HeartCore Enterprises, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS HEARTCORE ENTERPRISES, INC. CONSOLIDATED BALANCE SHEETS March 31, December 31, 2026 2025 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 774,033 $ 1,985,962 Accounts receivable 572,547 707,865 Investments in marketable securities 3,394,190 3,690,187 Prepaid expenses 222,818 182,077 Current portion of long-term note receivable 100,000 100,000 Deferred offering costs 250,000 250,000 Other current assets 175,335 208,503 Proceeds receivable from sale of discontinued operations 1,382,897 1,291,298 Total current assets 6,871,820 8,415,892 Non-current assets: Property and equipment, net 279,185 291,589 Operating lease right-of-use assets 506,456 29,449 Long-term investment in warrants 273,859 280,924 Deferred tax assets 22,633 23,121 Security deposits 278,154 282,958 Other non-current assets 241 549 Long-term proceeds receivable from sale of discontinued operations 3,539,421 3,736,995 Total non-current assets 4,899,949 4,645,585 Total assets $ 11,771,769 $ 13,061,477 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued expenses $ 1,230,686 $ 1,146,501 Accounts payable and accrued expenses – related party 96,333 124,618 Accounts payable and accrued expenses 96,333 124,618 Accrued payroll and other employee costs 663,683 509,547 Due to related party 401 285 Short-term debt – related party 69,000 75,000 Current portion of long-term debts 51,697 50,598 Insurance premium financing 97,773 13,430 Factoring liability 124,508 135,982 Operating lease liabilities, current 308,119 32,793 Income tax payables 1,847,411 1,857,386 Deferred revenue 650,469 676,216 Derivative liability 122,589 121,719 Other current liabilities 598,602 586,175 Total current liabilities 5,861,271 5,330,250 Non-current liabilities: Long-term debts 434,895 448,376 Operating lease liabilities, non-current 211,544 - Total non-current liabilities 646,439 448,376 Total liabilities 6,507,710 5,778,626 Shareholders’ equity: Preferred shares, $ 0.0001 par value, 20,000,000 shares authorized; Series A convertible preferred shares, 4,000 shares designated, 1,017 shares issued and outstanding as of March 31, 2026 and December 31, 2025; aggregate liquidation preference of $ 1,262,686 and $ 1,158,362 as of March 31, 2026 and December 31, 2025, respectively 691,858 691,858 Common shares, $ 0.0001 par value, 200,000,000 shares authorized, 1,288,812 and 1,270,991 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively * 129 127 Additional paid-in capital 21,876,230 21,902,169 Accumulated deficit ( 15,627,241 ) ( 13,755,534 ) Accumulated other comprehensive loss ( 66,099 ) ( 58,497 ) Total HeartCore Enterprises, Inc. shareholders’ equity 6,874,877 8,780,123 Non-controlling interests ( 1,610,818 ) ( 1,497,272 ) Total shareholders’ equity 5,264,059 7,282,851 Total liabilities and shareholders’ equity $ 11,771,769 $ 13,061,477 * On April 2, 2026, the Company effected a 1-for-20 reverse stock split of the Company’s issued and outstanding common shares. References to share and per share information of common shares in the unaudited consolidated financial statements have been retroactively adjusted. See NOTE 14. The accompanying notes are an integral part of these unaudited consolidated financial statements. F- 1 HEARTCORE ENTERPRISES, INC. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS 2026 2025 For the Three Months Ended March 31, 2026 2025 Revenues $ 1,245,844 $ 2,093,413 Cost of revenues (including cost of revenues resulting from transactions with a related party of $ 114,535 and $ 25,195 for the three months ended March 31, 2026 and 2025, respectively) 1,171,799 1,549,639 Gross profit 74,045 543,774 Operating expenses: Selling expenses 42,812 152,922 General and administrative expenses (including general and administrative expenses resulting from transactions with a related party of nil and $ 17,615 for the three months ended March 31, 2026 and 2025, respectively) 1,571,734 1,581,205 Total operating expenses 1,614,546 1,734,127 Loss from continuing operations ( 1,540,501 ) ( 1,190,353 ) Other income (expenses): Changes in fair value of investments in marketable securities ( 295,997 ) ( 1,781,664 ) Changes in fair value of investment in warrants ( 7,065 ) ( 51,621 ) Changes in fair value of derivative liability ( 870 ) - Interest income 582 2,243 Interest expenses ( 16,625 ) ( 17,794 ) Other income 14,095 9,313 Other expenses ( 112,865 ) ( 547 ) Total other expenses ( 418,745 ) ( 1,840,070 ) Loss from continuing operations before income tax expense ( 1,959,246 ) ( 3,030,423 ) Income tax expense 17,469 39,608 Net loss from continuing operations ( 1,976,715 ) ( 3,070,031 ) Loss from discontinued operations, net of income tax - ( 67,350 ) Net loss ( 1,976,715 ) ( 3,137,381 ) Less: net loss attributable to non-controlling interests ( 105,008 ) ( 50,389 ) Net loss attributable to HeartCore Enterprises, Inc. ( 1,871,707 ) ( 3,086,992 ) Dividends accrued on Series A convertible preferred shares ( 27,968 ) - Net loss attributable to HeartCore Enterprises, Inc. common shareholders $ ( 1,899,675 ) $ ( 3,086,992 ) Other comprehensive loss: Foreign currency translation adjustment ( 16,140 ) ( 8,014 ) Total comprehensive loss ( 1,992,855 ) ( 3,145,395 ) Less: comprehensive loss attributable to non-controlling interests ( 113,546 ) ( 49,152 ) Comprehensive loss attributable to HeartCore Enterprises, Inc. $ ( 1,879,309 ) $ ( 3,096,243 ) Net loss from continuing operations attributable to HeartCore Enterprises, Inc. per common share* Basic $ ( 1.49 ) $ ( 2.74 ) Diluted $ ( 1.49 ) $ ( 2.74 ) Loss from discontinued operations per common share* Basic $ - $ ( 0.06 ) Diluted $ - $ ( 0.06 ) Net loss attributable to HeartCore Enterprises, Inc. per common share* Basic $ ( 1.49 ) $ ( 2.80 ) Diluted $ ( 1.49 ) $ ( 2.80 ) Weighted average common shares outstanding* Basic 1,271,631 1,102,702 Diluted 1,271,631 1,102,702 * On April 2, 2026, the Company effected a 1-for-20 reverse stock split of the Company’s issued and outstanding common shares. References to share and per share information of common shares in the unaudited consolidated financial statements have been retroactively adjusted. See NOTE 14. The accompanying notes are an integral part of these unaudited consolidated financial statements. F- 2 HEARTCORE ENTERPRISES, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025 Shares* Amount Receivable Capital Deficit Income Equity Interests Equity Common Shares Additional Accumulated Other Total HeartCore Enterprises, Inc. Total Number of Subscription Paid-in Accumulated Comprehensive Shareholders’ Non-controlling Shareholders’ Shares* Amount Receivable Capital Deficit Income Equity Interests Equity Balance, January 1, 2025 - - 1,096,900 $ 110 $ ( 103,942 ) $ 20,658,236 $ ( 16,244,843 ) $ 343,936 $ 4,653,497 $ ( 1,191,482 ) $ 3,462,015 Net loss - - - - ( 3,086,992 ) - ( 3,086,992 ) ( 50,389 ) ( 3,137,381 ) Foreign currency translation adjustment - - - - - ( 9,251 ) ( 9,251 ) 1,237 ( 8,014 ) Issuance of common shares related to at the market offering agreement 794 - - 30,445 - - 30,445 - 30,445 Collection of subscription receivable - - 103,942 - - - 103,942 - 103,942 Exercise of stock options 5,000 1 - 116,999 - - 117,000 - 117,000 Stock-based compensation - - 1,073 - - 32,280 - - 32,280 - 32,280 Balance, March 31, 2025 - - 1,103,767 $ 111 $ - $ 20,837,960 $ ( 19,331,835 ) $ 334,685 $ 1,840,921 $ ( 1,240,634 ) $ 600,287 Shares Amount Shares* Amount Capital Deficit Loss Equity Interests Equity Preferred Shares Common Shares Additional Accumulated Other Total HeartCore Enterprises, Inc. Total Number of Number of Paid-in Accumulated Comprehensive Shareholders’ Non-controlling Shareholders’ Shares Amount Shares* Amount Capital Deficit Loss Equity Interests Equity Balance, January 1, 2026 1,017 $ 691,858 1,270,991 $ 127 $ 21,902,169 $ ( 13,755,534 ) $ ( 58,497 ) $ 8,780,123 $ ( 1,497,272 ) $ 7,282,851 Net loss - - - - - ( 1,871,707 ) - ( 1,871,707 ) ( 105,008 ) ( 1,976,715 ) Foreign currency translation adjustment - - - - - - ( 7,602 ) ( 7,602 ) ( 8,538 ) ( 16,140 ) Dividends accrued on Series A convertible preferred shares - - - - ( 27,968 ) - - ( 27,968 ) - ( 27,968 ) Stock-based compensation - - 796 - 2,031 - - 2,031 - 2,031 Reverse stock split rounding adjustment - - 17,025 2 ( 2 ) - - - - - Balance, March 31, 2026 1,017 $ 691,858 1,288,812 $ 129 $ 21,876,230 $ ( 15,627,241 ) $ ( 66,099 ) $ 6,874,877 $ ( 1,610,818 ) $ 5,264,059 * On April 2, 2026, the Company effected a 1-for-20 reverse stock split of the Company’s issued and outstanding common shares. References to share and per share information of common shares in the unaudited consolidated financial statements have been retroactively adjusted. See NOTE 14. The accompanying notes are an integral part of these unaudited consolidated financial statements. F- 3 HEARTCORE ENTERPRISES, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS 2026 2025 For the Three Months Ended March 31, 2026 2025 Cash flows from operating activities of continuing operations: Net loss $ ( 1,976,715 ) $ ( 3,137,381 ) Loss from discontinued operations, net of income tax - ( 67,350 ) Net loss from continuing operations ( 1,976,715 ) ( 3,070,031 ) Adjustments to reconcile net loss from continuing operations to net cash flows used in operating activities of continuing operations: Depreciation expense 7,720 20,289 Loss on disposal of property and equipment - 116,981 Non-cash lease expense 70,229 31,662 Gain on termination of lease - ( 9,059 ) Deferred income taxes - 27,515 Stock-based compensation 2,031 32,280 Changes in fair value of investments in marketable securities 295,997 1,781,664 Changes in fair value of investment in warrants 7,065 51,621 Changes in fair value of derivative liability 870 - Gain on settlement of asset retirement obligations - ( 45,873 ) Changes in assets and liabilities: Accounts receivable 135,238 ( 180,823 ) Prepaid expenses 66,924 50,591 Other assets 107,886 ( 26,711 ) Accounts payable and accrued expenses 85,404 ( 97,118 ) Accounts payable and accrued expenses – related party ( 28,338 ) ( 24,224 ) Accounts payable and accrued expenses ( 28,338 ) ( 24,224 ) Accrued payroll and other employee costs 154,736 ( 23,483 ) Due to related party 125 ( 884 ) Operating lease liabilities ( 60,127 ) ( 24,435 ) Income tax payables ( 9,785 ) ( 80,196 ) Deferred revenue ( 25,747 ) ( 233,911 ) Other liabilities 12,897 12,686 Net cash flows used in operating activities of continuing operations ( 1,153,590 ) ( 1,691,459 ) Cash flows from investing activities of continuing operations: Purchases of property and equipment ( 954 ) - Proceeds from sale of marketable securities - 462,763 Net cash flows provided by (used in) investing activities of continuing operations ( 954 ) 462,763 Cash flows from financing activities of continuing operations: Payments for finance lease - ( 4,071 ) Repayment of long-term debts ( 12,382 ) ( 10,561 ) Repayment of related party debt ( 6,000 ) - Repayment of insurance premium financing ( 23,657 ) ( 28,559 ) Net repayment of factoring arrangement ( 11,474 ) ( 45,341 ) Proceeds from issuance of common shares related to at the market offering agreement - 30,445 Proceeds from collection of subscription receivable - 103,942 Proceeds from exercise of stock options - 117,000 Net cash flows provided by (used in) financing activities of continuing operations ( 53,513 ) 162,855 Cash flows from discontinued operations: Net cash flows used in operating activities of discontinued operations - ( 309,332 ) Net cash flows provided by investing activities of discontinued operations - 10,298 Net cash flows used in financing activities of discontinued operations - ( 19,915 ) Net cash flows used in discontinued operations - ( 318,949 ) Effect of exchange rate changes ( 3,872 ) 2,685 Net change in cash and cash equivalents ( 1,211,929 ) ( 1,382,105 ) Cash and cash equivalents – beginning of the period 1,985,962 2,121,089 Cash and cash equivalents – end of the period $ 774,033 $ 738,984 Supplemental cash flow disclosures: Interest paid $ 16,625 $ 22,857 Income taxes paid (received), net $ ( 4,574 ) $ 93,586 Non-cash investing and financing transactions: Insurance premium financing $ 108,000 $ 139,500 Dividends accrued on Series A convertible preferred shares $ 27,968 $ - Operating lease right-of-use assets obtained in exchange for operating lease liabilities $ 552,577 $ - The accompanying notes are an integral part of these unaudited consolidated financial statements. F- 4 HEARTCORE ENTERPRISES, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS HeartCore Enterprises, Inc. (“HeartCore USA”), a holding company, was incorporated under the laws of the State of Delaware on May 18, 2021 . On July 16, 2021, HeartCore USA executed a share exchange agreement with certain shareholders of HeartCore Co., Ltd. (“HeartCore Japan”), a company that was incorporated in Japan on June 12, 2009. Pursuant to the terms of the share exchange agreement, HeartCore USA issued 15,999,994 shares of its common shares to the shareholders of HeartCore Japan in exchange for 10,706 shares out of 10,984 shares of common shares issued by HeartCore Japan, representing approximately 97.5 % of HeartCore Japan’s outstanding common shares. On February 24, 2022, HeartCore USA purchased the remaining 278 shares of common shares of HeartCore Japan. As a result, HeartCore Japan became a wholly-owned operating subsidiary of HeartCore USA. The share exchange on July 16, 2021 has been accounted for as a recapitalization between entities under common control since the same controlling shareholders controlled these two entities before and after the transaction. The consolidation of HeartCore USA and its subsidiary has been accounted for at historical cost and prepared on the basis as if the transaction had become effective as of the beginning of the earliest period presented in the unaudited consolidated financial statements. HeartCore USA, 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. On September 6, 2022, HeartCore USA entered into a share exchange and purchase agreement to acquire 51 % of the outstanding shares of Sigmaways, Inc. (“Sigmaways”), a company incorporated under the laws of the State of California in April 2006, and its wholly-owned subsidiaries, Sigmaways B.V. and Sigmaways Technologies Ltd. (“Sigmaways Technologies”). Sigmaways B.V. was incorporated in Netherlands in November 2019. Sigmaways Technologies was incorporated in Canada in August 2020. Sigmaways and its wholly-owned subsidiaries are primarily engaged in the business of providing software development and other services in the United States. The acquisition was closed on February 1, 2023. In January 2023, HeartCore USA incorporated a wholly-owned subsidiary, HeartCore Financial, Inc. (“HeartCore Financial”), under the laws of the State of Delaware. HeartCore Financial is engaged in the business of providing consulting services. In November 2023, HeartCore Japan established a 51 % owned subsidiary in Vietnam, HeartCore Luvina Vietnam Company Limited (“HeartCore Luvina”), which is engaged in the business of providing software development and other services. HeartCore Luvina started its operations from February 2024. In October 2025, HeartCore Japan transferred 51 % of the outstanding shares of HeartCore Luvina to HeartCore USA. 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 consulting services. On July 24, 2025, the Board of Directors approved to enter into a non-binding letter of intent to sell 100% of the outstanding shares of HeartCore Japan. The sale of HeartCore Japan represented a strategic shift that had a major impact on the results of operations and has been accounted for as a discontinued operation (see NOTE 16). The sale transaction was closed on October 31, 2025. In October 2025, HeartCore USA incorporated a wholly-owned subsidiary, Higgs Field Co., Ltd. (“Higgs Field”), in Japan. Higgs Field is engaged in the business of providing business and management consulting services. HeartCore USA, HeartCore Japan, Sigmaways, Sigmaways B.V., Sigmaways Technologies, HeartCore Financial, HeartCore Luvina, HeartCore Financial – Japan and Higgs Field are hereafter referred to as the “Company” unless specific reference is made to an entity. F- 5 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The 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 consolidated 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. The Company has presented the results of operations and cash flows of HeartCore Japan as discontinued operations in the unaudited consolidated financial statements as of and for all periods presented. All footnotes exclude activities of HeartCore Japan unless otherwise noted. All significant intercompany accounts and transactions have been eliminated. These unaudited interim consolidated financial statements do not include all of the information and disclosures required by the U.S. GAAP for complete consolidated financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments consisting of normal recurring nature considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2025. Liquidity and Going Concern The unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company assesses whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the unaudited consolidated financial statements are issued. For the three months ended March 31, 2026, the Company incurred net loss from continuing operations of $ 2.0 million and net cash flows used in operating activities of continuing operations of $ 1.2 million, primarily due to the macroeconomic downturn environment. As of March 31, 2026, the Company had cash and cash equivalents of $ 0.8 million, working capital of $ 1.0 million and accumulated deficit of $ 15.6 million. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s plan is to continue exploring strategic alternatives for raising additional funding for future operations through a combination of obtaining equity financing, entering into debt or other financing arrangements, and restructuring of operations to grow revenues and decrease expenses to supplement the Company’s liquidity. The Company’s ability to raise capital may be constrained by the price of and demand for the Company’s equity shares. Additional funding may not be available on favorable terms or at all, and could further dilute the Company’s current shareholders. Management cannot conclude as of the date of this report that its plans are probable of being successfully implemented. There can be no assurance that the Company will be able to obtain sufficient additional liquidity when needed or under acceptable terms, if at all. The unaudited consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company is unable to continue as a going concern. F- 6 Use of Estimates In 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 disclosures 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, allowance for credit losses, useful life of property and equipment, impairment of long-lived assets, valuation of stock-based compensation, valuation allowance of deferred tax assets, uncertain tax positions, implicit interest rate of operating and finance leases, valuation of investment in warrants, and valuation of derivative liability. Actual results could differ from those estimates. Investment in Warrants Investment in warrants represents stock warrants earned from its consulting service customers. The warrants are measured at fair value and any changes in fair value are recognized in other income (expenses). Investment in warrants is classified as long-term if the warrants are exercisable over one year after the date of receipt. Investments in Marketable Securities Investments in marketable securities represent equity securities registered for public sale with readily determinable fair value. The marketable securities are obtained through stocks of its customers received as noncash consideration from consulting services and through exercise of stock warrants of its consulting service customers and measured at fair value with any changes in fair value recognized in other income (expenses). Impairment of Long-Lived Assets Long-lived assets with finite lives, primarily property and equipment and operating lease right-of-use assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value. There were no impairments of these assets during the three months ended March 31, 2026 and 2025. Foreign Currency Translation The functional currency of HeartCore Japan, HeartCore Financial – Japan and Higgs Field is the Japanese Yen (“JPY”). The functional currency of HeartCore USA, HeartCore Financial and Sigmaways is the United States Dollar (“US$”). The functional currency of Sigmaways B.V. is the Euro (“EUR”). The functional currency of Sigmaways Technologies is the Canada Dollar (“CAD”). The functional currency of HeartCore Luvina is the Vietnam Dong (“VND”). Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the unaudited consolidated statements of operations and comprehensive loss. The reporting currency of the Company is the US$, and the unaudited consolidated financial statements have been expressed in US$. In accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 830-30, “Translation of Financial Statements”, assets and liabilities of the Company whose functional currency is not US$ are translated into US$, using the exchange rates on the balance sheet dates. Revenues and expenses are translated at average rates prevailing during the periods. The gains and losses resulting from the translation of financial statements are recorded as a separate component of accumulated other comprehensive income (loss) within the unaudited consolidated statements of changes in shareholders’ equity. F- 7 Revenue Recognition The Company recognizes revenues under ASC Topic 606, “Revenue from Contracts with Customers”. To determine revenue recognition for contracts with customers, the Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenues when (or as) the Company satisfies a performance obligation. Revenues amount represents the invoiced value, net of a value-added tax (“Consumption Tax”) and applicable local government levies. The Consumption Tax on sales are calculated at 10% of gross sales in Japan and Vietnam, 5% of gross sales in Canada, 21% of gross sales in Netherlands and nil of gross sales in the United States. The Company currently generates its revenues from the following main sources: Revenues from Software Development 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 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. Revenues 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. 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. Revenues 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 services 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 stocks and 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 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. Sales Returns and Allowances The 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 on the consolidated balance sheets. At a minimum, the Company reviews and refines these estimates on a quarterly basis. F- 8 Contract Balances The timing of revenue recognition may differ from the timing of invoicing to the customers. The Company determines 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. 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 amounts of revenues recognized during the three months ended March 31, 2026 and 2025 that were included in the opening deferred revenue balances were approximately $ 0.1 million and $ 0.2 million, respectively. Disaggregation of Revenues The Company disaggregates its revenues from contracts by revenue stream 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, 2026 and 2025 is as follows: SCHEDULE OF DISAGGREGATION OF REVENUES 2026 2025 For the Three Months Ended March 31, 2026 2025 Revenues from software development services $ 206,751 $ 7,089 Revenues from customized software development and services 1,013,346 1,840,781 Revenues from consulting services 25,747 245,543 Total revenues $ 1,245,844 $ 2,093,413 Concentration of Credit Risk Financial instruments that potentially subject the Company to credit risk consist primarily of accounts receivable, note receivable and other receivable. The Company usually does not require collateral or other security to support these receivables. The Company conducts periodic reviews of the financial condition and payment practices of its customers to minimize collection risk on accounts receivable. For the three months ended March 31, 2026 and 2025, customers account for 10% or more of the Company’s revenues are as follows: SCHEDULE OF CONCENTRATION OF CREDIT RISK For the Three Months Ended March 31, 2026 2025 Customer A 32.0 % 32.1 % Customer B 16.6 % - * Customer C 13.7 % 12.4 % Customer D 11.3 % 10.3 % Customer E - * 10.4 % As of March 31, 2026 and December 31, 2025, customers account for 10% or more of the Company’s accounts receivable are as follows: March 31, 2026 December 31, 2025 Customer A 18.8 % 21.3 % Customer D 16.5 % 12.9 % F- 9 For the three months ended March 31, 2026 and 2025, vendor accounts for 10% or more of the Company’s purchases is as follows: For the Three Months Ended March 31, 2026 2025 Vendor A 14.2 % 18.5 % As of March 31, 2026 and December 31, 2025, vendor accounts for 10% or more of the Company’s accounts payable and accrued expenses is as follows: March 31, 2026 December 31, 2025 Vendor B 13.1 % 14.0 % * Less than 10%. Segment Reporting ASC Topic 280, “Segment Reporting”, requires use of the management approach model for segment reporting. The management approach model is based on the way a company’s chief operating decision maker (“CODM”) organizes segments within the Company for making operating decisions, assessing performance and allocating resources. Reportable segments are based on services, geography, legal structure, management structure, or any other manner in which management disaggregates a company (see NOTE 17). Series A Convertible Preferred Shares and Derivative Liability When the Company issues the Series A convertible preferred shares (see NOTE 14), it first evaluates the balance sheet classification of the convertible instrument in its entirety to determine whether the instrument should be classified as a liability under ASC Topic 480, “Distinguishing Liabilities from Equity”, and second evaluates whether the conversion feature should be accounted for separately from the host instrument. A conversion feature of the Series A convertible preferred shares would be separated from the convertible instrument and classified as a derivative liability if the conversion feature, as a standalone instrument, meets the definition of an embedded derivative under ASC Topic 815, “Derivatives and Hedging”. Generally, characteristics that require derivative treatment include, among others, when the conversion feature is not indexed to the Company’s equity, as defined in ASC Topic 815-40, or when it must be settled either in cash or by issuing equity shares that are readily convertible to cash. The Company assesses the Series A convertible preferred shares as a whole and determines it does not meet the liability classification pursuant to ASC Topic 480 and the Company classifies the host instrument as permanent equity because no features provide for redemption by the holders of the Series A convertible preferred shares or conditional redemption, which is not solely within the Company’s control, and there are no unconditional obligations in that (i) the Company must or may settle in a variable number of its equity shares, and (ii) the monetary value is predominantly fixed, varying with something other than the fair value of the Company’s equity shares or varying inversely in relation to the Company’s equity shares. The Company assesses the conversion feature of the Series A convertible preferred shares for derivative accounting consideration and determines it meets the definition of an embedded derivative, which is separated from the host instrument and classified as a derivative liability carried on the consolidated balance sheets at fair value with any changes in fair value recognized in other income (expenses). The Company values the fair value of derivative liability using the income approach with the discounted cash flow valuation method with the assistance of a third-party valuation appraiser. The determination of fair value requires management to make significant estimates and assumptions related to forecasted cash flows and discount rate. F- 10 Fair Value Measurements The Company performs fair value measurements in accordance with ASC Topic 820, “Fair Value Measurements and Disclosures”. 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. 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: ● Level 1: quoted prices in active markets for identical assets or liabilities; ● Level 2: inputs other than Level 1 that are observable, either directly or indirectly; or ● Level 3: unobservable inputs that are supported by little or no market activities and that are significant to the fair values of the assets or liabilities. As of March 31, 2026 and December 31, 2025, the carrying values of current assets, except for investments in marketable securities, and current liabilities, except for derivative liability, approximated their fair values reported in the consolidated balance sheets due to the short-term maturities of these instruments. Assets and liabilities measured at fair value on a recurring basis as of March 31, 2026 and December 31, 2025 are summarized below (also see NOTE 5 for investments): SCHEDULE OF ASSETS MEASURED AT FAIR VALUE ON A RECURRING BASIS Fair Value Measurements as of March 31, 2026 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Unobservable Inputs (Level 3) Fair Value at March 31, 2026 Investments in marketable securities 3,394,190 - - 3,394,190 Long-term investment in warrants - 273,859 - 273,859 Derivative liability - - 122,589 122,589 Fair Value Measurements as of December 31, 2025 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Unobservable Inputs (Level 3) Fair Value at December 31, 2025 Investments in marketable securities 3,690,187 - - 3,690,187 Long-term investment in warrants - 280,924 - 280,924 Derivative liability - - 121,719 121,719 Discontinued Operations In accordance with ASC Topic 205-20, “Presentation of Financial Statements – Discontinued Operations”, a component or a group of components of an entity shall be classified as held for sale in the period in which all of the following criteria are met: (i) management, having the authority to approve the action, commits to a plan to sell the entity to be sold; (ii) the entity to be sold is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such entities to be sold; (iii) an active program to locate a buyer or buyers and other actions required to complete the plan to sell the entity to be sold have been initiated; (iv) the sale of the entity to be sold is probable and transfer of the entity to be sold is expected to qualify for recognition as a completed sale within one year; (v) the entity to be sold is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (vi) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. A component or a group of components of an entity classified as held for sale is reported at the lower of its carrying amount or fair value less cost to sell. If the fair value of the entity to be sold less cost to sell is lower than its carrying amount, an impairment loss is recognized and update each reporting period as appropriate. F- 11 The results of operations of the entity to be sold classified as held for sale are reported as discontinued operations if the disposal represents a strategic shift that has or will have a major effect on an entity’s operations and financial results. The Company assesses the sale of HeartCore Japan and determines it meets the held for sale criteria and the discontinued operations criteria. The results of operations of HeartCore Japan are presented as discontinued operations in the unaudited consolidated statements of operations and comprehensive loss for all periods presented. Prior periods have been adjusted to conform to the current presentation. The required disclosures are included in NOTE 16. Recent Accounting Pronouncements In November 2024, the FASB issued Accounting Standards Update (“ASU”) No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, requiring public companies to disclose additional information about specific expense categories in the notes to the consolidated financial statements on an annual and interim basis. ASU No. 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures. In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU No. 