HeartCore Enterprises, Inc.

HEARTCORE ENTERPRISES, INC.

NOTES TO 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 consolidated financial statements.

HeartCore USA, via its wholly-owned operating subsidiary, HeartCore Japan, is mainly engaged in the business of developing and sales of comprehensive software. Beginning from early 2022, HeartCore USA is engaged in the business of providing consulting services to Japanese companies with intention to go public in the United States capital market.

On September 6, 2022, HeartCore USA entered into a share exchange and purchase agreement to acquire 51% of the outstanding shares of Sigmaways, Inc. (“Sigmaways”), a company incorporated under the laws of the State of California in April 2006, and its wholly-owned subsidiaries, Sigmaways B.V. and Sigmaways Technologies Ltd. (“Sigmaways Technologies”). Sigmaways B.V. was incorporated in Netherlands in November 2019. Sigmaways Technologies was incorporated in Canada in August 2020. Sigmaways and its wholly-owned subsidiaries are primarily engaged in the business of providing software development and other services in the United States. The acquisition was closed on February 1, 2023.

In January 2023, HeartCore USA incorporated a wholly-owned subsidiary, HeartCore Financial, Inc. (“HeartCore Financial”), under the laws of the State of Delaware. HeartCore Financial is engaged in the business of providing consulting services.

In November 2023, HeartCore Japan established a 51% owned subsidiary in Vietnam, HeartCore Luvina Vietnam Company Limited (“HeartCore Luvina”), which is engaged in the business of providing software development and other services. HeartCore Luvina started its operations from February 2024. In October 2025, HeartCore Japan transferred 51% of the outstanding shares of HeartCore Luvina to HeartCore USA.

In April 2024, HeartCore Financial incorporated a branch office, HeartCore Financial, Inc. – Japan Branch Office (“HeartCore Financial – Japan”), in Japan. HeartCore Financial – Japan is engaged in the business of providing consulting services.

On July 24, 2025, the Board of Directors of the Company approved entry 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 15). The sale transaction closed on October 31, 2025.

In October 2025, HeartCore USA incorporated a wholly-owned subsidiary, Higgs Field Co., Ltd. (“Higgs Field”), in Japan. Higgs Field is engaged in the business of providing business and management consulting services.

HeartCore USA, HeartCore Japan, Sigmaways, Sigmaways B.V., Sigmaways Technologies, HeartCore Financial, HeartCore Luvina, HeartCore Financial – Japan and Higgs Field are hereafter referred to as the “Company” unless specific reference is made to an entity.

NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of the Company and its subsidiaries. The Company has presented the assets and liabilities of HeartCore Japan and its results of operations and cash flows as discontinued operations in the consolidated financial statements as of and for all periods presented. All footnotes exclude balances and activities of HeartCore Japan unless otherwise noted. All significant intercompany accounts and transactions have been eliminated.

Non-controlling Interests

The portion of the income or loss applicable to the non-controlling interests in Sigmaways and its wholly-owned subsidiaries and HeartCore Luvina is separately reflected in the consolidated statements of operations and comprehensive income (loss).

Use of Estimates

In preparing the 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 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 consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, useful life of property and equipment, impairment of long-lived assets, valuation of stock-based compensation, valuation allowance of deferred tax assets, implicit interest rate of operating and finance leases, valuation of asset retirement obligations, valuation of investment in warrants, revenue recognition with respect to fair value of noncash consideration, and valuation of derivative liability. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and deposits in banks and other financial institutions that are unrestricted as to withdrawal or use.

