HeartCore's Revenue Plunges Amid Strategic Japan Unit Sale

TL;DR

**HTCR is shedding its core business, signaling a risky pivot to consulting that's already hammered revenue and net income.**

AI Summary

HeartCore Enterprises, Inc. (HTCR) experienced a significant decline in revenue and net income for the nine months ended September 30, 2025, primarily due to the classification of HeartCore Japan as a discontinued operation. Total revenues plummeted from $21,270,891 in the nine months ended September 30, 2024, to $7,052,799 for the same period in 2025. The company reported a net loss attributable to HeartCore Enterprises, Inc. common shareholders of $1,609,851 for the nine months ended September 30, 2025, a stark contrast to the net income of $7,773,356 in the prior year. This shift was largely driven by a substantial loss from continuing operations of $2,913,181, despite a positive income of $1,188,481 from discontinued operations. Key business changes include the Board's approval on July 24, 2025, to sell 100% of HeartCore Japan, which was subsequently closed on October 31, 2025. The company also issued 2,000 Series A convertible preferred shares with an aggregate liquidation preference of $2,256,833 and 1,235,437 common shares through various agreements, raising $1,800,000 in net proceeds from the issuance of preferred and common shares related to a securities purchase agreement. Risks include the substantial decline in continuing operations' profitability and the impact of foreign currency translation adjustments, which resulted in a $38,370 negative adjustment for the three months ended September 30, 2025. The strategic outlook involves focusing on consulting services through HeartCore Financial and its Japan branch, and the newly incorporated Higgs Field Co., Ltd. in Japan.

Why It Matters

This filing reveals a dramatic restructuring for HeartCore Enterprises, Inc., with the sale of its core software development business, HeartCore Japan. For investors, the shift from a profitable software company to a consulting-focused entity presents significant uncertainty and a need to re-evaluate HTCR's long-term growth prospects and competitive positioning against established consulting firms. Employees of HeartCore Japan will be directly impacted by the sale, while those in the remaining consulting segments face a new strategic direction. Customers of HeartCore Japan will now deal with a new owner, potentially affecting service continuity. The broader market will observe if this strategic pivot can successfully transform HTCR into a viable player in the competitive consulting landscape, especially given the immediate financial downturn.

Risk Assessment

Risk Level: high — The company's revenue from continuing operations plummeted from $21,270,891 in the nine months ended September 30, 2024, to $7,052,799 in the same period of 2025, representing a 66.8% decrease. Furthermore, HeartCore Enterprises, Inc. reported a net loss attributable to common shareholders of $1,609,851 for the nine months ended September 30, 2025, compared to a net income of $7,773,356 in the prior year, indicating a severe deterioration in profitability from its ongoing business.

Analyst Insight

Investors should exercise extreme caution and consider divesting, as the company's core business has been sold, and remaining operations show a significant decline in revenue and profitability. Await further clarity on the performance of the new consulting focus before considering any new positions.

Financial Highlights

revenue

$7,052,799

net Income

($1,609,851)

eps

($0.07)

revenue Growth

-66.8%

Revenue Breakdown

Key Numbers

• $7.05M — Total Revenues (Down from $21.27M in 9M 2024, a 66.8% decrease)
• ($1.61M) — Net Income (Loss) Attributable to Common Shareholders (Shift from $7.77M income in 9M 2024 to a loss in 9M 2025)
• ($2.91M) — Net Income (Loss) from Continuing Operations (Significant loss for 9M 2025, compared to $6.71M income in 9M 2024)
• $1.19M — Income from Discontinued Operations (Positive contribution for 9M 2025, offsetting some continuing operations losses)
• 25,419,807 — Shares Outstanding (As of November 18, 2025)
• $1.80M — Net Proceeds from Issuance of Preferred and Common Shares (Raised through securities purchase agreement)
• 2,000 — Series A Convertible Preferred Shares (Issued as of September 30, 2025)
• ($0.07) — Basic EPS (For 9M 2025, down from $0.37 in 9M 2024)

