HeartCore Enterprises, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS HEARTCORE ENTERPRISES, INC. CONSOLIDATED BALANCE SHEETS June 30, December 31, 2026 2025 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 587,074 $ 1,904,826 Accounts receivable 62,770 22,830 Investments in marketable securities 2,668,317 3,690,187 Prepaid expenses 114,340 127,565 Deferred offering costs 250,000 250,000 Other current assets 113,670 208,503 Current assets of discontinued operations - 920,683 Proceeds receivable from sale of discontinued operations 467,970 1,291,298 Total current assets 4,264,141 8,415,892 Non-current assets: Property and equipment, net 252,389 275,465 Operating lease right-of-use assets 412,976 17,781 Long-term investment in warrants 121,774 280,924 Deferred tax assets 22,286 23,121 Security deposits 270,525 281,313 Other non-current assets 816 549 Non-current assets of discontinued operations - 29,437 Long-term proceeds receivable from sale of discontinued operations 3,520,918 3,736,995 Total non-current assets 4,601,684 4,645,585 Total assets $ 8,865,825 $ 13,061,477 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued expenses $ 286,711 $ 299,042 Accounts payable and accrued expenses – related party 33,946 124,618 Accounts payable and accrued expenses 33,946 124,618 Accrued payroll and other employee costs 88,057 64,203 Due to related party 460 285 Insurance premium financing 66,327 13,430 Operating lease liabilities, current 280,326 17,781 Income tax payables 1,737,804 1,857,386 Deferred revenue 568,773 676,216 Derivative liability 74,461 121,719 Other current liabilities 523,236 526,984 Current liabilities of discontinued operations - 1,628,586 Total current liabilities 3,660,101 5,330,250 Non-current liabilities: Operating lease liabilities, non-current 139,094 - Non-current liabilities of discontinued operations - 448,376 Total non-current liabilities 139,094 448,376 Total liabilities 3,799,195 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, 617 and 1,017 shares issued and outstanding as of June 30, 2026 and December 31, 2025, respectively; aggregate liquidation preference of $ 748,228 and $ 1,158,362 as of June 30, 2026 and December 31, 2025, respectively 419,741 691,858 Common shares, $ 0.0001 par value, 200,000,000 shares authorized, 1,441,565 and 1,270,991 shares issued and outstanding as of June 30, 2026 and December 31, 2025, respectively * 144 127 Additional paid-in capital 22,128,976 21,902,169 Accumulated deficit ( 17,650,321 ) ( 13,755,534 ) Accumulated other comprehensive loss ( 2,702 ) ( 58,497 ) Total HeartCore Enterprises, Inc. shareholders’ equity 4,895,838 8,780,123 Non-controlling interests 170,792 ( 1,497,272 ) Total shareholders’ equity 5,066,630 7,282,851 Total liabilities and shareholders’ equity $ 8,865,825 $ 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 10. 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 INCOME (LOSS) 2026 2025 2026 2025 For the Three Months For the Six Months Ended June 30, Ended June 30, 2026 2025 2026 2025 Revenues $ 321,428 $ 187,277 $ 553,926 $ 439,909 Cost of revenues (including cost of revenues resulting from transactions with a related party of $ 151,143 and $ 265,678 for the three and six months ended June 30, 2026, respectively, and of $ 31,328 and $ 56,523 for the three and six months ended June 30, 2025, respectively) 391,643 210,242 732,056 365,142 Gross profit (loss) ( 70,215 ) ( 22,965 ) ( 178,130 ) 74,767 Operating expenses: Selling expenses 34,867 77,006 69,203 214,596 General and administrative expenses (including general and administrative expenses resulting from transactions with a related party of nil for the three and six months ended June 30, 2026, and of $ 11,433 and $ 29,048 for the three and six months ended June 30, 2025, respectively) 718,933 667,507 1,888,888 1,708,906 Total operating expenses 753,800 744,513 1,958,091 1,923,502 Loss from continuing operations ( 824,015 ) ( 767,478 ) ( 2,136,221 ) ( 1,848,735 ) Other income (expenses): Changes in fair value of investments in marketable securities ( 521,494 ) 852,709 ( 817,491 ) ( 928,955 ) Changes in fair value of investment in warrants ( 9,570 ) 124,281 ( 16,635 ) 72,660 Changes in fair value of derivative liability 48,128 - 47,258 - Interest income 23 1,223 601 3,444 Interest expenses ( 3,054 ) ( 4,042 ) ( 4,477 ) ( 5,874 ) Other income 17,086 13,682 31,181 22,995 Other expenses ( 236,521 ) ( 366 ) ( 349,386 ) ( 913 ) Total other income (expenses) ( 705,402 ) 987,487 ( 1,108,949 ) ( 836,643 ) Income (loss) from continuing operations before income tax expense ( 1,529,417 ) 220,009 ( 3,245,170 ) ( 2,685,378 ) Income tax expense 20,872 5,973 38,341 45,581 Net income (loss) from continuing operations ( 1,550,289 ) 214,036 ( 3,283,511 ) ( 2,730,959 ) Income (loss) from discontinued operations, net of income tax ( 489,230 ) 847,470 ( 732,723 ) 655,084 Net income (loss) ( 2,039,519 ) 1,061,506 ( 4,016,234 ) ( 2,075,875 ) Less: net income from continuing operations attributable to non-controlling interests 15,770 8,009 30,074 18,888 Less: loss from discontinued operations attributable to non-controlling interests ( 32,209 ) ( 46,405 ) ( 151,521 ) ( 107,673 ) Net income (loss) attributable to HeartCore Enterprises, Inc. ( 2,023,080 ) 1,099,902 ( 3,894,787 ) ( 1,987,090 ) Dividends accrued on Series A convertible