Accounts Receivable

Accounts receivable represents the amounts that the Company has an unconditional right to consideration, which are stated at the original amount less an allowance for credit losses. The allowance for credit losses reflects the Company’s current estimate of credit losses expected to be incurred over the life of the receivables. The Company considers various factors in establishing, monitoring, and adjusting its allowance for credit losses including the aging of receivables and aging trends, customer creditworthiness and specific exposures related to particular customers. The Company also monitors other risk factors and forward-looking information, such as country specific risks and economic factors that may affect a customer’s ability to pay in establishing and adjusting its allowance for credit losses. Accounts receivable balances are written off after all collection efforts have ceased. The allowance is recorded against accounts receivable balances, with a corresponding charge recorded in the consolidated statements of operations and comprehensive income (loss). In circumstances in which the Company receives payment for accounts receivable that have previously been written off, the Company reverses the allowance and credit losses.

Property and Equipment, Net

Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives, as more details follow:

Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments, which substantially extend the useful lives of the assets, are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of operations and comprehensive income (loss).

Software Development Costs

Software development costs are expensed as incurred until the point the Company establishes technological feasibility. Technological feasibility is established upon completion of a detailed program design or the completion of a working model. Costs incurred by the Company between establishment of technological feasibility and the point at which the product is ready for general release are capitalized and amortized over the economic life of the related products. The Company’s software development costs incurred subsequent to achieving technological feasibility have not been significant and all software development costs have been expensed as incurred.

In the years ended December 31, 2025 and 2024, software development costs expensed as incurred amounted tonil and $179,762, respectively. These software development costs were included in the research and development expenses.

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 wereno impairments of these assets during the years ended December 31, 2025 and 2024.

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 consolidated statements of operations and comprehensive income (loss).

The reporting currency of the Company is the US$, and the consolidated financial statements have been expressed in US$. In accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 830-30, “Translation of Financial Statements”, assets and liabilities of the Company whose functional currency is not US$ are translated into US$, using the exchange rates on the balance sheet dates. Revenues and expenses are translated at average rates prevailing during the periods. The gains and losses resulting from the translation of financial statements are recorded as a separate component of accumulated other comprehensive income (loss) within the consolidated statements of changes in shareholders’ equity.

Translation of amounts from the functional currency of the Company into US$1 has been made at the following exchange rates:

Revenue Recognition

The Company recognizes revenues under ASC Topic 606, “Revenue from Contracts with Customers”.

To determine revenue recognition for contracts with customers, the Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenues when (or as) the Company satisfies a performance obligation. Revenues amount represents the invoiced value, net of a value-added tax (“Consumption Tax”) and applicable local government levies. The Consumption Tax on sales are calculated at 10% of gross sales in Japan and Vietnam, 5% of gross sales in Canada, 21% of gross sales in Netherlands and nil of gross sales in the United States.

The Company currently generates its revenues from the following main sources:

Revenues from Software Development Services

The Company provides customers with software development and support services pursuant to their specific requirements, which primarily compose of consulting, integration, training, custom application and workflow development. The Company recognizes revenues at a point in time when control is transferred to the customers and the Company is entitled to the payment, which is when the promised services are delivered and accepted by the customers.

Revenues from Customized Software Development and Services

The Company’s customized software development and services revenues primarily include revenues from providing software development solutions and other support services to its customers. The contract pricing is at stated billing rates per hour. These contracts are generally short-term in nature and not longer than one year in duration. For services provided under the contracts that result in the transfer of control over time, the underlying deliverable in the contracts is owned and controlled by the customers and does not create an asset with an alternative use to the Company. The Company recognizes revenues on rate per hour contracts based on the amount billable to the customers, as the Company has the right to invoice the customers in an amount that directly corresponds with the value to the customers of the Company’s performance to date.

