HTCR 10-Q
HeartCore Enterprises, Inc. (HTCR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM
For
the quarterly period ended
For the transition period from ______, 20___, to _____, 20___.
Commission
File Number
(Exact Name of Registrant as Specified in its Charter)
| (State or Other Jurisdiction
of Incorporation or Organization) |
(I.R.S. Employer Identification Number) |
(Address of Principal Executive Offices) (Zip Code)
(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 | ||
| The |
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.
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).
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 | ☐ |
| ☒ | 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 August 13, 2026, there were shares of outstanding common stock of the registrant.
HeartCore Enterprises, Inc.
Contents
| i |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HEARTCORE ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Investments in marketable securities | ||||||||
| Prepaid expenses | ||||||||
| Deferred offering costs | ||||||||
| Other current assets | ||||||||
| Current assets of discontinued operations | ||||||||
| Proceeds receivable from sale of discontinued operations | ||||||||
| Total current assets | ||||||||
| Non-current assets: | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Long-term investment in warrants | ||||||||
| Deferred tax assets | ||||||||
| Security deposits | ||||||||
| Other non-current assets | ||||||||
| Non-current assets of discontinued operations | ||||||||
| Long-term proceeds receivable from sale of discontinued operations | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accounts payable and accrued expenses – related party | ||||||||
| Accrued payroll and other employee costs | ||||||||
| Due to related party | ||||||||
| Insurance premium financing | ||||||||
| Operating lease liabilities, current | ||||||||
| Income tax payables | ||||||||
| Deferred revenue | ||||||||
| Derivative liability | ||||||||
| Other current liabilities | ||||||||
| Current liabilities of discontinued operations | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities: | ||||||||
| Operating lease liabilities, non-current | ||||||||
| Non-current liabilities of discontinued operations | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Shareholders’ equity: | ||||||||
| Preferred
shares, $ par value, shares authorized; Series A convertible preferred shares, shares designated, and
shares issued and outstanding as of June 30, 2026 and December 31, 2025, respectively; aggregate liquidation preference of
$ | ||||||||
| Common shares, $ par value, shares authorized, and shares issued and outstanding as of June 30, 2026 and December 31, 2025, respectively* | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total HeartCore Enterprises, Inc. shareholders’ equity | ||||||||
| Non-controlling interests | ( | ) | ||||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
| * |
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)
| For the Three Months | For the Six Months | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues (including cost of revenues resulting from transactions with a related party of $ | ||||||||||||||||
| Gross profit (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Operating expenses: | ||||||||||||||||
| Selling expenses | ||||||||||||||||
| General and administrative expenses (including general and administrative expenses resulting from transactions with a related party of for the three and six months ended June 30, 2026, and of $ | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses): | ||||||||||||||||
| Changes in fair value of investments in marketable securities | ( | ) | ( | ) | ( | ) | ||||||||||
| Changes in fair value of investment in warrants | ( | ) | ( | ) | ||||||||||||
| Changes in fair value of derivative liability | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||||||
| Other expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income (expenses) | ( | ) | ( | ) | ( | ) | ||||||||||
| Income (loss) from continuing operations before income tax expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax expense | ||||||||||||||||
| Net income (loss) from continuing operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Income (loss) from discontinued operations, net of income tax | ( | ) | ( | ) | ||||||||||||
| Net income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Less: net income from continuing operations attributable to non-controlling interests | ||||||||||||||||
| Less: loss from discontinued operations attributable to non-controlling interests | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) attributable to HeartCore Enterprises, Inc. | ( | ) | ( | ) | ( | ) | ||||||||||
| Dividends accrued on Series A convertible preferred shares | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) attributable to HeartCore Enterprises, Inc. common shareholders | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Other comprehensive income (loss): | ||||||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||||||||||
| Total comprehensive income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Less: comprehensive loss attributable to non-controlling interests | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Comprehensive income (loss) attributable to HeartCore Enterprises, Inc. | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Net income (loss) from continuing operations attributable to HeartCore Enterprises, Inc. per common share* | ||||||||||||||||
| Basic | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Diluted | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Income (loss) from discontinued operations per common share* | ||||||||||||||||
| Basic | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Diluted | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Net income (loss) attributable to HeartCore Enterprises, Inc. per common share* | ||||||||||||||||
| Basic | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Diluted | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Weighted average common shares outstanding* | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
| * |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-2 |
HEARTCORE ENTERPRISES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
| Preferred Shares | Common Shares | Additional | Accumulated Other | Total
HeartCore Enterprises, Inc. | Total | |||||||||||||||||||||||||||||||||||||||
| Number of | Number of | Subscription | Paid-in | Accumulated | Comprehensive | Shareholders’ | Non-controlling | Shareholders’ | ||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares* | Amount | Receivable | Capital | Deficit | Income | Equity | Interests | Equity | ||||||||||||||||||||||||||||||||||
| Balance, January 1, 2025 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | | $ | ( | ) | $ | | |||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Issuance of common shares related to at the market offering agreement | - | |||||||||||||||||||||||||||||||||||||||||||
| Collection of subscription receivable | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | - | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2025 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Issuance of Series A convertible preferred shares | - | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares related to securities purchase agreement | - | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares related to equity purchase agreement | - | |||||||||||||||||||||||||||||||||||||||||||
| Dividends accrued on Series A convertible preferred shares | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Preferred Shares | Common Shares | Additional | Accumulated Other | Total
HeartCore Enterprises, Inc. | Total | |||||||||||||||||||||||||||||||||||
| Number of | Number of | Paid-in | Accumulated | Comprehensive | Shareholders’ | Non-controlling | Shareholders’ | |||||||||||||||||||||||||||||||||
| Shares | Amount | Shares* | Amount | Capital | Deficit | Loss | Equity | Interests | Equity | |||||||||||||||||||||||||||||||
| Balance, January 1, 2026 | | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | | $ | ( | ) | $ | | |||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Dividends accrued on Series A convertible preferred shares | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2026 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Cumulative translation adjustment reclassified into earnings due to disposal of discontinued operations | - | - | ||||||||||||||||||||||||||||||||||||||
| Derecognition of non-controlling interests upon sale of discontinued operations | - | - | ||||||||||||||||||||||||||||||||||||||
| Series A convertible preferred shares converted to common shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Dividends accrued on Series A convertible preferred shares | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Reverse stock split rounding adjustment | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||||
| * |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-3 |
HEARTCORE ENTERPRISES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Six Months | ||||||||
| Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities of continuing operations: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Income (loss) from discontinued operations, net of income tax | ( | ) | ||||||
| Net loss from continuing operations | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss from continuing operations to net cash flows used in operating activities of continuing operations: | ||||||||
| Depreciation expense | ||||||||
| Loss on disposal of property and equipment | ||||||||
| Non-cash lease expense | ||||||||
| Gain on termination of lease | ( | ) | ||||||
| Deferred income taxes | ||||||||
| Stock-based compensation | ||||||||
| Changes in fair value of investments in marketable securities | ||||||||
| Changes in fair value of investment in warrants | ( | ) | ||||||
| Changes in fair value of derivative liability | ( | ) | ||||||
| Gain on settlement of asset retirement obligations | ( | ) | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expenses | ||||||||
| Other assets | ||||||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses – related party | ( | ) | ( | ) | ||||
| Accrued payroll and other employee costs | ( | ) | ||||||
| Due to related party | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Income tax payables | ( | ) | ||||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Other liabilities | ( | ) | ||||||
| Net cash flows used in operating activities of continuing operations | ( | ) | ( | ) | ||||
| Cash flows from investing activities of continuing operations: | ||||||||
| Purchases of property and equipment | ( | ) | ||||||
| Proceeds from sale of marketable securities | ||||||||
| Net cash flows provided by investing activities of continuing operations | ||||||||
| Cash flows from financing activities of continuing operations: | ||||||||
| Payments for finance lease | ( | ) | ||||||
| Repayment of insurance premium financing | ( | ) | ( | ) | ||||
| Proceeds from issuance of common shares related to at the market offering agreement | ||||||||
| Proceeds from collection of subscription receivable | ||||||||
| Proceeds from exercise of stock options | ||||||||
| Proceeds from issuance of Series A convertible preferred shares and common shares related to securities purchase agreement, net of share issuance costs | ||||||||
| Net cash flows provided by (used in) financing activities of continuing operations | ( | ) | ||||||
| Cash flows from discontinued operations: | ||||||||
| Net cash flows used in operating activities of discontinued operations | ( | ) | ( | ) | ||||
| Net cash flows provided by investing activities of discontinued operations | ||||||||
| Net cash flows used in financing activities of discontinued operations | ( | ) | ( | ) | ||||
| Net cash flows provided by (used in) discontinued operations | ( | ) | ||||||
| Effect of exchange rate changes | ( | ) | ||||||
| Net change in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents – beginning of the period | ||||||||
| Cash and cash equivalents – end of the period | $ | $ | ||||||
| Supplemental cash flow disclosures: | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid (received), net | $ | ( | ) | $ | ||||
| Non-cash investing and financing transactions: | ||||||||
| Insurance premium financing | $ | $ | ||||||
| Warrants converted to marketable securities | $ | $ | ||||||
| Operating lease right-of-use assets obtained in exchange for operating lease liabilities | $ | $ | ||||||
| Dividends accrued on Series A convertible preferred shares | $ | $ | ||||||
| Series A convertible preferred shares converted to common shares | $ | $ | ||||||
| Issuance of common shares related to equity purchase agreement | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-4 |
HEARTCORE ENTERPRISES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
HeartCore
Enterprises, Inc. (“HeartCore USA”), a holding company, was incorporated under the laws of the State of Delaware on
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 shares of its common shares to the shareholders of HeartCore Japan in exchange for shares out of shares of common shares issued by HeartCore Japan, representing approximately % of HeartCore Japan’s outstanding common shares. On February 24, 2022, HeartCore USA purchased the remaining shares of common shares of HeartCore Japan. As a result, HeartCore Japan became a wholly-owned operating subsidiary of HeartCore USA.
The share exchange on July 16, 2021 has been accounted for as a recapitalization between entities under common control since the same controlling shareholders controlled these two entities before and after the transaction. The consolidation of HeartCore USA and its subsidiary has been accounted for at historical cost and prepared on the basis as if the transaction had become effective as of the beginning of the earliest period presented in the unaudited consolidated financial statements.
HeartCore USA, via its wholly-owned operating subsidiary, HeartCore Japan, is mainly engaged in the business of developing and sales of comprehensive software. Beginning from early 2022, HeartCore USA is engaged in the business of providing consulting services to Japanese companies with intention to go public in the United States capital market.
On September 6, 2022, HeartCore USA entered into a share exchange and purchase agreement to acquire % 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
In April 2024, HeartCore Financial incorporated a branch office, HeartCore Financial, Inc. – Japan Branch Office (“HeartCore Financial – Japan”), in Japan. HeartCore Financial – Japan is engaged in the business of providing consulting services.
