UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______, 20___, to _____, 20___.

Commission File Number 001-41272

HeartCore Enterprises, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware

87-0913420

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification Number)

1-2-33, Higashigotanda, Shinagawa-ku

Tokyo, Japan

(Address of Principal Executive Offices) (Zip Code)

(206) 385-0488, ext. 100

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each Exchange on which Registered
Common Stock		HTCR		The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 22, 2023, there were 20,842,690 shares of outstanding common stock, par value $0.0001 per share, of the registrant.

HeartCore Enterprises, Inc.

Contents

		Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	F-1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18

Item 4.	Controls and Procedures	18

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	19

Item 1A.	Risk Factors	19

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19

Item 3.	Defaults Upon Senior Securities	19

Item 4.	Mine Safety Disclosures	19

Item 5.	Other Information	19

Item 6.	Exhibits	20

Signatures		21

Item 1. Financial Statements.

HEARTCORE ENTERPRISES, INC.

CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2023			2022
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	5,209,915		$	7,177,326
Accounts receivable		2,380,128			551,064
Short-term investment in warrants		437,812			-
Prepaid expenses		919,916			538,230
Due from related party		47,536			48,447
Other current assets		31,534			220,070
Total current assets		9,026,841			8,535,137

Non-current assets:
Property and equipment, net		214,566			203,627
Operating lease right-of-use assets		2,549,834			2,644,957
Intangible asset, net		4,993,750			-
Goodwill		3,276,441			-
Long-term investment in warrants		3,764,888			-
Deferred tax assets		245,997			263,339
Security deposits		367,981			244,395
Long-term loan receivable from related party		229,955			246,472
Other non-current assets		75			661
Total non-current assets		15,643,487			3,603,451

Total assets	$	24,670,328		$	12,138,588

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable and accrued expenses	$	1,160,309		$	497,742
Accrued payroll and other employee costs		416,779			360,222
Due to related party		2,923			402
Current portion of long-term debts		640,534			697,877
Insurance premium financing		352,518			-
Factoring liability		173,582			-
Operating lease liabilities, current		288,081			291,863
Finance lease liabilities, current		13,663			19,294
Income tax payables		681,830			2,747
Deferred revenue		1,530,472			1,724,519
Other current liabilities		225,167			53,027
Total current liabilities		5,485,858			3,647,693

Non-current liabilities:
Long-term debts		1,490,664			1,123,735
Operating lease liabilities, non-current		2,314,160			2,421,054
Finance lease liabilities, non-current		-			459
Deferred tax liabilities		1,398,250			-
Other non-current liabilities		135,536			138,018
Total non-current liabilities		5,338,610			3,683,266

Total liabilities		10,824,468			7,330,959

Shareholders’ equity:
Preferred shares ($0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively)		-			-
Common shares ($0.0001 par value, 200,000,000 shares authorized; 20,842,690 and 17,649,886 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively)		2,083			1,764
Additional paid-in capital		19,079,516			15,014,607
Accumulated deficit		(8,691,290	)		(10,573,579	)
Accumulated other comprehensive income		342,093			364,837
Total HeartCore Enterprises, Inc. shareholders’ equity		10,732,402			4,807,629
Non-controlling interest		3,113,458			-
Total shareholders’ equity		13,845,860			4,807,629

Total liabilities and shareholders’ equity	$	24,670,328		$	12,138,588

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-1

HEARTCORE ENTERPRISES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

	2023			2022
	For the Three Months Ended March 31,
	2023			2022
Revenues	$	8,734,150		$	2,276,001

Cost of revenues		3,101,066			1,055,356

Gross profit		5,633,084			1,220,645

Operating expenses:
Selling expenses		568,642			205,918
General and administrative expenses		2,685,207			2,468,933
Research and development expenses		79,624			108,259

Total operating expenses		3,333,473			2,783,110

Income (loss) from operations		2,299,611			(1,562,465	)