Revenues from Consulting Services

The Company provides public listing related consulting services to customers pursuant to the specific requirements prescribed in the contracts, which primarily include communicating with intermediary parties, preparing required documents related to the initial public offering and supporting the listing process. The consulting services contracts normally include both cash and noncash considerations. Cash consideration is paid in installment payments and is recognized in revenues over the period of the contract by reference to progress toward complete satisfaction of that performance obligation. Noncash consideration is in the form of stocks and warrants of the customers and is measured at fair value at contract inception. Noncash consideration that is variable for reasons other than only the form of the consideration is included in the transaction price, but is subject to the constraint on variable consideration. The Company assesses the estimated amount of the variable noncash consideration at contract inception and subsequently, to determine when and to what extent it is probable that a significant reversal of cumulative revenues recognized will not occur once the uncertainty associated with the variable consideration is subsequently resolved. Only when the significant revenues reversal is concluded probable of not occurring can variable consideration be included in revenues. Based on evaluation of likelihood and magnitude of a reversal in applying the constraint, the variable noncash consideration is recognized in revenues until the underlying uncertainties have been resolved.

Sales Returns and Allowances

The Company records reduction to revenues for estimated customer returns and allowances. The Company bases its estimates on historical rates of customer returns and allowances as well as the specific identification of outstanding returns. The actual amount of customer returns and allowances, which is inherently uncertain, may differ from the Company’s estimates. If the Company determines that actual or expected returns or allowances are significantly higher or lower than the reserves it established, it would record a reduction or increase, as appropriate, to revenues in the period in which it makes such a determination. Reserves for customer refunds are included within other current liabilities on the consolidated balance sheets. At a minimum, the Company reviews and refines these estimates on a quarterly basis.

Contract Balances

The timing of revenue recognition may differ from the timing of invoicing to the customers. The Company determines that its contracts do not include a significant financing component. The Company records a contract asset, which is included in accounts receivable in the consolidated balance sheets, when revenues are recognized prior to invoicing. The Company factors certain accounts receivable upon or after the performance obligation is being met. The Company records deferred revenue in the consolidated balance sheets when revenues are recognized subsequent to cash collection for an invoice. Deferred revenue is reported net of related uncollected deferred revenue in the consolidated balance sheets. The amounts of revenues recognized during the years ended December 31, 2025 and 2024 that were included in the opening deferred revenue balances were approximately $0.6 million and $0.6 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 years ended December 31, 2025 and 2024 is as follows:

Cost of Revenues

Cost of revenues primarily consists of salaries and outsourcing expenses for personnel and parties directly involved in the delivery of services to customers.

Advertising Expenses

Advertising expenses consist primarily of costs of promotion and marketing for the Company’s image and services, and costs of direct advertising, and are included in selling expenses. The Company expenses advertising costs as incurred or the first time the advertising takes place, whichever is earlier, in accordance with the ASC Topic 720-35, “Advertising Costs”. The advertising expenses were $310,572 and $426,457 for the years ended December 31, 2025 and 2024, respectively.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist primarily of accounts receivable, note receivable and other receivable. The Company usually does not require collateral or other security to support these receivables. The Company conducts periodic reviews of the financial condition and payment practices of its customers to minimize collection risk on accounts receivable.

For the years ended December 31, 2025 and 2024, customers account for 10% or more of the Company’s revenues are as follows:

As of December 31, 2025 and 2024, customers account for 10% or more of the Company’s accounts receivable are as follows:

For the years ended December 31, 2025 and 2024, no vendor accounts for 10% or more of the Company’s purchases.

As of December 31, 2025 and 2024, vendors account for 10% or more of the Company’s accounts payable and accrued expenses are as follows:

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 16).

Comprehensive Income or Loss

ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income or loss, its components and accumulated balances. Comprehensive income or loss as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income (loss), as presented in the consolidated statements of changes in shareholders’ equity, consists of changes in unrealized gains and losses on foreign currency translation.

Net Income (Loss) Per Share

The Company computes basic and diluted net income (loss) per share in accordance with ASC Topic 260, “Earnings Per Share”. Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the reporting period. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares and potentially dilutive common shares outstanding during the reporting period. Potentially dilutive common shares are not included in the calculation of diluted net income (loss) per share if their effect would be anti-dilutive.