On July 24, 2025, the Board of Directors approved to enter into a non-binding letter of intent to sell % of the outstanding shares of HeartCore Japan. The sale of HeartCore Japan represented a strategic shift that had a major impact on the results of operations and has been accounted for as a discontinued operation (see NOTE 12). The sale transaction was closed on October 31, 2025.
In October 2025, HeartCore USA incorporated a wholly-owned subsidiary, Higgs Field Co., Ltd. (“Higgs Field”), in Japan. Higgs Field is engaged in the business of providing business and management consulting services.
| F-5 |
On March 5, 2026, the Board of Directors approved to sell % of the outstanding shares of Sigmaways and its wholly-owned subsidiaries. The sale of Sigmaways and its wholly-owned subsidiaries represented a strategic shift that had a major impact on the results of operations and has been accounted for as a discontinued operation (see NOTE 12). The sale transaction was closed on June 22, 2026.
HeartCore USA, HeartCore Japan, Sigmaways, Sigmaways B.V., Sigmaways Technologies, HeartCore Financial, HeartCore Luvina, HeartCore Financial – Japan and Higgs Field are hereafter referred to as the “Company” unless specific reference is made to an entity.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim consolidated financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited consolidated financial statements include the accounts of HeartCore USA and its subsidiaries. The Company has presented the assets and liabilities of HeartCore Japan and Sigmaways and its wholly-owned subsidiaries and their results of operations and cash flows as discontinued operations in the unaudited consolidated financial statements as of and for all periods presented. All footnotes exclude balances and activities of HeartCore Japan and Sigmaways and its wholly-owned subsidiaries unless otherwise noted. All significant intercompany accounts and transactions have been eliminated.
These unaudited interim consolidated financial statements do not include all of the information and disclosures required by the U.S. GAAP for complete consolidated financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments consisting of normal recurring nature considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2025.
Liquidity and Going Concern
The unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company assesses whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the unaudited consolidated financial statements are issued.
The
Company incurred net loss from continuing operations of $
The Company’s plan is to continue exploring strategic alternatives for raising additional funding for future operations through a combination of obtaining equity financing, entering into debt or other financing arrangements, and restructuring of operations to grow revenues and decrease expenses to supplement the Company’s liquidity. The Company’s ability to raise capital may be constrained by the price of and demand for the Company’s equity shares. Additional funding may not be available on favorable terms or at all, and could further dilute the Company’s current shareholders. Management cannot conclude as of the date of this report that its plans are probable of being successfully implemented. There can be no assurance that the Company will be able to obtain sufficient additional liquidity when needed or under acceptable terms, if at all.
The unaudited consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company is unable to continue as a going concern.
| F-6 |
Use of Estimates
In preparing the unaudited consolidated financial statements in conformity U.S. GAAP, the management is required to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the unaudited consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information available as of the date of the unaudited consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, allowance for credit losses, useful life of property and equipment, impairment of long-lived assets, valuation of stock-based compensation, valuation allowance of deferred tax assets, uncertain tax positions, implicit interest rate of operating and finance leases, valuation of investment in warrants, and valuation of derivative liability. Actual results could differ from those estimates.
Investment in Warrants
Investment in warrants represents stock warrants earned from its consulting service customers. The warrants are measured at fair value and any changes in fair value are recognized in other income (expenses). Investment in warrants is classified as long-term if the warrants are exercisable over one year after the date of receipt.
Investments in Marketable Securities
Investments in marketable securities represent equity securities registered for public sale with readily determinable fair value. The marketable securities are obtained through stocks of its customers received as noncash consideration from consulting services and through exercise of stock warrants of its consulting service customers and measured at fair value with any changes in fair value recognized in other income (expenses).
Impairment of Long-Lived Assets
Long-lived assets with finite lives, primarily property and equipment and operating lease right-of-use assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value. There were no impairments of these assets during the three and six months ended June 30, 2026 and 2025.
Foreign Currency Translation
The functional currency of HeartCore Japan, HeartCore Financial – Japan and Higgs Field is the Japanese Yen (“JPY”). The functional currency of HeartCore USA, HeartCore Financial and Sigmaways is the United States Dollar (“US$”). The functional currency of Sigmaways B.V. is the Euro (“EUR”). The functional currency of Sigmaways Technologies is the Canada Dollar (“CAD”). The functional currency of HeartCore Luvina is the Vietnam Dong (“VND”). Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the unaudited consolidated statements of operations and comprehensive income (loss).
The reporting currency of the Company is the US$, and the unaudited consolidated financial statements have been expressed in the US$. In accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 830-30, “Translation of Financial Statements”, assets and liabilities of the Company whose functional currency is not US$ are translated into US$, using the exchange rates on the balance sheet dates. Revenues and expenses are translated at average rates prevailing during the periods. The gains and losses resulting from the translation of financial statements are recorded as a separate component of accumulated other comprehensive income (loss) within the unaudited consolidated statements of changes in shareholders’ equity.
| F-7 |
Revenue Recognition
The Company recognizes revenues under ASC Topic 606, “Revenue from Contracts with Customers”.
To
determine revenue recognition for contracts with customers, the Company performs the following five steps: (i) identify the contract(s)
with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable
consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price
to the performance obligations in the contract, and (v) recognize revenues when (or as) the Company satisfies a performance obligation.
The Company currently generates its revenues from the following main sources:
Revenues from Software Development Services
The Company provides customers with software development and support services pursuant to their specific requirements, which primarily compose of consulting, integration, training, custom application and workflow development. The Company recognizes revenues at a point in time when control is transferred to the customers and the Company is entitled to the payment, which is when the promised services are delivered and accepted by the customers.
Revenues from Consulting Services
The Company provides public listing related consulting services to customers pursuant to the specific requirements prescribed in the contracts, which primarily include communicating with intermediary parties, preparing required documents related to the initial public offering and supporting the listing process. The consulting services contracts normally include both cash and noncash considerations. Cash consideration is paid in installment payments and is recognized in revenues over the period of the contract by reference to progress toward complete satisfaction of that performance obligation. Noncash consideration is in the form of stocks and warrants of the customers and is measured at fair value at contract inception. Noncash consideration that is variable for reasons other than only the form of the consideration is included in the transaction price, but is subject to the constraint on variable consideration. The Company assesses the estimated amount of the variable noncash consideration at contract inception and subsequently, to determine when and to what extent it is probable that a significant reversal of cumulative revenues recognized will not occur once the uncertainty associated with the variable consideration is subsequently resolved. Only when the significant revenues reversal is concluded probable of not occurring can variable consideration be included in revenues. Based on evaluation of likelihood and magnitude of a reversal in applying the constraint, the variable noncash consideration is recognized in revenues until the underlying uncertainties have been resolved.
Sales Returns and Allowances
The Company records reduction to revenues for estimated customer returns and allowances. The Company bases its estimates on historical rates of customer returns and allowances as well as the specific identification of outstanding returns. The actual amount of customer returns and allowances, which is inherently uncertain, may differ from the Company’s estimates. If the Company determines that actual or expected returns or allowances are significantly higher or lower than the reserves it established, it would record a reduction or increase, as appropriate, to revenues in the period in which it makes such a determination. Reserves for customer refunds are included within other current liabilities on the consolidated balance sheets. At a minimum, the Company reviews and refines these estimates on a quarterly basis.
| F-8 |
Contract Balances
The
timing of revenue recognition may differ from the timing of invoicing to the customers. The Company determines that its contracts do
not include a significant financing component. The Company records a contract asset, which is included in accounts receivable in the
consolidated balance sheets, when revenues are recognized prior to invoicing. The Company records deferred revenue in the consolidated
balance sheets when revenues are recognized subsequent to cash collection for an invoice. Deferred revenue is reported net of related
uncollected deferred revenue in the consolidated balance sheets. The amounts of revenues recognized during the six months ended June
30, 2026 and 2025 that were included in the opening deferred revenue balances were approximately $
Disaggregation of Revenues
The Company disaggregates its revenues from contracts by revenue stream types, as the Company believes it best depicts how the nature, amount, timing and uncertainty of the revenues and cash flows are affected by economic factors. The Company’s disaggregation of revenues by revenue stream for the three and six months ended June 30, 2026 and 2025 is as follows:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues from software development services | $ | $ | $ | $ | ||||||||||||
| Revenues from consulting services | ||||||||||||||||
| Total revenues | $ | $ | $ | $ | ||||||||||||
Concentration of Credit Risk
Financial instruments that potentially subject the Company to credit risk consist primarily of accounts receivable and other receivable. The Company usually does not require collateral or other security to support these receivables. The Company conducts periodic reviews of the financial condition and payment practices of its customers to minimize collection risk on accounts receivable.
For the three and six months ended June 30, 2026 and 2025, customers account for 10% or more of the Company’s revenues are as follows:
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Customer A | % | * | % | * | ||||||||||||
| Customer B | * | % | * | * | ||||||||||||
| Customer C | * | % | % | % | ||||||||||||
| Customer D | * | % | * | % | ||||||||||||
| Customer E | * | * | * | * | ||||||||||||
| Customer F | * | * | * | % | ||||||||||||
| Customer G | * | * | * | % | ||||||||||||
As of June 30, 2026 and December 31, 2025, customers account for 10% or more of the Company’s accounts receivable are as follows:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Customer A | % | % | ||||||
| Customer H | * | % | ||||||
| F-9 |
For the three and six months ended June 30, 2026 and 2025, vendors account for 10% or more of the Company’s purchases from continuing operations are as follows:
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Vendor A | % | * | % | * | ||||||||||||
| Vendor B | % | * | % | * | ||||||||||||
| Vendor C | * | % | % | % | ||||||||||||
| Vendor D | * | % | * | * | ||||||||||||
As of June 30, 2026 and December 31, 2025, vendors account for 10% or more of the Company’s accounts payable and accrued expenses are as follows:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Vendor B | % | % | ||||||
| Vendor D | % | * | ||||||
| Vendor E | % | % | ||||||
| * |
Segment Reporting
ASC Topic 280, “Segment Reporting”, requires use of the management approach model for segment reporting. The management approach model is based on the way a company’s chief operating decision maker (“CODM”) organizes segments within the Company for making operating decisions, assessing performance and allocating resources. Reportable segments are based on services, geography, legal structure, management structure, or any other manner in which management disaggregates a company (see NOTE 13).
Series A Convertible Preferred Shares and Derivative Liability
When the Company issues the Series A convertible preferred shares (see NOTE 10), it first evaluates the balance sheet classification of the convertible instrument in its entirety to determine whether the instrument should be classified as a liability under ASC Topic 480, “Distinguishing Liabilities from Equity”, and second evaluates whether the conversion feature should be accounted for separately from the host instrument. A conversion feature of the Series A convertible preferred shares would be separated from the convertible instrument and classified as a derivative liability if the conversion feature, as a standalone instrument, meets the definition of an embedded derivative under ASC Topic 815, “Derivatives and Hedging”. Generally, characteristics that require derivative treatment include, among others, when the conversion feature is not indexed to the Company’s equity, as defined in ASC Topic 815-40, or when it must be settled either in cash or by issuing equity shares that are readily convertible to cash.