Key Players & Entities

• HeartCore Enterprises, Inc. (company) — Registrant and holding company
• HeartCore Japan (company) — Wholly-owned operating subsidiary, now discontinued operation
• HeartCore Financial, Inc. (company) — Wholly-owned subsidiary providing consulting services
• Higgs Field Co., Ltd. (company) — Newly incorporated wholly-owned subsidiary providing consulting services
• The Nasdaq Capital Market (regulator) — Exchange where common stock is registered
• $21,270,891 (dollar_amount) — Total revenues for nine months ended September 30, 2024
• $7,052,799 (dollar_amount) — Total revenues for nine months ended September 30, 2025
• $1,609,851 (dollar_amount) — Net loss attributable to common shareholders for nine months ended September 30, 2025
• $7,773,356 (dollar_amount) — Net income attributable to common shareholders for nine months ended September 30, 2024
• $2,256,833 (dollar_amount) — Aggregate liquidation preference of Series A convertible preferred shares

FAQ

Risk Factors

• Decline in Continuing Operations Profitability [high — financial]: The company experienced a substantial loss from continuing operations of $2,913,181 for the nine months ended September 30, 2025, a sharp contrast to the $6,710,000 income reported for the same period in 2024. This indicates a significant deterioration in the core business's ability to generate profit.
• Impact of Foreign Currency Fluctuations [medium — financial]: Foreign currency translation adjustments resulted in a negative impact of $38,370 for the three months ended September 30, 2025. While not a large absolute number, it highlights sensitivity to currency movements in international operations.
• Dependence on Consulting Services [medium — operational]: The company's strategic outlook involves focusing on consulting services through HeartCore Financial and its Japan branch, and the newly incorporated Higgs Field Co., Ltd. This concentration could pose a risk if the consulting market faces downturns or increased competition.
• Impact of Discontinued Operations [medium — financial]: While HeartCore Japan contributed positively with $1,188,481 in income from discontinued operations for the nine months ended September 30, 2025, its prior contribution to overall revenue and profit is now absent, leading to the dramatic revenue drop.

Industry Context

HeartCore Enterprises operates in the consulting services sector, which is generally characterized by a need for specialized expertise and strong client relationships. The industry can be sensitive to economic cycles, with companies often reducing discretionary spending on consulting during downturns. Competition can be fierce, with both large global firms and smaller niche players vying for market share.

Regulatory Implications

As a publicly traded company, HeartCore Enterprises is subject to SEC regulations and accounting standards, including those for reporting discontinued operations and financial instruments. Compliance with these standards is critical for accurate financial reporting and investor confidence. Any misstatement or failure to comply can lead to regulatory scrutiny and penalties.

What Investors Should Do

1. Monitor the performance of continuing operations closely.
2. Evaluate the strategic rationale and execution of the new entities (Higgs Field Co., Ltd.).
3. Assess the impact of preferred stock issuance on future earnings and dilution.

Key Dates

• 2025-07-24: Board approval to sell 100% of HeartCore Japan — Initiated the process of divesting a significant portion of the business, leading to its classification as discontinued operations.
• 2025-10-31: Closing of HeartCore Japan sale — Formalized the divestiture, impacting the company's reported financial results from this period onwards.
• 2025-09-30: Issuance of 2,000 Series A convertible preferred shares — Represents a capital raise and potential future dilution for common shareholders.
• 2025-11-18: Shares Outstanding reported as 25,419,807 — Provides a current snapshot of the company's equity structure.

Glossary

Discontinued Operations

A component of a business that has been disposed of or is classified as held for sale, and whose operating results and cash flows can be separately identified from the rest of the company's operations. (Crucial for understanding the significant drop in HeartCore's reported revenue and the shift in profitability, as HeartCore Japan was reclassified.)

Foreign Currency Translation Adjustments

Gains or losses that arise when a company's financial statements are translated from a foreign currency into the reporting currency. (Highlights the impact of exchange rate fluctuations on the company's financial performance, as seen with the negative adjustment in Q3 2025.)

Liquidation Preference

The amount that preferred shareholders are entitled to receive upon liquidation of a company, before common shareholders receive anything. (Indicates the priority claim on assets for the Series A preferred shareholders, which is $2,256,833 in this case.)

