HeartCore Enterprises Inc
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
HTCR$1.51-11.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-15.
0001493152-24-019355
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001493152-24-031900
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 111 previous paragraphs and 127 current paragraphs.
62 unchanged; 22 reworded; 33 added; 27 removed; 0 previous and 10 current paragraphs rearranged.
Tables are not compared: 12 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (33)
Current report
On February 29, 2024, the Company entered into a warrants transfer agreement with a non-related company to sell partial of the warrants it received from a customer (“Consulting Customer”) as noncash consideration from consulting services for $9,000,000 in cash. The Company received $9,000,000 during the six months ended June 30, 2024 and recorded it in other current liabilities as the warrants to be transferred are exercisable upon its Consulting Customer’s consummation of the Merger with a special purpose acquisition company or the occurrence of other fundamental events defined in the warrant agreement it had with the Consulting Customer.
Current report
In July 2024, BloomZ Inc. (“BloomZ”), one of our Go IPO clients, successfully began trading on The Nasdaq Capital Market. We hope that this marks the beginning of a second wave of initial public offerings for our Go IPO clients, as we are optimistic regarding the backlog of Go IPO deals.
Current report
In April 2024, HeartCore Financial incorporated a branch office, HeartCore Financial, Inc. – Japan Branch Office, in Japan.
Current report
Sale of Warrants
Current report
On February 29, 2024, the Company entered into a warrants transfer agreement with an unrelated third party to sell a warrant it received from a Go IPO client as non-cash consideration from consulting services for $9,000,000 in cash. The Company received $9,000,000 during the six months ended June 30, 2024 and recorded it in other current liabilities as the warrants were exercisable upon the Go IPO’s client’s consummation of a merger with a special purpose acquisition company or the occurrence of other fundamental events, as described in the warrant agreement between the Company and the Go IPO client.
Current report
Cash Dividends
Current report
The Company may continue to issue quarterly dividends going forward, contingent upon Board of Directors approval, following review of the Company’s then-current financial results. Future dividends, if any, may be less than, equal to or greater than recent dividends.
Current report
For the three months ended June 30, 2024 and 2023, we generated revenues of $4,066,388 and $5,095,373, respectively, reported a net loss of $2,211,118 and $1,022,846, respectively.
Current report
Our total revenues decreased by $1,028,985, or 20.2%, to $4,066,388 for the three months ended June 30, 2024 from $5,095,373 for the three months ended June 30, 2023, mainly attributable to (i) the decreased revenues of $486,631 from GO IPO consulting services as in the three months ended June 30, 2024, the Company entered into a settlement agreement with a customer, pursuant to which the consulting service agreement with the customer was terminated and the Company will refund $500,000 to the customer; (ii) the decreased revenues of $325,441 in maintenance and supporting services, as we entered into a significant maintenance service contract with a customer in the three months ended June 30, 2023 while there was no such contract in the current period ; and (iii) the decreased revenues of $172,894 in customized software development and services due to intense competition in software industry.
Current report
Our total gross profit decreased by $702,554, or 46.6%, to $805,881 for the three months ended June 30, 2024 from $1,508,435 for the three months ended June 30, 2023, mainly attributable to (i) a decrease in gross profit of $118,376 from GO IPO consulting services due to the consulting service agreement termination with a customer that resulted in reduction of consulting service revenues in the three months ended June 30, 2024; (ii) a decrease in gross profit of $346,136 in maintenance and support services in light of the decrease in sales; and (iii) a decrease in gross profit of $289,934 in customized software development and services in light of the increase in costs due to intense market competition.
Current report
Our selling expenses decreased by $308,654, or 63.2%, to $179,408 for the three months ended June 30, 2024 from $488,062 in the three months ended June 30, 2023, primarily attributable to (i) a decrease of $222,924 in advertising expenses due to less advertising activities in the current period; and (ii) a decrease of $77,580 in sales commission in light of the decrease in revenues.
Current report
Our general and administrative expenses decreased by $425,478, or 17.4%, to $2,022,409 for the three months ended June 30, 2024 from $2,447,887 in the three months ended June 30, 2023, primarily attributable to (i) a decrease of $230,118 in salaries and welfare due to the retirement of certain senior employees; and (ii) a decrease of $243,627 in office, utility, and other expenses due to our effort to reduce operating costs.
