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Item 7. Management’s Discussion and Analysis

2026-03-31 compared with 2025-03-31 · 457 added, 476 removed, 72 unchanged (93% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Special Note Regarding Forward-Looking Statements

All statements other than

statements of historical fact included in this annual report, including, without limitation, statements under “Management’s

Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business

strategy and the plans and objectives of management for future operations, are forward-looking statements.

When used in this annual report,

words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and

similar expressions, as they relate to us or the Company’s management, identify forward-looking statements.

Such forward-looking

statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s

Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors

detailed in our filings with the SEC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Note Regarding Forward-Looking Statements

Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”),

and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), provide a safe harbor for forward-looking

statements made by us or on our behalf.

We and our representatives may from time to time make written or oral statements that are “forward-looking,”

including statements contained in this report and other filings with the Securities and Exchange Commission (“SEC”) and in

our reports and presentations to stockholders or potential stockholders.

In some cases, forward-looking statements can be identified

by words such as “believe,” “expect,” “anticipate,” “plan,” “potential,”

“continue” or similar expressions.

Such forward-looking statements include risks and uncertainties and there are important

factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements.

factors, risks and uncertainties can be found in Part I, Item 1A, “Risk Factors,” of this Annual Report on Form 10-K.

we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, it is not possible to

foresee or identify all factors that could have a material effect on the future financial performance of the Company.

The forward-looking

statements in this Annual Report on Form 10-K are made on the basis of management’s assumptions and analyses, as of the time the

statements are made, in light of their experience and perception of historical conditions, expected future developments and other factors

believed to be appropriate under the circumstances.

as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions

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

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

on which any statement is based.

following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial

statements and the notes thereto contained elsewhere in this annual report.

Certain information contained in the discussion and analysis

set forth below includes forward-looking statements that involve risks and uncertainties.

statements and the notes thereto contained elsewhere in this Annual Report on Form 10-K.

References herein to “we,” “us”

or the “Company” refers to HeartCore Enterprises, Inc.

and its consolidated subsidiaries, including HeartCore Co., Ltd.

Co.”), HeartCore Capital Advisors, Inc.

(“HeartCore Capital Advisors”), HeartCore Financial, Inc.

Financial”) and its branch office in Japan, HeartCore Luvina Vietnam Company Limited (“HeartCore Luvina”), and Sigmaways,

(“HeartCore USA”) and its consolidated subsidiaries, including HeartCore Financial, Inc.

(“HeartCore Financial”) and

its branch office in Japan, Higgs Field Co., Ltd.

(“Higgs Field”), HeartCore Luvina Vietnam Company Limited (“HeartCore

Luvina”), and Sigmaways, Inc.

(“Sigmaways”) and its subsidiaries.

HeartCore Capital Advisors was merged into HeartCore Japan in January 2024.

Luvina was incorporated in the fourth quarter 2023 and started to operate in February 2024.

Business Overview

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

We provide software through two business units.

The first business unit, our CX division, includes a customer experience management business

(the “CXM Platform”) that has been in existence for 15 years.

Our CXM Platform includes marketing, sales, service and content

management systems, as well as other tools and integrations, that enable companies to attract and engage customers throughout the customer

We also provide education, services and support to help customers be successful with our CXM Platform.

The second business unit,

our DX division, is a digital transformation business which provides customers with robotics process automation, process mining and task

mining to accelerate the digital transformation of enterprises.

We also have an ongoing technology innovation team to develop software

that supports the narrow needs of large enterprise customers.

We have made significant investments

in our sales and marketing efforts globally.

As of December 31, 2024, our sales and marketing organization was comprised of 12 employees

including our field sales organization, which maintains a physical sales presence in the Japanese software market.

Using our go-to-market

strategy, we believe we have made significant contributions in Japan and have established a diversified revenue and customer base.

of December 31, 2024, our combined business units (customer experience management business unit and digital transformation business unit)

had 982 total customers in Japan, of which 724, or 73.7%, were paying customers, and 26 total customers outside Japan, of which 1, or

0.1%, was a paying customer.

Our 280 non-paying customers were originally paying customers that utilized our paid services but now use

a free version of the CXM Platform.

There is the potential for non-paying customers to become paying customers again if and when they

start utilizing our paid services again.

During 2022, we started the GO IPO business, which supports Japanese

companies listing on Nasdaq and NYSE in the United States.

As of December 31, 2024, we have entered into consulting agreements with 14

companies to assist them in their IPO process, whereby we are entitled to receive from each company a consulting fee that ranges from

$380,000 to $900,000 and warrants or stock acquisition rights to purchase 1% to 4% of the fully-diluted share capital of such companies

that is exercisable on certain dates at an exercise price of $0.01 or JPY1 per share.

We were incorporated in the

State of Delaware on May 18, 2021.

We conduct business activities principally through our wholly owned subsidiary, HeartCore Co., a Japanese

corporation, which was established in Japan by Mr.

2022, HeartCore USA started the GO IPO business, which supports Japanese companies listing on The Nasdaq Stock Market

(“Nasdaq”) and the New York Stock Exchange (“NYSE”) in the United States.

As of December 31, 2025, we have

entered into consulting agreements with 16 companies to assist them in their IPO process, whereby we are entitled to receive from

each company a consulting fee that ranges from $380,000 to $900,000 and warrants or stock acquisition rights to purchase 1% to 4% of

the fully-diluted share capital of such companies that is exercisable on certain dates at an exercise price of $0.01 or JPY1 per

to November 2025, we were also a leading software development company based in Tokyo, Japan.

We provided software through two

business units.

The first business unit, our CX division, included a customer experience management business (the “CXM

The second business unit, our DX division, was a digital transformation business which provided customers with

robotics process automation, process mining and task mining to accelerate the digital transformation of enterprises.

made the strategic decision to sell our software business assets in Japan and to concentrate our efforts on our GO IPO consulting

On October 31, 2025, the Company entered into a Purchase Agreement (the “HeartCore Japan Agreement”) with

Smith Japan Holdings KK (“Smith Japan”), pursuant to which the Company agreed to sell to Smith Japan, and Smith Japan

agreed to purchase (the “HeartCore Japan Sale”), all of the outstanding equity interests of HeartCore Co., Ltd., a

then-wholly owned subsidiary of the Company (“HeartCore Japan”).

The HeartCore Japan Sale closed on October 31,

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

We conduct business activities principally through our wholly owned subsidiary,

HeartCore Co., a Japanese corporation, which was established in Japan by Mr.

Sumitaka Yamamoto, our CEO, in 2009.

On September 6, 2022, HeartCore

Enterprises, Inc.

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

shares of Sigmaways, a company incorporated under the laws of the State of California, and its wholly owned subsidiaries.

Sigmaways and

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

The acquisition was

closed on February 1, 2023.

In the first quarter of 2023, we formed HeartCore Financial in the

and HeartCore Capital Advisors as part of our Go IPO consulting business.

In the fourth quarter of 2023, we formed HeartCore Luvina

in Vietnam, which is engaged in the business of software development.