The Company assesses the Series A convertible preferred shares as a whole and determines it does not meet the liability classification pursuant to ASC Topic 480 and the Company classifies the host instrument as permanent equity because no features provide for redemption by the holders of the Series A convertible preferred shares or conditional redemption, which is not solely within the Company’s control, and there are no unconditional obligations in that (i) the Company must or may settle in a variable number of its equity shares, and (ii) the monetary value is predominantly fixed, varying with something other than the fair value of the Company’s equity shares or varying inversely in relation to the Company’s equity shares.
The Company assesses the conversion feature of the Series A convertible preferred shares for derivative accounting consideration and determines it meets the definition of an embedded derivative, which is separated from the host instrument and classified as a derivative liability carried on the consolidated balance sheets at fair value with any changes in fair value recognized in other income (expenses). The Company values the fair value of derivative liability using the income approach with the discounted cash flow valuation method with the assistance of a third-party valuation appraiser. The determination of fair value requires management to make significant estimates and assumptions related to forecasted cash flows and discount rate.
| F-10 |
Fair Value Measurements
The Company performs fair value measurements in accordance with ASC Topic 820, “Fair Value Measurements and Disclosures”. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset’s or a liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC Topic 820 establishes three levels of inputs that may be used to measure fair value:
| ● | Level 1: quoted prices in active markets for identical assets or liabilities; | |
| ● | Level 2: inputs other than Level 1 that are observable, either directly or indirectly; or | |
| ● | Level 3: unobservable inputs that are supported by little or no market activities and that are significant to the fair values of the assets or liabilities. |
As of June 30, 2026 and December 31, 2025, the carrying values of current assets, except for investments in marketable securities, and current liabilities, except for derivative liability, approximated their fair values reported in the consolidated balance sheets due to the short-term maturities of these instruments.
Assets and liabilities measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025 are summarized below (also see NOTE 4 for investments):
| Fair Value Measurements as of June 30, 2026 | ||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Unobservable Inputs (Level 3) | Fair Value at June 30, 2026 | |||||||||||||
| Investments in marketable securities | $ | $ | $ | $ | ||||||||||||
| Long-term investment in warrants | $ | $ | $ | $ | ||||||||||||
| Derivative liability | $ | $ | $ | $ | ||||||||||||
| Fair Value Measurements as of December 31, 2025 | ||||||||||||||||
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Unobservable Inputs (Level 3) | Fair Value at December 31, 2025 | |||||||||||||
| Investments in marketable securities | $ | $ | $ | $ | ||||||||||||
| Long-term investment in warrants | $ | $ | $ | $ | ||||||||||||
| Derivative liability | $ | $ | $ | $ | ||||||||||||
| F-11 |
Assets Held for Sale and Discontinued Operations
In accordance with ASC Topic 205-20, “Presentation of Financial Statements – Discontinued Operations”, a component or a group of components of an entity shall be classified as held for sale in the period in which all of the following criteria are met: (i) management, having the authority to approve the action, commits to a plan to sell the entity to be sold; (ii) the entity to be sold is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such entities to be sold; (iii) an active program to locate a buyer or buyers and other actions required to complete the plan to sell the entity to be sold have been initiated; (iv) the sale of the entity to be sold is probable and transfer of the entity to be sold is expected to qualify for recognition as a completed sale within one year; (v) the entity to be sold is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (vi) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. A component or a group of components of an entity classified as held for sale is reported at the lower of its carrying amount or fair value less cost to sell. If the fair value of the entity to be sold less cost to sell is lower than its carrying amount, an impairment loss is recognized and update each reporting period as appropriate. Assets held for sale are not depreciated or amortized.
The results of operations of the entity to be sold classified as held for sale are reported as discontinued operations if the disposal represents a strategic shift that has or will have a major effect on an entity’s operations and financial results.
The Company assesses the sales of HeartCore Japan and Sigmaways and its wholly-owned subsidiaries and determines they meet the held for sale criteria and the discontinued operations criteria. The assets and liabilities of Sigmaways and its wholly-owned subsidiaries have been reflected as assets and liabilities of discontinued operations in the consolidated balance sheets for all periods presented. The results of operations of HeartCore Japan and Sigmaways and its wholly-owned subsidiaries are presented as discontinued operations in the unaudited consolidated statements of operations and comprehensive income (loss) for all periods presented. Prior periods have been adjusted to conform to the current presentation. The required disclosures are included in NOTE 12.
Recent Accounting Pronouncements
In November 2024, the FASB issued Accounting Standards Update (“ASU”) No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, requiring public companies to disclose additional information about specific expense categories in the notes to the consolidated financial statements on an annual and interim basis. ASU No. 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU No. 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its unaudited interim consolidated financial statements and related disclosures.
NOTE 3 – RELATED PARTY TRANSACTIONS
As
of June 30, 2026 and December 31, 2025, the Company had due to related party balances of $
As
of June 30, 2026 and December 31, 2025, the Company had accounts payable and accrued expenses balances of $
| F-12 |
NOTE 4 – INVESTMENTS
Investment in Warrants
The Company received warrants from its customers as noncash consideration from consulting services. The warrants are not registered for public sale and are initially measured at fair value at contract inception. The Company’s investment in warrants is measured on a recurring basis and carried on the consolidated balance sheets at an estimated fair value at the end of the period. The valuation of investment in warrants is determined using the Black-Scholes model based on the stock price, exercise price, expected volatility, time to maturity and risk-free interest rate for the term of the warrants.
The following table summarizes the Company’s investment in warrants activities for the six months ended June 30, 2026 and 2025:
| For the Six Months | ||||||||
| Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Fair value of investment in warrants at beginning of the period | $ | $ | ||||||
| Changes in fair value of investment in warrants | ( | ) | ||||||
| Warrants converted to marketable securities | ( | ) | ||||||
| Fair value of investment in warrants at end of the period | $ | $ | ||||||
Investments in Marketable Securities
The Company’s investments in marketable securities represent stocks received from its customers as noncash consideration from consulting services and stocks received upon the exercise of warrants described above. They are registered for public sale with readily determinable fair values, and are measured at quoted prices on a recurring basis at the end of the period.
The following table summarizes the Company’s investments in marketable securities activities for the six months ended June 30, 2026 and 2025:
| For the Six Months | ||||||||
| Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Fair value of investments in marketable securities at beginning of the period | $ | $ | ||||||
| Marketable securities converted from warrants* | ||||||||
| Changes in fair value of investments in marketable securities | ( | ) | ( | ) | ||||
| Marketable securities sold | ( | ) | ( | ) | ||||
| Fair value of investments in marketable securities at end of the period | $ | $ | ||||||
| * |
| F-13 |
NOTE 5 – PROPERTY AND EQUIPMENT, NET
Property and equipment, net consist of the following:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Machinery and equipment | $ | $ | ||||||
| Vehicle | ||||||||
| Subtotal | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
For
the three and six months ended June 30, 2026, the Company recognized depreciation expenses of $
NOTE 6 – LEASES
The
Company has entered into operating leases for office space with terms ranging from two to
Operating leases costs for lease payments are recognized on a straight-line basis over the lease term. Finance lease costs include amortization, which is recognized on a straight-line basis over the expected life of the leased assets, and interest expense, which is recognized following an effective interest rate method. Leases with initial term of twelve months or less are not recorded in the consolidated balance sheets.
The components of lease costs for the three and six months ended June 30, 2026 and 2025 are as follows:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Finance lease costs | ||||||||||||||||
| Amortization of finance lease right-of-use assets | $ | $ | $ | $ | ||||||||||||
| Interest on finance lease liabilities | ||||||||||||||||
| Total finance lease costs | ||||||||||||||||
| Operating leases costs | ||||||||||||||||
| Total leases costs | $ | $ | $ | $ | ||||||||||||
The following table presents supplemental information related to the Company’s leases for the six months ended June 30, 2026 and 2025:
| For the Six Months | ||||||||
| Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows from finance lease | $ | $ | ||||||
| Operating cash flows from operating leases | ||||||||
| Financing cash flows from finance lease | ||||||||
| Operating lease right-of-use assets obtained in exchange for operating lease liabilities | ||||||||
| Remeasurement of operating lease liabilities and right-of-use assets due to lease modification | ||||||||
| Weighted average remaining lease term (years): | ||||||||
| Finance lease | - | |||||||
| Operating leases | ||||||||
| Weighted average discount rate (per annum): | ||||||||
| Finance lease | % | % | ||||||
| Operating leases | % | % | ||||||
| F-14 |
As of June 30, 2026, the future maturity of lease liabilities is as follows:
| Operating | ||||
| Year Ended December 31, | Leases | |||
| Remaining of 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Total lease liabilities | ||||
| Less: current portion | ( | ) | ||
| Non-current lease liabilities | $ | |||
Pursuant
to the operating lease agreements, the Company made security deposits to the lessors. The security deposits amounted to $
NOTE 7 – OTHER CURRENT LIABILITIES
Other current liabilities consist of the following:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Customer refund liability* | $ | $ | ||||||
| Others | ||||||||
| Total other current liabilities | $ | $ | ||||||
| * |
NOTE 8 – INCOME TAXES
United States
HeartCore
USA and HeartCore Financial, incorporated in the United States, are subject to federal income tax at
Vietnam
HeartCore
Luvina is a company incorporated in Vietnam. It is subject to standard income tax rate at
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
| F-15 |
For the three and six months ended June 30, 2026 and 2025, the Company’s income tax expense are as follows:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Current | $ | $ | $ | $ | ||||||||||||
| Deferred | ||||||||||||||||
| Income tax expense | $ | $ | $ | $ | ||||||||||||
For
the three and six months ended June 30, 2026, the effective tax rate were
On August 6, 2021, the Board of Directors and shareholders of the Company approved a 2021 Equity Incentive Plan (“2021 Plan”), under which shares of common shares are authorized for issuance.
On August 1, 2023, the Board of Directors of the Company approved a 2023 Equity Incentive Plan, under which shares of common shares are authorized for issuance.
Stock Options
On December 25, 2021, the Company awarded stock options to purchase shares of common shares pursuant to the 2021 Plan at an exercise price of $ 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 % of the applicable shares of common shares, with the expiration date on .
On August 9, 2022, the Company awarded stock options to purchase shares of common shares at an exercise price of $ 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 .
