What changed in this filing

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Item 1. Financial Statements

2024-08-14 compared with 2024-05-15 · 565 added, 438 removed, 553 unchanged (64% of the section changed)

13 unchanged sentences

Non-current assets:

Accounts receivable, non-current

Property and equipment, net

1 unchanged sentence

Intangible asset, net

Long-term investment in SAFE

Long-term investment in equity securities

10 unchanged sentences

Accounts payable and accrued expenses

Accounts payable and accrued expenses –

related party

Accrued payroll and other employee costs

19 unchanged sentences

Shareholders’ equity:

Preferred shares ($ 0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of March 31, 2024 and December 31, 2023)

Preferred shares ($ 0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of June 30, 2024 and December 31, 2023)

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

20,864,144 and 20,842,690 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively)

20,864,144 and 20,842,690 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively)

Additional paid-in capital

11 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended

the Three Months

Ended June 30,

the Six Months

Ended June 30,

Cost of revenues

5 unchanged sentences

Income (loss) from operations

( 1,507,204 )

( 1,467,122 )

( 2,190,159 )

Other income (expenses):

1 unchanged sentence

Changes in fair value of investment in warrants

( 1,237,707 )

Interest income

1 unchanged sentence

Other expenses

Total other income (expenses)

Total other expenses

( 1,651,291 )

Income (loss) before income tax provision

( 2,283,281 )

( 1,644,848 )

( 3,841,450 )

Income tax expense (benefit)

1 unchanged sentence

( 2,211,118 )

( 1,022,846 )

( 3,689,120 )

net loss attributable to non-controlling interests

1 unchanged sentence

$ ( 1,951,100 )

$ ( 911,800 )

$ ( 3,284,450 )

Other comprehensive income (loss) :

2 unchanged sentences

( 2,235,238 )

( 3,702,945 )

comprehensive loss attributable to non-controlling interests

1 unchanged sentence

$ ( 1,972,330 )

$ ( 881,597 )

$ ( 3,290,474 )

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

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

Comprehensive Income

Shareholders’

Non-controlling

Shareholders’

Common Shares

Accumulated Other

Total HeartCore

Enterprises, Inc.

Comprehensive

Total HeartCore Enterprises, Inc.

Comprehensive Income

Shareholders’

Non-controlling

Shareholders’

1 unchanged sentence

$ ( 14,763,469 )

Net income (loss)

( 1,333,350 )

( 1,478,002 )

Foreign currency translation adjustment

Issuance of common shares for acquisition of subsidiary

Non-controlling interest arising from acquisition of subsidiary

Capital contribution from non-controlling shareholder

2 unchanged sentences

( 16,096,819 )

Common Shares

Accumulated Other

Total HeartCore

Enterprises, Inc.

( 1,951,100 )

( 2,211,118 )

Distribution of dividends

Foreign currency translation adjustment

Stock-based compensation

Balance, June 30, 2024

$ ( 18,047,919 )

HeartCore Enterprises, Inc.

Comprehensive

Shareholders’

Non-controlling

Shareholders’

1 unchanged sentence

$ ( 10,573,579 )

$ ( 14,763,469 )

( 1,333,350 )

Foreign currency

translation adjustment

of common shares for acquisition of subsidiary

Non-controlling

interest arising from acquisition of subsidiary

March 31, 2023

( 8,691,290 )

Net income (loss)

( 8,691,290 )

( 1,022,846 )

income (loss)

( 1,022,846 )

Foreign currency translation adjustment

Capital contribution from non-controlling shareholder

Stock-based compensation

Balance, March 31,

Foreign currency

translation adjustment

June 30, 2023

$ ( 9,603,090 )

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

the Three Months Ended

Cash flows from operating

income (loss)

$ ( 1,478,002 )

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

and amortization expenses

of debt issuance costs

lease expense

termination of lease

received as noncash consideration

For the Six Months

Cash flows from operating activities:

Net income (loss)

$ ( 3,689,120 )

in fair value of investments in marketable securities

in fair value of investment in warrants

in assets and liabilities:

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

Depreciation and amortization expenses

Amortization of debt issuance costs

Non-cash lease expense

Gain on termination of lease

Deferred income taxes

Stock-based compensation

Warrants received as noncash consideration

( 4,009,335 )

payable and accrued expenses

payroll and other employee costs

Changes in fair value of investments in marketable securities

Changes in fair value of investment in warrants

Loss on disposal of property and equipment

Changes in assets and liabilities:

Accounts receivable

Prepaid expenses

Accounts payable and accrued expenses

Accounts payable and accrued expenses –

related party

lease liabilities

cash flows provided by (used in) operating activities

Accrued payroll and other employee costs

Due to related party

Operating lease liabilities

Income tax payables

Deferred revenue

Other liabilities

Net cash flows used in operating activities

( 1,460,744 )

Cash flows from investing

of property and equipment

of loan provided to related party

for acquisition of subsidiary, net of cash acquired

cash flows provided by (used in) investing activities

Cash flows from financing

for finance leases

from short-term debt

of short-term and long-term debts

of insurance premium financing

from factoring arrangement

repayment of factoring arrangement

for debt issuance costs

contribution from non-controlling shareholder

cash flows used in financing activities

of exchange rate changes

Net change in cash and cash

( 1,368,562 )

and cash equivalents - beginning of the period

and cash equivalents - end of the period

Supplemental cash flow

Non-cash investing and

financing transactions:

lease right-of-use assets obtained in exchange for operating lease liabilities

premium financing

assumed in connection with purchase of property and equipment

shares issued for acquisition of subsidiary

Cash flows from investing activities:

Purchases of property and equipment

Prepayment for property and equipment

Advance on note receivable

Purchase of long-term investment in SAFE

Net proceeds from sale of warrants

Repayment of loan provided to related party

Payment for acquisition of subsidiary, net of cash acquired

Net cash flows provided by (used in) investing activities

( 1,181,646 )

Cash flows from financing activities:

Payments for finance leases

Proceeds from short-term debt

Repayment of short-term and long-term debts

Repayment of insurance premium financing

Net proceeds from factoring arrangement

Net repayment of factoring arrangement

Payments for debt issuance costs

Distribution of dividends

Capital contribution from non-controlling shareholder

Net cash flows used in financing activities

Effect of exchange rate changes

Net change in cash and cash equivalents

( 2,938,585 )

Cash and cash equivalents - beginning of the period

Cash and cash equivalents - end of the period

Supplemental cash flow disclosures:

Interest paid

Income taxes paid

Non-cash investing and financing transactions:

Operating lease right-of-use assets obtained in exchange for operating lease liabilities

Insurance premium financing

Liabilities assumed in connection with purchase of property and equipment

Common shares issued for acquisition of subsidiary

Warrants converted to marketable securities

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

18 unchanged sentences

earliest period presented in the accompanying unaudited consolidated financial statements.

