What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-08-13 compared with 2026-05-15 · 350 added, 210 removed, 113 unchanged (83% of the section changed)

31 unchanged sentences

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

As of March 31, 2026, we have entered into consulting agreements

As of June 30, 2026, 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

15 unchanged sentences

February 2022, we have been offering Go IPO consulting services, which include the following (collectively, the “Services”):

with introductions to law firms, underwriters and auditing firms, in order that clients can

make their selections, at their sole discretion;

in the preparation of documentation for internal controls required for an initial public

offering and simultaneous listing on the Nasdaq, the NYSE or the NYSE American;

support services to remove problematic accounting accounts upon listing support;

● Translation

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 NYSE or the NYSE American listing;

of accounting data from Japanese standards to accounting principles generally accepted in

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

of English web page;

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

Assisting with introductions

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

Assisting in the preparation

of documentation for internal controls required for an initial public offering and simultaneous listing on the Nasdaq, the NYSE or

the NYSE American;

Providing support services

to remove problematic accounting accounts upon listing support;

Translation of requested

documents into English;

Attend and, if requested

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

Provide support services

related to the Nasdaq, the NYSE or the NYSE American listing;

Conversion of accounting

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

Assist in the preparation

of S-1 or F-1 filings;

Creation of English web

Preparing 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

14 unchanged sentences

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.

Share Repurchase Program

During the first quarter of 2026, the Company’s

Board of Directors (the “Board”) authorized a share repurchase program, pursuant to which the Company may repurchase up to

$2.0 million of its outstanding shares of common stock.

The Board authorized the Company to purchase its common stock from time to time

on a discretionary basis through open market purchases, privately negotiated transactions or other means, including trading plans intended

to qualify under Rule 10b5-1 of the Exchange Act, in accordance with applicable federal securities laws and other applicable legal requirements.

A cash fee payable in installment

Issuance 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.

Repurchase Program

the first quarter of 2026, the Company’s Board of Directors (the “Board”) authorized a share repurchase program, pursuant

to which the Company may repurchase up to $2.0 million of its outstanding shares of common stock.

The Board authorized the Company to

purchase its common stock from time to time on a discretionary basis through open market purchases, privately negotiated transactions

or other means, including trading plans intended to qualify under Rule 10b5-1 of the Exchange Act, in accordance with applicable federal

securities laws and other applicable legal requirements.

The Company expects to fund these repurchases through existing cash balances.

Decisions regarding the amount and the timing of purchases

under the program will be influenced by the Company’s cash on hand, cash flows from operations, general market conditions and other

factors, and the program may be modified, suspended or discontinued at any time.

The Company is not obligated to acquire any particular

amount of its common stock.

Decisions regarding the amount and the timing of purchases under the program will be influenced by the Company’s cash on hand,

cash flows from operations, general market conditions and other factors, and the program may be modified, suspended or discontinued at

The Company is not obligated to acquire any particular amount of its common stock.

This program has no set termination date.

Bylaws Amendment

On March 24, 2026, the Board

adopted an amendment (the “Amendment”) to the Company’s bylaws (the “Bylaws”).

Prior to adoption of the

Amendment, the second sentence of Section 7.4 of the Bylaws provided that “[i]f any action is brought by any party against another

party, relating to or arising out of [the] Bylaws, or the enforcement hereof, the prevailing party shall be entitled to recover from the

other party reasonable attorneys’ fees, costs and expenses incurred in connection with the prosecution or defense of such action”,

and Section 7.5 of the Bylaws provided (and continues to provide following adoption of the Amendment) that “[a]ll powers, duties

and responsibilities provided for in [the] Bylaws, whether or not explicitly so qualified, are qualified by the provisions of the [Company’s

certificate of incorporation] and applicable law.”

The Amendment had the effect

of amending and restating the second sentence of Section 7.4 of the Bylaws to read as follows:

“If any action is brought by any

party against another party, relating to or arising out of these Bylaws, or the enforcement hereof, the prevailing party shall be entitled

to recover from the other party reasonable attorneys’ fees, costs and expenses incurred in connection with the prosecution or defense

of such action, provided that the provisions of this sentence shall not apply with respect to “internal corporate claims”

as defined in Section 115 of the DGCL or in connection with any other claim that a stockholder, acting in its capacity as a stockholder

or in the right of the Corporation, has brought in an action, suit or proceeding.”