On November 17, 2023 HeartCore

Japan and HeartCore Capital Advisors entered into a merger agreement to merge the two entities into one with HeartCore Japan being the

surviving entity.

On January 1, 2024, the merger was completed and HeartCore Capital Advisors transferred all of its assets and liabilities

to HeartCore Japan.

The merger has been accounted for as a recapitalization between entities under common control since the same controlling

shareholders controlled the two entities before and after the transaction.

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

Financial, Inc.

– Japan Branch Office, in Japan.

For the fiscal years ended December 31, 2024 and 2023, we generated

revenues of $30,407,229 and $21,845,830, respectively, and reported net loss of $5,212,900 and $4,876,700, respectively, and cash flows

used in operating activities of $4,774,971 and $4,331,209, respectively.

As noted in our consolidated financial statements, as of December

31, 2024, we had an accumulated deficit of $16,244,843.

Key Factors that Affect Our Results of Operations

We believe the following key

factors may affect our financial condition and results of operations:

Our Ability to Strength Our Competitive

Our mission is to be at the

forefront of innovation and thought leadership in enterprise business automation, analyzing enterprise users’ desktops and mission-critical

systems, and creating end-to-end software that provides business automation based on the results of that analysis and further simulating

We create end-to-end software that provides business automation.

Our customers use our software across their organizations

so that they can run their operations in a more fully automated manner.

Our ability to successfully implement the automation in our software

greatly affects our profitability.

Our Ability to Expand International Market

We maintain a physical sales

presence in the Japanese software market.

Using our global go-to-market strategy we believe we have established a diversified revenue

and customer base.

We will continue to develop our global operation.

International expansion over the long term represents a significant

opportunity and we plan to continue to invest in growing our presence internationally, both through expanding our sales and marketing

efforts and leveraging channel and other ecosystem partners.

Our Ability to Control Costs and Expenses

and Improve Our Operating Efficiency

Our business growth is dependent

on our ability to attract and retain qualified and productive employees, identify business opportunities, secure new contracts with customers

and our ability to control costs and expenses to improve our operating efficiency.

Our software costs (mostly including purchased software

license, salaries and welfare, and outsourcing expenses) have a direct impact on our profitability.

Our success is dependent, in part,

on our ability to reduce our exposure to increase in those costs through a variety of ways, while maintaining and improving margins and

market share.

In addition, our staffing costs (including salaries and welfare) and administrative expenses also have a direct impact on

our profitability.

Our ability to drive the productivity of our staff and enhance our operating efficiency affects our profitability.

Our Ability to Manage and Retain Customer

Our ability to manage and

retain customer renewals is vital to our expansion of renewals in our customer base and continuous and growing revenue.

By achieving and

maintaining high retention of customer renewals, we are able to cover most of our expenses from the revenue generated from such retained

customer renewals.

In order to achieve and maintain a high retention of customer renewals, we engage in the following actions:

conduct annual surveys of existing customers;

(ii) we conduct Net Promoter Scoring (NPS), whereby we measure customer loyalty and satisfaction

by asking our customers how likely they are to recommend our product and service to others;

and (iii) we have sales representatives visit

important customers to increase customer retention.

Our ability to expand within our customer base is demonstrated by our net retention

rate, which represents the rate of net expansion of annualized renewal run-rate from existing customers over the last 12 months.

As of December 31, 2024, our

combined business units (customer experience management business unit and digital transformation business unit) had 982 total customers

in Japan, of which 724, or 73.7%, were paying customers and 26 total customers outside Japan, of which 1, or 0.1%, was a paying customer.

Our 280 non-paying customers were originally paying customers that utilized our paid services but now use a free version of the CXM Platform.

net retention rate for our paying customers of our customer experience management business unit (CMS business) was 95%, 88%, and 92% as

of December 31, 2024, 2023, and 2022, respectively.

There is an insignificant impact (below 10%) on our net retention rate as to former

paying customers of our CMS business utilizing the free version of your CXM Platform.

A Severe or Prolonged Slowdown in the Global

and Japan Economy Could Materially and Adversely Affect Our Business and Our Financial Condition

In recent years, the economic

indicators in Japan have shown mixed signs, and future growth of the Japanese economy is subject to many factors beyond our control.

current administration of Prime Minster Shigeru Ishiba and the former administration of Prime Minister Fumio Kishida have introduced policies

to combat deflation and promote economic growth.

In addition, the Bank of Japan introduced a plan for quantitative and qualitative monetary

easing in April 2013 and announced a negative interest rate policy in January 2016.

However, the long-term impact of these policy initiatives

on Japan’s economy remains uncertain.

The impact of Brexit on the Japanese economy and on the value of the Japanese yen against

currencies of other countries in which we generate revenue, in both the short and long term, is also uncertain.

In addition, an increase

in the consumption tax rate, which took place in April 2014 with a further increase in October 2019, may also adversely impact the Japanese

economy, potentially impacting consumer spending, and advertising spending by businesses.

Any future deterioration of the Japanese or

global economy may result in a decline in consumption that would have a negative impact on demand for our products and their prices.

GO IPO consulting services

business may experience a decrease in clients due to external factors such as the slowdown of the Japanese economy.

In addition, an increase

in the number of competitors may have an impact on the business.

Results of Operations

Comparison of Results of Operations for the

Fiscal Years Ended December 31, 2024 and 2023

The following table summarizes

our operating results as reflected in our statements of operations for the fiscal years ended December 31, 2024 and 2023, respectively,

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

September 6, 2022, HeartCore Enterprises, Inc.

entered into a share exchange and purchase agreement (“Sigmaways

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

California, and its wholly owned subsidiaries.

Sigmaways and its wholly owned subsidiaries are engaged in the business of developing

and sales of software in the United States.

The acquisition closed on February 1, 2023.

the Company made the strategic decision to sell its software business assets in Japan and to concentrate its efforts on the GO IPO consulting

In connection therewith, in addition to the HeartCore Japan Sale, which closed on October 31, 2025, the Company is assessing

all strategic alternatives to divest its 51% equity interest in Sigmaways.

As of the date of this report, the Company has not entered into a definitive agreement with respect to a sale of

its equity interest in Sigmaways.

Accordingly, there can be no assurance that any transaction will be consummated.

Any potential transaction

remains subject to, among other things, the negotiation and execution of definitive agreements and the satisfaction of customary closing

January 2023, we formed HeartCore Financial, Inc.

(“HeartCore Financial”), a wholly owned subsidiary of HeartCore USA, in

as part of our GO IPO consulting business.

In November 2023, we formed HeartCore Luvina Vietnam Company(“HeartCore Luvina”),

a 51% owned subsidiary, in Vietnam, which is engaged in the business of software development and other services.

HeartCore Luvina started

operations in February 2024.

In October 2025, HeartCore Japan transferred 51% of the outstanding shares of HeartCore Luvina to HeartCore

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 consulting services.

October 2025, HeartCore USA incorporated a wholly-owned subsidiary, Higgs Field Co., Ltd.

(“Higgs Field”), in Japan.

Field is engaged in the business of providing business and management consulting services.