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

comprehensive software.

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

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

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

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

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

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

18 unchanged sentences

Luvina”), which is engaged in the business of providing software development and other services.

HeartCore Luvina started its operations from February 2024.

HeartCore Luvina started its operations

from February 2024.

November 17, 2023, HeartCore Japan and HeartCore Capital Advisors entered into a merger agreement to merge the two entities into one

4 unchanged sentences

common control since the same controlling shareholders controlled the two entities before and after the transaction.

USA, HeartCore Japan, Sigmaways, Sigmaways B.V., Sigmaways Technologies, HeartCore Financial, HeartCore Capital Advisors and HeartCore

Luvina are hereafter referred to as the Company.

In April 2024, HeartCore Financial incorporated a branch office, HeartCore Financial, Inc.

– Japan Branch Office

(“HeartCore Financial – Japan”), in Japan.

HeartCore Financial – Japan is engaged in the business of providing

financial consulting services.

USA, HeartCore Japan, Sigmaways, Sigmaways B.V., Sigmaways Technologies, HeartCore Financial, HeartCore Capital Advisors, HeartCore Luvina and HeartCore

Financial – Japan are hereafter referred to as the Company.

2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of Presentation and Principles of Consolidation

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

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

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

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

The unaudited consolidated financial statements include

the accounts of the Company and its subsidiaries.

All significant intercompany accounts and transactions have been

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

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

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

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

The unaudited consolidated financial statements include the accounts of

the Company and its subsidiaries.

All significant intercompany accounts and transactions have been eliminated.

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

6 unchanged sentences

be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2023.

Correction of Error in Previously Issued Financial

During the review of the Company’s consolidated

financial statements for the six months ended June 30, 2024, the Company identified an error in the consolidated statement of cash flows

in the consolidated financial statements for the three months ended March 31, 2024 due to a misclassification between operating and investing

activities for the net proceeds received from sale of warrants, and corrected such error through a cumulative out-of-period adjustment

in the consolidated statement of cash flows for the six months ended June 30, 3024.

The change in prepaid expenses and change in other

liabilities in the operating cash flows for the three months ended March 31, 2024 should have been $ 102,028 and $ 60,658 , respectively,

but was stated as $ ( 3,257,972 ) and $ 5,060,658 , respectively, resulting in net cash flows provided by operating activities overstated by

$ 1,640,000 .

Concurrently, the Company failed to include net proceeds from sale of warrants included in the investing activities of $ 1,640,000 ,

resulting in net cash flows provided by investing activities understated by $ 1,640,000 in the consolidated statement of cash flows for

the three months ended March 31, 2024.

The error had no impact on the consolidated balance sheet, statement of operations and comprehensive income (loss) and statement of changes

in shareholders’ equity.

In accordance with the SEC’s Staff Accounting Bulletin Nos.

99 and 108 (SAB 99 and SAB 108), the Company evaluated

this error and, based on analysis of quantitative and qualitative factors, determined that the error is not material to the previously

issued financial statements and the cumulative out-of-period adjustment for the correction of this error is not material to the financial

statements for the six months ended June 30, 2024.

Therefore, as permitted by SAB108, the Company corrected such error in the current

filing through a cumulative out-of-period adjustment in the consolidated statement of cash flows for the six months ended June 30, 3024.

preparing the unaudited consolidated financial statements in conformity U.S.

GAAP, the management is required to make certain

estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and

liabilities at the date of the unaudited consolidated financial statements and the reported amounts of revenues and expenses during

the reporting period.

These estimates are based on information available as of the date of the unaudited consolidated financial

Significant estimates required to be made by management include, but are not limited to, the allowance for credit

losses, useful lives of property and equipment and intangible asset, the impairment of long-lived assets and goodwill, valuation of

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

valuation of asset retirement obligations, valuation of investment in warrants, revenue recognition and purchase price allocation with respect to business combination.

Actual results could differ

from those estimates.

GAAP, the management is required to make certain estimates

and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the

date of the unaudited consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

These estimates are based on information available as of the date of the unaudited consolidated financial statements.

Significant estimates

required to be made by management include, but are not limited to, the allowance for credit losses, useful lives of property and equipment

and intangible asset, the impairment of long-lived assets and goodwill, valuation of stock-based compensation, valuation allowance of

deferred tax assets, implicit interest rate of operating and finance leases, valuation of asset retirement obligations, valuation of

investment in warrants, revenue recognition and purchase price allocation with respect to business combination.

Actual results could

differ from those estimates.

Retirement Obligations

22 unchanged sentences

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

the three months ended March 31, 2024 and 2023, software development costs expensed as incurred amounted to $ 89,134 and $ 79,624 , respectively.

the six months ended June 30, 2024 and 2023, software development costs expensed as incurred amounted to $ 200,402 and $ 119,232 , respectively.

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

7 unchanged sentences

The marketable

securities 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 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).

in Equity Securities

1 unchanged sentence

net asset value.

Investment in equity securities is accounted for using a measurement alternative, under which this investment is measured

at cost, adjusted for observable price changes and impairments, with changes recognized in other income (expenses).

Investment in equity securities is classified as current asset if the Company

anticipates to dispose of the investment within one year from the date of receipt based on information available as of the date the unaudited

consolidated financial statements are issued.

Investment in equity securities is accounted for using a measurement alternative, under which this investment is

measured at cost, adjusted for observable price changes and impairments, with changes recognized in other income (expenses).