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its unaudited interim consolidated financial statements and related disclosures. NOTE 3 – ACCOUNTS RECEIVABLE Accounts receivable consist of the following: SCHEDULE OF ACCOUNTS RECEIVABLE NET March 31, 2026 December 31, 2025 Accounts receivable – non-factored $ 434,460 $ 534,710 Accounts receivable – factored with recourse 138,087 173,155 Total accounts receivable, gross 572,547 707,865 Less: allowance for credit losses - - Total accounts receivable $ 572,547 $ 707,865 NOTE 4 – RELATED PARTY TRANSACTIONS As of March 31, 2026 and December 31, 2025, the Company had due to related party balances of $ 401 and $ 285 , respectively, from Sumitaka Yamamoto, the Chief Executive Officer (“CEO”) and major shareholder of the Company. The balance is unsecured, non-interest bearing and due on demand. During the three months ended March 31, 2026 and 2025, the related party paid operating expenses on behalf of the Company and received the payments in a net amount of $ 125 and nil , respectively. As of March 31, 2026 and December 31, 2025, the Company had accounts payable and accrued expenses balances of $ 96,333 and $ 124,618 , respectively, to Luvina Software Joint Stock Company (“Luvina Software”), the non-controlling shareholder of HeartCore Luvina. During the three months ended March 31, 2026 and 2025, the Company engaged the related party for software development and other support services of $ 114,535 and $ 42,810 , respectively. During the three months ended March 31, 2026 and 2025, the Company repaid to the related party for operating expenses the related party paid on behalf of the Company of nil and $ 884 , respectively. F- 12 As of March 31, 2026 and December 31, 2025, the Company had short-term debt balances of $ 69,000 and $ 75,000 , respectively, to Prakash Sadasivam, the CEO and non-controlling shareholder of Sigmaways and its subsidiaries. The debt is borrowed from the related party for working capital purpose. The balance is unsecured, bears an annual interest of 7.5 % and due on demand. During the three months ended March 31, 2026 and 2025, the Company repaid to the related party of $ 6,000 and nil , respectively. NOTE 5 – INVESTMENTS Investment in Warrants The 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 consolidated 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 risk-free interest rate for the term of the warrants. The following table summarizes the Company’s investment in warrants activities for the three months ended March 31, 2026 and 2025: SCHEDULE OF INVESTMENT IN WARRANTS ACTIVITY 2026 2025 For the Three Months Ended March 31, 2026 2025 Fair value of investment in warrants at beginning of the period $ 280,924 $ 577,786 Changes in fair value of investment in warrants ( 7,065 ) ( 51,621 ) Fair value of investment in warrants at end of the period $ 273,859 $ 526,165 Investments in Marketable Securities The Company’s investments in marketable securities represent stocks received from its customers as noncash consideration from consulting services and 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, 2026 and 2025: SCHEDULE OF INVESTMENTS IN MARKETABLE SECURITIES 2026 2025 For the Three Months Ended March 31, 2026 2025 Fair value of investments in marketable securities at beginning of the period $ 3,690,187 $ 4,495,703 Changes in fair value of investments in marketable securities ( 295,997 ) ( 1,781,664 ) Marketable securities sold - ( 462,763 ) Fair value of investments in marketable securities at end of the period $ 3,394,190 $ 2,251,276 NOTE 6 – PROPERTY AND EQUIPMENT, NET Property and equipment, net consist of the following: SCHEDULE OF PROPERTY AND EQUIPMENT NET March 31, 2026 December 31, 2025 Machinery and equipment $ 338,426 $ 343,150 Vehicle 79,704 81,420 Subtotal 418,130 424,570 Less: accumulated depreciation ( 138,945 ) ( 132,981 ) Total property and equipment, net $ 279,185 $ 291,589 For the three months ended March 31, 2026 and 2025, the Company recognized depreciation expenses of $ 7,720 and $ 20,289 , respectively. F- 13 NOTE 7 – LEASES The Company has entered into operating leases for office space with terms ranging from 2 two to three years , and finance lease for vehicle with terms of five years . The estimated effect of lease renewal and termination options, as applicable, that are reasonably certain to be exercised in the determination of the lease term and initial measurement of lease right-of-use assets and lease liabilities is included in the unaudited consolidated financial statements. Operating leases costs for lease payments are recognized on a straight-line basis over the lease term. Finance lease costs include amortization, which is recognized on a straight-line basis over the expected life of the leased assets, and interest expense, which is recognized following an effective interest rate method. Leases with initial term of twelve months or less are not recorded in the consolidated balance sheets. The components of lease costs for the three months ended March 31, 2026 and 2025 are as follows: SCHEDULE OF COMPONENTS OF LEASE COST 2026 2025 For the Three Months Ended March 31, 2026 2025 Finance lease costs Amortization of finance lease right-of-use assets $ - $ 4,179 Interest on finance lease liabilities - 198 Total finance lease costs - 4,377 Operating leases costs 73,522 33,145 Total leases costs $ 73,522 $ 37,522 The following table presents supplemental information related to the Company’s leases for the three months ended March 31, 2026 and 2025: SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO COMPANY LEASE 2026 2025 For the Three Months Ended March 31, 2026 2025 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from finance lease $ - $ 198 Operating cash flows from operating leases 61,350 25,185 Financing cash flows from finance lease - 4,071 Operating lease right-of-use assets obtained in exchange for operating lease liabilities 552,577 - Remeasurement of operating lease liabilities and right-of-use assets due to lease modification 21,970 - Weighted average remaining lease term (years): Finance lease - 3.5 Operating leases 1.7 0.8 Weighted average discount rate (per annum): Finance lease 0.00 % 1.32 % Operating leases 1.45 % 4.23 % F- 14 As of March 31, 2026, the future maturity of lease liabilities is as follows: SCHEDULE OF FUTURE MINIMUM MATURITIES OF OPERATING LEASE LIABILITIES Operating Year Ended December 31, Leases Remaining of 2026 $ 238,721 2027 283,420 2028 - 2029 - 2030 - Thereafter - Total lease payments 522,141 Less: imputed interest ( 2,478 ) Total lease liabilities 519,663 Less: current portion ( 308,119 ) Non-current lease liabilities $ 211,544 Pursuant to the operating lease agreements, the Company made security deposits to the lessors. The security deposits amounted to $ 278,154 and $ 282,958 as of March 31, 2026 and December 31, 2025, respectively. NOTE 8 – OTHER CURRENT LIABILITIES Other current liabilities consist of the following: SCHEDULE OF OTHER CURRENT LIABILITIES March 31, 2026 December 31, 2025 Customer refund liability * $ 500,000 $ 500,000 Others 98,602 86,175 Total other current liabilities $ 598,602 $ 586,175 * On June 28, 2024, the Company entered into a settlement agreement with a customer, pursuant to which the consulting services agreement with the customer was terminated and the Company would refund $ 500,000 to the customer in August 2025. As of the date of this report, the Company did not make payment to the customer. NOTE 9 – FACTORING LIABILITY Sigmaways, the subsidiary acquired by the Company in February 2023, entered into a factoring and security agreement (“Factoring Agreement”) with The Southern Bank Company, an unrelated factor (“Factor”), in February 2017, for the purpose of factoring certain accounts receivable. Pursuant to the terms of the Factoring Agreement, Sigmaways may offer for sale, and the Factor may purchase in its sole discretion, certain accounts receivable of Sigmaways (“Purchased Receivable”). The Factoring Agreement provided for a maximum of $ 850,000 in Purchased Receivable. Selected accounts receivable is submitted to the Factor, and Sigmaways receives 90 % of the face value of the accounts receivable by wire transfer. Upon payment by the customers, the remainder of the amount due is received from the Factor after deducting certain fees. The Factoring Agreement specifies that eligible accounts receivable is factored with recourse. Pursuant to the terms of the recourse provision, Sigmaways is required to reimburse the Factor, upon demand, for Purchased Receivable that is not paid on time by the customers. The performance of all obligations and payments to the Factor is secured by all Sigmaways’ now owned and hereafter assets and any sums maintained by the Factor that are identified as payable to Sigmaways. F- 15 The Factoring Agreement has an initial term of twelve months and automatically renews for successive twelve-month renewal periods unless terminates pursuant to the terms of the Factoring Agreement. Sigmaways may terminate the Factoring Agreement with sixty days’ written notice to the Factor and is subject to certain early termination fee. The Factoring Agreement contains covenants that are customary for accounts receivable-based factoring agreements and also contains provisions relating to events of default that are