The Amendment was intended

to clarify that, consistent with Section 7.5 of the Bylaws and the provisions of the Delaware General Corporation Law, including Section

109(b) thereof, the Bylaws do not contain any provision that would impose liability on a stockholder for the attorneys’ fees or

expenses of the Company or any other party in connection with an internal corporate claim, or in connection with any other claim that

a stockholder, acting in its capacity as a stockholder or in the right of the Company, has brought in an action, suit or proceeding.

Reverse Stock Split

As previously

disclosed, on June 30, 2025, the Company’s stockholders approved an amendment to the Company’s certificate of incorporation,

as amended (the “Certificate of Incorporation”), to effectuate a reverse stock split of the Company’s outstanding shares

of common stock, at a ratio of no less than 1-for-2 and no more than 1-for-30, with such ratio to be determined at the sole discretion

of the Board.

On March 4, 2026, the Board approved a 1-for-20 reverse stock split of the Company’s issued and outstanding common

stock (the “Reverse Split”).

Subsequently, the Company filed a certificate of amendment (the “Certificate of Amendment”)

to its Certificate of Incorporation with the Secretary of State of the State of Delaware to effectuate the Reverse Split.

The Certificate

of Amendment was effective for state law purposes at 4:00 p.m.

Eastern Time on April 2, 2026 (the “Effective Time”), after

the close of trading on the Nasdaq Capital Market (“Nasdaq”), such that the Company’s common stock began trading on

Nasdaq at market open on April 6, 2026, on a post-Reverse Split basis.

the Effective Time, issued and outstanding shares of the Company’s common stock were automatically reclassified such that each 20

As of June 30, 2026 and August 13, 2026, the Company has repurchased an aggregate of nil and nil shares of common stock, respectively, for

an aggregate purchase price of $0 and $0, respectively.

previously disclosed, on June 30, 2025, the Company’s stockholders approved an amendment to the Company’s certificate of

incorporation, as amended (the “Certificate of Incorporation”), to effectuate a reverse stock split of the Company’s

outstanding shares of common stock, at a ratio of no less than 1-for-2 and no more than 1-for-30, with such ratio to be determined at

the sole discretion of the Board.

On March 4, 2026, the Board approved a 1-for-20 reverse stock split of the Company’s issued and

outstanding common stock (the “Reverse Split”).

Subsequently, the Company filed a certificate of amendment (the “Certificate

of Amendment”) to its Certificate of Incorporation with the Secretary of State of the State of Delaware to effectuate the Reverse

The Certificate of Amendment was effective for state law purposes at 4:00 p.m.

Eastern Time on April 2, 2026 (the “Effective

Time”), after the close of trading on the Nasdaq Capital Market (“Nasdaq”), such that the Company’s common stock

began trading on Nasdaq at market open on April 6, 2026, on a post-Reverse Split basis.

of the Effective Time, issued and outstanding shares of the Company’s common stock were automatically reclassified such that each

20 shares of pre-Reverse Split common stock became one share of common stock, with any fractional shares of common stock resulting being

3 unchanged sentences

with Nasdaq Minimum Bid Price Requirement

As previously disclosed,

on May 6, 2025, the Company received written notice (the “Bid Price Notice”) from the Nasdaq Staff indicating that the Company

was not in compliance with the Minimum Bid Price Requirement.

The notification of noncompliance had no immediate effect on the listing

or trading of the Company’s common stock on the Nasdaq Capital Market.

The Bid Price Notice indicated that the Company was provided

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

On November 4, 2025, the Nasdaq Staff notified the Company

of its determination that the Company was eligible for an additional 180-day period, or until May 1, 2026, to regain compliance with the

Minimum Bid Price Requirement.

On April 20, 2026, the Company

received written notice from the Nasdaq Staff that the Company has regained compliance with the Minimum Bid Price Requirement and the

matter has now been closed.

Accordingly, the Company’s common stock continues to be listed and traded on the Nasdaq Capital Market.

For the three months ended March 31, 2026 and 2025, we generated revenues

of $1,245,844 and $2,093,413, respectively, and reported a net loss from continuing operations of $1,976,715 and $3,070,031, respectively,

and had net cash flows used in operating activities of continuing operations of $1,153,590 and $1,691,459, respectively.