IPO Consulting Services

February 2022, we have been offering “Go IPO” consulting services to a number of private Japanese companies where we assist

such private Japanese companies and/or their affiliates with their initial public offerings (“IPOs”) in the United States

as well as their simultaneous listings onto the Nasdaq Stock Market, the New York Stock Exchange or the NYSE American.

More specifically,

these consulting services (collectively, “Services”) include the following:

with introductions to law firms, underwriters and auditing firms, in order that clients can make their selections, at their sole

of process mining and task mining licenses for internal audit and internal control;

in the preparation of documentation for internal controls required for an initial public offering and simultaneous listing on the

Nasdaq Stock Market, the New York Stock Exchange or the NYSE American;

support services to remove problematic accounting accounts upon listing support;

of requested documents into English;

and, if requested by the other party, lead, meetings of management and employees;

support services related to the Nasdaq, the New York Stock Exchange or the NYSE American listing;

of accounting data from Japanese standards to accounting principles generally accepted in the U.S.

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

of English web page;

an investor presentation/deck and executive summary of the operations.

providing the Services, we do not provide investment advice regarding the value of securities, nor do we engage in the solicitation of

investors or the negotiation of securities transactions.

We do not provide accounting or legal advice, and we do not act as an investment

advisor or broker-dealer.

to the terms of the consulting agreements with the issuers, the parties agree that we will not provide the following services, among

negotiation of the sale of the issuers’ securities;

participation in discussions between the issuers and potential investors;

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

pre-screening of potential investors;

due diligence activities;

and providing advice relating to valuation of or financial advisability of any investments in the issuers.

Additionally, we do not take part in the selection of, or negotiation of terms with, law firms, underwriters or audit firms.

Such selection

and negotiation is the sole responsibility of the client.

to the terms of the consulting agreements with the issuers, the issuers agree to compensate us as follows in return for the provision

of Services during the initial term of the consulting agreements:

cash fee payable in installment payments;

by issuers to us of warrants or stock acquisition rights to acquire a number of shares of capital stock of the issuer, to initially

be equal to a designated percentage of the fully diluted share capital of the issuer, subject to adjustment as set forth in the warrants

or stock acquisition rights.

Establishment of Higgs Field Co., Ltd.

In October 2025, the Company established

Higgs Field Co., Ltd.

as a new subsidiary in Japan as part of its strategic transition toward financial services-related business opportunities.

Higgs Field Co., Ltd.

engaged in providing consulting services related to digital securities, including self-offered corporate bonds and similar instruments.

Over the longer term, the Company intends to expand this business by pursuing registration as a licensed securities firm in Japan, which

would enable it to broaden the scope of its services, subject to obtaining the necessary regulatory approvals.

of 51% Interest in Sigmaways, Inc.

In 2025, the Company made the strategic decision to sell its software business assets in Japan and to concentrate

its efforts on the GO IPO consulting business.

In connection therewith, in addition to the HeartCore Japan Sale, which closed on October

31, 2025, the Company is assessing all strategic alternatives to divest its 51% equity interest in Sigmaways,

to a third party.

of the date of this report, the Company has not entered into a definitive agreement with respect to a sale of its equity interest in Sigmaways.

Accordingly, there

can be no assurance that any transaction will be consummated.

Any potential transaction remains subject to, among other things, the negotiation

and execution of definitive agreements and the satisfaction of customary closing conditions.

of HeartCore Japan

October 31, 2025, the Company entered into the HeartCore Japan Agreement with Smith Japan in relation to the HeartCore Japan Sale.

to the terms of the HeartCore Japan Agreement, the purchase price of the HeartCore Japan Sale was ¥1,800,418,650 (equivalent to approximately

$12 million, based on the October 31, 2025 Federal Reserve conversion rate of ¥154.10 = USD $1) (the “Purchase Price”),

subject to adjustment as set forth in the HeartCore Japan Agreement, to be paid as follows:

An amount of ¥1,013,340,000 less the amount of HeartCore

Japan’s debts as set forth in the HeartCore Japan Agreement (the “Estimated Debt”) will be paid by the Smith Japan

to the Company on the closing date (such final amount, the “Closing Payment”).

An amount of ¥126,133,200 (the “Holdback Amount”)

will be retained by the Smith Japan from the Closing Payment, and, subject to the provisions of the HeartCore Japan Agreement, will be

paid by Smith Japan to the Company on the first business day occurring the later of:

(a) 180 days after the closing date, or (b) if applicable,

the date the Net Tangible Assets (as defined in the HeartCore Japan Agreement) is finally determined pursuant to the terms of the HeartCore

Japan Agreement (the “Holdback Release Date”).

An amount of ¥273,866,800 (the “Long Term Holdback

Amount”) in respect of the agreements (“Multi-year Licensing Agreements”) concerning the licensing of HeartCore Japan’s

“HeartCore CMS” product to a specified customer for a period of more than one year will be retained by Smith Japan from the

Closing Payment and will be paid by Smith Japan as set forth in the HeartCore Japan Agreement.

Subject to the provisions of the HeartCore Japan Agreement,

an amount of ¥387,078,650 (the “Deferred Consideration”), which shall consist of a principal amount of ¥322,700,000

with an uncompounded rate of interest of 6.65% per annum, will be retained by Smith Japan from the Closing Payment and will be paid by

Smith Japan on October 31, 2028, the third annual anniversary of the closing date.

Within five business days following the final determination

of the actual amount of HeartCore Japan’s debts as of the closing (the “Final Debt Amount”), Smith Japan shall pay

to the Company an amount equal to (i) the Estimated Debt minus (ii) the Final Debt Amount.

For the avoidance of doubt, if the Final Debt

Amount is greater than the Estimated Debt, no payment shall be owed by Smith Japan.

to the terms of the HeartCore Japan Agreement, for a period of six months following the closing date (October 31, 2025), (i) the Company agreed to

provide Smith Japan with certain accounting and reporting transition services, and (ii) Smith Japan agreed to provide the Company

with certain human resources transition services.

HeartCore Japan Agreement contains customary representations, warranties, conditions, covenants, and indemnification obligations for

a transaction of this type.

HeartCore Japan Sale closed on October 31, 2025.

Distribution to Stockholders

USA and its Board of Directors deemed it in the best interests of HeartCore USA and its stockholders to authorize a one-time payment

to its stockholders in the amount of $0.13 per share of common stock.

federal tax purposes, this payment to stockholders will

be deemed to be a distribution.

The record date for holders of HeartCore USA’s common stock to participate in the distribution

was November 10, 2025, and the payment date was November 17, 2025.

Notice Regarding Minimum Bid Price Requirement

May 6, 2025, we received written notice (the “Bid Price Notice”) from the Nasdaq Listing Qualification Department (the “Nasdaq

Staff”) indicating that we were not in compliance with the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule

5550(a)(2) (the “Minimum Bid Price Requirement”) for continued listing on the Nasdaq Capital Market.

The notification of

noncompliance has no immediate effect on the listing or trading of our common stock on the Nasdaq Capital Market under the symbol “HTCR,”

and we are currently monitoring the closing bid price of our common stock and evaluating our alternatives, if appropriate, to resolve

the deficiency and regain compliance with this rule.