preferred shares ( 19,356 ) ( 611 ) ( 47,324 ) ( 611 ) Net income (loss) attributable to HeartCore Enterprises, Inc. common shareholders $ ( 2,042,436 ) $ 1,099,291 $ ( 3,942,111 ) $ ( 1,987,701 ) Other comprehensive income (loss): Foreign currency translation adjustment ( 18,373 ) 56,052 ( 34,513 ) 48,038 Total comprehensive income (loss) ( 2,057,892 ) 1,117,558 ( 4,050,747 ) ( 2,027,837 ) Less: comprehensive loss attributable to non-controlling interests ( 16,838 ) ( 40,783 ) ( 130,384 ) ( 89,935 ) Comprehensive income (loss) attributable to HeartCore Enterprises, Inc. $ ( 2,041,054 ) $ 1,158,341 $ ( 3,920,363 ) $ ( 1,937,902 ) Net income (loss) from continuing operations attributable to HeartCore Enterprises, Inc. per common share* Basic * $ ( 1.12 ) $ 0.19 $ ( 2.51 ) $ ( 2.49 ) Diluted * $ ( 1.12 ) $ 0.19 $ ( 2.51 ) $ ( 2.49 ) Income (loss) from discontinued operations per common share* Basic * $ ( 0.32 ) $ 0.81 $ ( 0.43 ) $ 0.69 Diluted * $ ( 0.32 ) $ 0.81 $ ( 0.43 ) $ 0.69 Net income (loss) attributable to HeartCore Enterprises, Inc. per common share* Basic * $ ( 1.45 ) $ 1.00 $ ( 2.94 ) $ ( 1.80 ) Diluted * $ ( 1.45 ) $ 0.99 $ ( 2.94 ) $ ( 1.80 ) Weighted average common shares outstanding* Basic * 1,410,386 1,104,446 1,341,297 1,103,617 Diluted * 1,410,386 1,107,017 1,341,297 1,105,245 * 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 10. 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 AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025 Shares Amount Shares* Amount Receivable Capital Deficit Income Equity Interests Equity Preferred Shares Common Shares Additional Accumulated Other Total HeartCore Enterprises, Inc. Total Number of Number of Subscription Paid-in Accumulated Comprehensive Shareholders’ Non-controlling Shareholders’ Shares Amount 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 Net income (loss) - - - - - - 1,099,902 - 1,099,902 ( 38,396 ) 1,061,506 Foreign currency translation adjustment - - - - - - - 58,439 58,439 ( 2,387 ) 56,052 Issuance of Series A convertible preferred shares 2,000 1,360,586 - - - - - - 1,360,586 - 1,360,586 Issuance of common shares related to securities purchase agreement - - 37,500 4 - 203,269 - - 203,273 - 203,273 Issuance of common shares related to equity purchase agreement - - 24,272 2 - 249,998 - - 250,000 - 250,000 Dividends accrued on Series A convertible preferred shares - - - - - ( 611 ) - - ( 611 ) - ( 611 ) Stock-based compensation - - - - - 27,924 - - 27,924 - 27,924 Balance, June 30, 2025 2,000 $ 1,360,586 1,165,539 $ 117 $ - $ 21,318,540 $ ( 18,231,933 ) $ 393,124 $ 4,840,434 $ ( 1,281,417 ) $ 3,559,017 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 Balance, March 31, 2026 1,017 691,858 1,271,787 127 21,876,232 ( 15,627,241 ) ( 66,099 ) 6,874,877 ( 1,610,818 ) 5,264,059 Net loss - - - - - ( 2,023,080 ) - ( 2,023,080 ) ( 16,439 ) ( 2,039,519 ) Net income (loss ) - - - - - ( 2,023,080 ) - ( 2,023,080 ) ( 16,439 ) ( 2,039,519 ) Foreign currency translation adjustment - - - - - - ( 17,974 ) ( 17,974 ) ( 399 ) ( 18,373 ) Cumulative translation adjustment reclassified into earnings due to disposal of discontinued operations - - - - - - 81,371 81,371 - 81,371 Derecognition of non-controlling interests upon sale of discontinued operations - - - - - - - - 1,798,448 1,798,448 Series A convertible preferred shares converted to common shares ( 400 ) ( 272,117 ) 152,753 15 272,102 - - - - - Dividends accrued on Series A convertible preferred shares - - - - ( 19,356 ) - - ( 19,356 ) - ( 19,356 ) Reverse stock split rounding adjustment - - 17,025 2 ( 2 ) - - - - - Balance, June 30, 2026 617 $ 419,741 1,441,565 $ 144 $ 22,128,976 $ ( 17,650,321 ) $ ( 2,702 ) $ 4,895,838 $ 170,792 $ 5,066,630 * 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 10. 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 Six Months Ended June 30, 2026 2025 Cash flows from operating activities of continuing operations: Net loss $ ( 4,016,234 ) $ ( 2,075,875 ) Income (loss) from discontinued operations, net of income tax ( 732,723 ) 655,084 Net loss from continuing operations ( 3,283,511 ) ( 2,730,959 ) Adjustments to reconcile net loss from continuing operations to net cash flows used in operating activities of continuing operations: Depreciation expense 15,394 28,728 Loss on disposal of property and equipment - 116,981 Non-cash lease expense 133,553 30,620 Gain on termination of lease - ( 9,059 ) Deferred income taxes - 27,673 Stock-based compensation 2,031 60,204 Changes in fair value of investments in marketable securities 817,491 928,955 Changes in fair value of investment in warrants 16,635 ( 72,660 ) Changes in fair value of derivative liability ( 47,258 ) - Gain on settlement of asset retirement obligations - ( 45,873 ) Changes in assets and liabilities: Accounts receivable ( 40,102 ) ( 30,439 ) Prepaid expenses 120,260 60,557 Other assets 83,271 152,927 Accounts payable and accrued expenses ( 9,464 ) ( 106,918 ) Accounts payable and accrued expenses – related party ( 90,717 ) ( 23,386 ) Accrued payroll and other employee costs 25,945 ( 35,053 ) Due to related party 191 ( 884 ) Operating lease liabilities ( 126,904 ) ( 23,648 ) Income tax payables 11,150 ( 105,946 ) Deferred revenue ( 107,443 ) ( 190,163 ) Other liabilities ( 3,278 ) 2,865 Net cash flows used in operating activities of continuing