Current report
As a percentage of revenues, our general and administrative expenses were 49.7% and 48.0% of our total revenues for the three months ended June 30, 2024 and 2023, respectively.
Current report
As a percentage of revenues, our research and development expenses were 2.7% and 0.8% of our total revenues for the three months ended June 30, 2024 and 2023, respectively.
Current report
Income Tax Benefit
Current report
Income tax benefit was $72,163 in the three months ended June 30, 2024, a decrease of $549,839, or 88.4%, from income tax benefit of $622,002 in the three months ended June 30, 2023, primarily due to a net loss before income tax provision in the current period, while we recorded a net income before income tax provision in the three months ended March 31, 2023 and the Company started to consider net operating losses carried forward from previous years in income tax calculation and recognized an income tax benefit in the three months ended June 30, 2023 to offset the income tax expense recognized in the prior quarter.
Current report
Net Loss
Current report
As a result of the foregoing, we reported a net loss of $2,211,118 for the three months ended June 30, 2024, representing a $1,188,272, or 116.2%, increase from a net loss of $1,022,846 for the three months ended June 30, 2023.
Current report
As a result of the foregoing, we reported a net loss attributable to HeartCore Enterprises, Inc. of $1,951,100 for the three months ended June 30, 2024, representing a $1,039,300, or 114.0%, increase from a net loss attributable to HeartCore Enterprises, Inc. of $911,800 for the three months ended June 30, 2023.
Current report
Revenues
Current report
Cost of Revenues
Current report
Our total costs of revenues slightly decreased by $412,954, or 6.2%, to $6,275,050 for the six months ended June 30, 2024 from $6,688,004 for the six months ended June 30, 2023, mainly in light of the decrease in sales in GO IPO consulting services.
Current report
Gross Profit
Current report
Selling Expenses
Current report
Our selling expenses decreased by $657,589, or 62.2%, to $399,115 for the six months ended June 30, 2024 from $1,056,704 in the six months ended June 30, 2023, primarily attributable to a decrease of $338,863 in stock-based compensation, as the Company granted shares of common stock to employees and service providers of Sigmaways in 2023, and there was no such event in the current period; and (ii) a decrease of $322,142 in advertising expense due to less advertising activities in the current period.
Current report
General and Administrative Expenses
Current report
Our general and administrative expenses decreased by $704,382, or 13.7%, to $4,428,712 for the six months ended June 30, 2024 from $5,133,094 in the six months ended June 30, 2023, primarily attributable to (i) a decrease of $532,207 in stock-based compensation, as the Company granted shares of common stock to employees and service providers of Sigmaways in 2023, and there was no such event in the current period; and (ii) a decrease of $113,950 in office, utility, and other expenses due to our effort to reduce operating costs.
Current report
As a percentage of revenues, our general and administrative expenses were 48.6% and 37.1% of our total revenues for the six months ended June 30, 2024 and 2023, respectively.
Current report
Research and Development Expenses
Current report
Other Income (Expenses), Net
Current report
As a result of the foregoing, we reported a net loss of $3,689,120 for the six months ended June 30, 2024, representing a $4,474,311, or 569.8%, decrease from a net income of $785,191 for the six months ended June 30, 2023.
Current report
Net cash flows provided by investing activities amounted to $5,271,823 for the six months ended June 30, 2024, primarily attributable to net proceeds from sale of unearned warrants of $5,640,000, offset by payment of $350,000 to purchase long-term investment in SAFE and prepayment of $35,209 for property and equipment.
Current report
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 or other non-current liabilities on the consolidated balance sheets. At a minimum, the Company reviews and refines these estimates on a quarterly basis.
Removed paragraphs (27)
Previous report
Koei Shoji Co., Ltd. Service Agreement
Previous report
On April 11, 2024 (the “Koei Shoji Effective Date”), the Company entered into a Service Agreement (the “Koei Shoji Agreement”) by and between the Company and Koei Shoji Co., Ltd., a Japanese corporation (“Koei Shoji”). Pursuant to the terms of the Koei Shoji Agreement, Koei Shoji engaged the Company, on an exclusive basis, to assist Koei Shoji in connection with its initial public offering. The following summarized the main services to be provided by the Company (collectively, the “Koei Shoji Services”):
Previous report
In providing the Koei Shoji Services, the Company will not render legal advice or perform accounting services, and will not act as an investment advisor or broker/dealer. Pursuant to the terms of the Koei Shoji Agreement, the parties agreed that the Company will not provide the following services, among others: negotiation of the sale of Koei Shoji’s securities; participation in discussions between Koei Shoji and potential investors; assisting in structuring any transactions involving the sale of Koei Shoji’s securities; pre-screening of potential investors; due diligence activities; nor providing advice relating to valuation of or financial advisability of any investments in Koei Shoji.