Stock-based Compensation

The Company accounts for stock-based compensation awards in accordance with ASC Topic 718, “Compensation – Stock Compensation”. The cost of services received from employees and non-employees in exchange for awards of equity instruments is recognized in the consolidated statements of operations and comprehensive income (loss) based on the estimated fair value of those awards on the grant date and amortized on a straight-line basis over the requisite service period or vesting period. The Company records forfeitures as they occur.

Related Parties and Transactions

The Company identifies related parties, and accounts for and discloses related party transactions in accordance with ASC Topic 850, “Related Party Disclosures” and other relevant ASC standards.

Parties, which can be an entity or individual, are considered to be related if they have the ability, directly or indirectly, to control the Company or exercise significant influence over the Company in making financial and operational decisions. Entities are also considered to be related if they are subject to common control or common significant influence.

Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive and free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions are consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.

Income Taxes

Income taxes are accounted for using an asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes”. Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current period and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets also include the prior years’ net operating losses carried forward. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

The Company follows ASC Topic 740, which prescribes a more-likely-than-not threshold for financial statements recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on recognition of income tax assets and liabilities, classification of current and deferred tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures.

Under the provisions of ASC Topic 740, when tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the consolidated financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the consolidated balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits is classified as interest expenses and penalties are classified in general and administrative expenses in the consolidated statements of operations and comprehensive income (loss).

Series A Convertible Preferred Shares and Derivative Liability

When the Company issues the Series A convertible preferred shares (see NOTE 13), 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.

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:

As of December 31, 2025 and 2024, 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 December 31, 2025 and 2024 are summarized below (also see NOTE 5 for investments):

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 sale of HeartCore Japan and determines it meets the held for sale criteria and the discontinued operations criteria. The assets and liabilities of HeartCore Japan 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 are presented as discontinued operations in the 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 15.

Recent Accounting Pronouncements

New Accounting Pronouncements Recently Adopted

In December 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures, primarily related to the rate reconciliation and income taxes paid information. ASU No. 2023-09 is effective for public companies for annual reporting periods beginning after December 15, 2024, on a prospective basis. The Company adopted ASU No. 2023-09 for the year ended December 31, 2025 (see NOTE 11).

New Accounting Pronouncements Not Yet Effective

In November 2024, the FASB issued 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 July 2025, the FASB issued ASU No. 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments in ASU No. 2025-05 provide entities with a practical expedient to simplify the estimation of expected credit losses on current accounts receivable and current contract assets that arise from transactions accounted for under ASC Topic 606 by allowing the assumption that current conditions as of the balance sheet date will not change during the remaining life of the asset. ASU No. 2025-05 is effective for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years, with early adoption 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 interim consolidated financial statements and related disclosures.

NOTE 3 –ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:

NOTE 4 –RELATED PARTY TRANSACTIONS

As of December 31, 2025 and 2024, the Company had due to related party balances of $285 andnil, 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 years ended December 31, 2025 and 2024, the related party paid operating expenses on behalf of the Company and received the payments in a net amount of $299 andnil, respectively.

As of December 31, 2025 and 2024, the Company had due to related party balances ofnil and $885, respectively, from Luvina Software Joint Stock Company (“Luvina Software”), the non-controlling shareholder of HeartCore Luvina. The balance is unsecured, non-interest bearing and due on demand. During the year ended December 31, 2025, the Company repaid to the related party for operating expenses the related party paid on behalf of the Company of $884. During the year ended December 31, 2024, the related party paid operating expenses on behalf of the Company in the amount of $899. As of December 31, 2025 and 2024, the Company had accounts payable and accrued expenses balances of $124,618 and $47,199, respectively, to Luvina Software. During the years ended December 31, 2025 and 2024, the Company engaged the related party for software development and other support services of $290,305 and $202,288, respectively.

As of December 31, 2025 and 2024, the Company had a short-term debt balance of $75,000 to Prakash Sadasivam, the CEO and non-controlling shareholder of Sigmaways. The debt is borrowed from the related party for working capital purpose. The balance is unsecured, bears an annual interest of 7.5% and due on demand.