Other income (expenses):
Changes in fair value of investments in warrants		193,365			-
Interest income		31,605			1,458
Interest expenses		(39,840	)		(11,271	)
Other income		14,201			16,673
Other expenses		(29,457	)		(23,662	)
Total other income (expenses)		169,874			(16,802	)

Income (loss) before income tax provision		2,469,485			(1,579,267	)

Income tax expense (benefit)		661,448			(816	)

Net income (loss)		1,808,037			(1,578,451	)

Less: net loss attributable to non-controlling interest		(74,252	)		-

Net income (loss) attributable to HeartCore Enterprises, Inc.	$	1,882,289		$	(1,578,451	)

Other comprehensive income (loss):
Foreign currency translation adjustment		(25,034	)		80,053

Total comprehensive income (loss)		1,783,003			(1,498,398	)
Less: comprehensive loss attributable to non-controlling interest		(76,542	)		-
Comprehensive income (loss) attributable to HeartCore Enterprises, Inc.	$	1,859,545		$	(1,498,398	)

Net income (loss) per common share attributable to HeartCore Enterprises, Inc.
Basic	$	0.10		$	(0.09	)
Diluted	$	0.10		$	(0.09	)
Weighted average common shares outstanding
Basic		19,066,160			17,265,332
Diluted		19,066,160			17,265,332

The accompanying notes are an integral part of these unaudited consolidated financial statements.

F-2

HEARTCORE ENTERPRISES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

	Number of shares*		Amount		paid-in capital			Accumulated deficit			comprehensive loss			shareholders’ deficit			controlling interest		shareholders’ deficit
	Common shares				Additional						Accumulated other			Total HeartCore Enterprises, Inc.			Non-		Total
	Number of shares		Amount		paid-in capital			Accumulated deficit			comprehensive income (loss)			shareholders’ equity (deficit)			controlling interest		shareholders’ equity (deficit)
Balance, December 31, 2021		15,546,454	$	1,554	$	3,350,779		$	(3,896,113	)	$	(15,172	)	$	(558,952	)	$	-	$	(558,952	)
Net loss		-		-		-			(1,578,451	)		-			(1,578,451	)		-		(1,578,451	)
Foreign currency translation adjustment		-		-		-			-			80,053			80,053			-		80,053
Issuance of common shares for cash		3,096,000		310		13,643,969			-			-			13,644,279			-		13,644,279
Issuance of common shares from exercise of share options		273,489		27		(11	)		-			-			16			-		16
Stock-based compensation		-		-		422,164			-			-			422,164			-		422,164
Balance, March 31, 2022		18,915,943	$	1,891	$	17,416,901		$	(5,474,564	)	$	64,881		$	12,009,109		$	-	$	12,009,109

	Common shares				Additional					Accumulated other			Total HeartCore Enterprises, Inc.			Non-			Total
	Number of shares		Amount		paid-in capital		Accumulated deficit			comprehensive income			shareholders’ equity			controlling interest			shareholders’ equity
Balance, December 31, 2022		17,649,886	$	1,764	$	15,014,607	$	(10,573,579	)	$	364,837		$	4,807,629		$	-		$	4,807,629
Beginning balance		17,649,886	$	1,764	$	15,014,607	$	(10,573,579	)	$	364,837		$	4,807,629		$	-		$	4,807,629
Net income (loss)		-		-		-		1,882,289			-			1,882,289			(74,252	)		1,808,037
Foreign currency translation adjustment		-		-		-		-			(22,744	)		(22,744	)		(2,290	)		(25,034	)
Issuance of common shares for acquisition of subsidiary		2,500,000		250		3,149,750		-			-			3,150,000			-			3,150,000
Non-controlling interests arising from acquisition of subsidiary		-		-		-		-			-			-			3,190,000			3,190,000
Stock-based compensation		692,804		69		915,159		-			-			915,228			-			915,228
Balance, March 31, 2023		20,842,690	$	2,083	$	19,079,516	$	(8,691,290	)

SEC Form 10-Q filed by Heartcore Enterprises Inc.