Nasdaq Listing Rules require listed securities to maintain a minimum bid price of $1.00 per share and, based upon the closing bid price

for the last 30 consecutive business days, we no longer meet this requirement.

The Bid Price Notice indicated that we will be provided

180 calendar days, or until November 3, 2025, in which to regain compliance.

If we failed to regain compliance with Rule 5550(a)(2) prior

to the expiration of the 180 calendar day period, but meet the continued listing requirement for market value of publicly held shares

and all of the other applicable standards for initial listing on the Nasdaq Capital Market, with the exception of the Minimum Bid Price

Requirement, and provide written notice of our intention to cure the deficiency during the second compliance period by effecting a reverse

stock split, if necessary, then we may be granted an additional 180 calendar days to regain compliance with Rule 5550(a)(2).

November 4, 2025, the Nasdaq Staff notified us of its determination that HeartCore USA is eligible for an additional 180-day period,

or until May 1, 2026, to regain compliance with the Minimum Bid Price Requirement.

If at any time during this additional time period

the closing bid price of HeartCore USA’s security is at least $1 per share for a minimum of 10 consecutive business days, Nasdaq

will close the matter.

compliance cannot be timely demonstrated, the Nasdaq Staff will provide notify us that our common stock will be delisted.

At that time,

we may appeal the Nasdaq Staff’s determination to a Hearings Panel.

There can be no assurance that we will be able to regain compliance

with the Minimum Bid Price Requirement, even if we maintain compliance with the other listing requirements.

We are considering actions

that we may take in response to the Bid Price Notice in order to regain compliance with the continued listing requirements, including

a reverse stock split, if necessary, but no decisions regarding a response have been made at this time.

the years ended December 31, 2025 and 2024, we generated revenues of $8,968,732 and $22,685,544, respectively, and reported a net

loss from continuing operations of $4,184,005 and $5,148,651, respectively.

We had cash flows used in operating activities of

$3,117,101 and $3,890,317, respectively.

As noted in our consolidated financial statements, as of December 31, 2025, we had an

accumulated deficit of $13,755,534.

of Operations

of Results of Operations for the Fiscal Years Ended December 31, 2025 and 2024

following table summarizes our operating results as reflected in our statements of operations for the fiscal years ended December 31,

2025 and 2024, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.

For the Years Ended December 31,

$ (13,716,812 )

Cost of revenues

(11,564,193 )

Operating expenses:

5 unchanged sentences

Total operating expenses

Income (loss) from operations

Loss from continuing operations

Other expenses

Loss before income tax benefit

Income tax benefit

Loss from continuing operations before income tax expense (benefit)

Income taxes expense (benefit)

Net loss from continuing operations

Income (loss) from discontinued operations, net of income tax

Net income (loss)

net loss attributable to non-controlling interests

Net loss attributable to HeartCore Enterprises, Inc.

$ (1,481,374 )

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

Dividends accrued on Series A convertible preferred shares

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

common shareholders

$ (1,481,374 )

For the Years Ended December 31,

Revenues from on-premise software

Revenues from maintenance and support services

Revenues from software as a service (“SaaS”)

Revenues from software development and other miscellaneous services

Revenues from software development services

Revenues from customized software development and services

Revenues from consulting services

(12,823,826 )

Total revenues

(13,716,812 )

Cost of revenues

Costs of on-premise software

Costs of maintenance and support services

Costs of software as a service (“SaaS”)

Costs of software development and other miscellaneous services

Costs of software development services

Costs of customized software development and services

1 unchanged sentence

Total cost of revenues

On-premise software

Maintenance and support services

Software as a service (“SaaS”)

Software development and other miscellaneous services

Software development services

Customized software development and services

Consulting services

(12,730,251 )

Total gross profit

Our total revenues increased by $8,561,399, or 39.2%, to $30,407,229

for the year ended December 31, 2024 from $21,845,830 for the year ended December 31, 2023, mainly

attributable to (i) the increased revenue of $8,524,455 from GO IPO consulting services as two of the Company’s GO IPO consulting

customers successfully listed on the Nasdaq in the fiscal year 2024 and the Company recognized revenues from noncash consideration in

the form of warrants and ordinary shares from the consulting services customers of $13.5 million, while only $3.8 million of revenue recognized

from noncash consideration in the form of warrants in the fiscal year 2023;

and (ii) an increase of $1,114,551 in on-premise software

revenue as we entered into multiple long-term license contracts with relatively large contract price and revenue amount in the fiscal

and offset by (iii) a decrease of $929,954 in revenue from customized software development and services due to intense market

competition and we obtained fewer customer orders in the fiscal year 2024.

Cost of Revenues

Our total costs of revenues decreased by $1,199,057, or 8.7%, to $12,579,359

for the year ended December 31, 2024 from $13,778,416 for the year ended December 31, 2023, mainly

attributable to (i) a decrease of $1,085,192 in the cost of GO IPO consulting services in line with the decrease in revenues of GO IPO

consulting services by excluding the amount recognized from noncash consideration;

and (ii) a decrease of $332,033 in cost of maintenance

and support services as we gradually used internal resources to provide the services in 2024, which

was less costly when compared with using outsourcing resources.

Our total gross profit

increased by $9,760,456, or 121.0%, to $17,827,870 for the year ended December 31, 2024 from $8,067,414 for the year ended December

31, 2023, mainly attributable to an increase in gross profit of $9,609,647 from GO IPO

consulting services, as we recognized greater revenues from noncash consideration from IPO customers upon their IPO effectiveness

with no associated costs in the fiscal year 2024 than that recognized in 2023.

For the reasons discussed

above, our overall gross profit margin increased by 21.7% to 58.6% for the year ended December 31, 2024 from 36.9% in the fiscal year

Operating Expenses

The following table sets forth

the breakdown of our operating expenses for the fiscal years ended December 31, 2024 and 2023:

$ (11,564,193 )

total revenues decreased by $13,716,812, or 60.5%, to $8,968,732 for the year ended December 31, 2025 from $22,685,544 for the year

ended December 31, 2024, mainly attributable to (i) a decreased revenue of $12,823,826 from GO IPO consulting services mainly because

we generated significant revenue from noncash consideration of $12,969,683 from one large IPO deal in the prior period, and there

was no such large amount of revenue recognized from noncash consideration in the same period in 2025;

(ii) a decreased revenue

of $995,039 from customized software development and services in connection with a slowdown in revenue of Sigmaways, driven by

intense competition in the U.S.

software market;

and (iii) offset by an increased revenue of $102,053 from software development services in connection with the

additional customer orders obtained in Japan.

total costs of revenues decreased by $2,152,619, or 27.0%, to $5,817,279 for the year ended December 31, 2025 from $7,969,898 for

the year ended December 31, 2024, mainly attributable to the decrease of $2,143,213 in the cost of customized software development

and services, which was in light of (i) the decrease in sales and (ii) the decrease was also attributable to Sigmaways’ reduction in

subcontracting cost in the current period by ending cooperation with certain costly vendors for cost saving purpose.