NOTE 5 –INVESTMENTS

Investment in Warrants

The Company received warrants from its customers as noncash consideration from consulting services. The warrants are not registered for public sale and are initially measured at fair value at contract inception using the binomial model with the assistance of a third-party valuation appraiser. The following table summarizes the inputs to the model used to estimate the fair value of the warrants received and recognized as consulting services revenues for the years ended December 31, 2025 and 2024:

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 year. The valuation of investment in warrants is determined using the Black-Scholes model. The following table summarizes the inputs to the model used to estimate the fair value of the investment in warrants as of December 31, 2025 and 2024:

The following table summarizes the Company’s investment in warrants activities for the years ended December 31, 2025 and 2024:

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 year.

The following table summarizes the Company’s investments in marketable securities activities for the years ended December 31, 2025 and 2024:

NOTE 6 –PROPERTY AND EQUIPMENT, NET

Property and equipment, net consist of the following:

For the years ended December 31, 2025 and 2024, the Company recognized depreciation expenses of $46,373 and $70,218, respectively.

NOTE 7 –OTHER CURRENT LIABILITIES

Other current liabilities consist of the following:

NOTE 8 –FACTORING LIABILITY

Sigmaways, the subsidiary acquired by the Company in February 2023, entered into a factoring and security agreement (“Factoring Agreement”) with The Southern Bank Company, an unrelated factor (“Factor”), in February 2017, for the purpose of factoring certain accounts receivable. Pursuant to the terms of the Factoring Agreement, Sigmaways may offer for sale, and the Factor may purchase in its sole discretion, certain accounts receivable of Sigmaways (“Purchased Receivable”). The Factoring Agreement provided for a maximum of $850,000 in Purchased Receivable.

Selected accounts receivable is submitted to the Factor, and Sigmaways receives 90% of the face value of the accounts receivable by wire transfer. Upon payment by the customers, the remainder of the amount due is received from the Factor after deducting certain fees.

The Factoring Agreement specifies that eligible accounts receivable is factored with recourse. Pursuant to the terms of the recourse provision, Sigmaways is required to reimburse the Factor, upon demand, for Purchased Receivable that is not paid on time by the customers. The performance of all obligations and payments to the Factor is secured by all Sigmaways’ now owned and hereafter assets and any sums maintained by the Factor that are identified as payable to Sigmaways.

The Factoring Agreement has an initial term of twelve months and automatically renews for successive twelve-month renewal periods unless terminates pursuant to the terms of the Factoring Agreement. Sigmaways may terminate the Factoring Agreement with sixty days’ written notice to the Factor and is subject to certain early termination fee.

The Factoring Agreement contains covenants that are customary for accounts receivable-based factoring agreements and also contains provisions relating to events of default that are customary for agreements of this type.

As of December 31, 2025 and 2024, there were $135,982 and $172,394 borrowed and outstanding under the Factoring Agreement, respectively. There are various fees charged by the Factor, including initial discount purchase fee, factoring fee and interest expense. For the years ended December 31, 2025 and 2024, the Company recorded $46,475 and $60,451 in interest expenses related to Factoring Agreement, respectively.

NOTE 9 –INSURANCE PREMIUM FINANCING

In January 2025, the Company entered into an insurance premium financing agreement with AFCO Direct, a division of AFCO Credit Corporation, for $139,500 at an annual interest rate of 13.9% for eleven months from February 1, 2025, payable in eleven monthly installments of principal and interest.

In January 2024, the Company entered into an insurance premium financing agreement with BankDirect Capital Finance for $172,689 at an annual interest rate of 13.9% for eleven months from February 1, 2024, payable in eleven monthly installments of principal and interest.

As of December 31, 2025 and 2024, the balances of the insurance premium financing were $13,430 and $16,626, respectively. For the years ended December 31, 2025 and 2024, the Company recorded $9,917 and $12,047 in interest expenses related to insurance premium financing, respectively.