Investment in equity securities is classified as long-term if the Company anticipates to dispose of the investment over one year

after the date of receipt based on information available as of the date the unaudited consolidated financial statements are issued.

The Company did not recognize any impairment loss on investment in equity securities for the six months ended June 30,

Investment in SAFE

Investment in SAFE represents investment in a

privately held entity that does not have a readily determinable fair value or report net asset value through

a simple agreement for future equity (“SAFE”).

Investment in SAFE is accounted for using a measurement alternative,

under which this investment is measured at cost, adjusted for observable price changes and impairments, with changes recognized in

other income (expenses).

Investment in SAFE is classified as long-term if the Company anticipates the equity financing or

dissolution or liquidity event prescribed in the SAFE to take place over one year after the date of receipt based on information

available as of the date the unaudited consolidated financial statements are issued.

The Company did not recognize any impairment

loss on investment in SAFE for the six months ended June 30, 2024.

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 three months ended March 31,

2024 and 2023.

There were no impairments of these assets during the six months ended June 30, 2024

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

3 unchanged sentences

Currency Translation

functional currency of HeartCore Japan and HeartCore Capital Advisors is the Japanese Yen (“JPY”).

The functional currency

of HeartCore USA, HeartCore Financial and Sigmaways is the United States Dollar (“US$”).

The functional currency of Sigmaways

functional currency of HeartCore Japan, HeartCore Capital Advisors and HeartCore Financial – Japan is the Japanese Yen

The functional currency of HeartCore USA, HeartCore Financial and Sigmaways is the United States Dollar

The functional currency of Sigmaways B.V.

is the Euro (“EUR”).

The functional currency of Sigmaways Technologies is the Canada Dollar (“CAD”).

functional currency of HeartCore Luvina is the Vietnam Dong (“VND”).

Transactions denominated in currencies other than the

functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction.

assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using

the applicable exchange rates at the balance sheet dates.

The resulting exchange differences are recorded in the unaudited consolidated

statements of operations and comprehensive income (loss).

The functional currency of Sigmaways

Technologies is the Canada Dollar (“CAD”).

The functional currency of HeartCore Luvina is the Vietnam Dong

Transactions denominated in currencies other than the functional currency are translated into the functional

currency at the exchange rates prevailing at the dates of the transaction.

Monetary assets and liabilities denominated in currencies

other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance

The resulting exchange differences are recorded in the unaudited consolidated statements of operations and

comprehensive income (loss).

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

In accordance with ASC Topic 830-30, “Translation of Financial Statements”, assets and liabilities of the

Company whose functional currency is not US$ are translated into US$, using the exchange rate on the balance sheet date.

and expenses are translated at average rates prevailing during the period.

The gains and losses resulting from the translation of

financial statements are recorded as a separate component of accumulated other comprehensive income within the unaudited

consolidated statements of changes in shareholders’ equity.

Company whose functional currency is not US$ are translated into US$, using the exchange rate on the balance sheet

Revenues and expenses are translated at average rates prevailing during the period.

The gains and losses resulting from the translation

of financial statements are recorded as a separate component of accumulated other comprehensive income within the unaudited consolidated

statements of changes in shareholders’ equity.

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

10 unchanged sentences

from On-Premise Software

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

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

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

right for a specified term.

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

to the customers.

The Company provides on-premise software in the form of both perpetual licenses and term-based licenses which grant

the customers with the right for a specified term.

Revenues from on-premise licenses are recognized upfront at the point in time when

the software is made available to the customers.

Licenses for on-premise software are typically sold to the customers 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.

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

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

software and maintenance and support service.

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

when those services are sold on a standalone basis.

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

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

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

or other observable evidence.

from Maintenance and Support Services

Maintenance and support services provided with software licenses consist of trouble shooting, technical support and

the right to receive unspecified software updates when and if available during the subscription.

Revenues from maintenance and support

services are recognized over time as such services are performed.

Revenues for consumption-based services are generally recognized as

the services are performed and accepted by the customers.

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

software updates when and if available during the subscription.

Revenues from maintenance and support services are recognized over time

as such services are performed.

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

by the customers.

from Software as a Service (“SaaS”)

The Company’s software is available for use as hosted application arrangements under subscription fee agreements

without licensing the rights of the software to the customers.

Subscription fees from these applications are recognized over time on a

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

The subscription contracts are generally one year or less in length.

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

the rights of the software to the customers.

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

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

The subscription contracts

are generally one year or less in length.

from Software Development and Other Miscellaneous Services

The 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.

The Company also provides

other miscellaneous services, such as 3D Space photography.

The Company generally recognizes revenues at a point in time when control

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

by the customers.

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.

The Company also provides other miscellaneous services,

such as 3D Space photography.

The Company generally recognizes revenues at a point in time when control is transferred to the customers

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

from Customized Software Development and Services

The Company’s customized software development and services revenues primarily include revenues from providing

software development solutions and other support services to its customers.

Company’s customized software development and services revenues primarily include revenues from providing software development

solutions and other support services to its customers.

The contract pricing is at stated billing rates per hour.

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

For services provided under the contracts

that result in the transfer of control over time, the underlying deliverable in the contracts is owned and controlled by the customers

and does not create an asset with an alternative use to the Company.

The Company recognizes revenues on rate per hour contracts based

on the amount billable to the customers, as the Company has the right to invoice the customers in an amount that directly corresponds

with the value to the customers 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 contracts that result in the

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

an asset with an alternative use to the Company.

The Company recognizes revenues on rate per hour contracts based on the amount billable

to the customers, as the Company has the right to invoice the customers in an amount that directly corresponds with the value to the

customers 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 process.

The consulting service contracts normally include both cash and noncash

considerations.

Cash consideration is paid in installment payments and is recognized in revenues 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.

The timing of revenue recognition may differ from

the timing of invoicing to the customers.

The Company has determined that its contracts do not include a significant financing component.

The Company records a contract asset, which is included in accounts receivable in the consolidated balance sheets, when revenues are recognized

prior to invoicing.

The Company factors certain accounts receivable upon or after the performance obligation is being met.

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

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

The amount of revenues recognized

during the three months ended March 31, 2024 and 2023 that were included in the opening deferred revenue balance was approximately $1.0

million and $0.9 million, respectively.