Previous report
In exchange for providing the Koei Shoji Services, Koei Shoji will pay to the Company $500,000 (the “Services Fee”) as follows:
Previous report
Koei Shoji Warrant
Previous report
For Phase 3, in return for the Company’s NADAQ listing, the Company shall issue, and the Conpany shall be entitled to receive, a warrant to acquire a number of shares of capital stock of the entity designated by the Company from among the Company and its affiliated company becoming a publicly traded company, which may be revised by mutual agreement between the Parties to change the issuing entity from Company to another entity. The total amount of such shares shall be an amount equal to 3% of the fully diluted share capital of Koei Shoji as of Effective Date; provided, however, that the number of such shares may be adjusted subject to the Warrant. The right to receive Warrant shall be deemed fully earned and vested as of the Effective Date. The Warrant shall be issued within 15 days upon establishment of a holding entity of Koei Shoji.
Previous report
PharmaBio Corporation. Service Agreement
Previous report
On March 18, 2024 (the “PharmaBio Effective Date”), the Company entered into a Service Agreement (the “PharmaBio Agreement”) by and between the Company and PharmaBio Corporation., a Japanese corporation (“PharmaBio”). Pursuant to the terms of the PharmaBio Agreement, PharmaBio engaged the Company, on an exclusive basis, to assist PharmaBio in connection with its initial public offering. The following summarized the main services to be provided by the Company (collectively, the “PharmaBio Services”):
Previous report
In providing the PharmaBio Services, the Company will not render legal advice or perform accounting services, and will not act as an investment advisor or broker/dealer. Pursuant to the terms of the PharmaBio Agreement, the parties agreed that the Company will not provide the following services, among others: negotiation of the sale of PharmaBio’s securities; participation in discussions between PharmaBio and potential investors; assisting in structuring any transactions involving the sale of PharmaBio’s securities; pre-screening of potential investors; due diligence activities; nor providing advice relating to valuation of or financial advisability of any investments in PharmaBio.
Previous report
In exchange for providing the PharmaBio Services, PharmaBio will pay to the Company $800,000 (the “Services Fee”) as follows:
Previous report
PharmaBio Warrant
Previous report
It is agreed that PharmaBio shall issue stock acquisition rights of Japanese companies, which is equivalent to 3% of outstanding shares one day before public listing in return for and contingent upon its public listing, subject to common practice and procedures prior to the initial public offering for NASDAQ listing. PharmaBio and the Company shall discuss and conclude the separate agreement that shall define specific terms and conditions of stock acquisition rights within six months from the Effective Date.
Previous report
Jyo Co., Ltd. Service Agreement
Previous report
On February 23, 2024 (the “Jyo Effective Date”), the Company entered into a Service Agreement (the “Jyo Agreement”) by and between the Company and Jyo Co., Ltd., a Japanese corporation (“Jyo”). Pursuant to the terms of the Jyo Agreement, Jyo engaged the Company, on an exclusive basis, to assist Jyo in connection with its initial public offering. The following summarized the main services to be provided by the Company (collectively, the “Jyo Services”):
Previous report
In providing the Jyo Services, the Company will not render legal advice or perform accounting services, and will not act as an investment advisor or broker/dealer. Pursuant to the terms of the Jyo Agreement, the parties agreed that the Company will not provide the following services, among others: negotiation of the sale of Jyo’s securities; participation in discussions between Jyo and potential investors; assisting in structuring any transactions involving the sale of Jyo’s securities; pre-screening of potential investors; due diligence activities; nor providing advice relating to valuation of or financial advisability of any investments in Jyo.