customary for agreements of this type. As of March 31, 2026 and December 31, 2025, there were $ 124,508 and $ 135,982 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. For the three months ended March 31, 2026 and 2025, the Company recorded $ 10,142 and $ 8,901 in interest expenses related to Factoring Agreement, respectively. NOTE 10 – INSURANCE PREMIUM FINANCING In January 2026, the Company entered into an insurance premium financing agreement with AFCO Direct, a division of AFCO Credit Corporation, for $ 108,000 at an annual interest rate of 13.9 % for ten months from February 1, 2026, payable in ten monthly installments of principal and interest. In January 2025, the Company entered into an insurance premium financing agreement with AFCO Direct, a division of AFCO Credit Corporation, for $ 139,500 at an annual interest rate of 13.9 % for eleven months from February 1, 2025, payable in eleven monthly installments of principal and interest. As of March 31, 2026 and December 31, 2025, the balances of the insurance premium financing were $ 97,773 and $ 13,430 , respectively. For the three months ended March 31, 2026 and 2025, the Company recorded $ 1,423 and $ 1,832 in interest expenses related to insurance premium financing, respectively. NOTE 11 – LONG-TERM DEBTS The Company’s long-term debts represent loans borrowed from a bank and a financial institution as follows: SCHEDULE OF LONG-TERM DEBTS Name of Bank/Financial Institution Amount Borrowed Loan Duration Annual Interest Rate Balance as of March 31, 2026 Balance as of December 31, 2025 First Home Bank $ 350,000 (a) 4/18/2019 – 4/18/2029 Wall Street Journal U.S. Prime Rate + 2.75 % $ 147,701 $ 157,923 U.S. Small Business Administration 350,000 (a) 5/30/2020 – 5/30/2050 3.75 % 338,891 341,051 Aggregate outstanding principal balances 486,592 498,974 Less: current portion ( 51,697 ) ( 50,598 ) Non-current portion $ 434,895 $ 448,376 (a) These debts are guaranteed by Prakash Sadasivam, the CEO and non-controlling shareholder of Sigmaways and its subsidiaries, and secured by all assets of Sigmaways. For the three months ended March 31, 2026 and 2025, the Company recorded $ 5,060 and $ 7,061 in interest expenses related to long-term debts, respectively. As of March 31, 2026, future minimum principal payments for long-term debts are as follows: SCHEDULE OF FUTURE MINIMUM LOAN PAYMENTS Principal Year Ended December 31, Payment Remaining of 2026 $ 38,216 2027 55,325 2028 60,471 2029 27,857 2030 9,973 Thereafter 294,750 Total $ 486,592 F- 16 NOTE 12 – INCOME TAXES United States HeartCore USA, Sigmaways and HeartCore Financial, incorporated in the United States, are subject to federal income tax at 21 % statutory tax rate with respect to the profit generated from the United States. Netherlands Sigmaways B.V. is a company incorporated in Netherlands. The first EUR 200,000 of taxable income is subject to a statutory tax rate of 19 % and the remaining taxable income is subject to a statutory tax rate of 25.80 % . Canada Sigmaways Technologies is a company incorporated in British Columbia in Canada. It is subject to income tax on income arising in, or derived from, the tax jurisdiction in British Columbia it operates. The basic federal rate of Part I tax is 38 % of taxable income, 28 % after federal tax abatement. After the general tax reduction, the net federal tax rate is 15 %. The provincial and territorial lower and higher tax rates in British Columbia are 2 % and 12 %, respectively. Vietnam HeartCore Luvina is a company incorporated in Vietnam. It is subject to standard income tax rate at 20 % with respect to the taxable income. Japan HeartCore Financial – Japan and Higgs Field are companies incorporated in Japan. Income taxes in Japan 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, 2026 and 2025, the Company’s income tax expense are as follows: SCHEDULE OF INCOME TAX EXPENSES 2026 2025 For the Three Months Ended March 31, 2026 2025 Current $ 17,469 $ 12,093 Deferred - 27,515 Income tax expense $ 17,469 $ 39,608 For the three months ended March 31, 2026 and 2025, the effective tax rate were 0.89 % and 1.31 %, respectively. NOTE 13 – STOCK-BASED COMPENSATION On August 6, 2021, the Board of Directors and shareholders of the Company approved a 2021 Equity Incentive Plan (“2021 Plan”), under which 120,000 shares of common shares are authorized for issuance. On August 1, 2023, the Board of Directors of the Company approved a 2023 Equity Incentive Plan (“2023 Plan”), under which 100,000 shares of common shares are authorized for issuance. F- 17 Stock Options On December 25, 2021, the Company awarded stock options to purchase 76,725 shares of common shares pursuant to the 2021 Plan at an exercise price of $ 50.00 per share to various officers, directors, employees and consultants of the Company. The stock options vest on each annual anniversary of the date of issuance, in an amount equal to 25 % of the applicable shares of common shares, with the expiration date on December 25, 2031 . On August 9, 2022, the Company awarded stock options to purchase 725 shares of common shares at an exercise price of $ 49.60 per share to three prior employees of the Company. The stock options are fully vested and exercisable on the grant date, with the expiration date on August 9, 2026 . On February 3, 2023, the Company awarded stock options to purchase 5,000 shares of common shares pursuant to the 2021 Plan at an exercise price of $ 23.40 per share to an employee of the Company. The stock options vest 50 % on the grant date and February 1, 2024, respectively, with the expiration date on February 3, 2033 . The following table summarizes the stock options activities and related information for the three months ended March 31, 2026 and 2025: SCHEDULE OF STOCK OPTION ACTIVITY Number of Stock Options Weighted Average Exercise Price Weighted Average Remaining Term (Years) Intrinsic Value As of January 1, 2025 75,325 $ 48.23 7.01 $ 64,500 Granted - - - - Exercised ( 5,000 )         23.40 - - Forfeited - - - - As of March 31, 2025 70,325 $ 50.00 6.68 $ - As of January 1, 2026 56,075 $ 49.99 5.92 $ - Granted - - - - Exercised - - - - Forfeited - - - - As of March 31, 2026 56,075 $ 49.99 5.67 $ - Vested and exercisable as of March 31, 2026 56,075 $ 49.99 5.67 $ - For the three months ended March 31, 2026 and 2025, the Company recognized stock-based compensation related to stock options of nil and $ 30,676 , respectively. There was no outstanding unamortized stock-based compensation related to stock options as of March 31, 2026. Restricted Stock Units (“RSUs”) On February 9, 2022, the Company entered into executive employment agreements with five executives and granted 4,291 RSUs pursuant to the 2021 Plan. The RSUs vest on each annual anniversary of the date of the employment agreements, in an amount equal to 25 % of the applicable shares of common shares. The fair value of the RSUs at grant date is $ 424,809 . F- 18 The following table summarizes the RSUs activities and related information for the three months ended March 31, 2026 and 2025: SCHEDULE OF RESTRICTED STOCK UNITS Number of RSUs Weighted Average Grant Date Fair Value Per Share Unvested as of January 1, 2025 2,146 $ 99.00 Granted - - Vested ( 1,073 ) 99.00 Forfeited ( 113 ) 99.00 Unvested as of March 31, 2025 960 $ 99.00 Unvested as of January 1, 2026 796 $ 99.00 Granted - - Vested ( 796 ) 99.00 Forfeited - - Unvested as of March 31, 2026 - $ - For the three months ended March 31, 2026 and 2025, the Company recognized stock-based compensation related to RSUs of $ 2,031 and $ 1,604 , respectively. There was no outstanding unamortized stock-based compensation related to RSUs as of March 31, 2026. NOTE 14 – SHAREHOLDERS’ EQUITY Shares Authorized The Company is authorized to issue 200,000,000 shares of common shares, par value of $ 0.0001 per share, and 20,000,000 shares of preferred shares, par value of $ 0.0001 per share. At the Market Offering Agreement (“ATM Agreement”) On October 23, 2023, the Company entered into a ATM Agreement with H.C. Wainwright & Co., LLC (“Wainwright”), as sales agent, pursuant to which the Company may offer and sell, from time to time, through Wainwright, shares of the Company’s common shares, par value of $ 0.0001 per share, having an aggregate offering price of up to approximately $ 2 million (“ATM Shares”). The Company pays commission fees of 4 % for each completed sale of ATM Shares pursuant to the