As noted in our

unaudited consolidated financial statements, as of March 31, 2026, we had an accumulated deficit of $15,627,241.

previously disclosed, on May 6, 2025, the Company received written notice (the “Bid Price Notice”) from the Nasdaq Staff

indicating that the Company was not in compliance with the Minimum Bid Price Requirement.

The notification of noncompliance had no immediate

effect on the listing or trading of the Company’s common stock on the Nasdaq Capital Market.

The Bid Price Notice indicated that

the Company was provided 180 calendar days, or until November 3, 2025, in which to regain compliance.

On November 4, 2025, the Nasdaq

Staff notified the Company of its determination that the Company was eligible for an additional 180-day period, or until May 1, 2026,

to regain compliance with the Minimum Bid Price Requirement.

April 20, 2026, the Company received written notice from the Nasdaq Staff that the Company has regained compliance with the Minimum Bid

Price Requirement and the matter has now been closed.

Accordingly, the Company’s common stock continues to be listed and traded

on the Nasdaq Capital Market.

of 51% Interest in Sigmaways and Its Subsidiaries

June 22, 2026, the Company entered into a Stock and Debt Purchase Agreement (the “Sigmaways Agreement”) with Semaphore Technologies,

(“Semaphore”).

Pursuant to the terms of the Sigmaways Agreement, the Company sold its entire 51% majority ownership

interest in Sigmaways, Inc.

(“Sigmaways”) and its subsidiaries, consisting of 229,500 shares of capital stock (the “Sigmaways

purchase price for the Sigmaways Shares is up to $650,000, which reflects the uncertain and disputed nature of

the value and collectability of the underlying assets.

Pursuant to the terms of the Sigmaways Agreement, the payments would be as follows:

cash payment of $1,000 at closing;

earn-out amount of up to $649,000, payable within 10 days of the end of the 12-month period

following closing, calculated as 10% of Sigmaways’ Gross Revenue (as defined in the

Sigmaways Agreement) that exceeds $5,500,000.

closing of the transactions contemplated by the Sigmaways Agreement occurred on June 22, 2026.

Following the closing, the Company has

no further operational involvement or obligations with respect to Sigmaways.

Sigmaways Agreement contains customary representations, warranties, and covenants, including a maximum liability cap equal to the amount

actually paid to the Company (except in cases of fraud).

Sale of 51% Interest in HeartCore Luvina

On August 3, 2026, the Company

entered into a Capital Contribution Portion Transfer Agreement (the “Transfer Agreement”) with Luvina Software Joint Stock

Company (“Luvina”), our non-controlling shareholder of HeartCore Luvina.

Pursuant to the terms of the Transfer Agreement,

the Company agreed to sell its entire 51% ownership interest in Heartcore Luvina, together with all rights and obligations attaching thereto

and accrued up to the date of the Transfer Agreement, to Luvina in exchange for JPY29,000,000 (approximately $184,093).

The closing of the transactions

contemplated by the Transfer Agreement is expected to occur on or before August 14, 2026.

The Transfer Agreement

contains customary representations, warranties, and covenants.

the three months ended June 30, 2026 and 2025, we generated revenues of $321,428 and $187,277,

respectively, and reported a net loss from continuing operations of $1,550,289 and net income from continuing operations of

$214,036, respectively.

the six months ended June 30, 2026 and 2025, we generated revenues of $553,926 and $439,909, respectively,

and reported a net loss from continuing operations of $3,283,511 and $2,730,959, respectively, and had net cash flows used in

operating activities of continuing operations of $2,482,756 and $1,965,478, respectively.

As noted in our unaudited consolidated

financial statements, as of June 30, 2026, we had an accumulated deficit of $17,650,321.

of Operations

of Results of Operations for the Three Months Ended March 31, 2026 and 2025

following table summarizes our operating results as reflected in our unaudited consolidated statements of operations and

comprehensive loss for the three months ended March 31, 2026 and 2025, respectively, and provides information regarding the dollar

and percentage increase (or decrease) during such periods.

For the Three Months Ended March 31,

of Results of Operations for the Three Months Ended June 30, 2026 and 2025

following table summarizes our operating results as reflected in our unaudited consolidated statements of operations and comprehensive

income (loss) for the three months ended June 30, 2026 and 2025, respectively, and provides information regarding the dollar and percentage increase

(or decrease) during such periods.