NOTE 10 –LONG-TERM DEBTS

The Company’s long-term debts represent loans borrowed from a bank and a financial institution as follows:

For the years ended December 31, 2025 and 2024, the Company recorded $31,268 and $46,291 in interest expenses related to long-term debts, respectively.

As of December 31, 2025, future minimum principal payments for long-term debts are as follows:

NOTE 11 –INCOME TAXES

United States

HeartCore USA, Sigmaways and HeartCore Financial, incorporated in the United States, are subject to federal income tax at 21% statutory tax rate with respect to the profit generated from the United States.

Netherlands

Sigmaways B.V. is a company incorporated in Netherlands. The first EUR 200,000 of taxable income is subject to a statutory tax rate of 19% and the remaining taxable income is subject to a statutory tax rate of 25.80%.

Canada

Sigmaways Technologies is a company incorporated in British Columbia in Canada. It is subject to income tax on income arising in, or derived from, the tax jurisdiction in British Columbia it operates. The basic federal rate of Part I tax is 38% of taxable income,28% after federal tax abatement. After the general tax reduction, the net federal tax rate is 15%. The provincial and territorial lower and higher tax rates in British Columbia are 2% and 12%, respectively.

Vietnam

HeartCore Luvina is a company incorporated in Vietnam. It is subject to standard income tax rate at 20% with respect to the taxable income.

Japan

HeartCore Financial – Japan and Higgs Field are companies incorporated in Japan. Income taxes in Japan are imposed by the national, prefectural and municipal governments, and in the aggregate result in an effective statutory tax rate of approximately 34.59%.

For the years ended December 31, 2025 and 2024, the Company’s income tax expense (benefit) are as follows:

After the adoption of ASU No. 2023-09 on a prospective basis, a reconciliation of the provision for income taxes to the amount computed by applying the 21% U.S. federal statutory income tax rate to loss from continuing operations before income tax expense (benefit) for the year ended December 31, 2025 is as follows:

For the year ended December 31, 2024, prior to the adoption of ASU No. 2023-09, a reconciliation of the effective income tax rate to the U.S. federal statutory income tax rate is as follows:

The tax effects of temporary differences that give rise to the deferred tax assets and liabilities at December 31, 2025 and 2024 are presented below:

The realization of deferred tax assets is dependent upon the generation of sufficient taxable income of the appropriate character in future periods. The Company regularly assesses the ability to realize its deferred tax assets and establishes a valuation allowance if it is more-likely-than-not that some portion of the deferred tax assets will not be realized. The Company weighs all available positive and negative evidence, including its earnings history and results of recent operations, projected future taxable income, and tax planning strategies.

The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as the Company’s projections for growth. The adjustments of a valuation allowance against deferred tax assets may cause greater volatility in the effective income tax rate in the periods in which the valuation allowance is adjusted.

The following table presents income taxes paid, net of refunds:

Uncertain Tax Positions

The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of December 31, 2025 and 2024, the management considered the Company did not have any significant unrecognized uncertain tax positions. The Company did not incur any interest or penalties tax for the years ended December 31, 2025 and 2024. The Company does not anticipate any significant increases or decreases in unrecognized tax benefits in the next twelve months from December 31, 2025. The Company files U.S. federal, state and foreign tax returns. The tax years ending from December 31, 2022 through December 31, 2024 generally remain subject to examination by the Internal Revenue Service and various state taxing authorities. The tax years ending from December 31, 2021 through December 31, 2024 generally remain subject to examination by various foreign jurisdictions. The Company is not currently under examination in any jurisdictions.

NOTE 12 –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 2,400,000 shares of common shares are authorized for issuance.

On August 1, 2023, the Board of Directors of the Company approved a 2023 Equity Incentive Plan (“2023 Plan”), under which 2,000,000 shares of common shares are authorized for issuance.