operations ( 2,482,756 ) ( 1,965,478 ) Cash flows from investing activities of continuing operations: Purchases of property and equipment ( 1,840 ) - Proceeds from sale of marketable securities 346,894 1,071,732 Net cash flows provided by investing activities of continuing operations 345,054 1,071,732 Cash flows from financing activities of continuing operations: Payments for finance lease - ( 8,375 ) Repayment of insurance premium financing ( 55,103 ) ( 65,257 ) 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 Proceeds from issuance of Series A convertible preferred shares and common shares related to securities purchase agreement, net of share issuance costs - 1,800,000 Net cash flows provided by (used in) financing activities of continuing operations ( 55,103 ) 1,977,755 Cash flows from discontinued operations: Net cash flows used in operating activities of discontinued operations ( 11,397 ) ( 709,414 ) Net cash flows provided by investing activities of discontinued operations 844,198 19,904 Net cash flows used in financing activities of discontinued operations ( 22,134 ) ( 206,988 ) Net cash flows provided by (used in) discontinued operations 810,667 ( 896,498 ) Effect of exchange rate changes ( 16,750 ) 39,022 Net change in cash and cash equivalents ( 1,398,888 ) 226,533 Cash and cash equivalents – beginning of the period 1,985,962 2,121,089 Cash and cash equivalents – end of the period $ 587,074 $ 2,347,622 Supplemental cash flow disclosures: Interest paid $ 30,674 $ 63,320 Income taxes paid (received), net $ ( 17,394 ) $ 131,118 Non-cash investing and financing transactions: Insurance premium financing $ 108,000 $ 139,500 Warrants converted to marketable securities $ 142,515 $ - Operating lease right-of-use assets obtained in exchange for operating lease liabilities $ 552,577 $ 23,495 Dividends accrued on Series A convertible preferred shares $ 47,324 $ 611 Series A convertible preferred shares converted to common shares $ 272,117 $ - Issuance of common shares related to equity purchase agreement $ - $ 250,000 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 August 2026, HeartCore USA entered into a purchase agreement to sell 51 % of the outstanding shares of HeartCore Luvina to its non-controlling shareholder. 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 12). 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. F- 5 On March 5, 2026, the Board of Directors approved to sell 51 % of the outstanding shares of Sigmaways and its wholly-owned subsidiaries. The sale of Sigmaways and its wholly-owned subsidiaries 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 12). The sale transaction was closed on June 22, 2026. 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. 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 HeartCore USA and its subsidiaries. The Company has presented the assets and liabilities of HeartCore Japan and Sigmaways and its wholly-owned subsidiaries and their results of operations and cash flows as discontinued operations in the unaudited consolidated financial statements as of and for all periods presented. All footnotes exclude balances and activities of HeartCore Japan and Sigmaways and its wholly-owned subsidiaries 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. The Company incurred net loss from continuing operations of $ 1.6 million and $ 3.3 million for the three and six months ended June 30, 2026, respectively, and net cash flows used in operating activities of continuing operations of $ 2.5 million for the six months ended June 30, 2026, primarily due to the macroeconomic downturn environment. As of June 30, 2026, the Company had cash and cash equivalents of $ 0.6 million, working capital of $ 0.6 million and accumulated deficit of $ 17.7 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 and six months ended June 30, 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$”). The functional currency of Sigmaways B.V. is the Euro (“EUR”). The functional currency of Sigmaways Technologies is the Canada Dollar (“CAD”). The functional currency of HeartCore Luvina is the Vietnam Dong (“VND”). Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the unaudited consolidated statements of operations and comprehensive income (loss). The reporting currency of the Company is the US$, and the unaudited consolidated financial statements have been expressed in the 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 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 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 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 six months ended June 30, 2026 and 2025 that were included in the opening deferred revenue balances were approximately $ 0.1 million and $ 0.4 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 and six months ended June 30, 2026 and 2025 is as follows: SCHEDULE OF DISAGGREGATION OF REVENUES 2026 2025 2026 2025 For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Revenues from software development services $ 239,732 $ 9,286 $ 446,483 $ 16,375 Revenues from consulting services 81,696 177,991 107,443 423,534 Total revenues $ 321,428 $ 187,277 $ 553,926 $ 439,909 Concentration of Credit Risk Financial instruments that potentially subject the Company to credit risk consist primarily of accounts 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 