ 1.5 million and $ 1.2 million, respectively.

Disaggregation

2 unchanged sentences

The Company’s disaggregation of revenues for the

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

three and nine months ended September 30, 2023 and 2022 is as following:

OF DISAGGREGATION OF REVENUES

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

Ended September 30,

For the Nine Months

Ended September 30,

Revenues from on-premise software

5 unchanged sentences

Total revenues

ENTERPRISES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

Ended September 30,

For the Nine Months

Ended September 30,

Revenues from customer experience management platform

6 unchanged sentences

Total revenues

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.

of September 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

5 unchanged sentences

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

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.

the nine months ended September 30, 2023, customer B and C represent 14.2 % and 13.6 %, respectively, of the Company’s total revenues.

For the nine months ended September 30, 2022, customer A represents 10.0 % of the Company’s total revenues.

the nine months ended September 30, 2023, vendor D, B, A and E represent 26.4 %, 26.2 %, 22.1 % and 15.9 %, respectively, of the Company’s

total purchases.

For the nine months ended September 30, 2022, vendor A, B, C and D represent 25.9 %, 19.7 %, 16.3 % and 15.5 %, respectively,

of the Company’s total purchases.

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

3 unchanged sentences

The Company records forfeitures as they occur.

ENTERPRISES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Company accounts its business combinations using the acquisition method of accounting in accordance with ASC Topic 805.

12 unchanged sentences

obtaining control at its acquisition-date fair value and the remeasurement gain or loss, if any, is recognized in the unaudited consolidated

statements of operations and comprehensive income (loss).

statements of operations and comprehensive loss.

value is determined based upon the guidance of ASC Topic 820, “Fair Value Measurements and Disclosures,” and generally are

16 unchanged sentences

or liabilities.

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.

of September 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.

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

3 unchanged sentences

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.

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 six months ended June 30, 2023 and 2022:

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

OF INVESTMENTS IN WARRANTS

For the Six Months Ended

For the Nine Months Ended

September 30,

Fair value of investments in warrants at beginning of the period

7 unchanged sentences

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

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 nine months ended September 30,

2023 and 2022:

OF INVESTMENTS IN MARKETABLE SECURITIES

For the Six Months Ended

For the Nine Months Ended

September 30,

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

3 unchanged sentences

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

ENTERPRISES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Accounting Pronouncements

31 unchanged sentences

OF ACCOUNTS RECEIVABLE NET

September 30,

Accounts receivable – non-factored

6 unchanged sentences

OF PREPAID EXPENSES

September 30,

Prepayments to software vendors

2 unchanged sentences

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.

ENTERPRISES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

5 — NOTE RECEIVABLE AND LONG-TERM 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 (“IPO”) on the Nasdaq Capital Market or New York Stock Exchange , or 3) 180 days following the note

The interest rate would be 12 %

per annum for any amount that is unpaid when due.

On July 27, 2023, the Company entered into a note exchange agreement with the

promissory note issuer pursuant to which all of the promissory note principal amount and accrued interest owed to the Company shall

be converted into and exchanged for 600,000

shares of common shares of the promissory note issuer upon the effectiveness of its IPO.

promissory note issuer has not completed the IPO as of September 30, 2023.

September 1, 2023, the Company purchased a $ 300,000 promissory note from a non-related company.

The note bears an interest rate of 4 %

per annum and matures on September 2, 2026.

On the first business day following each annual anniversary of September 1, 2023, the promissory

note issuer shall pay to the Company the sum of one-third of the total promissory note amount due and outstanding, including all accrued

and unpaid interest as of such time, unless such annual payment has been forgiven by the Company pursuant to certain conditions.

interest rate would be 10 % per annum for any amount that is unpaid when due.

6 — RELATED PARTY TRANSACTIONS

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

of September 30, 2023 and December 31, 2022, the Company has a due to related party balance of $ 7,859 and $ 402 , respectively, from Sumitaka

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

1 unchanged sentence

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

During the nine months ended September 30, 2023, the related party paid operating expenses on behalf of the

Company and received the payments in a net amount of $ 7,562 .

During the nine months ended September 30, 2022, the related party paid

operating expenses on behalf of the Company and received the payments in a net amount of $ 3,098 .

of September 30, 2023 and December 31, 2022, the Company has a loan receivable balance of $ 226,515 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 six months ended June 30, 2023 and 2022, the Company received repayments of $ 23,715 and $ 21,508 , respectively, from this related

the nine months ended September 30, 2023 and 2022, the Company received repayments of $ 34,823 and $ 33,042 , 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

3 unchanged sentences

OF PROPERTY AND EQUIPMENT NET

September 30,

Leasehold improvements

2 unchanged sentences

Property and equipment, net

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

expenses were $ 70,200 and $ 64,398 for the nine months ended September 30, 2023 and 2022, respectively.