On December 25, 2021, the Company awarded stock options to purchase 1,534,500 shares of common shares pursuant to the 2021 Plan at an exercise price of $2.50 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 14,500 shares of common shares at an exercise price of $2.48 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 100,000 shares of common shares pursuant to the 2021 Plan at an exercise price of $1.17 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 years ended December 31, 2025 and 2024:

For the years ended December 31, 2025 and 2024, the Company recognized stock-based compensation related to stock options of $(286,000) and $247,859, respectively. There wasno outstanding unamortized stock-based compensation related to stock options as of December 31, 2025.

Restricted Stock Units (“RSUs”)

On February 9, 2022, the Company entered into executive employment agreements with five executives and granted 85,820 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.

On October 1, 2024, the Company granted 69,653 RSUs pursuant to the 2023 Plan to four executives of the Company. The RSUs are fully vested upon issuance. The fair value of the RSUs at grant date is $52,944.

On October 3, 2025, the Company granted 153,482 RSUs pursuant to the 2023 Plan to four executives of the Company. The RSUs are fully vested on the grant date. The fair value of the RSUs at grant date is $131,150.

The following table summarizes the RSUs activities and related information for the years ended December 31, 2025 and 2024:

For the years ended December 31, 2025 and 2024, the Company recognized stock-based compensation related to RSUs of $134,861 and $120,885, respectively. The outstanding unamortized stock-based compensation related to RSUs was $2,031 (which will be recognized through February 2026) as of December 31, 2025.

NOTE 13 –SHAREHOLDERS’ EQUITY

Shares Authorized

The Company is authorized to issue 200,000,000 shares of common shares, par value of $0.0001 per share, and 20,000,000 shares of preferred shares, par value of $0.0001 per share.

At the Market Offering Agreement (“ATM Agreement”)

On October 23, 2023, the Company entered into a ATM Agreement with H.C. Wainwright & Co., LLC (“Wainwright”), as sales agent, pursuant to which the Company may offer and sell, from time to time, through Wainwright, shares of the Company’s common shares, par value of $0.0001 per share, having an aggregate offering price of up to approximately $2 million (“ATM Shares”). The Company pays commission fees of 4% for each completed sale of ATM Shares pursuant to the terms of the ATM Agreement. During the years ended December 31, 2025 and 2024, the Company sold a total of 15,892 and 1,004,190 shares of the ATM Shares for net proceeds of $30,445 and $1,423,342 after deducting commission fees and other transaction costs, respectively. The subscription receivable of $103,942 related to ATM Shares sold on December 31, 2024 was collected in full on January 2, 2025.

Designation of Series A Convertible Preferred Shares and Securities Purchase Agreement

On June 30, 2025, the Company filed a certificate of designations of preferences and rights of Series A convertible preferred shares (“Series A COD”) with the Secretary of State of the State of Delaware to set forth the terms of the Series A convertible preferred shares. Pursuant to the Series A COD, the Company designated 2,000 shares of preferred shares as Series A convertible preferred shares and each share of Series A convertible preferred shares has a stated value of $1,100. On October 22, 2025, the Board of Directors of the Company approved to amend the number of designated shares of Series A convertible preferred shares to 4,000 shares pursuant to the Series A COD. The following summarizes the material terms of the Series A convertible preferred shares:

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 750,000 shares of common shares (“750,000 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 750,000 Common Shares based on their relative fair values.

For the year ended December 31, 2025, there were 983 shares of Series A convertible preferred shares converted into 1,619,164 shares of common shares.

For the year ended December 31, 2025, the Company paid dividends on Series A convertible preferred shares of $220,000 through issuance of 336,391 shares of common shares. Dividends accrued on Series A convertible preferred shares amounted to $94,357 for the year ended December 31, 2025.

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 485,437 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 year ended December 31, 2025, no common shares were sold pursuant to the terms of the equity purchase agreement.

Capital Contribution for Non-controlling Shareholder

In November 2023, the Company established a 51% owned subsidiary, HeartCore Luvina, in Vietnam. On February 16, 2024, the Company received capital contribution of VND 1,646.4 million in cash, equivalent to $67,195, from the non-controlling shareholder of HeartCore Luvina.