and six months ended June 30, 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 June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Customer A 74.6 % - * 80.6 % - * Customer B - * 17.8 % - * - * Customer C - * 42.7 % 11.1 % 36.5 % Customer D - * 30.2 % - * 36.9 % Customer E - * - * - * - * Customer F - * - * - * 12.4 % Customer G - * - * - * 10.2 % As of June 30, 2026 and December 31, 2025, customers account for 10% or more of the Company’s accounts receivable are as follows: June 30, December 31, 2026 2025 Customer A 100.0 % 87.6 % Customer H - * 12.4 % F- 9 For the three and six months ended June 30, 2026 and 2025, vendors account for 10% or more of the Company’s purchases from continuing operations are as follows: For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Vendor A 22.7 % - * 16.1 % - * Vendor B 16.0 % - * 11.2 % - * Vendor C - * 15.0 % 16.6 % 32.9 % Vendor D - * 14.1 % - * - * As of June 30, 2026 and December 31, 2025, vendors account for 10% or more of the Company’s accounts payable and accrued expenses are as follows: June 30, December 31, 2026 2025 Vendor B 10.7 % 11.7 % Vendor D 12.7 % - * Vendor E 56.1 % 53.8 % * 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 13). Series A Convertible Preferred Shares and Derivative Liability When the Company issues the Series A convertible preferred shares (see NOTE 10), 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 June 30, 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 June 30, 2026 and December 31, 2025 are summarized below (also see NOTE 4 for investments): SCHEDULE OF ASSETS MEASURED AT FAIR VALUE ON A RECURRING BASIS Fair Value Measurements as of June 30, 2026 Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Unobservable Inputs (Level 3) Fair Value at June 30, 2026 Investments in marketable securities $ 2,668,317 $ - $ - $ 2,668,317 Long-term investment in warrants $ - $ 121,774 $ - $ 121,774 Derivative liability $ - $ - $ 74,461 $ 74,461 Fair Value Measurements as of December 31, 2025 Quoted Prices in Active Markets for Identical Assets or Liabilities (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 F- 11 Assets Held for Sale and 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. Assets held for sale are not depreciated or amortized. 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 sales of HeartCore Japan and Sigmaways and its wholly-owned subsidiaries and determines they meet the held for sale criteria and the discontinued operations criteria. The assets and liabilities of Sigmaways and its wholly-owned subsidiaries have been reflected as assets and liabilities of discontinued operations in the consolidated balance sheets for all periods presented. The results of operations of HeartCore Japan and Sigmaways and its wholly-owned subsidiaries are presented as discontinued operations in the unaudited consolidated statements of operations and comprehensive income (loss) for all periods presented. Prior periods have been adjusted to conform to the current presentation. The required disclosures are included in NOTE 12. 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 – RELATED PARTY TRANSACTIONS As of June 30, 2026 and December 31, 2025, the Company had due to related party balances of $ 460 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 six months ended June 30, 2026 and 2025, the related party paid operating expenses on behalf of the Company and received the payments in a net amount of $191 and nil, respectively. As of June 30, 2026 and December 31, 2025, the Company had accounts payable and accrued expenses balances of $ 33,946 and $ 124,618 , respectively, to Luvina Software Joint Stock Company (“Luvina Software”), the non-controlling shareholder of HeartCore Luvina. During the three and six months ended June 30, 2026, the Company engaged the related party for software development services of $ 151,143 and $ 265,678 , respectively. During the three and six months ended June 30, 2025, the Company engaged the related party for software development and other support services of $ 42,761 and $ 85,571 , respectively. During the six months ended June 30, 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 NOTE 4 – 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 six months ended June 30, 2026 and 2025: SCHEDULE OF INVESTMENT IN WARRANTS ACTIVITY 2026 2025 For the Six Months Ended June 30, 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 ( 16,635 ) 72,660 Warrants converted to marketable securities ( 142,515 ) - Fair value of investment in warrants at end of the period $ 121,774 $ 650,446 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 six months ended June 30, 2026 and 2025: SCHEDULE OF INVESTMENTS IN MARKETABLE SECURITIES 2026 2025 For the Six Months Ended June 30, 2026 2025 Fair value of investments in marketable securities at beginning of the period $ 3,690,187 $ 4,495,703 Marketable securities converted from warrants * 142,515 - Changes in fair value of investments in marketable securities ( 817,491 ) ( 928,955 ) Marketable securities sold ( 346,894 ) ( 1,071,732 ) Fair value of investments in marketable securities at end of the period $ 2,668,317 $ 2,495,016 * For the six months ended June 30, 2026 and 2025, the Company exercised 63,558 and nil shares of warrants in exchange for 63,558 and nil shares of common