HeartCore Enterprises, Inc.: Form 10-Q for the period ended Jun 30, 2025

The Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), provide a safe harbor for forward-looking statements made by us or on our behalf. We and our representatives may from time to time make written or oral statements that are “forward-looking,” including statements contained in this report and other filings with the Securities and Exchange Commission (“SEC”) and in our reports and presentations to stockholders or potential stockholders. In some cases, forward-looking statements can be identified by words such as “believe,” “expect,” “anticipate,” “plan,” “potential,” “continue” or similar expressions. Such forward-looking statements include risks and uncertainties and there are important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors, risks and uncertainties can be found in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as the same may be updated from time to time, including in Part II, Item 1A, “Risk Factors,” of this Quarterly Report on Form 10-Q.

Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, it is not possible to foresee or identify all factors that could have a material effect on the future financial performance of the Company. The forward-looking statements in this report are made on the basis of management’s assumptions and analyses, as of the time the statements are made, in light of their experience and perception of historical conditions, expected future developments and other factors believed to be appropriate under the circumstances.

Except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this Quarterly Report on Form 10-Q and the information incorporated by reference in this Quarterly Report on Form 10-Q to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.

Business Overview

We are a leading software development company based in Tokyo, Japan. We provide software through two business units. The first business unit, our CX division, includes a customer experience management business (the “CXM Platform”) that has been in existence for over 15 years. Our CXM Platform includes marketing, sales, service and content management systems, as well as other tools and integrations, that enable companies to attract and engage customers throughout the customer experience. We also provide education, services and support to help customers be successful with our CXM Platform.

The second business unit, our DX division, is a digital transformation business which provides customers with robotics process automation, process mining and task mining to accelerate the digital transformation of enterprises. We also have an ongoing technology innovation team to develop software that supports the narrow needs of large enterprise customers.

During 2022, we started the GO IPO business, which supports Japanese companies listing on The Nasdaq Stock Market (“Nasdaq”) and NYSE in the United States. As of June 30, 2025, we have entered into consulting agreements with 16 companies to assist them in their IPO process, whereby we are entitled to receive from each company a consulting fee that ranges from $380,000 to $900,000 and warrants or stock acquisition rights to purchase 1% to 4% of the fully-diluted share capital of such companies that is exercisable on certain dates at an exercise price of $0.01 or JPY1 per share.

We were incorporated in the State of Delaware on May 18, 2021. We conduct business activities principally through our wholly owned subsidiary, HeartCore Co. Ltd. (“HeartCore Japan”), which was established in Japan in 2009 by Sumitaka Yamamoto, our Chairman of Board, Chief Executive Officer and President and a significant stockholder of the Company.

On September 6, 2022, we 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, and its wholly owned subsidiaries. Sigmaways and its wholly owned subsidiaries are engaged in the business of developing and sales of software in the United States. The acquisition closed on February 1, 2023.

In the first quarter of 2023, we formed HeartCore Financial, Inc. (“HeartCore Financial”) in the U.S. as part of our GO IPO consulting business. In the fourth quarter of 2023, we formed HeartCore Luvina Vietnam Company (“HeartCore Luvina”) in Vietnam, which is engaged in the business of software development.

In April 2024, HeartCore Financial incorporated a branch office, HeartCore Financial, Inc. – Japan Branch Office, in Japan.

Recent Developments

Nasdaq Notice Regarding Minimum Bid Price Requirement

On May 6, 2025, we received written notice (the “Bid Price Notice”) from the Nasdaq Listing Qualification Department (the “Nasdaq Staff”) indicating that we were not in compliance with the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”) for continued listing on the Nasdaq Capital Market. The notification of noncompliance has no immediate effect on the listing or trading of our common stock on the Nasdaq Capital Market under the symbol “HTCR,” and we are currently monitoring the closing bid price of our common stock and evaluating our alternatives, if appropriate, to resolve the deficiency and regain compliance with this rule.

The Nasdaq Listing Rules require listed securities to maintain a minimum bid price of $1.00 per share and, based upon the closing bid price for the last 30 consecutive business days, we no longer meet this requirement. The Bid Price Notice indicated that we will be provided 180 calendar days, or until November 3, 2025, in which to regain compliance. If at any time during this period the closing bid price of our common stock is at least $1.00 per share for a minimum of 10 consecutive business days, the Nasdaq Staff will provide us with written confirmation of compliance and the matter will be closed.

Alternatively, if we fail to regain compliance with Rule 5550(a)(2) prior to the expiration of the 180 calendar day period, but meet the continued listing requirement for market value of publicly held shares and all of the other applicable standards for initial listing on the Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement, and provide written notice of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary, then we may be granted an additional 180 calendar days to regain compliance with Rule 5550(a)(2).

There can be no assurance that we will be able to regain compliance with the Minimum Bid Price Requirement, even if we maintain compliance with the other listing requirements. We are considering actions that we may take in response to the Bid Price Notice in order to regain compliance with the continued listing requirements, but no decisions regarding a response have been made at this time.

Nasdaq Notice Regarding Minimum Stockholders’ Equity Requirement

On May 24, 2025, we received written notice (the “Stockholders’ Equity Notice”) from the Nasdaq Staff indicating that we are not in compliance with the $2,500,000 minimum stockholders’ equity requirement set forth in Nasdaq Listing Rule 5550(b) (the “Minimum Stockholders’ Equity Requirement”) for continued listing on the Nasdaq Capital Market. Additionally, the Nasdaq Staff noted that we do not meet the alternatives of market value of listed securities or net income from continuing operations as of May 23, 2025.