Basic EPS

Earnings per share calculated by dividing net income by the weighted-average number of outstanding common shares. (Shows the profitability attributable to each outstanding common share, which significantly decreased from $0.37 to ($0.07) year-over-year.)

Year-Over-Year Comparison

HeartCore Enterprises has seen a dramatic decrease in revenue, down 66.8% to $7.05M for the nine months ended September 30, 2025, compared to $21.27M in the prior year. This is largely attributable to the divestiture of HeartCore Japan, now classified as a discontinued operation. Consequently, net income has swung from a substantial profit of $7.77M to a net loss of $1.61M for common shareholders. The company also reported a significant loss from continuing operations of $2.91M, a stark reversal from a profit of $6.71M in the prior year, indicating a substantial weakening of its core business performance.

Filing Documents

• form10-q.htm (10-Q) — 1573KB
• ex3-1.htm (EX-3.1) — 3KB
• ex31-1.htm (EX-31.1) — 11KB
• ex31-2.htm (EX-31.2) — 12KB
• ex32-1.htm (EX-32.1) — 6KB
• ex3-1_001.jpg (GRAPHIC) — 1592KB
• ex3-1_002.jpg (GRAPHIC) — 482KB
• 0001493152-25-023997.txt ( ) — 11433KB
• htcr-20250930.xsd (EX-101.SCH) — 51KB
• htcr-20250930_cal.xml (EX-101.CAL) — 96KB
• htcr-20250930_def.xml (EX-101.DEF) — 304KB
• htcr-20250930_lab.xml (EX-101.LAB) — 517KB
• htcr-20250930_pre.xml (EX-101.PRE) — 436KB
• form10-q_htm.xml (XML) — 1413KB

Financial Statements

Financial Statements F-1 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 1 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 13 Item 4.

Controls and Procedures

Controls and Procedures 13

- OTHER INFORMATION

PART II - OTHER INFORMATION 14 Item 1.

Legal Proceedings

Legal Proceedings 14 Item 1A.

Risk Factors

Risk Factors 14 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 14 Item 3. Defaults Upon Senior Securities 14 Item 4. Mine Safety Disclosures 14 Item 5. Other Information 14 Item 6. Exhibits 14

Signatures

Signatures 15 i ITEM 1. FINANCIAL STATEMENTS HEARTCORE ENTERPRISES, INC. CONSOLIDATED BALANCE SHEETS September 30, December 31, 2025 2024 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 1,451,019 $ 1,973,810 Accounts receivable 1,107,187 1,030,243 Investments in marketable securities 2,903,815 4,495,703 Investment in warrants 598,380 - Prepaid expenses 144,048 131,325 Current portion of long-term note receivable 200,000 100,000 Deferred offering costs 250,000 - Other current assets 133,056 136,217 Current assets of discontinued operations 5,824,649 1,550,067 Total current assets 12,612,154 9,417,365 Non-current assets: Property and equipment, net 319,361 475,697 Operating lease right-of-use assets 29,386 172,594 Long-term investment in warrants 354,950 577,786 Long-term note receivable - 100,000 Deferred tax assets 3,914 31,575 Security deposits 6,578 108,880 Other non-current assets 10,828 11,715 Non-current assets of discontinued operations - 3,069,422 Total non-current assets 725,017 4,547,669 Total assets $ 13,337,171 $ 13,965,034 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 1,333,724 $ 1,637,108 Accounts payable and accrued expenses – related party 25,507 47,199 Accounts payable and accrued expenses 25,507 47,199 Accrued payroll and other employee costs 382,087 273,115 Due to related party - 885 Short-term debt – related party 70,900 75,000 Current portion of long-term debts 49,479 46,382 Insurance premium financing 52,823 16,626 Factoring liability 228,310 172,394 Operating lease liabilities, current 20,400 134,910 Finance lease liabilities, current 17,349 15,956 Income tax payables 716,253 818,030 Deferred revenue 472,830 751,251 Derivative liability 245,820 - Other current liabilities 654,606 589,762 Current liabilities of di

View Full Filing

View this 10-Q filing on SEC EDGAR