Previous report
In exchange for providing the Jyo Services for Phase 1, Jyo will pay to the Company $750,000 (the “Services Fee”) as follows:
Previous report
For Phase 2, in return for Jyo’s Nasdaq listing, Jyo will issue and the Company will be entitled to receive, a warrant to acquire a number of shares of capital stock of the entity designated by the Company from Jyo and its affiliated company becoming a publicly traded company. The total amount of such shares will be an amount equal to 2% of the fully diluted share capital of Jyo as of the Jyo Effective Date (subject to adjustment as set forth in the Jyo Agreement).
Previous report
The term of the Jyo Agreement will continue until the earlier of (i) three years from the Jyo Effective Date; and (ii) two years later from the date on which the stock of Jyo or any successor or resulting entity in the contemplated initial public offering of Jyo’s stock in the U.S. or a merger or other similar transaction with a special purpose acquisition company, or other transaction pursuant to which Jyo or its affiliated company becomes a public traded company in the U.S. The term of the Jyo Agreement may be renewed upon the mutual written agreement of the parties to the Jyo Agreement.
Previous report
The Jyo Agreement may be terminated by either party upon one month’s written notice to the other party, with the payment set forth in the Jyo Agreement. However, if either party engages in anti-social force activities, the other party will terminate the Jyo Agreement without written notice immediately, and the other party will pay the compensation as set forth in the Jyo Agreement.
Previous report
Jyo Warrant
Previous report
On February 23, 2024, Jyo issued to the Company a common stock purchase warrant (the “Jyo Warrant”) to purchase 80 shares of Jyo capital stock, subject to adjustment as set forth in the Jyo Warrant. Pursuant to the terms of the Jyo Warrant, the Company may, at any time (i) on or after the earlier of the date that either (a) Jyo completes its first listing on any tier of the Nasdaq Stock Market, the New York Stock Exchange or the NYSE American; (b) Jyo consummates a merger or other transaction with a special purpose acquisition company (“SPAC”) wherein Jyo becomes a subsidiary of the SPAC; or (c) Jyo consummates any other Jyo Fundamental Transaction (as defined in the Jyo Warrant) (the “Jyo Trigger Date”); and (ii) on or prior to the close of business on the tenth anniversary of the Jyo Trigger Date, exercise the Jyo Warrant to purchase 80 shares of Jyo’s capital stock (subject to adjustment as provided in the Jyo Warrant), which represents 2% of Jyo’s issued and outstanding common stock as of the issuance date of the Jyo Warrant, for an exercise price per share of $0.01, subject to adjustment as provided in the Jyo Warrant. The number of shares for which the Jyo Warrant will be exercisable will be automatically adjusted on the Jyo Trigger Date to be 2% of the fully diluted number and class of shares of capital stock of Jyo as of the Jyo Trigger Date, following completion of the transactions which caused the Jyo Trigger Date to be achieved. The Jyo Warrant contains a 9.99% equity blocker.
Previous report
Cash Dividend
Previous report
Our selling expenses decreased by $348,935, or 61.4%, to $219,707 for the three months ended March 31, 2024 from $568,642 in the three months ended March 31, 2023, primarily attributable to a decrease of $280,819 in stock-based compensation, as the Company granted common stocks to the employees of Sigmaways in 2023, and no such event in the current period.
Previous report
Our general and administrative expenses decreased by $278,904 or 10.4%, to $2,406,303 for the three months ended March 31, 2024 from $2,685,207 in the three months ended March 31, 2023, primarily attributable to (i) a decrease of $479,527 in stock-based compensation, as the Company granted common stocks to the employees of Sigmaways during three months ended March 31, 2024, and no such event in the current period; offset by (ii) an increase of $146,044 in salaries and welfare expenses, as certain sales staff were promoted to executive management, and their compensation was reclassified from selling expenses in 2023 to general and administrative expenses in 2024, and (iii) an increase of $129,677 in office, utility and other expenses, as continuous expansion of our business and establishment of new subsidiary.
Previous report
As a percentage of revenues, general and administrative expenses were 47.7% and 30.7% of our revenues for the three months ended March 31, 2024 and 2023, respectively.
Previous report
As a result of the foregoing, we reported a net loss of $1,478,002 for the three months ended March 31, 2024, representing a $3,286,039 or 181.7% decrease from a net income of $1,808,037 for the three months ended March 31, 2023.