Under Nasdaq rules, we had 45 calendar days (or until July 8, 2025) to submit a plan to regain compliance, which we did. On July 11, 2025, the Nasdaq Staff notified us that they had granted us an extension until September 30, 2025, to regain compliance with the Minimum Stockholders’ Equity Requirement. Pursuant to the terms of the extension, on or before September 30, 2025, we must complete the transactions pursuant to the Equity Purchase Agreement and Securities Purchase Agreement (both as defined below) and evidence compliance with the Minimum Stockholders’ Equity Requirement as indicated in the Nasdaq Staff’s notification.

The notification of noncompliance had no immediate effect on the listing or trading of our common stock on the Nasdaq Capital Market under the symbol “HTCR.” There can be no assurance that we will be able to regain compliance with the Minimum Stockholders’ Equity Requirement, even if we maintain compliance with the other listing requirements.

Consulting and Services Agreement with tmsuk Co. Ltd.

On May 30, 2025 (the “tmsuk Effective Date”), we entered into a Consulting and Services Agreement (the “tmsuk Consulting Agreement”) with tmsuk Co., Ltd., a Japanese corporation (“tmsuk”). Pursuant to the terms of the tmsuk Consulting Agreement, we agreed to provide tmsuk certain services, including the following (collectively, the “tmsuk Services”):

(i) Assistance with the introduction, for a law firm, underwriter and auditing firm for tmsuk, with tmsuk making their selections, at their sole discretion;

(ii) Assisting in the preparation of documentation for internal controls required for an initial public offering or de-SPAC or other Fundamental Transaction (as defined in the tmsuk Warrant) by tmsuk;

(iii) Providing support services to remove problematic accounting accounts upon listing;

(iv) Translation of requested documents into English;

(v) Attend and, if requested by tmsuk, lead, meetings with tmsuk’s management and employees;

(vi) Provide tmsuk with support services related to tmsuk’s NASDAQ listing;

(vii) Conversion of accounting data from Japanese standards to U.S. GAAP;

(viii) Assist in the preparation of S-1 or F-1 filings;

(ix) Creation of English web page; and

(x) Preparing an investor presentation/deck and executive summary of tmsuk’s operations.

In providing the tmsuk Services, we agreed to not render legal advice or perform accounting services, nor act as an investment advisor or broker/dealer. Pursuant to the terms of the tmsuk Consulting Agreement, the parties agreed that we will not provide the following services, among others: negotiation for the sale of tmsuk’s securities; participation in discussions between tmsuk and potential investors; assisting in structuring any transactions involving the sale of tmsuk’s securities; pre-screening of potential investors; due diligence activities; nor providing advice relating to valuation of or financial advisability of any investments in tmsuk; or handling any funds or securities on behalf of tmsuk.

Pursuant to the terms of the tmsuk Consulting Agreement, tmsuk agreed to compensate us as follows in return for the provision of the tmsuk Services during the nine-month term:

(a) $500,000, to be paid as follows: (i) $200,000 on the tmsuk Effective Date; (ii) $150,000 on the three-month anniversary of the tmsuk Effective Date; and (iii) $150,000 on the six-month anniversary of the tmsuk Effective Date; and

(b) Issuance by tmsuk to the Company of a warrant (the “tmsuk Warrant”), deemed fully earned and vested as of the tmsuk Effective Date, to acquire a number of shares of capital stock of tmsuk, to initially be equal to 3% of the fully diluted share capital of tmsuk as of the tmsuk Effective Date, subject to adjustment as set forth in the tmsuk Consulting Agreement and the tmsuk Warrant.

Issuance by tmsuk of the tmsuk Warrant may be subject to the approval of tmsuk’s stockholders, and in such case, the tmsuk Warrant will not be issued unless and until stockholder approval is obtained. In the event that tmsuk stockholder approval is not obtained, and the tmsuk Warrant is not issued, on or before the 90th day following the tmsuk Effective Date, the parties agreed to reasonably cooperate to come to mutual agreement on an alternate method to provide to us the same value and rights as would have been provided pursuant to the tmsuk Warrant.

In the event that the term of the tmsuk Consulting Agreement is extended beyond the initial nine-month term, tmsuk agreed to compensate us for tmsuk Services provided at the rate of $150 per hour, based on the hours spent by our personnel providing the tmsuk Services.

The tmsuk Consulting Agreement may be terminated at any time by either party upon notice to the other party.

OEM Sales Agreement

On June 23, 2025, HeartCore Japan entered into an OEM Sales Agreement (the “Silver Egg Agreement”) by and between HeartCore Japan and Silver Egg Technology CO. Ltd. (“Silver Egg”). Pursuant to the terms of the Silver Egg Agreement, Silver Egg agreed to provide to HeartCore Japan its AI recommendation service, “Aigent Recommender,” developed by Silver Egg (the “Services”). The specific terms and conditions for the provision of the Services will be determined in individual agreements. The Silver Egg Agreement will serve as the basic agreement and will apply to all individual agreements between HeartCore Japan and Silver Egg during the term of the Silver Egg Agreement, and such individual agreements will constitute a part of the Silver Egg Agreement.