For the Three Months Ended June 30,

Cost of revenues

4 unchanged sentences

Loss from continuing operations

Other income (expenses)

Income (l oss) from continuing operations before income tax expense

Income tax expense

Net income (loss) from continuing operations

Income (l oss) from discontinued operations, net of income tax

Net income (loss)

net income from continuing operations attributable to non-controlling interests

loss from discontinued operations attributable to non-controlling interests

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

$ (2,042,436 )

$ (3,141,727 )

Our revenues increased by $134,151, or 71.6%, to $321,428 for the three

months ended June 30, 2026 from $187,277 for the three months ended June 30, 2025, attributable to an increase of $230,446 from software

development services in connection with the additional customer orders obtained in HeartCore Luvina, our Vietnamese subsidiary, offset

by a $96,295 decrease in revenue from Go IPO consulting services, primarily due to extension of IPO timeline by Go IPO customers during

the current period.

Our cost of revenues increased by $181,401, or 86.3%, to $391,643 for the

three months ended June 30, 2026 from $210,242 for the three months ended June 30, 2025, attributable to an increase of $91,142 in the

cost of software development services in light of the increase in sales;

and an increase of $90,259 in the costs of Go IPO consulting

services, as we as spent more efforts and resources and incurred more outsourcing fees for Go IPO consulting services to enhance our Go

IPO consulting customers experience with us.

Our gross loss increased by $47,250, or 205.7%,

to $70,215 for the three months ended June 30, 2026 from $22,965 for the three months ended June 30, 2025, attributable to an

increase of $186,554 in gross loss from our Go IPO consulting services, as we as spent more efforts and resources and incurred more

outsourcing fees for Go IPO consulting services to enhance our Go IPO consulting customers experience with us, resulted in gross

loss during the current period;

offset by an increase of $139,304 in gross profit from our software development services as we

implemented cost control policy and enhanced efficiency in rendering such services, resulted in gross profit during the current

For the reasons discussed above, our overall gross

loss percentage increased by 9.5% to 21.8% for the three months ended June 30, 2026 from 12.3% for the three months ended June 30, 2025.

Our selling expenses decreased by $42,139, or 54.7%, to $34,867 for the

three months ended June 30, 2026 from $77,006 for the three months ended June 30, 2025, primarily attributable to a decrease of $30,547

in advertising and referral expenses, as we reduced certain marketing and referral activities and cancelled promotion campaigns with lower

advertising performance during the current period.

and Administrative Expenses

Our general and administrative expenses increased by $51,426, or 7.7%, to

$718,933 for the three months ended June 30, 2026 from $667,507 for the three months ended June 30, 2025, primarily attributable to (i)

an increase of $56,080 in rental expenses mainly due to our relocation to an office with higher rental fees during the current period;

partially offset by (ii) a decrease of $10,713 in office, utility and other expenses as we implemented expense saving policy to cut down

various operating expenses in order to save operating cash flows during the current period.

Income (Expenses), Net

Our other income (expenses) includes changes in fair value of investments

in marketable securities, changes in fair value of investment in warrants, changes in fair value of derivative liability, interest income

generated from bank deposits, interest expenses for insurance premium financing, other income, and other expenses.

Total other income

(expenses), net decreased by $1,692,889, or 171.4%, to $705,402, total other expenses, net for the three months ended June 30, 2026, from

total other income, net of $987,487 for the three months ended June 30, 2025, primarily attributable to a decrease of $1,374,203 in changes

in fair value of investments in marketable securities and a decrease of $133,851 in change in fair value of investment in warrants due

to fair value measurement across periods.

Our income tax expense was minimal, which were $20,872 and $5,973 for the

three months ended June 30, 2026 and 2025, respectively, as we incurred pre-tax loss positions and/or had sufficient net operating losses

carry forward to offset taxable income position.

Income (Loss)

from Discontinued Operations, Net of Income Tax

On October 31, 2025, the Company entered into the HeartCore Japan Agreement

with Smith Japan in relation to the sale of 100% equity interest in HeartCore Co., Ltd.

The HeartCore Co., Ltd.

sale closed on October

On June 22, 2026, the Company entered into the Sigmaways Agreement with Semaphore in relation to the sale of 51% equity interest

in Sigmaways and its subsidiaries.

The Sigmaways and its subsidiaries sale closed on June 22, 2026.