total gross profit decreased by $11,564,193, or 78.6%, to $3,151,453 for the year ended December 31, 2025 from $14,715,646 for the

year ended December 31, 2024, mainly attributable to (i) a decrease of $12,730,251 in gross profit from GO IPO consulting services,

as we generated a significant noncash consideration of from one large IPO deal in the prior period and the significant decrease in

noncash consideration revenue caused the decrease in gross profit as we did not incur cost when revenue was recognized from noncash

consideration as costs were incurred throughout the consulting service period before IPO completion;

offset by (ii) an increase of

$1,148,174 in gross profit from customized software development and services, as Sigmaways reduced outsourcing costs by ending

cooperation with costly vendors in the current period, resulting in costs decreasing more than revenue did.

the reasons discussed above, our overall gross profit margin decreased by 29.8% to 35.1% for the year ended December 31, 2025 from 64.9%

in the fiscal year 2024.

following table sets forth the breakdown of our operating expenses for the fiscal years ended December 31, 2025 and 2024:

For the Years Ended December 31,

Total revenues

$ (13,716,812 )

Operating expenses:

5 unchanged sentences

Total operating expenses

Selling Expenses

Our selling expenses primarily include advertising expenses, sales

salaries, commissions, and welfare, sales promotion expenses, referral expense, and stock-based compensation.

$ (8,604,587 )

selling expenses primarily include advertising expenses, referral

expenses, and stock-based compensation.

For the Years Ended December 31,

1 unchanged sentence

Advertising expenses

Sales salaries, commissions and welfare

Sales promotion expenses

Referral expenses

1 unchanged sentence

Total selling expenses

Our selling expenses decreased

by $260,879, or 17.2%, to $1,255,368 for the year ended December 31, 2024 from $1,516,247 in the fiscal year 2023, primarily attributable

to (i) a decrease of $359,359 in advertising expenses due to less advertising activities in the current year, (ii) a decrease of $416,476

in stock-based compensation, as the Company granted restricted common stocks which immediately vested upon issuance and stock options

to employees of Sigmaways in 2023, and there was no such amount restricted common stocks and stock options granted in the current year,

the decrease is also contributed by the graded vesting method of stock options for those issued in previous years, which generally more

stock-based compensation will recognize in the early stage, offset by (iii) the increase of $464,963 in sales salaries, commissions and

welfare as the Company shifted marketing strategy in the fiscal year 2024.

As a percentage of revenues,

our selling expenses accounted for 4.1% and 6.9% of our total revenues for the years ended December 31, 2024 and 2023, respectively.

General and Administrative Expenses

Our general and administrative expenses primarily consist of employee

salaries and welfare expenses, consulting and professional service fees, depreciation and amortization expenses, rent expense, office,

utility and other expenses, travel and entertainment expenses, and stock-based compensation.

selling expenses decreased by $387,326, or 62.4%, to $233,744 for the year ended December 31, 2025 from $621,070 in the fiscal year

2024, primarily attributable to (i) a decrease of $260,815 in stock-based compensation due to the resignation from the Company of

some of the option and RSU holders resigned from the

Company, resulted in the forfeiture of options and RSUs and reversal of SBC expense in 2025 and brought SBC expense in 2025 to

negative amounts, while there were no such large amount of forfeiture and reversal of SBC expense in prior year ;

decrease of $115,885 in advertising expenses as we reduced certain marketing activities and cancelled promotion campaigns with lower

advertising performance.

a percentage of revenues, our selling expenses accounted for 2.6% and 2.7% of our total revenues for the years ended December 31, 2025

and 2024, respectively.

and Administrative Expenses

general and administrative expenses primarily consist of employee salaries and welfare expenses, consulting and professional service

fees, depreciation and amortization expenses, rent expense, office, utility and other expenses, bad debt, travel and entertainment

expenses, and stock-based compensation.

For the Years Ended December 31,

7 unchanged sentences

Total general and administrative expenses

$ (1,027,794 )

Our general and administrative expenses decreased by $1,027,794 or

10.6%, to $8,628,587 for the year ended December 31, 2024 from $9,651,381 in the fiscal year 2023, primarily attributable to (i) a decrease

of $825,248 in salaries and welfare expenses due decrease in numbers of directors, change in bonus structures, and dissolution of HeartCore

Capital Advisors in the fiscal year 2024;

(ii) a decrease of $558,041 in stock-based compensation, as the Company granted restricted common

stocks which immediately vested upon issuance and stock options to employees of Sigmaways in 2023, and there was no such amount restricted

common stocks and stock options granted in the current year, the decrease is also contributed by the graded vesting method of stock options

for those issued in previous years, which generally more stock-based compensation will recognize in the early stage;

general and administrative expenses decreased by $882,933 or 12.8%, to $6,039,026 for the year ended December 31, 2025 from

$6,921,959 in the fiscal year 2024, primarily attributable to (i) a decrease of $625,245 in depreciation and amortization expenses,

primarily because we fully impaired intangible assets arising from the acquisition of Sigmaways at the end of the 2024 fiscal year,

resulting in no amortization expenses recorded in 2025;

(ii) a decrease of $504,948 in consulting and professional services fees

mainly because of the decrease in public relations service fees as the Company engaged in public relations related activities in the

previous year to enhance compliance and regulation information, while no such activities occurred in 2025;

offset by (iii) an

increase of $479,668 in consulting and professional service fees, primarily because the Company newly engaged public relations related

activities in 2024 to enhance compliance and regulation information, while no such activities occurred in previous year.

As a percentage of revenues,

general and administrative expenses were 28.4% and 44.2% of our revenues for the fiscal years ended December 31, 2024 and 2023, respectively.

Research and Development Expenses

Our research and development

expenses primarily consist of employee salaries and welfare expenses, outsourcing expenses, and stock-based compensation.

For the Years Ended December 31,

increase of $212,733 in salaries and welfare, primarily due to the distribution of a one-time bonus to certain officers and

employees in connection with the successful disposition of HeartCore Japan.

a percentage of revenues, general and administrative expenses were 67.3% and 30.5% of our revenues for the fiscal years ended December

31, 2025 and 2024, respectively.

and Development Expenses

research and development expenses primarily consist of outsourcing expenses and stock-based

compensation.

the Years Ended December 31,

and development expenses

research and development expenses

Salaries and welfare expenses

Outsourcing expenses

Stock-based compensation

Total research and development expenses

Our research and development

expenses decreased by $289,557 or 28.4%, to $729,584 in the year ended December 31, 2024 from $1,019,141 in the year ended December 31,

2023, primarily attributable to a decrease of $603,367 in outsourcing expenses relating to the development

of new CMS management screen features, which stared in 2023 and about to completed in the current year;

and offset by an increase of $371,748

in salaries and welfare expenses for the employees assigned to the development of a new product, Global CMS, started in 2024.

As a percentage of revenues,

research and development expenses were 2.4% and 4.7% of our revenues for the fiscal years ended December 31, 2024 and 2023, respectively.

Impairment of Intangible Asset

Our intangible asset represents

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

As of December 31, 2024, we accessed the

value of such intangible asset become zero by engaging a third-party valuation appraiser, accordingly, we recorded an impairment of intangible

asset of $3,878,125, excluding an amortization expense of $637,500 in the year ended December 31, 2024.