The term of the Silver Egg Agreement is two years. Unless either party notifies the other in writing at least six months prior to the expiration of the term, the Silver Egg Agreement will automatically renew for additional two year periods. Notwithstanding the foregoing, if either party wishes to terminate the Silver Egg Agreement during the term, both parties must agree in writing. The term of each individual contract pursuant to the Silver Egg Agreement will commence on the date of the individual contract and will continue until the last day of the month in which 12 months have elapsed from the start date of the use of the Services. However, unless HeartCore Japan or Silver Egg gives written notice to the other party at least 30 days prior to the expiration of the term, the individual contract will be automatically renewed for an additional 12-month periods.

Pursuant to the terms of the individual agreement for the first year (through June 30, 2026) and for the second year (from July 1, 2026 to June 30, 2027), when HeartCore Japan achieves the target number of contracts (20), the monthly service fees to be paid by HeartCore Japan to Silver Egg will be as follows:

• Up to 500,000 page views: 30,000 Yen
• 500,001 - 800,000 page views: 48,000 Yen
• 800,001 – 1,000,000 page views: 60,000 Yen

If HeartCore Japan does not achieve the target number of contracts by June 30, 2026, the monthly service fees to be paid by HeartCore Japan to Silver Egg for the second year (from July 1, 2026 to June 30, 2027) will increase as follows:

• Up to 500,000 page views: 35,000 Yen
• 500,001 - 800,000 page views: 56,000 Yen
• 800,001 – 1,000,000 page views: 70,000 Yen

Consulting and Services Agreement with Cipher Core Co., Ltd.

On June 30, 2025, the Company entered into a Consulting and Services Agreement (the “Consulting Agreement”) with Cipher Core Co., Ltd. (“Cipher Core”). As compensation for its services under the Consulting Agreement, Cipher Core will pay the Company an aggregate of $500,000 in fees, and issue to the Company a warrant to acquire 3% of Cipher Core’s capital stock, on a fully diluted basis. The number of warrant shares, which is fully earned, vested, and non-returnable, may be subject to adjustments.

As part of the Consulting Agreement, the Company agreed to assist Cipher Core in its efforts to go public and list on the Nasdaq Stock Market (“Nasdaq”). Under the Consulting Agreement, the Company will assist Cipher Core with:

i. the introduction for a law firm, underwriter and auditing firm for Cipher Core, with Cipher Core making their selections, at their sole discretion;

ii. translating requested documents into English;

iii. assisting in the preparation of documentation for internal controls required for an IPO;

iv. conversion of accounting data from Japanese standards to U.S. GAAP;

v. providing support services to remove problematic accounting accounts upon listing;

vi. support creation of an English web page;

vii. preparation of an investor presentation and executive summary of the operations;

viii. provision of providing general support services; and

ix. assisting in the preparation of a registration statement.

In providing the services under the Consulting Agreement, the Company will not render legal advice or perform accounting services, and will not act as an investment advisor or broker/dealer. Pursuant to the terms of the Consulting Agreement, the parties agreed that the Company will not provide the following services, among others: negotiation for the sale of Cipher Core’s securities; participation in discussions between Cipher Core and potential investors; assisting in structuring any transactions involving the sale of Cipher Core’s securities; pre-screening of potential investors; due diligence activities; nor providing advice relating to valuation of or financial advisability of any investments in Cipher Core; or handling any funds or securities on behalf of Cipher Core.

Equity Purchase Agreement

On June 30, 2025, we and Crom Structured Opportunities Fund I, LP (“Crom” or the “Investor”), an accredited investor, entered into an Equity Purchase Agreement (the “Equity Purchase Agreement”), pursuant to which the we have the right, but not the obligation, to direct the Investor, at any time and from time to time during the Commitment Period (as hereinafter defined) as provided in the Equity Purchase Agreement, to purchase up to $25,000,000 (the “Maximum Commitment Amount”) in aggregate gross purchase price of newly issued fully paid shares of our common stock, par value $0.0001 (the “Advance Shares”). The “Commitment Period” means, subject to the terms and conditions of the Equity Purchase Agreement, the period commencing on June 30, 2025 and ending on the earlier of (i) the date on which the Investor shall have purchased Advance Shares equal to the Maximum Commitment Amount, (ii) June 30, 2027, (iii) written notice of termination by us to the Investor, (iv) the Equity Line of Credit (“ELOC”) Registration Statement (as hereinafter defined) is no longer effective after the initial effective date of the ELOC Registration Statement, (v) the date that we commence a voluntary bankruptcy case, a bankruptcy proceeding is commenced against us, a custodian is appointed for us or for all or substantially all of its property, or we make a general assignment for the benefit of its creditors, or (vi) the date on which the Equity Purchase Agreement is terminated by mutual written consent of the parties.

Under the terms and subject to the conditions of the Equity Purchase Agreement, we have the right, but not the obligation, to direct the Investor, by our delivery to the Investor of a notice (the “Advance Notice”) from time to time, to purchase Advance Shares (i) in a minimum amount not less than $25,000, calculated based on 96% of the volume-weighted average price (“VWAP”) of our common stock on the trading day immediately preceding the date during the Commitment Period that an Advance Notice is deemed delivered (the “Advance Date”), and (ii) in a maximum amount up to the lesser of (a) $500,000, or (b) 50% of the average daily trading value of the common stock during the seven trading days immediately preceding the respective Advance Date (excluding the single highest volume trading day and the single lowest volume trading day from such calculation) multiplied by the lowest VWAP of the common stock during the seven trading days immediately preceding the respective Advance Date (each, an “Advance”). Each Advance is subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided in the Equity Purchase Agreement.