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 normally include both cash and noncash considerations.

Cash consideration

is paid in installment payments and is recognized in revenues 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 records reduction to revenues for estimated customer returns and allowances.

The Company bases its estimates on historical rates

of customer returns and allowances as well as the specific identification of outstanding returns.

The actual amount of customer returns

and allowances, which is inherently uncertain, may differ from the Company’s estimates.

If the Company determines that actual or expected

returns or allowances are significantly higher or lower than the reserves it established, it would record a reduction or increase, as

appropriate, to revenues in the period in which it makes such a determination.

Reserves for customer refunds are included within other

current liabilities or other non-current liabilities on the consolidated balance sheets.

At a minimum, the Company reviews and refines

these estimates on a quarterly basis.

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

The Company has determined that its contracts

do not include a significant financing component.

The Company records a contract asset, which is included in accounts receivable, current or non-current, in the

consolidated balance sheets, when revenues are recognized prior to invoicing.

The Company factors certain accounts receivable upon or

after the performance obligation is being met.

The Company records deferred revenue in the consolidated balance sheets when revenues

are recognized subsequent to cash collection for an invoice.

Deferred revenue is reported net of related uncollected deferred revenue

in the consolidated balance sheets.

The amount of revenues recognized during the six months ended June 30, 2024 and 2023 that were included

in the opening deferred revenue balance was approximately $ 1.5 million and $ 1.3 million, respectively.

Disaggregation

The Company disaggregates its revenues from contracts

by product/service types, as the Company believes it best depicts how the nature, amount, timing and uncertainty of the revenues and

cash flows are affected by economic factors.

The Company’s disaggregation of revenues by revenue stream for the three months ended March

31, 2024 and 2023 is as following:

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

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

The Company’s disaggregation of revenues

by revenue stream for the three and six months ended June 30, 2024 and 2023 is as following:

SCHEDULE OF DISAGGREGATION OF REVENUES

For the Three Months Ended

the Three Months

Ended June 30,

the Six Months

Ended June 30,

Revenues from on-premise software

5 unchanged sentences

Total revenues

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

For the Three Months Ended

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

the Three Months

Ended June 30,

the Six Months

Ended June 30,

Revenues from customer experience management platform

6 unchanged sentences

Total revenues

of March 31, 2024 and 2023, 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 June 30, 2024 and 2023, and for the periods then ended, the majority of the long-lived assets (excluding intangible asset) and revenues generated were attributed to the Company’s operation in Japan.

Concentration

4 unchanged sentences

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

the three months ended March 31, 2024, customer A and B represent 13.4 % and 13.0 %, respectively, of the Company’s total revenues.

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

total revenues.

the three months ended March 31, 2024, no vendor accounts for more than 10% of the Company’s total purchases.

For the three

months ended March 31, 2023, vendor A, B and C represent 38.5 %, 29.6 %

respectively, of the Company’s total purchases.

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

Stock Compensation”.

The cost of services received from employees and non-employees in exchange for awards of equity instruments

is recognized in the unaudited consolidated statements of operations

and comprehensive income (loss) based on the estimated fair value of those awards on the grant date and amortized on a straight-line basis

over the requisite service period or vesting period.

The Company records forfeitures as they occur.

For the six months ended June 30, 2024, customer A represents 13.7 % of

the Company’s total revenues.

For the six months ended June 30, 2023, customer B, C and D represent 18.2 %, 12.8 % and 11.8 %, respectively,

of the Company’s total revenues.

For the six months ended June 30, 2024, no vendor accounts for more than

10% of the Company’s total purchases.

For the six months ended June 30, 2023, vendor A and B represent 60.9 % and 22.7 %, respectively,

of the Company’s total purchases.

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

The cost of services received from employees and non-employees in exchange for awards of equity instruments is recognized in the unaudited

consolidated statements of operations and comprehensive income (loss) based on the estimated fair value of those awards on the grant

date and amortized on a straight-line basis over the requisite service period or vesting period.

The Company records forfeitures as they

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

1 unchanged sentence

interests, if any, based on their estimated fair values as of the acquisition date.

The excess of the purchase price over those fair values

is recorded as goodwill.

The excess of the purchase price over those fair

values is recorded as goodwill.

Acquisition-related expenses are expensed as incurred.

5 unchanged sentences

is subsequently carried at fair value with changes in fair value reflected in earnings.

a business combination achieved in stages, the Company remeasures the previously held equity interest in the acquiree immediately before

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

of operations and comprehensive income (loss).

a business combination achieved in stages, the Company remeasures the previously held equity interest in the acquiree immediately

before 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).

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

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Value Measurements

The Company performs fair value measurements in accordance with ASC Topic 820.

Fair value is defined as the price

that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement

ASC Topic 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the

use of unobservable inputs when measuring fair value.

An asset’s or a liability’s categorization within the fair value hierarchy

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

ASC Topic 820 establishes three levels of inputs

that may be used to measure fair value:

Company performs fair value measurements in accordance with ASC Topic 820.

Fair value is defined as the price that would be received

to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable

inputs when measuring fair value.

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

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

ASC Topic 820 establishes three levels of inputs that may

be used to measure fair value:

quoted prices in active markets for identical assets or liabilities;

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or liabilities.

of March 31, 2024 and December 31, 2023, 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

Assets measured at fair value on a recurring basis as of March

31, 2024 and December 31, 2023 are summarized below (also see NOTE 6).

SCHEDULE OF ASSETS MEASURED AT FAIR VALUE ON A RECURRING BASIS

Fair Value Measurements as of March 31, 2024

Quoted Prices in Active Markets for Identical

Assets (Level 1)

Significant Other

Fair Value at

Investments in marketable securities

Long-term investment in warrants

Fair Value Measurements as of December 31, 2023

of June 30, 2024 and December 31, 2023, 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.

measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 are summarized below (also see NOTE 6):

OF ASSETS MEASURED AT FAIR VALUE ON A RECURRING BASIS

Value Measurements as of June 30, 2024

Prices in Active Markets for Identical

Investments in

marketable securities

Long-term investment in warrants

in marketable securities

investment in warrants

Value Measurements as of December 31, 2023

Prices in Active Markets for Identical

in marketable securities

investment in warrants

Accounting Pronouncements

In December 2023, the FASB issued Accounting Standards

Update (“ASU”) No.