The results of operations of HeartCore Co., Ltd.

and Sigmaways and its subsidiaries

are reported as discontinued operations for all periods presented, as the sale of HeartCore Co., Ltd.

and Sigmaways and its subsidiaries

represented strategic shift that had major impact on the Company’s operations and financial results.

We reported a loss from discontinued

operations, net of income tax, of $489,230 and an income from discontinued operations, net of income tax, of $847,470 for the three months

ended June 30, 2026 and 2025, respectively.

Income from Continuing Operations Attributable to Non-controlling Interests

owned a 51% equity interest of HeartCore Luvina.

Accordingly, we recorded net income from continuing operations attributable to

non-controlling interests of $15,770 and $8,009 for the three months ended June 30, 2026 and 2025, respectively.

Loss from Discontinued Operations Attributable

to Non-controlling Interests

As mentioned above, we owned a 51% equity interest of Sigmaways and its

subsidiaries before disposal on June 22, 2026.

Accordingly, we recorded loss from discontinued operations attributable to non-controlling

interests of $32,209 and $46,405 for the three months ended June 30, 2026 and 2025, respectively.

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 $19,356 and $611 for the three months ended June

30, 2026 and 2025, respectively.

Income (Loss) Attributable to HeartCore Enterprises, Inc.

Common Shareholders

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

common shareholders of $2,042,436 for the

three months ended June 30, 2026, representing a $3,141,727, or 285.8%, decrease from a net income attributable to HeartCore Enterprises,

common shareholders of $1,099,291 for the three months ended June 30, 2025.

of Results of Operations for the Six Months Ended June 30, 2026 and 2025

following table summarizes our operating results as reflected in our unaudited consolidated statements of operations and comprehensive

income (loss) for the six months ended June 30, 2026 and 2025, respectively, and provides information regarding the dollar and percentage increase

(or decrease) during such periods.

For the Six Months Ended June 30,

Cost of revenues

Gross profit (loss)

Operating expenses:

Selling expenses

General and administrative expenses

Total operating expenses

Loss from continuing operations

Other expenses

2 unchanged sentences

Net loss from continuing operations

Loss from discontinued operations, net of income tax

net loss attributable to non-controlling interests

Income (loss) from discontinued operations, net of income

net income from continuing operations attributable to non-controlling interests

loss from discontinued operations attributable to non-controlling interests

Net loss attributable to HeartCore Enterprises, Inc.

4 unchanged sentences

$ (1,987,701 )

$ (1,187,317 )

Our revenues decreased by $847,569, or 40.5%, to $1,245,844 for the three

months ended March 31, 2026 from $2,093,413 for the three months ended March 31, 2025, mainly attributable to a decreased revenue of $827,435

from customized software development and services in connection with the intense competition in the U.S.

software market.

cost of revenues decreased by $377,840, or 24.4%, to $1,171,799 for the three months ended March 31, 2026 from $1,549,639 for the

three months ended March 31, 2025, mainly attributable to a decrease of $539,614 in the cost of customized software development and

services, which was in light of the decrease in sales of respective revenues.

gross profit decreased by $469,729, or 86.4%, to $74,045 for the three months ended March 31, 2026 from $543,774 for the three

months ended March 31, 2025, mainly attributable to (i) a decrease of $298,720 in gross profit from our Go IPO consulting services,

as we as spent more efforts and resources and incurred more outsourcing fees for Go IPO consulting services to enhance our Go IPO

consulting customers experience with us, resulted in lower gross profit for our Go IPO consulting services;

(ii) a decrease of

$287,821 in customized software development and services in light of the decrease in customized software development and services

revenues and the increase in respective cost in connection with the increasing subcontracting fees for outsourced software engineers

due to the salary level increase in the overall software market;

and offset by (iii) an increase of $116,812 in software development

and other services provided by HeartCore Luvina due to the increase in software development and other services revenues and decrease

in respective cost due to the cost control policy we implemented.

the reasons discussed above, our overall gross profit margin decreased by 20.1% to 5.9% for the three months ended March 31,

2026 from 26.0% for the three months ended March 31, 2025.