On February 3, 2023, the Company awarded stock options to purchase shares of common shares pursuant to the 2021 Plan at an exercise price of $ per share to an employee of the Company. The stock options vest % on the grant date and February 1, 2024, respectively, with the expiration date on .
| Number of Stock Options | Weighted Average Exercise Price | Weighted Average Remaining Term (Years) | Intrinsic Value | |||||||||||||
| As of January 1, 2025 | $ | $ | ||||||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | ( | ) | | - | - | |||||||||||
| Forfeited | ( | ) | - | - | ||||||||||||
| As of June 30, 2025 | $ | $ | ||||||||||||||
| As of January 1, 2026 | $ | $ | ||||||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | - | - | ||||||||||||||
| Forfeited | - | - | ||||||||||||||
| As of June 30, 2026 | $ | $ | ||||||||||||||
| Vested and exercisable as of June 30, 2026 | $ | $ | ||||||||||||||
| F-16 |
For the three and six months ended June 30, 2026, there was stock-based compensation related to stock options. For the three and six months ended June 30, 2025, the Company recognized stock-based compensation related to stock options of $ and $, respectively. There was outstanding unamortized stock-based compensation related to stock options as of June 30, 2026.
Restricted Stock Units (“RSUs”)
On February 9, 2022, the Company entered into executive employment agreements with five executives and granted 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 % of the applicable shares of common shares. The fair value of the RSUs at grant date is $.
The following table summarizes the RSUs activities and related information for the six months ended June 30, 2026 and 2025:
| Number of RSUs | Weighted Average Grant Date Fair Value Per Share | |||||||
| Unvested as of January 1, 2025 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Unvested as of June 30, 2025 | $ | |||||||
| Unvested as of January 1, 2026 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ||||||||
| Unvested as of June 30, 2026 | $ | |||||||
For the three and six months ended June 30, 2026, the Company recognized stock-based compensation related to RSUs of and $, respectively. For the three and six months ended June 30, 2025, the Company recognized stock-based compensation related to RSUs of $ and $, respectively. There was outstanding unamortized stock-based compensation related to RSUs as of June 30, 2026.
NOTE 10 – SHAREHOLDERS’ EQUITY
Shares Authorized
The Company is authorized to issue shares of common shares, par value of $ per share, and shares of preferred shares, par value of $ per share.
At the Market Offering Agreement (“ATM Agreement”)
On
October 23, 2023, the Company entered into an ATM Agreement with H.C. Wainwright & Co., LLC (“Wainwright”), as sales
agent, pursuant to which the Company may offer and sell, from time to time, through Wainwright, shares of the Company’s common
shares, par value of $ per share, having an aggregate offering price of up to approximately $
| F-17 |
Designation of Series A Convertible Preferred Shares and Securities Purchase Agreement
On June 30, 2025, the Company filed a certificate of designations of preferences and rights of Series A convertible preferred shares (“Series A COD”) with the Secretary of State of the State of Delaware to set forth the terms of the Series A convertible preferred shares. Pursuant to the Series A COD, the Company designated shares of preferred shares as Series A convertible preferred shares and each share of Series A convertible preferred shares has a stated value of $. 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 shares pursuant to the Series A COD. The following summarizes the material terms of the Series A convertible preferred shares:
| ● | Dividends – Each Series A convertible preferred shares holder (“Holder”) shall be entitled to receive dividends of % per annum on the stated value of each share of Series A convertible preferred shares. |
| ● | Liquidation – In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the Holders shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of common shares and any other class or series of equity shares of the Company, an amount per share equal to the greater of (i) the stated value plus all accrued and unpaid dividends thereon or (ii) the amount that such Holder would receive if such Holder converts all of its shares of Series A convertible preferred shares into common shares immediately prior to such liquidation, dissolution or winding up. If, upon any such liquidation, dissolution or winding up, the assets and funds available for distribution among the Holders shall be insufficient to permit the payment to such Holders of the full preferential amount aforesaid, then the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the Holders in proportion to the amount that each such Holder is entitled to receive. After the payment of the full amount of the liquidation preference to which the Holders are entitled, the Holders shall have no right or claim to any of the remaining assets of the Company. |
| ● | Voting – The Series A convertible preferred shares shall have no voting rights. However, as long as any shares of Series A convertible preferred shares are outstanding, the Company shall not, without the affirmative vote of the Holders of a majority of the outstanding shares of Series A convertible preferred shares, and with each share of Series A convertible preferred shares having one vote on (i) alter or change adversely the powers, preferences or rights given to the Series A convertible preferred shares or alter or amend the Series A COD, (ii) issue additional shares of Series A convertible preferred shares or increase or decrease (other than by conversion) the number of authorized shares of Series A convertible preferred shares, or (iii) enter into any agreement with respect to any of the foregoing. |
| ● | Conversion – Each Holder shall have the right, at such Holder’s opinion, to convert any or all of the Series A convertible preferred shares held by such Holder into fully paid and nonassessable shares of common shares. The number of shares of common shares issuable upon conversion of each share of Series A convertible preferred shares shall be equal to the quotient obtained by dividing (i) the stated value plus all accrued and unpaid dividends thereon by (ii) % of the average of the two lowest volume weighted average price (“VWAP”) of the Company’s common shares for the five trading days immediately preceding the respective common shares conversion notice delivery date. |
| ● | Redemption – No share of Series A convertible preferred shares shall be redeemable under any circumstances. |
On
June 30, 2025, the Company entered into a securities purchase agreement and a registration rights agreement with Crom Structured Opportunities
Fund I, LP (“Crom Structured”), pursuant to which the Company closed, issued and sold to Crom Structured an aggregate of
shares of the Company’s designated Series A convertible preferred shares for an aggregate purchase price of $. Concurrently
with the signing of the securities purchase agreement, the Company issued shares of common shares (“ Common Shares”)
to Crom Structured for no consideration. The Company received net proceeds of $
| F-18 |
For the three and six months ended June 30, 2026, there were and shares of Series A convertible preferred shares converted into and shares of common shares, respectively. For the three and six months ended June 30, 2025, shares of Series A convertible preferred shares were converted into common shares.
For
the three and six months ended June 30, 2026, dividends accrued on Series A convertible preferred shares amounted to $
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 $
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 $
Concurrently
with the signing of the equity purchase agreement, the Company issued 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 $
For the three and six months ended June 30, 2026 and 2025, no common shares were sold pursuant to the terms of the equity purchase agreement.
Share Repurchase Program for Common Shares
On
February 18, 2026, the Board of Directors of the Company approved a share repurchase program (“2026 Share Repurchase Program”),
pursuant to which the Company is authorized to repurchase up to $
For the three and six months ended June 30, 2026, no common shares were repurchased pursuant to the 2026 Share Repurchase Program.
Reverse Stock Split for Common Shares
On March 4, 2026, the Board of Directors of the Company approved a reverse stock split (“2026 Reverse Stock Split”) of the Company’s issued and outstanding common shares at a ratio. The 2026 Reverse Stock Split was effective on April 2, 2026. The Company’s authorized number of shares and par value per share of common shares were not affected by the 2026 Reverse Stock Split. References made to share and per share information of common shares disclosed for all periods presented have been retroactively adjusted to reflect the effect of the 2026 Reverse Stock Split.
| F-19 |
Shares Issued and Outstanding
As of June 30, 2026 and December 31, 2025, there were and shares of common shares issued and outstanding, respectively.
As of June 30, 2026 and December 31, 2025, there were and shares of preferred shares (designated as Series A convertible preferred shares) issued and outstanding, respectively.
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.
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net income (loss) from continuing operations attributable to HeartCore Enterprises, Inc. per common share – basic | ||||||||||||||||
| Numerator | ||||||||||||||||
| Net income (loss) from continuing operations attributable to HeartCore Enterprises, Inc. common shareholders | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Denominator | ||||||||||||||||
| Weighted average number of common shares outstanding – basic | ||||||||||||||||
| Net income (loss) from continuing operations attributable to HeartCore Enterprises, Inc. per common share – basic | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Net income (loss) from continuing operations attributable to HeartCore Enterprises, Inc. per common share – diluted | ||||||||||||||||
| Numerator | ||||||||||||||||
| Net income (loss) from continuing operations attributable to HeartCore Enterprises, Inc. common shareholders | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Add: dividends accrued on unconverted Series A convertible preferred shares | ||||||||||||||||
| Less: changes in fair value of derivative liability, net of income tax | ||||||||||||||||
| Net income (loss) from continuing operations attributable to HeartCore Enterprises, Inc. – diluted | ( | ) | ( | ) | ( | ) | ||||||||||
| Denominator | ||||||||||||||||
| Weighted average number of common shares outstanding – diluted | ||||||||||||||||
| Net income (loss) from continuing operations attributable to HeartCore Enterprises, Inc. per common share – diluted | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| F-20 |
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Income (loss) from discontinued operations attributable to HeartCore Enterprises, Inc. per common share – basic | ||||||||||||||||
| Numerator | ||||||||||||||||
| Income (loss) from discontinued operations attributable to HeartCore Enterprises, Inc. | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Denominator | ||||||||||||||||
| Weighted average number of common shares outstanding – basic | ||||||||||||||||
| Income (loss) from discontinued operations attributable to HeartCore Enterprises, Inc. per common share – basic | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Income (loss) from discontinued operations attributable to HeartCore Enterprises, Inc. per common share – diluted | ||||||||||||||||
| Numerator | ||||||||||||||||
| Income (loss) from discontinued operations attributable to HeartCore Enterprises, Inc. | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Denominator | ||||||||||||||||
| Weighted average number of common shares outstanding – basic | ||||||||||||||||
| Dilutive effect of stock options, RSUs and Series A convertible preferred shares | ||||||||||||||||
| Weighted average number of common shares outstanding – diluted | ||||||||||||||||
| Income (loss) from discontinued operations attributable to HeartCore Enterprises, Inc. per common share – diluted | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net income (loss) attributable to HeartCore Enterprises, Inc. per common share – basic | ||||||||||||||||
| Numerator | ||||||||||||||||
| Net income (loss) attributable to HeartCore Enterprises, Inc. common shareholders | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Denominator | ||||||||||||||||
| Weighted average number of common shares outstanding – basic | ||||||||||||||||
| Net income (loss) attributable to HeartCore Enterprises, Inc. per common share – basic | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Net income (loss) attributable to HeartCore Enterprises, Inc. per common share – diluted | ||||||||||||||||
| Numerator | ||||||||||||||||
| Net income (loss) attributable to HeartCore Enterprises, Inc. common shareholders | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Add: dividends accrued on unconverted Series A convertible preferred shares | ||||||||||||||||
| Less: changes in fair value of derivative liability, net of income tax | ||||||||||||||||
| Net income (loss) attributable to HeartCore Enterprises, Inc. – diluted | ( | ) | ( | ) | ( | ) | ||||||||||
| Denominator | ||||||||||||||||
| Weighted average number of common shares outstanding – basic | ||||||||||||||||
| Dilutive effect of stock options, RSUs and Series A convertible preferred shares | ||||||||||||||||
| Weighted average number of common shares outstanding – diluted | ||||||||||||||||
| Net income (loss) attributable to HeartCore Enterprises, Inc. per common share – diluted | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| F-21 |
NOTE 12 – DISCONTINUED OPERATIONS
HeartCore Japan
On
July 24, 2025, in light of the intense competition of the software market in Japan, the Board of Directors of the Company approved to
enter into a non-binding letter of intent to sell
The following table summarizes the results of operations from discontinued operations, net of income tax for HeartCore Japan in the unaudited consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2025:
| For the Three Months Ended | For the Six Months Ended | |||||||
| June 30, 2025 | June 30, 2025 | |||||||
| Revenues | $ | $ | ||||||
| Cost of revenues | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling expenses | ||||||||
| General and administrative expenses | ||||||||
| Research and development expenses | ||||||||
| Total operating expenses | ||||||||
| Income from discontinued operations | ||||||||
| Other expenses | ( | ) | ( | ) | ||||
| Income from discontinued operations before income tax expense (benefit) | ||||||||
| Income tax expense (benefit) | ( | ) | ||||||
| Income from discontinued operations, net of income tax | $ | $ | ||||||
| F-22 |
Sigmaways and Its Wholly-owned Subsidiaries
On
March 5, 2026, in light of the intense competition of the software market in the United States, the Board of Directors of the
Company approved to sell
The following table summarizes the results of operations from discontinued operations, net of income tax for Sigmaways and its wholly-owned subsidiaries in the unaudited consolidated statements of operations and comprehensive income (loss) for the three and six months ended June 30, 2026 and 2025:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on sale of discontinued operations | ( | ) | ( | ) | ||||||||||||
| Loss from discontinued operations before income tax expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Loss from discontinued operations, net of income tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Less: loss from discontinued operations attributable to non-controlling interests | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from discontinued operations attributable to HeartCore Enterprises, Inc. | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| F-23 |
The following table summarizes the assets and liabilities of discontinued operations and non-controlling interests for Sigmaways and its wholly-owned subsidiaries in the consolidated balance sheets as of December 31, 2025:
| December 31, | ||||
| 2025 | ||||
| Assets of discontinued operations | ||||
| Cash and cash equivalents | $ | |||
| Accounts receivable | ||||
| Prepaid expenses | ||||
| Current portion of long-term note receivable | ||||
| Property and equipment, net | ||||
| Operating lease right-of-use assets | ||||
| Security deposits | ||||
| Total assets of discontinued operations | $ | |||
| Liabilities of discontinued operations | ||||
| Accounts payable and accrued expenses | $ | |||
| Accrued payroll and other employee costs | ||||
| Short-term debt – related party | ||||
| Current portion of long-term debts | ||||
| Factoring liability | ||||
| Operating lease liabilities, current | ||||
| Other current liabilities | ||||
| Long-term debts | ||||
| Total liabilities of discontinued operations | $ | |||
| Non-controlling interests | $ | ( | ) | |
Assets and liabilities classified as held for sale are reported at the lower of carrying amount or fair value less cost to sell. There was no valuation allowance against the assets classified as held for sale. As of the closing date of the sale of Sigmaways and its wholly-owned subsidiaries, the assets and liabilities classified as held for sale and non-controlling interests were derecognized and loss on sale of discontinued operations was recorded.