The number of Advance Shares then to be purchased by the Investor may not exceed the number of such shares that, when aggregated with all other shares of common stock then owned by the Investor beneficially or deemed beneficially owned by the Investor, would result in the Investor owning more than 4.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable pursuant to an Advance Notice.

The Equity Purchase Agreement further provides that we may not issue or sell to the Investor any Advance Shares under the Equity Purchase Agreement in excess of 19.99% of our issued and outstanding common stock on June 30, 2025, until stockholder approval satisfying the requirements of Nasdaq Rule 5635(d) has been obtained and is in effect. We obtained this stockholder approval on June 30, 2025.

We also agreed to pay the Investor a commitment fee equal to $250,000 worth of shares of common stock (“ELOC Commitment Shares”), with the number of ELOC Commitment Shares issued being based on the Nasdaq official closing price of the common stock on June 27, 2025, the trading day immediately prior to the effective date of the Equity Purchase Agreement, in consideration for the Investor’s entry into the Equity Purchase Agreement.

Pursuant to the terms of the Equity Purchase Agreement, we agreed that we will not without the prior written consent of the Investor, enter into an “Equity Line of Credit” or a “Variable Rate Transaction,” as such terms are defined in the Equity Purchase Agreement. The Investor agreed not to engage in any short sale or hedging transactions with respect to the common stock during the term of the Equity Purchase Agreement. We may terminate the Equity Purchase Agreement at any time by written notice to the Investor at least five trading days in advance; provided that there are no outstanding Advance Notices. We and the Investor may also terminate the Equity Purchase Agreement at any time by mutual written consent. In addition, the Equity Purchase Agreement will automatically terminate at the end of the Commitment Period.

Pursuant to the terms of the Equity Purchase Agreement, we agreed that it would also comply with the ELOC Registration Rights Agreement (as hereinafter defined) with respect to the filing and effectiveness deadlines of the ELOC Registration Statement in accordance with the terms of the ELOC Registration Rights Agreement.

We will not issue or sell any shares of common stock to the Investor pursuant to the Equity Purchase Agreement, except for the ELOC Commitment Shares, until and unless the ELOC Registration Statement has been declared effective by the SEC.

The Equity Purchase Agreement also contains customary representations, warranties, indemnification provisions and closing conditions. The representations, warranties and covenants contained in the Equity Purchase Agreement were made only for purposes of the Equity Purchase Agreement and as of specific dates, were solely for the benefit of the parties to such agreement and are subject to certain important limitations.

ELOC Registration Rights Agreement

In connection with the execution of the Equity Purchase Agreement, we and the Investor entered into a Registration Rights Agreement dated June 30, 2025 (the “ELOC Registration Rights Agreement”), pursuant to which we agreed to use our commercially reasonable efforts to prepare and file within 30 calendar days from the date of the Equity Purchase Agreement, an initial registration statement covering the resale of all of the shares of common stock which the Investor may acquire (including the Advance Shares and the Commitment Shares) pursuant to the Equity Purchase Agreement (the “ELOC Registration Statement”). We have also agreed to have the ELOC Registration Statement declared effective by the SEC within 90 days from June 30, 2025.

We filed such Registration Statement on Form S-1 (File No: 333-288937) with the SEC on July 25, 2025.

Securities Purchase Agreement

On June 30, 2025, we and the Investor executed a Securities Purchase Agreement (the “Securities Purchase Agreement”). According to the terms of the Securities Purchase Agreement, we agreed to issue to the Investor, and the Investor agreed to purchase from us, 2,000 shares of our Series A Convertible Preferred Stock at a purchase price equal to $1,000 per share ($2,000,000 in the aggregate), with each such share of Series A Convertible Preferred Stock having a stated value of $1,100. The sale of the shares of Series A Convertible Preferred Stock closed on June 30, 2025 (the “Closing”).

In connection with executing the Securities Purchase Agreement, for no additional consideration, at Closing, we issued to the Investor 750,000 shares of common stock (the “SPA Commitment Shares”).

The Investor has the right at any time (subject to certain ownership limitations) to convert all or any portion of the then Series A Convertible Preferred Stock into shares of common stock (the “Conversion Shares”). For additional information regarding the conversion terms of the Series A Convertible Preferred Stock, please see “Series A Convertible Preferred Stock” below.

Pursuant to the Securities Purchase Agreement, we will, at all times, reserve from its authorized and unissued shares of common stock, two times such number of shares of common stock as shall from time to time be sufficient to effectuate the conversion of all outstanding shares of Series A Convertible Preferred Stock.

The Securities Purchase Agreement also contains customary representations, warranties, indemnification provisions and closing conditions. The representations, warranties and covenants contained in the Securities Purchase Agreement were made only for purposes of the Securities Purchase Agreement and as of specific dates, were solely for the benefit of the parties to such agreement and are subject to certain important limitations.

SPA Registration Rights Agreement

In connection with the execution of the Securities Purchase Agreement, we and the Investor entered into a registration rights agreement (the “SPA Registration Rights Agreement”), pursuant to which we agreed to file, within 30 calendar days from the date of the Securities Purchase Agreement, an initial registration statement covering the resale of all of the Conversion Shares and SPA Commitment Shares. We have also agreed to have such registration statement declared effective by the SEC within 90 days from June 30, 2025.