Impairment of Goodwill

Our goodwill represents the

excess of the purchase price over the fair value of the net identifiable assets acquired in business acquisition of Sigmaways and its

subsidiaries.

As of December 31, 2024, we evaluated the fair value of the reporting unit of Sigmaways and its subsidiaries and estimated

the value of goodwill become zero by engaging a third-party valuation appraiser, accordingly, we recorded an impairment of goodwill of

$3,276,441 in the year ended December 31, 2024.

Other Income (Expenses), Net

Our other income (expenses) primarily includes changes in fair value

of investments in marketable securities, changes in fair value of investment in warrants, loss on sale of warrants, interest income generated

from bank deposits, interest expenses for bank loans and bonds, government grants, impairment of investment in equity securities, loss

on forgiveness of note receivable, other income, and other expenses.

Total other expenses, net, increased by $4,523,478 or 507.7%, from

other expenses, net, of $891,009 for the year ended December 31, 2023 to other expenses, net, of $5,414,487 for the year ended December

31, 2024, primarily attributable to an increase of $1,796,865 in loss on fair value changes in investments

in marketable securities, an increase of $3,970,628 in loss on sale of warrants, and an increase of $300,000 in impairment of investment

in equity securities, offset by an increase of $2,159,144 in gain on fair value changes in investment in warrants.

Income Tax Benefit

Income tax benefit was $136,822

for the year ended December 31, 2024, a slight increase of $3,158, or 2.4% from income tax benefit of $133,664 in the fiscal year 2023.

As a result of the foregoing,

we reported a net loss of $5,212,900 for the fiscal year ended December 31, 2024, representing a $336,200 or 6.9% increase from a net

loss of $4,876,700 for the fiscal year ended December 31, 2023.

Net Loss Attributable to Non-controlling

owned 51% equity interest of Sigmaways and its subsidiaries and 51% equity interest of HeartCore Luvina as of December 31, 2024.

research and development expenses decreased by $179,762, or 100.0%, to nil in the year ended December 31, 2025 from $179,762 in the year

ended December 31, 2024, primarily attributable to a decrease of $177,389 in outsourcing expenses as we reduced outsourcing research and development expenses for cash flow saving purposes in 2025.

a percentage of revenues, research and development expenses were 0.0% and 0.8% of our revenues for the fiscal years ended December 31,

2025 and 2024, respectively.

of Intangible Asset

Our impairment of intangible

asset decreased by $3,878,125 or 100.0%, to nil for the year ended December 31, 2025 from $3,878,125 in the fiscal year 2024,

primarily because we fully impaired intangible asset and goodwill raised from acquisition of Sigmaways due to the recurring net loss

position and negative operating cash flows in the prior year, while there was no such impairment of intangible asset activities in

Our impairment of goodwill

decreased by $3,276,441 or 100.0%, to nil for the year ended December 31, 2025 from $3,276,441 in the fiscal year 2024, primarily

because we fully impaired intangible asset and goodwill raised from acquisition of Sigmaways due to the recurring net loss position

and negative operating cash flows in the prior year, while there was no such impairment of goodwill activities in 2025.

Income (Expenses), Net

other income (expenses) primarily includes changes in fair value of investments in marketable securities, changes in fair value of investment

in warrants, loss on sale of warrants, interest income generated from bank deposits, interest expenses for bank loans and bonds, c hanges in fair value of derivative liability , impairment of investment in equity securities, loss on forgiveness of note receivable, other income, and other expenses.

other expenses, net, decreased by $4,332,308 or 81.0%, from other expenses, net, of $5,350,096 for the year ended December 31, 2024 to

other expenses, net, of $1,017,788 for the year ended December 31, 2025, primarily attributable to (i) a decrease of $3,970,628 in loss

on sale of warrants;

(ii) a decrease of $918,151 in loss on fair value changes in investments in marketable securities;

(iii) a decrease of $300,000 in impairment

of investment in equity securities;

offset by (iv)

a decrease of $1,032,024 in gain on fair value changes in investment in warrants.

Tax Expense (Benefit)

tax expense was $44,900 for the year ended December 31, 2025, representing a decrease of $408,056, or 112.4%, from income tax

benefit of $363,156 in the fiscal year 2024, mainly because we incurred income tax benefit position

in the prior year (mainly because the Company recognized large deferred income tax benefit due to impairment of intangible asset) and

income tax expense position in 2025 (the Company incurred consolidated net loss from continuing operations before tax position and minor

income tax expense recognized for subsidiaries generated income).

Net Loss from Continuing Operations

a result of the foregoing, we reported a net loss from continuing operations of $4,184,005 for the year ended December 31, 2025, representing

a $964,646, or 18.7%, decrease from a net loss from continuing operations of $5,148,651 for the year ended December 31, 2024.

(Loss) from Discontinued Operations, Net of Income Tax

July 24, 2025, the Board of Directors of the Company approved entry into a non-binding letter of intent to sell 100% of the outstanding

shares of HeartCore Japan.

On October 31, 2025, the Company entered into the HeartCore Japan Agreement with Smith Japan in relation to

the sale of HeartCore Japan.

The results of operations of HeartCore Japan are reported as discontinued operations for all periods presented

as the sale of HeartCore Japan represents a strategic shift that has or will have a major impact on its operations and financial results.

The sale transaction closed on October 31, 2025.

We reported an income from discontinued operations, net of income tax of $9,677,293

for the year ended December 31, 2025, representing a $9,741,542, or 15162.2%, increase from a loss from discontinued operations, net

of income tax of $64,249 for the year ended December 31, 2024.

Income (Loss)

a result of the foregoing, we reported a net income of $5,493,288 for the fiscal year ended December 31, 2025, representing a $10,706,188

or 205.4% increase from a net loss of $5,212,900 for the fiscal year ended December 31, 2024.

Loss Attributable to Non-controlling Interests

owned a 51% equity interest of Sigmaways and its subsidiaries and a 51% equity interest of HeartCore Luvina as of December 31, 2025.

Accordingly, we recorded net loss attributable to the non-controlling interests of $300,596 and $3,731,526 in the year ended

December 31, 2025 and 2024, respectively.

Net Loss Attributable to HeartCore Enterprises,

As a result of the foregoing, we reported a net loss attributable to

HeartCore Enterprises, Inc.

of $1,481,374 for the fiscal year ended December 31, 2024, representing a $2,708,516 or 64.6% decrease from

a net loss attributable to HeartCore Enterprise, Inc.

of $4,189,890 for the fiscal year ended December 31, 2023.

Liquidity and Capital Resources

As of December 31, 2024, we had $2,121,089 in cash and cash equivalents

as compared to $1,012,479 as of December 31, 2023.

We also had $1,950,050 in accounts receivable as of December 31, 2024.

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

as well as amounts billable to the customers for customized software development and services.

As of December 31, 2024, our working capital was $1,995,643.

our liquidity, management monitors and analyzes our cash, our ability to generate sufficient revenues in the future, and our operating

and capital expenditure commitments.