terms of the ATM Agreement. For the three months ended March 31, 2026 and 2025, the Company sold a total of nil and 794 shares of the ATM Shares for net proceeds of nil and $ 30,445 after deducting commission fees and other transaction costs, respectively. The subscription receivable of $ 103,942 related to ATM Shares sold on December 31, 2024 was collected in full on January 2, 2025. Designation of Series A Convertible Preferred Shares and Securities Purchase Agreement On June 30, 2025, the Company filed a certificate of designations of preferences and rights of Series A convertible preferred shares (“Series A COD”) with the Secretary of State of the State of Delaware to set forth the terms of the Series A convertible preferred shares. Pursuant to the Series A COD, the Company designated 2,000 shares of preferred shares as Series A convertible preferred shares and each share of Series A convertible preferred shares has a stated value of $ 1,100 . On October 22, 2025, the Board of Directors of the Company approved to amend the number of designated shares of Series A convertible preferred shares to 4,000 shares pursuant to the Series A COD. The following summarizes the material terms of the Series A convertible preferred shares: ● Dividends – Each Series A convertible preferred shares holder (“Holder”) shall be entitled to receive dividends of 10 % per annum on the stated value of each share of Series A convertible preferred shares. ● Liquidation – In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the Holders shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of common shares and any other class or series of equity shares of the Company, an amount per share equal to the greater of (i) the stated value plus all accrued and unpaid dividends thereon or (ii) the amount that such Holder would receive if such Holder converts all of its shares of Series A convertible preferred shares into common shares immediately prior to such liquidation, dissolution or winding up. If, upon any such liquidation, dissolution or winding up, the assets and funds available for distribution among the Holders shall be insufficient to permit the payment to such Holders of the full preferential amount aforesaid, then the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the Holders in proportion to the amount that each such Holder is entitled to receive. After the payment of the full amount of the liquidation preference to which the Holders are entitled, the Holders shall have no right or claim to any of the remaining assets of the Company. F- 19 ● Voting – The Series A convertible preferred shares shall have no voting rights. However, as long as any shares of Series A convertible preferred shares are outstanding, the Company shall not, without the affirmative vote of the Holders of a majority of the outstanding shares of Series A convertible preferred shares, and with each share of Series A convertible preferred shares having one vote on (i) alter or change adversely the powers, preferences or rights given to the Series A convertible preferred shares or alter or amend the Series A COD, (ii) issue additional shares of Series A convertible preferred shares or increase or decrease (other than by conversion) the number of authorized shares of Series A convertible preferred shares, or (iii) enter into any agreement with respect to any of the foregoing. ● Conversion – Each Holder shall have the right, at such Holder’s opinion, to convert any or all of the Series A convertible preferred shares held by such Holder into fully paid and nonassessable shares of common shares. The number of shares of common shares issuable upon conversion of each share of Series A convertible preferred shares shall be equal to the quotient obtained by dividing (i) the stated value plus all accrued and unpaid dividends thereon by (ii) 90 % of the average of the two lowest volume weighted average price (“VWAP”) of the Company’s common shares for the five trading days immediately preceding the respective common shares conversion notice delivery date. ● Redemption – No share of Series A convertible preferred shares shall be redeemable under any circumstances. On June 30, 2025, the Company entered into a securities purchase agreement and a registration rights agreement with Crom Structured Opportunities Fund I, LP (“Crom Structured”), pursuant to which the Company closed, issued and sold to Crom Structured an aggregate of 2,000 shares of the Company’s designated Series A convertible preferred shares for net proceeds of $ 1,800,000 after deducting share issuance transaction fees. For the three months ended March 31, 2026, no shares of Series A convertible preferred shares were converted into common shares. For the three months ended March 31, 2026, dividends accrued on Series A convertible preferred shares amounted to $ 27,968 . Equity Purchase Agreement On June 30, 2025, the Company entered into an equity purchase agreement and a registration rights agreement with Crom Structured, pursuant to which Crom Structured has committed to purchase up to $ 25 million in shares of the Company’s common shares, subject to certain limitations and conditions set forth in the equity purchase agreement. The Company shall not issue or sell any shares of common shares under the equity purchase agreement which, when aggregate with all purchases of common shares made by Crom Structured pursuant to the equity purchase agreement, would result in beneficial ownership of more than 4.99 % of the Company’s outstanding shares of common shares. Pursuant to the terms of the equity purchase agreement, the Company has the right, but not the obligation, to sell to Crom Structured, shares of common shares over the period commencing on the date of the equity purchase agreement and ending on the earlier of (i) the date on which Crom Structured shall have purchased common shares pursuant to the equity purchase agreement equal to $ 25 million, (ii) June 30, 2027, (iii) written notice of termination by the Company to Crom Structured, (iv) the registration statement is no longer effective after the initial effective date of the registration statement, or (v) the date that the Company commences a voluntary bankruptcy case, a bankruptcy proceeding is commenced against the Company, a custodian is appointed for the Company or for all or substantially all of its property, or the Company makes a general assignment for the benefit of its creditors. The purchase price will be calculated as 96 % of the VWAP of the Company’s common shares on the trading day immediately preceding the respective common shares purchase notice delivery date. For the three months ended March 31, 2026, no common shares were sold pursuant to the terms of the equity purchase agreement. F- 20 Share Repurchase Program for Common Shares On February 18, 2026, the Board of Directors of the Company approved a share repurchase program (“2026 Share Repurchase Program”), pursuant to which the Company is authorized to repurchase up to $ 2 million of its outstanding common shares. The timing and amount of repurchases under the program are determined by the Company’s management based on its evaluation of market conditions and other factors. This program has not set termination date and may be suspended or discontinued by at any time. For the three months ended March 31, 2026, no common shares were repurchased pursuant to the 2026 Share Repurchase Program. Reverse Stock Split for Common Shares On March 4, 2026, the Board of Directors of the Company approved a reverse stock split (“2026 Reverse Stock Split”) of the Company’s issued and outstanding common shares at a 1-for-20 ratio. The 2026 Reverse Stock Split was effective on April 2, 2026. The Company’s authorized number of shares and par value per share of common shares were not affected by the 2026 Reverse Stock Split. References made to share and per share information of common shares disclosed for all periods presented have been retroactively adjusted to reflect the effect of the 2026 Reverse Stock Split. Shares Issued and Outstanding As of March 31, 2026 and December 31, 2025, there were 1,288,812 and 1,270,991 shares of common shares issued and outstanding, respectively. As of March 31, 2026 and December 31, 2025, there were 1,017 shares of preferred shares (designated as Series A convertible preferred shares) issued and outstanding. NOTE 15 – NET LOSS PER SHARE Basic net loss per share is