Previous report
Net cash provided by investing activities amounted to $10,814 for the three months ended March 31, 2024, primarily consisting of repayment of $10,814 of loan provided to related party.
Reworded paragraphs (22)
Previous wording
During 2022, we started the GO IPO business, which supports Japanese companies listing on Nasdaq and NYSE in the United States. As of May 14, 2024, we have entered into consulting agreements with 14 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.
Current wording
During 2022, we started the GO IPO business, which supports Japanese companies listing on Nasdaq and NYSE in the United States. As of August 14, 2024, we have entered into consulting agreements with 14 companies to assist them in their IPO process, pursuant to which 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 .
Previous wording
On September 6, 2022, HeartCore Enterprises, Inc. (the “Company”) entered into a share exchange and purchase agreement (“Sigmaways Agreement”) to acquire 51% of the outstanding shares of Sigmaways, a company incorporated under the laws of the State of California, and its wholly-owned subsidiaries. Sigmaways and its wholly-owned subsidiaries are engaged in the business of developing and sales of software in the United States. The acquisition was closed on February 1, 2023.
Current wording
On September 6, 2022, the Company entered into a share exchange and purchase agreement (“Sigmaways Agreement”) to acquire 51% of the outstanding shares of Sigmaways, a company incorporated under the laws of the State of California, and its wholly owned subsidiaries. Sigmaways and its wholly owned subsidiaries are engaged in the business of developing and sales of software in the United States. The acquisition closed on February 1, 2023.
Previous wording
In the first quarter of 2023, we formed HeartCore Financial, Inc. in the U.S. and HeartCore Capital Advisors, Inc. (“HeartCore Capital Advisors”) in Japan, as a part of our Go IPO consulting business. In the fourth quarter of 2023, we formed HeartCore Luvina Vietnam Company Limited in Vietnam, which is engaged in the business of software development.
Current wording
In the first quarter of 2023, we formed HeartCore Financial, Inc. (“HeartCore Financial”) in the U.S. and HeartCore Capital Advisors, Inc. (“HeartCore Capital Advisors”) in Japan, as a part of our Go IPO consulting business. In the fourth quarter of 2023, we formed HeartCore Luvina Vietnam Company Limited in Vietnam (“HeartCore Luvina”), which is engaged in the business of software development.
Previous wording
On April 1, 2024, the Board of Directors of the Company declared a cash dividend of $0.02 per share of the Company’s common shares to be paid on May 3, 2024 to shareholders of record as of April 26, 2024. The Company may issue quarterly dividends going forward, contingent upon the financial results. The four potential annual dividends may be equal to or greater than the April 2024 dividend.
Current wording
On July 22, 2024, the Board of Directors of the Company declared a cash dividend of $0.02 per share of the Company’s common shares. The dividend will be paid on August 26, 2024 to shareholders of record as of August 19, 2024, resulting in an aggregate of $417,283 in total dividends to be paid by the Company.
Previous wording
For the three months ended March 31, 2024 and 2023, we generated revenues of $5,046,732 and $8,734,150, respectively, and reported net loss of $1,478,002 and net income of $1,808,037, respectively, and cash flows provided by operating activities of $741,381 and cash flows used in operating activities of $1,048,059, respectively. As noted in our unaudited consolidated financial statements, as of March 31, 2024, we had an accumulated deficit of $16,096,819.
Current wording
For the six months ended June 30, 2024 and 2023, we generated revenues of $9,113,120 and $13,829,523, respectively, reported a net loss of $3,689,120 and net income of $785,191, respectively, and had cash flows used in operating activities of $1,460,744 and 1,368,562, respectively. As noted in our unaudited consolidated financial statements, as of June 30, 2024, we had an accumulated deficit of $18,047,919.
Previous wording
Our total costs of revenues slightly decreased by $86,523, or 2.8%, to $3,014,543 for the three months ended March 31, 2024 from $3,101,066 for the three months ended March 31, 2023, in light of the decrease in sales in GO IPO consulting services and software development and other miscellaneous services, offset by the increase in the costs related to customized software development and services and maintenance and support services.
Current wording
Our total costs of revenues decreased by $326,431, or 9.1%, to $3,260,507 for the three months ended June 30, 2024 from $3,586,938 for the three months ended June 30, 2023, in light of the decrease in sales in GO IPO consulting services and on-premise software, offset by the increase in the costs related to customized software development and services and software as a service.
