HeartCore Enterprises, Inc. - 10-Q Summary (Period Ended June 30, 2026)
Business Context and Reporting Period
This is a Quarterly Report (Form 10-Q) for HeartCore Enterprises, Inc. for the period ended June 30, 2026. The Company is a holding company engaged in software development and "Go IPO" consulting services for Japanese companies listing in the U.S. The reporting period reflects a significant strategic shift, as the Company sold its Japanese software subsidiary (HeartCore Japan) in October 2025 and its U.S. software subsidiary (Sigmaways) in June 2026. Both divestitures are classified as discontinued operations.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2026 | Six Months Ended June 30, 2026 |
|---|---|---|
| Revenues (Continuing Ops) | $321,428 | $553,926 |
| Net Loss (Continuing Ops) | $(1,550,289) | $(3,283,511) |
| Net Loss (Total, incl. Discontinued) | $(2,039,519) | $(4,016,234) |
| Net Loss Attributable to Common Shareholders | $(2,042,436) | $(3,942,111) |
| Cash and Cash Equivalents (End of Period) | $587,074 | |
| Working Capital | $604,040 | |
| Accumulated Deficit | $(17,650,321) | |
| Operating Cash Flow (Continuing Ops) | $(2,482,756) (Six Months) |
Material Changes vs. Prior Period
- Revenue Mix Shift: Revenues from continuing operations increased 71.6% quarter-over-quarter and 25.9% year-over-year (six months). This growth was driven by software development services in Vietnam (HeartCore Luvina), which offset a significant decline in Go IPO consulting revenue due to extended client IPO timelines.
- Profitability Deterioration: The Company reported a gross loss of $70,215 for the quarter and $178,130 for the six months, compared to a gross profit of $74,767 in the prior year's six-month period. This was primarily due to increased outsourcing costs for consulting services.
- Discontinued Operations Impact: The sale of Sigmaways (closed June 22, 2026) resulted in a loss on sale of discontinued operations of $423,496. The Company received only $1,000 in upfront cash, with the remaining $649,000 contingent on future performance milestones deemed not probable of collection.
- Investment Valuation: Significant non-cash losses were recorded due to changes in the fair value of marketable securities ($817,491 loss for six months) and investments in warrants ($16,635 loss for six months).
Guidance, Outlook, Risks, and Unusual Items
- Going Concern Warning: Management has raised substantial doubt about the Company's ability to continue as a going concern. This is due to recurring net losses, negative operating cash flows, and an accumulated deficit of $17.7 million. The Company plans to raise additional funding through equity or debt, but success is not assured.
- Customer Concentration Risk: Following the sale of Sigmaways, revenue is highly concentrated. For the six months ended June 30, 2026, one customer (Customer A) accounted for 80.6% of total revenues and 100% of accounts receivable.
- Unusual Items:
- Reverse Stock Split: A 1-for-20 reverse stock split was effective April 2, 2026.
- Derivative Liability: The Company holds a derivative liability related to Series A convertible preferred shares, valued at $74,461 as of June 30, 2026.
- Customer Refund Liability: A $500,000 liability exists for a settlement agreement with a customer, with payment due in August 2025 (outstanding as of filing).
- Subsequent Events: In July 2026, the Company paid preferred dividends via share issuance and converted additional preferred shares to common stock. In August 2026, the Company agreed to sell its 51% interest in HeartCore Luvina for approximately $184,000.
Investor Verification Checklist
- Liquidity Runway: Verify the Company's ability to fund operations with only $587,074 in cash and a $2.5M operating cash burn over six months.
- Customer Concentration: Assess the risk of losing Customer A, which represents 80.6% of revenue and 100% of receivables.
- Discontinued Operations Proceeds: Confirm the collectability of the $649,000 earn-out from the Sigmaways sale, which management currently deems not probable.
- Going Concern Mitigation: Review any new financing agreements or capital raises disclosed in subsequent filings to address the substantial doubt raised in Note 2.
- Related Party Transactions: Review the $265,678 in software development costs paid to Luvina Software (a related party) during the six-month period.