NOTE 13 – SEGMENT AND GEOGRAPHIC INFORMATION
Segment Information
Operating segments are defined as components of an entity for which discrete financial information is available and is regularly reviewed by the CODM, the CEO of the Company, in making decisions regarding resource allocation and performance assessment. The Company determines its operations constitute a single operating segment and reportable segment in accordance with ASC Topic 280. The CODM assesses financial performance and decides how to allocate resources based on consolidated net income (loss) from continuing operations. Segment assets are reported on the Company’s consolidated balance sheets.
| F-24 |
The following table summarizes the selected financial information with respect to the Company’s single operating segment and reportable segment for the three and six months ended June 30, 2026 and 2025:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Less: | ||||||||||||||||
| Software related cost of revenues | ||||||||||||||||
| Consulting related cost of revenues | ||||||||||||||||
| Selling expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income (expenses) | ( | ) | ( | ) | ( | ) | ||||||||||
| Income (loss) from continuing operations before income tax expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax expense | ||||||||||||||||
| Net income (loss) from continuing operations | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
Geographic Information
The following table summarizes the breakdown of revenues by geography for the three and six months ended June 30, 2026 and 2025:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Japan | $ | $ | $ | $ | ||||||||||||
| Vietnam | ||||||||||||||||
| Total revenues | $ | $ | $ | $ | ||||||||||||
The following table summarizes the breakdown of long-lived assets by geography as of June 30, 2026 and December 31, 2025:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Japan | $ | $ | ||||||
| Vietnam | ||||||||
| Total long-lived assets | $ | $ | ||||||
NOTE 14 – SUBSEQUENT EVENTS
On
July 10, 2026, the Company paid dividends on Series A convertible preferred shares of $
On July 23, 2026, Crom Structured converted shares of Series A convertible preferred shares into shares of common shares.
| F-25 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), provide a safe harbor for forward-looking statements made by us or on our behalf. We and our representatives may from time to time make written or oral statements that are “forward-looking,” including statements contained in this Quarterly Report on Form 10-Q and other filings with the Securities and Exchange Commission (“SEC”) and in our reports and presentations to stockholders or potential stockholders. In some cases, forward-looking statements can be identified by words such as “believe,” “expect,” “anticipate,” “plan,” “potential,” “continue” or similar expressions. Such forward-looking statements include risks and uncertainties and there are important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors, risks and uncertainties can be found in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as the same may be updated from time to time, including in Part II, Item 1A, “Risk Factors,” of this Quarterly Report on Form 10-Q.
Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, it is not possible to foresee or identify all factors that could have a material effect on the future financial performance of the Company. The forward-looking statements in this Quarterly Report on Form 10-Q are made on the basis of management’s assumptions and analyses, as of the time the statements are made, in light of their experience and perception of historical conditions, expected future developments and other factors believed to be appropriate under the circumstances.
Except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this Quarterly Report on Form 10-Q and the information incorporated by reference in this Quarterly Report on Form 10-Q to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.
Unless the context otherwise requires, references herein to “we,” “us” or the “Company” refer to HeartCore Enterprises, Inc. (“HeartCore USA”) and its consolidated subsidiaries, including HeartCore Financial, Inc. and its branch office in Japan, Higgs Field Co., Ltd., HeartCore Luvina Vietnam Company Limited (“HeartCore Luvina”), and Sigmaways, Inc. (“Sigmaways”) and its subsidiaries.
Business Overview
In 2022, HeartCore USA started the Go IPO business, which supports Japanese companies listing on The Nasdaq Stock Market (“Nasdaq”) and the New York Stock Exchange (“NYSE”) in the United States. As of June 30, 2026, we have entered into consulting agreements with 16 companies to assist them in their IPO process, whereby we are entitled to receive from each company a consulting fee that ranges from $380,000 to $900,000 and warrants or stock acquisition rights to purchase 1% to 4% of the fully-diluted share capital of such companies that is exercisable on certain dates at an exercise price of $0.01 or JPY1 per share.
Prior to November 2025, we were also a leading software development company based in Tokyo, Japan. We provided software through two business units. The first business unit, our CX division, included a customer experience management business (the “CXM Platform”). The second business unit, our DX division, was a digital transformation business which provided customers with robotics process automation, process mining and task mining to accelerate the digital transformation of enterprises. In 2025, we made the strategic decision to sell our software business assets in Japan and to concentrate our efforts on our Go IPO consulting business. On October 31, 2025, the Company entered into a Purchase Agreement (the “HeartCore Japan Agreement”) with Smith Japan Holdings KK (“Smith Japan”), pursuant to which the Company agreed to sell to Smith Japan, and Smith Japan agreed to purchase (the “HeartCore Japan Sale”), all of the outstanding equity interests of HeartCore Co., Ltd., a then-wholly owned subsidiary of the Company (“HeartCore Japan”). The HeartCore Japan Sale closed on October 31, 2025.
| 1 |
Go IPO Consulting Services
Since February 2022, we have been offering Go IPO consulting services, which include the following (collectively, the “Services”):
| ● | Assisting with introductions to law firms, underwriters and auditing firms, in order that clients can make their selections, at their sole discretion; | |
| ● | Assisting in the preparation of documentation for internal controls required for an initial public offering and simultaneous listing on the Nasdaq, the NYSE or the NYSE American; | |
| ● | Providing support services to remove problematic accounting accounts upon listing support; | |
| ● | Translation of requested documents into English; | |
| ● | Attend and, if requested by the other party, lead, meetings of management and employees; | |
| ● | Provide support services related to the Nasdaq, the NYSE or the NYSE American listing; | |
| ● | Conversion of accounting data from Japanese standards to accounting principles generally accepted in the U.S. (“U.S. GAAP”); | |
| ● | Assist in the preparation of S-1 or F-1 filings; | |
| ● | Creation of English web page; and | |
| ● | Preparing an investor presentation/deck and executive summary of the operations. |
In providing the Services, we do not provide investment advice regarding the value of securities, nor do we engage in the solicitation of investors or the negotiation of securities transactions. We do not provide accounting or legal advice, and we do not act as an investment advisor or broker-dealer.
Pursuant to the terms of the consulting agreements with our clients, the parties agree that we will not provide the following services, among others: negotiation of the sale of the issuers’ securities; participation in discussions between the issuers and potential investors; assisting in structuring any transactions involving the sale of the issuers’ securities; pre-screening of potential investors; due diligence activities; and providing advice relating to valuation of or financial advisability of any investments in the issuers. Additionally, we do not take part in the selection of, or negotiation of terms with, law firms, underwriters or audit firms. Such selection and negotiation is the sole responsibility of the client.
Pursuant to the terms of the consulting agreements with the issuers, the issuers agree to compensate us as follows in return for the provision of Services during the initial term of the consulting agreements:
| ● | A cash fee payable in installment payments; and | |
| ● | Issuance by issuers to us of warrants or stock acquisition rights to acquire a number of shares of capital stock of the issuer, to initially be equal to a designated percentage of the fully diluted share capital of the issuer, subject to adjustment as set forth in the warrants or stock acquisition rights. |
Recent Developments
Share Repurchase Program
During the first quarter of 2026, the Company’s Board of Directors (the “Board”) authorized a share repurchase program, pursuant to which the Company may repurchase up to $2.0 million of its outstanding shares of common stock. The Board authorized the Company to purchase its common stock from time to time on a discretionary basis through open market purchases, privately negotiated transactions or other means, including trading plans intended to qualify under Rule 10b5-1 of the Exchange Act, in accordance with applicable federal securities laws and other applicable legal requirements. The Company expects to fund these repurchases through existing cash balances. Decisions regarding the amount and the timing of purchases under the program will be influenced by the Company’s cash on hand, cash flows from operations, general market conditions and other factors, and the program may be modified, suspended or discontinued at any time. The Company is not obligated to acquire any particular amount of its common stock. This program has no set termination date. As of June 30, 2026 and August 13, 2026, the Company has repurchased an aggregate of nil and nil shares of common stock, respectively, for an aggregate purchase price of $0 and $0, respectively.
| 2 |
Reverse Stock Split
As previously disclosed, on June 30, 2025, the Company’s stockholders approved an amendment to the Company’s certificate of incorporation, as amended (the “Certificate of Incorporation”), to effectuate a reverse stock split of the Company’s outstanding shares of common stock, at a ratio of no less than 1-for-2 and no more than 1-for-30, with such ratio to be determined at the sole discretion of the Board. On March 4, 2026, the Board approved a 1-for-20 reverse stock split of the Company’s issued and outstanding common stock (the “Reverse Split”). Subsequently, the Company filed a certificate of amendment (the “Certificate of Amendment”) to its Certificate of Incorporation with the Secretary of State of the State of Delaware to effectuate the Reverse Split. The Certificate of Amendment was effective for state law purposes at 4:00 p.m. Eastern Time on April 2, 2026 (the “Effective Time”), after the close of trading on the Nasdaq Capital Market (“Nasdaq”), such that the Company’s common stock began trading on Nasdaq at market open on April 6, 2026, on a post-Reverse Split basis.