Previous wording
For the reasons discussed above, our overall gross profit margin decreased by 24.2% to 40.3% for the three months ended March 31, 2024 from 64.5% in the three months ended March 31, 2023.
Current wording
For the reasons discussed above, our overall gross profit margin decreased by 9.8% to 19.8% for the three months ended June 30, 2024 from 29.6% in the three months ended June 30, 2023.
Previous wording
As a percentage of revenues, our selling expenses accounted for 4.4% and 6.5% of our total revenues for the three months ended March 31, 2024 and 2023, respectively.
Current wording
As a percentage of revenues, our selling expenses accounted for 4.4% and 9.6% of our total revenues for the three months ended June 30, 2024 and 2023, respectively.
Previous wording
We owned 51% equity interest of Sigmaways and its subsidiaries and 51% equity interest of HeartCore Luvina. Accordingly, we recorded net loss attributable to the non-controlling interests of $144,652 and $74,252 in the three months ended March 31, 2024 and 2023, respectively.
Current wording
We owned 51% equity interest in Sigmaways and its subsidiaries and 51% equity interest in HeartCore Luvina. Accordingly, we recorded net loss attributable to non-controlling interests of $260,018 and $111,046 for the three months ended June 30, 2024 and 2023, respectively.
Previous wording
Our total revenues decreased by $3,687,418, or 42.2%, to $5,046,732 for the three months ended March 31, 2024 from $8,734,150 for the three months ended March 31, 2023, mainly attributable to (i) the decreased revenues of $4,617,270 from GO IPO consulting services as the Company’s two IPO consulting customers successfully listed on the Nasdaq in the three months ended March 31, 2023 and the Company received warrants from its customers as noncash consideration from consulting services, while no such revenue in the three months ended March 31, 2024; offset by (ii) an increase of $721,815 in revenues from sale of on-premise software, primarily due to the Company newly obtained two large orders from two customers during three months ended March 31, 2024.
Current wording
Our total revenues decreased by $4,716,403, or 34.1%, to $9,113,120 for the six months ended June 30, 2024 from $13,829,523 for the six months ended June 30, 2023, mainly attributable to (i) the decreased revenues of $5,103,901 from GO IPO consulting services as the Company’s two IPO consulting customers successfully listed on the Nasdaq in the six months ended June 30, 2023 and the Company received warrants from its customers as non-cash consideration from consulting services, while there was no such activity in the six months ended June 30, 2024; (ii) the decreased revenues of $399,151 from maintenance and support services, as we entered into a significant maintenance service contract with a customer in thesix months ended June 30, 2023 while there was no such contract in the current period; offset by (iii) an increase of $592,971 in revenues from sale of on-premise software, primarily due to the Company newly obtained two large orders from two customers during the six months ended June 30, 2024.
Previous wording
Our total gross profit decreased by $3,600,895, or 63.9%, to $2,032,189 for the three months ended March 31, 2024 from $5,633,084 for the three months ended March 31, 2023, mainly attributable to (i) a decrease in gross profit of $4,248,772 from GO IPO consulting services, as we recognized revenues from the warrants of the customers upon customers’ IPO effectiveness in the three months ended March 31, 2023, while no such revenue was recognized in the current period; offset by (ii) an increase in gross profit of $728,871 in sale of on-premise software, as the sale of CMS license increased significantly, while there was not much change in the corresponding costs as the product was developed by ourself, instead of purchasing from outsiders.
Current wording
Our total gross profit decreased by $4,303,449, or 60.3%, to $2,838,070 for the six months ended June 30, 2024 from $7,141,519 for the six months ended June 30, 2023, mainly attributable to (i) a decrease in gross profit of $4,367,148 from GO IPO consulting services, as we recognized revenues from the warrants of the customers upon customers’ IPO effectiveness in the six months ended June 30, 2023, while there was no such activity in the current period; (ii) a decrease in gross profit of $483,044 in maintenance and support services in light of the decrease in sales; offset by (iii) an increase in gross profit of $759,015 in sales of on-premise software, as the sales of CMS license increased significantly, while there was not much change in the corresponding costs as the product was developed by ourself, instead of purchasing from outsiders.