Cash Flows for the Years Ended December

31, 2024 and 2023

The following table sets forth summary of our

cash flows for the periods indicated:

Income (Loss) Attributable to HeartCore Enterprises, Inc.

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

of $5,793,884 for the fiscal year ended

December 31, 2025, representing a $7,275,258 or 491.1% increase from a net loss attributable to HeartCore Enterprise, Inc.

of $1,481,374

for the fiscal year ended December 31, 2024.

Accrued on Series A Convertible Preferred Shares

June 30, 2025, we issued 2,000 shares of Series A convertible preferred shares, which were granted a cumulative dividend of 10% per annum.

Accordingly, we recorded dividends accrued on Series A convertible preferred shares of $94,357 in the current period.

Income (Loss) Attributable to HeartCore Enterprises, Inc.

Common Shareholders

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

common shareholders of $5,699,527 for

the year ended December 31, 2025, representing a $7,180,901, or 484.7%, increase from a net loss attributable to HeartCore Enterprises,

common shareholders of $1,481,374 for the year ended December 31, 2024.

and Capital Resources

of December 31, 2025, we had $1,985,962 in cash and cash equivalents as compared to $1,973,810 as of December 31, 2024.

We also had $707,865

in accounts receivable as of December 31, 2025.

Our accounts receivable primarily include balance due from customers for customized software development

and services.

of December 31, 2025, our working capital was $3,085,642.

In assessing our liquidity, management monitors and analyzes our cash, our

ability to generate sufficient revenues in the future, and our operating and capital expenditure commitments.

Flows for the Years Ended December 31, 2025 and 2024

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

For the Years Ended

Net cash used in operating activities

Net cash flows used in operating activities of continuing operations

$ (3,117,101 )

$ (3,890,317 )

Net cash provided by (used in) investing activities

Net cash provided by (used in) financing activities

Net cash flows provided by investing activities of continuing operations

Net cash flows provided by (used in) financing activities of continuing operations

Net cash flows used in discontinued operations

Effect of exchange rate changes

2 unchanged sentences

Cash and cash equivalents, end of the year

Operating Activities

Net cash used in operating

activities was $4,774,971 for the year ended December 31, 2024, primarily consisting of the following:

loss of $5,212,900 for the fiscal year.

securities and warrants received as noncash consideration in total of $13,541,693 as two of our IPO consulting customers completed the

IPO during the current year.

● A deferred income tax benefits of $1,076,600 mainly brought by amortization

and impairment of intangible asset.

gain of $1,657,699 on fair value changes in investment in warrants.

by loss of $3,970,628 recognized on sale of warrants to a third party.

cash used in operating activities was $3,117,101 for the year ended December 31, 2025, primarily consisting of the following:

loss from continuing operations of $4,184,005 for the fiscal year.

received as noncash consideration in total of $837,913 as our GO IPO consulting customers completed the IPO during the period.

gain of $625,675 on fair value changes in investment in warrants due to fair value measurement.

by loss of $1,494,234 on fair value changes in investments in marketable securities due to fair value measurement.

by an increase of $1,036,456 in income tax payables in connection with the gain recognized from the sale of discontinued operations.

cash used in operating activities was $3,890,317 for the year ended December 31, 2024, primarily consisting of the following:

loss from continuing operations of $5,148,651 for the fiscal year.

securities and warrants received as non-cash consideration of $13,541,693 as our IPO consulting customers completed the IPO during

by a total of $7,154,566 loss recognized on impairment of goodwill and intangible asset acquired from business acquisition of Sigmaways

and its subsidiaries.

by a loss of $2,412,385 on fair value changes in investments in marketable securities.

by depreciation and amortization expenses of $749,639.

by an increase of $669,142 in income tax payable.

by an increase of $710,001 in other liabilities, mainly because the increase of liability to refund a customer.

Net cash used in operating

activities was $4,331,209 for the year ended December 31, 2023, primarily consisting of the following:

Net loss of $4,876,700 for the fiscal year.

Warrants received as non-cash consideration of $3,763,621 as our IPO consulting customers completed the IPO during the current year.

An increase in accounts receivable of $338,312.

The increase was primarily due to the increase in our sales generated by our newly acquired subsidiary, Sigmaways .

The collected accounts receivable is available cash, which can be used as working capital for our business operation, if necessary.

A decrease of $327,877 in operating lease liabilities, due to the rent payment made.

Offset by stock-based compensation of $1,430,513, as we granted equity rewards to our employees and service providers in 2023.

Offset by a loss of $615,520 from the changes in fair value of investments in marketable securities.

Offset by a loss of $501,445 from the changes in fair value of investment in warrants.

Offset by depreciation and amortization expenses of $683,019, mainly because we acquired Sigmaways and its subsidiaries on February 1, 2023, and recognized amortization expense for the intangible asset identified through the acquisition .

Offset by an increase of $532,790 in accounts payable and accrued expenses as we incurred more operating expenses due to the expansion of our business .

Offset by an increase in deferred revenue of $553,130, due to the upfront payment received for IPO consulting services while most IPO customer were not declared IPO effective as of the balance sheet date.

Offset by non-cash lease expense of $346,070.

Investing Activities

Net cash provided by investing activities amounted to $6,349,204 for

the year ended December 31, 2024, primarily consisted of (i) net proceeds of $5,640,000 from sale

of warrants, and (ii) net proceeds of $749,546 from sale of marketable securities.

Net cash used in investing

activities amounted to $1,780,952 for the year ended December 31, 2023, primarily consisted of (i)

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

(ii) advances on notes receivable of $600,000;

and (iii) purchases of property and equipment of $526,260 .

Financing Activities

Net cash used in financing

activities amounted to $318,646 for the year ended December 31, 2024, primarily consisted of (i)

dividends distribution of $834,566;

(ii) repayment of $554,553 for short-term and long-term debts;

(iii) net repayment of $390,373 for

factoring arrangement, and (iv) proceeds of $1,423,342 from issuance of common stocks.

Net cash provided by financing

activities amounted to $136,194 for the fiscal year ended December 31, 2023, primarily consisted

of proceeds of $710,107 from short-term and long-term debts, and net proceeds of $562,767 from factoring arrangement, offset by repayment

of $711,395 for long-term debts, and repayment of 389,035 for insurance premium financing.

Contractual Obligations

Lease Commitment

The Company has entered into

operating leases for office space with terms ranging from two to fifteen years, and finance leases for office equipment and vehicle with

terms of five years.

As of December 31, 2024, future

minimum lease payments under the non-cancelable lease agreements are as follows:

Year Ended December 31,

Finance Lease

Operating Leases

Total lease payments

imputed interest

Total lease liabilities

current portion

Non-current lease liabilities

The Company’s debts included long-term debts borrowed from banks

and financial institutions.

