HeartCore Enterprises, Inc. (HTCR) - 10-K Summary
Business Context and Reporting Period
Reporting Period: Fiscal year ended December 31, 2025.
Company Overview: HeartCore Enterprises, Inc. is a Delaware holding company that has strategically pivoted from a software development business to a specialized "Go IPO" consulting firm. The company assists private Japanese companies in listing on U.S. exchanges (Nasdaq, NYSE). As of December 31, 2025, the company had 16 active consulting agreements.
Key Strategic Shifts:
- Divestiture of Software Business: On October 31, 2025, the company sold its Japanese software subsidiary, HeartCore Co., Ltd. ("HeartCore Japan"), to Smith Japan Holdings KK for approximately $12 million. This operation is now reported as discontinued operations.
- New Subsidiary: Established Higgs Field Co., Ltd. in October 2025 to pursue financial services and digital securities consulting in Japan.
- Asset Review: The company is assessing strategic alternatives to divest its 51% interest in Sigmaways, Inc., a U.S. software subsidiary.
Key Financial Metrics
| Metric | 2025 | 2024 | Variance |
|---|---|---|---|
| Total Revenues | $8,968,732 | $22,685,544 | -60.5% |
| Gross Profit | $3,151,453 | $14,715,646 | -78.6% |
| Gross Margin | 35.1% | 64.9% | -29.8 pts |
| Net Loss from Continuing Ops | $(4,184,005) | $(5,148,651) | Improvement of $964k |
| Income from Discontinued Ops | $9,677,293 | $(64,249) | Significant Increase |
| Net Income (Total) | $5,493,288 | $(5,212,900) | Turnaround to Profit |
| Cash and Equivalents (Year End) | $1,985,962 | $2,121,089 | -$135,127 |
| Working Capital | $3,085,642 | N/A | N/A |
Revenue Composition (2025): Consulting services ($1.91M), Customized software ($6.86M), and Software development ($0.20M). The decline in consulting revenue was primarily due to the absence of a large non-cash consideration deal recognized in 2024.
Material Changes vs. Prior Period
- Revenue Decline: Total revenue dropped 60.5% year-over-year. This was driven by a $12.8M decrease in consulting revenue (due to the lack of a large non-cash warrant deal in 2025 compared to 2024) and a $1.0M decrease in customized software revenue.
- Operating Expenses: Total operating expenses decreased by 57.8% to $6.27M. This reduction was largely due to the elimination of $7.15M in impairment charges (goodwill and intangible assets) recorded in 2024 related to the Sigmaways acquisition.
- Discontinued Operations: The sale of HeartCore Japan resulted in a $9.68M gain from discontinued operations, which turned the company's overall net result from a loss in 2024 to a profit in 2025.
- Stock Distribution: The company paid a one-time distribution of $0.13 per share to stockholders in November 2025, totaling approximately $3.3M.
Guidance, Outlook, Risks, and Unusual Items
Outlook and Guidance: The filing does not provide specific forward-looking financial guidance. Management is focused on the "Go IPO" consulting pipeline and potential divestiture of Sigmaways.
Material Risks:
- Nasdaq Compliance: The company received a notice of non-compliance with the $1.00 minimum bid price requirement. It was granted an additional 180-day period (until May 1, 2026) to regain compliance. Failure to do so could result in delisting.
- Revenue Volatility: Revenue is highly dependent on the timing of IPO completions and the valuation of non-cash consideration (warrants), leading to significant quarterly fluctuations.
- Internal Controls: Management concluded that disclosure controls and procedures were not effective as of December 31, 2025, citing a material weakness regarding a lack of sufficient financial reporting personnel with U.S. GAAP expertise.
- Regulatory: Risks associated with operating in Japan and the U.S., including potential classification as an unregistered broker-dealer or investment adviser.
Unusual Items:
- Non-Cash Consideration: Revenue recognition is heavily influenced by the fair value of warrants received from clients, which are subject to significant valuation adjustments.
- Share Repurchase: In February 2026, the Board approved a $2.0 million share repurchase program.
Investor Verification Checklist
- Nasdaq Status: Verify if the company has regained compliance with the $1.00 minimum bid price requirement by May 1, 2026, to avoid delisting.
- Internal Control Remediation: Review subsequent filings for updates on the remediation plan for the material weakness in internal controls over financial reporting.
- Sigmaways Divestiture: Monitor for definitive agreements regarding the sale of the 51% interest in Sigmaways, Inc., as this impacts future revenue streams.
- Warrant Valuation: Scrutinize the valuation methodology for warrants received as non-cash consideration, as this significantly impacts reported revenue and fair value adjustments.
- Cash Flow Sustainability: Assess the company's ability to fund operations given the net cash used in operating activities of continuing operations ($3.1M) and the reliance on the sale of discontinued operations for recent profitability.