Previous wording
Our research and development expenses slightly increased by $9,510 or 11.9%, to $89,134 in the three months ended March 31, 2024 from $79,624 in the three months ended March 31, 2023, primarily attributable to an increase of $65,408 in outsourcing expenses relating to the development of new CMS management screen features in the current period; offset by (ii) a decrease of $55,898 in stock-based compensation, as we granted common stock to the employees of Sigmaways during three months ended March 31, 2023, and no such event in the current period.
Current wording
Our research and development expenses slightly increased by $81,170, or 68.1%, to $200,402 in the six months ended June 30, 2024 from $119,232 in the six months ended June 30, 2023, primarily attributable to an increase of $137,967 in outsourcing expenses relating to the development of new CMS management screen features in the current period; offset by (ii) a decrease of $56,797 in stock-based compensation, as the Company granted shares of common stock to employees and service providers of Sigmaways in 2023, and there was no such event in the current period.
Previous wording
As a percentage of revenues, research and development expenses were 1.8% and 0.9% of our revenues for the three months ended March 31, 2024 and 2023, respectively.
Current wording
As a percentage of revenues, our research and development expenses were 2.2% and 0.9% of our total revenues for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
Our other income (expenses) primarily includes changes in fair value of investments in marketable securities, changes in fair value of investment in warrants, interest income generated from bank deposits, interest expense for bank loans and bond, other income, and other expenses. Total other income, net, of $169,874 for the three months ended March 31, 2023 decreased by $1,045,088 or 615.2% to other expenses, net, of $875,214 for the three months ended March 31, 2024, primarily attributable to an increase of $234,082 in loss on fair value changes in investments in marketable securities and an increase of $872,252 in loss on fair value changes in investment in warrants.
Current wording
Our other income (expenses) primarily includes changes in fair value of investments in marketable securities, changes in fair value of investment in warrants, interest income generated from bank deposits, interest expense for bank loans and bond, other income, and other expenses. Other expenses, net, of $7,852 for the six months ended June 30, 2023 increased by $1,643,439, or 20,930.2%, to other expenses, net, of $1,651,291 for the six months ended June 30, 2024, primarily attributable to an increase of $201,309 in loss on fair value changes in investments in marketable securities and an increase of $1,403,814 in loss on fair value changes in investment in warrants.
Previous wording
Income tax benefit was $80,167 for the three months ended March 31, 2024, a decrease of $741,615, or 112.1% from income tax expense of $661,448 in the three months ended March 31, 2023, primarily due to a net loss in the current period, while we recorded a net income in the three months ended March 31, 2023.
Current wording
Income tax benefit was $152,330 for the six months ended June 30, 2024, a decrease of $191,776, or 486.2%, from income tax expense of $39,446 in the six months ended June 30, 2023, primarily due to a net loss before income tax provision in the current period, while we recorded a net income before income tax provision in the six months ended June 30, 2023.
Previous wording
As a result of the foregoing, we reported a net loss attributable to HeartCore Enterprises, Inc. of $1,333,350 for the three months ended March 31, 2024, representing a $3,215,639 or 170.8% decrease from a net income of $1,882,289 for the three months ended March 31, 2023.
Current wording
As a result of the foregoing, we reported a net loss attributable to HeartCore Enterprises, Inc. of $3,284,450 for the six months ended June 30, 2024, representing a $4,254,939, or 438.4%, decrease from a net income attributable to HeartCore Enterprises, Inc. of $970,489 for the six months ended June 30, 2023.
Previous wording
As of March 31, 2024, we had $1,219,251 in cash as compared to $1,012,479 as of December 31, 2023. We also had $3,086,203 in accounts receivable as of March 31, 2024. Our accounts receivable primarily include balance due from customers for our on-premise software sold and services provided and accepted by customers, as well as amounts billable to the customers for customized software development and services.
Current wording
As of June 30, 2024, we had $3,806,349 in cash and cash equivalents, as compared to $1,012,479 as of December 31, 2023. We also had $2,440,872 in accounts receivable, current as of June 30, 2024. Our accounts receivable primarily include balance due from customers for our on-premise software sold and services provided and accepted by customers, as well as amounts billable to the customers for customized software development and services.