shares, respectively. F- 13 NOTE 5 – PROPERTY AND EQUIPMENT, NET Property and equipment, net consist of the following: SCHEDULE OF PROPERTY AND EQUIPMENT NET June 30, December 31, 2026 2025 Machinery and equipment $ 260,420 $ 268,319 Vehicle 78,482 81,420 Subtotal 338,902 349,739 Less: accumulated depreciation ( 86,513 ) ( 74,274 ) Total property and equipment, net $ 252,389 $ 275,465 For the three and six months ended June 30, 2026, the Company recognized depreciation expenses of $ 7,674 and $ 15,394 , respectively. For the three and six months ended June 30, 2025, the Company recognized depreciation expenses of $ 8,439 and $ 28,728 , respectively. NOTE 6 – 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 and six months ended June 30, 2026 and 2025 are as follows: SCHEDULE OF COMPONENTS OF LEASE COST 2026 2025 2026 2025 For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Finance lease costs Amortization of finance lease right-of-use assets $ - $ 4,309 $ - $ 8,488 Interest on finance lease liabilities - 190 - 388 Total finance lease costs - 4,499 - 8,876 Operating leases costs 70,918 5,051 137,977 31,424 Total leases costs $ 70,918 $ 9,550 $ 137,977 $ 40,300 The following table presents supplemental information related to the Company’s leases for the six months ended June 30, 2026 and 2025: SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO COMPANY LEASE 2026 2025 For the Six Months Ended June 30, 2026 2025 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from finance lease $ - $ 388 Operating cash flows from operating leases 129,565 23,786 Financing cash flows from finance lease - 8,375 Operating lease right-of-use assets obtained in exchange for operating lease liabilities 552,577 23,495 Remeasurement of operating lease liabilities and right-of-use assets due to lease modification 9,317 - Weighted average remaining lease term (years): Finance lease - 3.2 Operating leases 1.5 2.3 Weighted average discount rate (per annum): Finance lease 0.00 % 1.32 % Operating leases 1.39 % 2.51 % F- 14 As of June 30, 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 $ 144,328 2027 279,074 2028 - 2029 - 2030 - Thereafter - Total lease payments 423,402 Less: imputed interest ( 3,982 ) Total lease liabilities 419,420 Less: current portion ( 280,326 ) Non-current lease liabilities $ 139,094 Pursuant to the operating lease agreements, the Company made security deposits to the lessors. The security deposits amounted to $ 270,525 and $ 281,313 as of June 30, 2026 and December 31, 2025, respectively. NOTE 7 – OTHER CURRENT LIABILITIES Other current liabilities consist of the following: SCHEDULE OF OTHER CURRENT LIABILITIES June 30, December 31, 2026 2025 Customer refund liability * $ 500,000 $ 500,000 Others 23,236 26,984 Total other current liabilities $ 523,236 $ 526,984 * 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 8 – INCOME TAXES United States HeartCore USA 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. 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 %. F- 15 For the three and six months ended June 30, 2026 and 2025, the Company’s income tax expense are as follows: SCHEDULE OF INCOME TAX EXPENSES 2026 2025 2026 2025 For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Current $ 20,872 $ 5,815 $ 38,341 $ 17,908 Deferred - 158 - 27,673 Income tax expense $ 20,872 $ 5,973 $ 38,341 $ 45,581 For the three and six months ended June 30, 2026, the effective tax rate were 1.36 % and 1.18 %, respectively. For the three and six months ended June 30, 2025, the effective tax rate were 2.71 % and 1.70 %, respectively. NOTE 9 – 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, under which 100,000 shares of common shares are authorized for issuance. 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 six months ended June 30, 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 ( 325 ) 50.00 - - As of June 30, 2025 70,000 $ 50.00 6.43 $ - As of January 1, 2026 56,075 $ 49.99 5.92 $ - Granted - - - - Exercised - - - - Forfeited - - - - As of June 30, 2026 56,075 $ 49.99 5.42 $ - Vested and exercisable as of June 30, 2026 56,075 $ 49.99 5.42 $ - F- 16 For the three and six months ended June 30, 2026, there was no stock-based compensation related to stock options. For the three and six months ended June 30, 2025, the Company recognized stock-based compensation related to stock options of $ 22,006 and $ 52,682 , respectively. There was no outstanding unamortized stock-based compensation related to stock options as of June 30, 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 . The following table summarizes the RSUs activities and related information for the six months ended June 30, 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 June 30, 2025 960 $ 99.00 Unvested as of January 1, 2026 796 $ 99.00 Granted - - Vested ( 796 ) 99.00 Forfeited - - Unvested as of June 30, 2026 - $ - For the three and six months ended June 30, 2026, the Company recognized stock-based compensation related to RSUs of nil and $ 2,031 , respectively. For the three and six months ended June 30, 2025, the Company recognized stock-based compensation related to RSUs of $ 5,918 and $ 7,522 , respectively. There was no outstanding unamortized stock-based compensation related to RSUs as of June 30, 2026. NOTE 10 – 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 an 