Our selling expenses decreased by $110,110, or 72.0%,

to $42,812 for the three months ended March 31, 2026 from $152,922 for the three months ended March 31, 2025, primarily attributable

to a decrease of $95,668 in advertising and referral expenses, as we reduced certain marketing and referral activities and cancelled

promotion campaigns with lower advertising performance.

revenues increased by $114,017, or 25.9%, to $553,926 for the six months ended June 30, 2026 from $439,909 for the six months ended June

30, 2025, attributable to an increase of $430,108 from software development services in connection with the additional customer

orders obtained in HeartCore Luvina, our Vietnamese subsidiary, offset by a $316,091 decrease in revenue from Go IPO consulting services,

primarily due to extension of IPO timeline by Go IPO customers during the current period.

Our cost of revenues increased by $366,914, or 100.5%, to $732,056 for the

six months ended June 30, 2026 from $365,142 for the six months ended June 30, 2025, attributable to an increase of $197,731 in the cost

of software development services in light of the increase in sales;

and an increase of $169,183 in the costs of Go IPO consulting services,

as we as spent more efforts and resources and incurred more outsourcing fees for Go IPO consulting services to enhance our Go IPO consulting

customers experience with us.

Profit (Loss)

Our gross profit (loss) decreased by $252,897, or 338.2%, to gross loss

of $178,130 for the six months ended June 30, 2026 from gross profit of $74,767 for the six months ended June 30, 2025, attributable to

a decrease of $485,274 in gross loss from our Go IPO consulting services, as we as spent more efforts and resources to enhance our Go

IPO consulting customers experience with us, resulted in gross loss during the current period;

offset by an increase of $232,377 in gross

profit from our software development services as we implemented cost control policy and enhanced efficiency in rendering such services,

resulted in gross profit during the current period.

the reasons discussed above, our overall gross profit (loss) percentage decreased by 49.2% to -32.2% for the six months ended June 30,

2026 from 17.0% for the six months ended June 30, 2025.

Our selling expenses decreased by $145,393, or 67.8%, to $69,203 for the

six months ended June 30, 2026 from $214,596 for the six months ended June 30, 2025, primarily attributable to a decrease of $118,938

in advertising and referral expenses, as we reduced certain marketing and referral activities and cancelled promotion campaigns with lower

advertising performance during the current period.

and Administrative Expenses

Our general and administrative expenses were $1,571,734

and $1,581,205 for the three months ended March 31, 2026 and 2025, respectively, and remained stable across periods with minor decrease.

Other Expenses, Net

Our general and administrative expenses increased by $179,982, or 10.5%,

to $1,888,888 for the six months ended June 30, 2026 from $1,708,906 for the six months ended June 30, 2025, primarily attributable to

(i) an increase of $115,880 in salaries and welfare expenses due to the establishment of the new wholly-owned subsidiary, Higgs Field

(ii) an increase of $97,505 in rental expenses mainly due to our relocation to an office with higher rental fees during the

current period;

partially offset by (iii) a decrease of $59,399 in office, utility and other expenses as we implemented expense saving

policy to cut down various operating expenses in order to save operating cash flows during the current period.

Expenses, Net

Our other income (expenses) includes changes in fair value of investments

in marketable securities, changes in fair value of investment in warrants, changes in fair value of derivative liability, interest income

generated from bank deposits, interest expenses for loans, other income, and other expenses.

Total other expenses, net decreased by $1,421,325,

or 77.2%, to $418,745 for the three months ended March 31, 2026, from total other expenses, net of $1,840,070 for the three months ended

March 31, 2025, primarily attributable to a decrease of $1,485,667 in changes of fair value of investments in marketable securities due

to fair value measurement across periods.

Our income tax expense were minimal, which were $17,496 and $39,608 for

the three months ended March 31, 2026 and 2025, respectively, as we incurred pre-tax loss positions across periods.

Loss from Discontinued Operations, Net of Income Tax

On July 24, 2025, 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 Co., Ltd.

On October 31, 2025, the Company entered

into the HeartCore Japan Agreement with Smith Japan in relation to the sale of HeartCore Co., Ltd.

The results of operations of HeartCore

are reported as discontinued operations for all periods presented, as the sale of HeartCore Co., Ltd.

represents a strategic

shift that has a major impact on the Company’s operations and financial results.

generated from bank deposits, interest expenses for insurance premium financing, other income, and other expenses.