Dividends Paid for Common Shares

On March 29, 2024, the Board of Directors of the Company approved a dividend declaration of $0.02 per share of common shares for the shareholders of record at the close of business on April 26, 2024. The dividends of $417,283 were paid on May 3, 2024.

On July 22, 2024, the Board of Directors of the Company approved a dividend declaration of $0.02 per share of common shares for the shareholders of record at the close of business on August 19, 2024. The dividends of $417,283 were paid on August 26, 2024.

On October 19, 2025, the Board of Directors of the Company approved a dividend declaration of $0.13 per share of common shares for the shareholders of record at the close of business on November 10, 2025. The dividends of $3,304,575 was paid on November 17, 2025.

Shares Issued and Outstanding

As of December 31, 2025 and 2024, there were 25,419,807 and 21,937,987 shares of common shares issued and outstanding, respectively.

As of December 31, 2025 and 2024, there were 1,017 andno shares of preferred shares (designated as Series A convertible preferred shares) issued and outstanding, respectively.

NOTE 14 –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 years ended December 31, 2025 and 2024 is as follows:

NOTE 15 –DISCONTINUED OPERATIONS

On July 24, 2025, in light of the intense competition of the software market in Japan, the Board of Directors of the Company approved entry into a non-binding letter of intent to sell 100% of the outstanding shares of HeartCore Japan. The sale transaction was closed on October 31, 2025. The Company does not expect to have any continuing involvement in HeartCore Japan subsequent to the closing. The Company determines the assets 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 consolidated statements of operations and comprehensive income (loss) for all periods presented. All assets and liabilities of HeartCore Japan have been presented separately as assets and liabilities of discontinued operations in the consolidated balance sheets as of December 31, 2025 and 2024. On October 31, 2025, 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 year ended December 31, 2025, the Company received gross proceeds from sale of discontinued operations of $6,575,860, net of cash divested of $2,056,992.

The following table summarizes the results of operations from discontinued operations, net of income tax in the consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2025 and 2024:

The following table summarizes the assets and liabilities of discontinued operations in the consolidated balance sheets as of December 31, 2025 and 2024:

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 HeartCore Japan, the assets and liabilities classified as held for sale were derecognized and gain on sale of discontinued operations was recorded.

NOTE 16 –SEGMENT AND GEOGRAPHIC INFORMATION

Segment Information

Operating segments are defined as components of an entity for which discrete financial information is available and is regularly reviewed by the CODM, the CEO of the Company, in making decisions regarding resource allocation and performance assessment. The Company determines its operations constitute a single operating segment and reportable segment in accordance with ASC Topic 280. The CODM assesses financial performance and decides how to allocate resources based on consolidated net loss from continuing operations. Segment assets are reported on the Company’s consolidated balance sheets.

The following table summarizes the selected financial information with respect to the Company’s single operating segment and reportable segment for the years ended December 31, 2025 and 2024:

Geographic Information

The following table summarizes the breakdown of revenues by geography for the years ended December 31, 2025 and 2024:

The following table summarizes the breakdown of long-lived assets by geography as of December 31, 2025 and 2024:

NOTE 17 –SUBSEQUENT EVENTS

In January 2026, the Company entered into an insurance premium financing agreement with AFCO Direct, a division of AFCO Credit Corporation, for $108,000 at an annual interest rate of 13.9% for ten months from February 1, 2026, payable in ten monthly installments of principal and interest.

On February 18, 2026, the Board of Directors of the Company approved a 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.

On March 5, 2026, the Board of Directors of the Company approved to sell 51% of the outstanding shares of Sigmaways and its wholly-owned subsidiaries to a non-related company. As of the date of this report, the Company has not entered into a definitive agreement with respect to the sale of Sigmaways and its wholly-owned subsidiaries.

EXHIBIT INDEX

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.