As of the Effective Time, issued and outstanding shares of the Company’s common stock were automatically reclassified such that each 20 shares of pre-Reverse Split common stock became one share of common stock, with any fractional shares of common stock resulting being rounded up to the nearest whole share of common stock. The authorized number of shares, and par value per share, of the Company’s common stock were not affected by the Reverse Split.
Compliance with Nasdaq Minimum Bid Price Requirement
As previously disclosed, on May 6, 2025, the Company received written notice (the “Bid Price Notice”) from the Nasdaq Staff indicating that the Company was not in compliance with the Minimum Bid Price Requirement. The notification of noncompliance had no immediate effect on the listing or trading of the Company’s common stock on the Nasdaq Capital Market. The Bid Price Notice indicated that the Company was provided 180 calendar days, or until November 3, 2025, in which to regain compliance. On November 4, 2025, the Nasdaq Staff notified the Company of its determination that the Company was eligible for an additional 180-day period, or until May 1, 2026, to regain compliance with the Minimum Bid Price Requirement.
On April 20, 2026, the Company received written notice from the Nasdaq Staff that the Company has regained compliance with the Minimum Bid Price Requirement and the matter has now been closed. Accordingly, the Company’s common stock continues to be listed and traded on the Nasdaq Capital Market.
Sale of 51% Interest in Sigmaways and Its Subsidiaries
On June 22, 2026, the Company entered into a Stock and Debt Purchase Agreement (the “Sigmaways Agreement”) with Semaphore Technologies, Inc. (“Semaphore”). Pursuant to the terms of the Sigmaways Agreement, the Company sold its entire 51% majority ownership interest in Sigmaways, Inc. (“Sigmaways”) and its subsidiaries, consisting of 229,500 shares of capital stock (the “Sigmaways Shares”).
The purchase price for the Sigmaways Shares is up to $650,000, which reflects the uncertain and disputed nature of the value and collectability of the underlying assets. Pursuant to the terms of the Sigmaways Agreement, the payments would be as follows:
| ● | A cash payment of $1,000 at closing; and | |
| ● | An earn-out amount of up to $649,000, payable within 10 days of the end of the 12-month period following closing, calculated as 10% of Sigmaways’ Gross Revenue (as defined in the Sigmaways Agreement) that exceeds $5,500,000. |
The closing of the transactions contemplated by the Sigmaways Agreement occurred on June 22, 2026. Following the closing, the Company has no further operational involvement or obligations with respect to Sigmaways.
The Sigmaways Agreement contains customary representations, warranties, and covenants, including a maximum liability cap equal to the amount actually paid to the Company (except in cases of fraud).
Sale of 51% Interest in HeartCore Luvina
On August 3, 2026, the Company entered into a Capital Contribution Portion Transfer Agreement (the “Transfer Agreement”) with Luvina Software Joint Stock Company (“Luvina”), our non-controlling shareholder of HeartCore Luvina. Pursuant to the terms of the Transfer Agreement, the Company agreed to sell its entire 51% ownership interest in Heartcore Luvina, together with all rights and obligations attaching thereto and accrued up to the date of the Transfer Agreement, to Luvina in exchange for JPY29,000,000 (approximately $184,093).
The closing of the transactions contemplated by the Transfer Agreement is expected to occur on or before August 14, 2026.
The Transfer Agreement contains customary representations, warranties, and covenants.
Financial Overview
For the three months ended June 30, 2026 and 2025, we generated revenues of $321,428 and $187,277, respectively, and reported a net loss from continuing operations of $1,550,289 and net income from continuing operations of $214,036, respectively.
For the six months ended June 30, 2026 and 2025, we generated revenues of $553,926 and $439,909, respectively, and reported a net loss from continuing operations of $3,283,511 and $2,730,959, respectively, and had net cash flows used in operating activities of continuing operations of $2,482,756 and $1,965,478, respectively. As noted in our unaudited consolidated financial statements, as of June 30, 2026, we had an accumulated deficit of $17,650,321.
| 3 |
Results of Operations
Comparison of Results of Operations for the Three Months Ended June 30, 2026 and 2025
The following table summarizes our operating results as reflected in our unaudited consolidated statements of operations and comprehensive income (loss) for the three months ended June 30, 2026 and 2025, respectively, and provides information regarding the dollar and percentage increase (or decrease) during such periods.
| For the Three Months Ended June 30, | ||||||||||||||||||||||||
| 2026 | 2025 | Variance | ||||||||||||||||||||||
| % of | % of | |||||||||||||||||||||||
| Amount | Revenues | Amount | Revenues | Amount | % | |||||||||||||||||||
| Revenues | $ | 321,428 | 100.0 | % | $ | 187,277 | 100.0 | % | $ | 134,151 | 71.6 | % | ||||||||||||
| Cost of revenues | 391,643 | 121.8 | % | 210,242 | 112.3 | % | 181,401 | 86.3 | % | |||||||||||||||
| Gross loss | (70,215 | ) | -21.8 | % | (22,965 | ) | -12.3 | % | 47,250 | 205.7 | % | |||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Selling expenses | 34,867 | 10.8 | % | 77,006 | 41.1 | % | (42,139 | ) | -54.7 | % | ||||||||||||||
| General and administrative expenses | 718,933 | 223.7 | % | 667,507 | 356.4 | % | 51,426 | 7.7 | % | |||||||||||||||
| Total operating expenses | 753,800 | 234.5 | % | 744,513 | 397.5 | % | 9,287 | 1.2 | % | |||||||||||||||
| Loss from continuing operations | (824,015 | ) | -256.3 | % | (767,478 | ) | -409.8 | % | 56,537 | 7.4 | % | |||||||||||||
| Other income (expenses) | (705,402 | ) | -219.5 | % | 987,487 | 527.3 | % | (1,692,889 | ) | -171.4 | % | |||||||||||||
| Income (loss) from continuing operations before income tax expense | (1,529,417 | ) | -475.8 | % | 220,009 | 117.5 | % | (1,749,426 | ) | -795.2 | % | |||||||||||||
| Income tax expense | 20,872 | 6.5 | % | 5,973 | 3.2 | % | 14,899 | 249.4 | % | |||||||||||||||
| Net income (loss) from continuing operations | (1,550,289 | ) | -482.3 | % | 214,036 | 114.3 | % | (1,764,325 | ) | -824.3 | % | |||||||||||||
| Income (loss) from discontinued operations, net of income tax | (489,230 | ) | -152.2 | % | 847,470 | 452.5 | % | (1,336,700 | ) | -157.7 | % | |||||||||||||
| Net income (loss) | (2,039,519 | ) | -634.5 | % | 1,061,506 | 566.8 | % | (3,101,025 | ) | -292.1 | % | |||||||||||||
| Less: net income from continuing operations attributable to non-controlling interests | 15,770 | 4.9 | % | 8,009 | 4.3 | % | 7,761 | 96.9 | % | |||||||||||||||
| Less: loss from discontinued operations attributable to non-controlling interests | (32,209 | ) | -10.0 | % | (46,405 | ) | -24.8 | % | (14,196 | ) | -30.6 | % | ||||||||||||
| Net income (loss) attributable to HeartCore Enterprises, Inc. | (2,023,080 | ) | -629.4 | % | 1,099,902 | 587.3 | % | (3,122,982 | ) | -283.9 | % | |||||||||||||
| Dividends accrued on Series A convertible preferred shares | (19,356 | ) | -6.0 | % | (611 | ) | -0.3 | % | 18,745 | 3,067.9 | % | |||||||||||||
| Net income (loss) attributable to HeartCore Enterprises, Inc. common shareholders | $ | (2,042,436 | ) | -635.4 | % | $ | 1,099,291 | 587.0 | % | $ | (3,141,727 | ) | -285.8 | % | ||||||||||
| 4 |
Revenues
Our revenues increased by $134,151, or 71.6%, to $321,428 for the three months ended June 30, 2026 from $187,277 for the three months ended June 30, 2025, attributable to an increase of $230,446 from software development services in connection with the additional customer orders obtained in HeartCore Luvina, our Vietnamese subsidiary, offset by a $96,295 decrease in revenue from Go IPO consulting services, primarily due to extension of IPO timeline by Go IPO customers during the current period.
Cost of Revenues
Our cost of revenues increased by $181,401, or 86.3%, to $391,643 for the three months ended June 30, 2026 from $210,242 for the three months ended June 30, 2025, attributable to an increase of $91,142 in the cost of software development services in light of the increase in sales; and an increase of $90,259 in the costs of Go IPO consulting services, as we as spent more efforts and resources and incurred more outsourcing fees for Go IPO consulting services to enhance our Go IPO consulting customers experience with us.
Gross Loss
Our gross loss increased by $47,250, or 205.7%, to $70,215 for the three months ended June 30, 2026 from $22,965 for the three months ended June 30, 2025, attributable to an increase of $186,554 in gross loss from our Go IPO consulting services, as we as spent more efforts and resources and incurred more outsourcing fees for Go IPO consulting services to enhance our Go IPO consulting customers experience with us, resulted in gross loss during the current period; offset by an increase of $139,304 in gross profit from our software development services as we implemented cost control policy and enhanced efficiency in rendering such services, resulted in gross profit during the current period.
For the reasons discussed above, our overall gross loss percentage increased by 9.5% to 21.8% for the three months ended June 30, 2026 from 12.3% for the three months ended June 30, 2025.
Selling Expenses
Our selling expenses decreased by $42,139, or 54.7%, to $34,867 for the three months ended June 30, 2026 from $77,006 for the three months ended June 30, 2025, primarily attributable to a decrease of $30,547 in advertising and referral expenses, as we reduced certain marketing and referral activities and cancelled promotion campaigns with lower advertising performance during the current period.