Series A Convertible Preferred Stock

On June 30, 2025, we filed a Certificate of Designations of Preferences, Rights and Limitations of the Series A Convertible Preferred Stock (“Certificate of Designations”) with the Secretary of State of the State of Delaware. The number of shares of Series A Convertible Preferred Stock designated is 2,000 and each share of Series A Convertible Preferred Stock has a stated value equal to $1,100 (the “Stated Value”).

The Series A Convertible Preferred Stock have no voting rights. However, as long as any shares of Series A Convertible Preferred Stock are outstanding, we will not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series A Convertible Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series A Convertible Preferred Stock or alter or amend the Certificate of Designations, (b) increase the number of authorized shares of Series A Convertible Preferred Stock, or (c) enter into any agreement with respect to any of the foregoing.

Upon any liquidation, dissolution or winding-up, whether voluntary or involuntary that is not a Fundamental Transaction (as defined in the Certificate of Designations), a holder of Series A Convertible Preferred Stock (“Holder”) will receive 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 converted all of its shares of Series A Convertible Preferred Stock into common stock 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 of the Series A Convertible Preferred Stock will be insufficient to permit the payment to such Holders of the full preferential amount aforesaid, then the entire assets and funds legally available for distribution will be distributed ratably among the Holders of the Series A Convertible Preferred Stock in proportion to the amount that each such Holder is entitled to receive.

The conversion price in effect on any conversion date will be equal to 90% of the average of the two lowest volume-weighted average prices (the “VWAP”) of the common stock on Nasdaq (or such other national securities exchange on which the common stock is then listed) for the five Trading Days immediately preceding the date of the conversion notice delivered by the Holder of Series A Preferred Stock (the “Conversion Notice Date”), with such VWAP and resulting Conversion Price being subject to equitable adjustments for any stock splits or combinations occurring with respect to the common stock during such measurement period.

Each holder will be entitled to receive dividends of 10% per annum on the Stated Value of each share of Preferred Stock.

We filed such Registration Statement on Form S-1 (File No: 333-288937) with the SEC on July 25, 2025.

Stockholder Approval of Securities Issuances and Reverse Stock Split

On June 30, 2025, the holders of an aggregate of 13,147,393 shares of our common stock, representing approximately 60% of our overall voting power, executed a written consent in lieu of a meeting pursuant to which it approved (i) the issuance of a number of shares of our common stock in excess of 20% of the issued and outstanding shares of common stock as of the date of the execution of the Equity Purchase Agreement and the Securities Purchase Agreement, and the issuance of all shares of common stock pursuant to the Equity Purchase Agreement and the Securities Purchase Agreement, or on conversion of the Series A Convertible Preferred Stock (the “20% Issuance”), (ii) a reverse stock split of our 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 of Directors, and with any fractional shares of common stock resulting therefrom being rounded up to the nearest whole share of common stock (the “Reverse Stock Split”), and (iii) a form of amendment to our Certificate of Incorporation to effectuate the Reverse Stock Split (the “Reverse Stock Split Amendment” and collectively with the 20% Issuance and the Reverse Stock Split, the “Actions”).

Pursuant to rules adopted by the SEC under the Exchange Act, an Information Statement on Schedule 14C (the “Information Statement”) describing the Actions will be filed with the SEC and mailed to our stockholders. None of the Actions may become effective earlier than 20 calendar days following the mailing of the Information Statement.

Financial Overview

For the three months ended June 30, 2025 and 2024, we generated revenues of $4,744,246 and $4,066,388, respectively, and reported a net income (loss) of $1,061,506 and $(2,211,118), respectively.

For the six months ended June 30, 2025 and 2024, we generated revenues of $8,331,272 and $9,113,120, respectively, reported a net loss of $2,075,875 and $3,689,120, respectively, and had cash flows used in operating activities of $2,674,892 and $1,735,744, respectively. As noted in our unaudited consolidated financial statements, as of June 30, 2025, we had an accumulated deficit of $18,231,933.

Results of Operations

Comparison of Results of Operations for the Three Months Ended June 30, 2025 and 2024

The following table summarizes our operating results as reflected in our unaudited statements of operations for the three months ended June 30, 2025 and 2024, respectively, and provides information regarding the dollar and percentage increase (or decrease) during such periods.

Revenues

Our total revenues increased by $677,858, or 16.7%, to $4,744,246 for the three months ended June 30, 2025, from $4,066,388 for the three months ended June 30, 2024, primarily attributable to (i) an increased revenue of $1,155,548 from the sale of on-premise software, primarily attributable the Company obtained multiple large orders of CMS license in the current period, while no such comparable large order was obtained in second quarter 2024; (ii) an increased revenue of $134,571 from software as a service (“SaaS”), mainly because the Company put more efforts to expand and promote its traditional SaaS business in Japan during current quarter and obtained more orders, partially offset by (iii) a decreased revenue of $340,279 from customized software development and services in connection with the intense competition of the software market in the U.S.; and (iv) a decreased revenue of $319,396 from software development and other services, mainly as the Company shifted its business strategies to focus more on development and expansion its on-premise software revenue and SaaS revenue in the second quarter 2025, resulting in less resources and efforts were put on software development and other services.

Cost of Revenues

Our total cost of revenues decreased by $733,856, or 22.5%, to $2,526,651 for the three months ended June 30, 2025, from $3,260,507 for the three months ended June 30, 2024, mainly attributable to (i) the decrease of $579,688 in the cost of customized software development and services, which was in light of the decrease in sales in the second quarter 2025 and the decrease was also attributable to Sigmaways cut down its subcontracting cost in the current quarter by ending cooperation with certain costly vendors for cost saving purpose; and (ii) the decrease of $120,475 in the cost of GO IPO consulting services as fewer IPO projects were ongoing when compared with the second quarter 2024, and the Company also improved its operational efficiency in managing of IPO consulting projects, leading to costs decreased.

Gross Profit

Our total gross profit increased by $1,411,714, or 175.2%, to $2,217,595 for the three months ended June 30, 2025, from $805,881 for the three months ended June 30, 2024, mainly attributable to (i) an increase of $1,086,885 in gross profit from sale of on-premises software, as the sale increased dramatically while there was not much change in the corresponding costs as the product was developed independently and fixed, which were not proportional to sales; (ii) an increase of $239,409 in gross profit from customized software development and services, as Sigmaways reduced outsourcing costs by ending cooperation with costly vendors in the second quarter 2025, resulting in costs decreased more than revenue did; and (iii) an increase of $147,654 in gross profit from IPO consulting service, as the Company implement its operational efficiency for consulting revenue with the accumulation of IPO consulting projects experience in the current quarter.

For the reasons discussed above, our overall gross profit margin increased by 26.9%, to 46.7%, for the three months ended June 30, 2025 from 19.8% for the three months ended June 30, 2024.

Selling Expenses

Our selling expenses increased by $206,214, or 114.9%, to $385,622 for the three months ended June 30, 2025 from $179,408 in the three months ended June 30, 2024, primarily attributable to an increase of $224,138 in sales salaries, commissions and welfare, resulting from the employee restructuring in late 2024 by transferring certain administrative and management department employees to sales department to promote selling activities for software business in Japan.

As a percentage of revenues, our selling expenses accounted for 8.1% and 4.4% of our total revenues for the three months ended June 30, 2025 and 2024, respectively.

General and Administrative Expenses

Our general and administrative expenses decreased by $459,382, or 22.7%, to $1,563,027 for the three months ended June 30, 2025 from $2,022,409 in the three months ended June 30, 2024, primarily attributable to (i) a decrease of $169,503 in depreciation and amortization expenses, primarily because we fully impaired intangible asset arose from acquisition of Sigmaways at the end of last fiscal year, resulting in no amortization expenses were recorded in current quarter; and (ii) a decrease of $284,619 in consultant and professional service fees, mainly because we incurred broker fees in connection with termination of the IPO consulting services in the second quarter 2024, while no such expenses incurred in the current quarter.

As a percentage of revenues, general and administrative expenses were 32.9% and 49.7% of our revenues for the three months ended June 30, 2025 and 2024, respectively.

Research and Development Expenses

Our research and development expenses increased by $50,213, or 45.1%, to $161,481 in the three months ended June 30, 2025, from $111,268 in the three months ended June 30, 2024, primarily attributable to an increase of $82,419 in salaries and welfare expenses for the employees assigned to the development of a new product, Global CMS, which started in late 2024, offset by a decrease of $32,016 in outsourcing costs due to the expiration of certain outsourcing contracts in the current period.

As a percentage of revenues, research and development expenses were 3.4% and 2.7% of our revenues for the three months ended June 30, 2025 and 2024, respectively.

Other Income (Expenses), Net

Our other income (expenses) primarily includes changes in fair value of investments in marketable securities, changes in fair value of investment in warrants, interest income generated from bank deposits, interest expenses for bank loans, other income and other expenses. Total other expenses, net, of $776,077 for the three months ended June 30, 2024 increased by $1,726,556, or 222.5%, to total other income, net, of $950,479 for the three months ended June 30, 2025, primarily attributable to (i) an increase of $1,048,958 in changes in fair value of investments in marketable securities due to fluctuations in stock price of investees; and (ii) an increase of $683,101 in changes in fair value of investment in warrants due to fair value measurement.

Income Tax Benefit

Income tax benefit was $3,562 for the three months ended June 30, 2025, representing a decrease of $68,601, or 95.1%, from income tax benefit of $72,163 in the three months ended June 30, 2024, mainly because we recognized deferred income tax benefit in connection with amortization expense for intangible asset raised from acquisition of Sigmaways in the three months ended June 30, 2024, whereas, the intangible asset was fully impaired in the fourth quarter of 2024, and thus no such deferred income tax benefit recorded in current quarter.

Net Income (Loss)

As a result of the foregoing, we reported a net income of $1,061,506 for the three months ended June 30, 2025, representing a $3,272,624, or 148.0%, increase from a net loss of $2,211,118 for the three months ended June 30, 2024.

Net Loss Attributable to Non-controlling Interests

During the three months ended June 30, 2025 and 2024, we owned a 51% equity interest of Sigmaways and its subsidiaries and 51% equity interest of HeartCore Luvina. Accordingly, we recorded net loss attributable to the non-controlling interests of $38,396 and $260,018 in the three months ended June 30, 2025 and 2024, respectively.

Net Income (Loss) Attributable to HeartCore Enterprises, Inc.

As a result of the foregoing, we reported a net income attributable to HeartCore Enterprises, Inc. of $1,099,902 for the three months ended June 30, 2025, representing a $3,051,002, or 156.4%, increase from a net loss attributable to HeartCore Enterprises, Inc. of $1,951,100 for the three months ended June 30, 2024.

Dividends Accrued on Series A Convertible Preferred Shares

During the three months ended 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 of $611 on Series A convertible preferred shares.

Net Income (Loss) Attributable to HeartCore Enterprises, Inc. Common Shareholders

As a result of the foregoing, we reported a net income attributable to HeartCore Enterprises, Inc. common shareholders of $1,099,291 for the three months ended June 30, 2025, representing a $3,050,391, or 156.3%, increase from a net loss attributable to HeartCore Enterprises, Inc. common shareholders of $1,951,100 for the three months ended June 30, 2024.

Comparison of Results of Operations for the Six Months Ended June 30, 2025 and 2024

The following table summarizes our operating results as reflected in our unaudited statements of operations for the six months ended June 30, 2025 and 2024, respectively, and provides information regarding the dollar and percentage increase (or decrease) during such periods.

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Revenues

Our total revenues decreased by $781,848, or 8.6%, to $8,331,272 for the six months ended June 30, 2025, from $9,113,120 for the six months ended June 30, 2024, primarily attributable to (i) a decreased revenue of $677,091 from customized software development and services in connection with a slowdown in revenue of Sigmaways, driven by intensified competition in the U.S. software market; (ii) a decreased revenue of $302,759 from GO IPO consulting services mainly due to fewer ongoing IPO consulting projects in the six months ended June 30, 2025 when compared with same period in last fiscal year; (iii) a decreased revenue of $341,497 from software development and other services, mainly as the Company shifted its business strategies to focus more on development and expansion its on-premise software revenue and SaaS revenue in the six months ended June 30, 2025, resulting in less resources and efforts were put on software development and other services, partially offset by (iv) an increased revenue of $411,694 from sale on-premise software, primarily because the Company obtained several large CMS license orders in the current period.

Cost of Revenues

Our total cost of revenues decreased by $1,261,657, or 20.1%, to $5,013,393 for the six months ended June 30, 2025, from $6,275,050 for the six months ended June 30, 2024, mainly attributable to (i) the decrease of $954,627 in the cost of customized software development and services, which was in light of the decrease in sales and the decrease was also attributable to Sigmaways cut down its subcontracting cost in the current quarter by ending cooperation with certain costly vendors for cost saving purpose; and (ii) the decrease of $346,943 in the cost of GO IPO consulting services as fewer IPO projects were ongoing in the six months ended June 30, 2025 when compared with the six months ended June 30, 2024, and the Company also improved its operational efficiency in managing of IPO consulting projects, leading to costs decreased.

Gross Profit

Our total gross profit increased by $479,809, or 16.9%, to $3,317,879 for the six months ended June 30, 2025, from $2,838,070 for the six months ended June 30, 2024, mainly attributable to (i) an increase of $335,670 in gross profit from sale of on-premises software, as sales rose significantly while related costs remained largely unchanged since the product was independently developed with fixed costs not proportional to sales; (ii) an increase of $277,536 in gross profit from customized software development and services, as Sigmaways reduced outsourcing costs by ending cooperation with costly vendors in the current period, resulting in costs decreased more than revenue did; and (iii) an increase of $190,583 in gross profit from SaaS in light of the increase in corresponding revenue, partially offset by (iv) a decrease of $313,105 in gross profit from software development and other services in light of the decrease in corresponding revenue.

For the reasons discussed above, our overall gross profit margin increased by 8.7%, to 39.8%, for the six months ended June 30, 2025, from 31.1% for the six months ended June 30, 2024.

Selling Expenses

Our selling expenses increased by $277,667, or 69.6%, to $676,782 for the six months ended June 30, 2025, from $399,115 in the six months ended June 30, 2024, primarily attributable to an increase of $321,760 in sales salaries, commissions and welfare, resulting from the employee restructuring in late 2024 by transferring certain administrative and management department employees to sales department to promote selling activities for software business in Japan.

As a percentage of revenues, our selling expenses accounted for 8.1% and 4.4% of our total revenues for the six months ended June 30, 2025 and 2024, respectively.

General and Administrative Expenses

Our general and administrative expenses decreased by $936,297, or 21.1%, to $3,492,415 for the six months ended June 30, 2025, from $4,428,712 in the six months ended June 30, 2024, primarily attributable to (i) a decrease of $274,084 in salaries and welfare expenses, mainly resulting from the employee restructuring in late 2024 as mentioned above; (ii) a decrease of $329,377 in depreciation and amortization expenses, primarily because we fully impaired intangible asset arose from the acquisition of Sigmaways at the end of the 2024 fiscal year, resulting in no amortization expenses recorded in current period; and (iii) a decrease of $292,771 in consultant and professional service fees, mainly because we incurred broker fees in connection with termination of the IPO consulting services in the six months ended June 30, 2024, while no such expenses incurred in the current period.

As a percentage of revenues, general and administrative expenses were 41.9% and 48.6% of our revenues for the six months ended June 30, 2025 and 2024, respectively.

Research and Development Expenses

Our research and development expenses increased by $84,972, or 42.4%, to $285,374 in the six months ended June 30, 2025, from $200,402 in the six months ended June 30, 2024, primarily attributable to an increase of $161,767 in salaries and welfare expenses for the employees assigned to the development of a new product, Global CMS, which started in late 2024, partially offset by a decrease of $76,266 in outsourcing costs due to the expiration of certain outsourcing contracts in the current period.

As a percentage of revenues, research and development expenses were 3.4% and 2.2% of our revenues for the six months ended June 30, 2025 and 2024, respectively.

Other Income (Expenses), Net

Our other income (expenses) primarily includes changes in fair value of investments in marketable securities, changes in fair value of investment in warrants, interest income generated from bank deposits, interest expenses for bank loans, other income and other expenses. Total other expenses, net, of $1,651,291 for the six months ended June 30, 2024 decreased by $765,182, or 46.3%, to total other expenses, net, of $886,109 for the six months ended June 30, 2025, primarily attributable to (i) a decrease of $1,310,367 in changes in fair value of investment in warrants due to fair value measurement, partially offset by (ii) an increase of $498,624 in changes in fair value of investments in marketable securities due to fluctuations in stock price of investees.

Income Tax Expense (Benefit)

Income tax expense was $53,074 for the six months ended June 30, 2025, representing an increase of $205,404, or 134.8%, from income tax benefit of $152,330 for the six months ended June 30, 2024, mainly because we recognized deferred income tax benefit in connection with amortization expense for intangible asset raised from the acquisition of Sigmaways in the six months ended June 30, 2024, whereas the intangible asset was fully impaired in the fourth quarter of 2024, and thus no such deferred income tax benefit recorded in current period. Meanwhile, the income tax expenses incurred in the six months ended June 30, 2025 was mainly attributable to the decrease of deferred tax assets due to various revenue and expenses adjustments.

Net Loss

As a result of the foregoing, we reported a net loss of $2,075,875 for the six months ended June 30, 2025, representing a $1,613,245, or 43.7%, decrease from a net loss of $3,689,120 for the six months ended June 30, 2024.

Net Loss Attributable to Non-controlling Interests

During the six months ended June 30, 2025 and 2024, we owned a 51% equity interest of Sigmaways and its subsidiaries and 51% equity interest of HeartCore Luvina. Accordingly, we recorded net loss attributable to the non-controlling interests of $88,785 and $404,670 in the six months ended June 30, 2025 and 2024, respectively.

Net Loss Attributable to HeartCore Enterprises, Inc.

As a result of the foregoing, we reported a net loss attributable to HeartCore Enterprises, Inc. of $1,987,090 for the six months ended June 30, 2025, representing a $1,297,360, or 39.5%, decrease from a net loss attributable to HeartCore Enterprises, Inc. of $3,284,450 for the six months ended June 30, 2024.

Dividends Accrued on Series A Convertible Preferred Shares

In the six months ended 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 of $611 on Series A convertible preferred shares.

Net Loss Attributable to HeartCore Enterprises, Inc. Common Shareholders

As a result of the foregoing, we reported a net loss attributable to HeartCore Enterprises, Inc. common shareholders of $1,987,701 for the six months ended June 30, 2025, representing a $1,296,749, or 39.5%, decrease from a net loss attributable to HeartCore Enterprises, Inc. common shareholders of $3,284,450 for the six months ended June 30, 2024.

Liquidity and Capital Resources

As of June 30, 2025, we had $2,347,622 in cash and cash equivalents, as compared to $2,121,089 as of December 31, 2024. We also had $3,000,337 in accounts receivable as of June 30, 2025. Our accounts receivable primarily include the balance due from customers for our on-premise software sold and services provided and accepted by customers, as well as amounts billable to the customers for customized software development and services.

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

Operating Activities

Net cash flows used in operating activities was $2,674,892 for the six months ended June 30, 2025, primarily consisting of the following:

• Net loss of $2,075,875 for the six months ended June 30, 2025.
• An increase of $1,145,166 in accounts receivable due to increased sale of on-premise software in the current period.
• A decrease of $320,566 in accounts payable and accrued expenses as we continuously paid off such liabilities and decreased purchases to save operating expenses.
• A decrease of $282,704 in deferred revenue, due to more revenue was recognized than the upfront payment received in the current period.
• Offset by a loss of $928,955 on fair value changes in investments in marketable securities.
• Offset by non-cash lease expense of $163,354.

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Investing Activities

Net cash flows provided by investing activities amounted to $1,091,636 for the six months ended June 30, 2025, primarily attributable to the proceeds of $1,071,732 received from sale of marketable securities.

Financing Activities

Net cash flows provided by financing activities amounted to $1,770,767 for the six months ended June 30, 2025, primarily attributable to the proceeds of $1,800,000 received from issuance of Series A convertible preferred stock and common shares related to Securities Purchase Agreement after net against related share issuance costs.

Contractual Obligations

Lease Commitment

We entered into operating leases for office space with terms ranging from two to fifteen years, and a finance lease for vehicle with the term of five years.

As of June 30, 2025, future minimum lease payments under the non-cancelable lease agreements are as follows:

Debts

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

As of June 30, 2025, future minimum principal payments for long-term debts are as follows:

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Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of June 30, 2025.

Critical 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 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 six months ended June 30, 2025.

Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2025. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2025, our disclosure controls and procedures were not effective, for the same reason as previously disclosed under Item 9A. “Controls and Procedures” in our Annual Report on Form 10-K for our fiscal year ended December 31, 2024, as filed with the SEC on March 31, 2025.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 of the Exchange Act that occurred during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As a smaller reporting company, we are not required to disclose material changes to the risk factors that were contained in our Annual Report on Form 10-K for the year ended December 31, 2024, as updated from time to time.