Total other expenses,

net increased by $272,306, or 32.5%, to $1,108,949 for the six months ended June 30, 2026, from $836,643 for the six months ended June

30, 2025, primarily attributable to an increase of $348,473 in other expenses, which mainly contributed by foreign currency exchange loss

for proceeds receivable from sale of discontinued operations of HeartCore Co., Ltd.

which was denominated in Japanese Yen and Japanese

Yen to US$ exchange rate depreciated during the current period, partially offset by a decrease of $111,464 in loss on fair value changes

of investments in marketable securities due to fair value measurement across periods.

Our income tax expense was minimal, which were $38,341 and $45,581 for the

six months ended June 30, 2026 and 2025, respectively, as we incurred pre-tax loss positions.

Income ( Loss)

from Discontinued Operations, Net of Income Tax

On October 31, 2025, the Company entered into the HeartCore Japan Agreement

with Smith Japan in relation to the sale of 100% equity interest in HeartCore Co., Ltd.

The HeartCore Co., Ltd.

sale closed on October

We reported a loss from discontinued operations, net of income tax of $67,350 for the three months ended March 31, 2025.

Loss Attributable to Non-controlling Interests

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

51% equity interest of HeartCore Luvina.

Accordingly, we recorded net loss attributable to non-controlling interests of $105,008 and $50,389

for the three months ended March 31, 2026 and 2025, respectively.

On June 22, 2026, the Company entered into the Sigmaways Agreement with Semaphore in relation to the sale of 51% equity interest

in Sigmaways and its subsidiaries.

The Sigmaways and its subsidiaries sale closed on June 22, 2026.

The results of operations of HeartCore Co., Ltd.

and Sigmaways and its subsidiaries

are reported as discontinued operations for all periods presented, as the sale of HeartCore Co., Ltd.

and Sigmaways and its subsidiaries

represented strategic shift that had major impact on the Company’s operations and financial results.

We reported a loss from discontinued operations, net of income tax, of $732,723

and an income from discontinued operations, net of income tax, of $655,084 for the six months ended June 30, 2026 and 2025, respectively.

Income from Continuing Operations Attributable to Non-controlling Interests

We owned a 51% equity interest of HeartCore Luvina.

Accordingly, we recorded

net income from continuing operations attributable to non-controlling interests of $30,074 and $18,888 for the six months ended June 30,

2026 and 2025, respectively.

Loss from Discontinued Operations Attributable to Non-controlling Interests

As mentioned above, we owned a 51% equity interest of Sigmaways and its

subsidiaries before disposal on June 22, 2026.

Accordingly, we recorded loss from discontinued operations attributable to non-controlling

interests of $151,521 and $107,673 for the six months ended June 30, 2026 and 2025, respectively.

Accrued on Series A Convertible Preferred Shares

On 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 $27,968 and nil for the three months ended March 31, 2026 and 2025, respectively.

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 $47,324 and $611 for the six months ended June

30, 2026 and 2025, respectively.

Loss Attributable to HeartCore Enterprises, Inc.

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common shareholders of $3,942,111 for the

three months ended March 31, 2026, representing a $1,187,317, or 38.5%, decrease from a net loss attributable to HeartCore Enterprises,

common shareholders of $3,086,992 for the three months ended March 31, 2025.

six months ended June 30, 2026, representing a $1,954,410, or 98.3%, increase from a net loss attributable to HeartCore Enterprises,

common shareholders of $1,987,701 for the six months ended June 30, 2025.

and Capital Resources

of March 31, 2026, we had $774,033 in cash and cash equivalents, as compared to $1,985,962 as of December 31, 2025.

of June 30, 2026, we had $587,074 in cash and cash equivalents, as compared to $1,904,826 as of December 31, 2025.

We also had $62,770

in accounts receivable as of March 31, 2026.

Our accounts receivable primarily include the balance due from customers for our customized

software development and services accepted by customers.

of March 31, 2026, our working capital was $1,010,549.

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.

in accounts receivable as of June 30, 2026.

As of June 30, 2026, our working capital was $604,040.

In assessing our

liquidity, management monitors and assesses our cash and cash equivalents, our ability to generate sufficient revenues in the future,

and our operating and capital expenditure commitments.