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 six months ended June 30, 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. F- 17 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. ● 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 an aggregate purchase price of $ 2,000,000 . Concurrently with the signing of the securities purchase agreement, the Company issued 37,500 shares of common shares (“ 37,500 Common Shares”) to Crom Structured for no consideration. The Company received net proceeds of $ 1,800,000 from the securities purchase agreement after deducting share issuance transaction fees. The net proceeds from the securities purchase agreement were allocated to Series A convertible preferred shares and 37,500 Common Shares based on their relative fair values. F- 18 For the three and six months ended June 30, 2026, there were 400 and 400 shares of Series A convertible preferred shares converted into 152,753 and 152,753 shares of common shares, respectively. For the three and six months ended June 30, 2025, no shares of Series A convertible preferred shares were converted into common shares. For the three and six months ended June 30, 2026, dividends accrued on Series A convertible preferred shares amounted to $ 19,356 and $ 47,324 , respectively. For the three and six months ended June 30, 2025, dividends accrued on Series A convertible preferred shares amounted to $ 611 and $ 611 , respectively. 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. Concurrently with the signing of the equity purchase agreement, the Company issued 24,272 shares of common shares to Crom Structured as a commitment fee. The total fair value of the common shares issued for the commitment fee of $ 250,000 was recorded as deferred offering costs in the consolidated balance sheets. For the three and six months ended June 30, 2026 and 2025, no common shares were sold pursuant to the terms of the equity purchase agreement. 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 and six months ended June 30, 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. F- 19 Shares Issued and Outstanding As of June 30, 2026 and December 31, 2025, there were 1,441,565 and 1,270,991 shares of common shares issued and outstanding, respectively. As of June 30, 2026 and December 31, 2025, there were 617 and 1,017 shares of preferred shares (designated as Series A convertible preferred shares) issued and outstanding, respectively. NOTE 11 – NET INCOME (LOSS) PER SHARE Basic net income (loss) per share is calculated on the basis of weighted average outstanding common shares. Diluted net income (loss) per share is 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 income (loss) per share if their effect would be anti-dilutive. The computation of basic and diluted net income (loss) per share for the three and six months ended June 30, 2026 and 2025 is as follows: SCHEDULE OF COMPUTATION OF BASIC AND DILUTED EARNINGS (LOSS) PER SHARE 2026 2025 2026 2025 For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Net income (loss) from continuing operations attributable to HeartCore Enterprises, Inc. per common share – basic Numerator Net income (loss) from continuing operations attributable to HeartCore Enterprises, Inc. common shareholders $ ( 1,585,415 ) $ 205,416 $ ( 3,360,909 ) $ ( 2,750,458 ) Denominator Weighted average number of common shares outstanding – basic 1,410,386 1,104,446 1,341,297 1,103,617 Net income (loss) from continuing operations attributable to HeartCore Enterprises, Inc. per common share – basic $ ( 1.12 ) $ 0.19 $ ( 2.51 ) $ ( 2.49 ) Net income (loss) from continuing operations attributable to HeartCore Enterprises, Inc. per common share – diluted Numerator Net income (loss) from continuing operations attributable to HeartCore Enterprises, Inc. common shareholders $ ( 1,585,415 ) $ 205,416 $ ( 3,360,909 ) $ ( 2,750,458 ) Add: dividends accrued on unconverted Series A convertible preferred shares 17,156 611 34,124 611 Less: changes in fair value of derivative liability, net of income tax 34,652 - 34,026 - Net income (loss) from continuing operations attributable to HeartCore Enterprises, Inc. – diluted ( 1,602,911 ) 206,027 ( 3,360,811 ) ( 2,749,847 ) Denominator Weighted average number of common shares outstanding – diluted 1,410,386 1,104,446 1,341,297 1,103,617 Net income (loss) from continuing operations attributable to HeartCore Enterprises, Inc. per common share – diluted $ ( 1.12 ) $ 0.19 $ ( 2.51 ) $ ( 2.49 ) F- 20 2026 2025 2026 2025 For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Income (loss) from discontinued operations attributable to HeartCore Enterprises, Inc. per common share – basic Numerator Income (loss) from discontinued operations attributable to HeartCore Enterprises, Inc. $ ( 457,021 ) $ 893,875 $ ( 581,202 ) $ 762,757 Denominator Weighted average number of common shares outstanding – basic 1,410,386 1,104,446 1,341,297 1,103,617 Income (loss) from discontinued operations attributable to HeartCore Enterprises, Inc. per common share – basic $ ( 0.32 ) $ 0.81 $ ( 0.43 ) $ 0.69 Income (loss) from discontinued operations attributable to HeartCore Enterprises, Inc. per common share – diluted Numerator Income (loss) from discontinued operations attributable to HeartCore Enterprises, Inc. $ ( 457,021 ) $ 893,875 $ ( 581,202 ) $ 762,757 