In November 2023, the FASB issued Accounting Standards Update (“ASU”) No.

2023-07, Segment Reporting

Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments,

primarily through enhanced disclosures about significant segment expenses.

2023-09 is effective for public companies for annual

reporting periods beginning after December 15, 2023, on a retrospective basis.

Early adoption is permitted.

The Company is currently evaluating

the impact of this ASU on its unaudited consolidated financial statements and related disclosures.

December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvement to Income Tax Disclosures, to enhance the transparency and

decision usefulness of income tax disclosures, primarily related to the rate reconciliation and income taxes paid information.

2023-09 is effective for public companies for annual reporting periods beginning after December 15, 2024, on a prospective basis.

all other entities, it is effective for annual reporting periods beginning after December 15, 2025, on a prospective basis.

Early adoption

is permitted.

The Company is currently evaluating the impact of this ASU on its unaudited consolidated financial statements and related

Improvement to

Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures, primarily related to the rate

reconciliation and income taxes paid information.

2023-09 is effective for public companies for annual reporting periods beginning

after December 15, 2024, on a prospective basis.

For all other entities, it is effective for annual reporting periods beginning after

December 15, 2025, on a prospective basis.

Early adoption is permitted.

The Company is currently evaluating the impact of this ASU on

its unaudited consolidated financial statements and related disclosures.

3 – ACCOUNTS RECEIVABLE

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Accounts receivable – factored with recourse

Accounts receivable, gross

Total accounts receivable, gross

allowance for credit losses

Accounts receivable

Total accounts receivable

current portion

( 2,440,872 )

( 2,623,682 )

Accounts receivable , non-current

4 – PREPAID EXPENSES

1 unchanged sentence

SCHEDULE OF PREPAID EXPENSES

Prepayments to software vendors

Prepayments to software and consulting services vendors

Prepaid marketing and consulting fees

3 unchanged sentences

5 – RELATED PARTY TRANSACTIONS

of March 31, 2024 and December 31, 2023, the Company has a due to related party balance of $ 256 and $ 1,476 , respectively, from Sumitaka

of June 30, 2024 and December 31, 2023, the Company has a due to related party balance of $ 140 and $ 1,476 , respectively, from Sumitaka

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

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bearing and due on demand.

During the three months ended March 31, 2024, the Company made payments to the related party for operating expenses

During the six months ended June 30, 2024, the Company repaid to the related party for operating expenses

the related party paid on behalf of the Company in a net amount of $ 1,246 .

During the three months ended March 31, 2023, the related

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 .

of March 31, 2024 and December 31, 2023, the Company has a loan receivable balance of $ 202,922 and $ 227,704 , respectively, from Heartcore

of June 30, 2024 and December 31, 2023, the Company has a loan receivable balance of $ 185,769 and $ 227,704 , respectively, from Heartcore

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

1 unchanged sentence

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

the three months ended March 31, 2024 and 2023, the Company received repayments of $ 10,814 and $ 11,955 , respectively, from this related

the six months ended June 30, 2024 and 2023, the Company received repayments of $ 21,166 and $ 23,715 , respectively, from this related

During the six months ended June 30, 2024, the Company engaged Luvina Software Joint Stock Company, the non-controlling

interest shareholder of HeartCore Luvina, for software development and other support services in the amount of $ 31,590 .

As of June 30, 2024

and December 31, 2023, the Company has an accounts payable and accrued expenses balance of $ 21,579 and nil , respectively, to this

related party.

6 – INVESTMENTS

Investment in SAFE

On April 17, 2024, the Company entered into a simple agreement for future equity (“ SAFE”) for $ 350,000 with Heart-Tech Health, Inc.

(“Heart-Tech”), a non-related company, in exchange for

the right to be issued certain shares of Heart-Tech’s preferred stock in connection with Heart-Tech’s future equity financing,

at a 15 % discount to the price per share of the preferred stock sold in the equity financing, subject to a pre-determined valuation cap.

Alternatively, upon a dissolution or liquidity

event such as a change in control or an initial public offering, the Company is entitled to receive a portion of $ 350,000 .

30, 2024, the Company recorded the investment of $ 350,000 as an investment in SAFE on the consolidated balance sheet.

in Equity Securities

2 unchanged sentences

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 issuance.

The interest rate would be 12 % per

annum for any amount that is unpaid when due.

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.

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

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

The warrants are not registered for

public sale and are initially measured at fair value at contract inception.

The Company’s investment in warrants is measured

on a recurring basis and carried on the balance sheets at an estimated fair value at the end of the period.

The valuation of

investment in warrants is determined using the Black-Scholes model based on the stock price, exercise price, expected

volatility, time to maturity, and a risk-free interest rate for the term of the warrants exercise.

following table summarizes the Company’s investment in warrants activities for the

three months ended March 31, 2024 and 2023:

The warrants are not registered for public

sale and are initially measured at fair value at contract inception.

The Company’s investment in warrants is measured on a recurring

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

The valuation of investment in warrants

is determined using the Black-Scholes model based on the stock price, exercise price, expected volatility, time to maturity, and a risk-free

interest rate for the term of the warrants exercise.

following table summarizes the Company’s investment in warrants activities for the six months ended June 30, 2024 and 2023:

SCHEDULE OF INVESTMENT IN WARRANTS ACTIVITY

For the Three Months Ended

For the Six Months Ended

Fair value of investment in warrants at beginning of the period

1 unchanged sentence

Changes in fair value of investment in warrants

( 1,237,707 )

Warrants converted to marketable securities

Fair value of investment in warrant at end of the period

( 1,257,868 )

Fair value of investment in warrants at end of the period

in Marketable Securities

The Company’s investments in marketable securities represent stocks

received upon the exercise of warrants described above.

