HeartCore Enterprises, Inc.: Form 10-Q for the period ended Jun 30, 2026
Filed with the SEC on Aug 13, 2026 and accepted by EDGAR at Aug 13, 2026, 08:32 ET.
Management's discussion and analysis
As filed, 38,670 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
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.
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.
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.
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 Amount | % of Revenues | 2025 Amount | % of Revenues | Variance 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.
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.
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 Amount | % of Revenues | 2025 Amount | % of Revenues | Variance 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.
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.
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:
| Year Ended December 31, | Operating 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.
Controls and procedures
As filed, 1,132 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
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.
Risk factors
As filed, 2,038 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
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.
Figures reported in this filing
Standardized line items from the XBRL in this filing, for the period ended 2026-06-30. Comparative periods it repeats are left out.
| Line item | Period | Value | XBRL concept |
|---|---|---|---|
| Revenue | 3 months2026-04-01 to 2026-06-30 | $321.4k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months2026-01-01 to 2026-06-30 | $553.9k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months2026-04-01 to 2026-06-30 | $391.6k | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months2026-01-01 to 2026-06-30 | $732.1k | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months2026-04-01 to 2026-06-30 | −$70.2k | us-gaap:GrossProfit |
| Gross profit | 6 months2026-01-01 to 2026-06-30 | −$178.1k | us-gaap:GrossProfit |
| Operating income | 3 months2026-04-01 to 2026-06-30 | −$824.0k | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months2026-01-01 to 2026-06-30 | −$2.1m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months2026-04-01 to 2026-06-30 | $3.1k | us-gaap:InterestExpenseNonoperating |
| Interest expense | 6 months2026-01-01 to 2026-06-30 | $4.5k | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months2026-04-01 to 2026-06-30 | $20.9k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months2026-01-01 to 2026-06-30 | $38.3k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months2026-04-01 to 2026-06-30 | −$2.0m | us-gaap:NetIncomeLoss |
| Net income | 6 months2026-01-01 to 2026-06-30 | −$3.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months2026-04-01 to 2026-06-30 | −$1.45 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months2026-01-01 to 2026-06-30 | −$2.94 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months2026-04-01 to 2026-06-30 | −$1.45 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months2026-01-01 to 2026-06-30 | −$2.94 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months2026-04-01 to 2026-06-30 | 1,410,386 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months2026-01-01 to 2026-06-30 | 1,341,297 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months2026-01-01 to 2026-06-30 | −$2.5m | us-gaap:NetCashProvidedByUsedInOperatingActivitiesContinuingOperations |
| Capital expenditure | 6 months2026-01-01 to 2026-06-30 | $1.8k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | At period end2026-06-30 | $587.1k | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | At period end2026-06-30 | $4.3m | us-gaap:AssetsCurrent |
| Total assets | At period end2026-06-30 | $8.9m | us-gaap:Assets |
| Current liabilities | At period end2026-06-30 | $3.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | At period end2026-06-30 | $3.8m | us-gaap:Liabilities |
| Shareholders' equity | At period end2026-06-30 | $4.9m | us-gaap:StockholdersEquity |
Source: SEC EDGAR, the filing index for accession 0001493152-26-037604. Last ingested by Listed: Oct 24, 2026, 15:16 ET. Listed shows no prices and gives no investment advice.