Previous wording
Net cash provided by operating activities was $741,381 for the three months ended March 31, 2024, primarily consisting of the following:
Current wording
Net cash flows used in operating activities was $1,460,744 for the six months ended June 30, 2024, primarily consisting of the following:
Previous wording
Net cash used in financing activities amounted to $474,752 for the three months ended March 31, 2024, primarily consisting of repayment of $207,486 for short-term and long-term debts, and net repayment of $383,353 for factoring arrangement, offset by the proceeds of $68,138 from short-term debt and capital contribution of $67,195 from non-controlling shareholder.
Current wording
Net cash flows used in financing activities amounted to $874,136 for the six months ended June 30, 2024, primarily consisting of repayment of $281,451 for short-term and long-term debts, and net repayment of $242,008 for factoring arrangement, and dividend distribution of $417,283.
Previous wording
The Company’s debts included short-term debt and long-term debts borrowed from banks and financial institutions.
Current wording
The Company’s debts included long-term debts borrowed from banks and financial institutions.
Previous wording
The Company recognizes revenues under ASC Topic 606, “Revenue from Contracts with Customers”.
Current wording
The Company recognizes revenues under the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers”.
Previous wording
The timing of revenue recognition may differ from the timing of invoicing to the customers. The Company has determined 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 factors certain accounts receivable upon or after the performance obligation is being met. 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 amount of revenues recognized during the three months ended March 31, 2024 and 2023 that were included in the opening deferred revenue balance was approximately $1.0 million and $0.9 million, respectively.
Current wording
The timing of revenue recognition may differ from the timing of invoicing to the customers. The Company has determined that its contracts do not include a significant financing component. The Company records a contract asset, which is included in accounts receivable, current and non-current, in the consolidated balance sheets, when revenues are recognized prior to invoicing. The Company factors certain accounts receivable upon or after the performance obligation is being met. 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 amount of revenues recognized during the six months ended June 30, 2024 and 2023 that were included in the opening deferred revenue balance was approximately $1.5 million and $1.3 million, respectively.
Rearranged current paragraphs (10)
Current report — wording carried from elsewhere
On March 29, 2024, the Board of Directors of the Company declared a cash dividend of $0.02 per share of the Company’s common shares. The dividend was paid on May 3, 2024 to shareholders of record as of April 26, 2024, resulting in an aggregate of $417,283 in total dividends paid by the Company.
Current report — wording carried from elsewhere
Our research and development expenses slightly increased by $71,660, or 180.9%, to $111,268 in the three months ended June 30, 2024 from $39,608 in the three months ended June 30, 2023, primarily attributable to an increase of $72,559 in outsourcing expenses relating to the development of new CMS management screen features in the current period.
Current report — wording carried from elsewhere
Our other income (expenses) primarily includes changes in fair value of investments in marketable securities, changes in fair value of investment in warrants, interest income generated from bank deposits, interest expense for bank loans and bond, other income, and other expenses. Other expenses, net, of $177,726 for the three months ended June 30, 2023 increased by $598,351, or 336.7%, to other expenses, net, of $776,077 for the three months ended June 30, 2024, primarily attributable to an increase of $531,562 in loss on fair value changes in investment in warrants.
Current report — wording carried from elsewhere
Net Loss Attributable to HeartCore Enterprises, Inc.
Current report — wording carried from elsewhere
Comparison of Results of Operations for the Six Months Ended June 30, 2024 and 2023
Current report — wording carried from elsewhere
The following table summarizes our operating results as reflected in our unaudited statements of operations during the six months ended June 30, 2024 and 2023, respectively, and provides information regarding the dollar and percentage increase (or decrease) during such periods.
Current report — wording carried from elsewhere
For the reasons discussed above, our overall gross profit margin decreased by 20.5% to 31.1% for the six months ended June 30, 2024 from 51.6% in the six months ended June 30, 2023.
Current report — wording carried from elsewhere
As a percentage of revenues, our selling expenses accounted for 4.4% and 7.6% of our total revenues for the six months ended June 30, 2024 and 2023, respectively.
Current report — wording carried from elsewhere
Net Loss Attributable to Non-controlling Interests
Current report — wording carried from elsewhere
We owned 51% equity interest in Sigmaways and its subsidiaries and 51% equity interest of HeartCore Luvina. Accordingly, we recorded net loss attributable to non-controlling interests of $404,670 and $185,298 for the six months ended June 30, 2024 and 2023, respectively.