Denominator Weighted average number of common shares outstanding – basic 1,410,386 1,104,446 1,341,297 1,103,617 Dilutive effect of stock options, RSUs and Series A convertible preferred shares - 2,571 - 1,628 Weighted average number of common shares outstanding – diluted 1,410,386 1,107,017 1,341,297 1,105,245 Income (loss) from discontinued operations attributable to HeartCore Enterprises, Inc. per common share – diluted $ ( 0.32 ) $ 0.81 $ ( 0.43 ) $ 0.69 2026 2025 2026 2025 For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Net income (loss) attributable to HeartCore Enterprises, Inc. per common share – basic Numerator Net income (loss) attributable to HeartCore Enterprises, Inc. common shareholders $ ( 2,042,436 ) $ 1,099,291 $ ( 3,942,111 ) $ ( 1,987,701 ) Denominator Weighted average number of common shares outstanding – basic 1,410,386 1,104,446 1,341,297 1,103,617 Net income (loss) attributable to HeartCore Enterprises, Inc. per common share – basic $ ( 1.45 ) $ 1.00 $ ( 2.94 ) $ ( 1.80 ) Net income (loss) attributable to HeartCore Enterprises, Inc. per common share – diluted Numerator Net income (loss) attributable to HeartCore Enterprises, Inc. common shareholders $ ( 2,042,436 ) $ 1,099,291 $ ( 3,942,111 ) $ ( 1,987,701 ) Add: dividends accrued on unconverted Series A convertible preferred shares 17,156 611 34,124 611 Less: changes in fair value of derivative liability, net of income tax 34,652 - 34,026 - Net income (loss) attributable to HeartCore Enterprises, Inc. – diluted ( 2,059,932 ) 1,099,902 ( 3,942,013 ) ( 1,987,090 ) Denominator Weighted average number of common shares outstanding – basic 1,410,386 1,104,446 1,341,297 1,103,617 Dilutive effect of stock options, RSUs and Series A convertible preferred shares - 2,571 - - Weighted average number of common shares outstanding – diluted 1,410,386 1,107,017 1,341,297 1,103,617 Net income (loss) attributable to HeartCore Enterprises, Inc. per common share – diluted $ ( 1.45 ) $ 0.99 $ ( 2.94 ) $ ( 1.80 ) F- 21 NOTE 12 – DISCONTINUED OPERATIONS HeartCore Japan 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 income (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. For the six months ended June 30, 2026, the Company received proceeds from sale of discontinued operations for HeartCore Japan of $ 871,549 . The following table summarizes the results of operations from discontinued operations, net of income tax for HeartCore Japan in the unaudited consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2025: SCHEDULE OF OPERATIONS, ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS For the Three Months Ended For the Six Months Ended June 30, 2025 June 30, 2025 Revenues $ 2,775,189 $ 4,268,802 Cost of revenues 969,835 1,906,938 Gross profit 1,805,354 2,361,864 Operating expenses: Selling expenses 294,647 432,885 General and administrative expenses 409,219 757,402 Research and development expenses 161,481 285,374 Total operating expenses 865,347 1,475,661 Income from discontinued operations 940,007 886,203 Other expenses ( 13,300 ) ( 9,818 ) Loss on sale of discontinued operations Income from discontinued operations before income tax expense (benefit) 926,707 876,385 Income tax expense (benefit) ( 15,467 ) 1,561 Income from discontinued operations, net of income tax $ 942,174 $ 874,824 F- 22 Sigmaways and Its Wholly-owned Subsidiaries On March 5, 2026, in light of the intense competition of the software market in the United States, the Board of Directors of the Company approved to sell 51 % of the outstanding shares of Sigmaways and its wholly-owned subsidiaries. The Company does not expect to have any continuing involvement in Sigmaways and its wholly-owned subsidiaries subsequent to the closing. The Company determines the assets of Sigmaways and its wholly-owned subsidiaries met the criteria for classification as held for sale. Additionally, the Company determines the sale of Sigmaways and its wholly-owned subsidiaries represents a strategic shift that has a major impact on its operations and financial results. Accordingly, all results of operations of Sigmaways and its wholly-owned subsidiaries have been removed from continuing operations and presented as discontinued operations in the unaudited consolidated statements of operations and comprehensive income (loss) for all periods presented. All assets and liabilities of Sigmaways and its wholly-owned subsidiaries have been presented separately as assets and liabilities of discontinued operations in the consolidated balance sheets as of December 31, 2025. On June 22, 2026, the sale transaction was closed. The Company entered into a purchase agreement to sell 51 % of the outstanding shares of Sigmaways and its wholly-owned subsidiaries to Semaphore Technologies, Inc. for a cash consideration of up to $ 650,000 , consisting of (i) closing cash consideration of $ 1,000 , and (ii) additional cash consideration of up to $ 649,000 , upon achievement of certain financial performance milestones. The Company assesses the collection risk from time to time and determines the collection of additional cash consideration is not probable based on the current financial performance of Sigmaways and its wholly-owned subsidiaries. For the six months ended June 30, 2026, the Company received gross proceeds from sale of discontinued operations for Sigmaways