General and Administrative Expenses
Our general and administrative expenses increased by $51,426, or 7.7%, to $718,933 for the three months ended June 30, 2026 from $667,507 for the three months ended June 30, 2025, primarily attributable to (i) an increase of $56,080 in rental expenses mainly due to our relocation to an office with higher rental fees during the current period; partially offset by (ii) a decrease of $10,713 in office, utility and other expenses as we implemented expense saving policy to cut down various operating expenses in order to save operating cash flows during the current period.
Other Income (Expenses), Net
Our other income (expenses) includes changes in fair value of investments in marketable securities, changes in fair value of investment in warrants, changes in fair value of derivative liability, interest income generated from bank deposits, interest expenses for insurance premium financing, other income, and other expenses. Total other income (expenses), net decreased by $1,692,889, or 171.4%, to $705,402, total other expenses, net for the three months ended June 30, 2026, from total other income, net of $987,487 for the three months ended June 30, 2025, primarily attributable to a decrease of $1,374,203 in changes in fair value of investments in marketable securities and a decrease of $133,851 in change in fair value of investment in warrants due to fair value measurement across periods.
Income Tax Expense
Our income tax expense was minimal, which were $20,872 and $5,973 for the three months ended June 30, 2026 and 2025, respectively, as we incurred pre-tax loss positions and/or had sufficient net operating losses carry forward to offset taxable income position.
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Income (Loss) from Discontinued Operations, Net of Income Tax
On October 31, 2025, the Company entered into the HeartCore Japan Agreement with Smith Japan in relation to the sale of 100% equity interest in HeartCore Co., Ltd. The HeartCore Co., Ltd. sale closed on October 31, 2025. On June 22, 2026, the Company entered into the Sigmaways Agreement with Semaphore in relation to the sale of 51% equity interest in Sigmaways and its subsidiaries. The Sigmaways and its subsidiaries sale closed on June 22, 2026.
The results of operations of HeartCore Co., Ltd. and Sigmaways and its subsidiaries are reported as discontinued operations for all periods presented, as the sale of HeartCore Co., Ltd. and Sigmaways and its subsidiaries represented strategic shift that had major impact on the Company’s operations and financial results. We reported a loss from discontinued operations, net of income tax, of $489,230 and an income from discontinued operations, net of income tax, of $847,470 for the three months ended June 30, 2026 and 2025, respectively.
Net Income from Continuing Operations Attributable to Non-controlling Interests
We owned a 51% equity interest of HeartCore Luvina. Accordingly, we recorded net income from continuing operations attributable to non-controlling interests of $15,770 and $8,009 for the three months ended June 30, 2026 and 2025, respectively.
Loss from Discontinued Operations Attributable to Non-controlling Interests
As mentioned above, we owned a 51% equity interest of Sigmaways and its subsidiaries before disposal on June 22, 2026. Accordingly, we recorded loss from discontinued operations attributable to non-controlling interests of $32,209 and $46,405 for the three months ended June 30, 2026 and 2025, respectively.
Dividends Accrued on Series A Convertible Preferred Shares
On June 30, 2025, we issued 2,000 shares of Series A convertible preferred shares, which were granted a cumulative dividend of 10% per annum. Accordingly, we recorded dividends accrued on Series A convertible preferred shares of $19,356 and $611 for the three months ended June 30, 2026 and 2025, respectively.
Net Income (Loss) Attributable to HeartCore Enterprises, Inc. Common Shareholders
As a result of the foregoing, we reported a net loss attributable to HeartCore Enterprises, Inc. common shareholders of $2,042,436 for the three months ended June 30, 2026, representing a $3,141,727, or 285.8%, decrease from a net income attributable to HeartCore Enterprises, Inc. common shareholders of $1,099,291 for the three months ended June 30, 2025.
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Comparison of Results of Operations for the Six Months Ended June 30, 2026 and 2025
The following table summarizes our operating results as reflected in our unaudited consolidated statements of operations and comprehensive income (loss) for the six months ended June 30, 2026 and 2025, respectively, and provides information regarding the dollar and percentage increase (or decrease) during such periods.
| For the Six Months Ended June 30, | ||||||||||||||||||||||||
| 2026 | 2025 | Variance | ||||||||||||||||||||||
| % of | % of | |||||||||||||||||||||||
| Amount | Revenues | Amount | Revenues | Amount | % | |||||||||||||||||||
| Revenues | $ | 553,926 | 100.0 | % | $ | 439,909 | 100.0 | % | $ | 114,017 | 25.9 | % | ||||||||||||
| Cost of revenues | 732,056 | 132.2 | % | 365,142 | 83.0 | % | 366,914 | 100.5 | % | |||||||||||||||
| Gross profit (loss) | (178,130 | ) | -32.2 | % | 74,767 | 17.0 | % | (252,897 | ) | -338.2 | % | |||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Selling expenses | 69,203 | 12.5 | % | 214,596 | 48.8 | % | (145,393 | ) | -67.8 | % | ||||||||||||||
| General and administrative expenses | 1,888,888 | 341.0 | % | 1,708,906 | 388.4 | % | 179,982 | 10.5 | % | |||||||||||||||
| Total operating expenses | 1,958,091 | 353.5 | % | 1,923,502 | 437.2 | % | 34,589 | 1.8 | % | |||||||||||||||
| Loss from continuing operations | (2,136,221 | ) | -385.7 | % | (1,848,735 | ) | -420.2 | % | 287,486 | 15.6 | % | |||||||||||||
| Other expenses | (1,108,949 | ) | -200.2 | % | (836,643 | ) | -190.2 | % | 272,306 | 32.5 | % | |||||||||||||
| Loss from continuing operations before income tax expense | (3,245,170 | ) | -585.9 | % | (2,685,378 | ) | -610.4 | % | 559,792 | 20.8 | % | |||||||||||||
| Income tax expense | 38,341 | 6.9 | % | 45,581 | 10.4 | % | (7,240 | ) | -15.9 | % | ||||||||||||||
| Net loss from continuing operations | (3,283,511 | ) | -592.8 | % | (2,730,959 | ) | -620.8 | % | 552,552 | 20.2 | % | |||||||||||||
| Income (loss) from discontinued operations, net of income tax | (732,723 | ) | -132.3 | % | 655,084 | 148.9 | % | (1,387,807 | ) | -211.9 | % | |||||||||||||
| Net loss | (4,016,234 | ) | -725.1 | % | (2,075,875 | ) | -471.9 | % | 1,940,359 | 93.5 | % | |||||||||||||
| Less: net income from continuing operations attributable to non-controlling interests | 30,074 | 5.4 | % | 18,888 | 4.3 | % | 11,186 | 59.2 | % | |||||||||||||||
| Less: loss from discontinued operations attributable to non-controlling interests | (151,521 | ) | -27.4 | % | (107,673 | ) | -24.5 | % | 43,848 | 40.7 | % | |||||||||||||
| Net loss attributable to HeartCore Enterprises, Inc. | (3,894,787 | ) | -703.1 | % | (1,987,090 | ) | -451.7 | % | 1,907,697 | 96.0 | % | |||||||||||||
| Dividends accrued on Series A convertible preferred shares | (47,324 | ) | -8.5 | % | (611 | ) | -0.1 | % | 46,713 | 7,645.3 | % | |||||||||||||
| Net loss attributable to HeartCore Enterprises, Inc. common shareholders | $ | (3,942,111 | ) | -711.6 | % | $ | (1,987,701 | ) | -451.8 | % | $ | 1,954,410 | 98.3 | % | ||||||||||
| 7 |
Revenues
Our revenues increased by $114,017, or 25.9%, to $553,926 for the six months ended June 30, 2026 from $439,909 for the six months ended June 30, 2025, attributable to an increase of $430,108 from software development services in connection with the additional customer orders obtained in HeartCore Luvina, our Vietnamese subsidiary, offset by a $316,091 decrease in revenue from Go IPO consulting services, primarily due to extension of IPO timeline by Go IPO customers during the current period.
Cost of Revenues
Our cost of revenues increased by $366,914, or 100.5%, to $732,056 for the six months ended June 30, 2026 from $365,142 for the six months ended June 30, 2025, attributable to an increase of $197,731 in the cost of software development services in light of the increase in sales; and an increase of $169,183 in the costs of Go IPO consulting services, as we as spent more efforts and resources and incurred more outsourcing fees for Go IPO consulting services to enhance our Go IPO consulting customers experience with us.
Gross Profit (Loss)
Our gross profit (loss) decreased by $252,897, or 338.2%, to gross loss of $178,130 for the six months ended June 30, 2026 from gross profit of $74,767 for the six months ended June 30, 2025, attributable to a decrease of $485,274 in gross loss from our Go IPO consulting services, as we as spent more efforts and resources to enhance our Go IPO consulting customers experience with us, resulted in gross loss during the current period; offset by an increase of $232,377 in gross profit from our software development services as we implemented cost control policy and enhanced efficiency in rendering such services, resulted in gross profit during the current period.
For the reasons discussed above, our overall gross profit (loss) percentage decreased by 49.2% to -32.2% for the six months ended June 30, 2026 from 17.0% for the six months ended June 30, 2025.
Selling Expenses
Our selling expenses decreased by $145,393, or 67.8%, to $69,203 for the six months ended June 30, 2026 from $214,596 for the six months ended June 30, 2025, primarily attributable to a decrease of $118,938 in advertising and referral expenses, as we reduced certain marketing and referral activities and cancelled promotion campaigns with lower advertising performance during the current period.
General and Administrative Expenses
Our general and administrative expenses increased by $179,982, or 10.5%, to $1,888,888 for the six months ended June 30, 2026 from $1,708,906 for the six months ended June 30, 2025, primarily attributable to (i) an increase of $115,880 in salaries and welfare expenses due to the establishment of the new wholly-owned subsidiary, Higgs Field Co., Ltd.; (ii) an increase of $97,505 in rental expenses mainly due to our relocation to an office with higher rental fees during the current period; partially offset by (iii) a decrease of $59,399 in office, utility and other expenses as we implemented expense saving policy to cut down various operating expenses in order to save operating cash flows during the current period.
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Other Expenses, Net
Our other income (expenses) includes changes in fair value of investments in marketable securities, changes in fair value of investment in warrants, changes in fair value of derivative liability, interest income generated from bank deposits, interest expenses for insurance premium financing, other income, and other expenses. Total other expenses, net increased by $272,306, or 32.5%, to $1,108,949 for the six months ended June 30, 2026, from $836,643 for the six months ended June 30, 2025, primarily attributable to an increase of $348,473 in other expenses, which mainly contributed by foreign currency exchange loss for proceeds receivable from sale of discontinued operations of HeartCore Co., Ltd. which was denominated in Japanese Yen and Japanese Yen to US$ exchange rate depreciated during the current period, partially offset by a decrease of $111,464 in loss on fair value changes of investments in marketable securities due to fair value measurement across periods.
Income Tax Expense
Our income tax expense was minimal, which were $38,341 and $45,581 for the six months ended June 30, 2026 and 2025, respectively, as we incurred pre-tax loss positions.