They are registered for public sale with readily determinable fair values, and

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

The following table summarizes the Company’s investments

in marketable securities activities for the three months ended March 31, 2024 and 2023:

Company’s investments in marketable securities represent stocks received upon the exercise of warrants described above.

registered for public sale with readily determinable fair values, and are measured at quoted prices on a recurring basis at the end of

The following table summarizes the Company’s investments in marketable securities activities for the six months ended

June 30, 2024 and 2023:

SCHEDULE OF INVESTMENTS IN MARKETABLE SECURITIES

For the Three Months Ended

For the Six Months Ended

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

12 unchanged sentences

8 – PROPERTY AND EQUIPMENT, NET

and equipment, net consists of the following:

and equipment, net consist of the following:

SCHEDULE OF PROPERTY AND EQUIPMENT NET

3 unchanged sentences

Property and equipment, net

expenses are $ 28,710 and $ 17,062 for the three months ended March 31, 2024 and 2023, respectively.

expenses are $ 56,196 and $ 40,472 for the six months ended June 30, 2024 and 2023, respectively.

9 – INTANGIBLE ASSET, NET

4 unchanged sentences

Intangible asset, net

expenses are $ 159,375 and $ 106,250 for the three months ended March 31, 2024 and 2023, respectively.

of March 31, 2024, the future estimated amortization cost for intangible asset is as follows:

expenses are $ 318,750 and $ 265,625 for the six months ended June 30, 2024 and 2023, respectively.

of June 30, 2024, the future estimated amortization cost for intangible asset is as follows:

SCHEDULE OF AMORTIZATION INTANGIBLE ASSET

1 unchanged sentence

Remaining of 2024

Company has entered into six leases for its office space, one of which was terminated in February 2024, and these leases were

classified as operating leases.

It has also entered into a lease for office equipment, and two leases for vehicles, one of which was

terminated in September 2023, and these leases were classified as finance leases.

Company has entered into six leases for its office space, one of which was terminated in February 2024, and these leases were classified

as operating leases.

It has also entered into a lease for office equipment, 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 $ 69,106

are included in property and equipment, net as of March 31, 2024 and December 31, 2023, respectively.

and $ 85,613 are included in property and equipment, net as of June 30, 2024 and December 31, 2023, respectively.

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

2 unchanged sentences

following an effective interest rate method.

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

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

balance sheets.

components of lease costs are as follows:

SCHEDULE OF LEASE COSTS

For the Three Months Ended

For the Six Months Ended

Finance lease costs

6 unchanged sentences

OF SUPPLEMENTAL INFORMATION RELATED TO COMPANY’S LEASES

For the Three Months Ended

For the Six Months Ended

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

2 unchanged sentences

Financing cash flows from finance leases

Operating lease right-of-use asset s obtained

in exchange for operating lease liabilities

Operating lease right-of-use assets obtained in exchange for operating lease liabilities

Weighted average remaining lease term (years)

4 unchanged sentences

Operating leases

of March 31, 2024, the future maturity of lease liabilities is as follows:

of June 30, 2024, the future maturity of lease liabilities is as follows:

SCHEDULE OF FINANCE LEASE AND OPERATING LEASE FUTURE MATURITY OF LEASE LIABILITIES

10 unchanged sentences

The security deposits amount to $ 310,833 and $ 348,428

$ 348,428 as of March 31, 2024 and December 31, 2023, respectively.

11 – OTHER CURRENT LIABILITIES

current liabilities consists of the following:

as of June 30, 2024 and December 31, 2023, respectively.

11 – OTHER LIABILITIES

current liabilities consist of the following:

OF OTHER CURRENT LIABILITIES

consumption taxes

received for warrants sale *

On February 29, 2024, the Company entered into a warrants transfer agreement with a

non-related company to sell partial of the warrants it received from a customer (“Consulting Customer”) as noncash

consideration from consulting services for $ 9,000,000

Accrued consumption taxes

Advance received for warrants sale *

Total other current liabilities

February 29, 2024, the Company entered into a warrants transfer agreement with a non-related company to sell partial of the warrants

it received from a customer (“Consulting Customer”) as noncash consideration from consulting services for $ 9,000,000

The Company received

in March 2024 and recorded it in other current liabilities as the warrants to be transferred are exercisable upon its Consulting Customer’s

during the six months ended

June 30, 2024 and recorded it in other current liabilities as the warrants to be transferred are exercisable upon its Consulting Customer’s

consummation of the Merger with a special purpose acquisition company or the occurrence of other fundamental events defined in the warrant

agreement it had with the Consulting Customer.

The remaining $ 4,000,000

was received in April 2024.

Other non-current liabilities consist of the following:

OF OTHER NON-CURRENT LIABILITIES

Asset retirement obligations

Customer refund liability **

Total other non-current liabilities

On June 28, 2024, the Company entered into a

settlement agreement with a customer, pursuant to which the consulting service agreement with the customer was terminated and the

Company will refund $ 500,000

to the customer in August 2025.

12 – FACTORING LIABILITY

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terminated pursuant to the terms of the Factoring Agreement.

The Company may terminate the Factoring Agreement with sixty days’

written notice to the Factor and is subject to certain early termination fee.

The Company may terminate the Factoring Agreement with sixty days’ written

notice to the Factor and is subject to certain early termination fee.

Factoring Agreement contained covenants that are customary for accounts receivable-based factoring agreements and also contained provisions

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

of March 31, 2024 and December 31, 2023, there was $ 179,414

and $ 562,767 borrowed and outstanding under the Factoring Agreement, respectively.

There are various fees charged by the Factor,

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

During the three months ended March 31, 2024 and 2023,

the Company recorded $ 16,108

and $ 22,695 in interest expenses related to the Factoring Agreement, respectively.

of June 30, 2024 and December 31, 2023, there was $ 320,759 and $ 562,767 borrowed and outstanding under the Factoring Agreement, respectively.

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, 2024 and 2023, the Company recorded $ 30,786 and $ 41,611 in interest

expenses related to the Factoring Agreement, respectively.

13 – INSURANCE PREMIUM FINANCING

January 2024, the Company entered into an insurance premium financing agreement with BankDirect Capital Finance for $ 172,689

at an annual interest rate of 13.9 %

for eleven months from February 1, 2024, payable in eleven monthly installments of principal and interest.

January 2024, the Company entered into an insurance premium financing agreement with BankDirect Capital Finance for $ 172,689 at an annual

interest rate of 13.9 % for eleven months from February 1, 2024, payable in eleven monthly installments of principal and interest.