As of December 31, 2024, future

minimum payments for long-term debts are as follows:

by loss of $3,970,628 recognized on sale of warrants to a third party.

by a loss of $2,412,385 on fair value changes in investments in marketable securities due to fair value measurement.

by a decrease of $1,050,522 in accounts receivable.

cash provided by investing activities amounted to $5,590,600 for the year ended December 31, 2025, primarily consisted of (i) net proceeds

of $4,518,868 from sale of discontinued operations, net of cash divested;

and (ii) net proceeds of $1,071,732 from sale of marketable

cash provided by investing activities amounted to $6,314,546 for the year ended December 31, 2024, primarily consisted of (i) net proceeds

of $5,640,000 from sale of warrants, and (ii) net proceeds of $749,546 from sale of marketable securities.

cash used in financing activities amounted to $1,493,076 for the year ended December 31, 202 5 ,

primarily consisted of (i) dividends payment of $3,304,575

for common shares ;

offset by (ii) net p roceeds of $1,800,000 from issuance

of Series A convertible preferred shares and common shares related to securities purchase agreement.

cash provided by financing activities amounted to $134,098 for the year ended December 31, 2024, primarily consisted of (i) net proceed

of $1,423,342 from issuance of common shares related to at the market offering agreement;

offset by (ii) net repayment of $390,373 for

factoring arrangement, and (iii) dividend payment of $834,566 to common shares.

Company has entered into operating leases for office space.

Company’s debts included long-term debts borrowed from banks and financial institutions.

of December 31, 2025, future minimum payments for long-term debts are as follows:

Year Ended December 31,

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements

as of December 31, 2024.

Critical Accounting Policies and

Our discussion and analysis

of our financial condition and results of operations are based upon our consolidated financial statements.

These financial statements

are prepared in accordance with the generally accepted accounting principles in the United States (“U.S.

GAAP”), which requires

us to make estimates and assumptions that affect the reported amounts of our assets and liabilities and revenues and expenses, to disclose

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

and expenses incurred during the financial reporting period.

We continue to evaluate the estimates and assumptions that we believe to

be reasonable under the circumstances.

We rely on these evaluations as the basis for making judgments about the carrying values of assets

and liabilities that are not readily apparent from other sources.

Since the use of estimates is an integral component of the financial

reporting process, actual results could differ from those estimates.

Some of our accounting policies require higher degrees of judgment

than others in their application.

We believe critical accounting policies reflect the more significant judgments and estimates used in

preparation of our consolidated financial statements.

Revenue Recognition

We generate revenues from the following main sources:

on-premise software sales, maintenance and support services, software as a service (“SaaS”), software development and other

miscellaneous services, customized software development and services and consulting

A single contract could include one or multiple performance obligations.

For those contracts that have multiple performance

obligations, we allocate the total transaction price to each performance obligation based on its relative standalone selling price.

Revenue is recognized when control of the goods

and services provided are transferred to our customers and in an amount that reflects the consideration we expect to be entitled to in

exchange for those goods and services using the following steps:

1) identify the contract, 2) identify the performance obligations, 3)

determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue

as or when we satisfy the performance obligations.

We satisfy our performance obligations for maintenance

and support services, software as a service (“SaaS”), customized software development and services and consulting services

over time as the related services are provided.

We satisfy our performance obligations for on-premise software sales and software development

and other miscellaneous services at point in time.

We provide 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.

consideration is primarily 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.

We assess 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 valuation of noncash

consideration in the form of warrants of the customers are estimates are based on all available information and in some cases

assumptions with respect to the timing and amount of future revenues and expenses and are reviewed by consulting with third-party

valuation appraisers.

The fair value of the warrants received from the customers are estimated using the Black-Scholes model and

binomial model.

In connection with assessing the stock price as one of the inputs to the valuation model, income approach, through

the discounted cash flow method, and market approach, through the guideline company method, are used in the valuation process.

Management applies significant judgement related to these valuation models and approaches, such as future cash flows estimate,

discount rate assumption, selection of comparable companies, and etc.

These significant assumptions are based on company specific

Sheet Arrangements

did not have any off-balance sheet arrangements as of December 31, 2025.

Accounting Policies and Estimates

discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements.

financial statements are prepared in accordance with the generally accepted accounting principles in the United States (“U.S.

which requires us to make estimates and assumptions that affect the reported amounts of our assets and liabilities and revenues and expenses,

to disclose contingent assets and liabilities on the date of the consolidated financial statements, and to disclose the reported amounts

of revenues and expenses incurred during the financial reporting period.

We continue to evaluate the estimates and assumptions that we

believe to be reasonable under the circumstances.

We rely on these evaluations as the basis for making judgments about the carrying values

of assets and liabilities that are not readily apparent from other sources.

Since the use of estimates is an integral component of the

financial reporting process, actual results could differ from those estimates.

Some of our accounting policies require higher degrees

of judgment than others in their application.

We believe critical accounting policies reflect the more significant judgments and estimates

used in preparation of our consolidated financial statements.

generate revenues from the following main sources:

software development services, customized software development and services and consulting

is recognized when control of the goods and services provided are transferred to our customers and in an amount that reflects the consideration

we expect to be entitled to in exchange for those goods and services using the following steps:

1) identify the contract, 2) identify

the performance obligations, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in

the contract, and 5) recognize revenue as or when we satisfy the performance obligations.

provide 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 primarily 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.

We assess 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

Only when the significant revenues reversal is concluded probable of not occurring can variable consideration be included in

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.

valuation of noncash consideration in the form of warrants of the customers are estimates are based on all available information and

in some cases assumptions with respect to the timing and amount of future revenues and expenses and are reviewed by consulting with

third-party valuation appraisers.

The fair value of the warrants received from the customers are estimated using the binomial model.

Management applies significant judgement related to the valuation model and approach, such as dividend yield assumption, risk free

interest rate, volatility, selection of comparable companies, and etc.

These assumptions are based on company specific

information and projections, which may not be observable in the market, and, therefore, are considered Level 2 and Level 3

measurements.

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

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

We believe the accounting estimate for revenue recognition in connection with the valuation of the warrants received by

2 unchanged sentences

differ from estimates.

Impairment of Intangible Asset and Goodwill

We review our intangible asset

for impairment and perform a goodwill impairment assessment on an annual basis through a qualitative or quantitative assessment and when

events and circumstances indicate that the estimated fair value of a reporting unit may no longer exceed its carrying value.

of evaluating the potential impairment of intangible asset and goodwill is subjective because it requires the use of estimates and assumptions

in determining a reporting unit’s fair value, as well as the fair value of the intangible asset.

We calculate the fair values by

using the income approach, through the discounted cash flow method and multi-period excess earnings method, based on the present value

of future discounted cash flows, which requires us to use estimates and judgments about the future cash flows of the reporting unit, primarily

including forecasted revenue and revenue growth rates, weighted average cost of capital, and forecasted operating cash flows.

the accounting estimate for impairment of intangible asset and reporting unit are critical accounting estimates because our estimates

of fair values of intangible asset and reporting unit are based upon assumptions that are highly subjective, but which are inherently

uncertain and, as a result, actual results may differ from estimates.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

Not applicable.

FINANCIAL STATEMENTS AND SUPPLEMENTARY

Reference is made to pages

F-1 through F-29 comprising a portion of this annual report.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

is made to pages F-1 through F-31 comprising a portion of this annual report.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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-K

Item 7. Management’s Discussion and Analysis