calculated on the basis of weighted average outstanding common shares. Diluted net loss per share is calculated on the basis of basic weighted average outstanding common shares adjusted for the dilutive effect of stock options, RSUs and Series A convertible preferred shares. Potentially dilutive common shares 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. Potentially dilutive common shares issuable upon conversion of the Series A convertible preferred shares are determined by applying the if-converted method. Potentially dilutive common shares are not included in the calculation of diluted net loss per share if their effect would be anti-dilutive. The computation of basic and diluted net loss per share for the three months ended March 31, 2026 and 2025 is as follows: SCHEDULE OF COMPUTATION OF BASIC AND DILUTED EARNINGS (LOSS) PER SHARE 2026 2025 For the Three Months Ended March 31, 2026 2025 Net loss from continuing operations attributable to HeartCore Enterprises, Inc. per common share – basic Numerator Net loss from continuing operations $ ( 1,976,715 ) $ ( 3,070,031 ) Less: net loss from continuing operations attributable to non-controlling interests ( 105,008 ) ( 50,389 ) Net loss from continuing operations attributable to HeartCore Enterprises, Inc. ( 1,871,707 ) ( 3,019,642 ) Dividends accrued on Series A convertible preferred shares ( 27,968 ) - Net loss from continuing operations attributable to HeartCore Enterprises, Inc. common shareholders ( 1,899,675 ) ( 3,019,642 ) Denominator Weighted average number of common shares outstanding – basic 1,271,631 1,102,702 Net loss from continuing operations attributable to HeartCore Enterprises, Inc. per common share – basic $ ( 1.49 ) $ ( 2.74 ) Net loss from continuing operations attributable to HeartCore Enterprises, Inc. per common share – diluted Numerator Net loss from continuing operations attributable to HeartCore Enterprises, Inc. $ ( 1,871,707 ) $ ( 3,019,642 ) Less: changes in fair value of derivative liability, net of income tax ( 626 ) - Net loss from continuing operations attributable to HeartCore Enterprises, Inc. – diluted ( 1,871,081 ) ( 3,019,642 ) Denominator Weighted average number of common shares outstanding – diluted 1,271,631 1,102,702 Net loss from continuing operations attributable to HeartCore Enterprises, Inc. per common share – diluted $ ( 1.49 ) $ ( 2.74 ) F- 21 2026 2025 For the Three Months Ended March 31, 2026 2025 Loss from discontinued operations per common share – basic and diluted Numerator Loss from discontinued operations, net of income tax $ - $ ( 67,350 ) Denominator Weighted average number of common shares outstanding – basic and diluted 1,271,631 1,102,702 Loss from discontinued operations per common share – basic and diluted $ - $ ( 0.06 ) 2026 2025 For the Three Months Ended March 31, 2026 2025 Net loss attributable to HeartCore Enterprises, Inc. per common share – basic Numerator Net loss attributable to HeartCore Enterprises, Inc. common shareholders $ ( 1,899,675 ) $ ( 3,086,992 ) Denominator Weighted average number of common shares outstanding – basic 1,271,631 1,102,702 Net loss attributable to HeartCore Enterprises, Inc. per common share – basic $ ( 1.49 ) $ ( 2.80 ) Net loss attributable to HeartCore Enterprises, Inc. per common share – diluted Numerator Net loss attributable to HeartCore Enterprises, Inc. $ ( 1,871,707 ) $ ( 3,086,992 ) Less: changes in fair value of derivative liability, net of income tax ( 626 ) - Net loss attributable to HeartCore Enterprises, Inc. – diluted ( 1,871,081 ) ( 3,086,992 ) Denominator Weighted average number of common shares outstanding – diluted 1,271,631 1,102,702 Net loss attributable to HeartCore Enterprises, Inc. per common share – diluted $ ( 1.49 ) $ ( 2.80 ) NOTE 16 – DISCONTINUED OPERATIONS On July 24, 2025, in light of the intense competition of the software market in Japan, the Board of Directors of the Company approved to enter into a non-binding letter of intent to sell 100% of the outstanding shares of HeartCore Japan. The Company does not expect to have any continuing involvement in HeartCore Japan subsequent to the closing. The Company determines the sale of HeartCore Japan met the criteria for classification as held for sale. Additionally, the Company determines the sale of HeartCore Japan represents a strategic shift that has a major impact on its operations and financial results. Accordingly, all results of operations of HeartCore Japan have been removed from continuing operations and presented as discontinued operations in the unaudited consolidated statements of operations and comprehensive loss for all periods presented. On October 31, 2025, the sale transaction was closed. The Company entered into a purchase agreement to sell 100 % of the outstanding shares of HeartCore Japan to Smith Japan Holdings KK for a cash consideration of approximately $ 12 million, subject to price adjustment. The following table summarizes the results of operations from discontinued operations, net of income tax in the unaudited consolidated statements of operations and comprehensive loss for the three months ended March 31, 2025: SCHEDULE OF OPERATIONS, ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS For the Three Months Ended March 31, 2025 Revenues $ 1,493,613 Cost of revenues 937,103 Gross profit 556,510 Operating expenses: Selling expenses 138,238 General and administrative expenses 348,183 Research and development expenses 123,893 Total operating expenses 610,314 Loss from discontinued operations ( 53,804 ) Other income 3,482 Loss from discontinued operations before income tax expense ( 50,322 ) Income tax expense 17,028 Loss from discontinued operations, net of income tax $ ( 67,350 ) F- 22 NOTE 17 – SEGMENT AND GEOGRAPHIC INFORMATION Segment Information Operating segments are defined as components of an entity for which discrete financial information is available and is regularly reviewed by the CODM, the CEO of the Company, in making decisions regarding resource allocation and performance assessment. The Company determines its operations constitute a single operating segment and reportable segment in accordance with ASC Topic 280. The CODM assesses financial performance and decides how to allocate resources based on consolidated net loss from continuing operations. Segment assets are reported on the Company’s consolidated balance sheets. The following table summarizes the selected financial information with respect to the Company’s single operating segment and reportable segment for the three months ended March 31, 2026 and 2025: SCHEDULE OF SINGLE OPERATING SEGMENT AND REPORTABLE SEGMENT 2026 2025 For the Three Months Ended March 31, 2026 2025 Revenues $ 1,245,844 $ 2,093,413 Less: Software related cost of revenues 1,014,028 1,470,792 Consulting related cost of revenues 157,771 78,847 Related cost of revenues 157,771 78,847 Selling expenses 42,812 152,922 General and administrative expenses 1,571,734 1,581,205 Loss from continuing operations ( 1,540,501 ) ( 1,190,353 ) Total other expenses ( 418,745 ) ( 1,840,070 ) Loss from continuing operations before income tax expense ( 1,959,246 ) ( 3,030,423 ) Income tax expense 17,469 39,608 Net loss from continuing operations $ ( 1,976,715 ) $ ( 3,070,031 ) Geographic Information The following table summarizes the breakdown of revenues by geography for the three months ended March 31, 2026 and 2025: SCHEDULE OF SUMMARIZES THE BREAKDOWN OF REVENUES BY GEOGRAPHY 2026 2025 For the Three Months Ended March 31, 2026 2025 United States $ 929,942 $ 1,736,018 Japan 25,747 245,543 International 290,155 111,852 Total revenues $ 1,245,844 $ 2,093,413 The following table summarizes the breakdown of long-lived assets by geography as of March 31, 2026 and December 31, 2025: SCHEDULE OF SUMMARIZES THE BREAKDOWN OF LONG-LIVED ASSETS BY GEOGRAPHY March 31, 2026 December 31, 2025 United States $ 34,442 $ 27,792 Japan 743,376 292,451 International 7,823 795 Total long-lived assets $ 785,641 $ 321,038 NOTE 18 – SUBSEQUENT EVENTS On April 1, 2026, the Company converted partial of the warrants it received from a customer as noncash consideration from consulting services into marketable securities. On April 9, 2026, the Company sold marketable securities for proceeds of approximately $ 202,000 . During the subsequent period, there were 400 shares of Series A convertible preferred shares converted into 152,753 shares of common shares. F- 23