Income (Loss) from Discontinued Operations, Net of Income Tax
On October 31, 2025, the Company entered into the HeartCore Japan Agreement with Smith Japan in relation to the sale of 100% equity interest in HeartCore Co., Ltd. The HeartCore Co., Ltd. sale closed on October 31, 2025. On June 22, 2026, the Company entered into the Sigmaways Agreement with Semaphore in relation to the sale of 51% equity interest in Sigmaways and its subsidiaries. The Sigmaways and its subsidiaries sale closed on June 22, 2026.
The results of operations of HeartCore Co., Ltd. and Sigmaways and its subsidiaries are reported as discontinued operations for all periods presented, as the sale of HeartCore Co., Ltd. and Sigmaways and its subsidiaries represented strategic shift that had major impact on the Company’s operations and financial results. We reported a loss from discontinued operations, net of income tax, of $732,723 and an income from discontinued operations, net of income tax, of $655,084 for the six months ended June 30, 2026 and 2025, respectively.
Net Income from Continuing Operations Attributable to Non-controlling Interests
We owned a 51% equity interest of HeartCore Luvina. Accordingly, we recorded net income from continuing operations attributable to non-controlling interests of $30,074 and $18,888 for the six months ended June 30, 2026 and 2025, respectively.
| 9 |
Loss from Discontinued Operations Attributable to Non-controlling Interests
As mentioned above, we owned a 51% equity interest of Sigmaways and its subsidiaries before disposal on June 22, 2026. Accordingly, we recorded loss from discontinued operations attributable to non-controlling interests of $151,521 and $107,673 for the six months ended June 30, 2026 and 2025, respectively.
Dividends Accrued on Series A Convertible Preferred Shares
On June 30, 2025, we issued 2,000 shares of Series A convertible preferred shares, which were granted a cumulative dividend of 10% per annum. Accordingly, we recorded dividends accrued on Series A convertible preferred shares of $47,324 and $611 for the six months ended June 30, 2026 and 2025, respectively.
Net Loss Attributable to HeartCore Enterprises, Inc. Common Shareholders
As a result of the foregoing, we reported a net loss attributable to HeartCore Enterprises, Inc. common shareholders of $3,942,111 for the six months ended June 30, 2026, representing a $1,954,410, or 98.3%, increase from a net loss attributable to HeartCore Enterprises, Inc. common shareholders of $1,987,701 for the six months ended June 30, 2025.
Liquidity and Capital Resources
As of June 30, 2026, we had $587,074 in cash and cash equivalents, as compared to $1,904,826 as of December 31, 2025. We also had $62,770 in accounts receivable as of June 30, 2026.
As of June 30, 2026, our working capital was $604,040. In assessing our liquidity, management monitors and assesses our cash and cash equivalents, our ability to generate sufficient revenues in the future, and our operating and capital expenditure commitments.
The following table sets forth a summary of our cash flows for the periods indicated:
| For the Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Net cash flows used in operating activities of continuing operations | $ | (2,482,756 | ) | $ | (1,965,478 | ) | ||
| Net cash flows provided by investing activities of continuing operations | 345,054 | 1,071,732 | ||||||
| Net cash flows provided by (used in) financing activities of continuing operations | (55,103 | ) | 1,977,755 | |||||
| Net cash flows provided by (used in) discontinued operations | 810,667 | (896,498 | ) | |||||
| Effect of exchange rate changes | (16,750 | ) | 39,022 | |||||
| Net change in cash and cash equivalents | (1,398,888 | ) | 226,533 | |||||
| Cash and cash equivalents, beginning of the period | 1,985,962 | 2,121,089 | ||||||
| Cash and cash equivalents, end of the period | $ | 587,074 | $ | 2,347,622 | ||||
Cash Flows from Operating Activities of Continuing Operations
Net cash flows used in operating activities of continuing operations was $2,482,756 for the six months ended June 30, 2026, primarily consisting of the following:
| ● | Net loss from continuing operations of $3,283,511 for the six months ended June 30, 2026; | |
| ● | A decrease of $107,443 in deferred revenue due to recognition of revenues from deferred revenues during the six months ended June 30, 2026; | |
| ● | Offset by loss of $817,491 on fair value changes in investments in marketable securities due to fair value measurement; | |
| ● | Offset by a non-cash lease expenses of $133,553. |
| 10 |
Net cash flows used in operating activities of continuing operations was $1,965,478 for the six months ended June 30, 2025, primarily consisting of the following:
| ● | Net loss from continuing operations of $2,730,959 for the six months ended June 30, 2025; | |
| ● | A decrease of $190,163 in deferred revenue due to recognition of revenues from deferred revenues during the six months ended June 30, 2025; | |
| ● | Offset by loss of $928,955 on fair value changes in investments in marketable securities due to fair value measurement. |
Cash Flows from Investing Activities of Continuing Operations
Net cash flows provided by investing activities of continuing operations amounted to $345,054 for the six months ended June 30, 2026, primarily consisting of proceeds of $346,894 from sale of marketable securities.
Net cash flows provided by investing activities of continuing operations amounted to $1,071,732 for the six months ended June 30, 2025, for proceeds from sale of marketable securities.
Cash Flows from Financing Activities of Continuing Operations
Net cash flows used in financing activities of continuing operations amounted to $55,103 for the six months ended June 30, 2026, for repayment of insurance premium financing.
Net cash flows provided by financing activities of continuing operations amounted to $1,977,755 for the six months ended June 30, 2025, primarily consisting of proceeds of $1,800,000 from issuance of Series A convertible preferred shares and common shares related to securities purchase agreement, net of share issuance costs and proceeds of $117,000 from exercise of stock options.
Cash Flows from Discontinued Operations
Net cash flows provided by discontinued operations amounted to $810,667 for the six months ended June 30, 2026.
Net cash flows used in discontinued operations amounted to $896,498 for the six months ended June 30, 2025.
Contractual Obligations
Lease Commitment
The Company has entered into operating leases for office space. As of June 30, 2026, the future maturity of lease liabilities is as follows:
| Operating | ||||
| Year Ended December 31, | Leases | |||
| Remaining of 2026 | $ | 144,328 | ||
| 2027 | 279,074 | |||
| 2028 | - | |||
| 2029 | - | |||
| 2030 | - | |||
| Thereafter | - | |||
| Total lease payments | 423,402 | |||
| Less: imputed interest | (3,982 | ) | ||
| Total lease liabilities | 419,420 | |||
| Less: current portion | (280,326 | ) | ||
| Non-current lease liabilities | $ | 139,094 | ||
| 11 |
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of June 30, 2026.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our unaudited consolidated financial statements. These unaudited consolidated financial statements are prepared in accordance with the generally accepted accounting principles in the United States (“U.S. GAAP”), which requires us to make estimates and assumptions that affect the reported amounts of our assets and liabilities and revenues and expenses, to disclose contingent assets and liabilities on the date of the unaudited consolidated financial statements, and to disclose the reported amounts of revenues and expenses incurred during the financial reporting period. We continue to evaluate the estimates and assumptions that we believe to be reasonable under the circumstances. We rely on these evaluations as the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. We believe there are no critical accounting policies and estimates for the six months ended June 30, 2026.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2026. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2026, our disclosure controls and procedures were not effective, for the same reason as previously disclosed under Item 9A. “Controls and Procedures” in our Annual Report on Form 10-K for our fiscal year ended December 31, 2025, as filed with the SEC on March 31, 2026, as the same may be amended from time to time.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 of the Exchange Act that occurred during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are involved in various claims and legal actions arising in the ordinary course of business. To the knowledge of our management, there are no legal proceedings currently pending against us which we believe would have a material effect on our business, financial position or results of operations and, to the best of our knowledge, there are no such legal proceedings contemplated or threatened.
ITEM 1A. RISK FACTORS
Following the strategic disposition of Sigmaways and its subsidiaries, our revenue has become concentrated among a smaller number of key customers. The loss of, or a material reduction in business from, any of these customers, or a failure to collect outstanding receivables, could have a material adverse effect on our business, financial condition, and results of operations.
On June 22, 2026, we completed the sale of our entire 51% majority interest in Sigmaways and its subsidiaries. Following this transaction, we no longer consolidate or derive revenue from Sigmaways and its subsidiaries’ operational activities.
Prior to the disposition, a significant portion of our consolidated revenue was derived through Sigmaways and its subsidiaries. Following the sale of Sigmaways and its subsidiaries, our revenue from continuing operations is now significantly more concentrated among a smaller group of customers. For the three and six months ended June 30, 2026, a limited number of customers accounted for a substantial majority of our revenues and outstanding accounts receivable. If we fail to retain these key clients or if they reduce their commitments, our consolidated revenue will decline disproportionately. Our revenues and cash flows may experience heightened volatility, making financial performance less predictable from period to period
Our accounts receivable is concentrated among a small number of customers. Any deterioration in the financial condition or liquidity of these key customers, or general macroeconomic weakness in our primary geographic markets, could increase our credit risk and result in significant delay, default, or non-payment of outstanding accounts receivable.
Furthermore, the consideration of the disposition of Sigmaways and its subsidiaries consists of $1,000 upfront cash consideration and an earn-out consideration of up to $649,000 contingent on post-closing gross revenue thresholds over 12 months. We cannot provide assurance that any earn-out consideration will be realized.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Between April 6, 2026 and July 23, 2026, the Company issued an aggregate of 201,830 shares of common shares upon the conversion of an aggregate of 500 shares of the Company’s Series A convertible preferred shares.
On July 10, 2026, the Company issued 24,686 shares of common shares upon the conversion of accrued dividends payable on the Company’s Series A convertible preferred shares.
Each of the issuances described above was made in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder. Each recipient represented to the Company that it was an “accredited investor” as defined in Rule 501(a) of Regulation D, was acquiring the securities for investment and not with a view to, or for resale in connection with, any distribution thereof, and had access to information about the Company sufficient to make an informed investment decision. The book-entry positions representing the shares are subject to customary restrictive legends under the Securities Act. No underwriting discounts or commissions were paid in connection with these issuances, and there was no general solicitation or advertising.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There have been no defaults in any material payments during the covered period.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
(a) None.
(b) There have been no material changes to the procedures by which security holders may recommend nominees to our Board of Directors since we last provided disclosure in response to the requirements of Item 407(c)(3) of Regulation S-K.
(c)
During the quarter ended June 30, 2026, no HeartCore USA director or officer
ITEM 6. EXHIBITS
| * | Filed herewith. |
| ** | Furnished herewith. |
| 13 |
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
| HEARTCORE ENTERPRISES, INC. | ||
| Dated: August 13, 2026 | By: | /s/ Sumitaka Yamamoto |
| Sumitaka Yamamoto | ||
| Chief Executive Officer and President (principal executive officer) | ||
| Dated: August 13, 2026 | By: | /s/ Qizhi Gao |
| Qizhi Gao | ||
| Chief Financial Officer (principal financial officer and principal accounting officer) | ||
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