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

the Three Months

Ended March 31,

cash flows used in operating activities of continuing operations

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

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

cash flows used in discontinued operations

Effect of exchange rate

For the Six Months

Ended June 30,

Net cash flows used in operating activities of continuing operations

$ (2,482,756 )

$ (1,965,478 )

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 provided by (used in) discontinued operations

Effect of exchange rate changes

Net change in cash and cash equivalents

Cash and cash equivalents,

beginning of the period

Cash and cash equivalents,

end of the period

Cash and cash equivalents, beginning of the period

Cash and cash equivalents, end of the period

Flows from Operating Activities of Continuing Operations

cash flows used in operating activities of continuing operations was $1,153,590 for the three months ended March 31, 2026, primarily

consisting of the following:

cash flows used in operating activities of continuing operations was $2,482,756 for the six months ended June 30, 2026, primarily consisting

of the following:

Net loss from continuing

operations of $1,976,715 for the three months ended March 31, 2026.

Offset by loss of $295,997 on fair value changes in investments in marketable securities due to fair value measurement.

Offset by a decrease of $135,238 in accounts receivable in line with the

decrease in revenues.

by an increase of $154,736 in accrued payroll and other employee costs, primarily resulting from Sigmaways’s payroll delayed

arrangement in response to its sales slowdown.

Cash Flows from Investing Activities of Continuing Operations

cash flows used in investing activities of continuing operations amounted to $954 for the three months ended March 31, 2026, for

purchase of property and equipment.

Cash Flows from Financing Activities of Continuing Operations

cash flows used in financing activities of continuing operations amounted to $53,513 for the three months ended March 31, 2026,

primarily consisting of $23,657 for repayment of insurance premium financing, $12,382 for repayment of long-term debts, and

$11,474 for net repayment of factoring arrangement.

operations of $3,283,511 for the six months ended June 30, 2026;

A decrease of $107,443 in deferred revenue due to recognition of revenues from deferred revenues during the six months

ended June 30, 2026;

by loss of $817,491 on fair value changes in investments in marketable securities due to fair value measurement;

Offset by a non-cash lease

expenses of $133,553.

cash flows used in operating activities of continuing operations was $1,965,478 for the six months ended June 30, 2025, primarily consisting

of the following:

Net loss from continuing

operations of $2,730,959 for the six months ended June 30, 2025;

A decrease of $190,163 in deferred revenue due to recognition of revenues from deferred revenues during the six months ended

June 30, 2025;

Offset by loss

of $928,955 on fair value changes in investments in marketable securities due to fair value measurement.

Flows from Investing Activities of Continuing Operations

cash flows provided by investing activities of continuing operations amounted to $345,054 for the six months ended June 30, 2026,

primarily consisting of proceeds of $346,894 from sale of marketable securities.

Net cash flows provided by investing activities of continuing operations

amounted to $1,071,732 for the six months ended June 30, 2025, for proceeds from sale of marketable securities.

Flows from Financing Activities of Continuing Operations

Net cash flows used in financing activities of continuing operations amounted

to $55,103 for the six months ended June 30, 2026, for repayment of insurance premium financing.

Net cash flows provided by financing activities of continuing operations

amounted to $1,977,755 for the six months ended June 30, 2025, primarily consisting of proceeds of $1,800,000 from issuance of Series

A convertible preferred shares and common shares related to securities purchase agreement, net of share issuance costs and proceeds of

$117,000 from exercise of stock options.

Flows from Discontinued Operations

Net cash flows provided by discontinued operations amounted to $810,667

for the six months ended June 30, 2026.

Net cash flows used in discontinued operations amounted

to $896,498 for the six months ended June 30, 2025.

Company has entered into operating leases for office space.

As of March 31, 2026, the future maturity of lease liabilities is

Year Ended December 31,

Remaining of 2026

As of June 30, 2026, the future maturity of lease liabilities is as follows:

Ended December 31,

Total lease payments

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current portion

Non-current lease liabilities

The Company’s debts included long-term debts borrowed from a bank

and a financial institution.

As of March 31, 2026, future minimum principal payments for long-term debts were as follows:

Ended December 31,

lease liabilities

Sheet Arrangements

did not have any off-balance sheet arrangements as of March 31, 2026.

did not have any off-balance sheet arrangements as of June 30, 2026.

Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations

are based upon our unaudited consolidated financial statements.

These unaudited consolidated 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 unaudited 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.

We believe there are no critical accounting policies and estimates for the three months

ended March 31, 2026.

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

These unaudited consolidated 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 unaudited consolidated

financial statements, and to disclose the reported amounts of revenues and expenses incurred during the financial reporting period.

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.

We believe there are no critical accounting policies and estimates for the six months ended June 30, 2026.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis