
PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements, including balance sheets, statements of operations, changes in shareholders' equity, and cash flows, along with detailed notes explaining the company's organization, significant accounting policies, and specific financial line items for the periods ended June 30, 2025, and December 31, 2024 Consolidated Balance Sheets Consolidated Balance Sheets | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :-------------------------------- | :-------------------------- | :------------------ | | ASSETS | | | | Total current assets | $8,927,238 | $9,417,365 | | Total non-current assets | $4,598,082 | $4,547,669 | | Total assets | $13,525,320 | $13,965,034 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Total current liabilities | $7,093,842 | $7,421,722 | | Total non-current liabilities | $2,872,461 | $3,081,297 | | Total liabilities | $9,966,303 | $10,503,019 | | Total shareholders' equity | $3,559,017 | $3,462,015 | - Total assets decreased by approximately $439.7K from December 31, 2024, to June 30, 2025, primarily due to a decrease in current assets, notably investments in marketable securities9 - Total liabilities decreased by approximately $536.7K, driven by reductions in both current and non-current liabilities9 Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss) Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $4,744,246 | $4,066,388 | $8,331,272 | $9,113,120 | | Gross profit | $2,217,595 | $805,881 | $3,317,879 | $2,838,070 | | Income (loss) from operations | $107,465 | $(1,507,204) | $(1,136,692) | $(2,190,159) | | Net income (loss) | $1,061,506 | $(2,211,118) | $(2,075,875) | $(3,689,120) | | Net income (loss) attributable to common shareholders | $1,099,291 | $(1,951,100) | $(1,987,701) | $(3,284,450) | | Basic EPS | $0.05 | $(0.09) | $(0.09) | $(0.16) | | Diluted EPS | $0.04 | $(0.09) | $(0.09) | $(0.16) | - For the three months ended June 30, 2025, the company reported a net income of $1,061,506, a significant improvement from a net loss of $2,211,118 in the prior year period10 - For the six months ended June 30, 2025, the net loss decreased by 43.7% to $2,075,875 compared to $3,689,120 in the same period last year10 Unaudited Consolidated Statements of Changes in Shareholders' Equity - Total shareholders' equity increased from $3,462,015 as of December 31, 2024, to $3,559,017 as of June 30, 202513 - Key changes include the issuance of Series A convertible preferred shares ($1,360,586), issuance of common shares related to securities purchase agreement ($203,273), and issuance of common shares related to equity purchase agreement ($250,000) in the six months ended June 30, 202513 - Accumulated deficit increased from $(16,244,843) at December 31, 2024, to $(18,231,933) at June 30, 2025, reflecting the net loss for the period13 Unaudited Consolidated Statements of Cash Flows Unaudited Consolidated Statements of Cash Flows | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net cash flows used in operating activities | $(2,674,892) | $(1,735,744) | | Net cash flows provided by investing activities | $1,091,636 | $5,546,823 | | Net cash flows provided by (used in) financing activities | $1,770,767 | $(874,136) | | Net change in cash and cash equivalents | $226,533 | $2,793,870 | | Cash and cash equivalents – end of period | $2,347,622 | $3,806,349 | - Net cash used in operating activities increased to $2,674,892 for the six months ended June 30, 2025, from $1,735,744 in the prior year, primarily due to increased accounts receivable and decreased deferred revenue16237238 - Net cash provided by financing activities significantly improved to $1,770,767 in 2025, compared to net cash used of $874,136 in 2024, driven by proceeds from Series A convertible preferred stock and common shares issuance16240 Notes to Unaudited Consolidated Financial Statements NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS - HeartCore Enterprises, Inc. (HeartCore USA) was incorporated in Delaware on May 18, 2021, and operates primarily through its wholly-owned subsidiary, HeartCore Japan, which develops and sells comprehensive software1821 - The company expanded its operations by acquiring 51% of Sigmaways, Inc. in February 2023, establishing HeartCore Financial, Inc. in January 2023 for financial consulting, and forming HeartCore Luvina Vietnam Company Limited in November 2023 for software development222324 - Since early 2022, HeartCore USA also provides consulting services to Japanese companies seeking to go public in the U.S. capital market21 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - The financial statements are prepared in accordance with U.S. GAAP for interim financial information, consolidating all subsidiaries with significant intercompany transactions eliminated27 - Revenue is recognized under ASC Topic 606, disaggregated by product/service types including on-premise software, maintenance and support, SaaS, software development, customized software development, and consulting services3940414243444546495052 - The company measures investments in warrants and marketable securities at fair value, with changes recognized in other income (expenses); derivative liability from Series A convertible preferred shares is also measured at fair value343560 NOTE 3 – ACCOUNTS RECEIVABLE Accounts Receivable | Accounts Receivable Type | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :------------------ | | Accounts receivable – non-factored | $3,811,489 | $2,485,417 | | Accounts receivable – factored with recourse | $247,387 | $217,563 | | Total accounts receivable, gross | $4,058,876 | $2,702,980 | | Accounts receivable, non-current | $1,058,539 | $752,930 | - Total accounts receivable, gross, increased by approximately $1.36 million from December 31, 2024, to June 30, 202567 NOTE 4 – PREPAID EXPENSES Prepaid Expenses | Prepaid Expense Type | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :------------------ | | Prepayments to software and consulting services vendors | $150,811 | $188,528 | | Prepaid marketing fees | $45,563 | $32,129 | | Prepaid subscription fees | $73,611 | $115,593 | | Prepaid insurance premium | $140,585 | $44,023 | | Others | $92,601 | $78,566 | | Total prepaid expenses | $503,171 | $458,839 | - Total prepaid expenses increased by $44,332, or 9.66%, from December 31, 2024, to June 30, 2025, primarily driven by a significant increase in prepaid insurance premiums68 NOTE 5 – RELATED PARTY TRANSACTIONS - The Company has various transactions with related parties, including its CEO, non-controlling shareholder of HeartCore Luvina (Luvina Software), and a company controlled by the CEO (HeartCore Technology Inc.)697071 - As of June 30, 2025, the Company had a loan receivable of $158,378 from HeartCore Technology Inc. and a short-term debt of $75,000 to Prakash Sadasivam (CEO of Sigmaways and CSO of the Company)7172 - Software development and other support services from Luvina Software amounted to $85,571 for the six months ended June 30, 2025, an increase from $31,590 in the prior year period70 NOTE 6 – INVESTMENTS Investments | Investment Type | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------- | :----------------------------- | :----------------------------- | | Fair value of investment in warrants at beginning of period | $577,786 | $2,004,308 | | Changes in fair value of investment in warrants | $72,660 | $(1,237,707) | | Fair value of investment in warrants at end of period | $650,446 | $543,120 | | Fair value of investments in marketable securities at beginning of period | $4,495,703 | $642,348 | | Changes in fair value of investments in marketable securities | $(928,955) | $(430,331) | | Marketable securities sold | $(1,071,732) | - | | Fair value of investments in marketable securities at end of period | $2,495,016 | $435,498 | - The fair value of investment in warrants increased by $72,660 for the six months ended June 30, 2025, a positive change compared to a decrease of $1,237,707 in the prior year75 - Investments in marketable securities decreased by $2,000,687 for the six months ended June 30, 2025, primarily due to sales of marketable securities totaling $1,071,732 and negative fair value changes of $928,95577 NOTE 7 – LONG-TERM NOTE RECEIVABLE - The Company holds a $300,000 promissory note from a non-related company, bearing a 4% annual interest rate and maturing on September 2, 202678 - The Company forgave the first annual payment of $100,000 on December 31, 2024, recognizing a loss on forgiveness78 NOTE 8 – PROPERTY AND EQUIPMENT, NET Property and Equipment, Net | Asset Type | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :------------------ | | Leasehold improvements | $269,258 | $440,333 | | Machinery and equipment | $690,635 | $646,252 | | Vehicle | $88,634 | $80,586 | | Software | $148,580 | $135,089 | | Subtotal | $1,197,107 | $1,302,260 | | Less: accumulated depreciation | $(754,632) | $(717,406) | | Total property and equipment, net | $442,475 | $584,854 | - Total property and equipment, net, decreased by $142,379, or 24.35%, from December 31, 2024, to June 30, 2025, primarily due to a decrease in leasehold improvements and an increase in accumulated depreciation79 - Depreciation expenses for the six months ended June 30, 2025, were $42,437, a decrease from $56,196 in the prior year period79 NOTE 9 – LEASES - The Company has operating leases for office space (2-15 years) and finance leases for office equipment and vehicles (5 years)80 Lease Terms and Discount Rates | Lease Type | Weighted Average Remaining Lease Term (Years) - June 30, 2025 | Weighted Average Discount Rate (per annum) - June 30, 2025 | | :---------------- | :------------------------------------------------------ | :------------------------------------------------------- | | Finance leases | 3.2 | 1.32% | | Operating leases | 6.7 | 1.35% | Lease Liabilities | Lease Liabilities | June 30, 2025 | | :-------------------------- | :------------ | | Total finance lease liabilities | $56,751 | | Total operating lease liabilities | $1,904,264 | | Non-current finance lease liabilities | $39,085 | | Non-current operating lease liabilities | $1,613,378 | NOTE 10 – OTHER CURRENT LIABILITIES Other Current Liabilities | Other Current Liability Type | June 30, 2025 | December 31, 2024 | | :--------------------------- | :------------ | :------------------ | | Accrued consumption taxes | $197,291 | $277,593 | | Customer refund liability | $500,000 | $500,000 | | Others | $124,567 | $129,487 | | Total other current liabilities | $821,858 | $907,080 | - Total other current liabilities decreased by $85,222, or 9.39%, from December 31, 2024, to June 30, 2025, mainly due to a decrease in accrued consumption taxes84 - A customer refund liability of $500,000, related to a terminated consulting services agreement, is due in August 202584 NOTE 11 – FACTORING LIABILITY - Sigmaways has a factoring agreement with The Southern Bank Company, factoring certain accounts receivable with recourse, meaning Sigmaways is required to reimburse the Factor for unpaid Purchased Receivables8588 - As of June 30, 2025, $226,212 was borrowed and outstanding under the Factoring Agreement, an increase from $172,394 at December 31, 202491 - Interest expenses related to the Factoring Agreement were $24,599 for the six months ended June 30, 2025, a decrease from $30,786 in the prior year period91 NOTE 12 – INSURANCE PREMIUM FINANCING - The Company entered into an insurance premium financing agreement in January 2025 for $139,500 at 13.9% annual interest, payable over eleven months92 - As of June 30, 2025, the balance of insurance premium financing was $90,869, compared to $16,626 at December 31, 202494 - Interest expenses for insurance premium financing were $5,874 for the six months ended June 30, 2025, a decrease from $7,044 in the prior year period94 NOTE 13 – LONG-TERM DEBTS Long-Term Debts | Debt Type | Balance as of June 30, 2025 | Balance as of December 31, 2024 | | :-------------------------------- | :-------------------------- | :------------------------------ | | Aggregate outstanding principal balances | $1,490,664 | $1,652,068 | | Non-current portion | $1,097,263 | $1,238,813 | - Total long-term debts decreased by $161,404, or 9.77%, from December 31, 2024, to June 30, 202596 - Interest expenses related to long-term debts were $24,447 for the six months ended June 30, 2025, a decrease from $32,942 in the prior year period98 NOTE 14 – INCOME TAXES - The Company operates in multiple jurisdictions, including the United States (21% federal tax rate), Netherlands (19%-25.80%), Canada (15% federal, 2%-12% provincial), Vietnam (20%), and Japan (approx. 34.59%)101102103104105 Income Tax Expense (Benefit) | Income Tax | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Current | $12,362 | $588 | $25,066 | $1,201 | | Deferred | $(15,924) | $(72,751) | $28,008 | $(153,531) | | Income tax expense (benefit) | $(3,562) | $(72,163) | $53,074 | $(152,330) | - For the six months ended June 30, 2025, the Company recorded an income tax expense of $53,074, a significant increase from an income tax benefit of $152,330 in the prior year, mainly due to the full impairment of intangible assets in Q4 2024106229 NOTE 15 – STOCK-BASED COMPENSATION - The Company has two equity incentive plans (2021 Plan and 2023 Plan) authorizing the issuance of common shares for stock options and Restricted Stock Units (RSUs)107109113 Stock Options Activity | Stock Options Activity | As of June 30, 2025 | As of June 30, 2024 | | :--------------------- | :------------------ | :------------------ | | Number of Stock Options | 1,400,000 | 1,512,000 | | Weighted Average Exercise Price | $2.50 | $2.41 | | Vested and exercisable | 1,053,625 | N/A | RSUs Activity | RSUs Activity | Unvested as of June 30, 2025 | Unvested as of June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | | Number of RSUs | 19,190 | 42,912 | | Weighted Average Grant Date Fair Value Per Share | $4.95 | $4.95 | - Stock-based compensation related to stock options decreased to $52,682 for the six months ended June 30, 2025, from $111,044 in the prior year; RSU-related compensation also decreased to $7,522 from $36,710111114 NOTE 16 – SHAREHOLDERS' EQUITY - The Company is authorized to issue 200,000,000 common shares and 20,000,000 preferred shares115 - On June 30, 2025, the Company entered into an Equity Purchase Agreement with Crom Structured Opportunities Fund I, LP, committing to purchase up to $25 million in common shares, and issued 485,437 common shares as a commitment fee116118119 - Also on June 30, 2025, the Company issued 2,000 shares of Series A convertible preferred shares for $2,000,000 and 750,000 common shares to Crom Structured, with the preferred shares having a 10% annual dividend and conversion rights121122123130 - As of June 30, 2025, there were 23,310,770 common shares and 2,000 Series A convertible preferred shares issued and outstanding129 NOTE 17 – NET INCOME (LOSS) PER SHARE Net Income (Loss) Per Share | EPS Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic Net income (loss) per share | $0.05 | $(0.09) | $(0.09) | $(0.16) | | Diluted Net income (loss) per share | $0.04 | $(0.09) | $(0.09) | $(0.16) | | Basic Weighted average common shares outstanding | 22,088,909 | 20,864,144 | 22,072,324 | 20,859,429 | | Diluted Weighted average common shares outstanding | 27,079,975 | 20,864,144 | 22,072,324 | 20,859,429 | - Basic EPS improved to $0.05 for the three months ended June 30, 2025, from $(0.09) in the prior year, reflecting the net income for the quarter132 - Diluted EPS for the six months ended June 30, 2025, remained at $(0.09), consistent with the basic EPS due to anti-dilutive effects of potential common shares131132 NOTE 18 – SEGMENT AND GEOGRAPHIC INFORMATION - The Company operates as a single operating and reportable segment, with the CEO acting as the chief operating decision maker133 Geographic Revenue | Geographic Revenue | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Japan | $2,953,180 | $1,940,248 | $4,692,336 | $4,809,387 | | United States | $1,664,429 | $2,045,780 | $3,400,447 | $4,066,060 | | International | $126,637 | $80,360 | $238,489 | $237,673 | | Total revenues | $4,744,246 | $4,066,388 | $8,331,272 | $9,113,120 | - Revenues from Japan increased significantly by 52.2% for the three months ended June 30, 2025, while U.S. revenues decreased by 18.6%; for the six months, Japan revenues slightly decreased, and U.S. revenues decreased by 16.4%135 NOTE 19 – SUBSEQUENT EVENT - On July 1, 2025, the Company converted a portion of customer warrants into marketable securities136 - On July 4, 2025, the U.S. government enacted the One Big Beautiful Bill Act (OBBBA), which includes changes to corporate income tax, allowing immediate expensing of R&D and permanent extensions of certain Tax Cuts and Jobs Act provisions; the Company is evaluating its impact137 - On July 24, 2025, the Board approved a non-binding letter of intent to sell 100% of HeartCore Japan for approximately $12 million in cash, subject to price adjustment138 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance and condition, highlighting key business activities, recent developments, and a detailed comparison of operating results for the three and six months ended June 30, 2025 and 2024; it also discusses liquidity, capital resources, and critical accounting policies Business Overview - HeartCore Enterprises, Inc. is a Tokyo-based software development company with two main business units: CX division (customer experience management platform) and DX division (digital transformation services like RPA, process mining, task mining)142143 - The company also operates a 'GO IPO' business, supporting Japanese companies in listing on Nasdaq and NYSE, having entered into consulting agreements with 16 companies as of June 30, 2025144 - Recent expansions include the acquisition of Sigmaways (U.S. software development), formation of HeartCore Financial (financial consulting), and HeartCore Luvina Vietnam (software development)146147 Recent Developments - The Company received Nasdaq notices regarding non-compliance with the $1.00 minimum bid price requirement (May 6, 2025) and the $2,500,000 minimum stockholders' equity requirement (May 24, 2025); an extension until September 30, 2025, was granted for the latter150151154155 - New consulting agreements were signed with tmsuk Co., Ltd. (May 30, 2025) and Cipher Core Co., Ltd. (June 30, 2025) for IPO support services, including cash fees and warrants158159165 - An OEM Sales Agreement was signed with Silver Egg Technology CO. Ltd. (June 23, 2025) for AI recommendation services, with a two-year term and automatic renewals161163 - The Company entered into an Equity Purchase Agreement and a Securities Purchase Agreement with Crom Structured Opportunities Fund I, LP on June 30, 2025, for up to $25 million in common stock purchases and the issuance of Series A Convertible Preferred Stock and common shares169181182 - Stockholders approved a 20% issuance of common stock and a reverse stock split (1-for-2 to 1-for-30) on June 30, 2025, to address Nasdaq listing requirements172193 Financial Overview Financial Overview | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $4,744,246 | $4,066,388 | $8,331,272 | $9,113,120 | | Net income (loss) | $1,061,506 | $(2,211,118) | $(2,075,875) | $(3,689,120) | | Cash flows used in operating activities | N/A | N/A | $(2,674,892) | $(1,735,744) | - The Company reported a net income of $1,061,506 for the three months ended June 30, 2025, a significant turnaround from a net loss of $2,211,118 in the prior year period195 - For the six months ended June 30, 2025, the net loss decreased by 43.7% to $2,075,875, and cash flows used in operating activities increased to $2,674,892196 - As of June 30, 2025, the Company had an accumulated deficit of $18,231,933196 Results of Operations Comparison of Results of Operations for the Three Months Ended June 30, 2025 and 2024 Three Months Ended June 30, 2025 and 2024 Operating Results | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Variance ($) | Variance (%) | | :------------------------------------------------ | :--------------------------- | :--------------------------- | :----------- | :----------- | | Revenues | $4,744,246 | $4,066,388 | $677,858 | 16.7% | | Cost of revenues | $2,526,651 | $3,260,507 | $(733,856) | -22.5% | | Gross profit | $2,217,595 | $805,881 | $1,411,714 | 175.2% | | Total operating expenses | $2,110,130 | $2,313,085 | $(202,955) | -8.8% | | Income (loss) from operations | $107,465 | $(1,507,204) | $1,614,669 | 107.1% | | Net income (loss) attributable to common shareholders | $1,099,291 | $(1,951,100) | $3,050,391 | 156.3% | - Total revenues increased by 16.7% to $4,744,246, primarily due to a $1,155,548 increase from on-premise software sales and a $134,571 increase from SaaS, partially offset by decreases in customized software development and other services199 - Gross profit surged by 175.2% to $2,217,595, driven by increased on-premise software sales and reduced outsourcing costs in customized software development and IPO consulting services201 - Operating expenses decreased by 8.8%, mainly due to a $459,382 reduction in general and administrative expenses (impairment of intangible assets and lower consultant fees), despite a 114.9% increase in selling expenses due to employee restructuring203205 Comparison of Results of Operations for the Six Months Ended June 30, 2025 and 2024 Six Months Ended June 30, 2025 and 2024 Operating Results | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Variance ($) | Variance (%) | | :------------------------------------------------ | :--------------------------- | :--------------------------- | :----------- | :----------- | | Revenues | $8,331,272 | $9,113,120 | $(781,848) | -8.6% | | Cost of revenues | $5,013,393 | $6,275,050 | $(1,261,657) | -20.1% | | Gross profit | $3,317,879 | $2,838,070 | $479,809 | 16.9% | | Total operating expenses | $4,454,571 | $5,028,229 | $(573,658) | -11.4% | | Loss from operations | $(1,136,692) | $(2,190,159) | $(1,053,467) | -48.1% | | Net loss attributable to common shareholders | $(1,987,701) | $(3,284,450) | $(1,296,749) | -39.5% | - Total revenues decreased by 8.6% to $8,331,272, mainly due to declines in customized software development and services, GO IPO consulting, and other software development services, partially offset by increased on-premise software sales218 - Gross profit increased by 16.9% to $3,317,879, primarily from higher on-premise software sales and reduced outsourcing costs in customized software development, despite a decrease in software development and other services220 - Operating expenses decreased by 11.4%, driven by reductions in general and administrative expenses (employee restructuring, intangible asset impairment, lower consultant fees), while selling and R&D expenses increased222224226 Liquidity and Capital Resources - As of June 30, 2025, the Company had $2,347,622 in cash and cash equivalents and $3,000,337 in accounts receivable235 Cash Flow Summary | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net cash flows used in operating activities | $(2,674,892) | $(1,735,744) | | Net cash flows provided by investing activities | $1,091,636 | $5,546,823 | | Net cash flows provided by (used in) financing activities | $1,770,767 | $(874,136) | | Net change in cash and cash equivalents | $226,533 | $2,793,870 | - Net cash used in operating activities increased due to higher accounts receivable and lower deferred revenue; net cash provided by investing activities decreased significantly due to the absence of large warrant sales seen in the prior year; net cash from financing activities improved substantially due to proceeds from Series A preferred stock and common share issuances237238239240 Contractual Obligations Contractual Obligations | Year Ended December 31, | Finance Lease Payments | Operating Lease Payments | Long-Term Debt Principal Payments | | :---------------------- | :--------------------- | :----------------------- | :-------------------------------- | | Remaining of 2025 | $9,151 | $165,586 | $168,363 | | 2026 | $18,302 | $293,770 | $388,783 | | 2027 | $18,302 | $293,770 | $416,931 | | 2028 | $12,201 | $287,511 | $183,938 | | 2029 | - | $285,425 | $27,926 | | Thereafter | - | $663,320 | $304,723 | | Total | $57,956 | $1,989,382 | $1,490,664 | - The Company has significant future obligations under operating leases, totaling $1,989,382 in payments, and long-term debts, totaling $1,490,664 in principal payments242244 Off-Balance Sheet Arrangements - As of June 30, 2025, the Company did not have any off-balance sheet arrangements246 Critical Accounting Policies and Estimates - The Company's financial statements rely on estimates and assumptions in accordance with U.S. GAAP, but management believes there are no critical accounting policies and estimates for the six months ended June 30, 2025247 Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there are no applicable quantitative and qualitative disclosures about market risk for the reporting period - The Company states that this item is not applicable248 Item 4. Controls and Procedures The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2025, for reasons previously disclosed; no material changes in internal control over financial reporting occurred during the quarter - As of June 30, 2025, the CEO and CFO concluded that disclosure controls and procedures were not effective, consistent with prior disclosures249 - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2025250 PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is not currently involved in any legal proceedings that are expected to have a material effect on its business, financial position, or results of operations - No legal proceedings are currently pending or threatened that would have a material effect on the Company's business, financial position, or results of operations252 Item 1A. Risk Factors As a smaller reporting company, the Company is not required to disclose material changes to its risk factors in this quarterly report, referring instead to its Annual Report on Form 10-K - As a smaller reporting company, the Company is not required to disclose material changes to risk factors in this Form 10-Q, referring to its Annual Report on Form 10-K for the year ended December 31, 2024253 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds On June 30, 2025, the Company issued 485,437 common shares as commitment fees and 2,000 Series A convertible preferred shares along with 750,000 common shares to Crom Structured Opportunities Fund I, LP, all through unregistered sales under Section 4(a)(2) of the Securities Act and Regulation D - On June 30, 2025, the Company issued 485,437 common shares as ELOC Commitment Shares to Crom Structured Opportunities Fund I, LP254 - On the same date, the Company issued 2,000 Series A convertible preferred shares for $2,000,000 and 750,000 common shares (SPA Commitment Shares) to Crom Structured254255 - These shares were issued to an accredited investor without registration under the Securities Act, relying on exemptions under Section 4(a)(2) and Regulation D255 Item 3. Defaults Upon Senior Securities There have been no material defaults on any senior securities during the reporting period - No material defaults upon senior securities occurred during the covered period256 Item 4. Mine Safety Disclosures This item is not applicable to the Company - The Company states that this item is not applicable257 Item 5. Other Information This section confirms no material changes to director nominee recommendation procedures and no Rule 10b5-1 trading arrangements adopted or terminated by directors or officers during the quarter - There have been no material changes to the procedures for security holders to recommend Board nominees258 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025259 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including certificates of designations, various agreements (consulting, OEM sales, equity purchase, securities purchase, registration rights), and certifications - Key exhibits include the Certificate of Designations for Series A Convertible Preferred Stock, Consulting and Services Agreements (tmsuk, Cipher Core), OEM Sales Agreement (Silver Egg), Equity Purchase Agreement, Securities Purchase Agreement, and associated Registration Rights Agreements with Crom Structured Opportunities Fund I, LP260 - Certifications from the Principal Executive Officer and Principal Financial Officer (Rule 13a-14(a) and 18 U.S.C. Section 1350) are also filed260 Signatures This section contains the required signatures for the Form 10-Q, confirming its submission on behalf of HeartCore Enterprises, Inc. by its Chief Executive Officer and President, Sumitaka Yamamoto, and Chief Financial Officer, Qizhi Gao - The report was signed on August 13, 2025, by Sumitaka Yamamoto, Chief Executive Officer and President, and Qizhi Gao, Chief Financial Officer265266