and its wholly-owned subsidiaries of $ 1,000 , net of cash divested of $ 28,351 . The following table summarizes the results of operations from discontinued operations, net of income tax for Sigmaways and its wholly-owned subsidiaries in the unaudited consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2026 and 2025: SCHEDULE OF OPERATIONS, ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS 2026 2025 2026 2025 For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Revenues $ 523,773 $ 1,781,780 $ 1,537,119 $ 3,622,561 Cost of revenues 422,623 1,346,574 1,254,009 2,741,313 Gross profit 101,150 435,206 283,110 881,248 Operating expenses: Selling expenses 7,050 13,969 15,526 29,301 General and administrative expenses 148,734 486,301 550,513 1,026,107 Total operating expenses 155,784 500,270 566,039 1,055,408 Loss from discontinued operations ( 54,634 ) ( 65,064 ) ( 282,929 ) ( 174,160 ) Other expenses ( 10,995 ) ( 23,708 ) ( 26,193 ) ( 39,648 ) Loss on sale of discontinued operations ( 423,496 ) - ( 423,496 ) - Loss from discontinued operations before income tax expense ( 489,125 ) ( 88,772 ) ( 732,618 ) ( 213,808 ) Income tax expense 105 5,932 105 5,932 Loss from discontinued operations, net of income tax ( 489,230 ) ( 94,704 ) ( 732,723 ) ( 219,740 ) Less: loss from discontinued operations attributable to non-controlling interests ( 32,209 ) ( 46,405 ) ( 151,521 ) ( 107,673 ) Loss from discontinued operations attributable to HeartCore Enterprises, Inc. $ ( 457,021 ) $ ( 48,299 ) $ ( 581,202 ) $ ( 112,067 ) F- 23 The following table summarizes the assets and liabilities of discontinued operations and non-controlling interests for Sigmaways and its wholly-owned subsidiaries in the consolidated balance sheets as of December 31, 2025: December 31, 2025 Assets of discontinued operations Cash and cash equivalents $ 81,136 Accounts receivable 685,035 Prepaid expenses 54,512 Current portion of long-term note receivable 100,000 Property and equipment, net 16,124 Operating lease right-of-use assets 11,668 Security deposits 1,645 Total assets of discontinued operations $ 950,120 Liabilities of discontinued operations Accounts payable and accrued expenses $ 847,459 Accrued payroll and other employee costs 445,344 Short-term debt – related party 75,000 Current portion of long-term debts 50,598 Factoring liability 135,982 Operating lease liabilities, current 15,012 Other current liabilities 59,191 Long-term debts 448,376 Total liabilities of discontinued operations $ 2,076,962 Non-controlling interests $ ( 1,633,871 ) Assets and liabilities classified as held for sale are reported at the lower of carrying amount or fair value less cost to sell. There was no valuation allowance against the assets classified as held for sale. As of the closing date of the sale of Sigmaways and its wholly-owned subsidiaries, the assets and liabilities classified as held for sale and non-controlling interests were derecognized and loss on sale of discontinued operations was recorded. NOTE 13 – 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 income (loss) from continuing operations. Segment assets are reported on the Company’s consolidated balance sheets. F- 24 The following table summarizes the selected financial information with respect to the Company’s 1 single operating segment and reportable segment for the three and six months ended June 30, 2026 and 2025: SCHEDULE OF SINGLE OPERATING SEGMENT AND REPORTABLE SEGMENT 2026 2025 2026 2025 For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Revenues $ 321,428 $ 187,277 $ 553,926 $ 439,909 Less: Software related cost of revenues 189,729 98,587 372,371 174,640 Consulting related cost of revenues 201,914 111,655 359,685 190,502 Selling expenses 34,867 77,006 69,203 214,596 General and administrative expenses 718,933 667,507 1,888,888 1,708,906 Loss from continuing operations ( 824,015 ) ( 767,478 ) ( 2,136,221 ) ( 1,848,735 ) Total other income (expenses) ( 705,402 ) 987,487 ( 1,108,949 ) ( 836,643 ) Income (loss) from continuing operations before income tax expense ( 1,529,417 ) 220,009 ( 3,245,170 ) ( 2,685,378 ) Income tax expense 20,872 5,973 38,341 45,581 Net income (loss) from continuing operations $ ( 1,550,289 ) $ 214,036 $ ( 3,283,511 ) $ ( 2,730,959 ) Geographic Information The following table summarizes the breakdown of revenues by geography for the three and six months ended June 30, 2026 and 2025: SCHEDULE OF SUMMARIZES THE BREAKDOWN OF REVENUES BY GEOGRAPHY 2026 2025 2026 2025 For the Three Months Ended June 30, For the Six Months Ended June 30, 2026 2025 2026 2025 Japan $ 81,696 $ 177,991 $ 107,443 $ 423,534 Vietnam 239,732 9,286 446,483 16,375 Total revenues $ 321,428 $ 187,277 $ 553,926 $ 439,909 The following table summarizes the breakdown of long-lived assets by geography as of June 30, 2026 and December 31, 2025: SCHEDULE OF SUMMARIZES THE BREAKDOWN OF LONG-LIVED ASSETS BY GEOGRAPHY June 30, December 31, 2026 2025 Japan $ 659,848 $ 292,451 Vietnam 5,517 795 Total long-lived assets $ 665,365 $ 293,246 NOTE 14 – SUBSEQUENT EVENTS On July 10, 2026, the Company paid dividends on Series A convertible preferred shares of $ 67,870 through issuance of 24,686 shares of common shares. On July 23, 2026, Crom Structured converted 100 shares of Series A convertible preferred shares into 49,077 shares of common shares. F- 25