8 — INTANGIBLE ASSET, NET

1 unchanged sentence

OF INTANGIBLE ASSETS

September 30,

Customer relationship

1 unchanged sentence

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:

expenses were $ 425,000 and nil for the nine months ended September 30, 2023 and 2022, respectively.

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

OF AMORTIZATION INTANGIBLE ASSET

1 unchanged sentence

Remaining of 2023

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

ENTERPRISES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

It has also entered into two leases

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

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.

for office equipment, one of which was terminated in June 2022, and two leases for vehicles, one of which was terminated in September

2023, and these leases were classified as finance leases.

Right-of-use assets of these finance leases in the amount of $ 85,591 and $ 18,335

are included in property and equipment, net as of September 30, 2023 and December 31, 2022, respectively.

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

5 unchanged sentences

OF LEASE COSTS

For the Six Months Ended

For the Nine Months Ended

September 30,

Finance lease costs

4 unchanged sentences

Total lease costs

ENTERPRISES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

OF SUPPLEMENTAL INFORMATION RELATED TO THE COMPANY’S LEASES

For the Six Months Ended

For the Nine Months Ended

September 30,

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

2 unchanged sentences

Financing cash flows from finance leases

Finance lease right-of-use asset obtained in exchange for finance lease liability

Operating lease right-of-use asset obtained in exchange for operating lease liability

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

Weighted average remaining lease term (years)

4 unchanged sentences

Operating leases

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

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

OF FINANCE LEASE AND OPERATING LEASE FUTURE MATURITY OF LEASE LIABILITIES

10 unchanged sentences

The security deposits amounted to $ 338,220 and

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

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

ENTERPRISES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

10 — FACTORING LIABILITY

19 unchanged sentences

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

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.

of September 30, 2023, there was $ 217,250 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 nine months ended September 30, 2023,

the Company recorded $ 54,790 in interest expense related to the Factoring Agreement.

11 — INSURANCE PREMIUM FINANCING

3 unchanged sentences

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.

of September 30, 2023 and December 31, 2022, the balance of the insurance premium financing was $ 122,279 and nil , respectively.

the nine months ended September 30, 2023 and 2022, the interest incurred was $ 25,988 and $ 19,859 , respectively.

ENTERPRISES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

12 — LONG-TERM DEBTS

6 unchanged sentences

Balance as of

September 30,

Balance as of

27 unchanged sentences

7/27/2020 – 6/30/2027

The Shoko Chukin Bank, Ltd.

JPY 30,000,000

7/25/2023 – 6/30/2028

Tokyo Interbank Offered Rate + 1.950 %

Japan Finance Corporation

18 unchanged sentences

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:

expense for long-term debts was $ 44,295 and $ 19,502 for the nine months ended September 30, 2023 and 2022, respectively.

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

SCHEDULE OF FUTURE MINIMUM LOAN PAYMENTS

1 unchanged sentence

Remaining of 2023

ENTERPRISES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

13 — INCOME TAXES

17 unchanged sentences

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:

of approximately 34.59 % for the nine months ended September 30, 2023 and 2022.

the nine months ended September 30, 2023 and 2022, the Company’s income tax expense (benefit) are as follows:

SCHEDULE OF INCOME TAX EXPENSES

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.

For the Nine Months Ended

September 30,

Income tax expense (benefit)

effective tax rate was ( 3.47 ) % and 0.21 % for the nine months ended September 30, 2023 and 2022, respectively.

ENTERPRISES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

14 – STOCK-BASED COMPENSATION

13 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 six months ended June 30, 2022.

In the same period, the share repurchase

liability of $ 16 was settled by issuance of 273,489 shares of common shares (equivalent to 183 shares of common shares of HeartCore Japan)

from exercise of stock options.

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

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

In the same period, the share

repurchase liability of $ 16 was settled by issuance of 273,489 shares of common shares (equivalent to 183 shares of common shares of

HeartCore Japan) from exercise of stock options.

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

SCHEDULE OF UNVESTED STOCK OPTION

Issued and unvested as of January 1, 2022

Vested and exercised

Issued and unvested as of June 30, 2022

of Stock Options

and unvested as of January 1, 2022

and exercised

and unvested as of September 30, 2022

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

1 unchanged sentence

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

1,534,500 shares of common shares at an exercise price of $ 2.50 per share to various officers, directors, employees and consultants of

The 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 .

1,534,500 shares of common shares pursuant to the 2021 Plan at an exercise price of $ 2.50 per share to various officers, directors, employees

and consultants of the Company.

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

applicable shares of common shares, with the expiration date on December 25, 2031 .

August 2, 2022, the Company awarded options to purchase 2,000 shares of common shares pursuant to the 2021 Plan 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

1 unchanged sentence

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:

February 3, 2023, the Company awarded options to purchase 100,000 shares of common shares pursuant to the 2021 Plan 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 .

August 25, 2023, the Company awarded options to purchase 2,000 shares of common shares pursuant to the 2021 Plan at an exercise price

of $ 1.10 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 25, 2033 .

August 1, 2023, the Board of Directors and stockholders of the Company approved a 2023 Equity Incentive Plan (the “2023 Plan”),

under which 2,000,000 shares of common shares are authorized for issuance.

No shares were issued pursuant to the 2023 Plan as of September

ENTERPRISES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

SCHEDULE OF STOCK OPTION ACTIVITY

As of January 1, 2022

As of June 30, 2022

As of September 30, 2022

As of January 1, 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.

As of September 30, 2023

Vested and exercisable as of September 30, 2023

Company calculated the fair value of options granted in the nine months ended September 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 ,

the three and nine months ended September 30, 2023, the Company recognized stock-based compensation related to options of $ 144,306 and

$ 479,122 , 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.

For the three and nine months ended September 30, 2022, the Company recognized stock-based compensation related

to options of $ 280,883 and $ 858,633 , respectively.

The outstanding unamortized stock-based compensation related to options was $ 578,075

(which will be recognized through August 2027) as of September 30, 2023.

Stock Units (“RSUs”)

10 unchanged sentences

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

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

following table summarizes the RSUs activity for the nine months ended September 30, 2023 and 2022:

SCHEDULE OF RESTRICTED STOCK UNITS

4 unchanged sentences

Unvested as of January 1, 2022

Unvested as of June 30, 2022

Unvested as of September 30, 2022

Unvested as of January 1, 2023

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 ,

Unvested as of September 30, 2023

the three and nine months ended September 30, 2023, the Company recognized stock-based compensation related to RSUs of $ 29,000 and $ 788,577 ,

respectively.

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.

For the three and nine months ended September 30, 2022, the Company recognized stock-based compensation related to RSUs

of $ 55,768 and $ 366,844 , respectively.

The outstanding unamortized stock-based compensation related to RSUs was $ 130,110 (which will

be recognized through February 2026) as of September 30, 2023.

ENTERPRISES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

15 – SHAREHOLDERS’ EQUITY

20 unchanged sentences

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.

the period from June 1, 2022 through September 30, 2022, the Company repurchased 1,349,390 shares of common shares at an average price

of $ 2.59 per share totaling approximately $ 3.5 million (including commissions) under the 2022 Share Repurchase Program.

As of September

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

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

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:

of September 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 September 30, 2023 and December 31, 2022.

16 – NET LOSS PER SHARE

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

Diluted net 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

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 loss per share if their effect would be anti-dilutive.

computation of basic and diluted net loss per share for the three and nine months ended September 30, 2023 and 2022 is as follows:

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

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

$ ( 911,800 )

Ended September 30,

For the Nine Months

Ended September 30,

Net loss per share - basic and diluted:

Net loss attributable to HeartCore Enterprises, Inc.

common shareholders

$ ( 2,307,220 )

$ ( 1,970,934 )

Net income (loss) attributable to common shareholders

$ ( 1,336,731 )

$ ( 5,253,026 )

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

Denominator used for net income (loss) per share

Net income (loss) per share - basic and diluted

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.

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

Net loss per share - basic and diluted

the three and nine months ended September 30, 2023 and 2022, the weighted average common shares outstanding are the same for basic and

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

ENTERPRISES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

17 – BUSINESS COMBINATION

31 unchanged sentences

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.

loss of $ 6,332,479 and $ 855,532 , respectively, to the Company from February 1, 2023 to September 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.

statements of operations and comprehensive loss for the three and nine months ended September 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

1 unchanged sentence

The Company did not recognize any impairment

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

loss on goodwill during the nine months ended September 30, 2023.

18 - SUBSEQUENT EVENTS

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.

October 4, 2023, the Company obtained a five-year term loan in the amount of JPY 10,000,000 (approximately $ 73,000 ) from the Sumitomo

Mitsui Banking Corporation, with an interest rate of 0.2 % per annum starting in November 2026.

The loan is co-guaranteed by Sumitaka

Yamamoto, the Company’s CEO and major shareholder, and Tokyo Credit Guarantee Association.

October 4, 2023, the Company obtained a five-year term loan in the amount of JPY 10,000,000 (approximately $ 73,000 ) from the Sumitomo

Mitsui Banking Corporation, with an interest rate of 0.6 % per annum.

The loan is co-guaranteed by Sumitaka Yamamoto, the Company’s

CEO and major shareholder, and Tokyo Credit Guarantee Association.

October 5, 2023, the Company obtained a five-year term loan in the amount of JPY 30,000,000 (approximately $ 219,000 ) from the Higashi-Nippon

Bank, with an interest rate of 1.45 % per annum.

The loan is co-guaranteed by Sumitaka Yamamoto, the Company’s CEO and major shareholder,

and Tokyo Credit Guarantee Association.

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