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

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

of March 31, 2024 and December 31, 2023, the balances of the insurance premium financing were $ 157,917

respectively.

During the three months ended March 31, 2024 and 2023, the Company recorded $ 2,039

and $ 5,304 ,

respectively, in interest expenses related to the insurance premium financing.

Company’s short-term debt represents loans borrowed from a bank and a financial institution as follows:

As of June 30, 2024 and December 31, 2023, the balances of the insurance

premium financing were $ 112,488 and nil , respectively.

During the six months ended June 30, 2024 and 2023, the Company recorded $ 7,044

and $ 18,033 , respectively, in interest expenses related to the insurance premium financing.

Company’s short-term debt represents a loan borrowed from a financial institution as follows:

SCHEDULE OF SHORT-TERM DEBTS

Name of Bank/Financial

Name of Financial

Interest Rate

4 unchanged sentences

12/26/2023 – 1/31/2024

Resona Bank, Limited

JPY 10,000,000

1/4/2024 – 7/4/2024

loan is secured by accounts receivable of HeartCore Japan in the amount of JPY 23,882,562 .

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

the following:

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

SCHEDULE OF LONG-TERM DEBTS

Original Amount

Borrowed (JPY)

Interest Rate

Balance as of

Banks/Financial

7 unchanged sentences

Resona Bank, Limited

JPY 50,000,000

JPY 50,000,000 (b)(c)

12/29/2017 – 12/29/2024

Resona Bank, Limited

JPY 10,000,000

JPY 10,000,000 (b)(c)

9/30/2020 – 9/30/2027

Resona Bank, Limited

JPY 40,000,000

JPY 40,000,000 (b)(c)

9/30/2020 – 9/30/2027

Resona Bank, Limited

JPY 20,000,000

JPY 20,000,000 (b)(c)

11/13/2020 – 10/31/2027

Sumitomo Mitsui Banking Corporation

JPY 100,000,000

JPY 100,000,000 (b)

12/28/2018 – 7/1/2024

Sumitomo Mitsui Banking Corporation

JPY 10,000,000

JPY 10,000,000 (b)(c)

12/30/2019 – 12/30/2026

Sumitomo Mitsui Banking Corporation

JPY 10,000,000

JPY 10,000,000 (b)(c)

10/4/2023 – 9/30/2028

Sumitomo Mitsui Banking Corporation

JPY 10,000,000

JPY 10,000,000 (b)(c)

10/4/2023 – 9/30/2028

5 unchanged sentences

7/25/2023 – 6/30/2028

Tokyo Interbank Offered Rate +

Interbank Offered Rate + 1.950 %

Japan Finance Corporation

2 unchanged sentences

Higashi-Nippon Bank

JPY 30,000,000

JPY 30,000,000 (b)

3/31/2022 – 3/31/2025

Higashi-Nippon Bank

JPY 30,000,000

JPY 30,000,000 (b)(c)

10/11/2023 – 9/30/2028

First Home Bank

$ 350,000 (e)

4/18/2019 – 4/18/2029

Wall Street Journal U.S.

Rate + 2.750 %

Prime Rate + 2.750 %

Small Business Administration

$ 350,000 (e)

5/30/2020 – 5/30/2050

7 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 short-term debt and long-term debts was $ 2,628 and

respectively, for the three months ended March 31, 2024.

Interest expense for short-term debt and long-term debts was $ 2,929 and

$ 32,942 , respectively, for the six months ended June 30, 2024.

Interest expense for short-term debt and long-term debts was nil and $ 22,810 ,

respectively, for the three months ended March 31, 2023.

of March 31, 2024, future minimum principal payments for long-term debts are as follows:

respectively, for the six months ended June 30, 2023.

of June 30, 2024, future minimum principal payments for long-term debts are as follows:

SCHEDULE OF FUTURE MINIMUM LOAN PAYMENTS

2 unchanged sentences

15 – INCOME TAXES

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

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

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

with respect to the profit generated from the United States.

is a company incorporated in Netherlands in November 2019.

10 unchanged sentences

Luvina is a company incorporated in Vietnam in November 2023.

It is subject to standard income tax rate at 20 % with respect to the taxable

It is subject to standard income tax rate at 20 % with respect to the

taxable income.

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

3 unchanged sentences

are imposed by the national, prefectural and municipal governments, and in the aggregate result in an effective statutory tax rate of

approximately 34.59 %

for the three months ended March 31, 2024 and 2023.

the three months ended March 31, 2024 and 2023, the Company’s income tax expense (benefit) are as follows:

approximately 34.59 % for the six months ended June 30, 2024 and 2023.

the six months ended June 30, 2024 and 2023, the Company’s income tax expense (benefit) are as follows:

SCHEDULE OF INCOME TAX EXPENSES

For the Three Months Ended

For the Six Months Ended

Income tax expense (benefit)

effective tax rate was 5.14 % and 26.78 % for the three months ended March 31, 2024 and 2023, respectively.

$ ( 152,330 )

The effective tax rate was 3.97 % and 4.78 % for the six months ended June

30, 2024 and 2023, respectively.

16 – STOCK-BASED COMPENSATION

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

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

under which 2,400,000

shares of common shares are authorized for issuance.

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.

options vest 50 %

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

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 1, 2023, the Board of Directors 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 March 31, 2024.

following table summarizes the stock options activity and related information for the three months ended March 31, 2024 and 2023:

No shares were issued pursuant to the 2023 Plan as of June 30, 2024.

following table summarizes the stock options activity and related information for the six months ended June 30, 2024 and 2023:

SCHEDULE OF STOCK OPTION ACTIVITY

As of January 1, 2023

As of March 31, 2023

As of June 30, 2023

As of January 1, 2024

As of March 31, 2024

Vested and exercisable as of March 31, 2024

The Company calculated the fair value of options granted in the three

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

Significant assumptions used in the valuation include expected volatility,

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

The Company recognized stock-based

compensation related to options of $ 70,447 and $ 184,335 during

the three months ended March 31, 2024 and 2023, respectively.

The outstanding unamortized stock-based compensation related to options was $ 345,437 (which will be recognized through December 2025)

as of March 31, 2024.

As of June 30, 2024

Vested and exercisable as of June 30, 2024

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

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

the three and six months ended June 30, 2024, the Company recognized stock-based compensation related to options of $ 40,597 and $ 111,044 ,

respectively.

For the three and six months ended June 30, 2023, the Company recognized stock-based compensation related to options of

$ 150,481 and $ 334,816 , respectively.

The outstanding unamortized stock-based compensation related to options was $ 266,230 (which will

be recognized through December 2025) as of June 30, 2024.

Stock Units (“RSUs”)

3 unchanged sentences

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

following table summarizes the RSUs activity for the three months ended March 31, 2024 and 2023:

The following table summarizes the RSUs activity for the six months ended June 30, 2024 and 2023:

SCHEDULE OF RESTRICTED STOCK UNITS

Grant Date Fair

Weighted Average

Value Per Share

Unvested as of January 1, 2023

Unvested as of March 31, 2023

Unvested as of June 30, 2023

Unvested as of January 1, 2024

Unvested as of March 31, 2024

The Company recognized stock-based compensation related to RSUs of $ 21,265

and $ 730,893

during the three months ended March 31, 2024 and 2023, respectively.

The outstanding unamortized stock-based compensation related to RSUs was $ 79,845

(which will be recognized through February 2026) as of March 31, 2024.

Unvested as of June 30, 2024

the three and six months ended June 30, 2024, the Company recognized stock-based compensation related to RSUs of $ 15,445 and $ 36,710 ,

respectively.

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

and $ 759,577 , respectively.

The outstanding unamortized stock-based compensation related to RSUs was $ 64,400 (which will be recognized

through February 2026) as of June 30, 2024.

17 – SHAREHOLDERS’ EQUITY

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 19).

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 19).

November 2023, the Company established a 51 % owned subsidiary in Vietnam.

1 unchanged sentence

of VND 1,646.4 million in cash, equivalent to $ 67,195 , from the non-controlling shareholder of the subsidiary.

of March 31, 2024 and December 31, 2023, there were 20,864,144 and 20,842,690 shares of common shares issued and

outstanding, respectively.

shares were issued and outstanding as of March 31, 2024 and December 31, 2023.

On March 29, 2024, the Board of Directors

approved a dividend declaration of $ 0.02

per share of common share for the shareholders of record

at the close of business on April 26, 2024 .

The dividends in the amount of $ 417,283 were paid on May 3, 2024.

of June 30, 2024 and December 31, 2023, there were 20,864,144 and 20,842,690 shares of common shares issued and outstanding, respectively.

preferred shares were issued and outstanding as of June 30, 2024 and December 31, 2023.

18 – NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is calculated

on the basis of weighted average outstanding common shares.

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

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

Common shares

equivalents are determined by applying the treasury stock method to the assumed conversion of share repurchase liability to common shares

related to the early exercised stock options and unvested RSUs, and are not included in the calculation of diluted income (loss) per share

if their effect would be anti-dilutive.

computation of basic and diluted net income (loss) per share for the three months ended March 31, 2024 and 2023 is as follows:

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

Diluted net income (loss) per share

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

and other dilutive securities.

Common shares equivalents are determined by applying the treasury stock method to the assumed conversion

of share repurchase liability to common shares related to the early exercised stock options and unvested RSUs, and are not included in

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

computation of basic and diluted net income (loss) per share for the three and six months ended June 30, 2024 and 2023 is as follows:

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

For the Three Months Ended

the Three Months

Ended June 30,

the Six Months

Ended June 30,

Net income (loss) per share - basic and diluted

Net income (loss) attributable to HeartCore

Enterprises, Inc.

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

common shareholders

$ ( 1,951,100 )

Weighted average number of common shares outstanding used in calculating net income

(loss) per share

$ ( 911,800 )

$ ( 3,284,450 )

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

Net income (loss) per share - basic and diluted

For the three months ended March 31, 2024 and 2023,

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.

NOTE 19 – BUSINESS COMBINATION

On September 6, 2022, HeartCore USA entered into the

Sigmaways Agreement to acquire 51 % of the outstanding shares of Sigmaways, a company incorporated under the laws of the State of California,

and its subsidiaries.

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

was closed on February 1, 2023.

The purchase consideration is $ 4,150,000 , consisted of $ 1,000,000 in cash and 2,500,000 shares of common shares of the Company with fair

value of $ 3,150,000 at the closing date.

The total purchase price is allocated to the tangible

and identifiable intangible assets acquired and liabilities assumed and non-controlling interest based on their estimated fair values

as of the acquisition date.

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

The purchase price is allocated on the acquisition

date as follows:

the three and six months ended June 30, 2024 and 2023, 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.

19 – BUSINESS COMBINATION

September 6, 2022, HeartCore USA entered into the Sigmaways Agreement to acquire 51 % of the outstanding shares of Sigmaways, a company

incorporated under the laws of the State of California, and its subsidiaries.

The Sigmaways Agreement was further amended on December

23, 2022 and February 1, 2023, respectively, and the transaction was closed on February 1, 2023.

The purchase consideration is $ 4,150,000 ,

consisted of $ 1,000,000 in cash and 2,500,000 shares of common shares of the Company with fair value of $ 3,150,000 at the closing date.

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

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

The excess of the purchase price over those fair values is

recorded as goodwill.

purchase price is allocated on the acquisition date as follows:

SCHEDULE OF BUSINESS PURCHASE PRICE ALLOCATION

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Total purchase consideration

The results of operations, financial position and

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

the date of acquisition.

Pro forma results of operations for the business combination

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

The Company’s policy is to perform its annual

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

indicate that an impairment may exist.

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

31, 2024 and 2023.

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

unaudited consolidated financial statements since the date of acquisition.

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).

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

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

The Company did not recognize any impairment

loss on goodwill for the six months ended June 30, 2024 and 2023.

NOTE 20 – SUBSEQUENT EVENT

On July 22, 2024, the Board of Directors

of the Company declared a cash dividend of $ 0.02 per share of the Company’s common shares to be paid on August 26, 2024 to

shareholders of record as of August 19, 2024.

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